Managers who are always focused on outputs may be missing the point. To bring about transformational change, it’s crucial to understand the role of inputs and processes in shaping those outputs. It all comes down to a simple idea: everything is a system, and everything is connected.

In the LEAD (Leader Education and Development) Program developed by the Institute for Postindustrial Leadership, participants are introduced to five profound principles through presentations and group discussions. In this sixth article of our series, we will discuss the second foundational principle: Input – Process – Output (I-P-O).

The profound principles that form the foundation of the LEAD Program were discovered through theory, rather than being invented or arbitrarily selected. These principles are fundamental truths that have universal application. Internalized principles form our paradigms which are the source of our beliefs and behaviors. Our paradigms are powerful because they become the lenses through which we see our organizations and the world.

The I-P-O principle is grounded in theories which deal with analyzing phenomena from a holistic perspective. This systemic perspective shifts the attention from parts to the whole and asserts that system elements are rationally connected and interrelated. Systems are a fundamental characteristic of nature – indeed the universe. Open systems interact with the environment through the dynamic relationship between its inputs, processes and outputs.

It is essential to study systems in order to understand the interdependencies and interactions of individual components and sub-systems. We’re interested in four system theory corollaries that inform our work: 1) systems cannot understand or manage themselves, 2) systems must be understood before they can be managed or improved, 3) changing one part of a system affects other parts of the system, and 4) optimizing parts of a system does not optimize the whole system.

When studying the I-P-O principle it becomes apparent that even though systems thinking makes obvious sense, most organizations practice sub-system thinking and consequently have a limited understanding of their systems and processes. Two commonly known concepts related to this phenomenon are: 1) people become prisoners of their processes; and 2) bad processes handicap good people.

We have found that managers automatically gravitate to outputs or results (aka the O’s.) These elements have traditionally been referred to as objectives  or goals. In our experience, most managers are obsessed with the O’s. They overemphasize the O’s and underestimate the I’s and the P’s. Their fixation on outputs overshadows their attention to the inputs and the processes. This in part explains their fascination with MBO (management by objectives) and setting stretch goals.

A deeper dive into the I-P-O principle reveals the following: I-P-O is a way of thinking about systems as inputs being transformed through processes into desired outputs. Once an output is stated, the inputs and processes required to produce the output must be identified and understood. Profound knowledge of I’s and P’s is essential but insufficient – the I’s and P’s must also be measured. The role of measurement is to understand and control the inputs and processes. An output cannot be managed; only inputs and processes can be managed. The value of an output is in its ability to help generate an understanding of the inputs and processes. The I-P system will only deliver the O’s that it is designed to deliver.

Not surprisingly, participants in the LEAD workshops quickly realize that the I-P-O  principle is routinely violated in their organizations. Interestingly, initial reactions to the principle include these common observations: “our processes are not well understood”; “our processes are often arbitrarily changed”; “our processes are assumed to work”; and, “our processes have never worked.” Additionally, three other observations are usually expressed: 1) people are often blamed for the performance of the system, 2) managers mostly focus on outputs and use goals to motivate, and 3) the inherent weaknesses of the system are usually ignored or denied.  

These are pervasive problems that unfortunately go unnoticed and unchallenged because they have deep cultural roots based on faulty assumptions. Over thirty years ago, Masaaki Imai, Founder of the Kaizen Institute, observed that “management has been too focused on results and not on the process of what achieves or delivers those results.” The efficiency and effectiveness of any system demands and depends upon the internalization, integration, and institutionalization of the I-P-O principle.  

It is only through the process of internalizing profound principles at the motive level, and integrating them into our behavioral repertoires, that we will institutionalize them into the fabric of our cultures. When I-P-O is internalized, integrated, and institutionalized, we intuitively begin to explore the white spaces between functions and departments – because we understand the importance of integration in achieving our objectives and goals. This enables us to develop a more sophisticated understanding of our organizations, socio-technical systems and business processes.  

I-P-O also teaches us that achieving the O is directly related to having profound knowledge of the I’s and P’s – in stark contrast to the generally accepted maxim that goal-setting improves performance. I-P-O also helps us debunk the management myth that people do not buy into company goals and avoid being held accountable. It is our experience that people rarely have problems with the goals. They have problems with the fact that they do not have control of the inputs and processes needed to attain the goals.

This realization reinforces one of the premier I-P-O corollaries: You cannot hold a person accountable for an output if they do not have control over the inputs and the processes. We end this article with two corollaries contributed by workshop participants: “inputs and processes must be balanced”; and, “an output from one system can be the input into another system.”

Internalizing, integrating and institutionalizing systems thinking and the I-P-O principle changes the way leaders think, transforms the way teams collaborate, and revolutionizes the way organizations operate.

Everything is connected.

This is the sixth article in a series by Terry and Matt. See previous columns here. They are co-founders and directors of the Institute for Postindustrial Leadership at the University of Indianapolis. For more information about the Institute, go to: or email Terry and Matt at

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