Causal Loop Diagrams

A. Construct the appropriate single causal loop diagram for each story. Be sure to include whether it is a reinforcing or balancing loop and label each section of the loop with a “s” or “o”. Also, include any “delays” you might recognize.

1. A company has increased new products. These products have increased the overall sales of the company. The company has decided to increase the sales force to take advantage of the new opportunities for sales of its new products. This decision has increased company revenue and also increased the company’s profits. As a result of these higher profits, the company is spending more money on R & D, which it hopes will lead to more new products. (12 pts)

2. A major automobile manufacturer has started to give rebates on the purchase of

new cars, trucks, and SUVs. This has cut the purchased price of the vehicles and

increased sales. These sales have both increased the company’s market share and its revenues. The company has decided to continue to give more rebates on new vehicles purchased. (11 pts)

3. An increase in trust has also led to an increase in employee empowerment. However, greater employee empowerment has led to greater information about the organization’s increased discussion of employee layoffs, which has increased employee anxiety and decreased confidence in the organization. Trust in the organization has now declined. (11 pts)

4. A pro golfer has really increased his practice time, which has elevated his playing

ability. This new level of play has contributed to winning several tournaments and

several new endorsements and business opportunities. However, the time involved

in meeting these commitments have seriously curtailed the player’s practice time.

(11 pts)

B. Construct the following two multi-loop diagrams. Be sure to include whether it is a reinforcing or balancing loop and label each section of the loop with a “s” or “o”. Also, include any “delays” you might recognize.

1. The number of people who have applied for subprime loans have increased the banks interest in making them available, which has in turn increased the number of applicants. However, the number of loans with now higher interest rates increased and the number of defaults on these loans also increased, which in turn decreased the number of the number of available loans. (15 pts)
2. Organizations are in need of leadership. Some organizations have relied on finding the heroic, charismatic leader, which temporarily decreases their need. However, this perceived need for leadership can also be met by developing leadership capabilities throughout the organization, which in the long term decreases their need for leadership. Nevertheless, many organizations still shift the burden, which increases their dependence on charismatic leaders and decreases the chance for developing leadership capabilities.(20 pts)