Strategic Modelling and Business Dynamics: A Feedback Systems Approach

2.7. Causal Loop Diagrams – Basic Tips

In this chapter, several causal loop diagrams have been presented. Despite their variety they all follow the basic tips of good practice.

2.7.1. Picking and Naming Variables

The choice of words is vital. Each variable must be a noun. Avoid the use of verbs or directional adjectives. For example, a causal diagram can use the word 'sales', but not 'sales planning' or 'increased sales'. Simple nouns like 'accounts' or 'staff' can be augmented with adjectives to give phrases like large accounts' or experienced staff'. Sticking to these basic naming rules helps when assigning polarity to causal links and explaining how changes propagate around loops.

Words are versatile, but they should also be grounded in facts. The range of concepts that can be included in causal loop diagrams extends from the hard and easily measureable, such as 'new products' and 'recruits', to the soft and intangible such as 'morale' or 'customer perceived quality'. A powerful feature of feedback systems thinking and system dynamics is its ability to incorporate both tangible and intangible factors. However, for any variable no matter how soft, you should always have in mind a specific unit of measure, a way in which the variable might be quantified, even if formal recorded data do not exist. Hence, you might imagine morale on a scale from 0 (low) to 1 (high) or product quality on a scale from 1 (low) to 5 (high). Be sure to pick words that imply measureability, such as ...