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Effective organizational leadership requires frequent problem solving. One way of understanding how leaders solve problems is through the concept of mental models. Mental models are effective tools for organizing information so that creative solutions can be generated quickly and effectively. They are cognitive in nature and, although they are naturally occurring in all individuals, the nature of their occurrence and how they affect problem solving is particularly important to the study of leadership. As applied to leadership, they are organized knowledge structures that contain information about complex systems, whether pertaining to the organization (such as its overall structure, various divisions, teams, and so forth) or in the larger world (for example, industries, conglomerates, and so on). Mental models include as information about how a system works, as well as information on cause-and-effect connections within a system. Mental models also include temporal or categorical linkages, and they organize information about the environmental elements and contingencies that can influence a system's operations.

For example, a senior manager might have as a mental model an organized understanding of his or her department that includes mental representations of subunits and members of the department; the roles, resources, and tasks of the department; the connection of the department to other key organizational units; and how all these elements interact to carry out departmental actions. The mental model would also include the environmental demands that the manager's department faces and how those demands or contingencies relate to department members' responses and actions.

Mental models serve three functions: description, explanation, and prediction. By giving individuals a framework that describes and organizes phenomena, mental models give people a sense of control over their environment and a starting point from which to begin to tackle problems. Mental models help people make sense of their surroundings, and when that happens, people can form expectations; they can begin to make predictions about future events and behaviors. In addition, mental models make it easier for people to incorporate new information into preexisting categories. They make it possible to navigate novel problem situations more quickly.

How Mental Models Form and Develop

A person will begin to develop a mental model of a system as soon as he or she is exposed to it. Initially, the mental model will include just factual information about the elements and parts of the system, as well as basic information about how these elements are related. Such information is called declarative knowledge. Thus, when an organization gets a new chief executive officer, for example, that new CEO will quickly begin to form an understanding of the company's organizational units and the members within these units. This newly forming model will also include knowledge about how units and members relate to one another and will contain the most detailed information about those people and processes with which the CEO interacts most frequently.

As the CEO gains experience, he or she enriches the mental model with knowledge about how to get things done within the system—how units and members act to accomplish specified actions, what the key steps are in particular action sequences, and how certain routine goals are met.

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