January 21, 2016

Systems Approach in Management

Business organizations are systems. Management of an organization can also be viewed as a system.

A system may be defined as an assemblage of objects or functions united by some interaction or interdependence. The action in one or of one causes a reaction in another.

Systems may be open loop or closed loop. In the closed-loop systems, there is a feedback of information to correct errors that are detected in output of the system. In the case of a production system, when defects are noticed by the inspectors, if the system is examined and adjusted, there is a closed loop system in operation. If simply, the rejected are thrown out and nothing else is done, the closed loop is not operating.   In management functions, control is the function that measures results and further plans are made in the light of plan-results gaps.

Also, systems can be open systems. Business organizations are open systems, they are part of industrial systems, which are parts of social systems

The effective manager must in a very real sense, be a scientific and creative designer of workable systems. Systems composed of subsystem which are run by various people and having relations. Any problem in one subsystem has an effect on other subsystem and therefore on the output of the whole system. If a task is achieved by people are made unhappy in the process, for the next task the system will be full of unhappy people who may not even listen to what the managers are saying.

Kotler and Keller recommend system approach to marketing as one aspect of holistic marketing which they recommend as the appropriate concept for the 21st Century in their 14 Edition of Marketing Management.

Integrated Marketing

Entire marketing function or mix is to be treated as a system and each activity has an effect on other activities. Synergy can be created among the activities and the overall effect can be magnified when integrated marketing or systems thinking based marketing is practiced.

Management Systems

Based on Management Systems: A Viable Approach

by Maurice Yolles, 1999
Pub by Financial Times Pitman

Management can be argued as being concerned with inquiry and action.  Inquiry occurs through planning and by defining organisational mission, goals and manager aims. It subsequently results in action and involves the cybernetic processes of control and communications.

All strategies are influenced by worldviews of individuals and of groups. Each individual perceives the world in his own  way, that perception  determines how he responds to it. No doubt, the worldview is influenced by the socialization that starts with the family  and is further affected by experiences of each individual. Organizations also have unique worldviews. Worldviews are regarded as informal and are called weltanschauungen whether they belong to either an individual or a group. Some beliefs, values, attitudes, and concepts that are part of worldviews can be made more or less transparent to others. When this occurs we say that that they have been formalised, and turned into paradigms. Weltanschauungen are not transparent to others, and are informal. Worldviews are manifested as behaviour  which is a result of the interplay between weltanschauungen of those individuals or organisations and the paradigms around.

Management systems describe the process of management through the application of systems metaphors. It was initiated in the 1930s with the work of Barnard, where organisations are seen as cooperative systems. All managed organisations are seen as systems that share certain conceptual elements. These include input, process, output, and feedback. The inputs in the manufacturing firm, for instance, consist of raw materials, technical knowledge, labour, equipment, and financing, all of which are combined under managerial direction into a process that results in a finished output or product. The market acceptance of the product and resulting sales give a financial return (feedback) to the firm which reactivates the cycle. Low sales indicate that a change in the input or process is necessary to produce a more acceptable output. Through cycles such as these, organisations learn and maintain their existence.

Business systems are seen to be open to their environment. They import inputs, export outputs, and interpret the feedback they receive from the environment. What happens in the environment affects them, and as the environment changes, management must monitor the changes and adapt the organisation to the new situation.

 In the business systems, to achieve organisational goals, people must perform tasks, using technical knowledge and equipment, and they must work together in structured relationships. Human beings enter into social relationships, both formal (job-related) and informal (non-job-related) at the work place. The task of management is to coordinate all of these parts and plan future activities. It also involves decision-making and regulation of the organisational system. Managers are involved in planning, implementing, and controlling to achieve the set goals.

There are two important lessons for the manager in open systems theory of management. The first is that no organisation exists in a vacuum. The environment constrains what the manager can do, but it only offers opportunities and potentialities. Managers must be aware of and understand environmental events and trends because the organisation's well-being and even survival depend upon appropriate adaptation to change.

The second lesson of the systems approach is its stress on the interrelatedness of the parts of an organisation. Lower level managers  are often tempted to see organisational problems and activities in isolation. In an extreme case, a manager may concentrate upon the efficient functioning of his or her own department and give only secondary attention to its relationships with other parts of the organisation. Any neglect of important relationships results in some degree of inefficiency or effectiveness of the organization.

Open Systems Theory

An open system interacts with its environment. In particular, “with respect to its relations with the
environment, a system is called open that maintains exchanges with its environment - especially exchanges of matter, energy and information.

According to von Bertalanffy [1973] the theory of open systems represent generalisations of physical theory, kinetics, and thermodynamics, which led to new principles and insight. Negative feedback is one of these. It occurs when homeostatic maintenance of a characteristic state or goal is desired. It is based on circular causal chains and mechanisms monitoring and feeding back information on deviations from the state to be maintained or the goal to be achieved. Another is the idea of equifinity, where an open system has a tendency to move towards having final states that derive from different initial states and in different ways.

Adaptation is also seen as an important feature of open systems. Open systems theory recognises that systems are in dynamic relationship with their environment, and receive inputs that they transform in some way to create outputs. The open system is seen to adapt to its environment by responding to changes in the environment as well as response of environment to its output through changes in its form and processes. The open system is supposed to be in continuing interaction with its external environment and maintains homeostasis (desired state).

The terms used in Open Systems Theory

Inputs (resources): like raw materials, money, people (human resources), equipment, information, knowledge, legal authority from the environment for action.

Outputs: products, services, ideas as an outcome of organisational action; and organisation transfers its main outputs beck to the environment and uses others internally.

Technology: tools, machines, techniques for transforming recourses into outputs; techniques can be mental (e.g., exercising judgement) social, chemical, physical, mechanical, or electronic. Environment: the task environment includes all of the external organisations and conditions that are directly related to an organisation’s main operations and its technologies.

Goals and strategies: future states sought by the organisation’s dominant decision makers. Goals are desired end states, while objectives are specified targets and indicators of goal attainment. Strategies are overall routes to goals, including ways of dealing with the environment. Plans specify courses of action towards an end goal. Goals and strategies are the outcomes of conflict and negotiation among powerful parties within the outside organisation.

Behaviour and process: prevailing patterns of behaviour, interactions, and relations between groups and individuals - including corporations, conflict, coordination, communication, controlling and rewarding behaviour, influence and power relations, goal setting, information gathering, self-criticism, evaluation, group

Culture: shared norms, values, beliefs and assumptions, and the behaviour and artefacts that express these orientations - including symbols, rituals, stories, and language; norms and understanding about the nature and identity of the organisation, the way work is done, the value and possibility of changing or innovating, relations between lower and higher ranks, the nature of the environment.

Form: this is composed of structure - the enduring relations between individuals, groups, and larger units - including role assignments, grouping of positions in divisions/departments..., and process, such as standard operating procedures and human resource mechanisms.

The System Metaphor

A situation can be seen as a system if it can be associated with the accomplishment of some purpose. The system can be generically defined through the conceptualisation that is has:

1. a set of connected parts,
2. a complex whole,
3. a materially or immaterially organised body.


Once a boundary has been created, we can refer to the space of rich interactions as the system domain, and that of the poor interactions as its external environment. A system may be said to be purposeful when it pursues actions that in some way relate to goals that represent purpose. Entities in the environment are seen to influence the system or its parts.

A business system takes inputs from the external environment, and in return provides it with outputs. It is thus seen as a transformer of inputs to outputs. The processes that occur to enable this are said to be purposive. The inputs are resources that may be both material or non-material and may include: raw materials, equipment, people, money, information, knowledge, and energy. The outputs may be material (like roducts), or non-material (like services).

A system can be seen as a whole with a set of parts that may be systems in their own right, when they are called subsystems. Thus the system domain will be part of the environment of the subsystem. This idea is recursive, so that subsystems can themselves have subsystems.

Within the bounds of a system, the parts form a richly interactive group that has been bounded together holistically through purpose. They are said to be synergistic. The concept of synergy means that the value of the parts of a system is greater when they work together cooperatively as a whole. As the level of cooperation reduces, so the parts begin to operate for their own independent purposes (in pursuit of their unrelated goals), and this may be contrary to the purposes of the system as a whole.

We can talk of primary and secondary purposes. For example, in dentistry, the primary purpose is patient dental health care with a secondary purpose of patient dental education. A purposeful system is task orientated through its actions. A primary task enables the primary purpose to be accomplished.

An Organised Body

A coherent situation can be modelled to have a form and as such will be seen to be
organised. An organised body is something which
(a) has an orderly structure
(b) has a working order,
(c) is organic.

An orderly structure occurs if the parts of a whole can be seen to have a relationship that has a meaning for the perceiver. Normally, this means that the structure has a purpose that the order is responsible for. If a coherent situation has a working order, then it is engaged in processes that occur according to some progression such that a purpose can be identified. If a coherent situation is organic, then it has a set of parts that are constituent of the whole and are coordinated within it. If an organic whole continues to exist, then coordination implies that there will be some control and communications processes at work that contribute to its continuance.

An alternative expression for an organised body is an organisation.  It may be worth noting at this point that in the literature there is some difference over the definition of organisation and structure. Social structure refers to fundamental social relationships seen to apply to: any ordered arrangement of distinguishable wholes [Frith, 1949] that represent the principles underlying social relations, and not the content. The nature of structures is that they set bounds on, or limit, possible courses of organisational action.  Thus, structure can be seen to be devoid of action, but is related to action. Action that involves the transformation of something is referred to as process, and we may therefore see that structure and process can be differentiated.

Organisation has both structures and processes. The organisation of a body has conditionality. Consider that a system is seen as a whole with a set of parts. Without constraint, any activities can occur in any of the parts, and each part can be seen as a space of potentially unlimited possible activities. But how does the purpose of the system get achieved. To achieve the purpose, the activities of parts have to limited and ti is done through the process of communication that occurs between the parts, that enables activities in one part to be related in some way to those of another and vice versa. Communication thus acts as an enabling mechanism for organisation that constrains the potential for activities in the parts so as to facilitate them to work together as whole. A whole is said to be richly connected when the parts are not easily reducible so that separate individual examination can occur without reference to the other parts. Conversely, poorly connected situations occur where the parts of the whole are highly reducible. In richly connected situations,  we would expect to find a great deal of communication.

Ashby introduces the idea that organisation can have quality by distinguishing between good and bad organisation in relativistic terms.  In defining good and bad, Ashby interprets the idea of Summerhoff
[1950] who explains that good and bad organisation is determined through: (a) the relationship between the a set of perturbations that disturbs the situation in some way, and (b) the perceived goals that the organisation is seen to be attempting to achieve. If the nature of the perturbations change, then the organisation is said to be good if it responds to the change, and bad if it does not.

Ashby has created a view of what constitutes a good or a bad organisation through a model that has become central to managerial cybernetics as it has to other fields of management theory. It has done this because it generates a satisfactory way of looking at them.  This view is consistent with much of the recent management theory literature in that it promotes the idea that it is through the institutionalisation of innovation [Drucker, 1985]  organisations have to respond to an uncertain and unpredictable environment. Innovation promotes survivability.


A Systems Approach to Management
G. M. Jenkins and P. V. Youle
Vol. 19, Special Conference Issue: Decision-Making (Apr., 1968), pp. 5-21
Published by: Operational Research Society

Systems approaches to management Michael Jackson

The Basic Management Cycle: A Systems Approach to the Management Process
W.R. Allen

January Month Management Knowledge Revision Plan

MBA Core Management Knowledge - One Year Revision Schedule

Updated  21 Jan 2016,   17 Sep 2015, 10 Jan 2015

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