Rather than dealing separately with the various segments of an organization, the systems approach to management views the organization as a unified, purpose full system composed of interrelated parts. This approach gives managers a way of looking at the organization as a whole and as a part of the larger external environment. Systems theory tells us that the activity of any segment of an organization affects in varying degrees, the activity of every other segment.
Production managers in a manufacturer’s plant, for example prefer long uninterrupted production runs of standardized products in order to maintain maximum efficiency and low costs. Marketing managers, on the other hand, who want to offer customers quick delivery of a wide range of products, would like a flexible manufacturing schedule that can fill special orders on short notice. Systems oriented production managers make scheduling decisions only after they have identified the impact of these decisions on other departments and on the entire organization. The point of the systems approach is that managers cannot function wholly within the confines of the traditional organization chart. They must mesh their department with the whole enterprises. To do what, they have to communicate not only with other employees and departments, but frequently with representatives of other organizations as well. Clearly systems managers grasp the importance of webs of business relationships to their efforts.
Some key Concepts:
Many of the concepts of general systems theory are finding their way into the language of management. Managers need to be familiar with the systems vocabulary so they can keep pace with current developments.
Subsystems: The parts that make up the whole of a system are called subsystems. And each system in turn may be a subsystem of a still larger whole. Thus a department is a subsystem of a plant, which may be a subsystem of a company, which may be a subsystem of a conglomerate or an industry which is a subsystem of the national economy which is a subsystem of the world systems.
Synergy: Synergy means that the whole is greater than the sum of its parts. In organizational terms, synergy means that as separate departments within an organization cooperate and interact, they become more productive than if each were to act in isolation, For example, in a small firm, it is more efficient for each department to deal with one Finance department than for each department to have a separate finance department of its own.
Open and closed Systems: A system is considered an open system if it interacts with its environment; it is considered a closed system if it does not. All organizations interact with their environment, but the extent to which they do so varies. An automobile plant, for example, is a far more open system than a monetary or a prison.
System Boundary: Each system has a boundary that separates it from its environment. In a closed system, the system boundary is rigid; in an open system, the boundary is more flexible. The system boundaries of many organizations have become increasingly flexible in recent years. For example, managers at oil companies wishing to, engage in offshore drilling now consider public concern for the environment. A trend is that American communities are demanding more and more environmental responsibility from companies. For example, Santa Rosa, California, a city of 125,000 treats environmental violations such as off gassing a waste product that is allowing it to evaporate into the atmosphere as a potential criminal offense.
Flow: A system has flows of information materials and energy (including human energy). These enter the system from the environment as inputs (raw materials for example), undergo transformation processes within the system (operations that alter them) and exit the system as outputs (goods and services).
Feedback: Feedback is the key to system controls. As operations of the system proceed, information is fed back to the appropriate people, and perhaps to a computer, so that the work can be assessed and, if necessary corrected. For example when Aluminum Company of America began feeding production data back to the factory floor, workers in the Addy, Washington, magnesium plant quickly observed ways to improve operations, boosting productivity by 72 percent.
Systems theory calls attention to the dynamic and interrelated nature of organizations and the management task. Thus, it provides a framework within which we can plan actions and anticipate both immediate and far reaching consequences while allowing us to understand unanticipated consequences as they develop. With a systems perspective, general managers can more easily maintain a balance between the needs of the various parts of the enterprises and the needs and goals of the whole firm.