An Overview Of The Systems Theory Of Management

Until 1940, Physicist studied closed systems and deduced laws, which applied to those systems at every instance. Thus taking those studies as a reference in 1940 a biologist named „Ludwig von Bertalanffy‟ studied and founded a new theory which currently, in this spontaneously changing and emerging market & industries, is applied for the betterment of the enterprise. The main aspect of this particular theory is considering an organization as a whole system which may comprise of many „Sub-Systems‟. The complex interaction between these sub-systems leads to the proper functioning of a whole system. Using system dynamics and approaching a holistic view can provide an insight into how an ideal enterprise or a system would function. This paper is just an overview of the suggested theory and summarises the popular work done by various experts in this field.

Introduction

Systems theory is one of the most promising theories of all which are being currently used by many organizations. In this particular theory, an organization is considered as a whole system. A system can be made up of a large number of subparts that interact in a complex way. In such systems, the effect of the whole system is taken into consideration rather than contemplating the results of a particular subpart.

History

Initially proposed by a biologist „Ludwig von Bertalanffy‟ in 1940, shed the light on the use of an open system for a living organism and that the laws and principles of the closed system were not to be applied on this system. Further in 1950 E.T. Grether concluded that for the development in the marketing science two things were required: better tools for investigating marketing facts, and development of a hypothetical framework that will help in the questioning regarding marketing phenomenon. In the journal Management Science, well-renowned economist Kenneth Boulding suggested the use of Systems theory for management.

Further researches and various studies included „Systems Theory‟ as a core subject and formulated various other techniques to implement it. For example „David J Teece‟ studied “Dynamic capabilities as a (workable) management systems theory”, Eric Reidenbach & Terence Olivia studied “General living systems theory and marketing: A framework for analysis”. Various other management & economics experts studied this theory and have formulated their own techniques to implement it.

Systems Theory

The goal of understanding any organization or organism cannot be achieved by studying its components in an isolated environment. Thus to achieve such goals „System theory‟ was developed to provide us a holistic view of any organization.

Definition

“A system is a set of two or more interrelated elements with the following properties:

• Each element has an effect on the functioning of the whole.
• Each element is affected by at least one other element in the system.
• All possible subgroups of elements also have the first two properties.”

Systems can be divided into two following categories:

• Closed Systems: These systems refrain from interacting with their environment. These systems are hardly affected by its environment and maintain their original state for a long time. E.g.: Research Labs.
• Open Systems: These systems interact with their environment. These systems are easily affected by the changes in their environment and are very vulnerable to such changes. E.g.: a living organism. As various external factors affect an organizations or organisms workflow and can cause various sudden changes in its procedures, closed systems laws and regulations cannot be applied to these types of subjects. These types of systems are not self-sustainable and will deteriorate at a faster rate than that of an open system. Thus for long term sustainability and flourishment of any organization or organism, an open system is considered to be an ideal system. In this type, it can survive by relying on the environmental factors required for its own betterment.

Characteristics of Systems Theory

James Grier Miller in his extraordinary work, Living Systems (1978) has concluded a generalized theory which focuses on a complete description of the structure, process, and behaviour of all the living systems whether they are small organisms like a cell or big organization like a federal government. Miller gave nine main characteristics of any living organism that are:

1. Open: It should have permeable boundaries and require the transfer of energy, matter, and information through these boundaries for its survival.
2. Negentropic: Energy renewing
3. Complex above a minimum level
4. Contain a blueprint of their structure and process
5. Have a decision-making unit controlling the entire system
6. Have critical subsystems
7. Subsystems are integrated, self-regulating, and act as a whole with a purpose
8. Can exist in a given environment
9. Should contain organic compounds.

Components of Systems Theory

1. Subsystems: “Each small part of the bigger whole forms the whole organization. These small parts as subsystems”.
2. Synergy: “The sum total of total parts is less than that of the whole. Synergy defines the relationships amongst all parts of the organization. If every department works independently, the total output would be less than what is produced by them together”.
3. System Boundary: System boundary separates any system from its surrounding known as environment. “The world outside of the boundary of the system is its environment. This boundary is flexible in case of open system and rigid in case of a closed system”.
4. Flow: “It represents the movement of inputs into the system from the environment, their transformation into outputs and supply of outputs to the environment”.
5. Feedback: “Feedback mechanism helps in knowing whether or not output is accepted by the environment. The information is feedback to the organization so that organizational operations can be assessed and if need be, corrected. Feedback means the response of the environment to organizational outputs”.

Building Blocks of Systems Theory

Input: They can be categorized into two subparts:

• Maintenance inputs: Required to help sustain the system.
• Production inputs: Energic and physical inputs required so as to process it in a materialistic yield.

Throughput: Various operations and processes required or done on the inputs so as to produce a product required by the environment. This product is specifically crafted as per the needs of the environment.

Output: At this stage, a final product is delivered to its environment through various channels.

Feedback: This particular component of the system enables us to regulate and improve the quality of our product.

Results

Advantages

• The holistic view being the most obvious feature of this theory, a systems approach also focuses on the study of individual parts.
• A wide range of potential framework allowing us to utilize the Systems Theory to its fullest is possible.
• Deals with a vast and complex network of subsystems.
• Adapts as per the feedbacks and its environment for its own betterment.
• Multidisciplinary approach.

Disadvantages

• It lacks in providing tools and procedures in order to implement as an organizational practice.
• Originally theorized on living organisms, therefore factors like human behaviour and hierarchy were not considered.
• Depends on its environment. Thus vulnerable to a series of problems and issues due to its unpredictability.

Conclusion

It is clear from the above mentioned text and facts that the Systems Theory does provide a base for various techniques and approaches and help them to formulate themselves. While doing so, although it fails to capture the essence of human behaviour and hierarchy, it can be applied in an ideal situation. Being open to the environment helps in its own sustainability and prosperity. To summarize the Systems Theory, it can be said, a vast field the ideas and opportunities are yet to be explored and in near future it can prove to be the very basic building block of every organization.