Sharda University School of Business Studies

SYSTEMS THEORY Provides a general analytical framework (perspective) for viewing an organization.

The Systems Theory What Is a System? ◦A collection of parts operating interdependently to achieve a common purpose Systems Approach ◦Shows that the performance of the whole is greater than the sum of the performance of its parts  Seeks to identify all parts of an organized activity and how they interact

Systems Theory Synergy Interdependence Interconnections ◦within the organization ◦between the organization and the environment Organization as ORGANISM “A set of elements standing in inter- relations”

General Theoretical Distinctions Classical and humanistic theories prescribe organizational behavior, organizational structure or managerial practice (prediction and control). MACHINE Systems theory provides an analytical framework for viewing an organization in general (description and explanation). ORGANISM

Misunderstandings Doesn’t focus on specific task functions Doesn’t directly explore the impact of interpersonal relationships and loyalty on productivity Doesn’t provide for detailed focus Changes in environment directly affect the structure and function of the organization.

Strengths Recognizes... ◦interdependence of personnel ◦impact of environment on organizational structure and function ◦affect of outside stakeholders on the organization Focuses on environment and how changes can impact the organization Broadens the theoretical lens for viewing organizational behavior.

Principles of General Systems Theory Laws that govern biological open systems can be applied to systems of any form. Open-Systems Theory Principles ◦Parts that make up the system are interrelated. ◦Health of overall system is contingent on subsystem functioning. ◦Open systems import and export material from and to the environment. ◦Permeable boundaries (materials can pass through) ◦Relative openness (system can regulate permeability) ◦Synergy (extra energy--whole is greater than sum of parts)

Characteristics of Organizations as Systems Input-Throughput-Output ◦Inputs  Maintenance Inputs (energic imports that sustain system)  Production Inputs (energic imports which are processed to yield a productive outcome) ◦Throughput (System parts transform the material or energy) ◦Output (System returns product to the environment) ◦TRANSFORMATION MODEL (input is transformed by system)

Feedback and Dynamic Homeostasis ◦Positive Feedback - move from status quo ◦Negative Feedback - return to status quo ◦Dynamic Homeostasis - balance of energy exchange Equivocality and Requisite Variety (Karl Weick) ◦Equivocality (uncertainty and ambiguity) ◦Requisite Variety (complex inputs must be addressed with complex processes)

Characteristics of Organizations as Systems Role of Communication ◦Communication mechanisms must be in place for the organizational system to exchange relevant information with its environment  Boundary Spanners perform this function!  Media Outlets are communication link between system & environment ◦Communication provides for the flow of information among the subsystems Systems, Subsystems, and Supersystems ◦Systems are a set of interrelated parts that turn inputs into outputs through processing ◦Subsystems do the processing ◦Supersystems are other systems in environment of which the survival of the focal system is dependent

Five Main Types of Subsystems ◦Production (technical) Subsystems - concerned with throughputs-assembly line ◦Supportive Subsystems - ensure production inputs are available-import raw material ◦Maintenance Subsystems - social relations in the system-HR, training ◦Adaptive Subsystems - monitor the environment and generate responses (PR) ◦Managerial Subsystems - coordinate, adjust, control, and direct subsystems

Characteristics of Organizations as Systems Boundaries ◦The part of the system that separates it from its environment ◦Four Types of Boundaries (Becker, 1997)  Physical Boundary - prevents access (security system)  Linguistic Boundary - specialized language (jargon)  Systemic Boundary - rules that regulate interaction (titles)  Psychological Boundary - restricts communication (stereotypes, prejudices)

The ‘Closed’ System ◦Healthy organization is OPEN ◦Do not recognize they are embedded in a relevant environment ◦Overly focused on internal functions and behaviors ◦Do not recognize or implement equifinality ◦Inability to use feedback appropriately ◦CO-DEPENDENT

Contingency Theory There is no one best way to structure and manage organizations. Structure and management are contingent on the nature of the environment in which the organization is situated. Argues for “finding the best communication structure under a given set of environmental circumstances.” Management of Innovation - Burns and Stalker (1968)

Two Contingency Theories Burns and Stalker (1968) Management of Innovation ◦Organizational systems should vary based on the level of stability in the environment ◦Two different types of management systems  Mechanistic systems - appropriate for stable environment  Organic systems - required in changing environments (unstable conditions) ◦Management is the Dependent Variable  Variations in environmental factors lead to management Lawrence and Lorsch (1969) ◦Key Issue is environmental uncertainty and information flow ◦Focus on exploring and improving the organization’s relationship with the environment ◦Environment is characterized along a certainty- uncertainty continuum

Pragmatic Application of Systems Theory The Learning Organization ◦Peter Senge’s The Fifth Discipline: The Art and Practice of the Learning Organization (1990) ◦An organization that is continually expanding its capacity to create its future ◦Organizational Learning Occurs under Two Conditions  1) When design of organizational action matches the intended outcome  2) When initial mismatch between intentions and outcomes is corrected, resulting in a match ◦Key attribute of learning organization is increased adaptability ◦Adaptability is increased by advancing from adaptive to generative learning

The Learning Organization Adaptive (single-loop) Learning ◦Involves coping with a situation ◦Limited by the scope of current organizational assumptions ◦Occurs when a mismatch between action and outcome is corrected without changing the underlying values of the system that enabled the mismatch. Generative (double-loop) Learning ◦Moves from COPING to CREATING an improved organizational reality ◦Necessary for eventual survival of the organization Both are Central Features of the Model of the Communicative Organization Synergy and Nonsummativity are Important

The Learning Organization Through communication, teams are able to learn more than individuals operating alone. ◦Critics argue that teams inhibit learning ◦Thoughts? Leadership is a key element in creating and sustaining a learning organization. Leaders are responsible for promoting an atmosphere conducive to learning CREATIVE TENSION ◦Represents difference between the “vision” of where the organization could be and the reality of the current organizational situation.

Impediments to Learning Organization Complexity of the Environment ◦Difficult to determine cause and effect ◦Multiple contributing elements in complex environments Internal Conflicts ◦Individuals, teams, departments, and subcultures are often at odds ◦Energy is drained by conflect Organization members must be trained in communication and conflict-negotiation skills

Summary Systems Theory is NOT a prescriptive management theory Attempts to widen lens through which we examine and understand organizational behavior The Learning Organization ◦Synergy ◦Nonsummativity ◦Interdependence ◦Equifinality ◦Requisite Variety ◦Emphasizes COMMUNICATION in the Learning Process Organizations cannot separate from their environment Organizational teams or subsystems cannot operate in isolation

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