The Systems Perspective

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The Systems Perspective

Recognizing that the classical, behavioral, and quantitative approaches to management are not necessarily contradictory or mutually exclusive is important. Even though each perspective makes specific assumptions and predictions, each can also complement the others. Indeed, a complete understanding of management requires an appreciation of all three perspectives. In addition, contemporary management theory based on systems and contingency perspectives builds from these earlier perspectives in a variety of ways.  Enrol on one of BOTI’s leadership development courses, management skills training courses or management training programmes and discover the world of management.

Enrol on one of BOTI’s leadership development courses, management skills training courses or management training programmes and discover the world of management.

The systems perspective is one important contemporary management theory.  A system is an interrelated set of elements functioning as a whole. As shown by viewing an organization as a system, we can identify four basic elements: inputs, transformation processes, outputs, and feedback. First, inputs are the material, human, financial, and information resources the organization gets from its environment. Next, through technological and managerial processes, inputs are transformed into outputs. Outputs include products, services, or both (tangible and intangible); profits, losses, or both (even notfor-profit organizations must operate within their budgets); employee behaviors; and information. Finally, the environment reacts to these outputs and provides feedback to the system.

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Thinking of organizations as systems provides us with a variety of important viewpoints on organizations such as the concepts of open systems, subsystems, synergy, and entropy. Open systems are systems that interact with their environment, whereas closed systems do not interact with their environment. Although organizations are open systems, some make the mistake of ignoring their environment and behaving as though their environment is not important.

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The systems perspective also stresses the importance of subsystems-systems within a broader system. For example, the marketing, production, and finance functions within Mattel are systems in their own right but are also subsystems within the overall organization. Because they are interdependent, a change in one subsystem can affect other subsystems as well. If the production department at Mattel lowers the quality of the toys being made (by buying lower-quality materials, for example), the effects are felt in finance (improved cash flow in the short run owing to lower costs) and marketing (decreased sales in the long run because of customer dissatisfaction). Managers must therefore remember that although organizational subsystems can be managed with some degree of autonomy, their interdependence should not be overlooked.

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Synergy suggests that organizational units (or subsystems) may often be more successful working together than working alone. The Walt Disney Company, for example, benefits greatly from synergy. The company’s movies, theme parks, television programs, and merchandise licensing programs all benefit one another. Children who enjoy a Disney movie like Mulan want to go to Disney World and see the Mulan show or parade and to buy stuffed animals of the film’s characters. Music from the film generates additional revenues for the firm, as do computer games and other licensing arrangements for lunch boxes, clothing, and so forth. Synergy is an important concept for managers because it emphasizes the importance of working together in a cooperative and coordinated fashion.

Finally, entropy is a normal process that leads to system decline. When an organization does not monitor feedback from its environment and make appropriate adjustments, it may fail. For example, Studebaker, W T Grant, and Penn Central Railroad went bankrupt because each company failed to revitalize itself and keep pace with changes in its environment. A primary objective of management, from a systems perspective, is to continually re-energize the organization to avoid entropy.

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