- A Modern Organizational
A quote to start with-
“You think that because you understand
one that you must understand two
because one and one make two. But you
forget that you must also understand
-Sufi Teaching Story (quoted in Meadows 2008)
Systems approach in Management
Most modern approaches to management have
integrated and expanded the key concepts
developed within the classical approaches after
Modern approach is studied in 4 phases:
I. Quantitative approach
II. System approach
III. Contingency approach
IV. Excellence approach
What is a system?
A system is a collection of parts that interacts
with each other to produce outcomes that
are more than the sum of the parts alone.
Or, the term ‘System’ may be defined as a set
of interrelated and interacting components
assembled in a particular sequence so as to
produce some results.
4 Elements to a system:
For eg. A tree is a system of leaves, branches,
trunk, fruits that together interact through
photosynthesis and other processes to create
outcomes far larger than what any single part
The tree itself is a part of a larger system like a
forest or the ecosystem.
Neighbourhood Cities Regions Nation
A basketball team
Types of systems
Self Contained & ignores the effect on environment on a system.
Little applicability to study of organizations.
Recognizes dynamic interaction of the system with environment.
Used to explain organization systems.
Evolution of systems
Basic Open System
Characteristics of an Open System
Obtaining Inputs/energy- Dominos draws customers
and materials from outside.
Throughputs- Input is transformed into a new product.
Ingredients being made into a food item.
Outputs- Service or good given to customers, such as
a complete pizza.
Systems as a cycle of events- Input-output cycle.
Pizza makes customer happy which makes him buy
more and the cycle repeats. Ensuring growth.
Negative Entropy- Entropy- Disintegrate or run down.
A closed system, due to no acquaintance with the
environment will run down overtime. Open system
characterized by negative entropy.
Dominos must use fresh inputs, as such is the
nature of the business, to grow.
Information Input, Negative Feedback - Inputs
include information of the environment. Outputs
contain information of the company w.r.t. the
Steady State- Energy can be imported to arrest
entropy, and thus maintain some constancy in
energy exchange. For Dominos, they have a whole
floor of innovation in their Brisbane office.
Differentiation- Open system organisations move
toward the multiplication and elaboration of more
specialised functional roles . Dominos have
achieved this by introducing regulated feedback
mechanisms, such as customer surveys and market
Integration and Coordination-As differentiation
proceeds, it is countered by processes that bring the
system together for unified functioning.
Dominos achieved coordination-pizza tracking system
as a result of market research and coordinates the
process from the time of input of the customers order,
the processing or preparation of the pizza, and the
export or delivery to the customer.
Equifinality- Ability of an organisation to move toward a
It is unclear from the case study what the final state
of Dominos will be, as it is not known what
regulatory mechanisms, if any, control the
organisation’s operations. However, it is clear that
they have a goal, and are on target to reach that
Importance of the Systems
For managers- permits seeing the
organization as a whole with
Prevents lower-level managers from
viewing their jobs as static or isolated.
Encourages managers to identify and
understand the environment.
More effective problem solving
Satisfaction of all stakeholders
Limitations of the Systems
Abstract- One thing to talk about inter-dependence,
and another to talk about
the degree of the same, if a particular
action is taken.
Has only an intellectual appeal and
cannot be applied to practical situations.
It doesn’t offer any tool or technique for
Value to managers
Managers using systems approach are less
prone to look for immediate results.
Less likely to take decisions that trade off
organisations long term health for looking
good in short term.
Managers awareness of interdependency
of organisational activities is increased.
Applicable when end goals are either
vague or defy measurement.
Case Study on General Motors
General motors, from its inception through the
early 1960s, operated as if it were basically a
closed system . Management decided on the
products it wanted to sell, produced those
products, and offered them to customers. GM
assumed that whatever it made would sell, and for
decades it was right. Government was generally
benign, and consumer-advocate groups were
non-existent or had little influence. GM virtually
ignored its environment, for the most part,
because its executives saw the environment as
having almost no impact on the company’s
While some critics of GM still attack the firm for
being too insulated from the environment, GM
has certainly become more open. The actions
of consumer groups, stockholders, government
regulators, and foreign competition have
forced GM to interact with, and be more
responsive to, its environment. So while it may
not be the open model for an open system, GM
is more open today than it was 50 years ago.
How could GM survive as a closed
Why did GM feel the need to become
open to the environment?
Give one example of environment
interaction of GM.
How could GM survive as a
closed organization initially?
At the turn of the 20th century there were fewer
than 8,000 automobiles in America, many of them
powered by steam or electricity, others had
gasoline engines. An unexpected turnout at the
first New York Auto Show in 1900, showed the
magnitude of the public’s fascination with the
With horse drawn vehicles initially and then
automobiles, GM became the leading
Commitment to innovation brought out great new
Why did GM feel the need to
become open to the environment?
Closed systems can hamper growth since the
flow of information stays within the system and
has no chance to interact with or build on
knowledge from the outer environment.
The 60s and 70s were a time of new challenges
and great change. Environmental concerns,
increased as prices and foreign competition led
to an unprecedented downsizing of vehicles
across all GM vehicle lines.
Give one example of environment
interaction of GM.
GM profits struggled from 1981 to 1983 following
the late 1970s and early 1980s recession.
GM profits rebounded during the 1980s.
After careful screening of the environment which
included the innovations of other companies
and demands of consumers GM had downsized
its product line and invested heavily in
It’s not easy for the management to consider the
pros and cons of open and closed organizations
and to find the right mix.
The solution is to adjust the organization
according to the situation:
u in periods of changes organizations are in need of
more flexibility and innovation – OPEN
u in quiet phases, when it comes to the realization of
certain projects - CLOSED