Systems theory provides a framework for viewing organizations as complex systems with interdependent parts. It recognizes that organizations are open systems that import and export resources with their environment. An organization's structure and functions depend on its environment and ability to adapt through feedback. The learning organization applies systems principles by continually expanding its capacity to learn from its environment through open communication between interdependent parts.

1. Chapter 4: SYSTEMS THEORY
Provides a general analytical
framework (perspective) for viewing
an organization.

2. 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”

3. Overview
 General Theoretical Distinctions
 Misunderstandings
 Strengths of Systems Theory
 Systems Framework
 General Systems Theory Principles
 System Characteristics
 Contingency Theory
 The Learning Organization

4. 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

5. 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.

6. 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
 Seeks to explain “synergy” & “interdependence”
 Broadens the theoretical lens for viewing
organizational behavior.

7. Systems Framework
 Ludwig von Bertalanffy (1968)
 Offered a more comprehensive view of organizations
 NOT a theory of management - new way of
conceptualizing and studying organizations
 Four Strengths (“promises”) M. Scott Poole
– Designed to deal with complexity
– Attempts to do so with precision
– Takes a holistic view
– It is a theory of emergents - actions and outcomes at the collective
level emerge from the actions and interactions of the individuals
that make up the collective

8. 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)
– Second Principle of Thermodynamics (ENTROPY)
 Entropy must increase to a maximum
 Negentropy increases growth and a state of survival
– Synergy (extra energy causes nonsummativity--whole is greater than sum
of parts)
– Equifinality vs. “one best way.”

9. 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)

10. 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

11. 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

12. Characteristics of Organizations as Systems
 McMillan & Northern (1995) on Enabling Co-dependency
– Asymmetrical communication status of the hierarchy
 Levels of authority
 Fear of Punishment
– The socially acceptable addiction
 Workaholics
 Addiction leads to more co-dependency
– The organization’s selective attention
 Money and power as distractions
 Focus on ends instead of means
– Skilled communication incompetence
 Deprived of useful feedback
 Emotion is masked
 First extension of Systems Theory into Management Practice -
CONTINGENCY THEORY

13. 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)

14. 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

15. 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

16. 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 (Chapter 6)
 Synergy and Nonsummativity are Important

17. 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.

18. 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

19. 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

20. Bottom Line
The same misunderstandings and
problems that continue to occur
will eventually cause fatal damage
to the system.