SYSTEM THINKING

Seminar report
on
system thinking
by
B.Sharmila(10
MBI0049)
V.Abishek(10MBI0067)
S.Lekha(10MBI0091)
R.Mohana(10MBI0097)
S.Suchitra(10MBI0118)
N.Vadivel(10MBI0132)

Definitions
Systems Thinking has been defined as an approach to problem solving, by viewing "problems"
as parts of an overall system, rather than reacting to specific part, outcomes or events and
potentially contributing to further development of unintended consequences. System thinking is
not one thing but a set of habits or practices within a framework that is based on the belief that
the component parts of a system can best be understood in the context of relationships with each
other and with other systems, rather than in isolation. Systems thinking focus on cyclical rather
than linear cause and effect.

What is a System?
Very simply, a system is a collection of parts (or subsystems) integrated to accomplish an
overall goal (a system of people is an organization). Systems have input processes, outputs and
outcomes, with ongoing feedback among these various parts. If one part of the system is
removed, the nature of the system is changed.
Systems range from very simple to very complex. There are numerous types of systems. For
example, there are biological systems (the heart, etc.), mechanical systems (thermostat, etc.),
human/mechanical systems (riding a bicycle, etc.), ecological systems (predator/prey, etc.), and
social systems (groups, supply and demand, friendship, etc.).
Complex systems, such as social systems, are comprised of numerous subsystems, as well. These
subsystems are arranged in hierarchies, and integrated to accomplish the overall goal of the
overall system. Each subsystem has its own boundaries of sorts, and includes various inputs,
processes, outputs and outcomes geared to accomplish an overall goal for the subsystem.
A pile of sand is not a system. If one removes a sand particle, you've still got a pile of sand.
However, a functioning car is a system. Remove the carburetor and you've no longer got a
working car.

Systems theory
Systems theory is the transdisciplinary study of systems in general, with the goal of elucidating
principles that can be applied to all types of systems at all nesting levels in all fields of research.
The term does not yet have a well-established, precise meaning, but systems theory can
reasonably be considered a specialization of systems thinking, a generalization of systems
science, a systems approach. The term originates from Bertalanffy's General System Theory
(GST) and is used in later efforts in other fields, such as the action theory of Talcott Parsons and
the system-theory of Niklas Luhmann.
In this context the word systems is used to refer specifically to self-regulating systems i.e. that
are self-correcting through feedback. Self-regulating systems are found in nature, including the
physiological systems of our body, in local and global ecosystems, and in climate - and in human
learning processes.

Systems thinking
System thinking is the process of understanding how things influence one another within a
whole. In nature, systems thinking examples include ecosystems in which various elements such
as air, water, movement, plants, and animals work together to survive or perish. In organizations,
systems consist of people, structures, and processes that work together to make an organization
healthy or unhealthy.

Basic Principles of Systems Thinking.
System thinking provides another lens for understanding people’s behavior within organizations.
It is a very different focus from that of leadership development, where the characteristic of one
individual is seen to determine the fate of the entire organization or department. In systems
thinking, the structure of an organization influences the behavior of the people within it. This
explains why two managers in succeeding positions may be plagued by similar problems, or may
have similar management styles. If the organization calls for micromanaging or covert
leadership, then people will behave according to those unspoken dynamics. This is not to imply

that people are controlled by the structure they arein, but it is more difficult for one person to
“buck the system” (or “cowboy,” as one of my clients likes to call it) and create lasting change
than we are often told. Large systems in particular need systemic interventions, not just
command and control leaders. Systems thinking looks at organizations as organic entities. A look
at some of the “laws” of systems thinking will provide some insight into this, using as an
example an organization that is trying to create a participatory decision-making environment,
where everyone is involved and their input is valued.

Change is slow but can be lasting
If this organization has a long history of unilateral decisionmaking, it will take awhile for
the culture to change. Employees have experience in the past with trying to provide input or
take initiative and being shot down or ignored, so it will take many consistent messages and
actions to convince them that their voices really are important.

Cause and effect are not always closely linked in time
One of the ways that this change might be hindered is if a manager of a department clings to the
Old style of unilateral decisionmaking. His staff quickly learns that he doesn’t really want their
input. Eventually they learn to make a show of providing input, but don’t really participate,
waiting for the inevitable: to be told what to do. Ultimately they don’t participate at a desirable
level for effective collaboration, and the manger begins to assume that they don’t really care or
want to participate, when in fact they do. The manager thinks his staff are apathetic, so he makes
decisions on his own, since he can’t get anyone to participate, and the cycle continues. The cause
and effect of even this simple loop can take many steps to carry out.

The easy answer usually does not take into account the complexity
Of the system.
The easy answer is to put the mangers through some training on how to create a diffusion of
responsibility, information, and decision-making throughout the organization--quick and easy.
But as the above example illustrates, it’s too easy to be effective. Consistent effort throughout
the organization, training, feedback, and reinforcement of collaboration will be required to get
people to really step up with new ideas and information, knowing that they will be heard.
Because organizations as systems exist in a stable state (even when putting out fires is the
familiar stable state you are used to), change is resisted. Quick fixes and easy answers create
surface changes but do not change the way the organization functions, and often when change is
instituted, the behavior of people within a system gets worse before it gets better. But small
changes can produce big results, if you understand the complexity of the system in which
you are working. Sometimes just removing an obstacle or providing the right tool can transform
how people do their work. The key is finding the place where you can have the greatest impact
with the least amount of force. Systems thinkers call these places “leverage points.” While
systems thinking is far more complex a field than can be illustrated in this brief article, hopefully
you have some ideas about what a powerful mindset it is and the kind of issues that systems
thinking can help to address. For more information, see the resources below.

Systems Principles -- Some Examples
Systems theory has identified numerous principles that are common to systems, many of which
help us to better understand organizations. One of the best descriptions of systems principles is in
the booklet "Systems 1: An Introduction to Systems Thinking" by Draper L. Kauffman, Jr.,
edited by Stephen. A. Carlton (from the Innovative Learning Series by Futures Systems, Inc.,
1980, Stephen.A.Carlton, Publisher, Minneapolis, MN (612) 920-0060). The following is
adapted from that booklet.

The system's overall behavior depends on its entire structure (not the sum of its various parts).
The structure determines the various behaviors, which determine the various events. Too often,
we only see and respond to the events. That's why, especially in the early parts of our lives, we
can be so short-sighted and reactionary in our lives and in our work. We miss the broader scheme
of things.
Too often in organizations (and in management training programs), we think we can break up the
system and only have to deal with its parts or with various topics apart from other topics.
Systems theory reminds us that if you break up an elephant, you don't have a bunch of little
elephants.
There is an optimum size for a system.
If we try to make the system any larger, it'll try to break itself up in order to achieve more
stability. Too often in our organizations, we continually strive to keep on growing -- until the
reality of the system intervenes. At this point, we again only see the events, not the behaviors or
the structures that cause them. So we embark on short-sighted strategies to fix events, often only
causing more problems for ourselves and others.
There are numerous other systems principles, e.g.,
- Systems tend to seek balance with their environments
- Systems that do not interact with their environment (e.g., get feedback from customers) tend to
reach limits
A circular relationship exists between the overall system and its parts.
Ever notice how an organization seems to experience the same kinds of problems over and over
again? The problems seem to cycle through the organization. Over time, members of the
organization come to recognize the pattern of events in the cycle, rather than the cycle itself.
Parents notice this as they mature as parents. Over time, they recognize the various phases their
children go through and consider these phases when dealing with the specific behaviors of their
children.

Thinking in Organizations
Recently, management studies have come to view organizations from a new perspective: a
systems perspective. This systems perspective may seem quite basic. Yet, decades of
management training and practices in the workplace have not followed from this perspective.
Only recently, with tremendous changes facing organizations and how they operate, have
educators and managers come to face this new way of looking at things. This interpretation has
brought about a significant change (or paradigm shift) in the way management studies and
approaches organizations.
Why is it Important to Look at Organizations as Systems?
The effect of this systems theory in management is that writers, educators, consultants, etc. are
helping managers to look at organizations from a broader perspective. Systems theory has
brought a new perspective for managers to interpret patterns and events in their organizations. In
the past, managers typically took one part and focused on that. Then they moved all attention to
another part. The problem was that an organization could, e.g., have wonderful departments that
operate well by themselves but don't integrate well together. Consequently, the organization
suffers as a whole.
Now, more managers are recognizing the various parts of the organization, and, in particular, the
interrelations of the parts, e.g., the coordination of central offices with other departments,
engineering with manufacturing, supervisors with workers, etc. Managers now focus more
attention on matters of ongoing organization and feedback. Managers now diagnose problems,
not by examining what appear to be separate pieces of the organization, but by recognizing larger
patterns of interactions. Managers maintain perspective by focusing on the outcomes they want
from their organizations. Now managers focus on structures that provoke behaviors that
determine events -- rather than reacting to events as was always done in the past.

Some Systems Tools
•

Brainstorming tools
o

•

Fishbone or cause and effect diagrams

Dynamic thinking tools
o

Behavior over time diagrams - capture dynamic relationships over time with
multiple variables on one graph

o

Causal loop diagrams - show the relationship between two or more variables, with
two basic loops - reinforcing and balancing.

o

System archetypes - common dynamic relationships that seem to recur in many
situations

•

Structural thinking tools - structural thinking tools take the focus off of correlational
relationships and focuses on the causal structures that produce the observes behavior,
how things actually work.
o

Graphical function diagram - captures the way in which one variable affects
another by plotting the relationship between the two over the full range of
relevant values.

o

Structure-behavior pair - This type of diagram is also called a 'stock and flow' or
an 'accumulator and flow' diagram. The symbols on the charts represent the stock
of something or the flow between two stocks. These are the building blocks for
computer models.

o

Policy-structure diagram - is a conceptual map of the decision-making process
embedded in the organization. It uses the same symbols as the stock and flow
diagrams.

•

Computer-based tools - are based on the automation of the other tools, including the
graphs, causal loops, and stock and flow diagrams. These models allow for simulations,
training tools using simulation, and automated learning labs.

CAUSAL LOOP DIAGRAMS
Causal loop diagrams (CLDs) are a kind of systems thinking tool. These diagrams consist of
arrows connecting variables (things that change over time) in a way that shows how one variable
affects another. Here are some examples:

Each arrow in a causal loop diagram is labeled with an "s" or an "o." "S" means that when the
first variable changes, the second one changes in the same direction (for example, as your
anxiety at work goes up, the number of mistakes you make goes up, too). "O" means that the first
variables causes a change in the opposite direction in the second variable (for example, the more
relaxation exercises you do, the less stressed you feel).
In CLDs, the arrows come together to form loops, and each loop is labeled with an "R" or a "B."
"R" means reinforcing; i.e., the causal relationships within the loop create exponential growth or
collapse. (For instance, the more anxious you are at work, the more mistakes you make, and as
you make more mistakes, you get even more anxious, and so on, in a vicious, upward spiral). "B"
means balancing; i.e., the causal influences in the loop keep things in equilibrium. (For example,
if you feel more stressed, you do more relaxation exercises, which brings your stress level
down.)

CLDs can contain many different "R" and "B" loops, all connected together with arrows. By
drawing these diagrams with your work team or other colleagues, you can get a rich array of
perspectives on what's happening in your organization. You can then look for ways to make
changes so as to improve things. For example, by understanding the connection between anxiety
and mistakes, you could look for ways to reduce anxiety in your organization

Organization as Open Systems
Systems can vary in how open they are to their outside environments. Open systems, such as
organizations and people, exchange information and resources with their environments. They
cannot completely control their own behavior and are influenced in part by external forces.
Organizations, for example, are affected by such environmental conditions as the availability of
raw material, customer demands, and government regulations. Understanding how these external
forces affect the organization can help explain some of its internal behavior. Open systems
display a hierarchical ordering. Each higher level of system comprises lower-level systems:
systems at the level of society comprise organizations; organizations comprise groups
(departments); and groups comprise individuals. Although systems at different levels vary in
many ways—in size and complexity, for example—they have a number of common
characteristics by virtue of being open systems, and those properties can be applied to systems at
any level. The following key properties of open systems are described below: inputs,
transformations, and outputs; boundaries; feedback; equifinality; and alignment..
Any organizational system is composed of three related parts: inputs, transformations, and
outputs. Inputs consist of human or other resources, such as information, energy, and materials,
coming into the system. Inputs are acquired from the system’s external environment. For
example, a manufacturer in organization acquires raw materials from an outside supplier.
Similarly, a hospital nursing unit acquires information concerning a patient’s condition from the

attending physician. In each case, the system (organization or nursing unit) obtains resources
(raw materials or information) from its external environment. Transformations are the processes
of converting inputs into outputs. In organizations, a production or operations function composed
of both social and technological components generally carries out transformations. The social
component consists of people and their work relationships, whereas the technological component
involves tools, techniques, and methods of production or service delivery. Organizations have
developed elaborate mechanisms for transforming incoming resources into goods and services.
Banks, for example, transform deposits into mortgage loans and interest income. Schools attempt
to transform students into more educated people. Transformation processes also can take place at
the group and individual levels. For example, research and development departments can
transform the latest scientific advances into new product ideas. Outputs are the results of what is
transformed by the system and sent to the environment. Thus, inputs that have been transformed
represent outputs ready to leave the system. Group health insurance companies receive
premiums, healthy and unhealthy individuals, and medical bills, transform them through
physician visits and record keeping, and export treated patients and payments to hospitals and
physicians.

Feedback:
feedback is information regarding the actual performance or the results of the system. Not all
such information is feedback, however. Only information used to control the future functioning
of the system is considered feedback. Feedback can be used to maintain the system in a steady
state (for example, keeping an assembly line running at a certain speed) or to help the
organization adapt to changing circumstances. McDonald’s, for example, has strict feedback
processes to ensure that a meal in one outlet is as similar as possible to a meal in any other outlet.
On the other hand, a salesperson in the field may report that sales are not going well and may
insist on some organizational change to improve sales. A market research study may lead the
marketing department to recommend a change to the organization’s advertising campaign.

Alignment:
A system’s overall effectiveness is determined by the extent to which the different parts are

aligned with each other. This alignment or fit concerns the relationships between inputs and
transformations, between transformations and outputs, and among the subsystems of the
transformation process. Diagnosticians who view the relationships among the various parts of a
system as a whole are taking what is referred to as a systemic perspective. Alignment refers to a
characteristic of the relationship between two or more parts. It represents the extent to which the
features, operations, and characteristics of one system support the effectiveness of another
system. Just as the teeth in two ‘wheels of a watch must mesh perfectly for the watch to keep
time, so do the parts of an organization need to mesh for it to be effective. For example, General
Electric attempts to achieve its goals through a strategy of diversification, and a divisional
structure is used to support that strategy. A functional structure would not be a good fit with the
strategy because it is more efficient for one division to focus on one product line than for one
manufacturing department to try to make many different products. The systemic perspective
suggests that diagnosis is the search for misfits among the various parts and subsystems of an
organization.

Benefits of Open Systems View of Organizations:
Today, consultants and clients are learning to more clearly recognize the various parts and
processes of an organization, and, in particular, their inter-relationships and alignment, for
example, the coordination between the Board and the Chief Executive Officer, or integration
between the Strategic Plan and other plans. Understanding of inter-relationships and alignment is
not only about parts and processes within the system, but also to the system and its environment
– an “open systems” approach. Consultants and clients now focus much more attention on the
feedback among the various major parts and processes in the organization and between the
organization and its environment. Consultants examine problems, not just by focusing on what
appears to be separate parts, but on the larger patterns of interactions within the parts. They focus
on structures that provoke behaviors that determine events – rather than reacting to events as was
done in the past. They maintain perspective on performance by focusing on the outcomes that the
organization wants to achieve, particularly in its external environment. The following paragraphs

itemize some of the major benefits when looking at your clients’ organizations from an open
systems perspective.

More Effective Problem Solving
Without clear understanding of the “big picture” of an organization, consultants and leaders tend
to focus only on the behaviors and events associated with problems in the workplace, rather than
on the systems and structures that caused the problems to occur in the first place. To effectively
solve problems in any type of organization, it is critical to be able to identify the real causes of
the problems and how to address those causes. A systems view provides clear understanding of
the “big picture.”

More Effective Leadership
The most important responsibilities of a leader are to set direction and to influence others to
follow that direction. It is difficult to establish direction for an organization and to keep that
organization on its course if you do not understand how the organization works in the first place.
Without a clear understanding of the overall nature and needs of an organization, the leader can
get lost in the day today activities, never really giving attention to the more important activities,
such as planning the organization’s overall direction and organizing their resources. As a result,
the leader “cannot see the forest for the trees.” The leader ends up working harder, rather than
smarter. A systems view helps the leader to really understand the overall structures and dynamics
of the organization and what must be done to guide the organization towards it strategic vision
and goals.

More Effective Communication
One of the most important ingredients for the success of any system is ongoing feedback, or
Communication, among all the parts of the organization. Some of the first symptoms that an
Organization or consulting project is in trouble are sporadic and insufficient communications. In

these situations, people often struggle to see beyond their own roles in the organization or
project. Consequently, people are much less effective than they could be otherwise. Without a
clear understanding of the parts of an organization or project and how they relate to each other, it
is difficult to know what to communicate and to whom. Adapted from “Field Guide to
Consulting and Organizational Development” – to obtain the entire book, select “Publications” at
http://www.authenticityconsulting.com

More Effective Planning
The planning process is basically working one’s way backwards through the system of an
organization or project. It includes identifying desired results (goals and outcomes), what
measures or outputs (tangible results) will indicate that those results have been achieved, what
processes will produce those outputs, and what inputs are required to conduct those processes in
the system. A systems view often makes the planning process much more clear and orderly to
planners.

More Effective Design of Projects, Products and Services
An advantage for designers who have a systems view is that they have stronger knowledge of the
primary parts of their project, product or service and how they should be aligned to more
effectively reach desired goals. A systems view also promotes focus on achieving overall results,
so the day-today details of managing the project, product or service do not become the most
important activities for people to address – so people do not become focused in matters that are
urgent, rather than important.

More Effective Organizational Results
The most successful projects and organizations often use a variety of methods to achieve results.
In projects, methods can include, for example, coaching, facilitating, training or provision of
resources. In organizations, methods can include strategic planning, business planning,
management

and

leadership

development,

team

building,

supervisory

development,

organizational and employee performance management, and principles of organizational change.
Any consultant or leader would be hard-pressed to employ these various methods in an effective

fashion without a good understanding of the overall systems of their project or organization.
Consequently, having a systems view is critical to accomplishing successful results.

Avoid Founder’s Syndrome
Founder’s Syndrome occurs when an organization operates primarily according to the
personality of one of the members of the organization (usually the founder), rather than
according to the mission (purpose) of the organization. When first starting their organizations,
founders often have to do whatever it takes to get the organizations off the ground, including
making seat-of-the-pants decisions to deal with frequent crises that suddenly arise in the
workplace. As a result, founders often struggle to see the larger picture and are unable to suitably
plan to make more proactive decisions. Consequently, the organization gets stalled in a highly
reactive mode characterized by lack of funds and having to deal with one major crisis after
another. The best “cure” for this syndrome is developing broader understanding of the structures
and processes of an organization, with an appreciation for the importance of planning.
Peter Senge is a leading writer in the area of learning organizations, whose seminal works The
Fifth Discipline: The Art and Practice of the Learning Organization, and The Fifth Discipline
Field book: Strategies and Tools for Building a Learning Organization explain that there are five
disciplines, which must be mastered when introducing such an organization:
1. Systems Thinking - the ability to see the big picture and to distinguish patterns instead
of conceptualizing change as isolated events. A System thinking needs the other four
disciplines to enable a learning organization to come about. There must be a paradigm
shift - from being unconnected to interconnected to the whole, and from blaming our
problems on something external, to a realization that how we operate, our actions, can
create problems (Senge 1990,10).
2. Personal Mastery - begins "by becoming committed to . . . lifelong learning," and is the
spiritual cornerstone of a learning organization. Personal Mastery involves being more

realistic, focusing on becoming the best person possible, and to strive for a sense of
commitment and excitement in our careers to facilitate realization of potential (Senge
1990,11).
3. Mental Models - they must be managed because they do prevent new and powerful
insights and organizational practices from becoming implemented. The process begins
with self- reflection, unearthing deeply held belief structures and generalizations, and
understand how they dramatically influence the way we operate in our own lives. Until
there is realization and a focus on openness, real change can never be implemented
(Senge 1990,12).
4. Building Shared Visions - visions cannot be dictated because it begins with the personal
visions of individual employees, who may not agree with the leader's vision. What is
needed is a genuine vision that elicits commitment in good times and bad, and has the
power to bind an organization together. As Peter Senge contends, "building shared vision
fosters a commitment to the long term" (Senge 1990,12).
5. Team Learning - is important because currently, modern organizations operate on the
basis of teamwork, which means that organizations cannot learn if team members do not
come together and learn. It is a process of developing the ability to create desired results;
to have a goal in mind and work together to attain it (Senge 1990,13).
To summarize, a learning organization does away with the mentality that it is only senior
management who can and do all the thinking for the entire corporation. It challenges all
employees to tap into their inner resources and potential, in hopes they can build their own
community based on principles of liberty, humanity, and a collective will to learn.

Chaos Theory
Systems theory has evolved to another level called chaos theory. In this context, chaos does not
mean total confusion. Chaos refers to the dynamics of a system that apparently has no, or little,
order, but in which there really is an underlying order. In these systems, small changes can cause
complex changes in the overall system. (In technical terms, chaos theory applies to complex nonlinear dynamics systems.) Chaos theory has introduced new perspectives and tools to study

complex systems, such as biological, human, groups, weather, population growth and the solar
system.
The term chaos theory is used widely to describe an emerging scientific discipline whose
boundries are not clearly defined. The terms complexity theory and complex systems theory
provide a better description of the subject matter. Chaos theory is a developing scientific
discipline which is focused on the study of nonlinear systems.

Applications of Chaos Theory to Real-Life Situations
Much like physics, chaos theory provides a foundation for the study of all other scientific
disciplines. It is actually a tool box of methods for incorporating nonlinear dynamics into the
study of science. For many people, the work in chaos represents the reunification of the sciences.
In mathematics, the use of strange attractors, fractals, and cellular automata, and other nonlinear,
graphical models are used for studying data that was previously thought of as random.
Mathematical applications of chaos theory actually began being developed 100 years ago by the
French mathematician Henre Poincare.
In biology, chaos is used in the identification of new evolutionary processes leading to
understanding the genetic algorithim, artificial life simulations, better understanding of learning
processes in systems including the brain, and studies of such previously unresearchable areas as
consciousness and the mind. This strain can be traced back to the work of Charles Darwin, and is
a significant new understanding of evolutionary processes. Darwin's work also appears in direct
conflict with Newton's because it changes our understanding of the nature of time, demonstrating
that some time is not reversible.
In physics, thermodynamics in particular, chaos is applied in the study of turbulence leading to
the understanding of self-organizing systems and system states (equilibrium, near equilibrium,
the edge of chaos, and chaos). Prigogine explains that the concept of entropy is actually the
physicists application of the concept of evolution to physical systems. The greater the entropy of
a system, the more highly evolved the system is. Chaos theory is also having a major impact on
quantum physics and attempts to reconcile the chaos of quantum physics with the predictability
of Newton's universe. The push for such unification came from Einstein. Chaos theory is causing

most quantum physicists to accept what Einstein rejected, that God probably did play dice with
the universe.
Chaos theory is already affecting the critical aspects of our lives. It greatly impacts all sciences.
For example, it is answering previously unsolvable problems in quantum mechanics and
cosmology. The understanding of heart arrhthmias and brain function has been revolutionized by
chaos research. There have been games and toys developed from chaos research, such as the
SimAnt, SimLife, SimCity, etc. series of computer games. Fractal mathematics are critiical to
improved information compression and encryption schemese needed for computer networking
and telecommunications. Genetic algorithims are being applied to economic research and stock
predictions. Engineering applications range from factory scheduling to product design, with
pioneering work being done at places such as DuPont and Deere & Co.

SYSTEM THINKING

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