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Systems Management

Today’s companies are much more complex than they used to be. They are larger and employ more people. They most likely manufacture, service, and finance what they sell, not only in their home markets but in foreign markets throughout the world, too. They also operate in complex, fast-changing, competitive, global environments that can quickly turn competitive advantages into competitive disadvantages. How, then, can managers make sense of this complexity, both within and outside their organizations? One way to deal with organizational and environmental complexity is to take a systems view of organizations. The systems approach is derived from theoretical models in biology and social psychology developed in the 1950s and 1960s. A system is a set of interrelated elements or parts that function as a whole. Rather than viewing one part of an organization as separate from the other parts, a systems approach encourages managers to complicate their thinking by looking for connections between the different parts of the organization. Indeed, one of the more important ideas in the systems approach to management is that organizational systems are composed of parts or subsystems, which are simply smaller systems within larger systems. Subsystems and their connections matter in systems theory because of the possibility for managers to create synergy. Synergy occurs when two or more subsystems working together can produce more than they can working apart. Systems can be open or closed. Closed systems can function without interacting with their environments. But nearly all organizations should be viewed as open systems that interact with their environments and depend on them for survival. Therefore, rather than viewing what goes on within the organization as separate from what goes on outside it, the systems approach encourages managers to look for connections between the different parts of the organization and the different parts of its environment. Finally, it makes managers acutely aware that good internal management of the organization may not be enough to ensure survival. Survival also depends on making sure that the organization continues to satisfy critical environmental stakeholders such as shareholders, employees, customers, suppliers, governments, and local communities.