Q&A MSc Business: ....Modern Organizations are viewed as a ‘System’ Discuss.



Q: Modern Organizations are viewed as a ‘System’ Discuss. (8marks)

A:  Systems Theory

Modern Organizational Theories are classified into two types – Systems Theory and Contingency Theory. In this article, we will take an in-depth look at the Systems Theory along with its contributions and criticisms.

The Systems Theory was developed in the early 1960s. With a conceptual and analytical base, it attaches great significance to empirical research data.  In simple terms, the theory considers organizations as systems. ”A system is an organized or complex whole – an assemblage or combination of things or parts which form a complex unitary whole”.

There are two types of systems:

Open Systems – which interact with their environment. Also, all living systems are open systems.

Closed Systems – which have no interaction with their environment. Also, all non-living systems are closed systems.

An organization is an Open System as it continuously interacts with its environment. Therefore, to understand an organization, one must identify its boundaries. We can understand an organization’s interaction with its environment as an input-output model.

Inputs are energy, information, and materials which the organization takes from the environment. It then transforms with the help of people and machines and supplies the output to the environment.  Further, the reaction of the environment to the output is the feedback mechanism using which the organization can evaluate and correct itself.

systems theory

An organization has several sub-systems like technical sub-systems, social sub-systems, etc. Some of these sub-systems are independent and don’t need interlinking through any process. Hence, the Systems Theory involves the study of an organization and identifies:

Its strategic parts

The nature of the interdependency between these parts.  If there are any processes or systems which link the parts together and the list of goals that the system is trying to accomplish.

Main Parts of an Organization System

The primary parts of an organization system are as follows:

Individual – An individual and his personality are the basic part of the system. Every individual’s attitude and motives determine his expectations when he participates in the organization system.

Formal Organization – A formal organization is the interrelated pattern of jobs which are designed to regulate the actions of individuals and other resources in the organization. Therefore, the individual must perform his job and the organization must fulfil his expectations on successfully completing the job. Usually, there is incongruency between the goals of the organization and those of its members.

Informal Organization – In any organization, an individual interacts significantly with the informal group to which he belongs. This informal group, typically, demands the individual to conform to its laid-down behaviour patterns. The individual conforms to accomplish his goals by associating with the informal group. Further, since the two interact, they modify each other’s behaviour.

Status and Roles – In every organization, individuals are expected to play certain roles. These roles determine their status. There are times when the demands on an individual from formal and informal organizations contradict each other. At such times, there is a role conflict. Therefore, the two roles must fuse together. This fusion process works to wield divergent elements together to preserve the integrity of the organization.

Physical Setting – Another important component is the physical surroundings in which an individual performs a job. Therefore, it is important to carefully examine the interaction in the complex man-machine system. One cannot approach the problem in a purely technical manner and needs to consider the social, psychological, as well as physiological conditions of members. Only then can one fit the machines to men.

An interconnection between the sub-systems  The sub-systems of an organization are interconnected through various processes as described below:

Communication – An effective mechanism which links all the organizational sub-systems together. It involves receiving messages from the external environment and sharing these messages within the organization. It also works as a control and coordination mechanism to link the decision centres in the system.

Decision-making is another important process for linking various parts in an organization. In fact, the decision to produce depends on the interaction between individuals and the demands of the organization. Hence, the decision of an individual to participate in production depends on the demands and rewards of the organization.

Balance – Balance is an equilibrating mechanism which allows the different parts of the system to stay in a harmonious and structured relationship with each other. It helps in ensuring integrity in the face of a rapidly changing environment.

Contributions of the Systems Theory

The Systems Theory offers an open-system view of an organization and recognizes its environmental interface.  The theory is dynamic and adaptive.  It adopts a multi-level and multi-dimensional approach. Therefore, it considers both macro and micro aspects.  Further, it draws from several disciplines like sociology, economics, psychology, engineering, etc.

It is descriptive and not prescriptive or normative, Further, it is probabilistic and not deterministic and places a lot of emphasis on lateral rather than vertical relationships.  Cybernetics is another significant contribution to the Systems Theory. Cybernetics is the science of communication and control in a man-machine system.

Criticism of the Systems Theory

The Systems Organizational Theory is not unified but an amalgamation of several theories like the systems theory, contingency theory, decision theory, etc.  It is not really modern, but a synthesis of the research contributions of earlier theories.  This theory is too abstract to be of practical use. It does not specify the precise relationships between the organization and the social system.

It does not offer a framework which can be applied to all organizations.


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