System Theory - System theory The classical behavioral and...

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System theory The classical, behavioral and management science theorists studied management in fragmented way. They failed to provide the comprehensive picture of organization and management. They ignored the relationship and interaction of the organization and its external environment. In response to these shortcomings, the systems theory of management evolved during 1950 s. This theory views the organization as a system of interrelated parts with a unified purpose. For example, implementing a solution to a problem in the production department of a company will likely affect other aspects such as marketing, finance, and personnel. Each part is tightly linked to other organizational parts, no single part of an organization exists and operates in isolation from the others. Therefore, managers must view the organization as integrated system of interrelated parts and try to anticipate the unintended as well as intended impacts of their decisions. The approach also views the organization as linked to its environment. Organizational effectiveness, even survival, depends on the organizations interaction with its environment. For example, in order to function, an organization obtains inputs like human resource, financial resource, raw materials, information etc. from the environment. It obtains qualified skilled and motivated employees from universities, competitors and from other organizations. It obtains funds from banks, other lending institutions and from the people who buy shares. Likewise, it obtains raw materials from suppliers and information from journals, reports, periodicals and other external contacts. These inputs are then coordinated, used and then managed in a conversion/transformation process that produces output. However, the organization s task is not complete. The customer s decision to buy or look elsewhere provides feedback to the organization. If the feedback is positive (the customers buy products), the environment provides it a critical input-cash which the company uses to obtain other inputs such as top quality employees, machines, materials etc. If the feedback is negative (no sales), the environment provide it with a serious problem. And it has to go for corrective actions (for example, Changing product s design, price, strategies etc.). Neglecting developments in the environment (e.g. technological innovations, competitor s moves) will, over time, doom the company/organization. The different parts of open system organization can be illustrated from the following figure. In this way this theory views organization as open systems. However, not all the organizations are open systems. Some, like Buddhist monastery, churches, are closed systems. The organization pays little attention to the environment. Its members remain in the monastery without much interaction with the outside world. Developments in the outside world have little impact on the organization. Therefore, the main features of system theory to management can be stated as follows Goal orientation: Every system is goal oriented. Therefore, all the resources
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