System Theory
views an organization as a system that is composed of different parts, and for goal achievement all these
parts needed to work collectively.
Components of System Theory
Three components of system management
1.Input
Input is the first step of the system approach. An organization’s input includes human resources, raw
materials, physical resources, financial resources, equipment, technology, and information.
2. Process
The organizational process consists of processing inputs to make them the desired
outputs. The process may include transformation, operation, planning, leadership,
and management control.
3. Output
Output is the product of an organization. After successful processing, the output of
an organization may be desired product, service, employee behavior, productivity,
profitability, loss, job satisfaction, etc. Organizational outputs are that customers
consume or perceive and provide feedback.
Characteristics of System Theory
The system approach is a balanced view of management which suggests that managers must take an overall
balanced view because the best for the whole is not necessarily the best for each component of the system.
Some of the features of the system approach include:
Goal-Oriented
An organization is a goal-oriented system. An organization’s all subsystems have certain goals to achieve and their
collective efforts result in the achievement of the goals of the system.
Open Vs. Closed System
An organization is composed of both open and closed systems. A
closed system is within the organization and does not interact with the
external environment. Nor does it affect the environment nor is get
affected.
An open system interacts with both the internal and external
environment. It influences and gets influenced by the external
environment. An open system is more complex than a closed system
as it is related to the internal and external environment.
Subsystems
Every system has its sub-systems. An organization as a system has
various sub-systems such as its different business units, functional
departments, employees group, etc. They all are interconnected and
interrelated to each other.
Synergy
Synergy describes the efforts of the whole as greater than the efforts
of individual parts. The system approach ensures synergy in the
organization. This approach suggests to management that an
organization’s subsystems should coordinate in such a way that the
output should be always greater than the sum of the output of the
individual subsystem.
System Boundary
Every system has a boundary. In an open system, the boundary is
flexible and in a closed system, the boundary is fixed. The boundary of
one organization is different from another organization.
Feedback
Feedback is an essential component of the management system to
provide information regarding output. This is required for taking
corrective actions in the organization if the results deviate from
standard results.
Contributions and Limitations of System Theory
Contributions:
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It provides a holistic view of the organization.
It analyzes how different subsystems interact and relate to one another to produce
synergistic effects.
It implies that the organizational system would experience environmental effects,
allowing management to implement important tactics to counteract environmental
influence.
This theory is helpful for managing large and complex organizations.
Limitations:
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This theory is too abstract which is intangible in the real sense.
It is not possible to apply this concept in small organizations.
This approach does not provide specific guidelines to managers for functions and
duties.
There are no specific tools of management suggested by this theory.