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Evolution of Management Thought

Modern Organization Theory – 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.

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Modern Organizational Theories – Systems Theory

The Systems Theory was developed in the early 60s. With a conceptual and analytical base, it attaches a great significance on 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”.

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The different parts of the system are called sub-systems, which are interrelated. Further, various sub-systems are arranged according to a scheme so that the complete system is more than just a sum of its parts.

This ensures the efficient functioning of the system as a whole. Also, every system has a boundary which separates it from its environment.

Systems Theory

Source: Pixabay

Organization and its Environment

There are two types of systems:

  1. Open Systems – which interact with their environment. Also, all living systems are open systems.
  2. 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, in order to understand an organization, one must identify its boundary. We can understand an organization’s interaction with its environment as an input-output model.

Learn more about NeoClassical Organisation Theory here in detail.

Inputs are energy, information, and materials which the organization takes from the environment. It then transforms then 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-system, social sub-system, 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:

  1. Its strategic parts
  2. The nature of the interdependency between these parts
  3. If there are any processes or systems which link the parts together and
  4. 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:

  1. Individual – An individual and his personality is the basic part of the system. Every individual’s attitude and motives determine his expectation when he participates in the organization system.
  2. 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 fulfill his expectations on successful completion of the job. Usually, there is incongruency between the goals of the organization and those of its members.
  3. 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 behavior patterns. The individual conforms in order to accomplish his goals by associating with the informal group. Further, since the two interact, they modify each other’s behavior.
  4. 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 the formal and informal organizations contradict each other. At such times, there is a role conflict. Therefore, it is necessary that the two roles fuse together. This fusion process acts to wield divergent elements together in order to preserve the integrity of the organization.
  5. 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:

  1. Communication – An effective mechanism which links all the organizational sub-systems together. It involves receiving messages from the external environment and sharing this message within the organization. It also works as a control and coordination mechanism to link the decision centers in the system.
  2. Decision-making – This 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.
  3. 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.

Solved Question for You

Q1. What are the primary parts of an organization system?

Answer: The main parts of an organization system are:

  1. Individual
  2. Formal Organization
  3. Informal Organization
  4. Status and Roles
  5. Physical Setting
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What are the structural, Behavioral, focus ,emphasis and Practical elements of classical theory

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