SYSTEMS APPROACH Out of Operations Research also came the introduction of systems thinking.

In the 1950s and 1960s through the work of Norbert Wiener, Kenneth Boulding, and Churchman, systems theory attempted to form an integrative framework of management. Systems theory envisions that all things exist as part of a larger complex of things. An impact on one element has an impact on all elements, perhaps a minor effect on some parts, but nevertheless all things are interdependent and linked to one another. While the effort to reduce all knowledge to a General Systems Theory failed, systems theory remains part of our business vocabulary to explain relationships and effects and has taken a new direction influenced by the social scientists in the concept of the Learning Organization. Systems View Systems theory provides a model for investigating organizations and describing how its constituent elements work together. In its most elementary formulation an organization can be modeled:

To illustrate how the open system works consider: The firm is a "black box", we are not sure how it works, but we can see that it takes from its environment certain inputs, like labor and capital. The firm then transforms these resources in outputs, like goods and services. Control is achieved through feedback by which the firm "learns" to alter its inputs to achieve a more efficient transformation or attain better effectiveness. Efficiency - a measure of Output to Input. Is resource utilization optimal? For example, number of units produced per manhour or Sales/Cost ratio. Effectiveness - a measure of extent to which goal is attained. For example, Sales Target Actual Sales or Production Target/Actual Production ratio. The model is an open system when the "black box" interacts with its external environment. For example, if there is a shortage of a needed labor skill (e.g., nurses or

teachers) we can use the model to describe how the change in this external resource affects efficiency or effectiveness. To try to better understand the "black box" a closed system can be modeled. For example, I know that the number of nurses hired influences patient care, but assuming that we have enough nurses what information should we have to better learn how to optimize efficiency or effectiveness? Contingency Theory Well, the answer to most business problems is "It depends!" Yes, but on what? That thinking is the basis of contingency theory: a search for factors that affect an organization and for the implications of the organization's dependence on the factor. In the 1950's Burns and Stalker found that organizations respond to differing environments, answering the question: How do firms organize given their environment? It depends on what type of environment the organization is in. If the environment is fast changing, the type of structure is organic - a flat, low hierarchical form. If the environment is stable over time, the structure is mechanistic - a tall, bureaucratic form.