Department of Electrical Engineering

MASTER’S THESIS The Viable System Model in the analysis of the project management

The topic of the Master’s Thesis has been approved on 04.06.2008. The supervisors and examiners of the thesis are Professor D.Sc. (Tech.) Pertti Selvintoinen and Professor D.Sc. (Tech.) Tuomo K¨ssi. a

Hyvink¨¨ May 21, 2008 aa Arseniy Krasikov Siltakatu 15 B 05900 Hyvink¨a a¨ Finland

Lappeenranta University of Technology electrical engineering department Arseniy Krasikov The Viable System Model in the analysis of the project management Master’s thesis 2008 53 pages, 14 figures, 1 table and 1 appendix Examiners: Professor Pertti Selvintoinen Professor Tuomo K¨ssi a Keywords: cybernetics, systems theory, the VSM, Viable System Model, project management, complex systems analysis

The paper is made to understand modern (especially cybernetic) methods of complex systems analysis and management, to explain scientific basis of the Viable System Model, to compare theoretical model with developed project management system in Company. The manuscript purposes are achieved by studying of scientific papers from scientific journals collection such as Elsevier ( or Emerald ( Scientific basis of the VSM is gotten from Stafford Beer explanation and from personal investigation of neurophysiology and cybernetics history. The comparison is made by "objective" (studying of official company documentation ) and "subjective" (personal interviewing) methods.


The Master Thesis cannot be written without strong support of the Lappeenranta University of Technology and excellent help in spite of warm work of Company employees. I want to express heartfelt thanks to everyone who helps me during writing: to Julia Vauterin, Barbara Miraftabi, to Pertti Selvintoinen and to Tuomo K¨ssi from a LUT; to Antti Vanhatalo, to Mikko Uhari, to Marko Piela, to Esa Partanen, to JukkaPekka Reijomaa, to Kari Supi, to Ilpo V¨limaa, to Petri Lindroos, to Tino Wallgen, a to Asko Torki, to Janne Martin, to Sergeij Verolainen, and to Maarit Penti from Company; and, of course, to Victor Borisovich Vtorov, to Nikolaij Dmitrievich Polyahov and Oleg Yurievich Sabinin from Saint-Petersburg Electrotechnical University; to everyone who has helped and is not acknowledged undeservingly. Special thanks to my room-mate Roman Ivanov, who was to endure it for 4 months and for all my friends from the universities. Exclusive acknowledgements to sweet Olya, the most important person, for priceless help and for "broken nerves" during our discussions, and to my parents for their knowledge, excellent advices and constant help.


List of Figures
1 2 3 4 5 6 7 8 9 10 11 12 13 14 Reflector curve . . . . . . . . . . . . . . . Autonomic nervous system . . . . . . . . . Information fluxes in HNS . . . . . . . . . General architecture of functional system . Variety . . . . . . . . . . . . . . . . . . . . VSM technical representation . . . . . . . VSM neurological representation . . . . . . Operation unit organization . . . . . . . . Waterfall project management . . . . . . . Main flow of typical project in Company . Waterfall project management in Company Typical project team in Company . . . . . Relations into project management . . . . The VSM of Company’ PMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 16 18 21 23 24 25 28 29 30 30 40 42


List of Tables
1 Comparison between first and second-order cybernetics . . . . . . . . . 11


Abstract Acknowledgements List of figures List of tables Nomenclature 1 Introduction 2 A scientific foundation 2.1 Cybernetics . . . . . . . . . . . . . . . 2.2 Fundamentals of neurophysiology . . . 2.2.1 Fundamental of neurophysiology 2.2.2 Theory of functional systems . . 2.3 Stafford Beer’s Viable System Model . i ii iii iv v 1 4 4 11 11 16 20 28 28 29 34 36 38 43 44 46 46

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3 Company’ project management organization and VSM 3.1 Company’ project management organization . . . . . . . 3.1.1 Objective project management in Company . . . 3.1.2 Subjective project management in Company . . . 3.1.3 Conclusion of investigation . . . . . . . . . . . . . 3.2 Comparison the VSM and Company’ PMO . . . . . . . . 4 Conclusion References Appendices A Appendix1

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Effective organizations operate like effective human beings. Stafford Beer

We live in new world, in new post-industrial informational society. Today we operate mostly with information, mostly with complex information, and mostly with very rapid changing information. “Information is power” but it is power only when we can find useful information among of noise. To understand how we could make our interaction with information more effective and to create systems that can be adaptive (stable) like human, we are to understand the process of cognition and understanding. One way to do it is self-cognition. Humans are the most adaptive form of life, form of live matter. I am sure that building any kind of systems, using the principles on which the human body is built, is the key for stable development, and the answer to future challenges. Construction of this type of systems is exceedingly wide and difficult task. But such sciences as cybernetics, systems science, theory of information, game theory, neurophysiology, behavioural and cognitive psychology give us new ways to understand who we are. The heritage of Norbert Wiener, A. A. Bogdanov, William Ross Ashby, Ludvig von Bertalanffy, P. K. Anokhin, Claude E. Shannon, McCulloch, Heinz von Foerster and Stafford Beer give us chance to find a solution. As example of system operated only with information one can choose project management. The project management essence is to achieve goals in changing external and internal environment with resource limitation. That is reason why project management orgnization should be flexible to change all the time to become as more adaptive as possible. Thus it can be compared with live organism. And this is why it can be the object of investigation. Project management is very important in modern world. Moreover, it is one of the cornerstones of success in process of creation and upgrading "tools" in "toolbox" of humanity, in progress. It is reason to make it as effective as possible. The Company company pays a lot of attention to its project management development. So I have excellent possibility to inspect serious, advanced "organism", exploring the Company project management orgnization in its development. Here it an outcome of one project management orgnization evolution was investigated and was compared it with the Viable System Model by Stafford Beer which is based on second-order cybernetics and neurophysiology. The cybernetics as a modern science was founded by mathematician Norbert Wiener with publishing of his book "Cybernetics, or Control and Communication in the An1

imal and Machine" in 1948. He defines cybernetics as "the science of control and communication, in the animal and the machine". Cybernetics science operates with such ideas as negative or positive feedback, transformations, blackbox, sustainability, and etc. in all kind of systems. Thus Cybernetics can be seen as general theory for communication and control. orgnization contains both and thus it should be based on cybernetics. Information as a base of communication requires its investigation. Thus the next step of cybernetics development - second-order cybernetics - doesn’t look outsider. It is cybernetics of cybernetics or investigation of cognition by subject of cognition. What is new is the profound insight that it needs a brain to write a theory of the brain. From this follows that a theory of the brain that has any aspirations for completeness, has to account for the writing of this theory. And even more fascinating, the writer of this theory has to account for her- or himself. Translated onto the domain of cybernetics: the cybernetician, by entering his own domain, has to account for his own activity; cybernetics becomes cybernetics of cybernetics, or second-order cybernetics.[1] So now self-referentiality, self-organizing, and the subject-object problem are under cybernetics view. The essence of an organization is a cooperation based on communication, on information exchange between subjects with personal goals and ways of thinking. Thus the results of cybernetics and second-order cybernetics are necessary for the basis of creation of organization. It is great knowledge, but a real example should be discovered for sure. Thus, to understand the Viable System Model as a result of cybernetics it is necessary to explain the organization and the work principles of human nervous system (HNS) as optimal information processing structure. I say "optimal" because results of evolution give us special and exclusive power to work with information. The consciousness is a special property of human. Of course, in the investigation knowledge of higher nervous activity or of physics of signal transmission is not implemented because of its extreme complexity and specificity. The VSM (viable system model) bases on general functional division and its orgnization, we work with a bird-eye view of human nervous system. Thus I explain functional division and some aspect of self-regulation of HNS. Shortly, it consists of several systems by functional division which work with information from intra- and extra- environment and with experience and future prognosis. It is very difficult tasks for technical systems. That is why it is very interesting and 2

important to explore how our somatic and autonomic nervous system are organized and function together. It is a key for creation good information organizations. Neurophysiology had been already connected with cybernetics by academic of Academy of Sciences of the USSR P. K Anokhin. Pyotr Kuzmich explored nervous feedback action in nervous activity and called it - ’return afference’ (’обратная афферентация’) in 1935. It happened 12 year before Wiener’s ’Cybernetics’. It clearly show to us straight connection between ideas of cybernetics and real functioning of living system like we. It gives to us possibility to implement knowledge of physiology and morphology of our nervous system in construction of information processing system. Besides feedback, Pyotr Anokhin create 2 additional terms. They are ’afferent synthesis (’афферентный синтез’) and ’acceptor of action results’ (’акцептор результатов действия’). It says that cybernetics can be develop by knowledge of neurophysiology. Therefore we have essential background to understand the foundation of the Viable System Model. Background knowledge give us point of view from where we can see scientific connection between cybernetics, neurophysiology and management orgnization itself. The cross-point of this connection is created by Stafford Beer and called the Viable System Model. It is suggested to be the best model of management orgnization among others known to me on today. It is very important to compare this model and real evolution of management in information present world. The investigation has been done by two methods: gathering of "objective" and "subjective" information. "Objective" flag is set to the official materials of trainings, guidelines, how-to, manuals, policies, and practices. But official materials had been created in the past, and something can be changed or official materials are transform by project managers into everyday work. Thus, it was decided to make an interviewing of project management participants (project team players). It "subjective" part of the investigation. With ideas of theory of functional systems, to define investigated system a goal was chosen. The goal is "providing successful project execution or achieving goals of customer with a profit". It is the goal of the project management. By this way, a reducing of variety of the reality for the manuscript could be done. In the sum, the main goals of the work are to explain scientific basis of the VSM, to describe the complex system of project management by the model. This goals achieving make possible to create recommendations which are could be used by the company to improve their management system.



A scientific foundation

A mechanisation of processes was started in XVII century from first industrial revolution. The mechanisation shows to world serious advantages of resource economy and quality improving. It was a new movement that can be turn back. The new epoch of mechanisation was started when one got possibility to create and distribute mechanical and electrical energy in wide limits. Cheap energy opens the door to wide using of mechanization. Because of it part of human hand work in all work was moved from 90% to 10% (Мартыненко И.И. и др. Автоматика и автоматизация производственных процессов. М., 1985;). First mechanised process are was regulated by people. They check information given by sensors or by process being. Next step, logically, was mechanisation of regulation. Idea of self-regulation by feedback principle was used. Feedback is universal principle of regulation. It can be found in any regulated system. Example of feedback classically presents by thermostat. The wide machine using showed great advantages of automatic work in comparison of human execution of same tasks even in complex situations. Increasing movement of automation and of difficulty of tasks required appropriate methods of controlling. Investigation and development of the methods is task of cybernetics. It is known that the term "cybernetics" for definition of science of the management of public systems used by French physicist Ampere and Polish scientist F.-B. Trentowski in the Polish language book "Stosunek filozofii do cybernetyki, czyli sztuki rza ˛dzenia narodem" One can assume that the roots of cybernetics, basically, are in the second half of the 19th century, and they were quite independently by the end of the first half of 20th the century. The roots of these elements represent a purely engineering knowledge, as well as some local synthesis - the result of the development of theoretical knowledge in specific science and the scientific and technical disciplines. They are: • automatic control system and automatic control theory; • elements of simulation and the theory of local models for different areas of technology; • computing devices and mathematical instruments; • digital computers; • communications and some questions of the theory of communication; 4

• biomedical research, such as biomechanics, general physiology, physiology higher nervous activity; • issues of the administrative and production management, the elements of the general theory of systems; • elements of psychology labor and engineering psychology; • mathematical logic as a part of mathematics. Let me start from automatic regulation and management. Development technology needs, the requirements for maintaining the different values that characterize the functioning of technical devices in specified limits, led to the invention and the subsequent development of various regulators. The first technically applicable device of this kind, which used unstated principle for the controlling of deviations (feedback), was a Watt regulator - it is served for regulating the speed of the steam machine by influencing the amount of moving in her pair. In the future there would be created other devices of this kind. The proliferation of regulators, the need of improving the accuracy of their work and of eliminating the phenomenon of instability (self-oscillations) led to a theoretical understanding of the principles of their work, to a mathematical description of their methods of operation, and the creation of appropriate engineering calculations. The first theoretical study of automatic regulation systems with feedback associated with the names of J. C. Maxwell, I. A. Vyshnegradskij and A. Stodolа.[2] Until the middles of 30ies of 20th century theory of regulation was developed in the framework of separate technical disciplines, such as the regulation of machines, regulation of electric motors, hydraulic regulators, electrical drive etc. The term "feedback", piercing all theory of automatic regulation, became only after the appearance of electrical and electronic components and built on the basis of a variety of tracking systems, previously called servosystem or servodevice. Since the late 30ies intensive insinuation of tracking systems in all branches of technology, including radio engineering, electronics and computing devices started. Articles of the subject became available in magazines, collectives of appropriate specialists were formed. Established by that time, the general theory of automatic regulation was associated with A. V. Mihaylov, G. Nyquist, A. A. Andronov, B. N. Petrov, M. A. Ayzerman, A. A. Fel’dbaum and many other scientists. The theory of automatic regulation was one of the essential foundations of cybernetics, and after the last outbreak was in it as one of the essential parts. modelling also had been developed in the context of specific scientific and engineering disciplines in the first half of 19th century already, in some areas earlier. It is primarily 5

about building a small working models of various technical systems and devices before its creation in physical size. Such simulations are called scale-modelling. Examples include model steam engines and locomotives were made by their designers (G. Watt, R. Trevithick, J. Stephenson, etc.) in preparation for the practical realization of their inventions. Currently, this kind of model (ships, aircraft, etc.) studied in test waterpools, aerodynamic pipes and so on. The origin of modelling in science related to appearance of the concept "similarity" used primarily for the solution of some problems of construction mechanics, and then infiltrated into other areas of technology. The development of this type of modelling has led to the establishment of relevant theory, sometimes called the theory of similarity. Using the same system as a model for studying other is one of the main methods of Cybernetics. It has been intensively developed since the wide distribution of electric circuits, when thanks to the Kirchhoff laws it has became able to state that the behaviour of these circuits is described by the system of differential equations. Changing circuits parameters meant, in effect, changing the parameters of relevant equations (system of equations), and the restructuring of the circuit - changing the form of equations. So electrical circuits (schemes) have been became a convenient tool for study processes of variety systems. Model researches originally were developed independently by the individual technical disciplines. Electric simulation of acoustic systems, modelling of mechanical systems etc. were studied. The moment that all of these types of simulations are based on the differential equations for description of the different nature processes led to "universalization" of electric (electronic) models, and to using them as a tool for solving differential equations, regardless of what real systems and processes are described by these equations. So it was beginning of development of analogue computers and the so-called mathematical modelling. Around this time, i.e. by 30ies of 20th century, the efforts of a number of scientists (L. I. Gutenmakher, G. L. Polisar, etc.), shown that the electrical network can be used for modelling more complex systems, for the solution of partial differential equations. There electrical grid models that were applied to meet the challenges of construction mechanics, the theory of elasticity, hydrodynamics, etc. By the beginning of the formation of cybernetics as scientific direction (late 40ies) applies a revolutionary idea J. von Neumann of the "unity" of information used at all stages of digital computers. In the von Neumann concept automatic digital computer is a device for processing information of any nature, not necessarily the numerical. By the end of 40ies, the development of computers and its theories were significantly


influenced by components are ("roots") of cybernetics such as the theory relay-contact network and slot-machines, mathematical logic. Programming issues also got increasing importance. There is a need, however, to note that computer science can not be equated with cybernetics: they are cross-cutting with it, as its technological base. Indeed, "hypostasis" of computers are multiple. These machines are a powerful tool for the most complicated mathematical calculations, solving of different scientific and engineering problems. It does not always have direct links with cybernetics, but, of course, refers to applied mathematics. Because of the high-performance computing it is a powerful tool of information (not necessarily mathematical) modelling of a variety of objects, systems, processes and phenomena. As a universal tool for modelling computers naturally used to meet the challenges of cybernetics itself. In this sense, computers are an essential cybernetics tools. Further, the computers are the main part of complex information systems, studied in cybernetics. Finally, the architecture, capabilities, the theory and principles of improving of computers are targeted by cybernetics. Technical means of communication - like watches, methods and means of measurement - represent the most ancient preimage of cybernetic systems in ideological terms. Indeed, if any technical systems can be characterized by coefficient of efficiency, i.e. attitude useful energy or substances to energy or substances invested to produce the desired effect, the task of communication systems and measuring systems is to obtain data, communications, signals, i.e. that has generally named as ’information’ and has become one of the basic notions of cybernetics. Signal, informational nature of measuring instruments and communication devices makes them a direct predecessor of cybernetic systems. Because they are based on the concept of the signal, concept of the mark. Postal or wire message is valuable not because of his real or energy content, but because of the sense of information. You can go even further and find roots of Cybernetics as language and writing - the first system in which signs, informational nature is the "excuse" their existence. Let’s go back to communication systems. Development of them led to such important concepts for cybernetics as encoding of messages, communication channel, the source and receiver information, interference, noise, etc. Interestingly, the first example of science - namely, the statistical - approach to coding associated with S. Morse, who in designing (1838) of telegraph code (called his name), took into account the frequency of the various letters in the English texts. The progress of communication systems, the invention of a radio, electronic circuits and specific information tools such as radar, led to the development of the theory of communications, released in the scientific and technological self-discipline, which would go down in cybernetics. A large influence on the subsequent development had works of academician V. A. Kotelnikov, who have established the link between the


continuous signals and discrete codes and the possibility of a continuous signal at any discrete form and state, and works of C. Shennon and W. Weaver with their theory of information and famous model of communication.[3] The Shannon–Weaver model of communication has been called the "mother of all models."[4] It embodies the concepts of information source, message, transmitter, signal, channel, noise, receiver, information destination, probability of error, coding, decoding, information rate, channel capacity, etc.[5] Biology and Medicine, which rate of development is continuously increasing, also had a noticeable effect on the emergence of cybernetic ideas. First of all, this applies to the basic physiology and physiology of higher nervous activity. As far back as 19th century one attempted to engage the scientific knowledge of the area of mechanics to study the movement of living organisms. Studies of blood flow led to the opening of several laws of hydrodynamics (A. Navier, J. G. Stokes). Physiological studies (N. A. Belov, M. M. Zawadowskij, N. A. Bernstein, and then P. K. Anokhin) led to a significant role of feedback principle in the operation of living organisms. Model representations in the study of physiological processes were involved by I. M. Sechenov,by I. P. Pavlov in widely known work about the role of signal information in higher nervous activity in animals and humans. In the Cannon W. В.’s works was formulated in 1929 principle of homoeostasis and were considered the foundation for stable functioning of physiological systems that after the invention by W. R. Ashby of homeostat[6] formed the basis of one of the cybernetics directions - homeostatic. By the same date, complex inter-related regulatory systems that support - despite the changing external influences - within certain limits several vital parameters of the body, such as body temperature, blood pressure and blood chemistry, the frequency of pulse, respiration etc. were found in an organism. Studies of Higher Nervous Activity and morphology of the nervous system and brain, the study of the nerve cells functioning revealed the role of electric processes in the functioning of the nervous system, discrete - at some level - the nature of the neurons functioning; was disclosed inaccurate structure of some brain zones, analysators in particular. It turned out that the first approximation of neurons operate on the principle of "all or nothing", i.e., in a certain extent, similar to a relay switching elements. By 30ies of 20th century were cybernetic meaningful research by N. A. Bernstein and P. K. Anokhin. By him, in particular, was declared existence in living organisms of "acceptors of action results" (synonymous with the known proactive mechanism - "predictor"), and was created idea of a functional system and was shown that the 8

implementation of the concept sheds light on the nature teleological functioning of physiological systems of organism and its purposeful conduct. Theory of functional system has been used in the research to define systems in management of Company. Additional materials about this theory in neurophysiology were put in the paper. The complexity of biological entities and processes, a large number and variety of links between elements and their subsystems, difficulties of studying such systems by traditional methods resulted in the same period to the birth of the "general theory of systems" (L. von Bertalanffy), which was initially developed in parallel with cybernetics and then almost merged with it.[7] Root of cybernetics, relatively little noticeable in the first stages of its historic training and advancement, were attempts to explore the problems of scientific management in social and economic systems. It should be noted, the above-mentioned work of F.-B. Trentovski that long before Wiener used the term "cybernetics", and published in 10-20ies of 20th century work of A. A. Bogdanov "Tektologiya", who tried to make, in the modern language, system-cybernetic analysis of some issues in the social structures and management.[8] The works of A. A. Bogdanov and L. von Bertalanffy represent the first attempt to build a "general" theory of large and complex systems, such as biological and socioeconomic system, the examination of those systems from structurally-information standpoint with a significant diversion from their real objects composition. By the time of "clearance" of cybernetics a number of studies were executed in which the mathematical methods had been used to analyse economic systems and to solve a number of economic problems. One of the first works of this kind was the work of L. V. Kantorovich "The Mathematical Method of Production Planning and Organization"[9] in 1939. It should also be noted walked in a similar vein studies of V.S. Nemchinov, V. V. Novozhilov, V. A. Zalgaller and V. V. Leontiev - scientists, for whom, in particular, belongs an initiative of using of model approaches in the economy and construction of a number of economic models that have played a significant role in the development of mathematical economics, also called economic cybernetics. Note that the initial formation of cybernetics, social and economic structures, because of their complexity and difficulty of formalization are not had been considered as objects of cybernetics and information analysis jet. But these works are, often blurred, already had had some general principles and provisions that have been introduced into the conceptual apparatus of cybernetics later (feedback, information, the integrity of the system, etc.). Some mathematical directions, as part of its developing science, have become a necessary and important tool for cybernetics studies. Among these directions should be


point, above all, to the theory of ordinary differential equations, and especially on issues of sustainability of A. M. Lyapunov, as well as on the problem of optimization of complex dynamical systems described by differential equations and their systems. Cybernetics was characteristic to use of such exotic, in their time, parts of mathematics such as the mathematical logic and the theory of algorithms. Appeared in a "pure" mathematics, those sections traditionally contacted only with general issues of mathematics grounding; long time it was believed that they would not have applied value. Only appearance of the relay-contact network theory, the use of base-2 system, which is closely linked with the same algebra binary logic (Boolean algebra), the requirements in the design and optimization of logical and computational elements and nodes of computer made mathematical logic, and, to some extent, and all of discrete mathematics, one of the effective tools of cybernetic research. The same can be said about the theory of algorithms and recursive functions created within the framework of mathematical logic in connection with the problems of computability and provability, but used theoretical basis and development tool of the programming. It was noted that the development of cybernetics, in its turn, has had a stimulating effect on research in the field of mathematical logic, the theory of algorithms and the entire discrete mathematics. It should be mentioned that ideas and the results of A. M. Turing, E. Post, A. A. Markov and other mathematicians and logicians, whose work formed the mathematical foundations of cybernetics. Speaking about cybernetics, it is necessary to pay special attention to the importance of communication or otherwise - transmitting of information in the operation of any natural organisms or technical devices. It is problem that try be solved by different sciences. And it is one of the problem for second-order cybernetics. Second-order cybernetics is founded by Heinz von Foerster in early 1970ies and defined him as "Cybernetics of cybernetics"[10]. S. A. Umpleby has created table to show significant differences between first and second-order cybernetics[11]. It helps us to speedily understand key ideas: Discovering of details of second-order cybernetics is out this paper, but it is important to note that the viable system model correlates with ideas of autonomy and cognition. Before speaking about the viable system model to better understanding some basis knowledge of nervous human system and theory of function systems will be explained.


Author Von Foerster Pask Varela Umpleby Umpleby

First-order cybernetics the cybenetics of observed systems the purpose of a model

Second-order cybernetics the cybenetics of observing systems the purpose of a modeller controlled systems autonomic systems interaction among the interaction between variables in a system observer and observed theories of social sys- theories of the intertems action between ideas and society

Table 1: Comparison between first and second-order cybernetics


Fundamentals of neurophysiology
Fundamental of neurophysiology

The main function of nervous system is connection and regulation of different physiological processes in accordance with changing of internal and external environment conditions. Adapting to the environment does not preclude a certain independence of the body. With higher level of adaptation it becomes less unequivocal response to the body’s changing conditions of life, so much freedom it has. For example, an independent permanence of the temperature of the body in relation with a temperature of external environment means autonomy from the environment. The main structure-functional unit of the nervous system is the nerve cell - neuron, which is distinguished body cells and sprouts: dendrites and axons. Neuron is a system that has many inputs and one output. Such a pattern is characteristic of the nervous system as a whole. The number of fibres carrying impulses to the centres, exceeded the number of fibres carrying impulses to outwards. By functions neurons can be divided in three groups: efferent neurons carried information from centre to outward, afferent neurons carried impulses from outwards to a centre, and interneurons which functions are preliminary intermediate processing of impulses and organization of collateral connections. The figure below shows functions of this types of neurons in reflexes. The figure is under creative commons license. Here and below (CC) symbol and url to the source of the figure into the caption are used. In the thesis the higher nervous activity is not touched. Mostly, an attention to autonomic nervous system is paied. Anyway, consideration of a nervous system physiological division and organization of information fluxes are necessary to understand 11

Figure 1: Reflector curve (CC)

essence of viable system model. In the list below physiological division of the human nervous system is. • Somatic nervous system – Afferent system – Efferent system • Autonomic nervous system – Sympathetic ∗ Afferent system ∗ Efferent system – Parasympathetic ∗ Afferent system ∗ Efferent system The autonomic nervous system is a set of points and ways to provide the regulation of internal environment of the body. The autonomic nervous system regulates metabolic processes and the activities of internal organs by participating in the integration of internal environment in a whole organism There is close connection between autonomic and somatic nervous systems: all motor reactions are given autonomic support (changing pulse, blood pressure, gas, etc.), and motor actions impact on the regulation of autonomic functions.


The general principle of autonomic regulation is a reflex. Afferent part of a reflex starts from various internal receptors placed in all internal organs. From this receptors afferent signals go to segment centres by special ways. From the centres regulation of organs is made by efferent ways. On the basis of morphological, neurochemical, and functional characteristics of the autonomic nervous system is divided to sympathetic and parasympathetic. It is believed that the function of parasympathetic system is first and foremost stabilize the internal environment. A sympathetic system is designed to adapt the internal environment to the changing environment and responding to the unexpected impact. This division multiple fiction because of any organ is under constant influence of the sympathetic and parasympathetic systems. Before explanation of general principles of human nervous system (HNS) functioning,

Figure 2: Autonomic nervous system (CC)

I should to say that both of systems are represented in the Viable system model. Idea that every function-unit in enterprise has to have 2 independent information channels (moreover, two heads). One is for action. other is for relaxation. It is one of the main Beer’s ideas for industrial management for me. For the future, sympathetic system 13

often functions in all organs of the body in one time. Vertical management organization, or constant circulation impulses between higherand lower divisions, is very important. The role of higher nerve centres is to enhance the flexibility of regulation. Despite the hierarchical structure of the nervous system, the functioning of its various departments are inextricably. To perform simple actions it is necessary to organize interaction of many complex nervous systems of automatic control and management. Nervous reflex principle should not be seen as a simple stimulus-response scheme. In most cases, any reaction is the result of complex information processing, coordinated participation of various levels of integration. Overall consistency in the processing of incoming to the nervous system information and implementation elected solutions in the form of concrete actions can be roughly split into the following phases. The most peripheral receptor-effector level submitted receptor apparatus and muscles, provides, on the one hand, the transformation of energy of irritant to a specific energy of nervous pulse, but on the other hand, processing of the efferent signal energy in muscle contraction. Reception apparatus is the main source of afference to the next integrative level - segment. Under the segmental level means not only the segment of the spinal cord, but also "segmental" stem complexes consisting of a sensitive and motor bulbonuclear (ядра черепного нерва). Segment funds of its own assets of receptor signal admission and processing, and apparatus generated efferent pulse to a muscle. In the process of evolution "segment" is gradually losing its importance as a efferent response centre, becoming in the latter stages of phylogenesis only a point of information conversion. The bulk of this recoded information "segment" sends in higher and more complex apparatus of integration - subcortical structures. At the same time, activity of efferent (motor) segmental centres is provided to be at a certain level. Subcortical structure have a much more subtle information processing apparatus by the side of "segment" because of several independent afferent channels being, and through the work of subcortical efferent system. This system is not directly related to muscle, but manage it by segment efferent centres mediation. It is involved in making the complex automated motor acts that require consistency of many muscle groups. With subspecial system for receiving and processing information, own efferent channels, subcortical integrative level is the next step encoding of afferent signals which provides selection of critical information and preparing it to receive it in cerebral cortex. Thus, the information, which comes by afferent channels to cerebral cortex, is tentatively processed and re-encoded at least three stages: receptor-effector, segmental, and subcortical. Each integral level processes of the information and produces a re-


sponse by itself, but the critical information is sent to the upstream centres, which in turn perform the same task. Consequently, in the cortex comes only those signals, which require concerted action conscious person. Multiple conversion of afferent impulses towards to the cortex provides step-by-step "drop-out" of signals that do not have critical meaning for the body as a whole and be treated with "precortex" levels of integration. This allows the cortex make fundamental decision to the whole organism, "not staying focused on the little things". An error in any "precortex" level of integration should lead to revenue perverted information to cortex, and the last one with no direct link with an external source of information will generate erroneous decision. This is not happening because of multichannel revenues of afferent impulses to the cortex, which provides an objective assessment of each afferent channel information, early detection of the error and its compensation. Impulses sent to the cortex, originally delivered to the so-called projection cortical zone, where it is reflected. There information from all zones receptor zones are "projected" , but in processed and compressed form. Analysis and synthesis of this information are carried out in cortical centres that provide "recognition" - a comparison of the received and stored in the memory signals, its update and specification. Based on the convergence of the work of all gnostic centres, an objective picture of the human environment and the state of the body is generated. An analysis of the situation and the real possibilities of propulsion systems for the moment forms "solution" - a plan of an action. In the hierarchy of the nerve centres special place is for cerebral cortex. Thanks to the information incoming from the various functional systems, the most difficult analytical-synthetic information processing activity is possible there. It provides education links to consolidate individual experience, and the freezing of relations, which lose value. Using cerebral cortex provides training that leads development of self-living systems, decision-making based not only on analysis of given situation, but of the previous experience in additional. The functional activity of the central nervous system is regulated by the continuous flow afferent pulses through functioning of non-specific structures of the brain, especially reticular formation. In reticular formation collateral go away from all specialized afferent conductors. As a result reticular formation is a kind of energy collector, which can actively influence on the various centres until cerebral cortex. It creates the possibility of reactions even at very weak irritant. From reticular formation inhibiting influence outgoes also, as upstream or downstream. It provides individual reactions and concentration of attention.[12] On the figure below one can see scheme of information fluxes in HNS. Combination of sympathetic-parasympathetic organization and information fluxes or-


Higher nervous activity



Projection cortical zone

Optic thalamus

Striatum pallidus

Subcortex level

Additional afferentation

Little brain

Reticular formation



Segment level



Receptor-effector level

Figure 3: Information fluxes in HNS

ganization is made in the viable system model by Stafford Beer. Before VSM explanation better to explain theory of functional systems. Besides its role in information fluxes organization scheme it can give us additional approach to real organizations discovering.


Theory of functional systems

Term ’system’ is widely used in modern world. Everyday one can hear: jagirdar system, Continental System, solar system, Banner system, plurality system, metric system, sewage system, control system, cardiovascular system, weapons system, economic system, operating system, endocrine system. But there is no clear definition of the system. It can be something what consists of several connected parts, it can be connected parts with emergence property. Moreover, there is special theory for exploring systems. It is called General system theory (GST) and is created by Ludvig von Bertalnffy in 1950. He presented it in the "British journal of the Philosophy of Science". Bertalanffy writes:


...there exist models, principles, and laws that apply to generalized systems or their subclasses, irrespective of their particular kind, the nature of their component elements, and the relationships or "forces" between them. It seems legitimate to ask for a theory, not of systems of a more or less special kind, but of universal principles applying to systems in general.[7] Unfortunately, its implementation in research activity faces difficulties. By my own, implementation problem can be solved by P. K. Anokhin system definition: Системой можно назвать только такой комплекс избирательно вовлеченных компонентов, у которых взаимодействие и взаимоотношения принимают характер взаимоСОдействия компонентов на получение фокусированного полезного результата. The system can be described only as such a set of components involved selectively, whose interaction and relationships in nature are intercontribution of components for a beneficial result.[13] That way, the investigation of system organization can be focused on goals and structure supporting achieving it. Before investigation is necessary to explain the theory of functional systems. It has very important moments concerning self-organization and hierarchy of goals. They help us to understand project management organization as a system. The functional systems by P. K. Anokhin are self-organized and self-regulated dynamic centric-acentric organizations united nervous and humoral regulations. All components of the systems interconribute in supporting various useful results satisfying a needs and increased adaptivity for the systems and for a body in a whole. An assessment of results in every functional system is made continuously by return afference. Afferent synthesis stage is a start point. It is founded on dominant motivation. Motivation is originated on the most important need of a body in that moment. Excitation created by dominant motivation mobilizes genetic and personal experience to satisfy the need. Information about external environment is posted by situational afference. It allows to estimate possibilities and where applicable to correct previous need satisfy experience in concrete situation. The interaction of excitations created by dominant motivation, memory and situational afference, produces readiness condition (prestart integration) to achieve necessary adaptive result. Startup afference changes system from ready state to action. In the afferent synthesis stage dominant motivation defines what should be done, a memory how it should be done, situational and startup afference when it should be done to achieve the necessary result. The afferent synthesis stage is finished by decision-making. In that stage the only one way to satisfy dominant need among other is chosen. By it functional system is 17

D A C SiA Memory B Action result acceptor Afferent synthesis Decision making Action programm Result features Return afference


Action result Action




Figure 4: General architecture of functional system А - afferent synthesis stage; B - decision-making; C - formation of action result acceptor and efferent action program; D - return afference; SiA - situational afference; StA - startup afference;

under constraint. Just after decision-making, an acceptor of the action result and program of action are made. In the acceptor of action result all outstanding features of future action result are programmed. This programming is made on basis of dominant motivation that import from the memory information about result features and its roads. Therefore, the acceptor of action results represents mechanism of foresighting, forecasting, functional system action results simulation, the place where results parameters are modelled and compared with an afferent model. Results features information are compared with the model by return afference. The action program (efferent synthesis) is a coordinated interaction of somatic, vegetative and humoral components in order to hit useful adaptive result. The action program forms required adaptive act by way of special complex of excitation in central nervous system before its realization by concrete actions. The program defines using of required efferent structures. By dint of return afference separate stages and final results are estimated. Information from receptors comes to structures of the action result acceptor by afferent nervous and humoral channels. A coincidence of real result parameters and its model (made by the result action acceptor) features means satisfaction of initial need of an organism. It is the finish of the functional system activity. But its components can be used in other functional systems. In case of a discordance oriental-exploring reaction is appeared. It leads rebuilding of afferent synthesis, new decision-making, updating


of the model characteristics in the action result acceptor and the action program. hence, the functional system activity realizes in new direction. The principle of multiparametrical interaction defines generic activity of various functional systems which direction is to achieve multiunit result. For example, homoeostasis parameters (osmotic pressure, acid-base balance, etc...) are provided by individual functional systems. This systems are integrated in united generic functional system of homoeostasis . It defines integration of internal environment and its changing in consequence of a metabolism and a body’s external activity as also. In addition, a deviation of one indicator leads reallocation of other parameters of the generic functional system. The principle of hierarchy suggests the functional systems range in accordance with biological or social importance. In such a manner, in biological sense the dominant functional system is a system that provides continuity, then pabulum functional system, then reproduction, etc.. A organism activity in every time moment is governed by a dominant functional system in plan view of survival or adaptation. Dominant function system is changed after need satisfaction.[13] The theory of functional system by P. K. Anokhin gives us understanding of adaptation processes. It looks to be recursive, thus it can be useful way of investigation real processes in business organizations.



Stafford Beer’s Viable System Model
The people in an organization need information to perform their jobs effectively, but too much information can be a distraction. What is needed is both variety attenuation and variety amplification. S. Umpleby

In his books "Brain of the Firm"[14] and "The heart of Enterprise"[15], Beer noted that the time lag of traditional management schemes ability to respond to changes dooming us to deal with the consequences. Adaptive to rate changes but no to changes itself methods are needed, we need self-changed structure, working on selfchanged rules, i.e. self-organization. Let us say we would able to look at the problem from this angle and find possible solutions but could we implement them within the framework of existing structures and traditional management methods? The most powerful computer used in the old concepts of governance does not save the situation. The problem is not how to use the computer, it is to find new ways of managing our computer century, in the face of rapidly changing opportunities of computer technology. Instead, data-processing systems systems that produce information by deft data analysis are needed. Only then there is information as distinction that creates the difference of perception, thinking and reaction, and so provide accurate decisions. Instead of managing people, machines, materials and money Beer goes to the management of complexity. This is a major cyber-invariant in the management of large system of any nature. Mere of complexity is the variety of states, and basis of VSM is a law requisite variety by W. R. Ashby, which requires a set of management reaction was no less variety than a set of possible states of environment, problem situations in an environment where an activity is. Umpleby presents this as The amount of appropriate selection that can be performed is limited by the amount of information available. For appropriate regulation the variety in the regulator must be equal to or greater than the variety in the system being regulated. Or, the greater the variety within a system, the greater its ability to reduce variety in its environment through regulation. Only variety (in the regulator) can destroy variety (in the system being regulated). The law was formulated by Ross Ashby.[16] 20

But it is impossible to accommodate all states of even very small company and its environment. Attempts to develop a detailed algorithm to automate the management faced with such volume calculations, which surpasses even the hypothetical possibility of computerization. How, the company survive? How do we manage this complexity? With the help of self-organization. Many processes are organizing themselves. The structure of the well organized company makes directed narrowing attenuation of environment variety and amplification of management capabilities and reactions in one time. Every moment it is trying to find compromise between autonomy of units and dictatorship of "senior" management, between cooperation and autocracy. Obviously, the variety of environments is higher than variety of technological operations, which in turn exceeds the variety of management. No manager does know everything that happens in his office, and even more in the market. In reality, we are taking measures that should neutralize any conceivable problem and simultaneously arming against us unimaginable problems. A narrowing of variety management facility (attenuation) and the increase in variety controller (amplifying). For example, law-

Figure 5: Variety

enforcement increase its variety by professionalism, modern communications, motor transport. Specific information systems reduce the variety of the suspects. Powerful attenuators are weapon license, car registration, access restrictions, curfews, but this is infringing human rights, his freedom. Search compromise between amplification and attenuation of variety is a management itself. All of this is quite naturally, but is used unwittingly. It is desirable in such systemic analysis of problems to list all the used and available attenuators and amplifiers. So we manage complexity, questions about the role and structure of its flexibility, the geometry of relationships, channel capacity and converters of synchronizing their work appear. This special issues of management cybernetics. 21

Select the main thing: instead of running over and analysis of all possible in the competitive environment situations, we simply employ an experienced administrator, clearly dosed give him the freedom to demonstrate the variety of his brain and responsibility dictated by security of firm and those cover the variety of environments. In this way we create autonomic subsystem. That autonomy - powerful amplifier and attenuator at the same time. The extreme degree of autonomy - is when every day we hear "All okay" or "There are problems". Through this subsystem, we briefly attenuate a variety to one bit. However, in problem situations we should organise quick and powerful intervention, possibly exceeding the competence of the subsystem. Will structure allow the transition from autonomy to the central control? Will have channels enough capacity for information in the periods of crisis? Who defines the degree of autonomy? The human nervous system shows to us way to manage it. On this analogy Beer bases its model. HNS organization we explore above. In his model Beer introduces the concept of "resource" contract, which legalizes and agree on the degree of autonomy staff. The treaty declares activities that they can take, and provides these resources activities. It is clear that the contract should be adjusted in changing of the degree of autonomy. In this light, it can be said that investments are attenuators of variety, and the responsibility - limiter risk in the variety of our decisions. Now, VSM is drawn in the technical (in sense of working with variety) figure 6 and in neuro (in sense of relation with HNS) figure 7. Its consists of 5 functional subsystems (first of them contains recursion) and environment separated INSIDE-NOW and OUTSIDE-THEN. Firstly about recursion. Such self-similarity is considered as a key to viability. There is first theorem: every viable system contains a viable system itself is an element itself. VSM fractal structure reflects the relationship between the parts in their integration into a whole, provides consistency of goals and the degree of community growth. Other subsystems two, three, four and five, do not contain ’fraktality’. They are not viable in themselves, they are intended to preserve the organization to support homoeostasis in changes of the situation in the internal and external circumstances. In 6 on the left side an environment is shown, also there are the interests of units and their intersection. This intersection could be implicit, as an image of the company for all operational units. Explanation of the subsystems is better to start from the System 1. Subsystem 1 consist of operational units network. Operational units are who really do their work, or who operates with environment and their managers. Operational unit activities are




5 4 3 3* 2


Variety amplification Variety attenuation

Figure 6: VSM technical representation


Figure 7: VSM neurological representation (modified source from [14])


not a service for other operational units. Subsystem 1 normally connect and absorb most variety from external environment. In the 5 represent typical operational unit tasks and how it is represented 8 by Sandy Britain and Oleg Liber from University of Wales in their "A Framework for Pedagogical Evaluation of Virtual Learning Environments"

Figure 8: Key operational communication channels

As an example of VSM here and below, the project management organization as an etalon for future comparison is used. By this way, operation units in project management organization makes abbsorbation of variety of different variant before realisation and make project executed. Firstly they are designers or constructors or leading engineers. Who make choices about ways of realization of customer requirements. In difficult projects they are separate in different units, e.g. mechanical and electrical. In additional one can also classify manufacture, buying, erection as an operational units. It is essential to show to communication between operational unit managers. It help to react on events fastly if they have enough information and resources to do it. Operation unit managers communication allow to understand situation before official explanation. This operational units especially in case of shared resources such as money, people, time, sequence of processing conflict each other. This oscillation should be dumped and operation units should be coordinated. In the best case coordination is done by operational units theirselfs. Because of reducing of variety in outside coordina25

tion case. Such coordination is represented in the VSM as system 2 (triangles in the 6). With connection with HNS system 2 can be seen as sympathetic system. For illustration of the system time schedule, general schedule, standards, cash flow regulation and etc. can be used. In project management this type are commonly used. Reticular formation in the VSM presented by system 3 which is belong to metasystem. Metasystem does not mean senior in hierarchical sense. This system communicate with system 1 and gather information from system 2. It has functions of integration and synergation. It is management at all, management of situation INSIDE and NOW. It solve serious problems, set goals and communicate with other level of recursion. From higher level of recursion system 3-2-1 looks as only operational unit. In standard project management system 3 is operational control of activities-in-progress. In accordance with Ashby’s law of requisite variety Beer create The First Axiom of Management: The sum of horizontal variety disposed by n operational elements equals the sum of vertical variety disposed on the six vertical component of corporate cohesion. First 5 we already know: communication into environment among customers, communication between operation unit, communication managers of operational units, dump of oscillation by system 2, and an intervation of metasystem into operational units.[15] The last one component is system 3*. It is audition or independent gathering information of operations by metasystem. This channel is only for audit not for providing of new instructions or interventions of metasystem into operation units. Management should create useful and only necessary indices for fast audit and good variety disposition. Of course, 3* has analogy into HNS - parasympathetic system. For project management financial, scope, and quality audit is made usually. To understand all environment and make suggestion about future, to orient into OUTSIDE and THEN nature use system 4 by Beer terminology. This system understand where organization is, where it better to be in future and how to achieve it. This system has channels, approaches and power make decision of direction into future. As example one can use RD department. But it only technical prognosis, enterprise, of course, will be more viable if it would prognoses financial and market situation. For better results all this prognoses should make by one team of managers. It is strange analyse market without technical support. Traditionally example from project management: system 4’s functions are product planning, future activities, purchasing and contract, financial planning, scope change control. It is very important to make plans with understanding of situation in internal environment. It provide be close communication between system 3 and 4. Both of them 26

works with high variety and it is necessary to create good attenuators and amplifiers of it. It can be made by meetings The final system in the VSM is the System 5. Jim Underwood from University of technology Sydney explanation of its role was used. One can find materials of VSM on The system is the "boss" system, the policy making system. This is where the final responsibility lies, but in a well designed system few decisions are made here. The decisions which do need to be made here concern how the operational system (system 1) should change its behaviour to deal with the changing environment. This is based on intelligence information about the environment (filtered through system 4) and control information about the operational system (filtered through system 3). These two sources of information need to be in balance, so as well as dealing with the information, system 5 needs to ensure that the systems which provide it are properly designed. But the decisions which get as far as system 5 will be those that haven’t been prespecified by policy guidelines or subsystem goals, decisions which can’t be rationally decided. System 5 must make a decision, even if it’s to just wait and see. So these decisions are made according to cultural precedent, the personality(ies) of system 5, the "mood of the time" or something similar. This is how the "ethos" or character of the organization comes into play. Beer calls system 5 a "variety sponge". All the things which can’t be decided otherwise are decided here. There had better not be too many of them. System 5 can be compared with cortex in human nervous system. In the project management system 5’s functions are define project organization, objectives, policy and procedures, scope change approval.[17] The original principles, theorem and axioms for the Viable System Model are into appendix 1.



Company’ project management organization and VSM
Company’ project management organization

The investigation concerns in project management organization. What is project management and how it can be organized will be discussed here. Project management is management of achieving goals and objectivities with qualifications of resources. Resources are money, people, materials, energy, space, provisions, communication, motivation, etc. Besides effective using of resources, project faces with changing of environment and, consequently, of goals. It turn, situation is very complex and it has high variety. There are a lot of techniques and approaches help in fighting with this variety. For example, the simplest is do not change project plan at all. It is used in "waterfall development". This approach consists of several standards steps: requirements specification, design, construction, integration, validation, installation and maintenance. On figure below steps are can be seen. It has very strong disadvantage. It is very sensitive to

Figure 9: Waterfall project management

requirement definition. Thus if there is some small uncertainty in beginning it would be big difference between realization and planning. To reduce it, different approaches are using. They are "waterfall development with feedback", critical chain, extreme project management, event chain methodology, process based management. These methods in the paper are not explained, but one can see that project management organization has a lot of techniques. It means that project is difficult and uncertain action. Hence, it requires powerful system of controlling and strong organization.


It is suggested that the Viable system model is what project management need for itself controlling because the project management works in, practically, not clear defined environment. It is a typical task for the viable system. Before analysis better to say that project can be divided into two step: planning and realization of the plan. It can be compared with theory of functional systems. Plan has relation with acceptor of action result and realization relates to a efference. Now it can be suggested that should be sensors in subsystems to control how plan is realized. This ideas give us strong relation between neurophysiology and project management. It is necessary to say that afferent synthesis (sells) and decision making (project kick-off) are not explored in the paper.


Objective project management in Company

Here explaining of the "real situation" starts. Firstly about methods of exploring. In the manuscript two ways to explore project management in Company are used. They are using of official documents like manuals, guides and teaching materials, and personal interviewing of project participants. I concentrated on the level of project not on level project portfolio or level of project parts realization. So system-in-focus is a big project. The begining is the manuals and guides that are given to me by Company management. The documents divided into to main parts: mindsets for overview of PM, and standard practices of operating. By this way, "objective" information about PMO in the Company is gathered. In the paper, I widely use it, but not everywhere put the copies of the documentation. It is seemed to be classical waterfall project that has a lot of problems in finish-

Figure 10: Main flow of typical project in Company

ing of the project. That is more interest for thesis because load of problems lies on 29

Figure 11: Waterfall project management in Company

project management. Now I am suggesting that interviewing give me good information. It is not very important information but it give us understanding how project "really" goes. More useful for the master’s thesis to see what are roles and their responsibilities. It helps to explore project management organization. A project team consists of a project manager, leading engineers, buyer, manufacturing supervisor, forwarder logistics and erection responsible. Also a production coordinator participate in the project, but official information has not updated. Project manager is a main person in project team. He/she has a lot of responsibilities

Figure 12: Typical project team in Company

and main of them is success of the project. The lists below are gotten from official guidelines: Project manager is the Executive Director ("Managing Director") of the project: • Responsible for the financial result of the project (= keeping or improving the project’s margin) • Responsible for the on-time delivery of the project 30

• Responsible for delivering the project according to the Contract • Responsible for managing all customer issues He/she also has the tasks: • Makes critical project decisions • Makes overall project schedule. “Pulls the internal parties together”. • Constantly follows and steers the progress, decides on changes . • Launches the Project Team • Secures that persons nominated to his project know what they should do • Secures the necessary resources for the project. Does constant resource planning • Secures that the Project Team members know their detailed financial goals • Makes project budget and constantly forecasts the financial result • Initiates invoicing and controls the money collection • Initiates and controls that the necessary financials instruments are received and issued • Knows the customer Contract interprets it to the rest of the organization • Manages and settles extra orders during the project • Initiates and controls, that the necessary financials instruments are received and issued (e.g. payment and performance bonds, Letters of Credit etc.), as also possible special insurances are arranged. • Secures to get necessary resources for the project (Engineering, Manufacturing Supervision, Erection, Commissioning etc.). Does constantly progress follow-up and resource planning • Secures that persons nominated to his project know what they should do (both content timing) • Makes critical project decisions. Consults specialists to obtain necessary background information for decision making. • Represents KCI’s official position towards the customer • Responsible for managing, invoicing and settling extra orders during the project • Responsible for ensuring that the claims (including punch list issues) are taken care of. Makes necessary decisions to get these done 31

• Responsible for managing warranty issues. It is seemed to be too complex, too much variety for one person. It will be analysed in comparison part of the master’s thesis. There are information about other team players: Leading engineering is • Responsible for the technical content and technical documentation of the project so, that we fulfil our obligations in the Contract’s technical issues. "We deliver technically what is promised". • Responsible for managing the work of project’s designers • Responsible for defining and supplying technical information with the proper content and right timing to persons / functions needing that information • Understands thoroughly both the Contract’s technical requirements and the customer’s technical expectations • Plans and secures the amount of needed competent engineering resources • Makes the engineering schedule and steers its progress • Defines the work contents for designers and monitors, steers and controls the progress • Arrange that the necessary Purchasing Specifications are done in due time and with correct content • Makes technical decisions concerning the project. Consults specialists as needed. • Monitors and forecasts engineering hours constantly • Monitors and forecasts equipment weight constantly • Acts as the technical specialist for Purchasers, Manufacturing Supervisors and Vendors • Manages the distribution of the project’s technical documentation • Manages that as-built –documents are systematically done and distributed also to the customer • Makes Customer Training Material and Maintenance Operation Manuals • Acts often as Customer Trainer him / herself • Solves technical claim and warranty problems 32

Purchaser • Cost terms (incl. delivery times) information during quotation phase and during project execution • Negotiate and place orders to the internal and external suppliers and vendors • Plan together with the Project Team the proper timing for receiving tech. specifications and placing the orders • Proactively monitor and control all vendors. Focus on "bottle neck" vendors. Technical assistance from Leading Engineer. • Manage all claim- issues related to Procurement ("the one who buys, manage settle his claims") • Must know the budgeted cost (in project Budget) for each specific item to be procured Manufacturing supervisor • Manage, control quality and supervise the crane manufacturer (both in case of an internal or an external manufacturer) • Responsible for steering and instructing the crane manufacturer so, that the manufacturer keeps the schedule, does proper quality and uses the methods securing the right quality. Arranges the necessary relevant documents and instructs the maker. • Reports to either Procurement or project Manager as agreed specifically in each specific case. Logistics • Define transportation and logistics concepts and costs(both in quotation phase and in project execution). Define timetable for transportation arrangements. (In Finland: Do this together with Global Purchasing Manufacturing) • Plan and organize the transportation/ logistics to intermittent storages and to crane maker • Plan and organize the transportation/ logistics of the ready made crane or crane parts to the erection site • Arrange and/or buy the transportation and needed forwarding services Erection responsibility


• Responsible for arranging and planning all erection site activities: erection team, subcontractors, crane inspectors/ testers, tools, mobile cranes, housing, commissioning, etc. • Responsible for defining and doing additional purchases required for erection, loading tests and commissioning inspections • Define and make the punch list and warranty work. Arrange and manage the work to be done. Punch list and warranty works must be accepted by Project Manager. In addition, the list of activities for the production coordinator is made: • Responsible for coordination of vendors and sub-contractors. • Responsible for in-time delivering of necessary components to sub-contractors. All this information about activities shows that project team as a whole and team players have a big autonomy for the actions. It supports the investigation because autonomy of the units is a very important part of the VSM. 3.1.2 Subjective project management in Company

Objective means project management organization wich is based on documentation and guide lines. This objective documents represent general information about PMO. It gives knowledge of the project management organization as it should be. But real situation is more complex. That is why it is necessary to gather information about "real" situations as more as possible. Method of interviewing in reason of the time limit and, hence, impossibility to participate in real project was chosen. Real projects in Company take about 1-2 years from start to end. Thus I could get my own experience of project management. The interviewing has been made by 20 personal questions and 9 general questions which was chosen by me. Personal questions concern 2 areas - internal and external environment. Each area divided to 4 parts: structure, functions, pathology and communication. Venereal question are about 5 subsystems of the viable system model: operational activity, coordination, optimization and controlling, planning and policy. Personal questions: 1. What is your role in project team? 2. Who is your manager? 3. Who are managed by your?


4. With whom of project team do you communicate more recently? 5. What are your general activities? 6. Who defines goal for you? 7. How do you check that goals are achieved? 8. When do your start participation in the project? 9. What reports do you make for manager? 10. What information do you give manager besides reports? 11. What reports are made for you? 12. What information do you get besides reports? 13. What are typical problems in the project team 14. Are any conflicts in the project team? 15. If yes how is it solved? 16. What is an "external environment" for you if "internal environment" is the project team 17. What information and how do you get from an "external environment" 18. How do you react on it? 19. What do you do when you cannot react by yourself? 20. How do you communicate with an "external environment"? General questions: 1. Who are operational unit in the team? 2. How is team coordinated? 3. How is project execution optimized? 4. How does the team understand about stresses in the project execution? 5. Who set goals for all project? 6. What are usual goals? 7. How does the team understand that requirements for the project are changed? 8. How does the team make plan for the project? 35

9. How does the team change approaches and policy of the project execution? The questions were asked in the interview. Persons from different project teams participated in the interview. Persons were chosen‘ from all subsystems of the hypothetical viable system model of project management. Knowledge of the theory of functional systems was used. Thus, the main goal/function is to achieve project goals by its management.


Conclusion of investigation

Basing on the analysis of the investigation results, the project management in Company into several parts can be divided. The criteria of division are functions, clustering into a communication network, place and kind of activities. They are • Project manager, • Design or engineering, • Building, • Forwarding or logistics, • Erection and commission. The project manager is the main person in the project. He/she makes all important decisions, communicate with customer, choose methods of project management, he/she sets subgoals. He/she is responsible for final result. Design or engineering is provided by mechanical and electrical leading engineers. It is mental part of the project. On this stage, a technical plan and drawings are made. Actually a project plan is made also. It is made by the core team: leading engineers and project manager. Most of decisions are not changed in future. The next step is physical realization of the drawings. It made by vendors are subcontracts. Company wide uses outsourcing. Thus the building cluster of project team consists of production coordinator, buyer and manufacturing supervisor. Their function is to made the crane in according with drawings and time table. Forwarding and logistics move crane to the customer place. It is motion cluster in the project management team. Last cluster or operational unit is erection and commission responsible. It customerside operation units they make final part of the project.


The clustering supported by functional division, by subjective points of view and by communication preference in the team. Special question about it is in the interview. It seen that project management can be easily represented by the VSM. It will be done in next part of the manuscript.



Comparison the VSM and Company’ PMO

The comparison of the models and the project management system will be made by functional system comparison. The PMO is suggested to be in the class of the VSM, hence it can be compared directly. Through the investigation I have not found and ideas that do not appear in the VSM. So direct approach with the VSM as a reference can be used in my manuscript. Before the comparison some ideas of self-organization representation should be explained. Self-organization is an essential part of the VSM. But graphical representation of the connections into the team is too complex. Thus, communication into Company project management can be more simply shown by connectivity matrix E 3.2. The connectivity matrix is a term from graph theory. The matrix contains information of ways which existence between nodes. The graph theory seems to be useful in the VSM studing. Main row and column for connectivity matrix are set by the vector of nodes V . Nodes are divided to 3 groups: metasystem, operational unit and environment.   M etasystem_of _project_management   M etasystem_of _engineering     El._and_mech._engineering     Environment_f or_engineering     M etasystem_of _building     M anuf acturing_and_buying     Envionment_f or_building     M etasystem_of _f orwarding V =    F orwarding_and_logistics     Environment_f or_f orwarding     M etasystem_of _erection     Erection_and_commision     Environment_f or_erection     P roject_management Outside_and_then_enivronment_f or_P M


 0 1  0  0  1  0  0  E = 1  0  0  1  0  0  1 0

1 0 1 0 1 0 0 1 0 0 1 0 0 0 0

1 1 0 1 0 1 0 0 1 0 0 1 0 0 0

0 0 1 0 0 0 1 0 0 1 0 0 1 0 0

1 1 0 0 0 1 0 1 0 0 1 0 0 0 0

1 0 0 0 1 0 1 0 1 0 0 1 0 0 0

0 0 0 1 0 1 0 0 0 1 0 0 1 0 0

1 1 0 0 1 0 0 0 1 0 1 0 0 0 0

1 0 1 0 0 1 0 1 0 1 0 1 0 0 0

0 0 0 1 0 0 1 0 1 0 0 0 1 0 0

1 1 0 0 1 0 0 1 0 0 0 1 0 0 0

1 0 1 0 0 1 0 0 1 0 1 0 1 0 0

0 0 0 1 0 0 1 0 0 1 0 1 0 0 0

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0

 1 0  0  0  0  0  0  0  0  0  0  0  0  0 0

Graphical representation of this graph is in the figure 13. The figure sows relation between 3 types of objects (environment, operational unit and metasystems). It shows complex nature of the operational units into system 1 of the VSM. After this digression, I make direct comparison: The system 1 in PMO is presented by the operational units: engineering, building, forwarding and erection. It is clearly seen from documentation. Besides, it relates with "waterflow" project management. I suggest that nothing new can be added here. The system 2, i.e. function of coordination, is realized by time tables and by the project plan. The meetings of the project team also are very important. Interviewers pay a lot of attention to it. It is one of the most using tools to resolve problems. The system 3* is supported by activity of the project team players. For my opinion, there are no good monitoring of the situations: no indices are made. Only active position of the operational units or the project manager, and some information in the Movex (financial and project software tool, show real situation. I suggest it is a soft spot in Company’ PMO. Fortunately, crane building does not have very fast changing external environment. Thus, there are no big problems with passive monitoring system and thus system is not yet developed. Integration or synergy of the internal environment are made by the system 3. In the project management of Company it is the responsibility of the project manager. All interviewers in the project team said about it. The project manager’s activities also contain the system 4 functions or communi39

Figure 13: Relations into project management


cation with customer, participating in sales and making forecasting of the project. The system 4 based on experience of the project management team. But, also there are instructions for forecasting during project execution. Moreover there is principle "Live in tomorrow already today". Subjective information do not make me sure about its esxecution. So it depends on concrete project manager. The system 5 is a policy making system. Policy is written into guidelines, but not every project team player knows it. Thus, the project manager should to provide this policy to everyone in the team. General policy of the company is shown at special common meetings also. Thus the Company pays attention to this important but difficult part of company life. In the sum, I can say that project management seems to be quite viable system. It has autonomy, all parts are presented even they are not well developed. Growing of the company shows good results of using this approaches in management. Negative moments are in not developed systems such as monitoring, adaptation, policy. In addition, concentration that systems in one person - the project manager can make too unstable because of too high variety in this parts. Thus here should be professional with big experience to provide this functions well. To represent final results of the investigation the scheme of the VSM of project management in the figure 14 is made. Dotted and light gray lines show problem parts of the system from the VSM point of view. Now it could be said: the system 1, the system 2 are made well; the system 3* is not well done; the systems 3, 4 and 5 concentrate in one person what leads to the high dependence on him.


Figure 14: The VSM of Company’ PMO




"Two waves" of cybernetics and neurophysiology are commonly used in modern management. Besides the VSM, it is used in St. Gallen management system, in Total Quality Management, in the Balanced Scorecard. The manuscript contains basic ideas and history of its development. The VSM also is based on it. Hence, it was used in the manuscript as a reference of management approach. Inasmuch as Company has developed project management system it is possible to describe and compare it with the reference. It was done by "objective" and "subjective" methods of exploring. Succesful describing allows to make some recommendation for Company’ PMO. The investigation shows that management has good developed basic system 1 and 2. But a bulkhead of project management to provide high adaptivity stay is not developed in so good manner. It is Achilles’ heel of the projects and can become serious in case of fast changing environment. But now, the environment in heavy machine building is not fastly fluctuated. There again it is the reason to not pay a lot of attention to the system 3*,4 and 5. To prepare for future, to improve viliability of the Company project management the system 3* indices to active and other independent ways of monitoring situation in internal operation units should be done. The systems 3, 4 and 5 should be improved too, but I think it is not more important because of its present fractional development. The goals and further exploring of scientific base of management can be set for future work. Ideas of self-organization, battle with around-world complexity, adaptation, reflection systems are need to be learned for more successful actions in stable development movement.


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APHORISMS: The first regulatory aphorism It is not necessary to enter the black box to understand the nature of the function it performs. The second regulatory aphorism It is not necessary to enter the black box to calculate the variety that it potentially may generate. PRINCIPLES: The first principle of organization Managerial, operational and environmental varieties, diffusing through an institutional system, tend to equate; they should be dsigned to do so with minimum damage to people and to cost. The second principle of organization The four directional channels carrying information between the management unit, the operation, and the environment must each have a higher capacity to transmit a given amount of information relevant to variety selection in a given time than the originating subsystem has to generate it in that time. The third principle of organization Wherever the information carried on a channel capable of distinguishing a given variety crosses a boundary, it undergoes transduction; the variety of the transducer must be at least equivalent to the variety of the channel. The fourth principle of organization The operation of the first three principles must be cyclically maintained through time without hiatus or lags. THEOREM: Recursive system theorem In a recursive organizational structure, any viable system contains, and is contained in, a viable system.


AXIOMS: The first axiom of management The sum of horizontal variety disposed by n operational elements equals the sum of vertical variety disposed on the six vertical components of corporate cohesion. The second axiom of management The variety disposed by System Three resulting from the operation of the First Axiom equals the variety disposed by System Four. The third axiom of management The variety disposed by System Five equals the residual variety generated by the operation of the Second Axiom. LAW:

The law of cohesion for multiple recursions of the viable system The System One variety accessible to System Three of Recursion x equals the variety disposed by the sum of the metasystems of Recursion y for every recursive pair. The principles and axioms are from "The heart of enterprise" [15]


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