System approach to management

What is a system?
It is a group of related parts that move or work together like the human body consists
of several parts and each part works in connection with the other. Systems approach
is based on the generalization that everything is interrelated and interdependent.

One its most important characteristic is that it is composed of hierarchy of sub-

systems. Every organisation has a structure, where we can see the various
departments in which the whole of the organisation is divided. Each department
works on its own but can not work in absolute isolation. It has to depend on other
departments for various functions to be performed.

SUB SYSTEM

The organisation is viewed as an organic and open system, which is composed of

interacting and interdependent parts, called subsystems. For example, any big
organisation will have a lot of different departments such as human resources,
finance, PR etc. these departments are called subsystems.Each sub-system is a part
of other sub-system and change in one sub-system leads to a change in other sub-
system.

OPEN AND CLOSED SYSTEM

The type of System depends upon the environment and Organisation is in. Here the
environment refers to both external and internal Factors that may affect working of a
business for example competition, public policy, suppliers, investors.
The systems which have no interaction with the environment , self contained, rigid,
static and mechanical are known as the closed systems. This system is not affected by
the business environment whatsoever. on the other hand an open system interacts
with the environment Which makes it dynamic and flexible in nature

systems should not be differentiated as open or closed rather they should be

differentiated on the basis of degree of openness. Because there is hardly any
system which is not at all affected by the environmental forces.

Synergy
Synergy is an interaction or cooperation giving rise to a ‘whole that is greater than the simple
sum of its parts’. It actually refers to the teamwork in which all individuals work
together and their collective total output is more than the sum of their individual
output if they do it in isolation.
System Boundary

Line that separates the system from its environment is known as boundary. If the
boundary is visible and rigid like a wall it is like the closed system but if the boundary
is flexible and is visible in the form of relationship between the various parts of the
organisation and environment, it is like an open-system.

For example he can not change the policies made by the Government but can replace
a worker who is not performing

Feedback

Feedback is the response received. It may be positive or negative in nature. If the

feedback turns out to be negative, a manager should find out the cause and fix it.

FEATURES

Hierarchy of Sub-System; It is the basic feature of system-approach. It explains that

within an organisation there are several parts, where each part is considered to be a
sub-system of another sub-system.

Interrelated and Interdependent: A system consists of interacting elements. It is a set

of interrelated and interdependent parts arranged in a manner that produces a
unified whole.

Boundary:This approach clearly defines what is within the organisation and what is
outside the organisation. In other words a manager is well aware about the
controllable factors and uncontrollable factors.

Input-Output Process: It receives information, material and energy from other

systems as inputs. These inputs undergo a transformation process within a system
and leave the system as output to other systems

Open System- system can be either closed or open. An organisation being a social
system is an open system which puts effect on the environment and is affected by the
environment.

Adaptive: Adaptability means adjusting with the changing environment. Under the
system approach to management, the organisation is an open organisation and it
takes input from the environment and adjusts accordingly.

Dynamic: An organisation can not be static. It has to move on and on with every
change in the environment. An organisation is a dynamic system as it is responsive to
its environment. It is vulnerable to change in its environment.

Integration of Activities: System Approach is an integrated approach as it integrates

the activities and the departments in order to derive the best use of scarce resources.
It takes into consideration all the subsystems of the system.
Contribution of this system/advantages

● It allows the manager to recognize the effect of environmental factors as the

environment is complex and continues to evolve so it helps a manager to
adapt more and more.
● It analyses the system at different levels and inter-relates and integrates it into
a unified set of direction.
● System approach to management also implies that managers should have an
analytical observation power. He should be able to analyse the available
opportunities and to allocate the resources considerably.
● New ideas should also be accepted by a manager even from a lower level
employee. He should teach his employees the benefits of team-work or the
importance of synergy. So this approach actually makes him a real motivator.

PLANNING
Is a predetermined course of action. It is the process of thinking before doing. In
other words, a plan is to produce a scheme for future action, to bring about specified
results at a specified cost, in a specified period of time.

It can be defined as “thinking in advance what is to be done, when it is to be done,

how it is to be done and by whom it should be done.”

OBJECTIVE

● Planning reduces uncertainty and the organisation only has a well defined ‘to
do list’.The plans are made to overcome uncertainties.Planning helps the
manager to face the uncertainty because planners try to force the future by
making some assumptions. The plans are made to overcome uncertainties.
● Planning can bring cooperation and co- ordination among various sections of
organizations.
● Achieving the predetermined goals – Planning activities are aimed at
achieving the objectives of the enterprise

CHARACTERISTICS

● Planning is goal-oriented: All plans arise from objectives. Objectives provide

the basic guidelines for planning activities. Planning has no meaning unless it
contributes in some positive manner to the achievement of predetermined
goals.
 ● Planning is a primary function: Planning is the foundation of management. It
is a parent exercise in the management process. It is a preface to business
activities.
● Planning is all-pervasive: Planning is a function of all managers. It is needed
and practised at all managerial levels. Planning is inherent in everything a
manager does. Managers have to plan before launching a new business.
● Planning is a mental exercise: Planning is a mental process involving
imagination, foresight and sound judgment. Planning compels managers to
abandon guesswork and wishful thinking.
● Planning is a continuous process: Planning is continuous. It is a never-ending
activity. Once plans for a specific period are prepared, they are translated into
action.
● Planning involves choice: Planning essentially involves choice among various
alternative courses of action.
● Planning is forward looking: Planning means looking ahead and preparing for
the future. It means peeping into the future, analysing it and preparing for it.
● Planning is flexible: Planning is based on a forecast of future events. Since the
future is uncertain, plans should be reasonably flexible.
● Planning is an integrated process: Plans are structured in a logical way
wherein every lower-level plan serves as a means to accomplish higher level
plans. They are highly interdependent and mutually supportive.
● Planning includes efficiency and effectiveness dimensions: Plans aim at
deploying resources economically and efficiently. They also try to accomplish
what has been actually targeted. The effectiveness of plans is usually
dependent on how much it can contribute to the predetermined objectives.

Planning levels

Strategic Planning- strategic plans are designed with the entire organization in mind
and begin with an organization's mission.

They are long-term in nature and place an organization within its external
environment. It essentially focuses on planning for the coming years to take the
organization from where it stands today to where it intends to be.•The strategic plan
must be forward looking, effective and flexible, with a focus on accommodating
future growth.Strategic plans, provided by top-level managers, serve as the
framework for lower-level planning.
Rajesh is a top-level manager for a clothing company . As a top-level manager, he
must use strategic planning to ensure the long-term goals of the organization are
reached like growth and profitability

Tactical planning- A tactical plan answers "how do we achieve our strategic plan?".
•Tactical plans span a short time frame (usually less than 3 years) and are usually
developed by middle level managers.Tactical plans are concerned with the
responsibility and functionality of lower-level departments to fulfill their parts of the
strategic plan. Tactical plans entail detailing resource and work allocation among the
subunits within each division.

For example, when Anushka , the middle-level manager at the clothing company,
learns about strategic plans for increasing productivity,she immediately begins to
think about possible tactical plans to ensure that happens.

Operational plan- Operational plans are at the bottom. Operational plans are short-
term (less than a year) plans developed to create specific action steps that support
the strategic and tactical plans.

they are the plans that are made by frontline, or low-level, managers. The operational
plan maps out the day-to-day tasks required to run a business and cover. For
example, personnel responsible for the lower level operation will do work like ,
ordering and stocking inventory; creating a monthly budget; developing a
promotional advertisement.

Operational plans can be −

Standing plans − Drawn to cover issues that managers face repeatedly, e.g. policies,
procedures, rules.

Ongoing plans − Prepared for single or exceptional situations or problems and are normally
discarded or replaced after one use, e.g. programs, projects, and budgets

Contingency plans- Contingency planning involves identifying alternative courses of

action that can be implemented if and when the original plan proves inadequate
because of changing circumstances. contingency plan is sometimes referred to as
"Plan B," because it can be also used as an alternative for action if expected results
fail to materialize.Anticipating change during the planning process is best in case
things don’t go as expected. Management can then develop alternatives to the
existing plan and ready them for use when and if circumstances make these
alternatives appropriate.
PLANNING PROCESS

The planning process is the steps a company takes to develop budgets to guide its future
activities.

1. Setting objectives- The first step in the planning process is to identify the
goals of the organisation. In other words, managers must provide clear
guidelines for organisational efforts,such as explaining what is to be achieved
and how to achieve it so that activities can be kept on the right track. For
example Ramesh wants to increase his market share, hence objectives will be
framed to achieve the same.
2. Developing premises- The next step is to come up with a list of required tasks
to meet the objectives defined.Premises are assumptions about the
environment in which plans are made and implemented. These assumptions
usually relate to environmental factors like policies, consumer preference etc.
for example to increase the market share for the product, ramesh needs to
consider various factors while devising the plan
3. Alternatives and selection available- It is really hard to select when there are
multitude choices available to an organisation . All of these alternative
courses should be identified. And the best alternative should be selected.
4. Derivative plan- After selecting the best course of action, the management
has to formulate the secondary plans to support the basic plan. The plans
derived for various departments, units, activities, etc., in a detailed manner are
known as ‘derivative plans’.
5. Securing cooperation and participation- To some extent the success of a
company depends upon its employees. Hence Encouraging diverse
participation For constructive criticism , Suggestion and complaint helps in
developing even stronger plans making the organisation successful. Hence
Ramesh should involve his employees in the decision making process to
achieve its objective.
6. Follow-up - Plans have to be reviewed continually to ensure their relevance
and effectiveness. In the course of implementing plans, certain facts may
come to light that were not even thought of earlier. In the light of these
changed conditions, plans have to be revised. Without such a regular follow-
up, plans may become out-of-date and useless. For example, clothing is fast
changin. Hence, ramesh would need to follow up with all his plans.

What is planning premises?

Planning premises are defined as the anticipated environment in which plans are
expected to operate. They include assumptions or forecasts of the future and known
conditions that will affect the operation of plans. These events may be known
conditions or anticipated events which may or may not happen.The forecast or the
assumptions about future which provide a base for planning in present are known as
planning premises.

Internal premises- Internal Premises come from the business itself. they relate to
premises about the company’s internal policies and programmes, sales
forecasts,skills and abilities of personnel etc. These premises may be strengths or
weaknesses of the organisation.

External premises- External premises originate from factors outside the

organisation. These are the indirect- action environmental factors (social, political,
technological etc.) which affect the organisation. They are also non-controllable
premises beyond the control of the organisation. The external environmental factors
represent opportunity or threat to the organisation.

Controllable premises- Controllable premises are within the control of a business

enterprise, such as, men, money, materials, policies, procedures, programmes etc.
Such premises are usually internal to the business.

Semi- controllable premises- Semi-controllable premises are those which can be

partially controlled by a business enterprise like, labour position in the market, prices
of the product, market share of the company etc.

Uncontrollable premises- Uncontrollable Premises are those over which the

management has absolutely no control. They include weather conditions,
consumers' behaviour, government policy, natural calamities, wars, etc.

Tangible premises- Tangible Premises can be measured in quantitative terms. For

example, production forecast and sales forecast can be expressed in monetary
terms.

Intangible premises- Intangible Premises cannot be measured in quantitative terms.

They include goodwill of the business, employee's morale, employee's attitude and
public relations.

FORECASTING

Forecasting is the technique of estimating the relevant future events and problems
on the basis of past and present behavior or happenings. It shows that the manager
know something of future happenings even before things actually happened
forecasting provides them this knowledge whenever the managers plan business of
the Nations they have to take into account the past present and prevailing economic
political and social conditions as it provides a basis for planning

CHARACTERISTIC
1. Forecasting relates to future events.

2. Forecasting is needed for the planning process because it devises the future

course of action.

3. It defines the probability of happening in future events. Therefore, the happening

of future events can be precise only to a certain extent.

4. Forecasting is made by analysing the past and present factors which are relevant

for the functioning of an organisation.

5. The analysis of various factors may require the use of statistical and

mathematical tools and techniques.

FORECASTING METHODS

Methods can be qualitative or quantitative in nature.

Quantitative

1. Time series model- Time series models look at historical data and identify

patterns in the past data to arrive at a point in the future based on these

historical values. Since the historical data has a pattern, it becomes evident

that the data in the future should also have a pattern. Through this A trend can

be known over the period of time which may be true for the future also.

2. Associative model- Associative models look at the variable that is being

forecasted as being related to other variables in the system, which means

each variable is associated with the other variable in the system. The forecast

projections are made based on these associations.

Qualitative

1. Delphi model- The agreement of a group of experts in consensus is required

to conclude in the Delphi method. This method involves a discussion between

experts on a given problem or situation. An argument or brainstorming is done

to complete that everyone involved in the debate agrees to.

2. Market survey- Surveys can be conducted to gather information on the

intentions of the concerned people. On the basis of such surveys, demand for

various products can be projected. Survey method is suitable for forecasting

demand—both for existing and new products.

3. Executive opinion- This method is very similar to the Delphi method; however,

the only difference here is that the executives may or may not be experts of

the matter in question, albeit they have the experience to understand the

problem or situation and formulate a forecasting method that would bring out

the best possible result.

4. Sales force composite- The information and intuition of the salesperson

determine the needs of the customer and estimate the sales in the particular

region . This information is vital in forecasting the needs of the customer,

which can be used to make necessary changes in the business

MBO stands for management by objectives. IT was popularized by Peter Drucker. It

is a personnel management technique where managers and employees work
together to set, record and monitor goals for a specific period of time. It requires that
employees set measurable goals based upon the organizational goals. It streamlines
the plan of action of the workforce and establishes their roles and responsibilities.

STEP-1 and 2 (SETTING GOALS/OBJECTIVES)

As a team head I would be the controller and adjudicator of my team. So in a
complex environment with dependencies and decreased efficiency, a good
way seems to be to set targets and objectives for my teammates, assign
responsibilities and then measure the results after the defined period. This
way the larger objective will be broken down in individual targets and passed
down from level to level. This will help me to pin point clear and measurable
accountability and evaluate performance of my team mates. So this way I have
already set up objectives for my team and have also mapped it mentally as to
how I would assign them duties and which duty will be assigned to whom. So
when every teammate is clear with his/her duty then they will know what
exactly they have to do.

STEP 3-MONITORING PERFORMANCE AND PROGRESS

Once I have put forth the organizational goals and individual employee objectives, I
will be sure that the tasks and responsibilities assigned to each employee is being
duly worked upon by him/her. Now I need to monitor their performances and
progress. For this I will use the following ways-
1)Identify ineffective programs by comparing performance with pre-established
objectives
2)Preparing long and short range objectives and plans and making sure that I use
constant monitoring processes by always making sure that my teammates know that
their work is under proper check.
3)Designing a sound organizational structure with clear responsibilities and decision
making authority at the appropriate level.

STEP 4- PERFORMANCE EVALUATION

Once I have put forth the organizational goals and individual employee objectives, I
will be sure that the tasks and responsibilities assigned to each employee is being
duly worked upon by him/her. Now I need to monitor their performances and
progress. For this I will use the following ways-
1)Identify ineffective programs by comparing performance with pre-established
objectives
2)Preparing long and short range objectives and plans and making sure that I use
constant monitoring processes by always making sure that my teammates know that
their work is under proper check.
3)Designing a sound organizational structure with clear responsibilities and decision

making authority at the appropriate level.

STEP 5- PROVIDING FEEDBACK

Feedback is defined as the information or comments about something that you have
done which tells you how good or bad it is. Feedback occurs when outputs of a
system are routed back as inputs as part of a chain of cause and effect that forms a
circuit or loop. The system can then be said to feed back into itself
•In the management by objectives approach, the most essential step is the
continuous feedback on the results and objectives, as it enables the teammates to
track and make corrections to their actions. My feedback will be complemented by
frequent formal evaluation meetings in which my teammates and I will discuss
progress towards objectives, leading to more feedback. This will not only help my
teammates to improve but will also help me know what are the areas of excellence of
each teammates and what are the areas they need to work on.

STEP 6- PERFORMANCE APPRAISAL

performance appraisal is a regular review of a teammate’s job performance

and overall contribution to a company. Also known as annual review,
performance review or evaluation , or employee appraisal, a performance
appraisal evaluates the teammate’s skills, achievements and growth-or lack
thereof. The main purpose of appraisal is to promote communication and
provide useful feedback about job performance, to facilitate better working
relationships, to provide a historical record of performance and to contribute to
professional development. I will also acknowledge and appreciate the
teammates who will successfully achieve their targets as pre assigned by
means of added benefits, be it verbal recognition ,bonuses, an opportunity to
select the kind of work that they would like to take up for the next team project.
This will not only motivate that team member but other members also to be
motivated by the benefits that they will receive if they fulfil their work
efficiently. This will boost productivity.