Systems Approach to Management

It is a collection of interrelated parts acting together to achieve some goal which

exists in the environment. Also, system is defined as a set of objects working
together with relationships between the objects and their attributes related to each
other and to the environment.
Therefore, system in simple terms in respect to management, it is a set of different
independent parts working together in interrelated manner to accomplish a set of
objectives.

Elements of Systems Approach

An organization is a unified and purposeful system consisting of several
interconnected, interacting and interdependent parts. The parts of a system are
called sub-systems. Each sub-system influences the other sub-systems and the
system as a whole.
The position and function of each sub-system can be analysed and understood only
in relation to other sub-systems and to organization as a whole. Each sub-system
derives its strength by its association and interaction with the other sub-systems. As
a result the collective contribution of the organization is greater than the aggregate
of individual contributions of its sub-systems. This is known as synergy. Each system
has a boundary that separates it from its environment. The boundary determines
which parts are internal to the organization and which are external. For example,
employees are within the boundary and creditors; customers are external to a firm.
The reaction or response of the environment to the output is known as feedback.
Feedback is useful in evaluating and improving the functioning of the system.
Organizations operate on the principle that they have several alternative ways of
doing the same thing or achieving the same goal.
Classification of systems
Open systems –
An open system actively interacts with its environment. By interacting with other
systems, it tries to establish exchange relationships.
Closed systems –
A closed system is self contained and isolated from the environment. It is a non-
adaptive system. It does not receive inputs often from other systems and does not
trade with the outside world. Example: An automatic wrist watch
7-S Model
The 7-S model was originally used to analyze both large and small firms by looking at
their structure, offering a wider explanation through seven Elements:
1. strategy,
2. structure,
3. systems,
4. style,
5. staff,
6. skills, and
7. shared values.

The Seven Elements

Strategy: Actions a company plans in response to or anticipation of changes in its
external environment. It may also be seen as plans for allocation of resources to
enable the company’s identified goals.
Structure: Basis for specialization and coordination influenced primarily by strategy
and by organizational size and diversity. This is also the way that different units in
the firm relate to each other.
Systems: Formal and informal procedures that support the strategy and structure.
Often internal systems are more powerful than they are given credit for. They are
also the procedures and processes that characterize how the work should be done
and internal systems used to accomplish the needed performance.
Style: The culture of the organization, which consists of two components. One of
them is management style, how key managers behave and what they do rather than
what they say. It answers the questions: How do they spend their time? What are
they focusing their attention on?
Staff: Human resource management, the processes and efforts used to develop
managers, socialization, and the shaping of basic management values, It also
includes ways of introducing young recruits to the company, and the support given
to manage employees’ careers.
Skills: These are the distinctive and core competencies of the company, They include
the ways competencies are expanded or shifted. This can also be determined from
the perspective of core competencies that exist and are developed in the firm.
Shared values: Also called super ordinate goals, these are the central believes and
attitudes, guiding concepts, and fundamental ideas around which a business is built.
Usually stated at the abstract level, they have great meaning inside the organization
even though outsiders may not see or understand them. They can be summarized as
what extent the company stands for and what it believes in.
These seven elements also help estimate the effectiveness of a firm. They are
interrelated -- if one element changes, it will affect all the others. For example, a
change in human resource systems such as internal career plans and management
training has an impact on organizational culture and thus will affect structures,
processes, and finally the characteristic competences of the organization. Another
example is changes in the structure such as merging sales and marketing that affect
the number and quality of new products that the company can launch.
Advantages of this theory
 It aims at meaningful analysis of organizations and their management.
 It facilitates the interaction between organization and its environment.
 It guides managers to avoid analysing problems in isolation and to develop an
integrated approach.
Disadvantages of this theory
 Over-conceptual
 The approach does not recognize the differences in systems.
 Systems philosophy does not specify the nature of interactions and inter-
dependencies.
 Unpractical: It cannot be easily and directly applied to practical problems.