Productivity Improvement

Open Systems Approach

Organizational open systems

We defined a firm as an independent economic unit, which has as its aim the earning of a profit by offering goods and services for sale to society.

  • It is a physical/conceptual entity
  • It has interrelated and interacting parts (departments, people, machines, etc.)
  • It exists in an environment with which it interacts
  • It has a preferred state (profitability)

By definition it is a system. (We can benefit by studying the firm as a system in interaction with its environment.)

  • It is an open system
  • it is an adaptive
  • It is a productive system

It may therefore be of benefit to use a systems approach to the analysis of the organization.

The systems approach to the analysis of the organization

This section is the most important part of this article, with a view to the development of your problem solving skills. A recommended procedure you should use when analyzing your organization, or any other complex problem, is as follows:

Define a conceptual boundary for the system

  • The boundary of the system is defined to reduce the scope of the problem and to ensure that the correct focus is attained in the analysis.
  • You must exercise your own discretion in defining the boundary. If you define it too broadly your analysis will become unwieldy or too complex to handle. If you define it too narrowly (the most common fault) you will end up with a localized analysis, resulting in a limited perspective that excludes significant variables.
  • The definition of the boundary is often guided by the scope of the problem itself. The scope can vary from problem to problem. Sometimes an entire industry will be placed within the boundary, at other times an entire firm. Narrowing our focus, we could even define our boundary as being a single department or even person in the organization.
  • It is often necessary to redefine the boundary as the analysis proceeds. In very complex situations, the situation may have to be broken down into several systems interacting with one another.

Identify the parts of the system

  • The part of the system inside the boundary must now be identified.
  • A part of a system under study could be a smaller system in its own right. The parts of the system are entities or elements of the system, and their definition depends on the level of detail at which we wish to carry out our analysis.
  • In one analysis we might define a whole factory as a part of the system, whereas in the next analysis the various departments in the same factory might each be considered as a part of the system.
  • Once again, we must use judgment and discretion in defining or identifying the parts to be considered.

Identity the parts of the environment

  • It is seldom efficient to treat the environment as an undifferentiated amorphous entity with which the system interacts.
  • Generally certain parts of the system will have more specific interactions with specific parts of the environment than others.
    Wherever this occurs it may make the analysis more realistic to consider such an external part as a subsystem in the environment.

Determine system interactions

Open systems - system ineteractions

Determine the interaction between the parts of the system themselves and between parts of the system and the environment.

  • The interaction between the parts of the system themselves and between them and the environment can be identified in terms of flow of goods, materials, money, labor, machines, information, communication, etc.
  • Wherever possible, attempt to quantify the relationships, that is, attempt to establish a mathematical relationship for the variables, for example, a percentage of total production sold to a particular customer or segment.
  • There may also be interactions between elements in the environment that are important to the particular problem, for example a link between the firm's competitors and their suppliers, or between the firm's customers and their customers.

Analyze and attempt to forecast the trends in the variables

This is an essential part of the analysis.

  • Business problem solving should be future-orientated, so before we attempt to find a solution we have to analyze the trends that have taken place, and attempt to forecast future trends.

Commence problem analysis

  • Once we have concluding the previous stage we can start analyzing the problem. In doing so remember that the firm operates as a system and keep the results of the above analysis continuously in mind.
  • Your first attempt to use a systems approach may be very frustrating. It is only after making a few analyses that you will begin to appreciate the value of a systems approach.
The value of a systems approach

If we approach the firm as a system in interaction with it's environment, then in the analysis of problems or in planning of future activities we ensure that we do not neglect:

  • Parts of the system.
  • Parts of the environment.
  • The major variables affecting the system.
  • The relationships between variables and the parts of the system or the environment.

Most of the serious mistakes made in business arise because of neglect of one or more of these four factors.

Next: Analysis of organization as a system