What is System Approach/Theory of Management?
The system approach is new thinking in the management literature. A system is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. A system is a combination of sub-systems. For instance, an organization is a system and its sub-systems maybe are finance, management, selling, production, and accounting department, etc. so the combination of these departments forms a business firm as a system.
System theory is popularized by Ludwing Von Bertalanffy, Kenneth Boulding, NIE Weiner, Fermount E. Kast, and James. E Rosenzwing.
The system is composed of a number of subsystems and all the subsystems are related to each other. The system of an organization can be classified as physical, biological, mechanical, and social.
The system theory also studied on the basis of input, processing, and output components, they can be shown as:
#1 Input
Inputs are the raw materials that can be processed for the output. An organization gets input from the external environment. Input consists of human, financial, physical, and information. Qualified and experienced human resources, good physical infrastructure, and adequate capital are crucial for accomplishing organizational goals.
#2 Processing
Organizations are processing units. They convert raw materials into finished products through the conversion process. Solid planning, decision-making, leadership, and proper control are vital for better processing.
#3 Output
The output is the product of organizations. Outputs are supplied in the market and feedback or response is received. If the businesses provide quality outputs to their customers, buyers will have a positive attitude towards the organization and vice-versa. For a better product or service, an organization needs good inputs and processing.
Components of System Theory
#1 Goal Oriented
Every system is purposeful. It is directed towards achieving certain objectives.
#2 Subsystem
The parts or components of a system are called subsystems. Each system may be a subsystem of a larger whole making another system. For example, a teacher is a subsystem of a college, which is the subsystem of a university, which is also the subsystem of the education commission of the nation. These subsystems interact with each other.
#3 Synergy
The synergy means the whole is greater than the sum of its parts. Thus, the synergy effect means 2 + 2= 5. It means that the performance of the whole depends on how well its parts are related and not how well each part operates. For example, if two organizations or systems join together they will achieve more success than if they work separately.
#4 System Boundary
Every system has a boundary that separates it from its environment. In an organization, the boundary determines which parts are internal and which are external. In an open system, the system boundary is flexible, and in a closed system, the boundary is rigid. Many organizations apply flexible system boundaries.
#5 Open and Closed System
An open system continuously interacts with the environment. All organizations interact with their environment. It is concerned with the transformation of input into useful outputs required by environments.
The closed systems do not interact with the environment and are not affected by them. They are isolated within their organization and most have their works to be done within their environment. A clock is an example of a closed system.
#6 Flow
A system has a flow of materials, information, money, human, and other resources. These are inputs, processed through the conversion process, and comes as output and supplied in the market as a product or service.
#7 Feedback
A reaction or response from the environment is known as feedback. It helps to evaluate either the output is useful or not. It is useful in evaluating and improving the functioning of the system. Therefore, feedback is the key to system control.
Contribution of System Approach to the Management
- It provides a conceptual framework for a meaningful analysis for organizations and management.
- It emphasizes manager on the interdependence and interrelations of various parts of the organizations as well as between organizations and their environment.
- It emphasizes managers to analyze and understand every element of a problem in relation to another element.
Limitations of System Approach
- It is too abstract and can not be directly and easily applied to practical problems.
- It does not offer any tools or techniques of integration and the nature of interdependencies between organizations and the environment.