Strategic Management: Formulation and Implementation

The Systems Approach

The systems approach to management is more a perspective for viewing problems than a school of management thought.

Ludwig von Bertalanffy is recognized as the founder of general system theory. The system approach is based on the concept that an organization is a system. A system is defined as a number of interdependent parts functioning as a whole for some purpose. Here there are five components: inputs, a transformation process, outputs, feedback, and the environment.

The systems approach is very important in general management analysis. Four especially ideas that have had substantial impact on management thinking are the concepts of open versus closed systems, subsystems, subsystems and interdependencies, synergy and entropy.

Open versus closed systems. According to Ludwig von Bertlanffy, there are two basic types of systems: closed systems and open systems. Closed system are not influenced by and do not interact with their environments. Open systems interact with their environment. All organizations are open systems, although the degree of interaction may vary.

Entropy. Entropy is a universal property of systems and refers to their tendency to run down and die. A primary objective of management, form systems perspective, is to avoid entropy.

Synergy. Synergy means that the whole is greater the sum of its parts. Synergy is an important concept for managers in that it reinforces the need to work together in a cooperative fashion.

Subsystems. A subsystem is a system within a system. From another perspective, subsystems are parts of a system that depend on one another.

The concept „wholeness” is very important in general system analysis. L. Thomas Hopkins suggested the following six guidelines regarding system „wholeness” that should be remembered during systems analysis:

The whole should be the main focus of analysis, with the parts receiving secondary attention.
Integration is the key variable in wholeness analysis.
Possible modifications in each part should be weighted in relation to possible effects on every other part.
Each part has some role to perform so that the whole can accomplish its purpose.
The nature of the parts and its function is determined by its position in the whole.
All analysis starts with the existence of the whole.
Systems theory offers the manager a useful perspective. For example, the management system is based upon general system theory.