Systems theory is a relatively new area of study having been developed in the second half of this century. It was brought to light by authors such as Ackoff, Churchman and Emery, responding to the need to have an integrated perspective of those human activities that could be regarded as systems.
It was first used in operations research, as a means to develop models of different industrial processes. Through the extensive application of this theory it was then realised that such theory could be used in more complex spheres, encompassing the understanding of social systems.
A system may be defined as a purposeful whole, divided into interacting parts. The system is composed of four major elements: the environment, the inputs, the outputs and the process.
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"1.- The system has one or more defining functions.
2.- Each part in the set can affect the behavior or properties of the whole.
3.- There is a subset of parts that is sufficient in one or more environments for carrying out the defining function of the whole; each of these parts is separately necessary but insufficient for carrying out this defining function.
4.- The way that the behavior or properties of each part of a system affects its behavior or properties depends on the behavior or properties of at least one other part of the system.
5.- The effect of any subset of parts on the system as a whole depends on the behavior of at least one other subset."
When essential parts are in the environment, such as customers and external suppliers, the system is called "open system". Figure 1 represents such a layout viewed in environmental layers, a concept that depicts with clarity most firms. An "open system" has complex interactions with the environment, which in the figure is artificially subdivided into the operating and general environment. The first one has a direct influence on the operation of the project. We find in it the customers, the competition, the local community and suppliers. As we go farther, we still find these elements but as part of a national and international economic atmosphere, a business culture, a social environment, a legal framework and the overall technological advancement of the region.
Figure 1,
Basic Schematic of a System
The system approach focuses interactions between
components and environment, where we find the competition,
the local community, the culture, the social environment,
and the legal framework.
In the analysis of organisations there are few cases of closed systems, they do not operate in a vacuum from the very principle that they are social in nature. Although systems are physically encased in buildings, and graphically represented in boxes, in reality, the amount of interactions with the environment actually blurs the physical boundaries. More than the considerable effects on the system, the environment is the primordial cause for the existence of the system.
In the early theory of management, organisations were viewed as closed systems. F. W. Taylor (1911) envisioned them as machines that could be improved by increasing the efficiency of their mechanical parts, with no particular purpose and no regard for external influences, interpersonal relations or political uncertainty. In contrast, a firm conceptualised as a 'social system' would be one with "purposes of their own, made up of parts that have purposes of their own, and are parts of larger systems that also have purposes of their own" Ackof (1994:16).
Cleland (1983:22) asserted that there are three environmental levels within which an organisation works:
Operating environment - the set of suppliers, customers, and interest groups with which the firm deals directly;
General environment - the national and global context of social, political, regulatory, and economic and technological conditions."
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Knowing the environment is an extremely complex task. The systems approach helps decision makers narrow down the number of variables to consider. It also helps to perceive the interaction between them and the projects. At this point It could offer models to understand reality, predict and simulate different possible horizons, avoiding to a certain extent the use of expensive trial and error techniques.
The whole system is encased in a global environment very much defined by the current status of the economy, education, culture, politics and the legal-administrative framework. The project leader should be aware of the global context since it affects the possible outcomes. Although the environmental variables are predominantly out of his control, he or she can adapt and exert some pressure to make changes. The following issues within the global environment should be examined with special interest:
- The economy. Currency, inflation, sectoral indicators, tax structure, shadow prices and exchange value of agricultural goods and livestock;
- Social aspects, culture, local habits, religious observances and costumes, idiosyncrasy, conflicts between social groups;
- Politics. Democracy and local to central government relationships, different factions, relationships between current government and donor country;
- The legal framework, administrative procedures, and regulations affecting the project.
The most relevant inputs of the system are the resources coming from the environment as well as from the organisation. Figure 2 depicts those inputs and the links between them and the other parts of the system from the manager's perspective. That is, the diagram links the functions of a manager with the system itself.
The main resources are: human; financial; knowledge, materials and energy. But as important as those inputs are other environmental inputs such as the social, legal and ethical constraints; information on the market, the economy and public or local opinion, and, market opportunities and social responsibilities. These in turn are directly linked to the organisational inputs, which should be tuned to the environment. Within the organisation, the kind of resources and capabilities a firm has, defines the manager's strategy: from planning and control, to research and development and quality assurance. The following paragraphs describe a number of important issues to consider for input management.
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Figure 2 Diagram of full systems management according to Buchele (1977:274)
Labour as an input for the project, refers to the people involved directly in the implementation, operation and maintenance of the project. It requires a specific set of technicians and field administrators. It is also important to know what level of skills is required and what is the availability of those skills. Reaching a desired level of know-how requires the implementation of training programs that in some instances include personnel from outside the organisation, such as intermediate and end users and government officials.
It is also common to find that there is a scarcity of labour with specialist capabilities, for which one must consider bringing in consultants and people from other areas and occasionally even technicians from overseas. This will force the manager to focus and spend more resources on the logistics of this process.
Handling the appropriate channels of distribution and expediting imports will substantially benefit operations, making sure goods arrive safely and clear customs with no delay. Once in port or somewhere within the country (if the material in question is not imported) management must be involved in the proper storage, allocation and efficient distribution.
The choice of technology is to a certain extent tied up with the design and the country of origin of the firm or its associates. This forces managers to consider issues of appropriate technology, which bears direct relation to the local conditions.
Two major inputs for the project are money and land. Funds are necessary to finance the inputs, implement the engineering part of the project, for the start-up, operation and maintenance of the whole system. These funds must be sufficient and timely. The manager has to know if there are additional sources of funds for contingencies and how are they going to be allocated, what policies apply and what is the trend in inflation and currency variations.
As shown in figure 3, there are links that involve the flow of money and other resources to and from investors, suppliers, debtors, consumers, employees and government. Even in the smallest of projects these links are very complex and thus difficult to handle. Systems theory offers tools to simplify the task, by bringing the whole into perspective and relies on models to predict the behaviour of projects. In this respect, financial modelling must be staged according to the development of the project, from simplified versions to models that account for risk, currency fluctuations and inflation. In the first case detail is not necessary, tasks could be aggregated into a few major activity groups. This is in tune with systems theory, since it advocates synthesis instead of analysis, working from the desired state backwards to the current state. The following section will explore these issues from defining the right targets to achieving them through collaboration.
Fig. 3. A stakeholder's view of a firm (Ackoff,1994:39)
