Paper: 05, Principles of Management

Module: 07, Systems Approach to Management

Prof. S P Bansal
Principal Investigator Vice Chancellor
Maharaja Agrasen University, Baddi

Prof YoginderVerma
Co-Principal Investigator Pro–Vice Chancellor
Central University of Himachal Pradesh. Kangra. H.P.

Prof. Tejinder Sharma

Paper Coordinator Department of Commerce
Krukshetra University, Kurukshetra

Content Writer Dr. Dimple Khosla

Assistant Professor,
Dyal Singh College, Karnal
Items Description of Module
Subject Name Management
Paper Name Business Management
Module Title Systems Approach to Management
Module Id Module no.-7
Pre- Requisites Basic knowledge of Management Concept
Objectives To understand the concept of System Approach
Keywords System, management, approach , synergy, boundary

QUADRANT-I

1. Introduction
2. Meaning of System
3. Meaning of System Approach
4. Key Concepts of System Approach
5. Features of System Approach
6. Critical Evaluation of System Approach
7. Relationship between System approach and Contingency Approach
8. Conclusion
 System Approach to Management

# Introduction
There are various approaches to management like classical approach, neo-classical approach
and modern approach. Systems approach to management is a part of modern approach. This
approach was developed by Chester I. Bernard, Herbert Simon and their colleagues. Due to
the limitations of considering only a particular aspect by classical and neo - classical
approach, systems approach was developed. this approach considers the organisation as a
whole rather than considering some particular aspect.

# Meaning of System
System as the name suggests is a group of related parts that move or work together like the
human body consists of several parts and each part works in connection with the other. A
single function of the body is performed when a number of organs work together as a system.
According to the definition given in the Webopedia, “System means a group of
interdependent items that interact regularly to perform a task. In other words it is an
established or organised procedure.

# Meaning of System Approach

Now relating the word system with approach to management, it conveys that the whole of the
organisation is interconnected and interdependent. Every organisation has a structure, where
we can see the various departments in which the whole of the organisation is divided. Each
department works at its own but can not work in absolute isolation. It has to depend on other
departments for various functions to be performed. So the efficiency of one department
depends upon the efficiency of another department. For example, if purchase department does
not purchase raw material in time, production department can not produce the product in
time. So here it can be said that each department works as a sub-system to make the whole
organisation a system. Managers following this approach to management considers the
organisation as a whole rather than considering various parts of the organisation separately.

# Key Concepts of a System

 Sub-System :
A system is made up of various integrated and interdependent parts. Each such part is
known as a sub-system. For example an automobile firm may have several
departments like purchase department, production department, finance department ,
marketing department, personnel department etc. So each such department is a sub-
system of the whole firm and the whole firm is a sub-system of the automobile
industry, which is a sub-system of the Indian economic system and which is a
subisystem of world economic system. Each sub-system is a part of other sub-system
and change in one sub-system leads to a change in other sub-system.
 Open and Closed System:-
The system may be a closed system or an open system depending upon their
interaction with the environment. Here environment is the sum total of the factors and
forces outside the organisation such as customer, competitors, suppliers, investors,
government etc. The system which have no interaction with the environment , self
contained, rigid, static and mechanical are known as the closed systems. These are not
at all affected by the environmental factors whereas on the other hand open system are
those which interacts with the outside environment, are dynamic and flexible in
nature. Systems approach to management follows open system and thus receive inputs
from the environment and gives output to the environment.
But infact systems should not be differentiated as open or closed rather they should be
differentiated on the basis of degree of openness. Because there is hardly any system
which is not at all affected by the environmental forces.

 Synergy:
According to the business dictionary synergy is a state in which two or more things
work together in a particularly fruitful way that produce an effect greater than the sum
of their individual effects. In other words it can be expressed as ‘ the whole is greater
than the sum of its parts.’ It actually refers to the teamwork in which all individuals
work together and their collective total output is more than the sum of their individual
output if they do it in isolation. So in regard to the system approach to management
we can say that a business organisation operates more efficiently if it work in co-
operation with each other in a systematic manner rather than working separately.

 System Boundary:
Line that separates the system from its environment is known as boundary. If the
boundary is visible and rigid like a wall it is like the closed system but if the boundary
is flexible and is visible in form of relationship between the various parts of the
organisation and environment, it is like open-system. From here a manager can also
know which part he can better control and which he can not control. For example he
can not change the policies made by the Government but can replace a worker who is
not performing well.

 Feedback:
Feedback means the response, which may either be positive or negative. If the
feedback is positive then the manager gets motivated as the plan he initiated was
successful and if feedback is negative, he has to check where the problem is, what are
the causes and what are the possible ways to remove it.
# Features of System Approach to Management
 Hierarchy of Sub-System; It is the basic feature of system-approach which explains
that within an organisation there are several parts, where each part is considered to be
a sub-system of another sub-system. For example;

Planets is a part of Solar System

Solar System is a part of Galaxy

Galaxy is a part of Heavenly Bodies

Heavenly Bodies are a part of Universe

Similarly in an organisation there are many interdependent parts and each part may
consist of various sub-parts.

 Inter-related and Inter-dependent: The sub-system or parts prevailing in a system

are connected to each other and performance of one part is affected by the
performance of the other. These sub-parts are always considered in connection to each
other and not in isolation.
 Boundary: This approach clearly defines what is with in the organisation and what is
outside the organisation. In other words a manager is well aware about the
controllable factors and uncontrollable factors.
 Input-Output Process: System takes input from the environment and gives output to
the environment. As raw material is purchased from the market, processed in the
organisation and transformed into the finished product to supply into the market.
 Open System: As discussed earlier that system can be either closed or open. An
organisation being a social system is an open system which puts effect on the
environment and is affected by the environment.
 Adaptive: Adaptability means adjusting with the changing environment. Under the
system approach to management, the organisation is an open organisation and it takes
input from the environment and adjust accordingly.
 Dynamic: An organisation can not be static. It has to move on and on with every
change in the environment. So system approach says that the organisation is dynamic
and responsive. Within an organisation there are several sub-systems and the process
in between these sub-systems are all dynamic and vulnerable.
  Multidisciplinary: Management in any organisation is not influenced by a single
discipline. It is a result of so many disciplines like Economics, Statistics, Sociology,
Psychology, Operation Research, mathematics and various schools of Management
Thoughts. Management is also described as both science as well as arts since it has its
own principles which are applied in most of the organisations and it tries to do the
work in a systematic manner. This approach to management integrates knowledge
from all the above mentioned disciplines and many more.
 Probabilistic: In a chemical reaction one can always be sure that what will be the
result of mixing different compounds but in an organisation a manager can not be sure
that what will be the exact result of his efforts. Thus, system approach to management
says that it is probabilistic because the outcome is not certain. For example, a manager
asks purchase manager to buy more of raw material in comparison to the last month in
anticipation of huge demand in the near future, but he can just predict the probable
demand and not the exact demand.
 Integration of Activities: System Approach is an integrated approach as it integrates
the activities and the departments in order to derive the best use of scarce resources. It
takes into consideration all the sub-systems of the system.

# Critical Evaluation of System Approach to Management

 Contributions:
The contributions given by the system approach to management are:
(i) It enables a manager to think correctly and positively about how to get the
things done and teaches him to consider the organisation as a whole to
achieve the overall effectiveness rather than to consider each individual
part separately,
(ii) It follows management by objective as the focus is strived to achieve
organisational objective side by side fulfilling the individual objectives of
the sub-systems.
(iii) It helps the manager in understanding the impact of environmental factors
as the environment is dynamic and always keeps on changing so it enables
a manager to be more and more adaptive.
(iv) It tells the managers about the multilevel and multi-dimensional features of
management. It explains how it is applied at both micro and macro levels.
At micro level it may consider even a small sub-system and at macro level
it may consider even the whole business system.
(v) System approach to management also implies that manager should have an
analytical observation power. He should be able to analyse the available
opportunities and to allocate the resources considerably.
(vi) New ideas should also be accepted by a manager even from a lower level
employee. He should teach his employees the benefits of team-work or the
importance of synergy. So this approach actually makes him a real
motivator.
 (vii) The mechanism of feedback in this approach provides the manager
chances to reallocate the resources according to the changed environment
and also to remove the problems which arise in the path of the
performance.

 Limitations:

Inspite of being much better than the classical and neo-classical approaches to
management, system theory can not be said as an absolutely perfect theory. It suffers
from these limitations:
(i) This approach lacks universality. It is suitable for the large business
organisations but not for the small concerns. It is also more beneficial for
manufacturing concerns rather than service providers.
(ii) This theory does not explains the relationship among different variables
that can be applied to all business concerns.
(iii) System approach says that all subsystems are inter-related and inter-
dependent but to what extent it does not specify.
(iv) This approach is over-conceptual.
(v) It does not explain how the sub-systems of the specific organisation is
uniquely related in a given environment.

# Relationship between Contingency Approach and Systems Approach

 System Approach has failed to establish a relationship between the organisation and
the environment, whereas environment analysis is one of the major parts of the
conceptual framework for contingency approach. It is the foremost duty of the
manager to analyse the environment and take action according to the result of the
analysis.
 Contingency Approach follows the basic ideas and concepts given by the Systems
Approach but followers of contingency approach opines that system approach is not
targeted towards managerial action.
 System Approach is more concentrated towards human behaviour and the various
parts of the organisation i.e. how the various sub-parts are connected to each other,
whereas contingency approach concentrates on structural adaptation of the
organisation with its inside and outside environment.
 It can be said that contingency approach has emerged and built-up over the system
approach. So both the approaches can go together in an organisation. A manager can
decide within the various sub-systems what different strategies should be adopted by
him in different situations.
# Conclusion
To conclude we can say that system approach is a set of various inter-related and
inter-dependent sub-sets working together to achieve a common goal. It helps the
manager to bring co-ordination at various levels and to analyse systematically. This
approach provides a unified focus to the organisational efforts. It has given a new
sight to the managers.