"All organizations are perfectly designed to get the results they are now getting.

If we
want different results, we must change the way we do things." - Tom Northup

The success ratio of any organization depends on the management approach taken.
The company should function as a unit to achieve the set goals. One of the important
theories related to management is the systems theory.
What is Systems Approach?
The systems approach to management is a concept which views a company as an
interconnected purposive system that consists of several business sections. The entire
system can be broken into three parts namely - input, process and output.

 Input involves the raw materials, funds, technology, etc.

 The process refers to activities related to management, technology, operations, etc.
 Output are the products, results, etc.
 The response or feedback in a system focuses on the information and data which is
utilized for executing certain operations. These inputs aid in correcting the errors
found in the processes.

It is a management approach which enables the leadership to see the company as a

unified part or a major section of the larger outside corporate environment. Even a
small activity in a section of a company has a substantial effect on other sections of
the company. Such a system may be biological, physical or social, and may enable the
management to efficiently determine the long-term goals of the company. The
systems approach states that, for realizing the operations of an entity, it is essential to
see the entity as a whole system.
Elements of a System
A system is made of different subsystems: internal and external. These subsystems are
interconnected and influence each other and the system as a whole. Each of the
subsystem interacts with the adjacent subsystem and they work in synergy for the
betterment of the entire system. The limits within which the internal subsystems
function, are determined by the system boundary. The external subsystems, on the
other hand, are those which lie outside the boundary limits, but still influence the
system.

For example: In a supermarket, the various subsystems are the marketing and
advertising, sales, admin and finance department. These are the internal subsystems
that lie within the boundary. The external subsystem here are the buyers or the
customers who visit the store. Only when all these subsystems work together, the
system is said to function effectively.
Open and Closed System
The organization can act as an open or a closed system. An open system is the one
where the elements of the system can interact with the environment. This interaction
can involve the transfer of material, information or manpower. The purchase
department in any organization can be an example of open system. The buyers have to
interact with suppliers (environment) and other internal departments to carry out the
purchasing activity.

On the contrary, a closed system is the one which does not interact with the
environment at all. There is no exchange of information, material or manpower
between the system and environment. It is sometimes referred as an 'isolated system'.
An assembly line can be treated as a closed system if it does not interact for supply of
raw materials. A research department can also be an example of closed system.
The 7S Model
This is a rough illustration of the 7S model that is developed by McKinsey &
Company consulting firm. It exclusively concentrates on the seven key factors that are
responsible for enabling organizations to reach their desired goals. Only when all
these seven key areas work in a coordinated manner, will the company progress.
The key factors include:
♠ Organizational Strategy: The plan to maintain the competitive edge.
♠ Business Structure: The hierarchy of the organization.
♠ Efficient Systems: The day-to-day procedures and activities related to staff and
processes.
♠ Style: The management style that is adopted.
♠ Skills: The competence of the employees.
♠ Staff: The employees of the organization.
♠ Corporate Shared Values: The core values on which the company is built. It also
refers to the organization's working culture.
All individual elements are highly dependent on each other, so a change in any one of
them may disturb other sections. The company can analyze its current position and
then look for areas where improvement is needed. For this, the organization can frame
a set of questions based on the seven areas and look for answers for the same. Once,
the lacking areas are identified, the right action can be taken.
The systems approach to management is the key to coordinate all the processes in a
large company, and define the importance of individual procedures in the firm.

Systems Approach to Management

1. 1.
2. 2. “Management is the activity of getting things done with the aid of people and other
resources”<br />
3. 3. “No business in the world has ever made more money with poorer management”<br />
4. 4.
5. 5. Systems approach to Management<br />It is a collection of interrelated parts acting
together to achieve some goal which exists in the environment. Also, system is defined as a
set of objects working together with relationships between the objects and their attributes
related to each other and to the environment.<br />Therefore, system in simple terms in
respect to management, it is a set of different independent parts working together in
interrelated manner to accomplish a set of objectives.<br />
6. 6. ENVIRONMENT<br />Transformation<br /> process<br />input<br />output<br />System
Boundary<br />Systems approach to Management<br />Organization as a System receives
Input, transforms it through a Process for Output and Operates in an Environment
(economic, regulatory and other forces)<br />
7. 7. Elements of Systems Approach<br />An organization is a unified and purposeful system
consisting of several interconnected, interacting and interdependent parts.<br />The parts of
a system are called sub-systems. Each sub-system influences the other sub-systems and
the system as a whole.<br />The position and function of each sub-system can be analysed
and understood only in relation to other sub-systems and to organization as a whole.<br />
8. 8. Elements of Systems Approach<br />Each sub-system derives its strength by its
association and interaction with the other sub-systems. As a result the collective contribution
of the organization is greater than the aggregate of individual contributions of its sub-
systems. This is known as synergy.<br />Each system has a boundary that separates it from
its environment. The boundary determines which parts are internal to the organization and
which are external. For example, employees are within the boundary and creditors;
customers are external to a firm.<br />
9. 9. Elements of Systems Approach<br />The reaction or response of the environment to the
output is known as feedback. Feedback is useful in evaluating and improving the functioning
of the system.<br />Organizations operate on the principle that they have several alternative
ways of doing the same thing or achieving the same goal.<br />
10. 10.
11. 11. Classification of systems <br />Open systems - An open system actively interacts with its
environment. By interacting with other systems, it tries to establish exchange relationships.
<br />Closed systems - A closed system is self contained and isolated from the environment.
It is a non-adaptive system. It does not receive inputs often from other systems and does not
trade with the outside world. Example: An automatic wrist watch <br />
12. 12. McKinsey 7-S Model<br />The 7-S model was originally used to analyze both large and
small firms by looking at their structure, offering a wider explanation thorough seven<br
/>Elements: strategy, structure, systems, style, staff, skills, and shared values.<br />
13. 13. The Seven Elements<br />Strategy - Actions a company plans in response to or
anticipation of changes in its external environment. It may also be seen as plans for
allocation of resources to enable the company’s identified goals.<br />Structure -Basis for
 specialization and coordination influenced primarily by strategy and by organizational size
and diversity. This is also the way that different units in the firm relate to each other.<br />
14. 14. The Seven Elements<br />Systems -Formal and informal procedures that support the
strategy and structure. Often internal systems are more powerful than they are given credit
for. They are also the procedures and processes that characterize how the work should be
done and internal systems used to accomplish the needed performance.<br />Style - The
culture of the organization, which consists of two components. One of them is management
style, how key managers behave and what they do rather than what they say. It answers the
questions: How do they spend their time? What are they focusing their attention on?<br />
15. 15. The Seven Elements<br />Staff -Human resource management, the processes and
efforts used to develop managers, socialization, and the shaping of basic management
values, It also includes ways of introducing young recruits to the company, and the support
given to manage employees’ careers.<br />Skills -These are the distinctive and core
competencies of the company, They include the ways competencies are expanded or
shifted. This can also be determined from the perspective of core competencies that exist
and are developed in the firm.<br />
16. 16. The Seven Elements<br />Shared values -Also called super ordinate goals, these are the
central believes and attitudes, guiding concepts, and fundamental ideas around which a
business is built. Usually stated at the abstract level, they have great meaning inside the
organization even though outsiders may not see or understand them. They can be
summarized as what extent the company stands for and what it believes in.<br />
17. 17. The Seven Elements<br />Man, Machine<br />Material, Method,<br />Measurement<br
/>Product/Services, Profits,Customer & Societalsatisfaction, Other Long-term Goals<br
/>Organizing<br />Inputs<br />(Goal <br />Oriented)<br />Outputs<br />(External<br />To<br
/>Orgnzn.)<br />Planning<br />Staffing<br />Controlling<br />Leading<br />EXTERNAL
ENVIRONMENT(Opportunities, Constraints)<br />
18. 18. The Seven Elements<br />These seven elements also help estimate the effectiveness of
a firm. They are interrelated -- if one element changes, it will affect all the others. For
example, a change in human resource systems such as internal career plans and
management training has an impact on organizational culture and thus will affect structures,
processes, and finally the characteristic competences of the organization. Another example
is changes in the structure such as merging sales and marketing that affect the number and
quality of new products that the company can launch.<br />
19. 19. Advantages of this theory<br />It aims at meaningful analysis of organizations and their
management.<br />It facilitates the interaction between organization and its environment.<br
/>It guides managers to avoid analysing problems in isolation and to develop an integrated
approach.<br />
20. 20. Disadvantages of this theory<br />Over-conceptual<br />The approach does not
recognize the differences in systems.<br />Systems philosophy does not specify the nature
of interactions and inter-dependencies.<br />Unpractical: It cannot be easily and directly
applied to practical problems.<br />
21. 21. Questions ?<br />