BUSINESS ORGANIZATIONS:Organization as a System

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Introduction to Business MGT 211

Lesson 42

BUSINESS ORGANIZATIONS

Basically, an organization is a group of people intentionally organized to accomplish an

overall, common goal or set of goals. Business organizations can range in size from two

people to tens of thousands.

There are several important aspects to consider about the goal of the business organization.

These features are explicit (deliberate and recognized) or implicit (operating unrecognized,

"behind the scenes"). Ideally, these features are carefully considered and established, usually

during the strategic planning process. (Later, we'll consider dimensions and concepts that are

common to organizations.)

Vision --- Members of the organization often have some image in their minds about how the

organization should be working, how it should appear when things are going well.

Mission --- An organization operates according to an overall purpose, or mission.

Values --- All organizations operate according to overall values, or priorities in the nature of

how they carry out their activities. These values are the personality, or culture, of the

organization.

Strategic Goals --- Organizations members often work to achieve several overall

accomplishments, or goals, as they work toward their mission.

Strategies --- Organizations usually follow several overall general approaches to reach their

goals.

Systems and Processes that (Hopefully) Are Aligned With Achieving the Goals

Organizations have major subsystems, such as departments, programs, divisions, teams, etc.

Each of these subsystems has a way of doing things to, along with other subsystems; achieve

the overall goals of the organization. Often, these systems and processes are define by plans,

policies and procedures.

How you interpret each of the above major parts of an organization depends very much on

your values and your nature. People can view organizations as machines, organisms, families,

groups, etc. (We'll consider more about these metaphors later on in this topic in the library.)

Organizations as Systems (of Systems of Systems)

Organization as a System

It helps to think of organizations are systems. Simply put, a system is an organized collection

of parts that are highly integrated in order to accomplish an overall goal. The system has

various inputs which are processed to produce certain outputs that together, accomplish the

overall goal desired by the organization. There is ongoing feedback among these various parts

to ensure they remain aligned to accomplish the overall goal of the organization. There are

several classes of systems, ranging from very simple frameworks all the way to social

systems, which are the most complex. Organizations are, of course, social systems.

Systems have inputs, processes, outputs and outcomes. To explain,

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Inputs --- to the system include resources such as raw materials, money, technologies and

people. These inputs go through a

Process --- where they're aligned, moved along and carefully coordinated, ultimately to

achieve the goals set for the system.

Outputs --- are tangible results produced by processes in the system, such as products or

services for consumers. Another kind of result is outcomes, or benefits for consumers, e.g.,

jobs for workers, enhanced quality of life for customers, etc. Systems can be the entire

organization, or its departments, groups, processes, etc.

Feedback comes from, e.g., employees who carry out processes in the organization,

customers/clients using the products and services, etc. Feedback also comes from the larger

environment of the organization, e.g., influences from government, society, economics, and

technologies.

Each organization has numerous subsystems, as well. Each subsystem has its own

boundaries of sorts, and includes various inputs, processes, outputs and outcomes geared to

accomplish an overall goal for the subsystem. Common examples of subsystems are

departments, programs, projects, teams, processes to produce products or services, etc.

Organizations are made up of people -- who are also systems of systems of systems -- and on

it goes. Subsystems are organized in an hierarchy needed to accomplish the overall goal of

the overall system.

The organizational system is defined by, e.g., its legal documents (articles of incorporation, by

laws, roles of officers, eta.), mission, goals and strategies, policies and procedures, operating

manuals, eta. The organization is depicted by its organizational charts, job descriptions,

marketing materials, eta. The organizational system is also maintained or controlled by

policies and procedures, budgets, information management systems, quality management

systems, performance review systems, eta.

Standard Planning Process is Similar to Working Backwards Through the System

Remember how systems have input, processes, outputs and outcomes? One of the common

ways that people manage systems is to work backwards from what they want the system to

produce. This process is essentially the same as the overall, standard, basic planning process.

This process typically includes:

a) Establishing overall goals (it's best if goals are defined in measurable terms, so they usually

are in terms of outputs) (the overall impacts of goals are outcomes, a term increasingly used in

nonprofits)

b) Associating smaller goals or objectives (or outputs?) along the way to each goal.

c) Designing strategies/methods (or processes) to meet the goals and objectives

d) Identifying what resources (or inputs) are needed, including who will implement the methods

and by when.

Methods to the Madness: Systems Theory and Chaos Theory (Optional Reading)

NOTE: A person need not understand systems or chaos theory to start and run an

organization. A basic understanding, though, sure helps when dealing with the many kinds of

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typical issues that face members of organizations. Information at the following link is geared to

give the reader a taste of what systems theory is about, and then refer the reader to more

information if they are interested.

Thinking About Organizations as Systems --- Use functional structures when the organization

is small, geographically centralized, and provides few goods and services.

When the organization experiences bottlenecks in decision making and difficulties in

coordination, it has outgrown its functional structure. Use a divisional structure when the

organization is relatively large, geographically dispersed, and/or produces wide range of

goods/services. Use lateral relations to offset coordination problems in functional and

divisional structures. When the organization needs constant coordination of its functional

activities, then lateral relations do not provide sufficient integration. Consider the matrix

structure. To adopt the matrix structure effectively, the organization should modify many

traditional management practices.

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