Evolution of Organization and Management Theories

Modern View – Systems Approach,

Contingency Theory, and Peter Senge’s Systems thinking

EVOLUTION OF ORGANIZATION AND MANAGEMENT THEORIES

Modern View – Systems Approach, Contingency Theory, and Peter Senge’s Systems
thinking

Systems Approach

Definition

• The approach stands on the assumption that breaking down of a complex concept into
simple easy to understand units helps in better understanding of the complexity.
• “The whole is other than the sum of the parts” or “the whole is greater than the sum of its
parts”. (Kurt Koffka, 1886-1941)
The approach concentrates on the holistic entity of the system without neglecting the
components. It attempts to understand the role each component plays in the system while
simultaneously understanding the activity of the whole system. Major concepts of the systems
approach are:

1. Holism: A change in any part/component of a system affects the whole system directly or
indirectly (Boulding 1985, Litterer 1973, von Bertalanffy 1968).
2. Specialization: A whole system can be divided into granular (smaller easy to
understand), components so that the specialized role of each component is appreciated.
3. Non-summational: Every component (subsystem/partial system) is of importance to the
whole. It is therefore essential to understand the actions of each component to get the
holistic perspective (Boulding 1985, Litterer 1973).
4. Grouping: The process of specialization can create its own complexity by proliferating
components with increasing specialization. To avoid this, it becomes essential to group
related disciplines or sub-disciplines.
5. Coordination: The grouped components and subcomponents need coordination. Without
coordination the components will not be able to work in a concerted manner and will lead
 to chaos. Coordination and control is a very important concept in the study of systems as
without this we will not be a unified holistic concept.
6. Emergent properties: This is an important concept of systems approach. It means that
the group of interrelated entities (components) has properties as a group that is not present
in any individual component. This is the holistic view of a system. For example,
multicellular organisms exhibit characteristics as a whole which are not present in
individual constituent parts like cells.

Types:

1. Open Systems
o Systems that dynamically interact with their environment and are influenced by
the external environment.
o All organizations are open systems.
2. Closed Systems
o Systems that are not influenced by or do not interact with the environment.
The Organization as an Open System

All systems include elements for specification of:

1. Input – the resources needed put into the system to produce a deliverable
2. Output – the deliverable of the system’s processing of input
3. Throughput – process used by the system to convert resources into deliverable that are
useable by their system itself or the environment
4. Feedback – a deliverable or milestone of the throughput that feeds back into the system
as input
 5. Control – the activities & process used to evaluate input, throughput & output
6. Environment – the area surrounding the system
7. Goal – the overall purpose for existence or the desired outcomes

Contingency Theory

Definition

• Often called the Situational Approach is based upon the premise that all management is
essentially situational in nature. All decisions by managers will be affected (if not
controlled) by the contingencies of a given situation.
• Explains that there are specific situational factors that can affect the direct relationships
between independent and dependent variables in the study of organizational
behavior. Independent variables (x) are the cause of the change in the dependent
variable, while dependent variables (y) are a response affected by an independent
variable.
• There is no particular managerial action or organizational design that is appropriate for all
situations.
Some of the primary contributors to contingency theory include:
• Burns and Stalker - In their work "Management of innovation" (1968), they identified
two types of organizational structures (Mechanistic and Organic) and two categories of
the environment (Stable and Dynamic).
• John Woodward - She analyzed the influence of technology on the organization
structure and observed that the type of technology used for production, such as unit, small
batches, large batches, mass production, and continuous process of production. She also
examined how production shifts directly affected the span of control, use of committees,
participative decision making, and other structural characteristics.
• J.W. Lorsch and P.R. Lawrence - In studies beginning in 1969, they proposed that
organizations functioning in a complex environment adopted a much higher degree of
differentiation and integration than those operating in a simple environment. They
identified as key issues: environmental uncertainty and information flow. They advocated
to Focus on exploring and improving the organization's relationship with the
environment, which characterized by along a certainty-uncertainty continuum.

How do Contingencies Affecting Organizational Structure?

Theorists Burns and Stalker, in their text "Management of innovation" (1968), identified two
types of organizational structure (mechanistic) and (organic) and two categories of the
environment (stable and dynamic).
Mechanistic structures are more common in stable environments. Organic structures are more
common and suitable in dynamic environments.

The commonly-identified contingencies influencing organizational structure include:

• Organization Size
• Nature of Business and Technology (the need for customization)
• Environmental Uncertainty
• Individual Differences or Organizational Preferences

Advantages and Disadvantages of Contingency Theory

The primary advantages of contingency theory include:

• It provides a realistic view of management and organization.
• It discards the universal validity of principles.
• Managers are situation-oriented and not stereotyped.
• Lends itself to an innovative and creative management style.

The negatives of contingency theory include:

• It does not have a theoretical base.
• Executive is expected to know all the alternative courses of action before taking action in
a situation that is not always feasible.
• It does not prescribe a course of action.
• A situation can be influenced by many factors. It is difficult to analyze all these factors.

What are the primary characteristics of the Contingency Approach?

The primary characteristics of contingency theory include:

• Non-universality of management theory - There is no one best way of doing things.
• Contingency - Management decision making is contingent upon the situation.
• Environment - Managerial policies and practices to be effective, must adjust to changes
in the environment.
• Diagnostics - Managers must possess and continue to improve diagnostic skills so as to
anticipate and ready for environmental changes.
• Human Relations - Managers should have sufficient human relations skills to
accommodate and stabilize change.
• Information and Communication - Managers must develop a communication system
adequate to deal with environmental changes.
 Differences between the Systems and Contingency Organizational Theory

 The systems theory focuses on the internal dynamics of an organization’s structure and
behavior. On the other hand, the contingency organizational theory focuses on the
external determinants of the organization’s behavior and structure.
 The systems theory lays down universal principles for application in all situations. On the
other hand, the contingency organizational theory works on the prescription which says
that ‘it all depends’.

Basics Systems Contingency

Focus Interrelationships Situational Variables
Structure Open Systems view of the Environmental determinants
organization of organization
Means Conceptual skills Environmental Scanning
Results Systems theory as well as Dynamic management style
design
Practice Systems concepts Business environment
interface
Main Exponents F.E. Kast, J.E. Rosenzweig, P.R. Lawrence, J.W.
R.A. Johnson Lorsch, J. Woodward
Peter Senge’s Systems thinking

Definition

• Used to analyze patterns in an organization by looking at it from a holistic viewpoint

rather than small unrelated manageable parts
• to understand how it is that the problems that we all deal with, which are the most vexing,
difficult and intransigent, come about, and to give us some perspective on those problems
[in order to] give us some leverage and insight as to what we might do differently
The key concepts of Systems Thinking are the following:
 All systems are composed of inter-connected parts. The connections cause behavior of
one part to affect another. All parts are connected. A change to any part or connection
affects the entire system.

 The structure of a system determines its behavior. Structure is the pattern of part
connections, which is how the system is organized. System behavior is at least a thousand
times more dependent on connections than parts because that’s what determines how the
parts work together. To understand a system’s gross behavior, understand its structure. To
change a system’s gross behavior, change its structure.
 System behavior is an emergent phenomenon. How a system behaves cannot be
determined by inspection of its parts and structure. This is because parts are tightly
coupled, the parts and structure are constantly changing, feedback loops are present,
nonlinear relationships exist, behavior paths are history dependent, the system is
 selforganizing and adaptive, emergent behavior is counterintuitive, time delays exist, the
human mind has very limited calculation abilities, etc. Once you realize how complex the
behavior dynamics of even a simple system really is, you will never again assume you
can look at a system and predict how it will behave.
 Feedback loops control a system’s major dynamic behavior. A feedback loop is a
series of connections causing output from one part to eventually influence input to that
same part. This circular flow results in large amplification, delay, and dampening effects,
which is what causes the gross behavior of the system. Every part is involved in one or
more feedback loops. Systems have more feedback loops than parts, which causes
unimaginable complexity. Feedback loops are the main reason a system’s behavior is
emergent.

 Complex social systems exhibit counter intuitive behavior. The problems of such
systems therefore cannot be solved using intuition and our everyday problem-solving
methods. The use of intuitive methods to solve difficult complex social system problems
is a common trap, so common the entire environmental movement has fallen into it. Only
analytical methods using tools that fit the problem will solve difficult complex social
system problems. The first such tool to adopt is true systems thinking. The second one is
a process that fits the problem. The third one, unless it is an easy problem, is system
dynamics.

One way in which systems thinking is executed is the way in which situations are explained by
employees. Senge describes THREE LEVELS OF EXPLAINATION: a reactive explanation
based on events (1), a responsive explanation based on behavior (2) and a generative
explanation based on structural level (3). These three ways of explaining are linked to one
another. A System (level 3) leads to a certain behaviors (level 2) which can lead to certain events
(level 1). The best way to change events is therefore to change the system, which will lead to
different behavior.
Lifelong learning is important for an organization because learning results in creating. The more
people in an organization learn, the more value they can create for the company. Traditionally
there are SEVEN LEARNING CONSTRAINTS:

1. I-am-my-position syndrome. This syndrome is described by people talking

about what tasks they perform in an organization instead of what value they add
to the company goal. Talking in terms of tasks only results in lack of
accountability for the product or service the company delivers.
2. The enemy is there syndrome. When people are task-focused, they are likely to
not able to see their own influence on the company goals and as a result point to
others in organization as the root cause of all problems.
3. The illusion of taking charge. It describes the danger of reactive action instead
of proactive action. Proactive action is defined by people daring to face the results
of their own behavior and the willingness to change it to prevent problems from
reoccurring in the future.
 4. The fixation on events. Instead of focus on small continuous improvements.
Learning and improving should be part of everybody´s daily job and not just a
temporary one day event or a project. Projects, by definition, are temporary and
project teams are eliminated after a certain problem is solved.
5. The parable of the boiled frog. A Frog held in a pan in which the water
temperature slowly increases will die as soon as the water eventually boils,
because the frog will not notice the temperature increase. To prevent this from
happening to organizations in changing environments, changes of processes
should be measured and evaluated.
6. The delusion of learning from experience is described because people seldom
really know the outcome of their actions on the long term, while we tend to
believe that we can know the long-term outcome by looking at the short term
outcome.
7. The myth of the management team in which people truly believe that
management can solve all problems. When one thinks about it, it is obviously
impossible that one manager knows everything about all processes and has all
capabilities needed to solve each problem.
9 SYSTEM ARCHETYPES or behavior patterns which deserve management’s attention:

1. There is always a delay between the execution of actions and the final (long-term)
results.
2. A pattern of limited growth is the result of focusing on improving activities which focus
on improving growth accelerating factors instead of reducing growth limiting factors.
3. Moving the problem instead of solving it. This is what happens when only symptoms of
the problem are addressed and not the root cause, The problem can than re-occur, in the
same form but also in another department.
4. Deteriorating Goals when situations get tuff. Goals are set aside due to a crisis or
because of any other reason. This is simply not acceptable. The vision and its goals give
direction to the company, especially in these difficult times!
5. An escalation loop is a loop in which actors influence one another with a lose-lose
situation as outcome. An example is a price-war between supermarkets, where multiple
competitors eventually fight one another on being the cheapest, and none of them ends
up with profit in the end. According to Senge, one should only encourage a culture in
which win-win situations are created.
6. Success to the successful is the archetype in which resources are allocated to the most
successful activity which makes the unsuccessful ones even more unsuccessful because
they receive fewer resources. This is not necessarily the best policy fir the long term.
7. The politics to receive resources (for instance the budgeting game) is a situation where
departments make up and alter numbers to receive more resources for their department
instead of being able to see the scope of the entire organization and act accordingly.
8. Solutions which do not solve, is a situation where short terms positive results lead to
long term losses. For instance, reducing Preventative maintenance on machines in a
factory.
 9. Growth and underinvestment, is the trap where investing does not seem necessary
because all is well at the moment. Not investing today, however, might lead to a lost
opportunity for growth in the future because of a lack of skills or capacity.

11 laws of systems thinking that help us understand systems better. The laws are:

1. Today's problems come from yesterday's solutions.

Leaders are happy to solve problems, but don't always think about intended and
unintended consequences. Too often our solutions strike back to create new problems.

2. The harder you push, the harder the system pushes back.

Humans have a stubborn tendency to bully our way through tough situations when things
are not working out as we would hope. We charge ahead without taking time to think
through solutions to find better alternatives. Sometimes we solve problems; more often,
especially in the current environment, we find ourselves up to our ears in more problems.

3. Behavior grows better before it grows worse.

Short-term solutions give temporary improvement at best but never eliminate

fundamental issues and problems. These underlying problems will make the situation
worse in the long run.

4. The easy way out leads back in.

Leaders often have a few quick fixes in their "quiver" of solutions that have brought
quick and easy success in the past. Too often, the easy way out is retrofitting these fixes
to any situation without regard to the unique contexts, people, and timing.

5. The cure can be worse than the disease.

Often, the easy and familiar solution is not only ineffective but addictive and dangerous.
It might even induce dependency.

6. Faster is slower.

At the first taste of success, it is tempting to advance at full speed without caution.
Remember that the optimal rate of growth or change is far slower than the fastest growth
or change that is possible.

7. Cause and effect are not always closely related in time and space.

We are good at finding causes, even if they are just symptoms unrelated to root causes.
8. Small changes can produce big results -- but the areas of highest leverage are often
the least obvious.

The most grand and splashy solutions -- like changing organization policy, vision,
branding or tagline -- seldom work for transforming change. Small, ordinary but
consistent and repetitive changes can make a huge difference.

9. You can have your cake and eat it too -- but not all at once.

Rigid "either-or" choices are not uncommon. Remember that this is not a dilemma if we
change our perspective or the "rules" of the system.

10. Dividing an elephant in half does not produce two small elephants.

As a leader, you can fail to see the system as a whole at your peril. This flaw in
perception and vision often leads to suboptimal decisions, repeated tasks, lost time, and
energy, and maybe even losing followers.

11. There is no blame.

People and organizations like to blame, point fingers, and raise suspicions about events,
situations, problems, errors, and mistakes. Sometimes we even believe the blame we
throw around. In reality, we and the cause of events, situations, problems, errors, and
mistakes are part of the system.

Understanding systems thinking and principles is essential to transforming business

processes in an organization.
