Organization as Systems, 3 Perspectives - Form, Function, and Management - to Improve Understanding
Organizations as Systems
Organizations exist and operate in a competitive environment, and can seem complex and highly confusing amorphous mess that is very had to comprehend and analyze. The notion of "Organization as Systems" refers to an approach to conceptualizing organizations as systems based on systems thinking and theory, in order to give clarity and perspective to study and analyze the organization. A system is defined by its boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with another system.
Using systems overlay to understand organizations allows for the acknowledgement of the idea of systems composed of subsystems, their inter-relatedness and interdependence; the existence of boundaries that allow or prevent the interaction between various organization units and elements of other subsystems and environments. Systems theory likens the enterprise to an organism with interdependent parts, each with its own specific function and interrelated responsibilities. To ascertain certain subsystems requirements properly and to design appropriate organization's form (structure), functions, and sub-systems, etc., it is of primary importance to understand the purpose and mission of the system as a whole, and the relationship to its environment.
A number of various system views - logical system, open system, social system, operations system, performance management system, and control system - can be defined to aid analysis and improve the shared understanding of the organization. For example, the combined view of organizations as open, social systems is a systems theory approach to understanding organizations as organic, alive, dynamic and complex systems. Open systems, are essentially, goal-seeking, information feedback systems.
Organizations exist and operate in a competitive environment, and can seem complex and highly confusing amorphous mess that is very had to comprehend and analyze. The notion of "Organization as Systems" refers to an approach to conceptualizing organizations as systems based on systems thinking and theory, in order to give clarity and perspective to study and analyze the organization. A system is defined by its boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with another system.
Using systems overlay to understand organizations allows for the acknowledgement of the idea of systems composed of subsystems, their inter-relatedness and interdependence; the existence of boundaries that allow or prevent the interaction between various organization units and elements of other subsystems and environments. Systems theory likens the enterprise to an organism with interdependent parts, each with its own specific function and interrelated responsibilities. To ascertain certain subsystems requirements properly and to design appropriate organization's form (structure), functions, and sub-systems, etc., it is of primary importance to understand the purpose and mission of the system as a whole, and the relationship to its environment.
A number of various system views - logical system, open system, social system, operations system, performance management system, and control system - can be defined to aid analysis and improve the shared understanding of the organization. For example, the combined view of organizations as open, social systems is a systems theory approach to understanding organizations as organic, alive, dynamic and complex systems. Open systems, are essentially, goal-seeking, information feedback systems.
Organization Logical System
An organization is designed to accomplish predefined goals and objectives through its parts - organization units comprised of people - with a common purpose and the other organization resources they employ. Once organizational purpose/mission, strategy - corporate strategy, business strategy and operations strategy - and values are clear, the organization can be structured in such a way that roles and functions are clearly defined and differentiated, lines of communications and accountability untangled, and decision-making procedures transparent and functional. From a systems perspective an organization is an adaptive whole with constituent elements and emergent properties, making it more than the sum of its parts. A well designed organization ensures appropriate levels of energy is generated and maintained in the organization as system. An organization as system secures, expends, and conserves energy to maintain the system and further the achievement of its mission/purpose.
Logical Organization System
The organization logical structure is comprised of the the basic units that comprise the foundational elements of the organization and how they relate.
Purpose/Mission
Organizations have “purpose” - its reason for being - which may be expressed as a goal to be achieved. Goals, although specific and measurable, can be a simple statement of a company's culture or attitude, i.e., to be number one in customer satisfaction in a particular industry. Members in that organization have to subscribe to that goal; which gives coherence to their motivations, decisions, actions, and behavior. Obviously, their beliefs, motivations, etc., can also be influenced by culture (organizational, and environmental), as well as “self-awareness” (as it shapes learning and impacts decisions). In this formulation, “self-awareness” is an “internal” critical factor that can be expressed as a "health" metric.
Organization Units
The Organization Unit is an abstraction of the logical structured actors that represent business entities such as business units, business functions, departments, bureaus, teams, groups, divisions, etc. Organizational Units can be categorized according to certain characteristics such as responsibilities and obligations of a set of employees. They group a firm's controls, people, processes, culture, assets such as applications, and knowledge, and information to reflect the realization of the organization's effective strategy. An organization unit's policies define the decision rights for a group of people that are members of the organization. The decision rights may be defined in terms of RACI (Responsibility, Accountability, Consultative, and Information) criteria. An organization unit is an ordered grouping of interdependent positions linked together according to a plan (decision rights relationships) to achieve specific objectives.
Positions Structure
The Position Structure defines the competency realms or human resource capabilities, organized under organizational units, that are decisive in implementing the current and emergent strategy including creating and delivering value to customers. The organization position structure is designed to enhance communication and information flow among organization system elements (people or groups of people) that comprise the organization social system. Within the structure, rules, policies, and procedures are uniformly and impersonally applied to exert control over members’ behaviors.
Positions
When the Organizational Unit is decomposed into its lowest level elements they are represented by Positions. Positions are logical representations of groups of people within an organization unit based on decision rights, skills, knowledge, and competencies necessary to achieve the business organization's objectives. Positions are social concepts employed by organizations for abstracting from specific human actors in the organization. Positions define how the organization aims at implementing its decision-making design through the specification of the behavior of particular individuals or group of individuals. Positions can be categorized into the following: management positions, staff position, administrative position, etc.
Roles - Responsibilities
Role is the external expression of the responsibilities and function of an individual, team, or organization unit. Adhering to roles lead to social integration, organization and unity in social systems.
Processes
This element focuses on how the resource portfolio is utilized and allocated to activities with the intent of adding value. Adopting a process view means we deal with instances of work called flow units (e.g., consulting engagements, patients, hotel guests, barbershop/salon patrons, or customer orders) flowing through a network of activities and buffers. Buffers store flow units that have finished one activity, but are waiting for the next activity to start. The primary workflow is typically accompanied by an information flow (to coordinate activities) and cash flow (to support and reward them). A process may refer to workflow such as billing a customer, implementing an engineering change order, new product development, manufacturing process, etc.
Interactions and Relationships
Interaction refers to the manner in which each component functions with other components of the system. Interactions between actors can occur to satisfy goal intentions common to the actors, or global goals which pertain to the organization (or society) as a whole and lay outside the scope of any one individual actor.
Institutional Arrangements
Institutional arrangements refer to the policies, procedures and processes that allow systems to function and interact effectively and efficiently in an organized setting. Such arrangements/relationships can be rules which may be binding, e.g., legislation or contractual arrangements, or non-binding, e.g., codes of conduct, norms, and values that are unwritten but are widely accepted. Organizations depend on norms and rules as well as policies to guide behavior. Within the enabling environment, institutional arrangements are policy and legal frameworks; at the organizational level, they include strategy, processes, and technology that enable operations, as well as internal accountability mechanisms.
Policies and Procedures
Policies are recognized descriptions which act as enforcement mechanisms to restrain individual behavior and regulate all sorts of organizational interactions such as delegation, dependency relationships with internal/external organizational entities as well as defining concepts within the organizational setting. Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work towards stated goals. Policies and procedures enable how organizations operate to help them cope with their environments. The purpose of these rules is to allow the organization to make decisions using "standard operating procedures" as a guideline and hence make decisions more consistent.
Organization Behavior
The behavior of an organization as a whole is defined by the patterns of interactions among the people, individuals and groups of individuals that are members of the organization. The behavior of actors (people) in the organization is impacted by their beliefs, values, and "mental model", and influenced/guided by organization's purpose, policies, and cultures (institutional arrangements). To be good standing members of an organization, actors have to subscribe to the purpose and values of the that organization and policies which give coherence to the actor's behavior. The behavior of actors is manifested in each actor's decisions, actions, and priorities.
Programs
Programs, like Organizations can be conceptualized as systems. A program as a system is defined in terms of inputs, processes, outputs (tangible results), and outcomes (impacts on clients), with ongoing feedback among these elements.
Organization Management Structure
All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns decision rights - roles, responsibilities and authority - to carry out different tasks. Structures develop due to the need to organize behavior in a meaningful way and provide orientation for organizational members to set actions that comply with organizational strategy, organizational culture, and, as a result, accepted patterns of behavior.
An organization may be organized around functional lines -functional structure, product Lines - Goods and services, reporting structure, etc. The organizational structure helps make clear where teams and departments fit into a company's overall operations.
Within the structure, rules, policies, and procedures are uniformly and impersonally applied to exert control over organizational members’ behaviors. Organization structure is the manifestation of strategic orientations and regulate information flows, decision making, and patterns of behavior (i.e., the “internal allocation of tasks, decisions, rules, and procedures for appraisal and reward), selected for the best pursuit of a strategy. The behavior is influenced by the design of the organization structure and its institutional arrangements.
An organization is designed to accomplish predefined goals and objectives through its parts - organization units comprised of people - with a common purpose and the other organization resources they employ. Once organizational purpose/mission, strategy - corporate strategy, business strategy and operations strategy - and values are clear, the organization can be structured in such a way that roles and functions are clearly defined and differentiated, lines of communications and accountability untangled, and decision-making procedures transparent and functional. From a systems perspective an organization is an adaptive whole with constituent elements and emergent properties, making it more than the sum of its parts. A well designed organization ensures appropriate levels of energy is generated and maintained in the organization as system. An organization as system secures, expends, and conserves energy to maintain the system and further the achievement of its mission/purpose.
Logical Organization System
The organization logical structure is comprised of the the basic units that comprise the foundational elements of the organization and how they relate.
Purpose/Mission
Organizations have “purpose” - its reason for being - which may be expressed as a goal to be achieved. Goals, although specific and measurable, can be a simple statement of a company's culture or attitude, i.e., to be number one in customer satisfaction in a particular industry. Members in that organization have to subscribe to that goal; which gives coherence to their motivations, decisions, actions, and behavior. Obviously, their beliefs, motivations, etc., can also be influenced by culture (organizational, and environmental), as well as “self-awareness” (as it shapes learning and impacts decisions). In this formulation, “self-awareness” is an “internal” critical factor that can be expressed as a "health" metric.
Organization Units
The Organization Unit is an abstraction of the logical structured actors that represent business entities such as business units, business functions, departments, bureaus, teams, groups, divisions, etc. Organizational Units can be categorized according to certain characteristics such as responsibilities and obligations of a set of employees. They group a firm's controls, people, processes, culture, assets such as applications, and knowledge, and information to reflect the realization of the organization's effective strategy. An organization unit's policies define the decision rights for a group of people that are members of the organization. The decision rights may be defined in terms of RACI (Responsibility, Accountability, Consultative, and Information) criteria. An organization unit is an ordered grouping of interdependent positions linked together according to a plan (decision rights relationships) to achieve specific objectives.
Positions Structure
The Position Structure defines the competency realms or human resource capabilities, organized under organizational units, that are decisive in implementing the current and emergent strategy including creating and delivering value to customers. The organization position structure is designed to enhance communication and information flow among organization system elements (people or groups of people) that comprise the organization social system. Within the structure, rules, policies, and procedures are uniformly and impersonally applied to exert control over members’ behaviors.
Positions
When the Organizational Unit is decomposed into its lowest level elements they are represented by Positions. Positions are logical representations of groups of people within an organization unit based on decision rights, skills, knowledge, and competencies necessary to achieve the business organization's objectives. Positions are social concepts employed by organizations for abstracting from specific human actors in the organization. Positions define how the organization aims at implementing its decision-making design through the specification of the behavior of particular individuals or group of individuals. Positions can be categorized into the following: management positions, staff position, administrative position, etc.
Roles - Responsibilities
Role is the external expression of the responsibilities and function of an individual, team, or organization unit. Adhering to roles lead to social integration, organization and unity in social systems.
Processes
This element focuses on how the resource portfolio is utilized and allocated to activities with the intent of adding value. Adopting a process view means we deal with instances of work called flow units (e.g., consulting engagements, patients, hotel guests, barbershop/salon patrons, or customer orders) flowing through a network of activities and buffers. Buffers store flow units that have finished one activity, but are waiting for the next activity to start. The primary workflow is typically accompanied by an information flow (to coordinate activities) and cash flow (to support and reward them). A process may refer to workflow such as billing a customer, implementing an engineering change order, new product development, manufacturing process, etc.
Interactions and Relationships
Interaction refers to the manner in which each component functions with other components of the system. Interactions between actors can occur to satisfy goal intentions common to the actors, or global goals which pertain to the organization (or society) as a whole and lay outside the scope of any one individual actor.
Institutional Arrangements
Institutional arrangements refer to the policies, procedures and processes that allow systems to function and interact effectively and efficiently in an organized setting. Such arrangements/relationships can be rules which may be binding, e.g., legislation or contractual arrangements, or non-binding, e.g., codes of conduct, norms, and values that are unwritten but are widely accepted. Organizations depend on norms and rules as well as policies to guide behavior. Within the enabling environment, institutional arrangements are policy and legal frameworks; at the organizational level, they include strategy, processes, and technology that enable operations, as well as internal accountability mechanisms.
Policies and Procedures
Policies are recognized descriptions which act as enforcement mechanisms to restrain individual behavior and regulate all sorts of organizational interactions such as delegation, dependency relationships with internal/external organizational entities as well as defining concepts within the organizational setting. Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work towards stated goals. Policies and procedures enable how organizations operate to help them cope with their environments. The purpose of these rules is to allow the organization to make decisions using "standard operating procedures" as a guideline and hence make decisions more consistent.
Organization Behavior
The behavior of an organization as a whole is defined by the patterns of interactions among the people, individuals and groups of individuals that are members of the organization. The behavior of actors (people) in the organization is impacted by their beliefs, values, and "mental model", and influenced/guided by organization's purpose, policies, and cultures (institutional arrangements). To be good standing members of an organization, actors have to subscribe to the purpose and values of the that organization and policies which give coherence to the actor's behavior. The behavior of actors is manifested in each actor's decisions, actions, and priorities.
Programs
Programs, like Organizations can be conceptualized as systems. A program as a system is defined in terms of inputs, processes, outputs (tangible results), and outcomes (impacts on clients), with ongoing feedback among these elements.
- Inputs - The various resources needed to run the program, elg., money, facilities, clients, program staff, volunteers, etc.
- Processes - Processes are how program services are delivered, e.g., clients are conseled, children are cared for, art is created, association members are supported, etc.
- Outputs - These are the units of service, e.g., number of clients counseled, children cared for, artistic pieces produced, or members in the association.
- Outcomes - The impacts on the clients receiving the services, e.g., increased mental health, safe and secure development, richer artistic appreciation and perspectives in life, increased effectiveness among members, etc. The outcomes are the "compass" for the program and help it keep its direction.
Organization Management Structure
All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns decision rights - roles, responsibilities and authority - to carry out different tasks. Structures develop due to the need to organize behavior in a meaningful way and provide orientation for organizational members to set actions that comply with organizational strategy, organizational culture, and, as a result, accepted patterns of behavior.
An organization may be organized around functional lines -functional structure, product Lines - Goods and services, reporting structure, etc. The organizational structure helps make clear where teams and departments fit into a company's overall operations.
- Functional Structure - The functions that an organization needs to perform in order to meet its objectives and mission can be grouped into function areas - areas of responsibility and supervision. The functions and structure provide a way to group and organize an entity's activities or capabilities. Functional structure includes the functions, positions, and departments that make up a company's functions, and shows how the functional parts fit together as a whole system. Companies often have departments and teams structured within functions. An accounting department for example, may be one piece of a larger finance function/department.
- Divisional Structure - The divisional structure is a type of organizational structure that groups each organizational function into a division. Each division contains all the necessary resources and functions within it to support that product line or geography (for example, its own finance, IT, and marketing departments).
- Product Structure - The product organization utilizes the Function Structure approach but creates large business units within the company for each major product the company offers. As such each of those product division units consists of functional departments required to support that product.
Within the structure, rules, policies, and procedures are uniformly and impersonally applied to exert control over organizational members’ behaviors. Organization structure is the manifestation of strategic orientations and regulate information flows, decision making, and patterns of behavior (i.e., the “internal allocation of tasks, decisions, rules, and procedures for appraisal and reward), selected for the best pursuit of a strategy. The behavior is influenced by the design of the organization structure and its institutional arrangements.
Organization as Open Systems
Organizations viewed as Open systems are essentially, goal-seeking, information feedback systems. Open system theory (Ludwig von Bertanlanffy,, 1956), defines the concept of a system, where "all systems are characterized by an assemblage or combination of parts whose relations make them interdependent" (Scott p. 77). Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the business. Open systems tend to devise more than one way to accomplish goals or reach similar results with different conditions and operations--what von Bertanlanffy called “equifinality.” This is in direct contrast to closed systems that function under the assumption that there is only one way to achieve a result: a direct relationship between cause and effect. Closed systems have no interaction with their environment. All non-living systems are closed systems.
Openness refers to the free flow of information within the system.
Open Systems Components/Elements
Organization Open Systems continuously interact with their environments through acquisition of input, production of output, and exchange of information; they survive and grow by continuously adapting to their environment through learning. When a business regularly interacts with its environment, and exchanges and processes feedback, it is an open system organization. The key elements of Open Systems include:
Outputs and Inputs
The outputs of a system define the value produced by the system from its inputs for the benefit of the system's users. Determining the output is a critical step in specifying the nature, amount, and regularity of the inputs needed to operate the system.
Processors
Processors are elements of a system that actually transforms inputs into outputs. Transformation involve processors which are the elements of a system that actually transforms inputs into outputs. Processors may include resources such as people/human resources, equipment, etc., which can be organized according to how work gets done, i.e., processes for creating and delivering value, and how they are managed i.e., organization functions, divisions, etc.
Control Systems
Systems Controls - Feedback is a form of systems control. As systems, organizations use planning and control to manage their resources effectively. System's outputs are used as feedback that compares performance with goals. This comparison in turn helps managers formulate more specific goals as inputs. Feedback is received from within the organization and from the outside environments around it.
Feedback Mechanism
Feedback is a return of information about a result or the return portion of a process. Feedback measures output against a standard in some form of cybernetic procedure that includes communication and control. Feedback can be positive or negative; routine or informational. Negative feedback generally provides the controller with information for action. Positive feedback reinforces the performance of the system, and is routine in nature.
Environments
The enabling environment is comprised of the external and internal factors.
Organization Boundaries and Interfaces
All systems are contained by boundaries separating them from the environment. Organizational boundaries exist on a continuum ranging from extremely permeable - open - to almost impermeable - closed. Openness and closedness of organizations is related to the concept of external boundary permeability. Openness and closedness exist on a continuum.
For an organization to continue to adapt, survive and grow it must be able to import resources - people, raw materials, and information - through its boundaries (inputs), and then exchange the outputs - finished products, services, and information - with its environment (the outside world). The internal environments of an organization can be characterized by degree of openness and closeness, which might differ across departments, organizational units, or even systems of projects and programs.
Organizations viewed as Open systems are essentially, goal-seeking, information feedback systems. Open system theory (Ludwig von Bertanlanffy,, 1956), defines the concept of a system, where "all systems are characterized by an assemblage or combination of parts whose relations make them interdependent" (Scott p. 77). Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the business. Open systems tend to devise more than one way to accomplish goals or reach similar results with different conditions and operations--what von Bertanlanffy called “equifinality.” This is in direct contrast to closed systems that function under the assumption that there is only one way to achieve a result: a direct relationship between cause and effect. Closed systems have no interaction with their environment. All non-living systems are closed systems.
Openness refers to the free flow of information within the system.
Open Systems Components/Elements
Organization Open Systems continuously interact with their environments through acquisition of input, production of output, and exchange of information; they survive and grow by continuously adapting to their environment through learning. When a business regularly interacts with its environment, and exchanges and processes feedback, it is an open system organization. The key elements of Open Systems include:
- Output and Inputs
- Processors
- Control System
- Feedback Mechanism
- Environment
- Boundaries and Interfaces
Outputs and Inputs
The outputs of a system define the value produced by the system from its inputs for the benefit of the system's users. Determining the output is a critical step in specifying the nature, amount, and regularity of the inputs needed to operate the system.
- Inputs - An organization as a living entity must take in energy to survive and grow. An organization must obtain information from the external environment such as industry trends, the needs of market segments, as well as financial, human, and material resources from the external environment in order to survive and achieve sustainable growth. When an organization lacks suffucuent resources from the external environment, it begins to weaken and ultimately die.
- Outputs - The outputs of a system define the value produced by the system from its inputs for the benefit of the system's users. The determining the output is a critical step in is specifying the nature, amount, and regularity of the inputs needed to operate the system. The products and services produced from the inputs through the transformation processes are exported top the external environment by the organization to meet the tangible needs of customers, thus fulfilling the organization's purpose and making good on its commitments that managers and key personnel made in their implicit contract with the external environment.
Processors
Processors are elements of a system that actually transforms inputs into outputs. Transformation involve processors which are the elements of a system that actually transforms inputs into outputs. Processors may include resources such as people/human resources, equipment, etc., which can be organized according to how work gets done, i.e., processes for creating and delivering value, and how they are managed i.e., organization functions, divisions, etc.
- Process - A process is an orderly grouping of interdependent activities/tasks linked together according to a plan (flow chart) to achieve a specific objective (produce an output of a specified type). An activity is associated with assignment policies that defines the rules and criteria for match between role definition and the specification of the required skills and qualifications to perform the activity/task. The policy can be resolved at run-time to any available resource with the requisite skills and qualifications. These resources may be tangible assets/resources such as human resources (people), capital assets (i.e., property, plant and equipment).
Control Systems
Systems Controls - Feedback is a form of systems control. As systems, organizations use planning and control to manage their resources effectively. System's outputs are used as feedback that compares performance with goals. This comparison in turn helps managers formulate more specific goals as inputs. Feedback is received from within the organization and from the outside environments around it.
Feedback Mechanism
Feedback is a return of information about a result or the return portion of a process. Feedback measures output against a standard in some form of cybernetic procedure that includes communication and control. Feedback can be positive or negative; routine or informational. Negative feedback generally provides the controller with information for action. Positive feedback reinforces the performance of the system, and is routine in nature.
- Tactical Feedback - This relates to business results - measures of the product and operational tactical performance of a business. Business results demonstrate the quality and value of products and services that lead to customer satisfaction and engagement.
- Strategic Feedback - This relates to the strategic context and helps explain, at a high level, the reason for the entity's existence, what it exists to achieve, and the powers and functions it may exercise to help achieve its goals. Strategy organizes the internal and external context of an organization, using concepts like SWOTs and Porter’s Five Forces, to help us make sense or meaning of the environment we operate in. Strategy helps us make meaning of our context, and therefore helps us create a path forward. It provides others in the organization with a mental model to understand the organization, its’ environment and the path that it has chosen.
- Feedback Loop - The feedback loop is a process in which a system receives internal/external environmental responses to its behavior and in turn, reacts to those received responses by accommodating and assimilating the energy/information received, by altering the system's structure, and then engaging in altered exchanges of energy/information.
Environments
The enabling environment is comprised of the external and internal factors.
- The external environment is defined by external factors such as characterized by PESTEL factors e.g., tight lending conditions, government regulations and competition. These factors are uncontrollable, and can be modeled as "Influencer" concept abstraction borrowed from Business Motivational Model by the OMG. The category of external factors (influencer) is large and inclusive. Every business has hundreds of potential influencer. There will always be too many influencer to model. The decision as to what influencer to model is determined by the influencer's impact the organization's mission or mandate and if its of strategic relevance.
- The internal environment is defined by the set of internal factors resulting from either the way the business is run, or decisions made, or both. The factors resulting from how the business is run include the business reputation and image, credit worthiness, etc. The factors resulting from business decisions include management structure and staffing, physical decor of facilities/offices, etc. Internal factors can be conceptualized as "strengths"/"weaknesses" that can be controlled directly or indirectly; but changing these factors usually involves indirect costs such as lost productivity for example, while new employees are being trained, some direct costs such as a penalty for terminating a lease before it expires.
Organization Boundaries and Interfaces
All systems are contained by boundaries separating them from the environment. Organizational boundaries exist on a continuum ranging from extremely permeable - open - to almost impermeable - closed. Openness and closedness of organizations is related to the concept of external boundary permeability. Openness and closedness exist on a continuum.
- Openness - refers to the free flow of information within the organization. Creative departments are often characterized as open, with free flow of ideas among participants and very few restrictions on who gets what information, and at what time when a creative project is in its infancy.
- Closedness - refers to obstacles to the free flow of information within the organization. This is at the opposite end of the continuum; examples might be the defense department unit assigned to work on top secret defense planning affecting national security.
For an organization to continue to adapt, survive and grow it must be able to import resources - people, raw materials, and information - through its boundaries (inputs), and then exchange the outputs - finished products, services, and information - with its environment (the outside world). The internal environments of an organization can be characterized by degree of openness and closeness, which might differ across departments, organizational units, or even systems of projects and programs.
Organizations as Social Systems
A social system is a whole that is defined by its function(s) in one or more containing systems; each system containing at least two essential parts which can affect its behavior and properties. How it performs cannot be calculated by adding up all the work arrangements - like departments - with the resources and processes that connect it all together. Organizations can be viewed as systems - social systems - that are alive, organic, dynamic and complex.
Organizations are social systems in that each organization is made up of people, and has a defined purpose that is subscribed by the individuals that comprise the organization. Each organization depends on norms and rules as enforcement mechanisms to restrain the individual behavior of the people (actors). Any organization of people in a purposeful endeavor (i.e., business, community, society, militia, army, etc.) is also by deduction a system. So enterprises and business organizations are social systems that have purpose and are capable of independent thought, decisions, and actions as a result of the behavior of the members (human actors).
The significance of conceptualizing organizations as social systems - complex systems - is that systems theory and principles allow insight into how organizations work, and how they can be effectively evolved and changed to work better.
Social System Components/Elements
Social Systems are defined as system of systems in that, larger more complex systems are composed of systems of the same type (i.e., people or Social System). A basic construct of conceptualizing social systems is human actors that are deemed to be systems in that they have purpose and have intentions. These systems are modeled as a network of social actors which are viewed as being intentional, i.e., they have goals, beliefs, abilities, and commitments. The elements of a social system includes:
A social system may be defined as a plurality of social actors (people) who are engaged in more or less stable interaction "according to shared cultural norms and meanings". This model enables analysis of real world systems that focuses on how well the goals of various actors are achieved given some configuration of relationships among a set of actors that comprise a system, and what re-configurations of those relationships can help actors advance their strategic interests.
Organizational Units
Organizations are composed of interrelated (sub) organization units serving as specialized function, departments, divisions, geographic locations, etc. The organization unit is conceptualized as a social system - complexes of people and/or groups that according to commonly agreed rules and procedures strive to realize one or more preset objectives. Typical functions in a business organization may include Finance, Marketing and Sales, Human Resources, Operations, etc. A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts.
[TBD]
The dynamics of social systems are expressed in terms of the intentional properties of the actors that comprise the system, and the interaction relationships between these actors. Interactions between actors can occur to satisfy goals that are either common to actors or global goals which pertain to the society (organization) as a whole and lay outside the scope of any one individual actor. Considering sub-organizations as a kind of structured logical actor, interactions among the sub-organization units can be viewed as a way of realizing society goals.
Organization Culture
Organizational culture is the collective behavior of humans who are part of an organization, and the meanings they attach to their actions. Culture and values describe the expected cultural norms for how people collaborate within and across organization units (i.e., functions, divisions, departments, etc.) or teams. Culture includes the organizational values, visions, norms, working language, systems, symbols, beliefs and habits. Culture manifests itself in the particular way things are done in an organization. It affects who gets hired, how they get trained (formally or informally), what behaviors get rewarded, who gets promoted, and virtually all organizational procedures and administrative protocols. Organizational culture can be supportive of the following: Learning and Development (Growth), Participatory Decision-Making, Power Sharing, Support and Collaboration. Organizational culture can be supportive of the following: Learning and Development (Growth), Participatory Decision-Making, Power Sharing, Support and Collaboration, Tolerance for risk and conflicts. Culture establishes an organization climate that affects the day-to-day experience that people have when working in an organization. Like an atmosphere that permeates the work place. Organizational Climate is characterized by factors such as level and type of employee morale; confidence in management; openness to change; conflict and pressure; a spirit of creativity and innovation; fair process; and a no-blame philosophy.
It is important to note that culture is not overt behavior or visible artifacts that one might observe if one were to visit a company. It is not even the philosophy or value system which the organization articulates or has written down in various "charters". It is the assumptions which lie behind the values and which determine the behavior patterns and viable artifacts such as dress code, office layout, etc. Culture reflects and affects the ownership that individuals feel for execution related goals. The culture within the organization is a very important factor in attaining business success. The attitudes of staff and volunteers, and their ability to "go the extra mile" makes a very significant difference. Negative attitudes can have severe impact on the organization's ability to implement strategies for development despite however thorough the planning processes are. Positive attitudes of staff and volunteers will not only make the management tasks easier, but also will be noticed and appreciated by customers as well as members of the organization.
A social system is a whole that is defined by its function(s) in one or more containing systems; each system containing at least two essential parts which can affect its behavior and properties. How it performs cannot be calculated by adding up all the work arrangements - like departments - with the resources and processes that connect it all together. Organizations can be viewed as systems - social systems - that are alive, organic, dynamic and complex.
Organizations are social systems in that each organization is made up of people, and has a defined purpose that is subscribed by the individuals that comprise the organization. Each organization depends on norms and rules as enforcement mechanisms to restrain the individual behavior of the people (actors). Any organization of people in a purposeful endeavor (i.e., business, community, society, militia, army, etc.) is also by deduction a system. So enterprises and business organizations are social systems that have purpose and are capable of independent thought, decisions, and actions as a result of the behavior of the members (human actors).
The significance of conceptualizing organizations as social systems - complex systems - is that systems theory and principles allow insight into how organizations work, and how they can be effectively evolved and changed to work better.
Social System Components/Elements
Social Systems are defined as system of systems in that, larger more complex systems are composed of systems of the same type (i.e., people or Social System). A basic construct of conceptualizing social systems is human actors that are deemed to be systems in that they have purpose and have intentions. These systems are modeled as a network of social actors which are viewed as being intentional, i.e., they have goals, beliefs, abilities, and commitments. The elements of a social system includes:
- Actors - People or individuals that comprise the interacting units/elements in an organization/society. Groups, teams, or units of people can be viewed as logical actors.
- Interactions - Individuals (people) constitute the basic interaction units; but the interacting units may be groups or organization of individuals within the system; each interacting individual has function or role to perform in terms of the status he occupies in the system.
- Purpose - The purpose of a social system or organization defines the end goal or the object or reason for its existence. This purpose can be expressed as a goal to be achieved. Members in that organization/society (social system) have to subscribe to that goal; which gives coherence to their motivations, decisions, actions, and behavior. The nature of a social system is determined by its needs, satisfactions, and purpose. Obviously, their beliefs, motivations, etc., can also be influenced by culture (organizational, and environmental), as well as “self-awareness” (as it shapes learning and impacts decisions).
- Ideals and Norms - These are established by the society and intended for keeping the social system intact and for determining the various functions of different units. Norms prescribe the rules and relationships on the basis of which individuals or persons may acquire their cultural goals and aims. Ideals and norms are responsible for an ideal structure or system of the society. These norms and ideals may include folkways, customs, traditions, fashions, morality, religion, etc.
- Knowledge and Faith - Faith is the result of the prevalent customs and beliefs. They ensure the force of individuals are guided towards a particular direction. Faiths and knowledge act as controlling agency of different types of human societies.
- Sentiment - Sentiment is directly linked with the culture of people, it plays an immense role in investing society with continuity.
- Status - Every individual in society is functional; status may be conferred on an individual by virtue of his birth, sex, caste, age, etc. One may achieve it on the basis of service rendered.
- Role - Role is the external expression of the status. Adhering to roles lead to social integration, organization and unity in social systems.
- Power - This derives from the ability of some agents within society to set the agenda for future action. A power structure is an overall system of influence between any individual and every other individual within any selected group of people.
- Sanction - Society could not exist without social norms and the social sanctions that enforce them.
A social system may be defined as a plurality of social actors (people) who are engaged in more or less stable interaction "according to shared cultural norms and meanings". This model enables analysis of real world systems that focuses on how well the goals of various actors are achieved given some configuration of relationships among a set of actors that comprise a system, and what re-configurations of those relationships can help actors advance their strategic interests.
Organizational Units
Organizations are composed of interrelated (sub) organization units serving as specialized function, departments, divisions, geographic locations, etc. The organization unit is conceptualized as a social system - complexes of people and/or groups that according to commonly agreed rules and procedures strive to realize one or more preset objectives. Typical functions in a business organization may include Finance, Marketing and Sales, Human Resources, Operations, etc. A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts.
[TBD]
The dynamics of social systems are expressed in terms of the intentional properties of the actors that comprise the system, and the interaction relationships between these actors. Interactions between actors can occur to satisfy goals that are either common to actors or global goals which pertain to the society (organization) as a whole and lay outside the scope of any one individual actor. Considering sub-organizations as a kind of structured logical actor, interactions among the sub-organization units can be viewed as a way of realizing society goals.
Organization Culture
Organizational culture is the collective behavior of humans who are part of an organization, and the meanings they attach to their actions. Culture and values describe the expected cultural norms for how people collaborate within and across organization units (i.e., functions, divisions, departments, etc.) or teams. Culture includes the organizational values, visions, norms, working language, systems, symbols, beliefs and habits. Culture manifests itself in the particular way things are done in an organization. It affects who gets hired, how they get trained (formally or informally), what behaviors get rewarded, who gets promoted, and virtually all organizational procedures and administrative protocols. Organizational culture can be supportive of the following: Learning and Development (Growth), Participatory Decision-Making, Power Sharing, Support and Collaboration. Organizational culture can be supportive of the following: Learning and Development (Growth), Participatory Decision-Making, Power Sharing, Support and Collaboration, Tolerance for risk and conflicts. Culture establishes an organization climate that affects the day-to-day experience that people have when working in an organization. Like an atmosphere that permeates the work place. Organizational Climate is characterized by factors such as level and type of employee morale; confidence in management; openness to change; conflict and pressure; a spirit of creativity and innovation; fair process; and a no-blame philosophy.
It is important to note that culture is not overt behavior or visible artifacts that one might observe if one were to visit a company. It is not even the philosophy or value system which the organization articulates or has written down in various "charters". It is the assumptions which lie behind the values and which determine the behavior patterns and viable artifacts such as dress code, office layout, etc. Culture reflects and affects the ownership that individuals feel for execution related goals. The culture within the organization is a very important factor in attaining business success. The attitudes of staff and volunteers, and their ability to "go the extra mile" makes a very significant difference. Negative attitudes can have severe impact on the organization's ability to implement strategies for development despite however thorough the planning processes are. Positive attitudes of staff and volunteers will not only make the management tasks easier, but also will be noticed and appreciated by customers as well as members of the organization.
Organization Operations Systems
The Operations System for an organization is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. The existence of trade-offs and constraints in the operations system imply that no single operation can be universally appropriate for all organizations; rather, each organization strategy requires a tailored operating system configured such that its competencies best fit the customer value proposition specified by the organization's competitive strategy.
The Operations System is utilized by Operations Management in its tasks to provide the best match of supply with demand. The Operating System integrates three (3) different but complementary views of operations including:
Resource View
This view focuses on the assets used in operations to create and deliver value. The resource view of an organization or any of its parts as a bundle of resources (real assets). Viewing operations as a bundle of real assets is most useful when decision on amounts and types of resources the operation needs. This investment or capital budgeting decision, along with the allocation of resources to activities, is one of the major tasks of management. The resources/assets can be categorized into tangible resources (i.e., people/human resources, capital assets – property, plant and equipment), and intangible resources (i.e., relationship with suppliers and customers, intellectual property, reputation and brands, knowledge and experience in processing, technologies and markets). Often tangible real assets do the work, while intangible assets embody the know-how to do the work. Tangible real assets are human resources (people) and capital assets (property, plants, and equipment as shown on the balance sheet). Intangible assets include relationships with suppliers and customers, intellectual property, reputation and brands, and knowledge and experience in processing, technology, and markets.
According to the resource-based view of the firm (Barney 1991), organizational resources (e.g., financial, human, physical, informational, relational) help organizations enhance their marketing strategies, achieve sustainable competitive advantage, and gain better performance. These resources can be either tangible or intangible, and can be transformed into higher-order resources (i.e., competencies and capabilities), enabling the delivery of superior value to targeted buyers.
Process View
This view focuses on how the resource portfolio is utilized and allocated to activities with the intent of adding value. Adopting a process view means we deal with instances of work called flow units (e.g., consulting engagements, patients, hotel guests, barbershop/salon patrons, or customer orders) flowing through a network of activities and buffers. Buffers store flow units that have finished one activity, but are waiting for the next activity to start. The primary workflow is typically accompanied by an information flow (to coordinate activities) and cash flow (to support and reward them). A process may refer to workflow such as billing a customer, implementing an engineering change order, new product development, manufacturing process, etc.
A typical business organization accomplishes its work load by creating a series of tasks that are performed and carried out as required. These tasks can include purchasing materials, selling services, hiring employees or responding to customers. Placing those tasks into series of organized and interconnected systems may benefit the company by introducing efficiency and order to the workday and ultimately increasing the bottom line. Work systems allow everyday tasks to operate in a coordinated manner and provide a basic framework to produce services and products.
Competency View
This view focuses on the resulting abilities of the ensemble of an organization’s resources, processes and values which determine the set of outputs, products/services that the operating system will be particularly good at providing. A competency is a set of defined behaviors that provide a structured guide enabling the identification, evaluation, and development of behaviors in individual employees. A competency is the ability of an individual to do a job properly.
A competency is a set of defined behaviors that provide a structured guide enabling the identification, evaluation, and development of behaviors in individual employees. A competency is the ability of an individual to do a job properly. The competency view characterizes the abilities of the ensemble of the organization's resources, processes, and values. The competencies determine the set of outputs, products, and services that the operation will be particularly good at providing, and influences the "product mix" decisions. The competency view of the organization focuses on the resulting abilities of the ensemble of an organization’s resources, processes and values which determine the set of outputs, products/services that the operating system will be particularly good at providing.
Competency is an overloaded term and may refer to a person’s functional, social or technical competency.
Core competencies refer to a company’s core technical competencies; for example, a financial services firm must know how to manage risk. Core competencies are distinctive, rare, valuable firm-level resources that competitors are unable to imitate, substitute or reproduce.
Organization Operating Model
The operating model is an abstract representation of how an organization operates across process, organization structure, partner network, technology domains in order to deliver value defined by the organization in scope. Operating models facilitate the conversion of strategy to results. The Operating Model serves as a blueprint for how resources are organized and operated to get critical work done. It encompasses decisions around the shape and size of the business organization, where to draw the boundaries for each line of business, how people work together within and across these boundaries, how the corporate center will add value to the business units, and what norms and behaviors should be encouraged.
The design of an Operating Model starts by describing the strategy in sufficient detail that one can articulate a set of design principles - statements defining what the organization must do to enable execution of the strategy. Based on design principles the Operating Model takes shape through choices in the following areas::
Organization capability and culture are intangible, soft assets not directly visible to the organization. They are managed through the hard disciplines that shape them, such as: organization structure, decision rights, talent, management systems, and measures and incentives.
The Operations System for an organization is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. The existence of trade-offs and constraints in the operations system imply that no single operation can be universally appropriate for all organizations; rather, each organization strategy requires a tailored operating system configured such that its competencies best fit the customer value proposition specified by the organization's competitive strategy.
The Operations System is utilized by Operations Management in its tasks to provide the best match of supply with demand. The Operating System integrates three (3) different but complementary views of operations including:
Resource View
This view focuses on the assets used in operations to create and deliver value. The resource view of an organization or any of its parts as a bundle of resources (real assets). Viewing operations as a bundle of real assets is most useful when decision on amounts and types of resources the operation needs. This investment or capital budgeting decision, along with the allocation of resources to activities, is one of the major tasks of management. The resources/assets can be categorized into tangible resources (i.e., people/human resources, capital assets – property, plant and equipment), and intangible resources (i.e., relationship with suppliers and customers, intellectual property, reputation and brands, knowledge and experience in processing, technologies and markets). Often tangible real assets do the work, while intangible assets embody the know-how to do the work. Tangible real assets are human resources (people) and capital assets (property, plants, and equipment as shown on the balance sheet). Intangible assets include relationships with suppliers and customers, intellectual property, reputation and brands, and knowledge and experience in processing, technology, and markets.
According to the resource-based view of the firm (Barney 1991), organizational resources (e.g., financial, human, physical, informational, relational) help organizations enhance their marketing strategies, achieve sustainable competitive advantage, and gain better performance. These resources can be either tangible or intangible, and can be transformed into higher-order resources (i.e., competencies and capabilities), enabling the delivery of superior value to targeted buyers.
Process View
This view focuses on how the resource portfolio is utilized and allocated to activities with the intent of adding value. Adopting a process view means we deal with instances of work called flow units (e.g., consulting engagements, patients, hotel guests, barbershop/salon patrons, or customer orders) flowing through a network of activities and buffers. Buffers store flow units that have finished one activity, but are waiting for the next activity to start. The primary workflow is typically accompanied by an information flow (to coordinate activities) and cash flow (to support and reward them). A process may refer to workflow such as billing a customer, implementing an engineering change order, new product development, manufacturing process, etc.
A typical business organization accomplishes its work load by creating a series of tasks that are performed and carried out as required. These tasks can include purchasing materials, selling services, hiring employees or responding to customers. Placing those tasks into series of organized and interconnected systems may benefit the company by introducing efficiency and order to the workday and ultimately increasing the bottom line. Work systems allow everyday tasks to operate in a coordinated manner and provide a basic framework to produce services and products.
Competency View
This view focuses on the resulting abilities of the ensemble of an organization’s resources, processes and values which determine the set of outputs, products/services that the operating system will be particularly good at providing. A competency is a set of defined behaviors that provide a structured guide enabling the identification, evaluation, and development of behaviors in individual employees. A competency is the ability of an individual to do a job properly.
A competency is a set of defined behaviors that provide a structured guide enabling the identification, evaluation, and development of behaviors in individual employees. A competency is the ability of an individual to do a job properly. The competency view characterizes the abilities of the ensemble of the organization's resources, processes, and values. The competencies determine the set of outputs, products, and services that the operation will be particularly good at providing, and influences the "product mix" decisions. The competency view of the organization focuses on the resulting abilities of the ensemble of an organization’s resources, processes and values which determine the set of outputs, products/services that the operating system will be particularly good at providing.
Competency is an overloaded term and may refer to a person’s functional, social or technical competency.
- Functional competency is a specific knowledge or skill area, such as in marketing, finance, manufacturing, etc., that relates to the successful performance of the job. Functional competencies are specific to a specific department or type of job. They are basic skills and behavior that are needed to do a job successfully.
- Social competency or ability is any skill facilitating interaction and communication with others where social rules and relations are created, communicated , and changed in verbal and non-verbal ways.
- Technical competencies are specific to fluency in operating specific equipment, software application, design calculations, coding, theoretical and practical expertise in a specific domain such as barbering, dentistry, etc.
Core competencies refer to a company’s core technical competencies; for example, a financial services firm must know how to manage risk. Core competencies are distinctive, rare, valuable firm-level resources that competitors are unable to imitate, substitute or reproduce.
Organization Operating Model
The operating model is an abstract representation of how an organization operates across process, organization structure, partner network, technology domains in order to deliver value defined by the organization in scope. Operating models facilitate the conversion of strategy to results. The Operating Model serves as a blueprint for how resources are organized and operated to get critical work done. It encompasses decisions around the shape and size of the business organization, where to draw the boundaries for each line of business, how people work together within and across these boundaries, how the corporate center will add value to the business units, and what norms and behaviors should be encouraged.
The design of an Operating Model starts by describing the strategy in sufficient detail that one can articulate a set of design principles - statements defining what the organization must do to enable execution of the strategy. Based on design principles the Operating Model takes shape through choices in the following areas::
- Structure - This defines the appropriate boundaries for lines of business and shared services, centers of expertise, and other coordinating mechanisms that allow a company to leverage scale and expertise. The structure also specifies the size and shape of the organization with indicative resource levels and locations. Organizations are composed of interrelated (sub) organization units serving as specialized function, departments, divisions, geographic locations, etc. The organization unit is conceptualized as a social system - complexes of people and/or groups that according to commonly agreed rules and procedures strive to realize one or more preset objectives. Typical functions in a business organization may include Finance, Marketing and Sales, Human Resources, Operations, etc. A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts. Essentially, you can think of this high level organizational chart as the "hardware" of the operating model with the next four dimensions (Accountability, Governance, Culture, and Capabilities) serving as the "software" that makes the "hardware" run. The organization structure design focuses on enabling effective management of complexity, coordination and control of organizational behavior. This is critical as the decision rights cascade grows, because the structure and operating principles as well as governance of the organization becomes more complex and critical to manage.
- Accountability - This describes the roles and responsibilities of the main organization entities including ownership of P&Ls and a clear, value adding role for the corporate center. There should be clear guidelines for the roles each organizational unit will play in critical decisions. A reward framework linked to accountability reinforces strong execution.
- Governance - Governance and behavior refers to executive forums and management processes that yield high-quality decisions on strategies, priorities, resource allocation and business performance management. A management dashboard with the key metrics keeps the focus on the company's top priorities.
- Culture and Values (Ways of working) - This describes the expected cultural norms for how people collaborate within and across functions or teams. Organizational culture is the collective behavior of humans who are part of an organization, and the meanings they attach to their actions. Culture includes the organizational values, visions, norms, working language, systems, symbols, beliefs and habits. Culture manifests itself in the particular way things are done in an organization. It affects who gets hired, how they get trained (formally or informally), what behaviors get rewarded, who gets promoted, and virtually all organizational procedures and administrative protocols. Organizational culture can be supportive of the following: Learning and Development (Growth), Participatory Decision-Making, Power Sharing, Support and Collaboration,
- Capabilities - This refers to how the organization combines people, processes, and technology in a repeatable way to deliver desired outcomes. Organizational capabilities refer to a business's ability to successfully employ competitive strategies that allows it to survive and increase its value overtime. A business can improve its strategic capability by strengthening its organizational capabilities and resources, enabling it to better perform its strategic management functions in tandem to its operations management functions.
Organization capability and culture are intangible, soft assets not directly visible to the organization. They are managed through the hard disciplines that shape them, such as: organization structure, decision rights, talent, management systems, and measures and incentives.
Organization Management Control System
In the business world, organizations constantly need to ensure they are meeting the goals they have set for themselves. Management control systems are tools to aid management for steering an organization toward its strategic objectives and competitive advantage. Management controls are only one of the tools which managers use in implementing desired strategies. A management control system is a set of administrative procedures through which management (one group of people) in an organization intentionally influences or affect the behavior of other groups of people in the organization or its environment. Controlling is the fourth step in the management process. A management system is a set of policies, processes and procedures used by an organization to ensure that it can fulfill the tasks required to achieve its objectives.
What are Controls?
Controls are processes, and they focus on issues before, during or after a process. There are three (3) types of controls managers should be equipped with, these include: Feed forward, concurrent, and feedback controls. Feed forward controls involve identifying and preventing problems in an organization before they occur. Concurrent controls involve identifying and preventing problems in an organization as they occur. Feedback controls involve evaluating the organization's performance progress by comparing actual performance data against the planned performance goals.
Control Types and Measures
Control measures are actions and/or activities that are taken to prevent, eliminate or reduce the occurrence of a hazard that you have identified.
Strategic control always comes first, followed by operations, and then tactics. For example, a strategy to be environmentally responsible could lead to an operations decision to seek Leadership in Energy and Environmental Design (LEED) certification. This is a program that awards points toward certification for initiatives in energy efficiency, such as installing timed thermostats, using occupant sensors to control lighting use, and using green cleaning products. The tactical decision is deciding which energy-efficient equipment to purchase. At each level, controls ask if the decisions serve the purpose: actual energy savings, the LEED certification, and acting responsibly for the environment.
Elements of Management Control System
A management system is a "set of interrelated or interacting elements of an organization to establish policies and objectives, and processes to achieve those objectives". Management develops measuring tools to use o determine whether organizational goals are being met. A management control system is the way in which an organization manages the interrelated parts of its business in order to achieve its objectives. There are generally, five elements of a management control system; these include:
The management control system is a system that gathers and uses information to evaluate the performance of different organizational resources, such as: human resource, physical, financial, structural, cultural, and the organization as a whole (organization as a system) in light of the organizational strategies pursued. An effective management control system ensures that the top management policy decisions are put into practice at the level of operations. The control system allow management to track how well the organization is performing, identify areas of concern, and then take corrective action to address the concerns.
In the business world, organizations constantly need to ensure they are meeting the goals they have set for themselves. Management control systems are tools to aid management for steering an organization toward its strategic objectives and competitive advantage. Management controls are only one of the tools which managers use in implementing desired strategies. A management control system is a set of administrative procedures through which management (one group of people) in an organization intentionally influences or affect the behavior of other groups of people in the organization or its environment. Controlling is the fourth step in the management process. A management system is a set of policies, processes and procedures used by an organization to ensure that it can fulfill the tasks required to achieve its objectives.
What are Controls?
Controls are processes, and they focus on issues before, during or after a process. There are three (3) types of controls managers should be equipped with, these include: Feed forward, concurrent, and feedback controls. Feed forward controls involve identifying and preventing problems in an organization before they occur. Concurrent controls involve identifying and preventing problems in an organization as they occur. Feedback controls involve evaluating the organization's performance progress by comparing actual performance data against the planned performance goals.
Control Types and Measures
Control measures are actions and/or activities that are taken to prevent, eliminate or reduce the occurrence of a hazard that you have identified.
- Strategic Controls - Strategies are forward-looking decisions and actions that are based on management's assumptions about a number of various future events that have not occurred yet. Strategic control is concerned with controlling and guiding efforts on behalf of the strategy as action is taking place; this involves tracking the strategy as it is being implemented, detecting problems or changes in the premises and making necessary adjustments. Strategic controls are intended to steer the organization towards its long term strategic direction and ends. The major types of strategic control include: Premise Control, Implementation Control, Strategic Surveillance, and Special Alert Control.
- Operational Controls - Operational controls are security controls that are primarily implemented and executed by people (as opposed to systems). These controls are put in place to improve the security of a particular system (or group of systems). Operational control is the authority to perform those functions of command over subordinate forces involving organizing and employing commands and forces, assigning tasks, designating objectives, and giving authoritative direction necessary to accomplish the mission. Operational control involves control over intermediate-term operations and processes but not business strategies. Operational control systems ensure that activities are consistent with established plans. Mid-level management uses operational controls for intermediate-term decisions, typically over one to two years.
- Tactical Control - Tactical control emphasizes the current operations of an organization. Managers determine what the various parts of the organization must do for the organization to be successful in the near future (one year or less). For example, a marketing strategy for a wholesale bakery might be an e-commerce solution for targeted customers, such as restaurants. Tactical control may involve regularly meeting with the marketing team to review results and would involve creating the steps needed to complete agreed-upon processes.
Strategic control always comes first, followed by operations, and then tactics. For example, a strategy to be environmentally responsible could lead to an operations decision to seek Leadership in Energy and Environmental Design (LEED) certification. This is a program that awards points toward certification for initiatives in energy efficiency, such as installing timed thermostats, using occupant sensors to control lighting use, and using green cleaning products. The tactical decision is deciding which energy-efficient equipment to purchase. At each level, controls ask if the decisions serve the purpose: actual energy savings, the LEED certification, and acting responsibly for the environment.
Elements of Management Control System
A management system is a "set of interrelated or interacting elements of an organization to establish policies and objectives, and processes to achieve those objectives". Management develops measuring tools to use o determine whether organizational goals are being met. A management control system is the way in which an organization manages the interrelated parts of its business in order to achieve its objectives. There are generally, five elements of a management control system; these include:
- Planning what is desired - Establish clear goals and objectives.
- Establishing standards of performance - Establish realistic measurements of the level and quality of the goal(s),
- Monitoring and evaluating actual performance - Establish a system of reporting performance, which is accurate, relevant, timely, and identifies any deviations.
- Comparing actual results with desired results - Interpret and evaluate information in order to give details of progress, disclose deviations, and identify causes.
- Rectifying deviations, and taking corrective action - Execute the most appropriate course of action, which may
The management control system is a system that gathers and uses information to evaluate the performance of different organizational resources, such as: human resource, physical, financial, structural, cultural, and the organization as a whole (organization as a system) in light of the organizational strategies pursued. An effective management control system ensures that the top management policy decisions are put into practice at the level of operations. The control system allow management to track how well the organization is performing, identify areas of concern, and then take corrective action to address the concerns.