Business Organizations As Systems
Organization as Systems, 3 Perspectives - Form, Function, and Management - to Improve Understanding
Organizations as Systems
Business organizations are intricate entities with numerous interconnected components that work together to achieve the organization's goals and objectives. To comprehend their functioning and dynamics iot is essential to view them as systems.
The term system, implies an orderly arrangement, an interrelationship of parts; in the arrangement, every part has a place and plays a definite role, and they (the parts) are bound by interaction. A system has well-defined boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with other system(s) external to it, or its environment. To understand the functioning of a system you have to analyze and identify its core parts (subsystems) and understand how these various subsystems enter into specific relationships in the fulfillment of the system's intended mission/goals. The notion of "Organization as Systems" refers to an approach to conceptualizing organizations as systems (open, social systems), based on systems thinking and theory, in order to give clarity and perspective to studying and analyzing organizations.
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 form - structure, functions, and sub-systems - it is of primary importance to understand the purpose and mission of the organization as a whole, and the relationship to its environment. Systems thinking is integral thinking of analysis and synthesis which looks at things by looking at the whole (i.e., an organization, human body, etc.), where the parts should always work to benefit the whole. Systems thinking is concerned with how things work and fit together. Systems thinking informs strategic thinking which is concerned with where, for example, the organization should go and how to get there. For example, the human body can be conceptualized as a biological system, is comprised of subsystems such as circulatory, nervous, digestive, excretion systems, etc. and their specific relations in the fulfillment of the biological functions of the body.
Organizations viewed as systems, are composed of smaller interrelated subsystems serving specialized functions. Each of these subsystems receives inputs from the other subsystems and turns them into outputs for use by other subsystems. 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. The form/ structure of the organization (organizational structure) determines how each of the subsystems relate to each other in terms of control, and communication through out the organization.
The business organization conceptualized as a sub-system of an economic system of a country. They are open socio-economic systems. A business organization as a system may be comprised of subsystems built around the organizational system structure such as:
Using systems overlay to understand organizations allows for the acknowledgement of the idea of the organization as a system - an open social-economic system - 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.
Business organizations are open, social systems, they are highly dependent on outside resources, such as suppliers, labor market, and buyers/customers. Specifically, business organizations are impacted by a number of spheres of outside influence, such as: education and skills of workers, legal and political, economic, cultural, etc. A well designed organization ensures appropriate levels of energy is generated and maintained in the organization as system.
Business organizations are intricate entities with numerous interconnected components that work together to achieve the organization's goals and objectives. To comprehend their functioning and dynamics iot is essential to view them as systems.
The term system, implies an orderly arrangement, an interrelationship of parts; in the arrangement, every part has a place and plays a definite role, and they (the parts) are bound by interaction. A system has well-defined boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with other system(s) external to it, or its environment. To understand the functioning of a system you have to analyze and identify its core parts (subsystems) and understand how these various subsystems enter into specific relationships in the fulfillment of the system's intended mission/goals. The notion of "Organization as Systems" refers to an approach to conceptualizing organizations as systems (open, social systems), based on systems thinking and theory, in order to give clarity and perspective to studying and analyzing organizations.
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 form - structure, functions, and sub-systems - it is of primary importance to understand the purpose and mission of the organization as a whole, and the relationship to its environment. Systems thinking is integral thinking of analysis and synthesis which looks at things by looking at the whole (i.e., an organization, human body, etc.), where the parts should always work to benefit the whole. Systems thinking is concerned with how things work and fit together. Systems thinking informs strategic thinking which is concerned with where, for example, the organization should go and how to get there. For example, the human body can be conceptualized as a biological system, is comprised of subsystems such as circulatory, nervous, digestive, excretion systems, etc. and their specific relations in the fulfillment of the biological functions of the body.
Organizations viewed as systems, are composed of smaller interrelated subsystems serving specialized functions. Each of these subsystems receives inputs from the other subsystems and turns them into outputs for use by other subsystems. 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. The form/ structure of the organization (organizational structure) determines how each of the subsystems relate to each other in terms of control, and communication through out the organization.
The business organization conceptualized as a sub-system of an economic system of a country. They are open socio-economic systems. A business organization as a system may be comprised of subsystems built around the organizational system structure such as:
- Organizational System - This refers to the structure of the organization; it includes the definition of all business units, divisions, and sectors; the communication flow, and reporting hierarchy. In addition, this system is put in place to establish how each role/position in the business organization functions. This is the structure of how the organization is set up. That structure defines how each division of a business organization is set up, the hierarchy of who reports to whom, and how communications flows through the organization.
- Production Subsystems - These are the components that transform inputs into outputs such as goods and services. A Production system may comprise any method used in industry to create goods and services from various resources - labor, materials, equipment and space (facility, land, etc). All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services.
- Supportive Subsystem - These perform acquisition and distribution functions within the organization. Acquisition activities include securing resources such as employees and raw materials from the external environment. Human resources and purchasing functions would typically be included in this group. Distribution activities encompass efforts to transfer the products or services outside of the organization. Supportive subsystems of distribution type includes sales and marketing functions, public relations departments and lobbying efforts.
- Maintenance Subsystem - These systems maintain the social involvement of employees in the organization. Activities in this group includes providing employee benefits and compensation that motivate workers, creating favorable work conditions, empowering employees, and other forms of satisfying human needs. Management system processes that interface with the external environment must be designed to adapt to these influences. The management process is a decision-making process that interacts with a number of organizational systems that help integrate various parts of the organization.
- Adaptive Subsystems - These subsystems serve to gather information about problems and opportunities in the environment then respond with innovation that allow the organization to adapt. A firm's research lab and product development departments would be part of an adaptive subsystem.
- Managerial Subsystems - These direct the activities of other subsystems in the organization. These management systems set goals and policies, allocate resources, settle disputes, and generally work to facilitate the efficiency of the organization.
Using systems overlay to understand organizations allows for the acknowledgement of the idea of the organization as a system - an open social-economic system - 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.
Business organizations are open, social systems, they are highly dependent on outside resources, such as suppliers, labor market, and buyers/customers. Specifically, business organizations are impacted by a number of spheres of outside influence, such as: education and skills of workers, legal and political, economic, cultural, etc. A well designed organization ensures appropriate levels of energy is generated and maintained in the organization as system.
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Open Systems
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Social Systems
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Production Systems
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Operations Systems
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Management Systems
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Organization as Open Systems
Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the system (e.g., business organization). 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. Openness refers to the free flow of information within the system. All non-living systems are closed 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 Components/Elements
Organizations 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.
Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the system (e.g., business organization). 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. Openness refers to the free flow of information within the system. All non-living systems are closed 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 Components/Elements
Organizations 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
Social system refers to an orderly arrangement, an interrelationship of parts. In the arrangement, every part has a fixed place and a role to play. The parts are hound by interaction. Systems signifies, thus, patterned relationships among constituent parts of a structure which is based on functional relations and which makes these parts active and binds them into reality.
Social system is the patterned series of interrelationships between individuals, groups, and institutions, and forming a coherent whole social structure. A social system may be defined, after Parsons, a plurality of social actors who are engaged in more or less stable interaction "according to shared cultural norms and meanings." Individuals constitute the basic interaction units. But the interaction units may be groups or organization of individuals within the system. Social system is a comprehensive arrangement which takes in its orbit all the diverse subsystems such as the economic, political, religious and other institutions and their interrelations too.
Component Elements of a Social System
Society may be viewed as a system of interrelated parts which cooperate to preserve a recognizable whole and to satisfy satisfy some purpose or goal. Social system may be described as an arrangement of social interactions based on shared norms and values. Individuals constitute it and each has a place and function to perform within it.
All social organizations are "social system', since they consist of interacting individuals. In the social system each of the interacting individuals has a function or role to perform in terms of the status/position they occupy in the system. For example, in the family parents, sons and daughters are required to perform certain socially recognized functions or roles.
The elements of social system are:
[TBD]
A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts. Organizations and their members are usually conceptualized as systems designed to accomplish predetermined goals and objectives through people and other resources that they employ. The organization conceptualized as a social system, is complexes of people and/or groups that according to commonly agreed rules and procedures as well as norms strive to realize one or more preset objectives. The significance of conceptualizing organizations as complex systems is that systems principles allow insight into how organizations work. An organization as system secures, expends, and conserves energy (resources) to maintain the system and further the achievement of its mission/purpose.
An organizational system is the structure of how an organization is set up. That structure defines how each division of a business is set up, the hierarchy of who reports to whom and how communication flows throughout the organization. The organization conceptualized as a part of a larger social system, is complexes of people, and/or groups that according to commonly agreed rules and procedures as well as norms of interactions that arise among and between the people in the organization. An organization as a system is a combination of interrelated parts operating as a whole. It becomes a social system when it relates to people. The subject of business and society covers relationships to the broader social system outside its own organization. The basic operation of a system is that it receives inputs from its environment, processes these in some way, and then releases outputs to the environment.
Organizations as social structures is a perspective that focuses on the hardware of human association, the durable factors that govern people’s ways of being together as they achieve common goals by coordinated means. Social structure is what permits the organization’s persistence over time; it describes relations among differentiated positions, and references an agency or institutional will that transcends that of individuals. Structure implies wholeness rather than aggregates, predictable patterns of transformation, self-regulation, and closure.
Structure itself is a term borrowed from architecture, hence the spatial emphasis on prescribed places that people can inhabit. But if the architect designs the structure before it is inhabited, the organizational cognate can be discerned only after the fact by means of analysis. As the building goes up, its structure is visible to the untrained eye. Only the effects of social structures are visibly manifest in human responses to institutional circumstances – their material is not so much physical as latent.
Components of social structure include
The demands made on business are part of a larger series of changes occurring throughout the social system. Many difficult problems are arising because of very rapid change which is upsetting the delicate equilibrium in our complex society. It is clearly a system relationship in which social, educational, technological, and other types of change are closely interwoven.
Social system refers to an orderly arrangement, an interrelationship of parts. In the arrangement, every part has a fixed place and a role to play. The parts are hound by interaction. Systems signifies, thus, patterned relationships among constituent parts of a structure which is based on functional relations and which makes these parts active and binds them into reality.
Social system is the patterned series of interrelationships between individuals, groups, and institutions, and forming a coherent whole social structure. A social system may be defined, after Parsons, a plurality of social actors who are engaged in more or less stable interaction "according to shared cultural norms and meanings." Individuals constitute the basic interaction units. But the interaction units may be groups or organization of individuals within the system. Social system is a comprehensive arrangement which takes in its orbit all the diverse subsystems such as the economic, political, religious and other institutions and their interrelations too.
Component Elements of a Social System
Society may be viewed as a system of interrelated parts which cooperate to preserve a recognizable whole and to satisfy satisfy some purpose or goal. Social system may be described as an arrangement of social interactions based on shared norms and values. Individuals constitute it and each has a place and function to perform within it.
All social organizations are "social system', since they consist of interacting individuals. In the social system each of the interacting individuals has a function or role to perform in terms of the status/position they occupy in the system. For example, in the family parents, sons and daughters are required to perform certain socially recognized functions or roles.
The elements of social system are:
- Belief/Faith and Knowledge
- Sentiment
- Eng Goal and Objective
- Ideals and Norms
- Status-Position
- Role
- Power
- Sanction
[TBD]
A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts. Organizations and their members are usually conceptualized as systems designed to accomplish predetermined goals and objectives through people and other resources that they employ. The organization conceptualized as a social system, is complexes of people and/or groups that according to commonly agreed rules and procedures as well as norms strive to realize one or more preset objectives. The significance of conceptualizing organizations as complex systems is that systems principles allow insight into how organizations work. An organization as system secures, expends, and conserves energy (resources) to maintain the system and further the achievement of its mission/purpose.
An organizational system is the structure of how an organization is set up. That structure defines how each division of a business is set up, the hierarchy of who reports to whom and how communication flows throughout the organization. The organization conceptualized as a part of a larger social system, is complexes of people, and/or groups that according to commonly agreed rules and procedures as well as norms of interactions that arise among and between the people in the organization. An organization as a system is a combination of interrelated parts operating as a whole. It becomes a social system when it relates to people. The subject of business and society covers relationships to the broader social system outside its own organization. The basic operation of a system is that it receives inputs from its environment, processes these in some way, and then releases outputs to the environment.
Organizations as social structures is a perspective that focuses on the hardware of human association, the durable factors that govern people’s ways of being together as they achieve common goals by coordinated means. Social structure is what permits the organization’s persistence over time; it describes relations among differentiated positions, and references an agency or institutional will that transcends that of individuals. Structure implies wholeness rather than aggregates, predictable patterns of transformation, self-regulation, and closure.
Structure itself is a term borrowed from architecture, hence the spatial emphasis on prescribed places that people can inhabit. But if the architect designs the structure before it is inhabited, the organizational cognate can be discerned only after the fact by means of analysis. As the building goes up, its structure is visible to the untrained eye. Only the effects of social structures are visibly manifest in human responses to institutional circumstances – their material is not so much physical as latent.
Components of social structure include
- Culture
- Social Class
- Social Status
- Roles
- Groups
- Social Institutions
The demands made on business are part of a larger series of changes occurring throughout the social system. Many difficult problems are arising because of very rapid change which is upsetting the delicate equilibrium in our complex society. It is clearly a system relationship in which social, educational, technological, and other types of change are closely interwoven.
Production Systems
Production system refers to any of the methods used in organizations to create goods and services from resources. A production system transforms input to output. All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services.
A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, as when milk is transformed into cheese and butter. Where the inputs are information or people, the nature of the transformation may be less obvious. For example, a hospital transforms ill patients (the input) into healthy patients (the output). The input resources to any transformation process include workers, equipment used for production, raw materials, information, and clients. Inputs are the resources invested in accomplishing a task, and typically include time, money, and effort. Process refers to what is done in order to accomplish a task. The output is, obviously, the accomplishment itself. If you can get the same outcome with less work involved, this would be an improvement.
The transformation processes may be characterized by flows (channels of movement) in the process: both the physical flow of materials, work in the intermediate stages of manufacture (work in process) and finished goods; and the flow of information and the documents that carry and accompany the physical flows. The physical flows are subject to the constraints of the capacity of the production system, which also limits the system's ability to meet output expectations. Also, the capacity of the information handling channel of the production system may also be an important measure of a system's output. Managing the information flow, or the planning and control of the system to achieve acceptable outputs is an important task of operations management.
One useful way of categorizing the transformation process is in terms of different types of transformation changes that occur in the processes such as:
The transformation systems in an organization convert/transform inputs into outputs; the process technology determines the required transformation methods to produce output of desired quality. The transformation process viewed by a resource perspective, is defined in terms of transformed resources and transforming resources.
Transformed Resources are a mixture of materials, customers and information that are processed in such as manner to form a specific product or service. Value added involves the changing of the various parts into something new. i.e. the value of the original inputs has been changed. Often all three (3) types of input (materials, information and customers) to the transformation process are transformed by the same organization. For example, withdrawing money from a bank account involves information about the customer's account, materials such as checks and currency, and the customer. Treating a patient in hospital involves not only the ‘customer's’ state of health, but also any materials used in treatment and information about the patient.
The transforming resource (i.e., facility, human resource, and equipment), and process technology (that define the production of goods and service delivery systems) defines the type of transformation process. The main type of transforming resources used in transformation processes include facilities and buildings, equipment, process technology, and people involved in the operations process possibly including the customer in some types of services processes. For example, in a restaurant the transforming resources include equipment such as cookers, refrigerators, tables and chairs, and the chefs and waiters; the transformed resources of a restaurant include food and drink.
Production Systems
A Production system is any method used in industry to create goods and services from various resources - labor, materials, equipment and space (facility, land, etc). All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services. Production systems can be classified based on the method and type of transformation, such as:
Several different transformations are usually required in operations to produce a good or service.
Production systems can be classified into into types based on the production operations methods, such as:
Batch and continuous systems are often found in combination in the production of goods and services such as integrated circuits for electronic equipment, quick service restaurants, etc. While the capacity of the production system is a major factor in determining system output levels, the additional consideration of quality of the goods and services is also a limiting factor. The quality of a product measured against some objective standard may include appearance, performance characteristics, durability, serviceability, and other physical characteristics; timeliness of delivery; cost; appropriateness of documentation and supporting materials,etc. Quality of output is an important part of the definition of a production system. Customer feedback is used to adjust the transformation process.
Production system refers to any of the methods used in organizations to create goods and services from resources. A production system transforms input to output. All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services.
A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, as when milk is transformed into cheese and butter. Where the inputs are information or people, the nature of the transformation may be less obvious. For example, a hospital transforms ill patients (the input) into healthy patients (the output). The input resources to any transformation process include workers, equipment used for production, raw materials, information, and clients. Inputs are the resources invested in accomplishing a task, and typically include time, money, and effort. Process refers to what is done in order to accomplish a task. The output is, obviously, the accomplishment itself. If you can get the same outcome with less work involved, this would be an improvement.
The transformation processes may be characterized by flows (channels of movement) in the process: both the physical flow of materials, work in the intermediate stages of manufacture (work in process) and finished goods; and the flow of information and the documents that carry and accompany the physical flows. The physical flows are subject to the constraints of the capacity of the production system, which also limits the system's ability to meet output expectations. Also, the capacity of the information handling channel of the production system may also be an important measure of a system's output. Managing the information flow, or the planning and control of the system to achieve acceptable outputs is an important task of operations management.
One useful way of categorizing the transformation process is in terms of different types of transformation changes that occur in the processes such as:
- Physical Transformation - Changes in the physical characteristics of materials or customers.
- Location Transformation - Changes in the location of materials, information or customers.
- Possession Transformation - Changes in the ownership of materials or information.
- Storage Transformation - Storage or accommodation of materials, information or customers.
- Information Transformation - Changes in the purpose or form of information.
- Physiological Transformation - Changes in the physiological or psychological state of customers.
The transformation systems in an organization convert/transform inputs into outputs; the process technology determines the required transformation methods to produce output of desired quality. The transformation process viewed by a resource perspective, is defined in terms of transformed resources and transforming resources.
Transformed Resources are a mixture of materials, customers and information that are processed in such as manner to form a specific product or service. Value added involves the changing of the various parts into something new. i.e. the value of the original inputs has been changed. Often all three (3) types of input (materials, information and customers) to the transformation process are transformed by the same organization. For example, withdrawing money from a bank account involves information about the customer's account, materials such as checks and currency, and the customer. Treating a patient in hospital involves not only the ‘customer's’ state of health, but also any materials used in treatment and information about the patient.
The transforming resource (i.e., facility, human resource, and equipment), and process technology (that define the production of goods and service delivery systems) defines the type of transformation process. The main type of transforming resources used in transformation processes include facilities and buildings, equipment, process technology, and people involved in the operations process possibly including the customer in some types of services processes. For example, in a restaurant the transforming resources include equipment such as cookers, refrigerators, tables and chairs, and the chefs and waiters; the transformed resources of a restaurant include food and drink.
Production Systems
A Production system is any method used in industry to create goods and services from various resources - labor, materials, equipment and space (facility, land, etc). All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services. Production systems can be classified based on the method and type of transformation, such as:
- Manufacturing – the physical creation of products (for example making cars) transforming input resources to finished goods.
- Transport/Logistics – the movement of materials or customers (for example a taxi service)
- Supply – change in ownership of goods (for example in retailing)
- Service Production – the treatment of customers or the storage of materials (for example hospital wards, warehouses).
Several different transformations are usually required in operations to produce a good or service.
Production systems can be classified into into types based on the production operations methods, such as:
- Batch System - In the batch system, general purpose equipment and methods are used to produce small quantities of output (goods or services) with specifications that vary greatly from one batch to the next. A given quantity of a product is moved as a batch through one or more steps, and the total volume emerges simultaneously at the end of the production cycle. Examples include systems for producing specialized machine tools, or heavy duty construction equipment, specialty chemicals, and processed food products; or in the service sector, the system for processing claims in large insurance companies. Batch production systems are often referred to as job shops.
- Continuous System - In the continuous system, items to be processed flow through a series of steps, or operations that are common to most other products being processed. Examples include system for assembling automobile engines, and the automobiles themselves, as well as other consumer products such as washing machines, televisions, and personal computers. These systems are are often referred to as assembly/assembly line systems and are common in mass production operations.
- Project System - A project is a single focused endeavor. A project system is an undertaking to create a single, one of a kind product (good or service) where resources are brought together only once. Examples include a building, a ship, or the prototype of a product such as an aircraft or a large computer. Because of the singular nature of project systems, special methods of management have been developed to contain the costs of production within reasonable levels. A collection of projects is referred to as a program.
- Service Production System - []
Batch and continuous systems are often found in combination in the production of goods and services such as integrated circuits for electronic equipment, quick service restaurants, etc. While the capacity of the production system is a major factor in determining system output levels, the additional consideration of quality of the goods and services is also a limiting factor. The quality of a product measured against some objective standard may include appearance, performance characteristics, durability, serviceability, and other physical characteristics; timeliness of delivery; cost; appropriateness of documentation and supporting materials,etc. Quality of output is an important part of the definition of a production system. Customer feedback is used to adjust the transformation process.
Operations Systems
Operations systems are used by operations management to efficiently and effectively management the operations function in the creation and delivery of products - goods and services. The operations system is comprised of the following elements:
An Operations system is the joint configuration of resources and processes such that the resulting competencies are aligned with the organization's desired competitive position. The operations system design and implementation decisions are guided by the operations strategy.
Most firms share access to the same processes and technology, so they usually differ very little in the areas of core competencies. What is different is the operations capability embedded in the organizational fabric of the operations system which determine the degree to which operations matches its processes and infrastructure to its strategic objectives and goals.
Operational Capabilities
Operational capabilities are firm-specific sets of skills, processes, and routines, developed within the operations management that are regularly used in solving its problems through configuring its operational resources. Operational capability is the capacity to deploy, allocate, and coordinate resources. Operational capabilities provide unity, integration, and direction to resources and operational practices. They encapsulate both explicit elements (e.g., resources, practices) and tacit elements (e.g., know-how, skill sets, leadership) for handling a variety of problems or dealing with uncertainty. That is, operational capabilities draw on resources and operational practices to generate outcomes consistent with desired results, helping a plant develop solutions that make sense and give it sustainable competitive advantage.
Resources form a plant’s foundation, consisting of the plant’s capacity and all of its stocks (Wang & Ahmed, 2007). In contrast, operational practices such as just in time are fairly standardized activities, programs, or procedures that have been developed to address the attainment of specific operational goals or objectives (Flynn et al., 1995).
Core Competencies and Distinctive Competencies
Core competency refers to a company's set of skills or experience in some activity, rather than the physical or financial assets. Core competence is anything that a business does extremely well, and is generally considered to be critical to the business's overall performance. For example, a marketing agency's ability to generate data-led campaign ideas would be a core competence. An organization's core competency is an organization's strategic strength. For example, Honda's strategic strength (core competency) lies in its engine and propulsion systems.
A distinctive competence refers to a competence unique to a business organization, which enables the production of a unique value proposition in the function of the business. A distinctive competency is the basis for the development and maintenance of sustainable competitive advantage. For a business to develop and maintain sustainable competitive advantage, it must have some sort of operational capabilities embedded in the organizational fabric of the operations system, enabling it to produce a unique value proposition. In a dynamic environment, ultimately, distinctive competencies or the uniqueness of the value proposition produced using them, become less distinct or unique. Distinctive competencies, as a basis for competitive advantage, can come from a number of sources including: technology, industry position, market relations, cost, business processes, manufacturing processes, people, customer service, etc. Distinctive competencies can occur in a range of different areas, including: marketing, personnel, customer relations, technology, manufacturing, etc.
Organizational Capabilities
Organizational capabilities represent a distinctive and superior way of deploying, allocating, and coordinating resources (Amit & Schoemaker, 1993; Cavusgil, Seggie, & Talay, 2007; Schreyogg & Kliesch-Eberl, 2007). Thus, organizational capabilities are tacit social processes that emerge gradually over time, so gradually that participants may not even be aware of their existence and ultimately take them for granted (Leonard-Barron, 1992). As social processes, organizational capabilities are path dependent, influenced by factors such as firm history (Teece, Pisano, & Shuen, 1997), actions of decision makers (Rothaermel & Hess, 2007), and the firm’s learning process (Schreyogg & KlieschEberl, 2007). Furthermore, these paths are unique to a firm (Teece et al., 1997), described by Eisenhardt and Martin (2000) as “equifinality”; there are multiple paths to achieving the same organizational capability. Thus, the paths to a specific organizational capability can arise from very different starting points (Mosey, 2005).
Operations systems are used by operations management to efficiently and effectively management the operations function in the creation and delivery of products - goods and services. The operations system is comprised of the following elements:
- Operations Process - This refers to the organizational method for transforming input resources into goods or services. A process involves the use of an organization's resources to provide something of value . Major process decisions include: process structure, and customer involvement. Some examples of operations processes are: new product development, manufacturing, logistics, and distribution. Production processes can be of different types such as: make-to-order, mass production, and mass customization. Examples of administrative processes are production planning, budgeting and performance measurement processes.
- Resources - This refers to operations resources, i.e., the machines, tools, workers, facilities, physical areas, or vendors who perform the activities of an operations process (project or production process). Resources can be of different types, and have different capabilities. Examples of resources include buildings, plant, equipment, exclusive licenses, patents, stocks, land, debtors, employees. Generally tangible resources can be touched or felt; they have a physical shape.
- Competencies - A competency is the capacity to apply or use a related set of skills, knowledge, and abilities required to successfully perform "critical work functions" or tasks in a defined work setting. Core competency refers to a company's set of skills or experience in some activity, rather than the physical or financial assets. Core competence is anything that a business does extremely well, and is generally considered to be critical to the business's overall performance. Organizational competencies are core masteries that define what the organization requires of its employees to succeed, and how it expects overall goals to be accomplished. Most organizations define 15 to 25 competencies that lay out how employees are expected to act, and common traits everyone needs to succeed. For example, a marketing agency's ability to generate data-led campaign ideas would be a core competence. An organization's core competency is an organization's strategic strength. For example, Honda's strategic strength (core competency) lies in its engine and propulsion systems.
An Operations system is the joint configuration of resources and processes such that the resulting competencies are aligned with the organization's desired competitive position. The operations system design and implementation decisions are guided by the operations strategy.
Most firms share access to the same processes and technology, so they usually differ very little in the areas of core competencies. What is different is the operations capability embedded in the organizational fabric of the operations system which determine the degree to which operations matches its processes and infrastructure to its strategic objectives and goals.
Operational Capabilities
Operational capabilities are firm-specific sets of skills, processes, and routines, developed within the operations management that are regularly used in solving its problems through configuring its operational resources. Operational capability is the capacity to deploy, allocate, and coordinate resources. Operational capabilities provide unity, integration, and direction to resources and operational practices. They encapsulate both explicit elements (e.g., resources, practices) and tacit elements (e.g., know-how, skill sets, leadership) for handling a variety of problems or dealing with uncertainty. That is, operational capabilities draw on resources and operational practices to generate outcomes consistent with desired results, helping a plant develop solutions that make sense and give it sustainable competitive advantage.
Resources form a plant’s foundation, consisting of the plant’s capacity and all of its stocks (Wang & Ahmed, 2007). In contrast, operational practices such as just in time are fairly standardized activities, programs, or procedures that have been developed to address the attainment of specific operational goals or objectives (Flynn et al., 1995).
Core Competencies and Distinctive Competencies
Core competency refers to a company's set of skills or experience in some activity, rather than the physical or financial assets. Core competence is anything that a business does extremely well, and is generally considered to be critical to the business's overall performance. For example, a marketing agency's ability to generate data-led campaign ideas would be a core competence. An organization's core competency is an organization's strategic strength. For example, Honda's strategic strength (core competency) lies in its engine and propulsion systems.
A distinctive competence refers to a competence unique to a business organization, which enables the production of a unique value proposition in the function of the business. A distinctive competency is the basis for the development and maintenance of sustainable competitive advantage. For a business to develop and maintain sustainable competitive advantage, it must have some sort of operational capabilities embedded in the organizational fabric of the operations system, enabling it to produce a unique value proposition. In a dynamic environment, ultimately, distinctive competencies or the uniqueness of the value proposition produced using them, become less distinct or unique. Distinctive competencies, as a basis for competitive advantage, can come from a number of sources including: technology, industry position, market relations, cost, business processes, manufacturing processes, people, customer service, etc. Distinctive competencies can occur in a range of different areas, including: marketing, personnel, customer relations, technology, manufacturing, etc.
Organizational Capabilities
Organizational capabilities represent a distinctive and superior way of deploying, allocating, and coordinating resources (Amit & Schoemaker, 1993; Cavusgil, Seggie, & Talay, 2007; Schreyogg & Kliesch-Eberl, 2007). Thus, organizational capabilities are tacit social processes that emerge gradually over time, so gradually that participants may not even be aware of their existence and ultimately take them for granted (Leonard-Barron, 1992). As social processes, organizational capabilities are path dependent, influenced by factors such as firm history (Teece, Pisano, & Shuen, 1997), actions of decision makers (Rothaermel & Hess, 2007), and the firm’s learning process (Schreyogg & KlieschEberl, 2007). Furthermore, these paths are unique to a firm (Teece et al., 1997), described by Eisenhardt and Martin (2000) as “equifinality”; there are multiple paths to achieving the same organizational capability. Thus, the paths to a specific organizational capability can arise from very different starting points (Mosey, 2005).
Management Systems
Most organizations are complex systems that require lots of people from different areas within/outside of the organization to work together to achieve the organization's strategic objectives. Without some form of management systems in place, everyone is basically marching to the beat of their own drum. A management system describes the way in which companies organize themselves in their structures, and processes in order to act systematically, ensure smooth processes and achieve planned results. Management system are sets of procedures, processes, and policies that an organization uses manage risks - safety, environmental, quality, business continuity, etc. - and guide the organization and its activities to maximize business value.
Management processes usually follow the P-O-L-C cycle of plan, organize, lead and control management functions These functions are part of a body of practices and theories on how to be a successful manager. These functions are standard across industries, whether that be in a manufacturing plant, a home office, a grocery store, a retail store, a restaurant, a hotel, or even an amusement park. Management systems support decision-making across the management functions of planning organizing, leading and controlling.
All these functions have different purposes and critical skills requirements, but they all depend on communications, pattern recognition of situational context awareness to act, sensitivity to relationships, and an understanding of the organization's power structure. These functions are highly inseparable and work as a continuous management process, each function bleeds into the others and each affects the performance of the others.
Management systems focus on the requirements of customers, other interested parties, and/or sustainability issues. Management systems provide a company with crucial support in successfully meeting the challenges of the market and society. Management systems support the organization in avoiding mistakes, identifying opportunities and risks, and meeting the requirements of all stakeholders. Management systems play an important role in strategic alignment of companies and creating trust with interested parties. Management systems cover a wide spectrum of organization's objectives; some of the major organizational systems include:
All these systems play their respective roles in for example, strategic evaluation and control.
An effective management system is based on and controls structured and optimized processes, and policies that ensure people in the organization can complete the tasks required to meet organization's objectives. A management system is an invisible force (resource) that makes everyone's life in the organization easier, and outcomes more predictable. Once an organization sets up its management systems, they should reduce friction and create the right climate and environment for employees to excel.
Most organizations are complex systems that require lots of people from different areas within/outside of the organization to work together to achieve the organization's strategic objectives. Without some form of management systems in place, everyone is basically marching to the beat of their own drum. A management system describes the way in which companies organize themselves in their structures, and processes in order to act systematically, ensure smooth processes and achieve planned results. Management system are sets of procedures, processes, and policies that an organization uses manage risks - safety, environmental, quality, business continuity, etc. - and guide the organization and its activities to maximize business value.
Management processes usually follow the P-O-L-C cycle of plan, organize, lead and control management functions These functions are part of a body of practices and theories on how to be a successful manager. These functions are standard across industries, whether that be in a manufacturing plant, a home office, a grocery store, a retail store, a restaurant, a hotel, or even an amusement park. Management systems support decision-making across the management functions of planning organizing, leading and controlling.
- Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. According to KOONTZ "Planning is deciding in advance what to do, when to do, and how to do. In essence they map out where the organization is headed, its short-range and long-range performance targets, and the competitive moves and internal action approaches to be used in achieving the targeted results. Planning results in plans that are specifications desired intentions (modeled as intentional goal model) and the specification of the methods/means (strategies/processes) to be employed to achieve the desired. The planning process deals with chalking out a future course of action and deciding in advance the most appropriate course of actions for achieving predetermined and/or desired goals. It requires thinking strategically first, then applying that thought to making decision on choosing future courses of action from among alternatives. For managers, planning and decision-making require an ability to foresee, to visualize, and to look ahead purposefully.
- Organizing is a function of management that involves determining and providing resources (human and non-human) to the business organization. The Organizing function brings together physical, financial, and human resources and the productive relationships among them for achieving the goals established in the planning function. It is important to prioritize which resources are essential at any given time. The organizing, function must address goals and objectives; the way the organization is organized can affect goals and objectives in terms of how performance of those functional areas are tracked, as well as exactly what constitutes performance will vary from function to function. Leaders need to identify what activities are necessary, assign those activities to specific personnel, effectively delegating tasks. Leaders need to coordinate tasks to keep resources moving efficiently toward goals.
- Leading/Directing is one of the functions of management that directs activities and actuates the organizational methods/actions. Leading is the responsibility of managers to let staff know what work needs to be done, and also by when, to ensure efficient achievement of organizational purposes. Leading is that inter-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating subordinates for the achievement of organizational goals. The leading/directing function requires leaders to do more than simply give orders, they must supervise subordinates while simultaneously motivating teams through guided leadership communicated in clear ways to contribute in meaningful ways. Directing sets the enterprise in motion through the actions of people to execute the work prepared during planning, organizing and staffing.
- Controlling function refers to all the systems, processes and procedures that leaders create to monitor and evaluate the success of a plan. Controlling involves monitoring of activities, measurement of accomplishments and evaluation against some standards established in the organization; and action to correct deviations if any, to ensure achievement of organizational goals established in the plan. Controlling is primarily a goal oriented function of management in an organization. It is the process of comparing the actual performance with the set standards of the company to ensure that activities are are performed according to the plans, and if not then taking corrective action.
All these functions have different purposes and critical skills requirements, but they all depend on communications, pattern recognition of situational context awareness to act, sensitivity to relationships, and an understanding of the organization's power structure. These functions are highly inseparable and work as a continuous management process, each function bleeds into the others and each affects the performance of the others.
Management systems focus on the requirements of customers, other interested parties, and/or sustainability issues. Management systems provide a company with crucial support in successfully meeting the challenges of the market and society. Management systems support the organization in avoiding mistakes, identifying opportunities and risks, and meeting the requirements of all stakeholders. Management systems play an important role in strategic alignment of companies and creating trust with interested parties. Management systems cover a wide spectrum of organization's objectives; some of the major organizational systems include:
- Client Relationship Management,
- Product Quality Management,
- Planning systems,
- Motivational systems,
- Operations Management System - Operations management system (OMS) is a collection of processes, procedures and resources that enables a company to effectively manage business practices and achieve the highest level of efficiency with day-to-day operations, necessary for the creation and delivery of value to customers. Operations management systems are geared towards improving team performance and encouraging them to focus on tasks that are instrumental to their organizational growth. An OMS generally serves as a guide to ensure that various departments/function with different responsibilities work together to achieve common business goals. An OMS van also be used in managing information systems, administrative processes, enterprise resource planning, supply chain management, inventory management, etc.
- Legislative and Compliance Management,
- Risk and Safety Management,
- Financial Management,
- Knowledge Management,
- Performance Management,
- Management Control Systems - A management control system is a system that gathers and uses information to evaluate the performance of different organizational resources, such as: human, physical, financial, and the organization as a whole, in light of the organizational strategies pursued.
- Information system - Provides information on performance, standards, and how managers and individual employees are contributing to achievement of the organizational goals.
- Planning system - Planning is the basis for control. Planning provides the entire spectrum on which the control function is based. Planning establishes a plan which directs the behavior and activities in the organization. Control measures these behaviors and activities, and supports measures to remove any deviation.
- Motivation system - Motivation system is related to the entire organizational processes. Motivation system plays a central role in achieving the basic objective of the evaluation and control - ensuring that organizational objectives are achieved. Motivation system energizes managers and employees in the organization to perform better, which is the key to organizational success.
- Appraisal system - This system supports systematic evaluation of individual's performance with regard to their job, and potential for development. The appraisal system provides feedback, for control system, about how individuals are performing.
- Development system - Development system is concerned with developing personnel to perform better in their current and likely future positions they are expected to occupy. The development system aims at increasing organizational capability though people to achieve better results. These results become the basis for evaluation and control.
All these systems play their respective roles in for example, strategic evaluation and control.
An effective management system is based on and controls structured and optimized processes, and policies that ensure people in the organization can complete the tasks required to meet organization's objectives. A management system is an invisible force (resource) that makes everyone's life in the organization easier, and outcomes more predictable. Once an organization sets up its management systems, they should reduce friction and create the right climate and environment for employees to excel.
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