Organizations as Systems
The concept of organization as system refers to the grouping and arrangement of parts of an enterprise to form a whole in order to put it in good working order. Organizations as systems are comprised of complexes of norms and policies that guide behaviors of the members of the organization. Institutions - complexes of norms and behaviors that persists over time by serving collectively valued purpose. Organizations are complexes of people and/or groups that according to commonly agreed rules and procedures strive to realize one or more preset objectives.
Organizations can be conceptualized as systems in that, how the organization performs cannot be calculated by adding up all the work arrangements - like departments - with the resources and processes that connect it all together, functions, etc. A system is defined by its boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with another system. Organizations can be viewed as both open systems and social systems; as open systems they are essentially, goal-seeking, information feedback systems, and as social systems they are made up of people, and have defined purpose that is subscribed by the individuals that comprise the organization.
The concept of organization as system refers to the grouping and arrangement of parts of an enterprise to form a whole in order to put it in good working order. Organizations as systems are comprised of complexes of norms and policies that guide behaviors of the members of the organization. Institutions - complexes of norms and behaviors that persists over time by serving collectively valued purpose. Organizations are complexes of people and/or groups that according to commonly agreed rules and procedures strive to realize one or more preset objectives.
Organizations can be conceptualized as systems in that, how the organization performs cannot be calculated by adding up all the work arrangements - like departments - with the resources and processes that connect it all together, functions, etc. A system is defined by its boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with another system. Organizations can be viewed as both open systems and social systems; as open systems they are essentially, goal-seeking, information feedback systems, and as social systems they are made up of people, and have defined purpose that is subscribed by the individuals that comprise the organization.
Work Systems
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. Work systems are designed to accomplish a variety of tasks such as:
Elements or Components of Work Systems
The elements or components that define a work system include:
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. Work systems are designed to accomplish a variety of tasks such as:
- Work systems that accomplish a task and then end, Special Projects .e., Conference, data collection, etc.
- Work systems that are designed to manufacture a product for a specific time and then discontinued.
- Work systems that link together to form a larger work system, for example Production Lines. Production Work Systems link the Supply Chain Work System (material purchases), the Design Work System (Engineering), and the Packaging Work System (produced a purchase ready product).
Elements or Components of Work Systems
The elements or components that define a work system include:
- Workers (Participants) - employees or contract workers.
- Task - Task at hand that needs to be done, and how the task should be accomplished.
- Organization - The Organization element is defined in terms of Organization Structure, Organization's Policies, and Leadership Practices. The Organization Structure includes the individuals, the roles in the company and how the roles relate regarding the work to be done. The Organization's Policies include agreements, rules and statements that dictate the way the work needs to be completed. Leadership practices within the organization directs and controls the accomplishment of the work system and help maintain focus and motivation.
Organizations as Open Systems
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. 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).
Organizations conceptualized as Open Social Systems are essentially goal-seeking, information feedback systems. Conceptualized as Open Systems, organizations 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 organizational structure. Organizations usually try to influence their external environments through use of public relations, advertising and promotions, lobbying and advocacy, education, industry and local leaders. A highly effective organization is regularly exchanging feedback information with the external environment through use of environment scanning, market research and evaluations. The measure of effectiveness of an organization is its capacity to fulfill the system's goals, and the goals of its components. Often, normative structures are only loosely connected to actual behavior, at both the individual and group level. Pfeffer and Salancik note that "The organization is a coalition of groups and interests, each attempting to obtain something from the collectivity by interacting with others, and each with its own preferences and objectives." (Pfeffer and Salancik, 1978 p. 36). This loose coupling can be useful in itself (Weick, 1976) by improving adaptability.
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.
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. These may include resources such as people/human resources, equipment, etc., which can be organized according to how work gets done, i.e., organizational and business) processes for creating and delivering value, and how they are managed i.e., organization functions, divisions, etc. 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).
Organization Unit
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. An organization unit policies define the criteria for a group of people that are members of the organization. The criteria for the grouping may be based on function (people with similar skills), product develop, division, etc. An organization unit is an ordered grouping of interdependent positions linked together according to a plan (reporting relationships) to achieve specific objectives. Organizational Units can be categorized according to certain characteristics such as responsibilities and obligations of a set of employees. They group organizational controls, people, processes, culture, assets such as applications, and knowledge, and information to reflect the realization of the organization's effective strategy. When the Organizational Unit reaches its lowest level of decomposition it is represented by a Position.
Positions - Skills, Knowledge, and Capabilities
Positions as Logical Actors are social concepts employed by organizations for abstracting from specific human actors in the organization. Positions represent the part of the organizational design which specifies the competencies and services necessary to achieve the society (business enterprise) objectives. Positions define how the organization aims at implementing its design through the specification of the behavior of particular individuals or group of individuals.
Organization capability defines “what” a business does at its core, and can be denoted by the level-1 functions of the organization. It expresses the capacity to deploy resources or efficiently and effectively assign organization activities in creating and delivering value to customers. Organization capability is defined operationally, in terms of the dynamic relationships between organizational culture, the outcomes of operational processes, institutional arrangements, structure, and the organization’s resources. It expresses the potential capacity to deploy resources, or efficiently and effectively assign organization activities to the right “actors” (socio-technical systems) in creating and delivering value to customers.
Feedback
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.
Business Results - Tactical Feedback
Business results are measures of the product and operational tactical performance of a business. Results demonstrate the quality and value of products and services that lead to customer satisfaction and engagement.
Strategic Context - Strategic Feedback
The strategic context 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. A strategy is an approach or hypothesis of the intended means to accomplish certain defined goals and objectives that contribute to a certain defined vision/"end". A strategy is defined by an orderly grouping of interdependent goals linked together according to a plan (strategic plan) to achieve a strategic objectives that in turn contribute to achieving the mission. Strategy is achieved through the constant interplay between doing, planning, and evaluation. The strategic view defines the overall direction, goals and objectives of an organization given its purpose in the eternal environment.
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.
Enabling 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 the institutional relations between the business and the external organization/entity of interest to the business, but are not directly controlled by it. The external environment is modeled as a network of "External Entity" actors and their goal dependency relations with the business organization. The external entity abstraction is an abstraction over the concept of influencer in Motivational Modeling and can denote concepts such as regulators, competitors, market forces, customers, technology, etc. The category of external entities (influencers) is large and inclusive. Every business has hundreds of potential influencers. Influences can be political, economic, ecological, societal, and technology. There will always be too many influencers to model. The decision as to what influencers to model is determined by the influencers that impact the organization's strategies and tactics, and affect the achievement of goals and objectives of the organization.
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 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.
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. 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).
Organizations conceptualized as Open Social Systems are essentially goal-seeking, information feedback systems. Conceptualized as Open Systems, organizations 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 organizational structure. Organizations usually try to influence their external environments through use of public relations, advertising and promotions, lobbying and advocacy, education, industry and local leaders. A highly effective organization is regularly exchanging feedback information with the external environment through use of environment scanning, market research and evaluations. The measure of effectiveness of an organization is its capacity to fulfill the system's goals, and the goals of its components. Often, normative structures are only loosely connected to actual behavior, at both the individual and group level. Pfeffer and Salancik note that "The organization is a coalition of groups and interests, each attempting to obtain something from the collectivity by interacting with others, and each with its own preferences and objectives." (Pfeffer and Salancik, 1978 p. 36). This loose coupling can be useful in itself (Weick, 1976) by improving adaptability.
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. These may include resources such as people/human resources, equipment, etc., which can be organized according to how work gets done, i.e., organizational and business) processes for creating and delivering value, and how they are managed i.e., organization functions, divisions, etc. 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).
Organization Unit
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. An organization unit policies define the criteria for a group of people that are members of the organization. The criteria for the grouping may be based on function (people with similar skills), product develop, division, etc. An organization unit is an ordered grouping of interdependent positions linked together according to a plan (reporting relationships) to achieve specific objectives. Organizational Units can be categorized according to certain characteristics such as responsibilities and obligations of a set of employees. They group organizational controls, people, processes, culture, assets such as applications, and knowledge, and information to reflect the realization of the organization's effective strategy. When the Organizational Unit reaches its lowest level of decomposition it is represented by a Position.
Positions - Skills, Knowledge, and Capabilities
Positions as Logical Actors are social concepts employed by organizations for abstracting from specific human actors in the organization. Positions represent the part of the organizational design which specifies the competencies and services necessary to achieve the society (business enterprise) objectives. Positions define how the organization aims at implementing its design through the specification of the behavior of particular individuals or group of individuals.
Organization capability defines “what” a business does at its core, and can be denoted by the level-1 functions of the organization. It expresses the capacity to deploy resources or efficiently and effectively assign organization activities in creating and delivering value to customers. Organization capability is defined operationally, in terms of the dynamic relationships between organizational culture, the outcomes of operational processes, institutional arrangements, structure, and the organization’s resources. It expresses the potential capacity to deploy resources, or efficiently and effectively assign organization activities to the right “actors” (socio-technical systems) in creating and delivering value to customers.
Feedback
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.
Business Results - Tactical Feedback
Business results are measures of the product and operational tactical performance of a business. Results demonstrate the quality and value of products and services that lead to customer satisfaction and engagement.
Strategic Context - Strategic Feedback
The strategic context 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. A strategy is an approach or hypothesis of the intended means to accomplish certain defined goals and objectives that contribute to a certain defined vision/"end". A strategy is defined by an orderly grouping of interdependent goals linked together according to a plan (strategic plan) to achieve a strategic objectives that in turn contribute to achieving the mission. Strategy is achieved through the constant interplay between doing, planning, and evaluation. The strategic view defines the overall direction, goals and objectives of an organization given its purpose in the eternal environment.
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.
Enabling 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 the institutional relations between the business and the external organization/entity of interest to the business, but are not directly controlled by it. The external environment is modeled as a network of "External Entity" actors and their goal dependency relations with the business organization. The external entity abstraction is an abstraction over the concept of influencer in Motivational Modeling and can denote concepts such as regulators, competitors, market forces, customers, technology, etc. The category of external entities (influencers) is large and inclusive. Every business has hundreds of potential influencers. Influences can be political, economic, ecological, societal, and technology. There will always be too many influencers to model. The decision as to what influencers to model is determined by the influencers that impact the organization's strategies and tactics, and affect the achievement of goals and objectives of the organization.
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 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.
Organizations as Social Systems
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. Organizations as social systems are comprised of a collection of people, organized into structured grouping and managed to meet a need or pursue collective goals. Each organization depends on norms and rules as enforcement mechanisms to restrain the individual behavior of the people (actors).
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.
Business organizations are dynamic social systems in that each has a purpose, and is greater than the sum of its parts. Social Systems are defined as system of systems in that, larger more complex systems are composed of systems of the same type (i.e., Social System). A basic construct of conceptualizing social systems is human actors that are deemed to be systems in that they have are purpose and have intentions. 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 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).
Elements of 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.
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". 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. The elements of a social system includes:
Organization Purpose
Organizations have “purpose” (as in purposeful endeavor) 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 (social system actors) 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 Structure
Organization (management and operational) structures are 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. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns 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. The behavior of an organization is usually guided by its strategic and tactical goals.
Organization Behavior
The behavior of an organization as a whole is defined by the patterns of interactions among its functional organization units and the the behavior of social actors (people, individuals and groups of individuals) that are members of these units, and between the functional units with processes that interact with the environment such as customer service, marketing, regulatory compliance, etc. The behavior of actors is manifested in each actor's decisions, actions, and priorities. The behavior of actors 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. Actors' behavior can be analyzed and described at the following levels:
The behavior is influenced by the design of the organization structure and its institutional arrangements. A well designed organization ensures appropriate levels of energy is generated and maintained in the system. System organization secures, expends, and conserves energy to maintain the system and further the achievement of its mission/purpose.
Organization 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.
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 includes the organizational values, visions, norms, working language, systems, symbols, beliefs and habits. 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 manifests itself in the particular way things are done in an organization including how decisions are made. 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, Tolerance for risk and conflicts.
Organization climate is the manifestation of organizational culture; and is 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.
Organizational Policy and Procedure
Organizations depend on norms and rules - policies to guide behavior. 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. 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.
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. 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.
Enabling Environment Factors
The concept of organization enabling external environment factors can denote concepts such as competitors, market forces, customers, technology, etc.
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. Organizations as social systems are comprised of a collection of people, organized into structured grouping and managed to meet a need or pursue collective goals. Each organization depends on norms and rules as enforcement mechanisms to restrain the individual behavior of the people (actors).
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.
Business organizations are dynamic social systems in that each has a purpose, and is greater than the sum of its parts. Social Systems are defined as system of systems in that, larger more complex systems are composed of systems of the same type (i.e., Social System). A basic construct of conceptualizing social systems is human actors that are deemed to be systems in that they have are purpose and have intentions. 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 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).
Elements of 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.
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". 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. The elements of a social system includes:
- 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.
- 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 -
- Sanction -
Organization Purpose
Organizations have “purpose” (as in purposeful endeavor) 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 (social system actors) 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 Structure
Organization (management and operational) structures are 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. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns 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. The behavior of an organization is usually guided by its strategic and tactical goals.
Organization Behavior
The behavior of an organization as a whole is defined by the patterns of interactions among its functional organization units and the the behavior of social actors (people, individuals and groups of individuals) that are members of these units, and between the functional units with processes that interact with the environment such as customer service, marketing, regulatory compliance, etc. The behavior of actors is manifested in each actor's decisions, actions, and priorities. The behavior of actors 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. Actors' behavior can be analyzed and described at the following levels:
- Individual Level - At this level, the individual actor's behavior is influenced by factors such as: learning, perception, creativity, motivation, turnover, task performance, etc.
- Group Level - At this level, behavior is influenced by factors such as: group dynamics, intra- and inter-group conflicts and cohesion, leadership, power, norms, networks, communication, and roles.
- Organization Level - At this level, behavior is influenced by factors such as: organizational culture, organization structure, inter-organizational conflict and cooperation, change, technology, and external environment forces.
The behavior is influenced by the design of the organization structure and its institutional arrangements. A well designed organization ensures appropriate levels of energy is generated and maintained in the system. System organization secures, expends, and conserves energy to maintain the system and further the achievement of its mission/purpose.
Organization 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.
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 includes the organizational values, visions, norms, working language, systems, symbols, beliefs and habits. 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 manifests itself in the particular way things are done in an organization including how decisions are made. 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, Tolerance for risk and conflicts.
Organization climate is the manifestation of organizational culture; and is 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.
Organizational Policy and Procedure
Organizations depend on norms and rules - policies to guide behavior. 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. 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.
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. 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.
Enabling Environment Factors
The concept of organization enabling external environment factors can denote concepts such as competitors, market forces, customers, technology, etc.
Management System
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. These objectives cover many aspects the organization's performance (strategic and operational). In its most basic sense, a management system is how organizations ensure things get done. Many parts of the management system are common to a range of objectives, but others may be more specific. A complete management system covers every aspect of management and focuses on supporting the performance of management tasks to achieve the objectives.
The strategic management process is comprised of functions that provide a systematic way of viewing the managerial process
Strategic decision-making determines the objectives, resources and policies of an organization.
Business Management System is a set of tools for strategic planning and tactical implementation of policies, practices, guidelines, processes, and procedures that are used in the development, deployment, and execution of business plans and strategies, and all associated management functions. A simplification of the main aspects of management system is the Deming 4-element "Plan, Do, Check, Act" approach.
A complete management system covers every aspect of management and focuses on supporting the performance management to achieve the objectives. A fundamental principle of the method is iteration - once a hypothesis is confirmed or negated, executing the cycle again will extend knowledge further. The management system should be subject to continuous improvement as the organization learns.
What is a Strategy
Strategy in a business organization is about how the organization seeks to survive and prosper within its environment over the long-term. It consists of the moves made and approaches taken by management to produce successful performance of the organization. The definition of strategy in the management literature falls into one of four categories:
In reality, strategy evolves over time as our intentions accommodate reality. Decision makers or managers start with a given perspective, conclude that it calls for a certain position, and sets about achieving it by way of a carefully crafted plan. Over time things change; a pattern of decisions and actions marks movement from starting point to goal. This pattern of decisions and actions is called "realized" or "emergent" strategy. The actual strategy of an organization is the outcomes of the combination of executed parts of deliberate strategy and emergent strategy - "realized pattern " that was not expressly intended but emerged as a result of actions undertaken by the organization in response to environments factors.
General Strategy
General strategy refers to how - means by which - a given objective will be achieved. Strategy in the general sense is concerned with the relationships between ends and means; that is, between the results we seek and the resources at our disposal. Strategy and tactics are both concerned with formulating and then carrying out courses of action intended to attain particular objectives. Strategy is concerned with deploying the resources at your disposal whereas tactics is concerned with employing (utilizing) them.
Levels of Strategy
The term "strategy" is an overloaded in everyday conversations because most people including professional practitioners do not bother to explicitly establish their point of view into what is essentially a layered concept that exists at least three (3) levels such as general strategy, corporate strategy, and business and competitive strategy.
Essentially, when people use the word “strategy”, they are expressing concerns/interest in one of those layers i.e., general, corporate strategy, business and competitive strategy, and possibly additional layers such as “functional” strategy; and operations strategy.
Operations Strategy
Operations strategy binds the various operations decisions and actions in functional areas into a cohesive consistent response to competitive forces by linking firm/organization policies, programs, systems, and actions into a systematic response to the competitive/strategic priorities chosen and communicated by the corporate or business strategy. Operations strategy is the collective concrete actions chosen, mandated, or stimulated by corporate strategy. Operations strategy defines how an entire business will allocate its resources to support operations and its strategic goals. Operations strategies focus on maximizing the efficiency and effectiveness of production while minimizing operating costs.
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. These objectives cover many aspects the organization's performance (strategic and operational). In its most basic sense, a management system is how organizations ensure things get done. Many parts of the management system are common to a range of objectives, but others may be more specific. A complete management system covers every aspect of management and focuses on supporting the performance of management tasks to achieve the objectives.
The strategic management process is comprised of functions that provide a systematic way of viewing the managerial process
- Planning -This is decision making, regarding the goals and setting the future course of action from a set of alternatives to reach them. It means determining what the organization's position and the situation should be at some time in the future, and deciding how best to bring about that situation. It produces a plan which helps maintain managerial effectiveness by guiding future actions.
- Organizing - This is the process by which established plans are moved closer to realization. It involves determining how activities and resources - human resources and other resources that are identified as necessary by the plan to reach the goals - are to be assembled and coordinated, and establishing an intentional structure of positions or roles of responsibilities for people to fill in an organization. The structure is intentional in the sense of making sure that all the tasks necessary to accomplish the goals are assigned to people who can do them the best. Staffing is part of organizing, it involves filling and keeping filled the positions in the organization structure.
- Leading - This is the skills of influencing people for a particular purpose or reason.. It involves several deferment processes and activities such as direction, motivation, communication, and coordination.
- Controlling - This is monitoring the organization's progress towards goal fulfillment and evaluating activities. Monitoring is essential to ensure the achievement of organizational goals. Controlling involves measuring, comparing, finding deviation and correcting the organizational activities which are performed for achieving the goals or objectives. Some examples of means of controlling are budget for expenses, inspection recorder, and record of labor hours lost.
Strategic decision-making determines the objectives, resources and policies of an organization.
Business Management System is a set of tools for strategic planning and tactical implementation of policies, practices, guidelines, processes, and procedures that are used in the development, deployment, and execution of business plans and strategies, and all associated management functions. A simplification of the main aspects of management system is the Deming 4-element "Plan, Do, Check, Act" approach.
- Plan - This is the planning stage and involves establishing objectives and processes required to deliver the required results.
- Do - This is the performance (Doing) stage and involves organizing resources, implementing and executing the plan to achieve desired changes in the organization's situation. Usually, this will proceed in incremental phases, where small changes resulting from a phase are tested and data collected to see how effective the change is.
- Check - This constitutes the analysis stage and involves evaluating the data collected and results attained in the previous "Do" stage, and the conclusions drawn drive the next - "Act"/"Adjust" - stage. Evaluation may involve comparing collected data to the expected outcomes to determine any similarities or differences. The testing process itself, may be evaluated to determine if there were changes from the original test created during the planning stage. Visualizing the data helps management understand any developing trends as well as what changes work better than others.
- Act - This stage also called the Adjust stage is where a process is improved. Information from the "do" and "check" stages help identify issues with the process. These issues may include problems, non-conformity, opportunities for improvement, inefficiencies, and other issues that result in outcomes that are evidently less-than-optimal. Root causes of such issues are investigated, found and eliminated by modifying the process/strategy; and risks are re-evaluated. At the end of the actions in this stage, the process has better instructions, standards and goals; and the strategy has better assumptions, objective standards and goals. Planning for the next cycle can proceed with a better base-line.
A complete management system covers every aspect of management and focuses on supporting the performance management to achieve the objectives. A fundamental principle of the method is iteration - once a hypothesis is confirmed or negated, executing the cycle again will extend knowledge further. The management system should be subject to continuous improvement as the organization learns.
What is a Strategy
Strategy in a business organization is about how the organization seeks to survive and prosper within its environment over the long-term. It consists of the moves made and approaches taken by management to produce successful performance of the organization. The definition of strategy in the management literature falls into one of four categories:
- A Plan - This is a consciously intended courses of action on "how" - a means of getting from here to there. This may be general or detailed, formal or informal (in the mind). As a plan, strategy is conceived in advance, has a purpose and is thoughtful to some degree.
- A Perspective - A vision and direction, a view of what the company or organization is to become. Mintzburg points out that strategy as a perspective is the same as "Strategy As A Plan" but without the formal planning. In this view, many people in the organization have the same orientation or perspective when they make strategic decisions.
- A Pattern - A pattern of decisions over time that may be consistent or inconsistent but represents a strategy. A consistent pattern of decisions may be the result of an explicit and written strategy or it may be result from organizational culture, or it may result from the influence of one or more leaders. An inconsistent pattern of decisions also represents a sort of strategy - a non-strategy, perhaps, but a strategy that governs decisions. So, in a sense, every organization has a strategy; they all make strategic decisions or non-decisions that are also decisions.
- A Position - We may view a position taken by the organization that reflects decisions to offer particular products and services in particular markets as a strategy relative to the environment.
In reality, strategy evolves over time as our intentions accommodate reality. Decision makers or managers start with a given perspective, conclude that it calls for a certain position, and sets about achieving it by way of a carefully crafted plan. Over time things change; a pattern of decisions and actions marks movement from starting point to goal. This pattern of decisions and actions is called "realized" or "emergent" strategy. The actual strategy of an organization is the outcomes of the combination of executed parts of deliberate strategy and emergent strategy - "realized pattern " that was not expressly intended but emerged as a result of actions undertaken by the organization in response to environments factors.
General Strategy
General strategy refers to how - means by which - a given objective will be achieved. Strategy in the general sense is concerned with the relationships between ends and means; that is, between the results we seek and the resources at our disposal. Strategy and tactics are both concerned with formulating and then carrying out courses of action intended to attain particular objectives. Strategy is concerned with deploying the resources at your disposal whereas tactics is concerned with employing (utilizing) them.
Levels of Strategy
The term "strategy" is an overloaded in everyday conversations because most people including professional practitioners do not bother to explicitly establish their point of view into what is essentially a layered concept that exists at least three (3) levels such as general strategy, corporate strategy, and business and competitive strategy.
- Corporate Strategy - Corporate strategy defines the markets and the businesses in which a company will operate. Corporate strategy is typically decided in the context of defining the comp[any's mission and vision, that is, saying what the company does, why it exists, and what it is intended to become. Corporate level strategy is about positioning the organization in order to achieve intended business goals. The positioning may be for growth, stability, or exiting the business.
- Competitive/Business Strategy - Competitive strategy defines for a given business the basis on which it will compete. Competitive strategy hinges on a company's capabilities, strengths, and weaknesses in relation to market characteristics and the corresponding capabilities, strengths and weaknesses of its competitors.
- Function Strategy - Functional strategies are concerned with how the functional areas defined by the Operations Strategy design contribute to business strategy. Functional strategy define where the functions of a business make long-term plans which support the competitive strategy being pursued by the business strategy. Functional strategies specify outcomes to be achieved from the daily operations of specific departments or functions. A Functional Strategy, for any business, large or small, focuses (the achievement of a goal) on the skills and abilities of individual departments and their employees.
Essentially, when people use the word “strategy”, they are expressing concerns/interest in one of those layers i.e., general, corporate strategy, business and competitive strategy, and possibly additional layers such as “functional” strategy; and operations strategy.
Operations Strategy
Operations strategy binds the various operations decisions and actions in functional areas into a cohesive consistent response to competitive forces by linking firm/organization policies, programs, systems, and actions into a systematic response to the competitive/strategic priorities chosen and communicated by the corporate or business strategy. Operations strategy is the collective concrete actions chosen, mandated, or stimulated by corporate strategy. Operations strategy defines how an entire business will allocate its resources to support operations and its strategic goals. Operations strategies focus on maximizing the efficiency and effectiveness of production while minimizing operating costs.
Operations System
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 Operating System integrates three (3) different but complementary views of operations including:
The Operations System is utilized by Operations Management in its tasks to provide the best match of supply with demand.
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 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.
- 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.
- 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.
The Operations System is utilized by Operations Management in its tasks to provide the best match of supply with demand.