concepts of systems and organizations 1

8/8/2019 Concepts of Systems and Organizations 1

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Concepts of systems and Organizations


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Concepts of systems and Organizations

System :[ Is a collection of people, machines, and methods organized to

accomplish a set of specific tasks]

A system is an integrated set of components or entities thatinteract to achieve a particular function or goal.

Has boundaries, outputs, inputs, methods for converting inputs

to outputs and system interfaces.

Composed of interrelated and interdependent subsystems.

Example : College class, ( The components are the instructor, the

students, textbooks and facilities with learning goal ),


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Concepts of systems and OrganizationsBusiness

(The components are people, capital, materials and facilitiesto achieve the goal of making a profit)

System Boundary : Defines the scope of activities.

The activities in a class include lectures, discussion,testing, grading and preparation of assigned work.

A sales manager is responsible for managing, motivating,and evaluating the performance of a sales organization.

Systems and sub-systems : System consists of subsystemseach having elements, interactions and objectives.

Example : An educational system consists of individualcourses that are subsystems.

In a business system the various functions like marketing,finance and manufacturing are subsystems.

Similarly within the marketing subsystem the sales order-

entry and credit-checking functions are sub-systems.


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Concepts of systems and Organizations Outputs and inputs :

A system or a subsystem works to produce output from inputs. A training program produces trained employees with certain

skills.

The outputs from one sub-system become inputs into thenext. Also the input to a sub-system should be error free.

Interface : serves as a medium to convey the output from onesystem to the input into another system.

Example : Inventory control and purchasing. If inventory leveldrops below a certain level, then additional stock of these

items should be purchased. Subsystem interface and interface problems :

The output of one sub-system may not be sufficient toaccommodate the needs of the next sub-system. Example :The production system may not be able to produce enough

stock to meet sales demand during certain peak periods.


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Systems and their environmentsThe systems environment consists of people, organizations, andother systems that supply data to or receive data from the system.

Ex : For a sales manager it is the customers , vendors and theservices being marketed.

For the company owner it may be the competitors, the financial

institutions or may be the government agencies.

Open and closed systems : Is a system that interact with the external environment by

exchanging information and materials.

Receives feedback to change and to continue to exist in itsenvironment.

Example : marketing system operates in an environment ofcompetition. Thus if a competitor introduces new technology byproviding customers with on-line order entry terminals, themarketing function must adapt to the change in the environment so

as to remain at a competitive advantage.


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Systems and their environmentsClosed system : Is a self-contained system. Does not exchange any information with the environment.

Does not receive any feed back from the external environment and tend todeteriorate.

Example : If a training program administrator doesnt respond to the needs ofthe business environment for trained graduates, students may no longer be

able to get jobs and may go elsewhere for training. A university providing courses only in the day time.

System feedback : A system needs feedback which is the current performance rates when

compared to a set of standards.

Feed back is required to make changes in the activities of the system so as to

achieve the goals. Feedback increases the effort.

Ex : Tennis players, Sales people, product managers(negative feedback),trainers.

System should get the right kind of feedback. If the sales manager is awardedfor the no of calls he had made rather than the no of sales they close, theobjective can not be fulfilled.


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Systems and their environments Thus managers must design feedback mechanism for effective

control of business functions within an organization.

Systems entropy :

Corresponds to disorder in a system when not maintained.

Maintenance is a process of decreasing entropy or increasing

orderliness.

Orderliness can be achieved through preventive maintenance

checks.

Ex : An automobile mechanics going through training classes

to learn new diagnostic techniques for decreasing entropy.The preventive maintenance here will be the regular physical

examination for an employee and the regular tune-up for an

automobile and then taking the action as a result of these

regular checks.


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Systems and their environmentsSystem stress and change :

System change because of identified problems, new business

opportunities and new management directives. Also may be

due to stress.

Thus the achievement levels needed to meet existing goals

may change.

Ex : Because of reduced profit margins on sales, a division

sales manager may insist to increase the sales to 10 percent

instead of 7 percent to achieve the same profit. ( localize

stress ) Also it is easier to make changes within one subsystem than

within the total subsystem as for removing stress it may

require to rethink the existing work methods and

organization.


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ystems an t e r env ronments The sales manager may go for cutting down calls to smaller

customer accounts, substitute telemarketing. Sales people mayreallocate their time to give attention on customers who purchase

profitable lines and encourage customers who purchase lessprofitable lines. ( more effective procedures to improve theprofitability of sales )

Another source of system stress occurs if inputs cannot bemonitored and the system is expected to produce the same quality

of output. Ex : some school and universities go for open admissions putting

pressure on the entire educational system requiring remedialprograms and hiring of special trained teachers. (withoutmonitoring putting stress on the system)

Thus the new workers participate in training programs before theybegin to work in the firm so that they can receive jobs andresponsibilities consistent with their skill levels and backgroundsthus minimizing the stress. ( with monitoring)

To change the stress it is required change the activities of asubsystem. And since there are other subsystems with which the

changed system interacts within the overall system, it may beneeded to make changes in the other subsystems.


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How a system works Based on the goals, systems perform various activities by

organizing the components. For example a base ball team with the objective of winning

games perform activities like recruit players, organize training

programs, develop marketing campaigns.

Collect feed back from sportswriters, fans , the manager,coaches and players about their performance which provide

them with information they need to reallocate resources to

meet objectives.

Systems Concepts in business A systems approach is a way of analyzing the business

problems.

This approach views the business organization as a system of

interrelated parts (subsystems which are self contained unit

and part of the larger system) designed to accomplish goals.


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How a system works Thus managementis the practice of organizing resources,

including people, materials, procedures and machines toachieve objectives.

A manager uses a systems approach to understand the goals

of the total system, design and organize the functions of the

subsystems within the total system. The subsystems of the business are connected by resource

flows.

EX : The marketing research subsystem of a business obtain

information from customers about the modifications needed

in the firms products and services. This information is

transferred to the manufacturing subsystem responsible for

product design changes. Finally the marketing subsystem sells

the finished products to customers, and may get the follow-up

support from service subsystem.


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How a system works

Market research subsystem

Manufacturing subsystem

Marketing subsystem

Service subsystem

A firms subsystem

Input

Input

Input

Input

Process

Process

Process

Process

Output

Output

Output

Output

Customer needs

Finished Goods

Product in use


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How a system worksAn information system as a system :

An information system is a system that converts data intoinformation

( data with meaning : Provides managers with feedback theyneed about system and its operations for decision making).

In business context an information system is a subsystem ofthe business system of an organization.

Contains elements as hardware, software, personnel,databases and procedures to accomplish objectives.

Hardware : consists of devices that support data processing,

communication processing and other computer relatedactivities.

Software : Consists of the instructions that the hardware usesto process the information. ( Both application s/w and systems/w)


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How a system works Application software consists of the programs written to support

specific business functions like order entry, inventory control andaccounts receivable.

System software is used to run application software.

Information processing personnel:

Designers and programmers : Design and write theapplication programs to support information processing.

Data entry operators and equipment operators : Handle day-

to-day operations activities.

All personnel follow specific procedures to organize and managea companys information-processing activities like designing,

implementing of programs, maintaining hardware and software,

and managing of operations function.


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How a system worksSubsystems :

Information systems may be classified as :

Operational Information system : Provides information on theday-to-day activities of a business. Ex : order processing systemwhich consists of other subsystems like handling of incoming oforders, update inventory levels, and billing of customers.

Tactical Information system : Provides information that lets management allocate resources

(inventory and personnel) effectively to achieve businessobjectives.

Ex : Middle managers might want feedback about which items ininventory are moving rapidly and which items are moving slowlyso they can reallocate the investment in inventory to minimizewaste and maximize profitability.

Strategic planning system: Information systems that support thestrategic plans of the business are known as strategic planningsystems


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How a system worksOutputs and Inputs :

An information system receives inputs of data andinstructions and processes the data to produce outputs.

Ex : An inventory update procedure takes sales order

transactions and an old inventory master file as inputs and

produces sales listing, reorder report and new inventorymaster as output.

InventoryUpdate

Sales

transactions

Old inventory

master

Sales

listing

ReorderReport

New inventory

master


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How a system works

Hierarchy of subsystems :

The subsystems can be organized into a hierarchy representingthe functions within the overall system.

Ex : In the inventory update system, one subsystem is for sales

transaction, other for checking the inventory, one for generating

order report etc.

System feedback :

An information system provides system feedback to a manger

about day-to-day activities and about deviations from planned

activity.

Ex : In the inventory update system, the reorder report indicates

which inventory items need to be ordered. Thus a purchase

manager could use this report to reorder additional stock on a

day-to-day basis.


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How a system worksSubsystem interface :

Exist between the subsystems of an information system. Through the interface output from one subsystem passes as input

to another subsystem.

If the output of one subsystem in incorrect, then the next

subsystem will be affected.

Ex : If the price of an item in order entry is entered incorrectly, then

the charges to the customer will also be calculated incorrectly.

Internal controls :

Information systems use standards to make sure that the data are

processed correctly and that the system works properly. Standards like validations for input, password security to avoid

unauthorized access and update of data are used.

If unauthorized users update data files or input data are not valid,

then invalid reports or erroneous information are generated thus

leading to wrong decisions.


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How a system worksEffect of the systems approach on information system design :

Many ideas of systems approach are used for designing ofinformation systems. The design is made keeping eye on the

objective of the system.

The structure of an enterprise : ( microcomputer products and service)

The enterprise is organized into many subsystems, including themarketing, service and administrative subsystems.

The marketing subsystem deals with the promotion and marketing

of microcomputer products and services. This subsystem may be

managed by a sales manager who recruit sales people fordemonstrating and selling of the products. They are trained to

follow certain procedures like demonstrating the equipments and

making follow-up calls. If these are not followed then the

profitability suffers.


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How a system works The sales manager needs collect the feedback about the sales

people who have successfully closed sales, about customerswho are complaining and also about the technical problemswith the equipment.

Also may push for alternative lines of equipment when aparticular model breaks down often, until manufacturer

solves the technical problem. Needs to organize personnel resources, by assigning larger

accounts to experienced people and sending the weak onesfor some suitable training program.

Thus the sales manager uses the information to monitor and

control the activities of the marketing system for achievingthe objectives.

The service subsystem is used when the customers haveproblems with the products and preventive maintenance isneeded.


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How a system works

The administrative subsystem takes care of the billing

customers, purchasing, equipment and supplies from vendors,paying vendors, handling the accounting activities.


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Using the systems approach for problem solving

A systems approach can be used to solve the problems by

analyzing the problems and reorganizing the resources. The steps are

1. Define the problem.

2. Gather data describing the problem.

3. Identify alternative solutions.4. Evaluate these alternatives.

5. Select and implement the best alternative.

6. Follow up to determine whether the solution is working.

1. Define the problem : It is the most important part of thesystem study because if the wrong problem is identified, the

entire effort to change the system will be off track. Ex : If the

sales people are meeting their sales quotas, a system study is

required by collecting information about the problem.


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Using the systems approach for problem solving2. Gather data describing the problem :

It is required to study the environment, current standards,input resources, input procedures for understanding theproblem.

The environment includes the competitors, local communityand customers. It may happen that the competitors are sellingwith less prices.

Also the check that the standards are valid for the competitiveenvironment. It might turn out that a goal of increasing grosssales by 10 percent is unrealistic when the competition iscutting the prices.

Analyzing the management involves checking that the sales

manager is doing a good job and providing the salespeoplewith effective training and feedback regarding theirperformance.

Analyzing the input resources needs to find out that newsales and technical representatives are being recruited and


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are trained for demonstration. They should not have lack of

knowledge to win the new business. Work methods and procedures also need to be studied,

where the salespeople should follow up the new prospects,otherwise the company will lose valuable business.

3. Identify alternative solutions :

Given the fact that the competitor has dropped their prices,the owner needs to identify some alternative responses.

alternative 1 : Investigate for manufacturers to obtainproducts at a lower cost.

alternative 2 : Decrease the cost of sales by introducing mail-order sales supported by telemarketing. Use salespersons forlarge accounts only.

alternative 3 : Offering of on-line diagnostic support servicesfor machine failure.


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4.Evaluate the alternatives :

Alternative 1 : purchasing lower-cost products from supplierswill cut the costs, but would create difficulty at the service endas the products may be less reliable.

Alternative 2 : This strategy might free the sales representativesto concentrate on direct sales to high-potential accounts while

using a less costly strategy to maintain the business of smalleraccounts.

Alternative 3 : This alternative would offer customers additionallevels of service and technical support that add value to thefirms products. This strategy might work.

5. Select and Implement the best alternative :

If the owner decides to develop and implement a mail-orderprogram to reduce the cost of sales overhead to smalleraccounts and to enable sales personnel to focus on high-potential accounts.


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It is required to recruit new customer service representativesor to train the current employees for telemarketing.

Also it is required to develop and establish customer prospect

databases, as well as a system for shipping merchandise,

billing and authorizing credit transactions.

6. Follow-up to determine whether the solution is working :

At last the owner needs to determine if the system is meeting

its goals. If not, she has to make changes in management,

standards, resources, and procedures to achieve objectives.

Every manager needs feedback to determine if the goals of

the system are being achieved.


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Using information Systems for feedback

It is necessary to use information systems to provide

feedback. Success depends upon the ability to acquire, interpret and act

upon information.

Todays business environment requires managing by wire

with a business learning loop which is very much similar tofighter pilots learning loop. ( used for the ability of pilots to

respond )

OBSERVE ORIENT

DECIDEACT

SENSE INTERPRET

DECIDEACT

Air force OODA Loop Business Learning Loop


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Ex : In each Mrs. Fields cookies store, local managers use a

computing system to project sales for the day based on priorsales and inventory turnover. The software develops a

production plan and generates information on how many

batches of cookies to make, when to reorder materials and how

to schedule workers to achieve the desired result.

Guidelines for Designing and implementing a Manage by wire

system :

In designing a manage-by-wire capability, the modern corporation

must will to make tough decisions with respect to organizing

information technology, data and information-sharing capabilities.

Does the current information technology link information

sources, media, locations and users?

Does the company has the ability to share data using integrated

technology?


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Does the company provide managers with access to data that

is classified, organized, related and used in a meaningful way? Is information shared among business units where there are

value-added implications to sharing data?

Are the companys executives willing to commit to a

managing-by-wire strategy and to integrate data acrossmultiple business units?

If the employees resist for sharing data, then the corporate

management can use the pilot system to pilot the shared data

approach.


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Making the transition to the learning Organization

According to The fifth Discipline : The Art and

Practice of the Learning Organization a learningorganization can be defined as Organizations wherepeople continually expand their capacity to create theresults they truly desire, where new and expansivepatterns of thinking are nurtured, where collective

aspirations is set free, and where people arecontinually learning how to learn together.

The five disciplines of the learning organization are1. Personal mastery

2. Mental models3. Building shared vision

4. Team learning

5. Systems thinking


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Making the transition to the learning Organization

1. Personal mastery : is clarifying our personal vision, of focusing

of energies, of developing patience and of seeing realityobjectively.

2. Mental models : include biases, predispositions, and prejudices

that come in the way of clear communications, open inquiry and

learningful conversations. Enables us to understand the

shortcomings of our present way of visualizing the system.

3. Building shared vision : so as to bind people together around a

common identity and sense of destiny.

4. Team learning : Since teams are the fundamental learning unit

in most organizations. Enables to work together to achieve goals

that lie beyond individual perspectives.

5. Systems thinking : To achieve the vision, understanding of the

forces which must be mastered is required, through the systems

approach.


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Learning Disabilities of Current Organizations

People focus on their own position, and dont understand about

the affect of their actions on others, and dont recognize thatresults can be obtained when all the positions interact.

Individuals blame others outside their control, when problemarise.

The company should not be reactive to changes, rather it should

be proactive to changes.

Managers spend most of their time fighting fires rather thanconcentrating on long-term trends ( slow and gradual processes)which can have greater impact than immediate, concrete issues.

Functional hierarchies makes the analyzing of problems difficultfrom a cross-functional perspective. ( analyze the system as awhole )

Organizations tend to believe the myth of the managementteam, where as most team members are fighting for their own

areas of work.


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Using of Systems approach to make transition to

the learning organization Systems thinking is a way of thinking as a whole, to share the

responsibilities for the problems and to overcome them. It is

critical to learning organization.

Systems approach is used to analyze and understand problems in

business systems.

Todays problems come from yesterdays solutions. This isbecause the team that attempts to solve the problem is often

not the team that inherits the new problem.

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

is the more effort you spend to improve matters, the moreefforts that seems to be required. Ex : It may require to cut down

on customer service to spend new dollars on more effective

advertising to overcome the problem of weak market share, may

drive more customers away.


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the learning organization

The easy way out usually leads back in. Pushing harder and faster

with the same solutions to problems, may worse the matters.

Faster is slower. The rapid rise and fall of peoples express may lead

to cut costs, reduced service, and it becomes difficult for the

company to survive on such low profits.

Cause and effect are not closely related in time and space.When

there is problem in marketing cause is searched in marketing, when

problem is there in sales a new incentive plane may be thought, but

none of these steps use the systems approach to analyze problem

from a cross-functional perspective. Dividing an elephant in half does not produce two small elephants.

Study of individual and isolated functional units ( marketing,

manufacturing etc.) may lead to a completely different set of

problems than understanding the interactions among these

functions.


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the learning organization You can have your cake and eat it too but not all at once.

Manufacturers should not trade-off between quality and low cost

( making the quality low for low cost ) because quality ultimately

cuts the cost of ongoing maintenance and technical support.

There is no blame. Systems approach avoids the tendency to

blame others and makes everyone sharing the responsibility.

Systems thinking uncovers the patterns and relationships,

understands the processes rather than the isolated events,

maintains the standards, generate additional successes, anddiagnose problems with current work methods. Brings a shared

responsibility for change and for motivation for achieving a

shared vision through team work and individual performance.


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Feedback in the learning organization Feedback is essential and critical for understanding an

organization. Information systems become the feedbackmechanism which reinforces the system. Ex : Effective sales of a

new product provides positive feedback and generates new sales.

Balancing feedback is a type of feedback explained by systems

approach, where systems try to attain stability. To balance a

system it may require to make some adjustments to maintainsome goal or to achieve some target. Ex : Filling a new position is

a balancing process to maintain a skilled workforce.

Balancing processes are difficult to recognize as it looks like

nothing is happening and the system simply moves to achieve itsgoals, and change is such case is problematic. Resistance to

change is a response by the system that is attempting to maintain

an implicit system goal.

concepts of systems and organizations 1

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