Business Organizations as Systems

The system theory helps managers to look at organizations from a broader perspective. It
has brought a new perspective for managers to interpret patterns and events in
their organizations. In the past, managers typically took one part of the
organization and focused their attention on that and subsequently moved their
attention to another part. In 1940 the General Systems Theory was introduced.
This theory highlights that all organization are open to and interact with
their external environment. The theory emphasizes the ways in which organized
systems respond in an adaptive way to cope with significant changes in their
external environments so as to maintain their basic structures intact. As
applied to business management discipline, the system’s concept implies that
business firms are embedded in a broader social structure with which they
constantly interact.

System theory models of decision-making in human groups and organizations emphasize
their interaction with “outside” actors and organizations and concentrate on
identifying the particular elements in the environment of the group or
organization that significantly affect the outcomes of its decision-making. To
understand what an organization did, try to find out what threat or opportunity
it was responding to and how its pre-existing response mechanisms worked to do
this.

In contemporary society more managers are beginning to recognize the existence of
the various parts of the organization, and in particular, the interrelations of
the parts.

Example: The coordination of central officers with other departments, engineering with
manufacturing, supervisors with workers etc.