Systems Approach to Management: Theory & Concepts

Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

In the systems approach to management, organizations are regarded as systems, with all the distinct parts of the organization interacting to create a complex whole. Explore the systems approach to management theory and concepts and understand the difference between open and closed systems. Updated: 08/31/2021

What is Systems Theory?

Systems theory treats an organization as a system. A system can be either closed or open, but most approaches treat an organization as an open system. An open system interacts with its environment by way of inputs, throughputs, and outputs.

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  • 0:01 What Is Systems Theory?
  • 0:19 Key Concepts of Systems Theory
  • 2:48 Lesson Summary
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Key Concepts of Systems Theory

In order to understand the theory, you must first get a firm understanding of a system. A system is any set of distinct parts that interact to form a complex whole. Think of the universe. Its parts are as small as a subatomic particle and as large as galactic clusters. Each part is distinct but interacts to form the universe. An organization is also a system with parts such as employees, assets, products, resources, and information that form a complex system.

As we noted in our definition, systems can be open or closed. A closed system is not affected by its environment. For example, a chuck of iron ore is not substantially affected by its environment. An open system is a system that is affected by its environment. A simple example is a living organism, such as an animal. Most theorists treat an organization as an open system.

An open system consists of three essential elements. An organization receives resources such as equipment, natural resources, and the work of employees, referred to as inputs. The inputs are transformed, called throughputs, and then yield products or services called outputs. Outputs are released into the environment.

Feedback loops are also an important feature of open systems. They provide information to the organization by connecting the outputs to the inputs. A negative feedback loop indicates a problem that should be corrected. For example, the failure of product design indicated by the need to recall the product.

A positive feedback loop can identify outputs that have worked well. For example, a successful marketing campaign that yields high sales. Thus, feedback loops are a means of confirming success or signaling that corrections to the system need to be made.

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