Systemic thinking is different from systematic thinking. Systematic thinking is characterized a "having a set method or set of steps to follow." Systemic thinking is characterized as recognizing the interactions among all elements of the system, its subsystems, and its environment (suprasystem).
Systems are characterized as a group of elements that can be identified as belonging together to accomplish a specific task or function. All systems have a specific purpose or goal. Systems accept inputs from the environment, process these inputs, and provide outputs to the environment. The figure below illustrates the basic system model.
Systems are defined by their boundaries. Where the boundaries are is a function of our view of the system. Where we draw the boundaries also defines the purpose of the system. For example, if we draw the boundary around the computer hardware and software, we get one perspective of an IS. If we extend the boundary to include users, we get an entirely different system (with an entirely different purpose). If we view our organization as a collection of employees, buildings, equipment, and procedures, we get a different perspective from a view in which customers and suppliers are included. Where we draw the system boundaries defines the system, its purpose, and our perspective on controlling (managing) it.
Every system is itself a subsystem of some greater system, called the environment or suprasystem. Systems interact with the environment, receiving inputs and processing them into outputs. It is the outputs that define the purpose or goal of the system. Systems exist to serve the purpose, which is always to produce the outputs that the environment requires. An organization's customers are its environment, and the organization produces its products and/or services in order to satisfy its customers' requirements.
Every system is itself comprised of subsystems. The functional departments of an organization provide an example of the various subsystems within the system that is the organization. Recognizing the systemic nature of organizations provides insights into Total Quality Management (TQM). TQM means every node in the network, every team, takes on quality as an agenda item. This means that all of the organization's subsystems must embrace the TQM concept if it is to work. The reason that all subsystems must embrace TQM is that in order for systems to function effectively and efficiently, there must be subsystem goal congruence. As stated above, every system exists to serve its purpose. All subsystems exist to serve the purpose of the system. If the system (organization) is to be successful (produce goods and/or services that customers want and will buy), all subsystems must directly support the system's (organization's) purpose. Support means that all subsystems goals must be congruent with the system goals. This concept leads to some interesting consequences that (IMHO) have led to the difficulties that many companies have experienced when trying to implement TQM.
Subsystem goal congruence means that subsystems must always support the system's goal or purpose, even if the subsystems must themselves suboptimize their own performance. Consider this example. Within a sales organization, the Sales department subsystem and the Inventory department subsystem have completely opposite subsystem goals. Sales wants to provide high levels of customer service, which requires large inventories so orders can be filled without delays or backorders. Inventory wants to minimize total inventory costs, which requires small inventory levels and minimum numbers of orders from vendors. If each of these subsystems are allowed to optimize their own operations, the organization (the system) suffers. But think about typical American management, particularly MBO. The Inventory manager is evaluated based on his/her ability to "manage the inventory," a large part of which is to minimize costs. The Sales manager is evaluated based on his/her ability to "provide high levels of customer service." How can these two managers coexist within an organization? The answer is, they can't. Each manager's efforts to do the "best job" results in an overall degradation of the organization's efforts to sell to customers. What typically occurs is that top management has to "step in" and try to mitigate the situation (usually accompanied by lots of shouting and finger pointing). What is missing in these situations is the recognition that the Sales and Inventory departments are subsystems of the same system and they cannot be managed (or evaluated) independently. These two departments must be managed in such a way as to maximize the overall effectiveness of the entire organization. When subsystem goal congruence is achieved, the customer sees only quality, which is good service when purchasing a good product at a good price.
Systems (and subsystems) exchange resources (inputs and outputs) with each other at the boundaries of the systems through interfaces. (The interfaces are represented by the arrows in the figure above) Systems are specifically designed to have interfaces where required. For example, customers exchange resources with the organization through the interface commonly called the Sales Department. To the customer, the entire organization is embodied within the Sales Department since this is the only view of the organization that the customer has. Managers define system interfaces as necessary in order for the system to be successful. Interfaces also permit a simplified perspective on systems. For example, a customer need only have the perspective of an organization through the Sales Department. The customer doesn't need (nor do we want him/her) to know about the inputs and/or processes that result in the outputs. This concept greatly simplifies the "sales" process because the only information that need pass through the "Sales" interface is only what is required to successfully complete the sale. No information or inputs about the manufacturing process itself is required (unless, of course, the customer asks about the manufacturing process, in which case a new interface is temporarily established as a knowledgeable person talks to the customer).
Within the organization, the various subsystems interact with each other via interfaces. For example, when the Sales department is processing a customer's order, salespeople make inquiries about current inventory levels by interfacing with the Inventory department. The request for information passes from Sales to Inventory via the interface. The Sales department knows that it can send a part number to the Inventory department and receive the current inventory quantity on hand in return. It also knows that it can send a sale quantity to the Inventory department and the current inventory quantity on hand will be adjusted accordingly. The INTERFACE is defined in terms of what information passes between the subsystems. Interfaces must be formal and consistent in order to work. The Sales department must define all information it will need from the Inventory department and design interfaces to satisfy these requirements. As with customers above, how the Inventory department generates the information that the Sales department requests is of no interest to the Sales department. All Sales cares about is that the information be what they want and that it is correct.
The Inventory department has an interface with the Purchasing department so that purchase orders can be issued when inventory levels drop below reorder points. The Sales department has an interface with the Accounts Receivable department so that the customer's account can be credited when the sales is finalized. Note that there are not interfaces between Inventory and Accounts Receivable and between Purchasing and Accounts Receivable. This is because there is no need to directly exchange information between these departments. The point here is that interfaces exist only when necessary to exchange information between subsystems. Users are responsible for defining the need for interfaces and the information that will be exchanged across the interface.
Another system concept that is important to any organization is that systems either adapt to changes in the environment's requirements or they die. Today's business environment is characterized by change. Customer requirements change regularly for various reasons such as technology advances, new applications for existing products, or the availability of the same product or service from another supplier. The changing of the environment's requirements puts stress on the system. A call from a major customer demanding that prices be reduced by 10% will certainly cause stress on the sales manager! Systems either respond to the stress or they die (which typically means go out of business). A suprasystem (customer) enforces compliance with its new requirements through its control over the supply of resources (purchases) input into the system.
Recognizing that systems can react to stress in two distinct ways provides some insights into how stress can be managed. Systems can adapt to stress through either changing its purpose (its outputs) to meet the environment's new requirement (effectiveness), or by changing the achievement level attained when producing the required outputs (efficiency). If the environment's (customer's) new requirement is for a new product or service, the company must change its current product or service to satisfy the customer's demand. This is a change in the purpose of the system. If the customer's new requirement is for faster delivery of an existing product or service, the company must change its delivery procedures, which is a change in the achievement level. It is important for managers to determine the appropriate type of system change required in order to accommodate system stress. Developing a new produce when the customer simply wanted faster delivery is not very good stress management.
Another consequence of stress is that the subsystem(s) closest to the stress is (are) the only one(s) required to react to the stress. For example, if the customer wants a new product, it is the manufacturing department that must react to the stress. The inventory department doesn't have to modify its operations at all. The old saying, "If it ain't broke, don't fix it" comes to mind here.
Taking a systemic view of organizations provides new insights into management. Understanding that organizations are systems and behave as they do because they are systems provides guidance for implementing information systems. The changes in management required to "think systemically" is often best accomplished through Business Process Reengineering (BPR). We will talk about BPR in chapter 2, page 54.