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20 Part 1 • SyStemS analySiS FundamentalS

Organizations as Systems

Organizations and their members are usefully conceptualized as systems designed to accom-
plish predetermined goals and objectives through people and other resources that they employ.
Organizations are composed of smaller, interrelated systems (departments, units, divisions, etc.)
serving specialized functions. Typical functions include accounting, marketing, production, data
processing, and management. Specialized functions (smaller systems) are eventually reinte-
grated through various ways to form an effective organizational whole.
The significance of conceptualizing organizations as complex systems is that systems prin-
ciples allow insight into how organizations work. To ascertain information requirements prop-
erly and to design appropriate information systems, it is of primary importance to understand the
organization as a whole. All systems are composed of subsystems (which include information
systems); therefore, when studying an organization, we also examine how smaller systems are
involved and how they function.

Interrelatedness and Interdependence of Systems
All systems and subsystems are interrelated and interdependent. This fact has important implica-
tions both for organizations and for those systems analysts who seek to help them better achieve
their goals. When any element of a system is changed or eliminated, the rest of the system’s ele-
ments and subsystems are also significantly affected.
For example, suppose that the managers of an organization decide not to hire administrative
assistants any longer and to replace their functions with networked PCs. This decision has the
potential to significantly affect not only the administrative assistants and the managers but also
all the organizational members who built up communications networks with the now-departed
assistants.
All systems process inputs from their environments. By definition, processes change or
transform inputs into outputs. Whenever you examine a system, check to see what is being
changed or processed. If nothing is changed, you may not be identifying a process. Typical pro-
cesses in systems include verifying, updating, and printing.
Another aspect of organizations as systems is that all systems are contained by boundar-
ies separating them from their environments. Organizational boundaries exist on a continuum
ranging from extremely permeable to almost impermeable. To continue to adapt and survive,
organizations must be able first to import people, raw materials, and information through their
boundaries (inputs) and then to exchange their finished products, services, or information with
the outside world (outputs).
Feedback is one form of system control. As systems, all organizations use planning and
control to manage their resources effectively. Figure 2.1 shows how system outputs are used as
feedback that compares performance with goals. This comparison in turn helps managers formu-
late more specific goals as inputs. An example is a U.S. manufacturing company that produces
red-white-and-blue weight-training sets as well as gunmetal-gray sets. The company finds that
one year after the Olympics, very few red-white-and-blue sets are purchased. Production man-
agers use this information as feedback to make decisions about what quantities of each color to
produce. Feedback in this instance is useful for planning and control.
The ideal system, however, is one that self-corrects or self-regulates in such a way that deci-
sions on typical occurrences are not required. An example is a supply chain system for produc-
tion planning that takes into account current and projected demand and formulates a proposed

Figure 2.1
System outputs serve as feedback Goals
that compares performance with
goals.
Inputs Outputs
System