In classical science, nature was seen as mechanical systems composed of basic building blocks. In accordance with this view, Darwin proposed a theory of evolution in which the unit of survival is the species and sub species of the biological world. A century later it has become clear that the unit of survival is not any of these entities – what survives is the organism in its environment. Therefore, if an organism only thinks in terms of its own survival it will invariable harm its environment and may thus destroy itself.
Organisations, too, are living systems. Organisations are essentially a social system, that is, the interacting units are people. The psychic systems (minds) and interactions (between people) constitute the elements of the organisational system. Formal and informal work relationships can be considered as underlying relational systems that stretch beneath units and shape what occurs within them. These systems are defined by patterns of affect, cognition, and behavior (conative) among members of enclosed groups ranging in size from dyads (between two individuals) to organisations as a whole and are the source of complex social interactions and coordination of the system.
What is the purpose of an organisational system? An organisation is as a legal entity that serves as a nexus for a set of explicit and implicit contracts among individuals (with different needs), functioning in a way as to meet the relevant marginal conditions with respect to inputs and outputs, thereby maximising cash flow. The challenge organisations have is to manage the conflicting objectives of the individual participants in order to achieve a form of dynamic equilibrium (alignment) so as to yield the expected result of maximised sustainable profits.
Furthermore, functioning within an open system environment, an organisation is enclosed by its external environment implying that, to a degree, the external environment (society) is represented within the organisation. The purpose of an organisation should therefore be expanded to: organisations exist to create and trade value for the benefit of internal stakeholders as well as its external stakeholders in such a way as to meet the relevant marginal conditions with respect to inputs and outputs, thereby maximising cash flow. In order for an organisation to achieve the aforementioned, it is required to balance the allocation of resources in such a way that the expectations of its legitimate stakeholders are addressed in a sustainable way, that is, each stakeholder group needs to be satisfied with the appropriation of value as a result of the value created, measured against their contribution to the value creation process.
The organisation serves as the connection point for a set of formal and informal agreements among individuals representing all legitimate stakeholder groups. The organisation’s management hierarchy is the only group of stakeholders who enter into a form of contractual relationship with all other stakeholders and is also the only group that exercises positional power to influence resource allocation.
Within the above stated context, then, managers need to exhibit a form of organisational ambidexterity related to stakeholders. On the one hand, managers (each with their own perspective on the organisation’s overall purpose) need to develop and maintain relationships and associated agreements with stakeholders (externally as well as internally), thereby recognising the cognitively-open nature of the organisation. On the other one hand, for the organisation to be efficient, it needs to be operationally closed, implying tight-fitting – even bureaucratic – internal relationships and subsequent agreements among managers.
Interaction between internal organisational role players as well as with external stakeholders is the life blood of organisations (in its environment) and takes place due to perceived common goals and process and/or task interdependencies. Mutual expectations are agreed upon and variances (outcomes versus expectations) are addressed.
What is the main managerial implication of viewing organisations as open living systems? In contrast to the traditional unidirectional input-process-output view (left hand diagram below), managers should have a stakeholder-oriented perspective in that all role-players with legitimate interests participating in an organisation’s endeavours do so to capture value and that there is no prima facie priority of one set of interests and benefits over another. Managing the often competing interests and inputs of the stakeholders should therefore not be viewed as a zero-sum game (that is, addressing the needs of one stakeholder does not necessarily come at the expense of another). Also, a systems view of an organisation implies that value creation is instead viewed as value exchange – hence the arrows between the organisation and its stakeholder groups point in both directions (see right hand diagram below depicting the aforementioned).
The next article will focus on how the discussed principles can be applied through the implementation of Mission Directed Work Teams™.
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