ANALYZING THE INFLUENCE OF SYSTEMS THINKING ON

CONTEMPORARY MANAGEMENT PRACTICES

A TERM PAPER FOR MIS423 (MANAGEMENT THEORY)

BY

19CH026505 BALOGUN VICTOR OLUWASEYI

19CH026522 OHUE BERNICE OSEZELE

18CH024797 ANTHONY ARINZE CHIMAOBIM

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 ABSTRACT

This paper explores the concept of systems thinking and its impact on contemporary
management practices. Systems thinking is a holistic approach that recognizes the
interconnectedness and interdependencies within complex systems. By adopting systems
thinking, managers can gain a deeper understanding of their organizations, effectively manage
complexity, promote long-term thinking, facilitate collaboration, and address systemic issues.
The paper discusses the fundamental ideas of systems thinking, the transition from reductionist
to holistic perspectives, the significance of feedback loops, and the benefits and challenges of
implementing systems thinking in management. It also presents case studies from multinational
corporations and healthcare organizations to illustrate the practical application of systems
thinking in different contexts. Overall, systems thinking provides managers with a
comprehensive problem-solving approach that enables them to navigate the complexities of the
business environment and drive continuous improvement for sustainable success.

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 CHAPTER ONE

1.INTRODUCTION

1.1. SYSTEMS THINKING

Contemporary management practices are continually evolving to adapt to the complex and
dynamic nature of the business environment. One approach that has significantly influenced
these practices is systems thinking. Systems thinking is a holistic and interconnected way of
understanding and managing complex systems, recognizing the interdependencies among their
various components. By adopting systems thinking, managers can gain a deeper understanding of
the organization as a system, emphasize feedback loops and interdependencies, effectively
manage complexity, promote long-term thinking, facilitate collaboration, and address systemic
issues.

The fundamental ideas of systems thinking and how it affects management techniques will be
covered in detail in the parts that follow. We will examine the transition from reductionist to
holistic viewpoints, the identification of feedback loops and causal relationships, complexity
management techniques, the encouragement of sustainability and long-term thinking, the
promotion of collaboration and cross-functional teamwork, and the systemic method of
addressing root causes. There will also be case studies from the actual world to show how
systems thinking is applied practically in various organizational contexts.

Systems thinking adopts a comprehensive problem-solving approach that accentuates the

interdependencies among different components within a system. It entails perceiving problems
holistically rather than isolating individual parts and recognizing the potential ripple effects of
changes in one aspect on the entire system. As described by Ackoff (2017), systems thinking
encompasses a cognitive framework and a specialized vocabulary that enables the
comprehension and articulation of the forces and interconnected dynamics that mold system
behavior.

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The fundamental tenets of systems thinking encompass a focus on relationships, feedback
mechanisms, and interdependence. Relationships highlight the interconnectedness among various
elements within a system, while feedback pertains to the exchange of information between these
elements. Interdependence recognizes that the understanding of any individual component is
contingent upon its connections to the broader system, rather than in isolation (Senge, 2018). The
significance of systems thinking in contemporary management lies in its capacity to facilitate
organizations in comprehending intricate problems and making informed decisions. By adopting
a holistic approach, managers can delve into the underlying causes of issues instead of merely
addressing surface-level symptoms. This approach enables the formulation of more effective
solutions, leading to sustained success. Furthermore, systems thinking empowers organizations
to anticipate and adapt to environmental shifts such as technological advancements and evolving
market trends (Sterman, 2017).

1.2. HOLISTIC VIEW

Modern management has shifted from reductionist to holistic perspectives in understanding

organizations. This recognizes organizations as complex systems with interconnected parts and
interdependencies. It leads to reevaluating organizational structures to optimize collaboration and
communication, facilitating efficient information flow and synergy. Additionally, decision-
making considers systemic implications, ensuring comprehensive understanding and long-term
success. Embracing a holistic approach empowers organizations to adapt and thrive in an
interconnected business landscape.

According to the insights shared by Ackoff (2017), the holistic perspective of organizations as
systems necessitates a profound acknowledgment of the intricate interdependence among diverse
components. This perspective enables managers to cultivate a comprehensive comprehension of
the organization and its operating context. Similarly, Senge (2018) underscores the significance
of systems thinking, which entails grasping the intricate interconnections between various
organizational facets and fostering a collective vision for the future.

Recognizing interconnections and interdependencies in organizations has tangible implications

for structure and decision-making. It prompts the redesign of organizational structures to
enhance collaboration and communication between departments. Decision-making processes

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incorporate systemic thinking, considering the broader impacts on the organization. By
embracing a holistic view, organizations can navigate complexity, foster innovation, and achieve
sustainable success.

1.3. FEEDBACK LOOPS

Feedback loops in organizations serve a dual purpose of reinforcing and balancing. Reinforcing
loops magnify the impact of actions, leading to exponential growth or decline, while balancing
loops stabilize and maintain equilibrium. Recognizing these feedback loops helps managers
identify unintended consequences and proactively manage potential negative outcomes. By
leveraging reinforcing loops, organizations can drive positive change and foster continuous
improvement.

In addition, the utilization of feedback loops holds great potential for enhancing organizational
performance. Through a careful analysis of feedback loops, organizations can identify
opportunities for improvement and implement necessary corrective measures. As highlighted by
Kim and Hwang (2018), feedback loops play a vital role in fostering innovation and driving
organizational change. Correspondingly, the research conducted by Chen et al. (2019)
emphasizes the significant role of feedback loops in improving overall organizational
performance and realizing strategic objectives.

Systems thinking emphasizes leveraging feedback loops for organizational improvement.

Analyzing these loops provides insights into cause-and-effect relationships within the
organization. Managers identify leverage points for making small yet impactful adjustments and
harness reinforcing loops to amplify positive outcomes. This iterative process of leveraging
feedback loops becomes integral to organizational growth and long-term success.

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 CHAPTER TWO

2.SYSTEMS THINKING IN THE BUSINESS ENVIRONMENT

2.1. NAVIGATING THE COMPLEX BUSINESS ENVIRONMENT

It can be challenging to describe and comprehend how complexity affects projects and
organizations. Unfortunately, complexity has that as a default setting. An organization is
considerably harder to manage when it is complex than when it is simple. However, given that
the environment is constantly changing and full of challenges, being able to manage complexity
effectively is critical. To do so, one must have a thorough understanding of the organization's
goals and objectives, as well as any outside factors that may have an impact on them.

2.1.1. COMPLEX SYSTEMS THEORY AND ITS RELEVANCE TO MANAGEMENT

The Theory of Complex Systems is one theory that has increased in popularity in recent years.
Organizations, according to this theory, are complex systems made up of many linked elements,
and managing them effectively necessitates an understanding of these systems.

Figure 1: Main Features of a Complex System

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 Source: https://www.sciencedirect.com/

The benefit of complexity theory for management is that it offers insightful information on how
to comprehend and handle a variety of corporate contexts. This information can also be essential
to improve leadership.

Tools and techniques for managing complexity and decision-making in complex

environments

In managing complexity and decision-making within complex organizations, there are several
tools and techniques that have been shown to be effective:

i. Agent Based Models

In order to assess an agent's design and performance as well as gain knowledge about
novel behavior and properties, it uses dynamic actions, reactions, and communication
protocols among agents within the shared environment. It can also assist businesses in
evaluating numerous situations and projecting the outcomes of different choices.
ii. Network analysis
This approach is centered on examining connections between different system
components in order to discover significant individuals and their roles. Businesses will
benefit from being able to detect possible blockages and the flow of information and
resources inside their organization.
iii. Scenario Planning
This approach consists of creating a number of scenarios that take into account various
assumptions for the future and analyze their potential impact on the business. In uncertain
environments, it may help businesses to prepare themselves for different outcomes and
make informed decisions. According to Charlene Lew, Danielle Meyerowitz, and Göran
Svensson (2018), the benefits of scenario planning are either in regards to strategic
capability or aspects of organizational behavior.

2.2. COLLABORATION AND CROSS FUNCTIONAL TEAMWORK

In a workplace that values systems thinking, collaboration and cross-functional teamwork are
essential. They relate to the application of systems thinking principles in the following ways:

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 i. Breaking down silos and fostering collaboration
When teams or departments concentrate too much on achieving their own objectives at
the expense of good communication and collaboration with other parts of the company,
silos can develop. Organizations will be able to leverage cross-functional teams, regular
meetings, communication channels, as well as common goals and KPIs, to address this.
Organizations may enhance decision-making, inventiveness, and employee involvement
in this way to produce better results for all stakeholders.
ii. Enhancing communication and knowledge sharing
A knowledge base that functions as one of the primary information repositories can be
created by organizations. It may also contain laws, regulations, best practices, and other
critical information. Organizations may ensure that everyone has access to the same
information and follows the same set of instructions if they make this information widely
accessible to all employees. Knowledge sharing workshops are yet another technique to
motivate staff members to impart their knowledge and skills. This can be done during
formal training sessions or more casual meals and breaks. Through the development of a
culture of knowledge sharing, organizations can get access to one other's expertise in
order to foster a more collaborative and inventive work environment.

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 CHAPTER THREE

3.BENEFITS AND CHALLENGES

3.1. BENEFITS AND CHALLENGES OF IMPLEMENTING SYSTEMS

THINKING

This section details some of the benefits of implementing systems thinking in contemporary
management practices and the challenges faced by managers when trying to adopt systems
thinking to their current processes.

Benefits

i. Holistic Perspective
With the use of systems thinking, managers can view their company as a complicated
system with interconnected pieces. It offers a thorough comprehension of how diverse
elements and processes interact with one another and have an impact on one another,
resulting in better decision-making and problem-solving.
ii. Problem Solving
By concentrating on root causes rather than just symptoms, systems thinking aids in
solving complicated issues. It enables managers to create more practical solutions by
making it easier to identify feedback loops, delays, and nonlinear linkages that affect
system behavior.
iii. Continuous Improvement
Continuous learning and feedback loops are key concepts in systems theory. It
encourages firms to regularly review and modify their procedures, plans, and
organizational frameworks in light of customer feedback and data-driven insights, which
supports a culture of continuous improvement.
iv. Long-Term Focus

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 Systems thinking promotes a long-term outlook over temporary solutions. It enables
managers to think about the sustainability and long-term effects of their choices, resulting
in increased strategic planning and investment in the future success of the company.

Challenges

i. Paradigm Shift
An organizational cultural change and a fundamental shift in perspective are necessary
for systems thinking adoption. Adopting the integrated and comprehensive perspective of
systems thinking can be difficult for people and teams used to linear thinking or
segregated modes of operation.
ii. Complexity and Information Overload
Analyzing intricate relationships and dynamics inside an organization requires systems
thinking. In order to properly grasp and traverse the system, one must develop analytical
abilities and tools to manage complexity and deal with information overload.
iii. Time and Resource Constraints
Systems thinking implementation calls for devoted time, resources, and skill. Insufficient
time and resources may be allocated by organizations to employee training, the
development of systems thinking skills, and the use of systems thinking principles in
decision-making.
iv. Organizational Structure and Silos
The implementation of systems thinking can be hampered by functional silos and
hierarchical organizational structures. It might be necessary to alter the organizational
structure, procedures, and incentives in order to break down silos and promote cross-
functional collaboration.

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 CHAPTER FOUR

4.CASE STUDIES

4.1. SUCCESSFUL IMPLEMENTATION OF SYSTEMS THINKING IN

A MULTINATIONAL CORPORATION

Google is one of the top organizations in the world, and faced with organizational challenges
which were solved with the application of systems thinking. Some examples of how systems
thinking helped Google solve the challenges are;

i. Cross-Functional Collaboration
Effective collaboration across different departments and teams is very necessary for
innovation, problem solving and growth, the cross-functional collaboration involved
breaking down silos (business divisions that operate independently) to foster
communication and knowledge sharing among their employees, this contributed to their
collaborative work culture. Some practices used to facilitate this include, open office
spaces, project-based teamwork and internal communication platforms.
ii. Data Driven Decision Making
With heavy investments in data collection and analysis, and a keen focus in data
analytics, the use of this data centric approach has allowed Google to make, optimize its
processes, informed decisions and deliver personalized experiences to users.
iii. Innovation and Creativity
Systems thinking is focused on the broader context around problems and finding effective
and innovative solutions to the problems, one of the core values at Google is innovation,
and that is why employees are provided with time and resources to bring their ideas to
reality by employing initiatives like the “20% time policy” which allows employees to
allocate a percentage of their work hours to developing personal projects, the innovation
labs and R&D divisions also focus on exploring new technologies and pushing the
boundaries of what is possible.
iv.

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 v. Continuous Improvement: Google emphasizes on continuous improvement across the
functional areas of the organization, an agile methodology is used for their software
development as well as implementing iterative processes and regularly using user
feedback and internal reviews to improve their products.

4.2. SYSTEMS THINKING IN HEALTHCARE MANAGEMENT FOR

IMPROVED PATIENT OUTCOMES

The application of system thinking principles to healthcare management in recent years has
greatly increased the level of satisfaction and performance in patient outcomes, it entails
processes that are a better alternative to previous management practices in health, one of which is
the identification of root causes which is the process by which health care managers are
encouraged to go beyond surface-level symptoms to identify the root causes of problems or
challenges, this approach helps to identify the complex relationships and interactions between
the different components of the healthcare system that contribute to medical issues such as
inefficiencies or patient safety concerns.

Systems thinking has been put in practice by some leading healthcare organizations like;

i. Institute for Healthcare improvement (IHI)

The IHI is a global organization that is focused on the improvement of healthcare quality,
they advocated for the application of systems thinking through initiatives such as the
Triple Aim Framework introduced in 2007 that aimed to improve the population’s health,
patients experience and reduce costs incurred in healthcare, the systems thinking
approach has enabled them to support healthcare organizations worldwide by applying
methodologies like improvement science, process mapping and root cause analysis to
drive positive change in healthcare.
ii. Veterans Health Administration (VHA)
Veterans Health Administration is one of the largest healthcare systems in America
(Corcodilos, n.d.), and has utilized systems thinking to improve their processes. The
systems thinking approaches they use promote patient-centered care, which
acknowledges the patient as an integral part of the healthcare system, and it emphasizes
on understanding the needs and preferences of patients, involving patients in the

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 decision-making process, and taking their preferences into consideration. `Systems
thinking has enable them to build the Veterans Engineering Resource Center (VERC)
which applies engineering and system thinking methodologies to identify and reduce
issues like patient wait time and to optimize workflow processes and improve the overall
quality and safety of care.
iii. Geisinger Health
Geisinger Health is a United Stated based healthcare organization that has leveraged
systems thinking to improve patient outcomes and experiences, with the assistance of
systems thinking, they implemented a ProvenCare model, which focuses on
standardization, evidence-based practices and patient-centered care it aims to enhance the
quality in patient care by involving patients in decision making, continuously improving
care processes and implementing a systematic and data-driven approach, the model
consisted of key elements some of which are bundled payments, patient engagement and
continuous improvement.

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 5.REFERENCES

Chen, Y., Cheng, L. T. W., & Chen, H. (2019). The effects of feedback loops on organizational
performance: A dynamic capability perspective. Journal of Business Research, 98, 207-217.

Kim, J., & Hwang, J. (2018). The role of feedback loops in organizational innovation: A social
network perspective. Journal of Business Research, 89, 179-189.

Ackoff, R. L. (2018). Systems thinking for curious managers. Triarchy Press Limited.

Sterman, J. D. (2020). Learning from evidence in a complex world. American Journal of Public
Health, 110(S1), S61-S67.

Abar, S., Theodoropoulos, G. K., Lemarinier, P., & O’Hare, G. M. P. (2018). Agent Based
Modelling and Simulation tools: A review of the state-of-art software. Computer Science
Review, 24, 13–33

Borgatti, S. P., Everett, M. G., & Johnson, J. C. (2018). Analyzing social network. Sage
Publications

Meyerowitz, D., Lew, C., & Svensson, G. (2018). Scenario-planning in strategic decision-making:
requirements, benefits and inhibitors. Foresight, 20(6), 602–621.

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