MANAGEMENT SUPPORT

SYSTEM

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 Chapter I: System Concepts

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 System
Definition
A system is a collection of objects such as people,
resources, concepts, and procedures intended to
perform an identified function or to serve as a goal.
 System is defined as a set of elements arranged in an
orderly manner to accomplish an objective. –Davis and
Olson
Elements are not randomly arranged, but are arranged
with some logic governed by rules, regulations,
principles and policies so that they have a common
purpose or objective
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 Example
Computer System
 The elements in a computer system are Input
process & Output process, OS, compliers, DBMS,
packages etc.
 They have a common objective to process the
data and provide information.

Day to day examples of SYSTEM

1. Traffic System
2. Education System
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3. Business System etc.
 Abstract & Physical Systems
Systems can be abstract or physical.
 An abstract system is an orderly arrangement of
interdependent ideas or constructs.
Eg: A system of Theology is an orderly arrangement of ideas
about God and the relationship of humans to God.

 A physical system is a set of elements, which operate

together to accomplish an objective. They display activity
or behaviour. The parts interact to achieve an objective.
Eg: Circulatory System, transportation System, School
System, Computer System, Accounting System
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 Characteristics

1. They have specific objectives

 Systems exist because they have a job to do.
Everything that the system does and
everything that happens within the system is
for the purpose of fulfilling that objective.
 If the system achieves its purpose, it could
be said to be performing satisfactorily. If not,
it is termed a system malfunction.
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 Characteristics

2. Systems are composed of elements and these

elements can be systems within themselves
 Eg. Transport system:
 Subsystems: Road Transport System, Rail
Transport System, Air Transport System, and
Water Transport System.
 Each of these subsystems is fully functional system
by itself fulfilling all the criteria used to determine a
system

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 Characteristics

3. Elements can be common to several systems at

the same time
 A single element may be a part of several
systems at the same time.
 Eg: Human Body
Element –skin is a part of the body’s defense system;
it is part of the input system.
 Business system
Element- sales is a part of marketing system, also it is
a part of the accounting system.
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 Characteristics
4. Elements in a system are interrelated
 Eg: in a business system, marketing,
finance, manufacturing etc are related to
each other.
 Elements in a system are related to each
other. They may work differently from each
other and have different short-term goals,
but they eventually have the same goal,
which is to make the business profitable.

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 Characteristics

5. Elements in a system are interdependent

 They depend on each other for various inputs
and are responsible for directing their output to
each other.
6. Systems have a defined structure
 The flow of materials, feedback mechanisms
etc is possible because the interactions and
interdependency work within a predefined
structure.

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 Characteristics
7. Systems react with the environment
Almost all the systems have some form of reaction to
the environment in which they function. This is called
as the system behaviour. The behaviour may be in the
inputs the system receives from the environment, the
output it gives to the environment and the measures it
takes to protect itself in threat from the environment.
8. All systems have a life cycle
Life cycle denotes the birth, evolution, decay and death
of a system.
9. All systems have boundaries
Boundaries
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define the limits of the system. 12/08/21
 General Model (Parts) of a
System
INPUT PROCESSING OUTPUT

Feedback

A general model of a physical system has input, process and

output. A system can have several inputs and outputs also

Input 1 Output 1
Process
Input 2 Output 2
Input 3 Output 3

Input n-1 Output n-1

Input n Output n
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 The feature, which defines and delineates a system,
forms its boundary.
 The system is inside the boundary; the environment is
outside the boundary.
 When a system is defined to achieve certain objectives,
it automatically sets the boundaries for itself.
 The environment influences the choice of inputs,
method of processing, and contents of output. Since
the systems are designed for specific objectives or
outputs, the designer provides a filter around the
system to control the influence on the system.

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 Example
A manufacturing system’s objective is to produce products of desired
quality.
Since the raw materials and processes are selected with this objective,
the quality control system exercises a control of incoming raw
materials.
They keep a continuous watch on the process parameters so as to
keep the desired quality of production.
Therefore the quality control system provides a filter around the
manufacturing system that protects the system from the undesirable
influences of the environment.

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 Each system is composed of
subsystems, which in turn are made up of
other subsystems, each subsystem being
delineated by its boundaries. The
interconnections and interactions between
the subsystems are termed interfaces.
 Interfaces occur at the boundary and take
the form of inputs & outputs.

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 Computer configuration as System

Storage subsystem

Storage
 
unit

Input subsystem Processing subsystem Output subsystem

Input CPU Output

units units

Interfaces
(at channels)
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 CPU as a Subsystem

Subsystem Subsystem Subsystem

Control Storage
ALU Unit Unit

Interfaces

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Principles that dictate how systems
are built from subsystems

Concept of Decomposition
 Systems are usually so complex, that it becomes difficult
to study a system in its entirety.
 Therefore, systems are broken down into subsystems,
showing only the interactions between subsystems on
the overall model, and then breaking down each
subsystem to understand it thoroughly.
 The process of breaking down a system into
subsystems for the purpose of understanding the
system is called decomposition.
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 SYSTEM

Subsystem A Subsystem B Subsystem C

A1 A2 B1 B2 B3 C1 C2

A21 A22 C11 C12

Decomposition into subsystems is used both

-to analyze the existing system and
-to design and implement a new system.
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 Simplification
The number of potential interactions between subsystems is ½
n(n-1), where n = number of subsystems.
 Simplification is the process of organizing subsystems so
as to reduce the number of interactions between them, so
that the complexity is reduced.
 It can achieved by the following methods
 Clustering: Subsystems are divided into clusters, each of which
interacts with the other cluster through a single interface.
 Example: A database, which is accessed by many programs, but
the interconnections, is only through a database management
interface.
 Decoupling: This is a mechanism by which subsystems that
require close co-ordination are desynchronized.

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Systems connected within cluster, and clusters connected with
single interface

A1 A2 B1 B2

A3 A4 B3 B4

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 TYPES OF SYSTEMS
 Systems can be classified into different categories based on the output and degree of
information exchange with the environment.
 Deterministic & Probabilistic
 When the inputs, the process and the outputs are known with certainty the system
is called Deterministic system. It operates in a predictable manner i.e, you can
predict the o/p with certainty. Here, if one has a description of the state of the
system at a certain point plus a description of operation, the next state of the
system may be given exactly, without error.
 Eg: a correct computer program, which performs exactly according to the set of
instructions.
 When the output can be predicted in probabilistic terms the system is called a
Probabilistic system. Its behaviour is not predictable. Here, a certain degree of
error is always attached to the prediction of what the system is doing.
 Eg: inventory system, the average demand, average time for replenishment etc
may be defined, but the exact value at any given time is not known.

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 Open Vs Closed
 If a system has exchange of information, material or energy with the
environment including random and undefined inputs then it is called Open
system.
 Eg: organizational system (marketing, communication, forecasting) and
biological system.
 They tend to have form and structure to allow them to adapt changes in
their environment in such a way as to continue their existence. They have
‘self organizing’ ability i.e. to change their organization in response to
changing conditions.
 They attempt to maintain equilibrium by homeostasis, the process of
adjusting to keep the system operating within prescribed limits.
 Generally, open systems are same as of probabilistic systems as they are
complex in every aspect. Therefore they do considerable amount of
checking and controlling of the system behaviour.
 Eg: pricing system.
 If a system does not have any change with the environment nor is it
influenced by the environmental changes then such a system is called as
Closed system.
 These23 systems are based on rules and principles. 12/08/21
Human–Machine Systems (User-machine
systems)
 Information systems are generally human- machine systems in that both
perform some of the activities in the accomplishment of a goal. The
machine elements are relatively closed and deterministic, whereas the
human elements of the system are open and probabilistic. Various
combinations of human and machine are possible .  

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Information System as a System

Data Storage

Data Processing Information

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 Organizational Structure and Function

Organization- (a functional group or an institution)

is a conscious grouping of humans intended to
achieve specific goals.

Is an arrangement of people in an institution keeping

in view the concept of division of labour, authority,
responsibility and decision making so that the
institution, as a stable system, works coherently
towards the achievement of goals
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 Organizational Structure
The organization structure is built by arrangement of
organizational subsystems.

As a structure, an organization has three essential characteristics

1. Purpose or objective: The organization is formed for a specific

purpose or purposes. These become the objectives of the
organization.
2. People: The organization is made up primarily of people. It is
human structure.
3. Formality: the organization is a formal group. It has certain
procedures that must be followed to achieve the objectives.

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 Organizational Chart:
The organizational chart has two dimensions, vertical and horizontal.
M.D

GM GM GM (HR) GM (Finance)
(Production) (Marketing)

Manager Manager Manager Manager

Manager Manager Manager Manager Mark_Div1 HR_Div2 Fin_Div1 Fin_Div2
Prod_Div1 Prod_Div2 Mark_Div1 Mark_Div2

The vertical dimension shows the hierarchy and the flow of authority.
The horizontal dimension shows the level of differentiation, represented
by different departments and divisions at each level.

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 Demerits of organizational Charts

It cannot show
1. Degree of responsibility at each level.
2.Personal power commanded by different
managers, regardles of level.
3. Informal relationships and the organization’s
grapevine(informal channel of communication)

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 Basic principles on which
Organization structure is built

 Hierarchy of Authority
 Specialisation

 Standardisation or Formalisation

 Centralisation

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 Hierarchy of Authority
 The degree and strength of authority depends on the
level at which a person is holding position.
 How authority is measured?
On the basis of
 Command on control of resources
 The risk of business
 Decision making power to manage the risks and rewards.
 When the authority is distributed in a vertical order in
terms of levels, the organization is built on the principle of
hierarchy of authority.
 Effectiveness of the authority is based on the span of
control (no. of immediate persons being managed and
controlled
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 Specialisation

 Refers to the division of labour within the

organization.
 How is it decided?
 By arranging all similar and associated tasks under
one head.
 This principle brings clarity in organisation functions,
helps to select the right people and group them
properly, aids in functional planning and control of
the activities of the organization.

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 GM GM GM (HR) GM (Finance)
(Production) (Marketing)

Manager Manager Manager Manager

Manager Manager Manager Manager Mark_Div HR_Div2 Fin_Div1 Fin_Div2
Prod_Div1 Prod_Div2 Mark_Div Mark_Div 1
1 2

A typical organization is divided along functional lines which encourages

specialization within each function.

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Formalization

 The degree of formalization is the

extent to which rules and procedures
exist to handle organizational
activities.

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Centralization
 Refers to the level in the organization where decision
making occurs.
 Centralized- Most decision making occurs at the top of
the hierarchy
 Decentralized- Decision making is delegated at the
lower levels
Relation between Formalization & Centralization
In a highly formalized organization, operational people at
the lower levels make decisions based on rules &
procedures provided to them, exceptions are referred
to higher levels of decisions.

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 Types of Organization
Structure
 Mechanistic Organization structure
(Classical )
 This type of organization structure is
pyramid shaped,with fewer persons at
higher levels having a greater amount of
authority and power.
 Such structures tend to be tall and narrow,
with smaller spans of control and a greater
degree of centralization. Such a structure is
useful when organization is extremely large
and employees need clearly defined role
and tasks.
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 Demerits:
     It distances the employee from the overall objectives of the
organization. Persons at lower levels may look upon jobs as nothing
more than a presence required to fulfill a particular designation.
  Due to extreme centralization, persons at lower levels have simple and
repeative tasks and no authority. This leads to dissatisfaction and
extremely low levels of motivation.
Roles become watertight and it becomes virtually impossible to use the
strengths of employees across departments.
Very little upward flow of communication, leading to a feeling of
alienation in lower ranks and a remoteness from ground realities in
upper ranks.
Blind obedience to superiors is expected and dissension and creative
thinking is withheld.

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Organic Organization
structure
 This type of structure is more
democratic, offers wider spans of
control and more decentralization.
 Decision making is quick and more
close to the needs of the environment
in which the problem arises.

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 Merits & Demerits
Merits
1.  greater flexibility, allowing a quick change of roles and
responsibilities.
2.      All round communication is facilitated
3.  there is a greater emphasis on commitment to task rather than
acceptance of positional authority.
Such organization can respond quickly to changes in business and
general environment of the company.
Demerits
1.      offer a great amount of ambiguity in roles
2.      not suited to those who prefer to simply perform tasks
rather than think strategically. 12/08/21
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 Dynamics to Decision making
How are decisions made?
What are the inputs necessary for decision
making?
What obstructs the decision making process?
Swamping the manager with too much information may
force the manager to rush into decision making process
or may force him to ignore certain vital bits of
information while making the decision.
Therefore thorough understanding of the decision making
process is necessary for the manager to make an
informed
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timely decision. 12/08/21
Phases in the Decision-
making Process
Herbert A Simon, has postulated a
model for decision-making.
The model consists of three major
phases.
Intelligence
Design
Choice

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 Intelligence
Intelligence refers to the process of gathering information. It involves an
awareness of the environment, an active attempt to gather information
from the environment.
It involves
Problem Finding- means finding a difference between the existing
state and desired state.
The problem finder selects the model of what is desired and will compare it
with the reality, the differences are identified, and the differences are
evaluated as to whether they constitute a ‘problem’.
Problem Formulation- is to identify and clarify the exact problem,
so that the design and choice activities operate on the ‘right’ problem.

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Design
Indicates the generation of alternatives to solve the problem
formulated. This is a creative process.
The techniques used for ‘ideation’ are
Free thinking
Analogy
Brainstorming
Checklists etc.
Choice
The rational process to choose the most viable alternative to work
with. The path is selected that would most likely solve the problem
in hand.

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 Flowchart of Decision process

Intelligence
There is a flow of
activities from
intelligence to design
to choice., but at any
Design phase there may be a
return to a previous
phase.

Choice

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 Systems Control
 Process through which managers assure that actual
activities conform to the planned activities, leading to the
achievement of the stated common goals.
 Control consists of procedures to determine deviations
from plans and indicate corrective actions.
 For control purposes, a feedback loop is added to the
basic model of a system.
 The outputs from the system are compared with the
desired output(standard), any difference causes an input
to be sent to the process to adjust the operations so that
output will be closer to the standard.
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 Feedback Control for a
System

Input Output
System

Control
Sensors
devices
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 Control System Model

PROCESS OUTPUT
INPUT

SENSOR

CHANNELS OF COMPARISON
CORRECTIVE
UNIT FEEDBACK UNIT

STANDARD

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 Sensor: the device that measures the output.
Comparison unit: Compares the output with the standard.
Feedback Mechanism: the mechanism, which provides a signal to the
system, about the quality of performance, favourable or adverse.
If the measured output compares well with the standard, the system
provides a feedback to continue the operation. Otherwise a
feedback is provided to the system to stop the operation.
Corrective unit: An in-built mechanism which will decide, based on the
feedback to stop, regulate or continue the system operations. It will
act on inputs and processes to bring the system under control.

Control: the process of measuring the output, comparing with the

standard, sending the signal to the corrective unit and the corrective
unit acting upon it, is called a control.

Internal Control Eg: Switching on or off of the

compressor in an A.C

External Control Traffic Policeman

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 Types of Feedback

 Positive Feedback: reinforces the direction in

which the system is moving.In other words,
positive feedback causes the system to repeat
or amplify an adjustment or action.
 Negative Feedback:is the feedback which
seems to dampen( to dull) and reduce
fluctuation around the standard. It is used in
feedback controls.

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 In order to survive, Open systems responds to changes
in the environment. Whenever, significant changes
occurs in the environment, the system has to make
adjustments within itself to cope with the change.
 When the system is reacting to changes in the
environment, a certain amount of disorganization occurs
within the system. This disorganization is called
Entropy.
 Entropy: The degree of disorganization in the system.
 In order to reduce entropy, systems need negative
feedback about the environment. Negative feedback is
the process whereby the negative changes in the
environment are identified and notified to the system.
The system can then produce negative
entropy(organized change) to counteract this threat and
maintain its steady state.
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 Negative Feedback Control
 Negative feedback control in a system means keeping
the system operating within certain limits of
performance.
 Eg. Automated production system
 Control using negative feedback involves four elements
 A characteristic or condition to be controlled. It should be
measurable from some output.
 A sensor for measuring the characteristics or condition
 A control unit which compares the measurements with a
standard for that characteristic or condition
 An activating unit which generates a corrective input
signal52to the process. 12/08/21
 Management by Exception: Managerial
efforts get directed towards the goal with the
purpose of achievement.
 Exception: A significant deviation from the performance, or the
process and the standard.
 It can be +ve or –ve.
 The deviation could be predictive or could be arising out of
random causes in the business.
 When the deviation is consistently coming in, it calls for
managerial attention.
 A manager will be interested in knowing the reason for this
deviation and will accordingly take a corrective action.
 Reasons for deviation

Wrong performance Stds are set very low

standards
Stds are set too high
Wrong management
process Poor planning, organizing, staffing, directing & control
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 Systems Approach to
Organization

 A system is an assembly of elements arranged

in a logical order to achieve certain objectives.
 The elements in an organization
People
Task
Technology
Structure

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 The individuals in the organization are selected in
terms of number, quality and ability and are placed in
hierarchical order to plan and execute business
activities to achieve certain goals and objectives.
 The arrangement of task in terms of process and work
design is dependent on the people. The choice of
technology of handling the task is dependent on people
and these have to be arranged in proper structure.
Further a fifth element added is culture.
 An organization should be viewed as a socio-
technical system consisting of people,tasks,
technology, structure and culture
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 Model of the organization System

TASKS

PEOPLE STRUCTURE
GOALS

TECHNOLOGY CULTURE

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 Organization as Open Systems
 Organizations are open systems, since they receive unplanned and
unscheduled inputs from their environment and adapt in such a way as to
continue their existence.
 Characteristics that are common for open systems and which are
applicable to organizations
1.   the importation of energy- new suppliesof energy are brought into the organization in
the form of people and materials
2.   throughput- inputs are altered in some way as materials are processed or as people
are served.
3.   output- organization produces something which interacts with the environment.
4.   systems as cycles of events- products sent into the environment are the basis for the
source of energy for the repeating of the event
5.   negative entropy-an organization attempts to import more energy than it expends in
the process in order to maintain the system and to ensure its ongoing existene.
6.  information input, negative feedback, and the coding process-
7.   the steady state and dynamic homeostasis- system tend to maintain their basic
character
8.   differentiation- their is a tendency of elaboration of roles and specialisation of function.
9. equifinality-the organization has more than one way of accomplishing
organizational
57 objectives. 12/08/21
 Organizational Efficiency &
Effectiveness

 Systems concept offer two ways to measure and evaluate the

performance of the organisation as asystem.
 Effectiveness: Effectiveness is defined as ‘doing the right thing’, in
other words, producing the output for which the organisation was
formed(producing the desired output). It is measured in terms of
whether the system indeed produces the output for which it was
formed.
measure of goodness of output
 
 Efficiency: Efficiency is ‘doing things right’, in other words, the output
is exactly the specifications of the output(the use of inputs to
produce outputs).
measure of58the resources required to achieve the output. 12/08/21
 Relationship between efficiency & effectiveness

Efficiency measures the Effectiveness measures

relative cost of producing outputs against desired
outputs outputs

Input of
resources

Outputs
Process
(results)

feedback

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 Law of Requisite Variety
 Is one of the notions of system control theory
to obtain control.
 To control each possible state of the system
elements, there must be a corresponding
control state; to control a hundred states of the
system elements, there must be hundred
different states of controls.
 In another view, there must be at least as many
variations of control to be applied as there are
ways60for the system to get out of control.12/08/21
 The law
Ashby defined the Law of Requisite Variety by
stating that “Only variety can absorb variety”
This means that every decision system has to be
able to cater to every possible outcome of every
possible alternative.
This can only happen if there are exact number of
rules to cover the exact number of outcomes.
If an event occurs which does not have a rule or
procedure set down to handle it, the system is
unable to handle that event and thus becomes
ineffective.
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The law of requisite variety means that for a
system to be controlled, every controller(human
/machine) must be provided with
1. Enough control responses(what to do in each
case) to cover all possible conditions the system
may face
2.Decision rules for generating all possible control
responses
3.The authority to become a self organizing system in
order to generate control responses.
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 Its Application

Raw materials, in-process inventory climbing, at the

same time, reduced sales and reduced
production.
They had been furnished with decision rules for
ordering, canceling etc under no5rmal conditions,
but they had no rules governing how to handle
the inventory when production was decreasing,…
I.e., the system did not produce the requisite variety
of control responses.

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