CHAPTER 8

Systems and contingency theories

 Learning Outcomes
Having read this chapter, you should be able to:
Discuss systems theory as a theory of management and organization
Review the role of systems theory in understanding organizations and
management
Identify sub-systems at work in organizations
Discuss what is meant by the contingency approach to management
Explain the congruence model of organizational behaviour, based on the system
paradigm
DISCUSSION QUESTION

What is a system?
 DISCUSSION QUESTION

Discuss the core principles of systems

theory and how they apply to various
disciplines such as biology, sociology, and
management?
 Understanding Organizational Management
through Systems Theory
• In the 1960s, a shift occurred in management studies, with influential contributions from Burns and
Stalker, Lawrence and Lorsch, Emery and Trist, Katz and Khan, leading to a more comprehensive
approach to studying management in organizations.
• Systems theory offers a framework where attention is directed towards understanding the entirety of
an organization's work, including the interrelationships between its structure and behavior, as well as
the various variables at play.
• By adopting a holistic perspective, systems thinking enables us to view organizations within their
total environment, emphasizing the importance of interactions among different elements.
• This approach allows theorists to explore organizational behavior by considering people, structure,
technology, and the environment simultaneously, moving beyond the limitations of past explanations
that focused solely on structures or individuals.
 Fundamentals of Systems Theory
• Systems thinking involves a paradigm shift from focusing on individual parts
to considering the organization as a whole, acknowledging the
interconnectedness of its components.
• Organizations are viewed within the context of their entire environment,
highlighting the significance of multiple channels of interaction.
• This holistic approach facilitates the examination of key organizational
elements and their interactions, both internally and with the external
environment, offering a more comprehensive understanding of management
dynamics.
 Management as a System
• Management is described as the process of integrating disparate resources such
as people, machines, and finances into a coherent system to achieve
organizational objectives.
• Managers play a crucial role in coordinating and integrating the activities of
individuals and resources, focusing on achieving the goals of the overall
system.
• Organizations are conceptualized as systems comprising interconnected parts
that work together to accomplish various objectives, underscoring the
importance of synergy and collaboration in organizational management.
 DISCUSSION QUESTION

Explore the role of feedback loops in South

Africa's societal systems. How do they
influence policymaking, community
engagement, and governance structures?
 Reductionism vs. Holism
• Reductionism involves breaking down complex systems into their individual
components and analyzing each part separately, whereas holism emphasizes
understanding the system as a whole.
• While reductionism offers insights into the specific elements of a system,
holism provides a broader perspective that considers the interactions and
interdependencies among these elements.
• In the context of organizational management, a holistic view enables a more
comprehensive understanding of the organization's dynamics, emphasizing the
interconnectedness of its various components.
 Open Systems Theory
• General systems theory, which originated in the 1950s, introduced new ways of
thinking about organizations by focusing on how their parts interact rather than
just identifying individual components.
• Systems can be classified as either closed or open, with open systems
interacting with their environment to obtain inputs, convert them into outputs,
and discharge these outputs back into the environment.
• Social systems, such as organizations, are inherently open systems, relying on
their environment for inputs and adapting to external changes to survive and
thrive.
 Interdependence and Adaptation in Open
Systems
• Open systems exhibit interdependence with their environment, needing to
adapt to changing circumstances to remain viable.
• This adaptability is essential for business enterprises to navigate
fluctuating market conditions and ensure their continued success.
• Understanding the classification of environments affecting organizations
helps in developing strategies for effective adaptation and responsiveness.
 Sub-Systems and Boundaries in
Organizations
• Organizations consist of various sub-systems, such as production,
marketing, and accounting, each performing specific functions within the
overall system.
• Interfaces serve as sensitive boundaries between sub-systems, influencing
how they interact and collaborate.
• Organizational boundaries are not solely determined by physical factors
but are also shaped by management decisions and strategic considerations,
emphasizing the dynamic nature of organizational structure.
 Boundary Management for Organizational
Effectiveness
• Employees working at external boundaries interface with the
organization's environment, managing inputs and outputs.
• Those operating at internal boundaries facilitate coordination and
integration between different sub-systems, playing a crucial role in
organizational effectiveness.
• Effective boundary management involves establishing and maintaining
productive relationships between colleagues across various sub-systems,
fostering collaboration and synergy.
 DISCUSSION QUESTION

What are the key differences between open

and closed systems according to systems
theory? Provide examples of each from
different domains?
 Open and Closed Systems in Organizational
Sub-Systems
• Different organizational sub-systems may operate as either open or closed
systems, depending on their degree of interaction with the environment.
• Closed systems, like production and accounting, tend to be self-contained
and predictable, focusing on efficiency and stability.
• In contrast, open systems, such as marketing and research, thrive on
interaction with the environment, adapting to external influences for
innovation and growth.
 Characteristics of Open Systems
The common characteristics of open systems are as follows:
• Inputs
• Throughput or conversion (transformation), e.g. the processing of materials and organizing of work activities
• Output, e.g. of products or services
• Cyclic nature, e.g. the returns from marketing the output enable further inputs to be made to complete the cycle of
production
• Feedback enables the system to correct deviations; organizations tend to develop their own ‘thermostats’
• Differentiation, e.g. the tendency to greater specialization of functions and multiplicity of roles
• Equifinality – open systems do not have to achieve their goals in one particular way. Similar ends can be achieved by
different paths and from a different starting point.
• Giving consideration to the aforementioned characteristics of open systems, the input–conversion–output model, shown in
Figure 8.1:
 An adaptive system
• "Organizational systems refer to the interconnected components within an organization
that work together to achieve goals."
• Importance of cybernetics: "Cybernetics, the study of control and communication, plays a
vital role in understanding how organizations function."
• "Norbert Wiener and Stafford Beer's work laid the foundation for understanding self-
regulating systems within organizations.“
• In the 1960s, Katz and Kahn applied the concept of open system to the organization. Katz
and Kahn further set out to describe their view of social systems and their related sub-
systems. Advocating an open-system approach, they identified five sub-systems at work
within organizations:
 Five Sub-Systems of Organizations (M-
MAPS)
• Overview of M-MAPS acronym: "Managerial, Maintenance, Adaptive,
Production, and Supportive sub-systems constitute the core components of
organizational systems."
• Explanation of each sub-system: Managerial focuses on coordination and
control, Maintenance ensures stability, Adaptive anticipates change,
Production handles core tasks, and Supportive manages external relations.
 Developments in Systems Theory
• Human Relations theorists focused on humanizing the workplace but
lacked a holistic view of organizational problems.
• Introduction to systems theory approach: "Systems theory emphasizes the
interdependence of variables such as People, Organizational Structures,
Environment, and Technology (POET)."
• Role of Tavistock researchers: "Tavistock researchers pioneered socio-
technical systems and studied the interaction between technology and
social structures."
 The Tavistock Group
• Overview of Tavistock Institute of Human Relations: "The Tavistock Institute
contributed significantly to systems theory, particularly in understanding socio-
technical systems."
• Explanation of socio-technical systems concept: "Socio-technical systems
emphasize the integration of technology and social needs in work
environments."
• Case study: Coal-mining studies: "The transition from shortwall to longwall
mining methods highlighted the importance of balancing technology and social
dynamics."
 Socio-Technical Systems
• Socio-technical systems recognize the interconnectedness of technical and
social elements in organizational functioning.
• Maintaining a balance between technological advancements and social
well-being is crucial for organizational success.
• Benefits of composite methods: "Composite methods, integrating social
and technical aspects, lead to increased productivity and employee
satisfaction."
 Ken Rice's Contributions
• Introduction to Ken Rice's work: "Ken Rice's research expanded on
systems theory, emphasizing the distinction between operating and
managing systems."
• Explanation of systems theory: "Systems theory views organizations as
open systems with operating systems handling tasks and managing
systems overseeing coordination and decision-making."
 Work Design Findings
• Summary of Ken Rice's findings: "Ken Rice's studies on work design
highlighted key factors such as effective task performance, voluntary
cooperation, and group autonomy."
• Importance of effective performance: "Effective task performance
contributes to employee satisfaction and organizational success."
• Role of group autonomy: "Allowing groups autonomy fosters cooperation
and enhances work effectiveness."
 Environment Classification

• Introduction to environment classification: "Emery and Trist categorized

environments into placid, disturbed, and turbulent, based on their stability
and predictability."
• Explanation of turbulent environments: "Turbulent environments pose
challenges to organizations due to their rapid and unpredictable nature,
requiring adaptability and flexibility."
 Introduction to Contingency Theories
• Definition: Contingency theories propose that there is no one best way to
manage organizations. Instead, the most effective management style and
organizational structure depend on the unique circumstances or contingencies
facing the organization.
• Origin: Emerged in the late 1950s and developed throughout the latter half of
the 20th century as a response to the limitations of earlier management
theories.
• Key Concepts: Environment-structure relationship, adaptation to changing
environments, organic vs. mechanistic structures.
The contingency viewpoint
of management (at the
beginning of the Third
Industrial Revolution)
The contingency viewpoint of management
 Burns and Stalker's Contingency Theory
• Study: Conducted by sociologists Tom Burns and George Stalker in the late 1950s.
• Focus: Examined how organizations adapt to changing market and technical
conditions.
• Findings: Proposed that organizations facing rapid changes in the environment
benefit from organic structures with decentralized decision-making, while stable
environments are suited to mechanistic structures with centralized decision-making.
• Example: Compare a dynamic tech startup (organic structure) to a traditional
manufacturing company (mechanistic structure).
 Organic structures
• Organic structures with decentralized decision-making refer to
organizational systems or models where decision-making authority is
distributed throughout the organization rather than being concentrated at
the top or within specific hierarchies.
• These structures often emulate the self-organizing nature of biological
systems, such as cells or ecosystems.
• They are characterized by flexibility, adaptability, and responsiveness to
change.
 Mechanistic organizational structures
• Typically feature centralized decision-making, hierarchical authority, and clear
lines of communication and control.
• Ford Motor Company: Ford Motor Company, one of the oldest automobile
manufacturers in the world, has traditionally operated with a mechanistic
structure.
• Under the leadership of Henry Ford, the company established rigid hierarchies,
standardized processes, and centralized decision-making, particularly during
the early 20th century when Ford pioneered assembly line production.
 Woodward's Contingency Theory

• Study: Conducted by Joan Woodward in the 1950s.

• This theory that suggests that the most effective organizational structure depends
on the nature of the tasks or activities being performed within the organization.
• Focus: Explored the relationship between organizational characteristics,
technology, and business success.
• Findings: Different types of technology require different organizational structures.
For example, process industries require more decentralization and delegation.
 Lawrence and Lorsch's Contingency Theory
• Study: Developed by Paul Lawrence and Jay Lorsch.
• Focus: The theory suggests that organizations must adapt their structures to fit the
demands of their environment in order to achieve optimal performance.
• While Lawrence and Lorsch did not specifically focus on South Africa in their
research, we can apply their theory within the context of South African organizations.
• In the South African context, organizations face unique environmental factors shaped
by the country's history, culture, economy, and legal framework. Lets discuss how
Lawrence and Lorsch's Contingency Theory might apply within this context:
 The Aston Group's Contingency Theory
• Study: Conducted by Derek Pugh, David Hickson, and others.
• Focus: Explored the impact of technology on organizational structure.
• Findings: Technology's impact on structure varies based on company size
and other contextual variables.
• By considering both social and technical factors and adapting to local
conditions, organizations in South Africa can build structures that promote
collaboration, innovation, and resilience.
 Models Based on the System Paradigm
• Overview: Models like Leavitt's and Nadler and Tushman's integrate
systems thinking with open-system theory.
• Key Concepts: Interdependence of components, inputs, processes, outputs,
and congruence.
• Example: South African example: Apply Leavitt's model to a local
manufacturing company, emphasizing how changes in technology impact
structure and tasks.
 Criticisms and Future Directions
• Criticisms: Contingency theory has faced critiques, such as neglecting the
role of managers and oversimplifying complex organizational dynamics.
• Future Directions: Scholars like Child emphasize the importance of
considering both environmental factors and managerial choices in
organizational theory.
• Conclusion: Contingency theory remains a valuable framework for
understanding organizational adaptation but requires integration with
other perspectives for a comprehensive understanding.