Interrelationship Between Management Functions

SYSTEM APPROACH

The system approach is based on the view that an organization is a system composed of elements that are interrelated and interdependent. According to Cleland and King. “A system is composed of related and dependent elements which, when in interaction, form a unitary whole." It is simply an assemblage or combination of things or parts, forming a complex whole. Its important feature is that it is composed of a hierarchy of subsystems. The world as a whole can be considered to be a system in which various national economies are subsystems. In turn, each national economy is composed of its various industries, each industry is composed of firms, and of course, a firm can be considered a system composed of subsystem such as production, marketing, finance, accounting and so on. Thus, each system may comprise several subsystems and, in turn, each subsystem may be further composed of sub-systems.

Closed vs. Open System. A system may be closed or open. A closed system is self-dependent and does not have any interaction with the external environment. Physical and mechanical systems are closed systems. A closed system concentrates completely on internal relationships, i.e., interaction between sub-systems only. Because of lack of interaction with environment, it is unable to monitor changes occurring in the external environment. On the other hand, an open system has active interface with the environment through the input-output process as shown in Fig.

It can respond to the changes in the environment through the feedback mechanism. That is why, modern authors consider organization as an open system.

Contributions of Systems Approach

The basic features of systems approach are as under:

1. A system consists of interacting elements. It is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole.
2. The various subsystems are studied in their interrelationships rather than in isolation from each other.
3. An organizational system has a boundary that determines which parts are internal and which are external.
4. A system does not exist in a vacuum. It receives information, material and energy from other systems as inputs. These inputs undergo a transformation process within the system and leave the system as outputs to other systems.
5. An organization is a dynamic system as it is responsive to its environment. It is vulnerable to changes in its environment such as government policies, new technology, competition in the market, etc.

Criticism of Systems Approach

The systems approach is not free from limitations. It has the following deficiencies:

1. The systems approach cannot be considered a unified theory of organization. This is in no way a unified body of thought. Systems approach fails to take a comprehensive study to analyze the organization from different angles.
2. The systems approach has failed to specify the nature of interactions and inter dependencies between an organization and its external environment. 
3. The systems approach has failed to spell out the precise relationship between various subsystems.
4. The systems approach does not provide action framework applicable to all type of organizations.
5. The systems approach does not offer any tools or techniques for analysis and synthesis of the system and environment.