Term Paper: Systems Thinking Is a Way of Analyzing

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Systems Thinking is a way of analyzing how a company works in considerable depth. It looks at individuals, subgroups within the company such as departments, and the ways individuals and departments interact with each other, viewing the entire organization as a unified and interrelated whole. It recognizes that because of this inter-relatedness, if one part of the system changes, those changes will affect the entire organization in one way or another. However, at the same time that systems thinking recognizes the true complexity of business organizations, it looks for ways to simplify understanding of how the business works so that any needed changes can be made in an effective way (Mccann, 2004).

The analogy used for systems thinking is that of learning. Just as a person has a complex brain with many substructures, an organization has many layers. Both organizations and individuals are capable of learning, and both will function best if they recognize the need to constantly adapt to changing circumstances (Mccann, 2004). However, experts in the field of systems theory note that most organizations are not efficient learners, noting that the way most companies describe individuals' and departments' jobs are defined, and especially how the company as a whole thinks and interacts, actively interfere with both learning and adaptation to changed circumstances (Sherwood, 2000).

In today's market, companies are faced with new and novel situations. The company that can function adaptively in novel situations will have a significant edge over less flexible competition. Because of this, the important management issue for a company is how they can achieve the strengths they need so they can be responsive in an ever-changing business world (Gunasekara, 2003). The answer is to develop a company where the attitude from top to bottom, among all workers and in all departments, is one of continual, systematic learning about how the company functions. It requires doing the kind of detailed company research that will identify its real strengths and weaknesses and point the ways for effective business strategies (Gunasekara, 2003).

How Systems Thinking Might be Implemented

The first difficulty when implementing Systems Thinking is that the amount of information to analyze may seem overwhelming. Businesses are bombarded with more and more information, much of it needing to be dealt with in a timely way. At the same time, managers know that their decisions can have significant impact and don't want to rush into decisions without analyzing the information first. New and timely information can include market changes, positioning within the market, new developments by key competitors, or shifts in consumer trends. Companies who have done the hard work to have a systems strategy in place can better predict what their response should be. Unfortunately, too many companies rely on learning from past experience (Beckford, 2002), which presents a couple of problems. Past experience may not be relevant to current events because the larger circumstances may have changed. Systems thinking, by comparison, is focused on the future. It looks at what is going on now to see what works and what needs to be changed for the future benefit of the company.

Martin and McCausland (2001) tell a story from the recent war in Bosnia that illustrate the need to look to the future instead of just trying to learn from the past. A Captain and his company had been told to hold a crucial bridge. However, they were also told to use all means possible to avoid the use of deadly force, a dilemma for a fighting army. When someone tried to capture the bridge, it was not soldiers but civilians armed with bricks, rocks, and homemade gasoline bombs, which they began to throw at the soldiers, inflicting some injuries. The Captain called for reinforcements, but none were available. Under their orders, using advanced firepower on civilians armed largely with bricks and rocks ran counter to their order to avoid deadly force. The Captain could not rely on previous army experience, because virtually all of our military history had involved armies against armies, not small groups of soldiers against brick-throwing civilians.

While businesses do not have to make life-and-death decisions that will result in an international incident if handled badly, they still have to face situations every day they may not have seen before, such as how to position themselves on the internet effectively. Today's businesses today have to decide how to handle new and novel problems in effective ways.

Such creative thinking has to go beyond tracking the bottom line (O'Callaghan, 2004). Quarterly or even yearly profits may hide the cause-and-effect relationship between two events. If a company fails to position itself well on the Internet, this information may not be apparent simply by looking at quarterly sales. If they institute a new and more stringent returns policy, quarterly sales may go up. They may find that two years down the road sales have slumped because consumers turned to businesses who did not make it hard to return merchandise, but because of the two-year gap between cause and effect, they may not realize the long-term implications of their decision to restrict returns.

However, organizing the complex information regarding how business is transacted may seem daunting at first. They have to first make sense of everything they know about their organization (Mccann, 2004). Beckford (2001) describes how a bank might process a check. The steps might include authorization for payment by a bank official, a cashier to handle the transaction, and data entry. Each of these processes might be handled by a different department, each department having its own procedures (Beckford, 2002). Check handling is a major activity for banks, and if it creates a bottleneck, it creates a business problem. The bank would take what it knows about its check handling, and chart those activities precisely. Then they would have to look at this process as an organization instead of within individual departments only, and then realign what they do as necessary (Mccann, 2004).

Metrics and Strategies

The first core activity must be to look what the company does, and how it does it, in a very specific and detailed way. In addition they must look at the pressures, both from inside and outside of the company, that encourage the company to resist change. New projects can become a vehicle for making such changes as it may be easier to look at the data in a fresh way when faced with a new task (Gunasekara, 2003). In addition to all the steps followed by each department, however, the company needs to involve everyone in looking at all the factors, including cultural ones, that affect company decisions. This is organizational learning, because they must look at their company and all its aspects in new ways.

Beckford (2001) recommends looking at what he calls the "total process" - every single step, in sequence, including who does it and in what department it occurs. The second step he calls "Process Operation" or "Task." At this point, the group records the specific actions taken at each stage, including what is done in exceptional cases. The third stage he calls "Process Detail" or "Procedure." At this point the group looks at such detail as individual hand movements where appropriate (Beckford, 2002).

They then look at all this data and look for ways to chart the activities, and look for points that need more careful evaluation (Beckford, 2002). It is at this point that all the detail work makes sense, because decisions about what to evaluate in more detail can be made with confidence. Such analysis can detect bottlenecks and streamline company efforts (Beckford, 2002).

These efforts to analyze procedures must be supported by other analyses. Statistical analysis can play an important role in data evaluation, if done well and kept in perspective. Statistical analysis has to be done by someone skilled in the use of statistics, and the research design must be carefully planned (Beckford, 2002). The computer saying "GIGO" - Garbage In, Garbage Out - applies to statistics as well. In addition, because statistics are so narrowly focused, their trend is somewhat contrary to Systems Thinking. Because of their narrow focus, decisions should not be made based on statistical results alone (Beckford, 2002).

Another important measure is called "benchmarking." In benchmarking, a company compares its business characteristics to those of a competing organization (Beckford, 2002). For instance, Home Depot might look to Lowe's to see what they do. This analysis can suggest ways a company can improve its performance. It can provide a better picture of what their customers want (Beckford, 2002).

Strengths and Weaknesses of Systems Thinking

The great strength of Systems is that it results in a company that is more flexible and responsive in the face of change. They can gain an understanding of new information or circumstances more quickly, and modify how they use their assets for better effect (Mccann, 2004). However, the approach also has some weaknesses. Communication must be of very high quality throughout the company, and that can be difficult to… [END OF PREVIEW]

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