When we describe things as a system, we imply that these things have interconnections.
We cannot draft a new strategy without simultaneously making changes in the organizational structure. Nor can we bring in new tools without changing our systems and sometimes our structures.
The interconnections and how the parts are interconnected, are as important, and sometimes more important than, the actual parts.
We purpose to interconnect parts to form a system in such a way as to create the capacity in the system for synergy that is for the system to give an output that is greater or more valuable than the sum of its actual parts.
This interconnection of the parts of the organization is a fascinating topic. Can the interconnections play in the end an equal or even a more important role than the actual components which they interconnect?
To search for answers, let’s look at the organization, its various parts and their possible relationships
1. The traditional way of looking at the organization
We look at the organization from outside and we see that it is composed of parts which we conventionally recognize as:
Structure that sets up the organization in terms of divisions, business units, departments, sections, subsections.
Systems and procedures that describe the processes of getting work done
Staff that do the operations and who possess various Skills
Machinery, premises and tools that are mostly associated with capital expenditure and once purchased become difficult to change
Management/Leadership levels that are responsible for creating purpose and identity, and capacity for execution. They must foresee opportunities and risks and keep the organization viable now and in the future
The Board that together with executive management/leadership provides leadership, takes responsibility for Organization identity and purpose (Vision, Mission) and the overall governance for the organization’s long-term viability. They are oftentimes selected so as to bring knowledge and experience from outside into the organization
Culture that is the way that its people as individuals and teams behave among them as well as with stakeholders, customers and outside players
Strategy the way it chooses to achieve its vision and by which it is enabled to utilize its strengths as a competitive advantage and neutralize those of its competitors
Stakeholders that may include players inside and outside the organization that have the potential to impact its health and viability
Note: The parts just described are mainly in terms of what we see as visible components in an organization.
2. Interconnections
We look at these parts of the organization and we understand that they cannot be considered only as independent, isolated units. We recognize the need for their interconnections.
In a similar vein, Mckinsey produced the 7s model for Organizations, in which the organizational components among them were shown interconnected. So for example, and very rightly, Structure was interconnected with Systems, Staff, Style of leadership etc.
However, the approach of externally looking at the organization to assess what we see as its components while it offers an understanding of the necessity of interconnections to fill in a missing element does not make it easy to handle and manage them.
3. Another way to look at the Organization and its parts
Another way to look at the organization is to look at it internally in a more functional way and try to separate its workings into its constituent parts and interconnections. Doing that and borrowing concepts and terms from the VSM model of Patrick Hoverstadt’s book on The Fractal Organization, Creating Sustainable Organizations with the Viable System Model (see figure below), we may come up with the following functional parts for the organization:
- Operations (the primary activities)
- Delivery (managing the capacity of the organization to produce)
- Coordination (the degree to which alignment of effort is achieved)
- Monitoring (the way management performs its checks and receives feedback)
- Development (obtaining intelligence from its environment to better anticipate risks and opportunities)
- Policy (organizational identity enforcing and governance)
Note: The outside environment though not a part of the organization, constitutes a major factor with which the organization system interconnects and communicates.
This approach seems to offer a more practical methodology. It makes the interconnections among the parts more visible and the way to manage them more apparent. We see, for instance, that management (Delivery) must Coordinate and Monitor Operations giving and receiving feedback. Also, we understand the need for Development to link with the Environment to receive intelligence to assess risks and by way of innovations and marketing sustain the organization’s viability into the future.
4. Practical Implications
The system approach explains why sometimes organizations fail when they focus on improving one or two vexing issues they face without considering their linking with the other parts. A new structure to be made effective may need changes in operations or in how management is performed. Emphasizing efficiency in operations while neglecting the development of new products/services may have short lived success but ultimately bring failure. Incompatibility of operational outputs/products with the market needs should send a signal upward to management and further up to the development stage.
Interconnections, a system’s feature, are therefore very important. Some may need more art than science on behalf of the manager. But one thing is clear. The links between the parts must be innovatively made and the better they are, the more the organization will behave like a system integrating its various components to produce the so much sought-after synergetic outcome.
To those who might be further interested: Panikos Sardos is the Managing Director of P&E Sardos Business Solutions Int., a management consulting firm that offers advisory services, coaching and training and can be reached by email: psardos@sardossolutions.com, telephones: +357 99640912, +357 24400884, www.sardossolutions.com
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