Systems Concepts for Managing a Business

AGeneralSystemsModel,for ManagementandBusiness
By David Alderoty © 2015
Chapter 3) Systems Concepts for Managing a Business
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Notes for this E-Book
The concepts presented in this e-book are primarily focused on management and business. However, most of these concepts also apply to other types of systems that involve human beings. Thus, anywhere you see the words business or organization in this ebook, the material I am presenting may also apply to any type of system that is partly or totally comprised of human beings, such as a factory, a home-based business, a microbusiness, a school, a social club, a city, a state, a nation, a family, and an individual. In this e-book, I call the above entities, underlined in red, human systems.
In this e-book, I frequently use the word business, company, and organization interchangeably, as synonymous terms. In addition, I use the word employee, or employees to refer to non-managerial personnel.
Web Links in this E-Book
This e-book contains links to web-based articles and videos from other authors, for additional information, supporting material, and for alternative: perspectives, interpretations, explanations, and opinions. The links are the blue underlined words. In this e-book brown text, like these words, represent quotes. You can access the original source, by clicking on a link presented just before a quote. If a link fails, use the blue underlined words as a search phrase, with or for a video use The search will usually bring up the original website or one or more good alternatives.
Section 1)Managing aSystem,Subsystem,andStaticComponents
This topic is repeated for review purposes, from chapter 2
Topic 1) Managing Defined in Terms of a SYSTEM CONCEPTUALIZATION
Based on the way am using the terminology managing is a process that involves monitoring, evaluating, correcting and/or improving a business, to obtain one or more goals. Managing can also involve goal setting, planning, and creating new components of a system, such as new subsystems. To achieve the sub-goals underlined in red type, an appropriate or preferred managerial methodology may be utilized, to manage a specific type of system.
If the system is a business, the managing might involve evaluating, correcting and/or improvingemployee performance,advertising, and sales, with the goal of optimizing profits. Goal setting and planning may be focused on increasing productivity, with the ultimate objective of increasing profits. This might involve adding new components or subsystems to a business, such as new equipment, additional manufacturing facilities, and international selling outlets.
Topic 2) A Precise Definition of a System, fortheProcessofManaging
Based on the way I am using the terminology, a system is a set of components that interact with each other, and are conceptualized as a single unit, or as a machine, for the purpose of evaluation, study, managing, problem solving, and goal attainment efforts. The interacting components that comprise a system involve some type of dynamics such as a set of actions that leads to some type of change, which might be desirable, undesirable, or inconsequential. When the system is a business the set of actions usually include planning, and deliberate behaviors focused on specific goals.
The following six examples will clarify the above concept. With these examples, the SYSTEM is presented in capital letters, and the components that comprise the system are presented in red underlined text.
1) A BUSINESS comprised of one or moreowners or stockholders, managers, employees, workspace, equipment, suppliers, and customers
2) A COMPUTER comprised of a set of electronic components wired together, such as a power supply, motherboard, processor, sound card, video card, random-access memory, a hard drive, etc.
3) A HUMAN BEING comprised of biological, psychological, social, and cultural components
4) A NATION, STATE, or CITY comprised of roads and highways, buildings, businesses, homes,leaders, government officials,citizens, and inhabitants
5) A COLLEGE comprised of classrooms, equipment, board of directors, administrators, faculty, maintenance personnel, and students
6) A TORNADO comprised of awhirling mass of air, with water droplets and dust particles
Topic 3) Subsystems, and Static Components
The components that comprise a system can usually be classified as subsystems, or static components. With the six examples presented above, the words in underlined red type can be thought of as subsystems, or static components. The utility of this concept is explained in the following subtopics.
Topic 4) What Precisely is a Subsystem?
The interacting components that comprise a primary system, such as a business, can be conceptualized as subsystems, which are*generally smaller systems that comprise the primary system. For a business, the subsystems include managers, employees, equipment, suppliers, and consumers.
*Sometimes the subsystems are larger than the system. With the following examples the system is in capital letters, and the subsystems is in red underlined type. Suppliers might be larger than the MANUFACTURING FACILITY that purchases their products. A BUSINESS usually sells its products in a market that is larger than the BUSINESS. Often, external subsystems are larger than the system, but internal subsystems are always smaller than the system. Internal and external subsystems are explained in more detail in the following paragraphs.
The conceptualization of a subsystem is especially useful when the components can produce their own dynamics, orwhen they can behave independently of the other components. For example, stockholders, managers, employees, suppliers, and consumers that comprise a business, can behave autonomously, thus should be classified as subsystems. With the above examples, the subsystems are comprised of individuals, which are smaller subsystems that comprise larger subsystems.
In some cases, the personality, and the behavior of the individuals that comprise a subsystem might be relevant for a particular problem or goal. A good example would be conflict between the manager of the sales department, and the manager of the marketing department.
Topic 5) Static Components that Comprise a System
The workspace, furniture, and equipment that comprise a business, can be conceptualized as static components. This is because they are not autonomous entities, and they generally do not produce their own dynamics, without human intervention. However, it is sometimes useful to conceptualize static components as subsystems, especially when they are indirectly affecting the dynamics of a business.
Topic 6) When Should an Entity be Conceptualized as a Static Component,asOpposed to a Subsystem
You should conceptualize a component as a subsystem when it will directly, or indirectly, affect the dynamics of the system. For example, if lack of workspace is interfering with production, and causing conflict with the employees, it is affecting the dynamics of the system, and thus it should be conceptualized as a subsystem. When the dynamics of an entity are not important for the problem or goal you are working on, the entity can be conceptualized as a static component. For example, if the problem involves reducing rental costs, by eliminating unneeded workspace, the excess space can be thought of as a static component.
Section 2)Internal and External Subsystems, and other System Components and Dynamics
Topic 7) The Internal and External Environments of a System
Most of the subsystems that comprise a business function in an internal environment, but the business as a whole functions in an external environment. Problems with the internal and/or external environment can adversely affect the functioning of a business. This concept is important, and it is explained in more detail under the following two headings.
Topic 8) The External Environment of a Business
The external environment of a business is comprised of markets, or market segments, governmental regulations, competitors, suppliers, and customers. The culture of the people living in the environment is also important. Some localities are comprised of a number of cultures and subcultures, which can be important factors for manufacturing, advertising, and selling products and services.
Problems with the external environment of a business can include undesirable governmental regulations, problems with the economy, adverse changes in market conditions, difficulty with suppliers, difficulties in obtaining new employees with appropriate qualifications, and excessive competition from other businesses. Adverse weather conditions can also be a problem for some businesses. This is especially the case for businesses that are involved in agriculture, or transportation.
A favorable external environment for business is just the opposite of the above. Generally, a business should be deliberately located in favorable environments. Alternatively, a business can be designed for a specific environment. This includes selling and/or manufacturing products that meet the needs of the local consumers. This concept is especially important for small businesses, and it may be irrelevant for large organizations that ship their products to multiple selling outlets.
One of the main problems for micro-businesses, (mom-and-pop stores) especially in New York City, is competition from large corporations, and excessively high rents for business space. That is the external environment in New York City is not well suited for most micro-businesses. However, a micro-business might obtain far more customers in New York City then it would elsewhere. In some cases, this more than compensates for the adverse conditions mentioned above.
Topic 9) The Internal Environment of a Business
The internal environment of a business is usually partly influenced by the external environment. For example, the employees in a specific locality will usually have a specific type of culture, subculture, and speak a language related to that culture. This can affect the overall functionality of the business, and may necessitate a style of management that is appropriate for the culturally based norms and values of the employees.
However, large, and some medium-sized businesses, often have their own internal culture. This can include a set of norms, values, style of dress, and methods of communicating. With large organizations, there may be two or more subcultures, based on different departments, or the type of work employees perform. For example, assembly-line workers may develop their own subculture, and the professional staff, such as engineers, marketing experts, and executives might develop another subculture.
Upper management might attempt to create an organizational culture, but the culture and subcultures that develop, may, or may not, be what management wanted. A true organizational culture often develops spontaneously, and independently of the desires of upper management, but it can usually be greatly influenced by management.
Topic 10) Internal and External Subsystems, and InternalandExternalManaging
The internal and external environments of a business have their own subsystems and static components, which must be successfully managed for business to succeed. The subsystems that comprise a business can be classified as internal or external.
Internal subsystems are smaller systems within a larger primary system, and they can usually be controlled directly by management. Examples of internal subsystems for a business are managers, employees, workspace, and equipment. This involves management strategies focused on internal subsystems, which I am calling internal management, or internal managing.
External subsystems are systems in the external environment, which are usually vital for the operation of the primary system. For a business, examples are consumers, suppliers, and banks. External subsystemsusually CANNOT be controlled directly by management, but they usually can be INFLUENCED by management. The above involves management strategies that are focused on external subsystems, which I am calling external management, or external managing.
In general, internal managing may be focused on monitoring, evaluating, correcting, and/or improvingemployee performance, working conditions, and equipment. The external managing may be focused on monitoring, evaluating, correcting and/or improvingadvertising, public relations, customer satisfaction, as well as evaluating consumer needs, and overall market conditions.
Based on the ideas presented above, it should be apparent that the relative effectiveness of management involves two primary factors, which are presented below:

The ability to directly control internal subsystems, such as employees and equipment (This involves internal managing)

The ability to influence external subsystems, such as consumers, and suppliers (This involves external managing)

The two factors mentioned above generally will determine if a business succeeds or fails. A failure with the first factor might result in production problems, poor money management, low productivity, excessively high production costs, and conflict between employees. A failure with the second factor may result in difficulties with suppliers, conflict with customers, and an inability to sell enough goods or services to remain in business.
Topic 11) Focusing the Actions (or Behaviors) of the Subsystems, toMeetthePrimary Goals of the System
When management strategies are successful, they will synchronize and focus the behaviors of all of the subsystems, to meet the objectives of the business. However, the subsystems are comprised of people, which have their own personal goals. The personal goals of the individuals that comprise the subsystems are likely to differ from the objectives of the organization. A simplified example is management might want to maximize production, by using new equipment, and by reducing the number of employees. The employees most likely will want to maintain their jobs, and minimize their workload, and maximize their salary.
The important idea to keep in mind is managers and the employees they control are likely to have personal goals that might be in conflict with organizational objectives, and vice a versa. Sometimes this can be a major problem for all concerned. It can result in conflict, and in some cases labor strikes, which may endanger the continued existence of the business.
With certain types of systems, such as electronic devices, the subsystems can be perfectly controlled, focused, and synchronized, to perform a task. However, when dealing with human beings, especially in a business environment, perfection is usually not feasible. Nevertheless, maximizing the level of focus of all subsystems on organizational objectives is a reasonable objective for skilled managers. This can be done more effectively if the managers consider the needs and personal goals of the employees, and tried to create a set of rules, plans, and goals that result in mutual benefits for all concerned.
Topic 12) Strategies for Connecting OrganizationalGoalswithPersonalGoals
There are strategies that are sometimes useful for connecting organizational goals with personal goals. One example is sales commissions. With this strategy, the increase in productivity of a salesperson will result in greater financial gain for both the employee and the organization. A similar strategy is sometimes used for production, where an employee is compensated for each item he or she produces. A less precise strategy involves a rough estimate of the productivity of an employee, based on managerial observations. This involves rewarding the employee based on the degree of estimated productivity, with one or more of the following: increases in salary, promotions, commissions, bonuses, and/or other benefits. A less expensive strategy involves a few kind words, and complements for a job well done. This can be even more effective if it is coupled with a work environment that is generally friendly, and does not have any bursts of hostility from frustrated managers.
Topic 13) All Opened Systems Have Inputs and Outputs, andaBusinessisa Opened System
A business is an open system, which means it has inputs and outputs to the external environment. A simple example is a factory that has inputs of raw materials, and electricity, which are converted to products with the labor of employees. The products that are manufactured and sold represent the outputs of the factory. The money that is obtained by selling the products is also an input. The input of money is used, to buy more roar materials, electricity, and employee labor. This ultimately leads to an output of more products, and an input of more money. When a business is profitable, the input of money is greater than the expenses, which represents an output of money.
A very important concept that relates to inputs and outputs is rate. The Rate of inputs is the amount of an entity that is obtained per unit of time. An example of the rate of input is a factory that grosses an average of $5000 per day. The Rate of output is the amount of an entity that leaves the system per unit of time. An example is the average rate of expenditures per day.
Topic 14) The Inputs and Outputs of a BusinessMustbeControlled
In general, the inputs and outputs of the business must be controlled in an orderly manner. If the input of money is disrupted, the input of raw materials, electricity, and employee labor will also be disrupted. This will prevent the output of products, and eliminate the input of money. A similar result will occur if there is a disruption in the materials, labor, or electricity or other fuel. A potential solution to the above is to have a reserve of money and raw materials. Alternatively, an emergency source of raw materials and/or money can also prevent the above difficulties.