The Organization is a Dynamic, Social System

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DRJOHN2Dr. John Psarouthakis,
Executive Editor, The Business Thinker.

Once created, your company begins to take on a dynamic of its own. In spite of your best efforts, you eventually discover that you cannot control every action or outcome within your company, much less those actions impinging on it from outside. Why? According to open-systems theory, your company is part of a multi-tiered set of social systems. At one tier, your company is made up of individuals with freedom to choose and act, creating their own dynamic situation within the organization. In turn, your company interacts with individuals and organizations at higher levels of social systems beyond the organization’s own boundaries, further adding to its dynamic qualities. The Figure below illustrates this idea.

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The Organization is Part of Multitiered Set of Dynamic Social System.

Some interactions with the larger environment are a result of the I-T-O cycle (input-transformation-output). For instance, at the input stage, your company interacts with individuals (to recruit as employees), a bank (to apply for a loan); investors (to pressure for equity), suppliers (to buy raw materials), or a library (to obtain information). At the output stage, customers buy your products. But not all interactions are intentional or a direct result of the I-T-O cycle. Your company may be buffeted by higher interest rates, new government regulations or a spate of nasty weather. Your company may benefit from an unexpected new technological discovery or be threatened with extinction by the introduction of a substitute product. Paying attention to these interactions from the larger social system is also essential to your company’s survival and growth as a dynamic, social system.

In short, even though you create your own firm, once set in motion, many consequences are beyond your control. Consider the following image created in a training film to demonstrate chain reactions. A room is filled with ping pong balls set on mouse-traps. Someone (from off-camera) tosses a ball into the room. First, two other balls are released, then four, then eight. Before long, bouncing ping pong balls fill the room. Fortunately in the real world, chain reactions usually occur less randomly and more slowly. But the multiple interactions among individuals, groups and organizations in multi-tiered levels of social systems can result in a scene that appears almost as chaotic. When you create your company, you toss the first ball. After that, don’t expect to control all the dynamics you (and others) set in motion. But do pay close attention to the dynamics that result from your actions and those around you, both within and outside the company.

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