What is a system theory of management? Explain in brief the pros and cons of systems theory.

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  A system may be defined as a set of interrelated and interdependent parts working together as a network. Hence, a system should not be viewed as an individual part rather it should be understood as a whole. Therefore, a system is composed of a number of parts or subsystems related to each other. A part of a system in isolation is meaningless.



Components of System Theory
1. Inputs: An organization gets input from the external environment. The input consists of raw material, capital and human resource. The qualities of inputs determine the qualities of outputs.

2. Processing: Organizations are processing units. They convert raw materials into finished products through the conversion process. Sound planning, decision making, good leadership and proper control are essential for processing.

3. Outputs: Output is the product of organizations. Organizations are established to produce goods or services. Outputs are supplied in the market and response or feedback is received. If the organization is able to supply quality goods, the customer will have a positive attitude towards the organization and vice versa. Organizations having good input and processing will have a better product or service.

4. The environment: An organization constantly interacts with its environment since it is an open system. It receives inputs as raw material, labor, capital, managerial and technical expertise from the environment and transmits its outputs (goods and service) to the environment i.e. society.

5. Feedback: The business system is dynamic. Hence, it is based on feedback mechanism. It helps in knowing whether or not the output is accepted by the environment. The information is feedback to the organization on the basis of which the operations can be assessed and if needed be corrected.

Elements of System Theory
The system theory has the following elements:
1. Goal oriented: A system is established for the attainment of certain goal. In other words, a system is always goal oriented.

2. Sub-systems: A business is a sub-system of the wider social system. Hence, a business always interacts with the society.

3. Synergy: A system builds synergy. The total outcome of a system is greater than the sum of the outcomes by the individual parts.

4. System boundary: A system has certain boundary. It defines the internal and external elements or parts of a system. It makes the system open or closed.

5. Flow: There is a flow of input, processing and output in a system. It always follows this direction. Hence, a system is the flow of certain elements.

6. Feedback: A system gets feedback from the environment. It helps to improve and redefine the system if required. It is very important for effectiveness of the system.

7. Open or closed system: A system may be open or closed. The open system constantly interacts with the outer environment. However, the closed system does not interact with outside components.

Contributions/Advantages of System Theory
The following are some of the remarkable contributions of the system theory.
• The system theory provides a conceptual framework for viewing an oragnuzation.
• It enhances the interrelationship and coordination among the various parts or subsystem of the organization. 
• It gives equal importance to both internal and external contexts of an organization.
It provides a good basis for planning, executing and controlling.

Limitations/Disadvantages of System Theory
The following are some of the notable limitations of the system theory.
  • The system theory does not offer specific tools and technique for practicing managers.
  • It is criticized as being too abstract and vague. So, it cannot be applied into practical problems. It fails to specify the nature of interaction and interdependence between and organization and its environment.

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