The systems theory of organization is a theory that organizations are composed of many subsystems that aren’t necessarily related to one another and yet work together to form the whole. This theory is helpful for understanding things like organizational behavior, organizational change and organizational development.

The systems theory of organization has its roots in biology and systems science. However, it’s more commonly applied to businesses and other types of organizations. It was first formalized in the early 1950s by Ludwig von Bertalanffy, whose ideas became the foundation for what we now refer to as systems theory. This concept broke away from classical management theory that viewed organizations as machines and moved toward a more holistic view that sees them as networks of people, procedures and activities. 

Systems theory allows for an understanding of the connections between various parts of the organization and how they interact with one another.

Although Bertalanffy is most commonly associated with the development of systems theory, he isn’t the only person responsible for its creation. It was a collective effort by many individuals who were interested in understanding how an organization can function effectively and efficiently while also satisfying individual needs.

  1. Systems Theory: A Closer Look

  2. What Is The Systems Approach To Management?

  3. Importance Of Systems Theory

  4. Features Of Systems Theory

  5. Drawbacks Of The Systems Approach To Management

  6. Systems Theory At Work

Systems Theory: A Closer Look


Systems theory is a theoretical framework for understanding how organizations work. A system can be defined in different ways, but it’s best characterized as an entity that has all the elements necessary to carry out its functions. It started as a way to understand organizations from an outside perspective but has since become a means of gaining insight into daily operations within an organization.

A computer is a perfect example of how systems theory works. Essentially, a computer is a system made up of many smaller systems that have to work in coordination with one another. These individual systems are: the processor, RAM, motherboard, hard drive and power supply. All these components must come together to make the computer function. If even just one component isn’t functioning properly, the system won’t be able to complete any type of task. 

What Is The Systems Approach To Management?

The systems approach to management looks at a business in the same way. We can think of an organization as a series of systems and subsystems that interact with one another to create the overall organizational system. In businesses, a system refers to a cohesive collection of resources, activities and information.

Systems theory can be found everywhere in our world. We see it in science and medicine, where it has been used to better understand the human body. In the business world, it’s used to improve the performance and results of businesses.

In the systems approach to management, employees are more focused on achieving a collective goal for an organization rather than operational output.

The theory was a radical departure from classical management thinking, which viewed organizations as simple machines that could be easily understood. 

Importance Of Systems Theory

Here are some areas where systems theory can be of help in a modern workplace: 

  1. Strategic Planning

Understanding how an organization functions is important for managers who are involved in strategic planning. They need to know how various departments work together and affect each other. This is where the systems theory of organization is very helpful. It allows managers and other decision-makers to look at things like organizational change and organizational development from a broader perspective. 

  1. Managing Change

Looking at the big picture instead of looking just at the individual functions and aspects of an organization can be a valuable tool for those who need to make changes in an organization or who want to implement new initiatives within their businesses.

  1. Project Management

With large, multi-stakeholder projects, a systems approach allows for clear planning and delegation from the outset. It helps managers account for the interdependence between different verticals in an organization and assign ownership to achieve collective goals.

In large organizations and projects, systems theory forms the basis for many popular management techniques and practices. 

Features Of Systems Theory

Let’s look at a few distinctive features of the systems approach to management:

  1. Holistic

The systems approach to management focuses on a collective view of an organization. Managers are focused on making sure that all parts of the business (and sometimes outside organizations) contribute to its success as a whole.


  1. Offers Perspective

The systems approach allows you to look at an organization from the different perspectives of its subsystems, which gives you more insight and control. Changes can be made to each of the subsystems to make a positive impact on the entire organization.


  1. Change-friendly

Systems theory is one approach that may be useful for those who are interested in changing their organizations, or those who are interested in implementing new programs or initiatives within businesses. It can be highly effective in order to manage change and achieve desired outcomes through the coordinated use of scientific management techniques.

We might take systems thinking for granted now, but at the time of its birth it was a radical way to improve organizational performance and change, and it paved the way for several management systems still in use today.

Drawbacks Of The Systems Approach To Management

For everything the systems approach gives us, there are some shortcomings too. Here are a few points to consider when working with a systems approach:

  • Not Prescriptive Enough

In the systems approach, managers aren’t focused on reaching a single goal but on working to make sure that all units of an organization function together towards a collective goal. In this theory, they don’t discourage managers from considering other approaches when looking for ways to improve their businesses. That could be a strength, but it could also be a weakness if a manager needs a more rigid, prescriptive system.

If such a problem arises, systems theory has provided the basis for other management theories such as the balanced scorecard and total quality management. Managers can look to these for guidance.


  • Can Be Hard To Motivate Individuals

Some organizations have tried to adopt this approach and found it’s not a good fit for them. In a systems approach to management, they encourage managers to focus on making sure that all aspects of the organization work together in order to achieve the collective goal. But this can be difficult to explain to employees, and not all of them will find inspiration in such an approach either.


  • Calls For A Responsive Organization

The systems approach says that managers should work on not only the outputs of an organization but also on its underlying processes. Managers should focus on solving problems and adjusting their units when they don’t work together correctly. This requires accurate and timely diagnostics and problem-solving, and an adaptable organization that can be nudged in the right direction.


As with any theory of management, in practice, there’ll be some bottlenecks. But there is nothing that can’t be overcome if the organization is geared toward improvement.

Systems Theory At Work

Many companies find innovative ways to employ systems theory, particularly to manage change in the workplace. Here’s an example of how a business can use it to manage a problem.

  1. Assessing Existing Organizational Processes

Identify the existing system within the company that’s associated with the problem. We can find this through documentation, interviews, observation or data gathering from employees and managers.


  1. Analyzing The Current State Of Things

Analyze the current state of the system in relation to the problem. This includes processes, alignment with customer needs and expectations, finances, the structure of responsibilities within departments and employee morale.


  1. Do A SWOT Analysis

A SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis will help you identify the system’s current goals and their impact on the problem. What are some opportunities and threats that could be created through changes to the system? Should it be changed?


  1. Develop An Action Plan

Develop a plan to implement change in the system (depending on resources available and time).


  1. Communicate With Stakeholders

Communicate this plan to employees, management, and customers. Be sure to follow up on implementation with regular meetings, reports and feedback.

The systems approach to management is one of the many frameworks that can help managers tackle problems in the workplace head-on. In the Harappa Structuring Problems course, you’ll learn to break a problem down, simplify and analyze all your management challenges. You’ll learn how to use tools such as the Logic Tree and Ease Impact Analysis to diagnose your issues and solve them effectively. You’ll never look at a problem the same way again—join today!

Explore Harappa Diaries to learn more about topics related to the SOLVE habit such as A Guide To Task Management, What Is A Mind Map & The Procedure Of Risk Assessment to classify problems and solve them efficiently.

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