Organizations as Open Systems

Identify the important system components of an organization.

A complete understanding of organizational behavior requires an understanding of both human behavior and the organizational context where behavior is enacted. This section discusses the organizational context. First, organizations are presented as systems. Second, the formal and informal organizations are discussed. Finally, six focus companies are presented as contemporary examples and drawn on throughout the text.

As with human behavior, two different perspectives offer complementary explanations of organizations. Organizations are open systems of interacting components,

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which are people, tasks, technology, and structure. These internal components also interact with components in the organization's task environment. Organizations as open systems have people, technology, structure, and purpose, which interact with elements in the organization's environment.

What, exactly, is an organization? Today, the corporation is the dominant organizational form for much of the Western world, but other organizational forms have dominated other times and societies. Some societies have been dominated by religious organizations, such as the temple corporations of ancient Mesopotamia and the churches in colonial America.²⁵ Other societies have been dominated by military organizations, such as the clans of the Scottish Highlands and the regional armies of the People's Republic of China.²⁶ ,²⁷ All of these societies are woven together by family organizations, which themselves may vary from nuclear and extended families to small, collective communities.²⁸ ,²⁹ The purpose and structure of the religious, military, and family organizational forms may vary, but people's behavior in these organizations may be very similar. In fact, early discoveries about power and leadership in work organizations were remarkably similar to findings about power and leadership within families.³⁰

Organizations may manufacture products, such as aircraft components or steel, or deliver services, such as managing money or providing insurance protection. To understand how organizations do these things requires an understanding of the open system components of the organization and the components of its task environment.

Katz, Kahn, and Leavitt set out open system frameworks for understanding organizations.³¹ The four major internal components—task, people, technology, and structure—along with the organization's inputs, outputs, and key elements in the task environment, are depicted in Figure 1.1. The task of the organization is its mission, purpose, or goal for existing. The people are the human resources of the

FIGURE 1.1 An Open Systems View of Organization Based on Harold Leavitt, “Applied Organizational Change in Industry: Structural, Technological, and Humanistic Approaches,” in J. G. March, ed., Handbook of Organizations (Chicago: Rand McNally, 1965), 1145. Reprinted by permission of James G. March. View PDF

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organization. The technology is the wide range of tools, knowledge, and/or techniques used to transform the inputs into outputs. The structure is the systems of communication, the systems of authority, and the systems of workflow.

In addition to these major internal components, the organization as a system also has an external task environment. The task environment is composed of different constituents, such as suppliers, customers, and federal regulators. Thompson describes the task environment as that element of the environment related to the organization's degree of goal attainment; that is, it is composed of those elements of the environment related to the organization's basic task.³² There are a number of organizations that are using or considering the use of Twitter as a way of networking elements of their task environments.³³ For example, NASA is using Twitter to update interested parties on the status of upcoming space shuttle flights. Originally a tool for personal networking and sharing daily life events, Twitter has become a powerful marketing and communication device for companies.

The organization system works by taking inputs, converting them into throughputs, and delivering outputs to its task environment. Inputs consist of the human, informational, material, and financial resources used by the organization. Throughputs are the materials and resources as they are transformed by the organization's technology component. Once the transformation is complete, they become outputs for customers, consumers, and clients. The actions of suppliers, customers, regulators, and other elements of the task environment affect the organization and the behavior of people at work. For example, Onsite Engineering and Management experienced a threat to its survival in the mid-1980s by being totally dependent on one large utility for its outputs. By broadening its client base and improving the quality of its services (i.e., its outputs) over the next several years, Onsite became a healthier, more successful small company. Transforming inputs into high-quality outputs is critical to an organization's success.

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