4.2 Systems Theory And Contingency Theory

• The System theory of administration follows the broad premise that an organization functions as a holistic and integrated entity. 

• This wholism or integration can be construed as internal Integration among the various parts or subsystems

                                     or
                at the external level of integration with the broader environment or supersystem.

The latter interpretation is termed as the open system Approach which has also been explained as the contingency theory of organisation.

• The idea of "system" came to the field of organisational management and administration in the 1950s and the general system theory which was already in use in life sciences and social sciences now being extended to the study of the organisation as well.

• However, even before the use of GST, there was earlier suggestion regarding the need for integration of wholism in an organisation.

• Thinkers like Marry Parker Follet have talked about internal integration or coordination as an imperative for organisation effectiveness.

• Elton Mayo emphasized a social situation in administration and 

• finally, Chester Bernard described the organisation as a cooperative Social system.

• System Theory of Administration can be termed as a synthesis of classical and Neo-classical approaches in so far as it emphasises on balanced synthesis (or integration between the technological or structural emphasis of classical theory And Human or Behavioural emphasis of Neo-classical theory.)
• Thus, instead of an either or approach system theory emphaises a balanced wholism where both the concerns are optimally emphaisesed without one overshadowing other.

CORE ARGUMENTS OF THE SYSTEM THEORY 

• The system theory of organisation view the organisation as a collective of many parts and therefore view it as a system.

• As a result, the central argument of system theory is that the parts may be distinct identifiable and individually important but an even more important reality is that they are interactive, interdependent and mere contributors.

• As a result, it becomes imperative for organisations to achieve systematic balance and interactive integration among them.

• The moment there are significant part or subsystems, it becomes crucial that they receive harmonious attention instead of one being overriding importance and other getting Neglected.

• The general system theory is general ideas in the form of some technical Jargon.
• It observes that in case of a particular sub-system or part of an organisation receives over-riding importance and starts overshadowing or dominating the other parts.
• This is known as 'Sub-unit Goal Internalization" ie sub-unit/Part becomes that it cannot see the bigger picture and overall goals may be compromised because sub-units misconceives its own goal as supreme.  

• Sub-unit goal internationalism typically describes a situation where a particular unit or part/Subsystems, gets so fixated on its limited goals that such partial goals are achieved but in the process, they cause disproportionate damage to holistic or macro-goals.

• According to General System Theory, such situation if not stopped or rectified will eventually lead disintegration or demise of organisation termed as entropy.

• On the other hand, if there is balance and harmonious synthesis of various parts they will start converging towards their common pursuit of macro goals, each part's individual capability be potentially be magnified because of the support and force multiplier effect which it receives from other parts. 
• It is called "Internal Elaboration', or synergy.
• Synergy can be described as a situation where value, effort or performance of two or more parts when combined will be greater than sum of their individual values. In other words , it is increased effectiveness which results from mutual co-operation , convergence and holistic integration.

CONCEPT OF ENTROPY

• In general system theory, the concept of entropy is one of the key ideas that many administration thinkers have addressed, one of them NORBERT WIENER has defined entropy as-

• "Entropy is a measure of an Organisation's natural tendency towards disorder and disintegration"

• The Intriguing point in this definition is why entropy has been defined as a natural tendency. One reason can be found in the very nature of the organisation that by the very definition an organisation is a goal-oriented human grouping.

•  Now when there are common goals to be achieved by a number of people, it becomes natural and necessary that these goals will be divided into divisional , segment , unit goals or targets.

• Its fundamental and unavoidable necessity that organisation has to resort to division among constituting units or individuals , task differentiation or division of work is created and power differentiation of division of authority using horizontal or vertical differentiation.

•  The irony is this -divided work has to contribute to united goals.

• In other words , divergence is a necessary evil while convergence is the eventual goal.

• Organisation naturally have to encounter a paradox that differentiation is created in hope of integration, which may or may not effectively take place , thereby creating risk of entropy.

• Moreover , another natural feature contributing to the possibility of entropy is that Human collective that organisation is made up of -diverse element with 'Individual difference" .
• Human beings can be very diverse entity in terms of their background , value system, aspirations and ambition , ideas and priority, opinion , priorities, viewpoints.
• Therefore there is natural inherent possibility of conflict in opinion , priorities.

• Typically there is conflict over resources, role, importance credit for success, blame for failure , future , vision and direction of the organisation etc.

• Thus Norbert Wiener is right in arguing that organisation have an inbuilt entropy or a inherent natural tendency towards implosion causing disintegration and eventual decay of subsystem because subsystem wouldn't harmoniously converge .

• Thus entropy has been described as a negative energy which is found within the organisation because of natural human difference and inevitable division for achieving common goal through a human collective .

• In this context administration thinkers argue in order to overcome this inbuilt entropy , organisation has to build "a binding energy".

• In General System Theory Jargon this binding energy is called Negative entropy or Syntropy.

• Negative entropy can be described as a binding glue or a positive energy which will keep the parts together in an integral whole.

• In this context, its often observed that-" Good organisation will seek to export entropy and import and store Negative entropy".

• "This binding glue or negative entropy is often imported from the environment in form of progressive ideas and best practices from successful and integrated organisation".

Typical example of such best practices and proven benchmarks could be ideas like 

• theory , 
• cosmology , 
• inducement-contribution equilibrium, 
• system for management , 
• philosophy team structure, 
• democratic style of leadership etc. 

Good Organisation either try to cultivate their own negative entropy through own innovative developments which facilitate man to man and unit to unit integration. 

• Alternatively , they import already established benchmarks which have proven their utilities in other organisation.

• In Public administration its called comparative learning under the broad idea of "Ecology in administration" (Chapter 7-CPA).

• On the subject of entopy , behavioural thinker march and simon alos made observation -"Organisation are more earthworms than apes"

• Thus this cryptic statement what March and Simon are emphasizing is that organisation are yet not reached a stage in their evolution where they will have natural and inbuilt co-ordination unlike apes , earthworm don't have the intellectual procession which would give them superior dexterity, coordination or intra-organism interactions.

• Moreover earthworms are not as gregarious or social-able as apes and therefore also they are not naturally inclined towards co-operation or bond.

• Thus, according to March and Simon organisation don't have the natural or readily inbuilt binding energy or coordinating arrangement by there nature and by their stage of evolution.
• They are naturally vulnerable to entropy and have to make conscious efforts for syntropy or coordination.

• Another important terminology which is used in General system theory is the concept of "GESTALT" which refer to a unified pattern made possible by holism.
• Gestalt is defined as configuration pattern, so integrated as to constitute a functional unit with  propertiess which are not derivable by simple summation of its parts.

• Gestalat describes a situation where the holistic effect or goodness is more than the goodness that isolated parts would have created.

Systems Theory essentially aims at Gestalt and the various terminology which the General systems theory users can be interrelated as under-

• In the context of the evolution of administration that the system theory of organisation is often described as under

CONCEPT OF OPEN SYSTEM

• Under GST , a distinction is made between closed and open system on basis of relationships of system with its environment. 
• A closed system is defined as a system which is self contained whereas open system is heavily dependent on its environment.

Other differences between two are tabulated below-

• Traditionally under GST machines were described as close system whereas living enetity were described as open system on a simple logic that living organisation has a huge dependence on its environment in terms of exchange energy and because the environment is the much bigger super or supra system as compared to that organism

• Organsiation ae described as open system because 

a)They are human collective and therefore are closer in charateristics to living organisms.

b)There very nature is such that they depnd on external entities lying in environment for two most vital processes namley supply of input and absorption of output.

• This istelf can be seen as "the exchnage of energy" between supra-system and sytem, while another crucial dimension of this energy is stimulus response exchange.

• The idea of open system led to emergence of the contingency theory as the second branch of modern thought.

• Contingency Theory essentially argues that an organisation exists within a broader environment on which it is dependent for its success growth and even survival , therefore the organisation and its effectiveness is contingent upon how effectively it can interact with, understood and adapt to its environment.

• The idea of open system led to emergence of the contingency theory as the second branch of modern thought. 
• Contingency theory essentially argues that an organizaton exorts within a broader environment on which it is depencent for its success , growth and even survival . 
• Therefore the organisatioon and its effectivenmess is contingent upon how effectively it can interact with, understand and adapt to its environment.

The idea of open system is a thread which connects system theory with contingency theory and tis has been explained by two modern thinkers Katz and kahn  as depicted below.

• Thus, in  order to be effective as per the modern theory an organisation not only just  needs subsystem excellance but beyond that 

a)system holism
b)supra systemic Dynamic/ adaptiveness




1.Subsystem Excellance
2.Systemic Holism/Elaboration/Synergy
3.Supra-Systemic Adaptiveness/Dynamism

Thus contingency theory of administartion , according to Katz And Kahn takes next step forward and emphasises "Macro-managemnt"in addition to "Micro-Managemnt"

Contingency theory of organisation can thus be described as a knoweldge Intintegration Approach ie..it doesn't take a therotical view that the earlier theories were wrong or have become irrelevant and should be replaced instead it takes a synthesis approah to integrate all possible concerns of administartion excellance in organisation and on top of it adds the dimesion of Integral Elaboration and external adaptiveness.

Contingency Theory is also known as "Eclectic Approach"which means it is a practical , prgamatic approach .

It can be explained in two different but interrelated aspect-
a)It recommends knoweldge integration rather than replacement or subsititution.
 As a result it takes a practical line that even in contemporary or modern organsiation , some classical prinicples of work study or structure are still relevant.

b)It takes cognizance of the key reality that an organisation doe not operate in vaccum and as a result it needs to be pragmatic in realising that it cannot unilaterlly determine its success, through some preconceived ideas or best methods or styles of functioning instead there has to be a practical realisation that it's effectiveness is contigent upon eexternal forces and varibles.

Thus, under contingency theory there is nothing called "the best method" or the best structure or the best leadership style, contingency theory is more about the most fitting right now.

It seeks to continuously search for "the line of best fit"

In other words , modern administartion theory is termed as flexible design theory or situational design theory instead of traditional universal theory ,the logic being orgainsiation as a dependent varaible doesn't have the freedom or luxuary to unilaterally and rigidly decide its business line work methods , organisation structure , decsions or manaagement strategie.

Change becomes the only permanent thing and therefore flexibility and dynamism in terms of contnous innovation and adaption becomes the key.


The changing environment keps throwing up new opportunities and new threats and challenges to ride the monetum and optimally exploit opoortunities presented while mitigating the threats contniously by the environment.


A continous SWOT Analysis ie..an analysis of opportunities and threats lying in the environment in relation to its own strengths and weakness , so that the aim is to overcome the weakness and consolidate the strength to give an appropriate response to environment.

THE REQUIREMENTS CREATED BY OPEN SYSTEM OR CONTINGENCY IDEA

1)The Concept of Cybernetics( Genral system theory terminology)-Norbert weiner

Cybernetics is science of communication and control wherein the core idea is that an entity can use its communication to control or acheive its results.

The idea has been used in administartion theories because of open system concept of organisations.

One of the main thinkers to use cybernetics in administartion theories has been Norbert Weiner who has observed that organisational cybernetics is about environmental stimulus as the intial communication and the organisational adaptive response as the control which the organisation would want to exercise.

Thus, he described organisation environment action in the form of a cybernetics feedback loop as depicted below-

(2) THE CONCEPT OF "SYSTEM CONSTRAINT"

Another modern administrtaion thinker C.West Chruchman have described concept of system constarint by observing that "Environment of any organisation is the system constraint" meaning therevy that the system namely the organisation may have certain design or ideas or plans but yhe suprasystem or envronment may create constraints for the organisation.


The simple idea that churchman is emphasizing is that the environment often dictates terms to the organisation by establishing the rules of the game and therefore it imposes constraints on what it can do or what it cannot do or what it will do with greater success. This again highlights the basic feature of open system idea that organisation cannot decide unilaterally or in the vacuum, it will have to be guided by clues from the environment.

3)CONCEPT OF HOMEOSTASIS

Homeostasis is an interacting idea which seeks to convey a paradoxical situation of achieving stability through dynamism.

The open system or contingency approach requires adaptive dynamism on part of the organisation. This dynamism is not static or one time rather its continuous and therein lies the challenge.

Ideally speaking, an organisation would like to achieve a state of stability where the environment stops bothering it. However, the irony is that this state of stability is achieved via multiple adaptations.

thus, homeostasis can be described as a process of such hyper-adaptive dynamism that it creates a sense of stability.

In  this context it is often said-"organisation are open system striving for closer"

Homeostasis describes a process whereby an organisation takes cognisance of environmental volatility and prepares multiple adaptive responses for every possible eventuality at nay future stage, it has a contingency plan to effectively meet it.
Thus for all practical purposes, even a changing environment does not bother that super-adaptive entity because it has achieved stability via dynamism.

THE IF THEN  CONTINGENCY MODEL

The most well-known model of contingency approach was given by two thinkers Lawrence and Lrosh in 1967 and became highly popular in the 1970s.

The model follows the very core of contingency philosophy that an organisation is dependent on its environment and therefore as the environment changes, it will have to change its own structure and operative characteristics have to be aligned and realigned as per the environmental features.

According to this model , it visualises three different kinds of environment and argues that if the environment has this kind of structure or operative characteristics. Thus , the model reinforces the contingency argument that there is no single best organisation design or structure or philosophy. It rather depends on what the environment requires or what would be suitable to the environment in which this organisation finds itself.

STRATEGIC CONTINGENCY THEORY

It can be regarded as the logical extension of contingency theory wherein the main idea is that when an organisation seeks to respond to environmental contingency, it often creates new lines of business or new subunits or new divisions. Now the next big problem that this creates is the problem of managing the complex internal structure and achieving coordination internally. Thus, strategic contingency theory seeks to achieve internal dynamism necessitated by external dynamism.

To elaborate external dynamism often leads to multiple subunits and it creates new challenges like-

1. Dependence on common resources including human resources
2. subunit centrality and Non-substitutability ie...some unit may become very dominant/monopolistic.
3. conflicting performance criteria or heterogenous goals.

Thus it becomes a crucial issue as to how to ensure independence or autonomy to different units and yet achieve coordination and internal holism.

Strategic contingency theory recommends the solution like-

a)reciprocal dependency

b)Each subunit to have core competence and demonstrate its own strength to justify its relevance.

c)Innovative structural changes to create coordination with autonomy 

d)Freedom to subunits but check against sub-unit monopoly.

The best example of the use of this suggestion of strategic contingency theory is the new organisation structure introduced by Google in August 2015 by creating a new parent company Alphabet.