lesson 2: defining real projects ii: a systems approach
TRANSCRIPT
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Lesson 2: Defining Real Projects II: a systems approach
Topic objectives:
• to provide an overview of the two main perspectives on systems thinking
• to introduce the key terms with regard to systems thinking
• to show that a system has both an internal and an external environment, and that the
system responds to its external environment in terms of being closed or open
• raise awareness of the boundary problem with regard to organization and systems
thinking
• introduce the concept of post-contingency, or transformational, theory on organization
2.1 Perspectives on systems
In Lesson 1 the problem of defining important terms was raised, and definitions for a number of
terms were offered. This topic will cover several new areas and definitions for the most
important terms will be offered. The term “system,” for example, is perhaps the one of the
easiest to define, but it may also be the most difficult to comprehend initially. However, an
understanding of the two definitions which will be offered for a system is important in that it
underpins the work following in this and subsequent topics, particularly with regard to
organization design. Hence the reason for stressing at this point that it will be worthwhile
individual delegates going over the subject matter of this topic several times, if required, until
they feel reasonably comfortable about their understanding of it.
First, some definitions are necessary. The critical one, of course, is that of a system. Systems are
composed of regularly interacting or interrelating groups of activities. For example,
organizations are complex social systems; attempts to reduce the parts from the whole reduce the
overall effectiveness of organizations. In short, the organization system requires that we
consider all its individual parts and more importantly, their interactions with each other. Let’s
take one example: suppose we sought to improve the performance of the Marketing department
at our company and one of the recommendations was to push them to book more initial orders
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through cutting down technical feasibility studies. Well, Marketing might like this idea but
imagine that you were a project manager with this organization. How would you feel about the
decision to forego feasibility prior to signing a contract? This illustrates one aspect of systems:
you cannot consider the individual parts without seeing how they affect each other and the
overall “whole.”
The original work on systems theory was developed to consider biological systems, where
researchers naturally understood that a human system is a complex organism that mutually
supports and promotes the overall function of the body. For example, we talk in terms of the
circulatory system or the pulmonary system. Biological systems are complicated but mutually
harmonious. That is, the liver does not work against the heart or the actions of the kidneys.
Likewise, any intervention into one body part is going to have implications for the health and
functioning of other parts. This same thinking was later applied to the study of organizations to
illustrate the points made above: an effective social system is one in which all parts are
considered in relation to each other.
2.1.1 The ICE model
Given that within a project there is an intention to produce a specific product or series of
products, a “Widget” for example, there will also be a need for resources. This is the case
regardless of whether a manufactured product, such as a car, or a more ephemeral product
such as a better working environment is intended. Production of Widgets may require inputs
of the resources of labor, machinery and materials into a designed system of production
where they undergo some pre-planned conversion to become the product of that system:
in this case, Widgets. A system can therefore be defined as anything which involves three
factors: inputs of specific resources; a means of conversion of those resources; and the export of
a planned product from the means of conversion. This can be summarised as I(mport),
C(onversion), E(xport) or ICE, as shown in Figure 2.1.
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Figure 2.1 The ICE system model
One useful aspect of this definition of a system is that it can also be applied to just about
anything. Organizations, ranging from the smallest firm through to the largest multinational, can
be seen as being systems of equally validity to that for an individual production system within a
manufacturing facility. The ICE definition, or model, for a systems is therefore potentially highly
versatile and as such, a powerful tool for analyzing the requirements of an organization.
However, it is not the only definition or model available, and prior to dealing with systems
terminology relevant to both models of a system, the second model should be introduced.
2.1.2 The PAC model
A common belief is that the production process needs to accept the imposition of three criteria
commonly linked to production processes: time, cost and quality. Acceptance of such criteria
also denotes recognition of the need for those involved in the production process to work in a
structured, but not necessarily rigid, manner. The function of planning, which was briefly
mentioned previously, is one important component of a structured method of working. To this
can be added the functions of analysis and control, which results in another handy acronym of
PAC (Planning, Analysis, Control). The presence of these three functions within an entity can be
taken as evidence of that entity meeting the requirements for it to be identified as a system. It is
useful to develop some perception of the possible activities within each of the components of
PAC, before returning to a more detailed examination of further systems terminology.
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PAC, because of its structured nature, is particularly relevant to the solving of problems related
to the design and operation of production processes, and this can reasonably be expected to
inform the organization structure design issue also. Typical production problems which respond
well to the structured application of PAC are those which fall into the following categories:
working methods; quality control; production equipment selection, maintenance & replacement.
All of these categories of problems are relevant to production processes in all industries. The
planning of work methods, for example, is often seen as being relevant to productivity levels
when considering efficiency of production, irrespective of whether a hot-air balloon or an
elevated roadway is to be produced. However, prior to being able to carry out any meaningful
planning, the central element of PAC (analysis) has to be implemented; a production problem
has to be analyzed before a solution can be confidently planned. Analysis, however, is a
specialist function with a large body of knowledge to study, and it will therefore only be dealt
with in outline at this point. As would be expected when implementing PAC, any attempt to
carry out analysis requires us to impose a structure. One way to do this is to split the analysis
activity into recognized areas, or sub-activities, within the production system to be analyzed,
such as: human factors; work environment; methods and measurement; machines and
maintenance; materials; and systems synthesis.
2.2 Systems synthesis
Of these sub-activities, systems synthesis could be argued to be the most important. This is
because it allows the effects on the system of changes in each of the other sub-activities to be
evaluated. Evaluation takes place through the process of re-uniting an individual element which
has been analyzed and then re-planned to increase efficiency (a cause-to-effect process) with the
other elements of a system. The effect(s) of the re-planned element on the whole system can then
be identified and assessed to see if there has been a net gain, loss, or no overall change.
Synthesis is also an awkward sub-activity in that it exists within the analysis function of the PAC
model while containing aspects of planning, analysis and control itself. Systems synthesis may
require further adjustments to individual elements to be made as it involves limited further
analysis of the improved system. There may well be the need for trade-offs to ensure that all
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elements are sufficiently compatible to form a coordinated system. Reaching a final decision on
this issue may require a large number of iterations as revisions to the model of the production
process are synthesized into the model, the results evaluated, and further analysis carried out.
Because of this, the actions of analysis and synthesis are generally seen as being 'lockstep' stages
(analyze, synthesize, analyze, synthesize, etc.) in the development of a more effective (ultimately
measured in terms of some form of cost) system. Briefly looking at the areas of the analysis
process individually gives some idea of the factors which can be considered in each of them.
2.2.1 Human factors
Generally seen as the most complex and unpredictable production factor, in an economic sense,
within a production system. This is an important point to consider when seeking to design and
optimize an organization structure. For example, the distribution of resources in terms of wages
around the structure can have effects on the operation of that structure, so there may be a
decision to be made concerning the balancing of paying higher wages to attract and keep skilled
workers against the cost of training and spoilage caused by employing less skilled workers.
Typical considerations when analyzing human factors are: human abilities, placement, training,
motivation, safety and supervision.
2.2.2 Work environment
The work environment exists as a secondary consideration to human factors. The workplace
environment can affect the way human factors interact. For example, a noisy environment may
reduce productivity as workers tire more quickly due to the stress of their environment. A similar
effect occurs in high and low temperature environments, certainly until the people working in
those environments have completed a period of acclimatization. Workplace environment can
affect motivation and safety in particular, and it is important to note that performance in any
production system is affected by the physical environment. Typical considerations about the
workplace environment include: site location, facilities layout, workplace design, and working
conditions.
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2.2.3 Methods and measurement
The design of the workplace can have positive and negative effects on the work environment. In
order to maximize the benefit of a workplace's design, methods & measurement are essential
tools. They should be used to ensure optimal transformation of input to output (productivity),
resulting in minimum waste. Examples of methods by which the production procedures can be
studied are: operations analysis; work sampling; and methods engineering. Examples of
measurement techniques by which the rate of production can be assessed are: time study; work
sampling; and wage/bonus payments. The nature of the methods & measurement sub-activity has
resulted in a strong emphasis on the use of charts. Such charts save writing time, direct the study
in a structured manner and provide complete records. Three groups of charts are utilized by this
sub-activity; survey, design, and presentation.
2.2.4 Machines and maintenance
Modern production systems make considerable use of machines to either generate or facilitate
output. While it is important to view mechanization as being different from both automation and
robotics, the more important factor is to consider the existence of a human machine interface
within the system. Even within the most highly automated work environment a human-machine
interface can still be identified: humans plan the environment, feed it materials and distribute the
product.
Considering the machine aspect initially, there are generally two variables to be considered -
time and money, so a brief, and very simplistic, discussion of some relevant economics concepts
is required. A machine is a capital (money) item in that it costs the organization a given amount
to purchase it. However, the machine also has a value to the organization in that it is bought with
the intention of using it in some form of production, the product of which can then be sold. On
this basis, the general theory is that the machine's loss of value over time is compensated for by
the work it contributes to production. In this way an investment is amortized (maintained over
time). The rate at which it loses value is a function of the maintenance program, with the cost of
maintenance being balanced against the rate at which a machine loses value if it is not
maintained.
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The “value” of machines used in production systems is set to increase in the future as thinking
machines extend the integration of humans and machines, particularly in the areas of computer
aided design (CAD) and CAM (computer aided manufacture). A piece of trivia which might be
of interest at this point is that IBM's early work on using computers to aid the design process
went by an acronym which is a mirror image of CAD: DAC (design aided by computer). Not
many people know that! Headings relevant to the study of machines & maintenance are:
sequencing, line balancing, machine loading, maintenance, waiting lines (queuing).
2.2.5 Materials
One of the objectives for any system should be to have the correct materials required for the
conversion process in the correct amount at the correct place at the correct time. Achieving this
usually causes implementation problems - how much is needed? Where is it needed?
Organization structures respond to the issue of implementation by developing specialist
functions. Three material management functions can be identified at this point: purchasing,
inventory, and material handling. These can be further subdivided to give: purchasing
procedures; inventory concepts, functions, costs, models, management; material handling
principles, applications.
Consideration of such increasing subdivision of specialization is relevant in that it points to one
of the key characteristics of an organization's growth; a bigger organization results in a more
differentiated structure. In order to survive, the organization has to increase the extent of its
interfacing with other organizations around it, and this drives further and further specialization
(differentiation) within the organization. This issue will be returned to in a later topic.
2.2.6 System synthesis
The sub-activity of synthesis has been discussed in some detail previously, but we return to it
here for two reasons: 1) to reinforce the issue of the importance of synthesis at every level of
analysis; and 2) the increasing use of computer technology within the sub-activity.
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Computer technology is particularly on the increase in the areas of materials requirement
planning (MRP) and simulation techniques such as the Monte Carlo technique. Monte Carlo is
basically an iterative process whereby a problem is identified, then analyzed to produce a model
of it. The model is then placed in a simulation which attempts to overcome the problem and a
result is obtained from the simulation. If the result is satisfactory, the changes made within the
simulation are incorporated into the actual production system which should then operate more
effectively. If the result is not satisfactory, the whole process is repeated again and again, each
time with new changes, until a satisfactory answer is achieved. While the value of the Monte
Carlo technique is often debated by professionals across all industries (and there are strong
advocates both for using and not using Monte Carlo), the technique is a good example of how IT
can make life easier. In order to arrive at a solution using Monte Carlo simulation without
computer assistance a laborious process (due to its iterative nature) has to be initiated.
Furthermore, to obtain optimum performance from the production system all of the sub-activities
would have to be analyzed in turn, which can be a time consuming process, even if only the sub-
activities briefly introduced to this point are considered.
2.3 Memory test 1
A few questions to exercise the grey cells:
a) state the two forms for defining and identifying the existence of a system
b) give three of the four categories of production problem which are claimed to respond
well to analysis using PAC
c) name the three groups of charts used by the sub-activity of methods and measurement
d) what is meant by the term “amortized”?
e) what is a significant problem in using Monte Carlo simulation without IT support?
2.4 ICE and boundaries
Having looked at some of the problems involved in implementing the PAC model of a system, it
is time to look again at the apparently simple ICE model of a system. Many people find the ICE
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model's apparent simplicity and versatility attractive, particularly in that the highly structured
nature of PAC seems to have been avoided. This is not altogether the case as the functions of
planning, analysis, and control cannot be completely ignored. If nothing else, earlier topics have
stressed that production cannot be seen as being accidental; it must be intended and therefore
requires some planning. All is not therefore sunshine and roses with regard to ICE, but it is
generally regarded as being more user-friendly than PAC. There is, however, one rather more
significant problem which ICE cannot overcome: boundaries. One component of a system not
mentioned so far is the boundary and this needs to be examined in further detail, particularly
with regard to the definition of the real or true project.
The concept of boundaries within a system can be quite straightforward. Consider the production
of ice-cream, for example. You may or may not think you know much at all about the production
of ice-cream, but at this point it does not really matter either way because you have already
established one boundary within the system which you are going to design: you are intending to
design an organization which will produce a specific item. Not windows. Not engines. Not cars.
Just ice-cream. So how does this help? Well, consider ICE once more, particularly the
conversion component, as this is where the actual ice-cream making will take place. At some
point resources have to move from outside the organization (your ice-cream making company) to
the inside of that organization, where they will enter the conversion process. The point at which
that happens can be referred to as a boundary. The boundary between the conversion and the
imported resources (conversion import boundary) can then become tuned to the process of ice-
cream making. If any resources come along which are not related to the making of ice-cream,
something as ridiculous as reinforced concrete pillars for example, the import conversion
boundary should exclude them from the conversion process. You have now set up your first
quality control activity, which is also a boundary: the import conversion boundary. You have
also taken the first steps towards both the definition of the real project and the constraining of
possible mirage projects.
Not content with just one boundary, you then seek to establish other boundaries as you begin to
suspect these things may be quite useful. Along with the import boundary, an export boundary
can also be established. Assuming that no effort has been made to plan the conversion process,
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things may go somewhat wrong. The wrong color of ice-cream may be produced from time to
time, and such ice-cream will be of no use in subsequent production systems (those of your
customers), so they need to be excluded from such subsequent production systems. This
exclusion (a further quality control activity) can either take place at the point of import by
customers to the subsequent system, or given that product quality is an important consideration
within the first system, it can take place at the conversion export boundary of your system. It is
possible to tune the conversion export boundary of the ice-cream production system to reject ice-
cream which is not the correct taste, color, texture, etc. Because such a range of tuning is
possible, it is vital (for the majority of projects) that it is not left open to the possibility of
introducing a mirage project, such as someone in the project team being convinced that everyone
else’s apparent revulsion with regard to lima bean-flavored ice-cream is simply down to the fact
that it is not available in grocery stores. To this person, this is a situation that can be remedied by
the mirage project of producing large quantities of just such an ice-cream through “tuning” of the
export boundary.
Boundaries are therefore important with regard to how the system's external environment
interacts with its internal environment. This reference to internal and external environments may
sound somewhat medical at this point, but all will be revealed! Your consideration of systems
now needs to be divided into two categories; that dealing with the environment which is external
to the system, and that dealing with the environment which is internal to the system. As it is
debatable which is the easiest to deal with first, the internal environment will be considered
before looking at the external environment.
2.5 Environment and Systems Thinking
Organizations can be structured in an infinite variety of manners, ranging from highly complex
to extremely simple. What is important to understand is that typically, the structure of an
organization does not happen by chance; it is the result of a reasoned response to forces acting on
the firm. A number of factors routinely affect the reasons why a company operates the way it
does. For example, among the most important determinants or factors influencing an
organization’s operating philosophy is its operating environment. An organization’s external
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environment consists of all forces or groups that exist outside the organization and have the
potential to affect all or part of the organization. Thus, some of the elements in this external
environment that can play a significant role in a firm’s activities are competitors, customers in
the marketplace, the government and other legal or regulatory bodies, general economic
conditions, pools of available human or financial resources, suppliers, technological trends, and
so forth. The degrees to which these various factors do play a significant role in affecting the
activities of a company are referred to as the organization’s environmental complexity.
Environmental complexity defines the number of external environmental elements that can affect
our operations and the severity of their potential impact on us. In this way, we can see that the
structure or strategy of a corner grocery store, serving a limited clientele and employing few
people, is not likely to have nearly the degree of complexity that General Motors would possess.
The grocery store is affected by fewer environmental elements (lower complexity) and many of
them would have less severity on their activities than would be the case with the auto maker.
The second key element that defines an organization’s environmental uncertainty is the
dynamism, or change that occurs within each of the elements affecting its operations. Suppose,
for example, that a firm faced not only a complex set of environmental elements, but that these
elements were constantly in a state of flux, changing unexpectedly and often. It would be very
difficult to manage an organization’s environment effectively under circumstances where it was
virtually impossible to predict what environmental elements were likely to affect the
organization and when. Thus, dynamism complicates the manner in which we try and conduct
business. Microsoft Corporation is an excellent example of a company that is affected
powerfully by both a wide and diverse set of environmental elements affecting its operations, but
also by the fact that many of these elements are constantly changing. The lawsuits pending for
alleged antitrust violations affect the manner in which the firm conducts business. The
technological shifts in computer hardware and software are constantly being monitored and
addressed. Customer tastes and expectations are an important continuing concern. The list goes
on.
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The nature of the problem is shown in Figure 2.2. The diagram is a simple method for
categorizing the challenges facing organizations from the environment along the twin
dimensions of environmental complexity, the number of domain elements with which they must
contend and the dynamism, or changeability of those elements. With respect to levels of
environmental uncertainty, we can see that companies operating in relatively stable and certain
environments, such as beer distributorships differ substantially from computer or
telecommunications firms, not simply in the products or services they create but because the
products or services they provide differ dramatically in how they affect and are affected by their
external environment.
The conceptualization is Figure 2.2 is useful because it demonstrates a salient fact: organizations
and their sub-systems can widely differ in terms of the external pressures they face in developing
and managing projects. For some companies, rapid external shifts and constant multiple
pressures are a way of life. Their structural philosophy requires that they organize to take
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advantage of the opportunities and contend with the threats posed by their environment. For
other firms, stability and predictability are much more the standard for their activities. Because
they contend with lower complexity, lower dynamism, or both in their environment, they can
adopt an operating philosophy that allows them to exploit their opportunities and advantages in
their unique ways. For example, prior to a company’s decision regarding the type of structure it
should adopt, it must strongly consider the environment within which it wishes to conduct
business. We will learn more about structural issues in subsequent lessons.
2.5.1 A system’s internal environment
As far as systems for the production of artifacts are concerned, it can be argued that their internal
environment is effectively the process of conversion (production) taking place within them. The
nature of this conversion process can be determined by working backwards from the desired
system product, so that if ice-cream is the required product the conversion process will be
focused on turning specific resources into that product through the use of specific machines and
labor skills. Based upon the requirements of the conversion process, the required imports can
then be identified. In this simple model, it is only when imports enter the system, and the export
leaves the system that any consideration of the external environment needs to take place.
The conversion process determines the system internal environment, in that the environment
must allow the manufacture of ice-cream. Anything which will make it more difficult to produce
ice-cream must be excluded from the internal environment, and this is usually achieved through
the installation of various environment self-checks. One example could be that of heat; too much
heat is, if nothing else, an expensive waste of energy, whereas not enough heat will mean that the
ice-cream may not achieve the required workability and be too hard. The system internal
environment must therefore contain a self-check for monitoring heat levels. With a bit of further
consideration, you could doubtless come up with other possible internal environment self-checks
for the ice-cream production system.
A key consideration resulting from this introduction to the concept of the system internal
environment is that the environment is created and governed in terms of self-checks. It can
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therefore be argued that the internal environment is largely a quality assurance concept, and as
such is relatively controllable by the organization implementing the production system. The
external environment can, however, be a rather more difficult factor for the organization to deal
with.
2.5.2 A system’s external environment
Precisely identifying those items which compose an individual production system's external
environment can appear to be a complex and time consuming process, and in some cases that is
actually what it is! However, at this stage of the introduction to systems thinking, consideration
of a system's external environment need be no more complex than identifying all those items
which the internal environment is dependent upon. For example, in the case of the ice-cream
making system, the system's internal environment will require a number of imports. Possible
imports such as milk, sugar, and vanilla flavor are obvious examples.
All imports have to come into the system through the conversion import boundary, and it is this
boundary which can be used to identify where the internal environment stops and the external
environment starts in this example. A simple approach to this problem is to ask the question
"where do my required imports come from?" Quite frequently the answer will be that the
required imports are supplied by some other producer who operates outside the boundaries of
your system (the ice-cream making project), and as such are largely outside your control. A good
project manager needs to be aware that considerable planning effort may be required to ensure
that their project system's requirements are met by the systems of other projects and production
systems. This leads into a need to consider the issue of open and closed systems.
2.6 Open and closed systems
A final consideration at this point is that it is also highly likely that your project system will
result in an export (product) which acts as an import into a separate system elsewhere. Within an
increasingly global economy, this may mean that your system's export environment boundary
has to link into a conversion import boundary which is part of a project or production system on
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the other side of the planet. This then raises all sorts of other issues, within the context of co-
ordination and communication problems such as trying to communicate through different time
zones, languages and cultures. Such problems are not generally common when dealing with an
organization in the same city as yours; just that at times it feels like they are! A problem of
greater significance for production project systems is that they involve elements of both
sequential production and concurrent production. Sequential production is epitomized by the
general perception of manufacturing processes, where components are gradually added to the
product along a production line, such as in most car plants. Concurrent production refers to the
situation where many components are added at the same time, and generally results in a reduced
overall project or production duration. Within the majority of projects there will be a mixture of
sequential and concurrent production systems required in order to export the final product.
The internal and external system environments for a sequential and/or single production system
may be relatively straightforward considerations, but complications can arise when several
production systems need to be considered at the same time, as in concurrent production. So, for
example, when the fuselage, wings, and engine of the new Boeing 787 are perhaps being
individually constructed in sequential production environments controlled by separate
organizations, the overall intention is to produce a functioning airplane. Therefore, the individual
subassemblies (fuselage, wings, engine, etc) have to be brought together at some point. The
question then becomes one of does the organization structure itself around starting to assemble
the complete airplane only once all the individual subassemblies have been completed, or does it
aim for a structure which allows it to begin assembly, even though some of the subassemblies
may not have been completed at that point? Airbus’s massive A-380 aircraft ran into huge
coordination problems due to the complexity of manufacturing various components across
different firms headquartered in different countries, with different software systems. The result
was a serious glitch in production that required miles of cables being fed by hand through several
airframes before they ironed out the problems.
It can be argued that taking the first approach (sequential production) reduces the extent of risk
that an organization exposes itself to; if the wing manufacturer hits a problem and is delayed, the
airplane assembly process is not left waiting for resources as it has not yet started. However, the
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apparent minimization of risk in this strategy will result in an increase to the project duration as
the life-cycle is stretched out, and this will adversely affect the productivity of the assembly
organization. Switching to the second approach (concurrent production) increases productivity,
but also places greater emphasis upon relations with organizations outside the assembly
organization's internal environment, and therefore to some extent outside of its control.
Some organizations are deeply worried about the issue of controlling those factors outside of
their internal environments which they see as having possibly adverse effects on their operation.
This is not necessarily paranoia on their part, as the external environment is a rapidly changing
and confusing place to be, as can be shown by a brief consideration of the PEST (sometimes
presented as STEP) model. PEST is an acronym of the grouped factors that are typically seen as
composing an organization's external environment: political, economic, social, technology. As
with all other aspects of systems thinking, each of the PEST factors can be split down into
smaller and smaller sub-factors, and it is at this point that the versatility of the ICE systems
model tempts those of a rational frame of mind into a significant conceit. At the point when a
project manager who is from a background that would be regarded as involving rational thinking,
such as engineers, begins to realize the infinite possibilities of the ICE model, they tend to begin
thinking in terms of developing highly detailed simulations about their organization.
The reasoning goes that, because it is possible to break down systems into smaller and smaller
subsystems, and repeat the process with all the systems that their system interacts with
(component suppliers, energy companies, etc.), they should be able to plan out all the
connections and then simulate what the best response would be to make in any given set of
circumstances. Just think of the competitive edge that an organization would gain from being
able to do that! Alas, it just is not possible. Thinking the scenario through reveals that the sheer
number of connections and the level of interdependency that results from those connections
between all the systems that one organization interfaces with become overwhelming. For
example, think of how many external suppliers (regardless of the product they are supplying)
you can identify on a typical project that you are involved with at present. Now think about the
different materials used by those suppliers individually, and consider how many materials
suppliers your suppliers deal with. Then think about the number of sources of supplies that the
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materials suppliers have to deal with, and just consider the various possibilities on the supply
chain of one change in a single factor such as the political factor (perhaps a health and safety rule
concerning the extraction of a particular raw material?). Now repeat the process, but consider
this time a change in the level of tax applied to the fuel used by the haulage companies who
transport the supplies. At some point, even the best project manager has to accept that they just
cannot know all the answers.
2.6.1 Closed systems
If the project manager cannot, and perhaps should not be expected to know all the answers, what
alternative strategies are available to deal with the problem? Systems thinking offers two
possibilities, which can be summarized in terms of the extremes of a continuum: closed and open
systems.
Closed systems can be simply described as systems that operate entirely without communicating
to other systems outside their own boundary. They are incapable of directly taking anything from
the external environment, in that all their inputs are supplied by other systems within the
organization or project boundary, and they are incapable of responding in a positive manner to
changes in their external environment. Good examples of completely closed systems are
surprisingly difficult to come up with, as there almost always seems to be possibilities for what
may be referred to as leakages between the external and internal environments. A lawn mower
engine is one regularly offered example of a closed system; the argument being that so long as it
has gasoline it will continue to function, irrespective of what the environment external to the
engine may do. However, once it runs out of gas it can do nothing other than stop working.
Unfortunately, there are also other possibilities for negative interaction (the engine ceasing to
function) between the two environments, such as the engine seizing if it overheats when the
temperature of the external environment reaches a certain level.
The important consideration is perhaps not so much that there may be leakages between
environments, but that a closed system is not able to respond to such leakages in a positive
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manner. The engine has no means of either reducing the external temperature or reducing it's
own temperature to compensate. Likewise, the petrol engine has no way of letting users know
that they should not use diesel fuel before they fill up their fuel tank. There is also the possibility
of project managers seeking to ignore the leakages altogether and convince themselves that their
organization or system is absolutely closed, irrespective of what the external environment is
actually doing. Unfortunately, this usually ends in the messy and untimely end of the whole
project, organization, firm, or whatever other title is applied to the system under consideration.
Rather than worry about identifying a truly and completely closed system, the project manager
would perhaps spend the effort involved more profitably by considering ways of responding to
the identified leakages. This leads to the concept of the open system.
2.6.2 Open systems
Somewhere at the opposite end of the continuum to the closed system lies the open system,
which can be defined in terms of a number of characteristics: energy; throughput; output;
homeostasis; entropy / negative entropy; requisite variety; equifinality; and system evolution.
These characteristics will be dealt with in more detail as part of a later Topic, but at this point it
is sufficient to be aware that all organizations are, to some extent, open systems. They take
resources from the external environment, carry out one or more conversion processes, and then
place the completed product in the external environment. This does not mean that such systems
have no boundaries. In fact, it can be argued that an open system possesses more boundaries than
a closed system in that it is actively seeking to interface with all relevant factors in its external
environment. This is particularly so as an organization grows in size.
The organization may seek to operate more in the manner of an open system, and see if there are
other technologies out there in the external environment that it could use to overcome the key
problem with the engine product; it pollutes. A project may be initiated to examine the
possibilities of partnerships with the developers of clean fuels, for example, as one way of
responding to the newly perceived negative aspects of the organization's product. Such a
partnership would involve a range of new interfaces, or boundaries, with the external
environment. In this way the organization seeks to adapt, evolve and survive, and the suggestion
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that the ultimate open system is a living organism perhaps begins to seem less frivolous. This
leads into an initial consideration of what are referred to as postcontingency or transformational
approaches to organizations.
2.7 Memory test 2
Time to check back over a few points before moving on to the next section.
a) What are the two dimensions that define the “complexity” of a firm’s operating environment?
b) What defines a system's internal boundary?
c) What does PEST define and what do the letters stand for?
d) What does the so-called boundary problem refer to?
e) What is the key difference between a closed system and an open one?
f) What type of system can a project organization be regarded as?
2.8 Postcontingency approaches
The systems analysis technique for organization structure development discussed to this point is
an example of what is referred to as the contingency approach to projects, in which the argument
is that there is no single perfect way to organize for all projects; the most appropriate form or
structure for an organization will be dependent upon detailed information concerning the factors
and characteristics of the external environment. The organization then seeks to embed itself
within the external environment, and systems analysis has been, and in the majority still is, seen
as the most effective way of achieving this. However, problems such as the issue of boundaries
between infinite interdependent systems cause concern with regard to defining the extent and
nature of the true project. In essence, the information gathering activity becomes a project in
itself, both prior to initiating the real project and during its lifetime. Any changes in the external
environment during the project duration could require the organization structure to be revised
and this requires a form of organization that is capable of rapid response to change; a feature not
usually equated with contingency approaches. Such problems have caused researchers to
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examine possible alternative approaches to organization design. One possible approach is based
on what is referred to as postcontingency theory.
The basis of postcontingency, or transformational theory, is the questioning of the almost
instinctive attempt by people who sincerely believe that those above them in an organization's
hierarchy know absolutely what is going, to attempt to predict and control organizational
activities and events. Rather, the emphasis moves to encouraging people within an organization
to respond positively to what has been labeled by Banner and Gagne (1995) and others as
sapiential authority; authority based on actual (rather than assumed) knowledge and expertise. In
this way, the theory claims, the realization that the reality of organization is not one which can be
made to conform to any logical, reasoned, systemic way of thinking begins to emerge. Because
of the postcontingency theory's emphasis on regarding organizations as being fluid, and therefore
creative, entities, rather than structures defined in terms of hierarchies and formalization of
power and authority, there is the opportunity to release all the energy previously constrained by
such formalized structures. As one simple example, think of how engineering departments view
the issue of authority. Interviews with engineers in most organizations, across multiple
countries, reveal an interesting response. Ask them who they most respect or who wields the
greatest power within their department and they will typically point to the brightest or most
competent person, NOT the hierarchical boss. For them, authority is sapiential, not based on
rigid hierarchies.
Perhaps the most extreme perspective on organizations (for those who class themselves as
rational-minded thinkers) is that in which organizations are viewed as energy fields. This
suggestion appears to have originated with a consultant by the name of Linda Ackerman, who
derived her approach from a melding of quantum mechanics and Eastern philosophies
(Ackerman, 1984). Within this approach, the key factor is identification with the organization's
purpose by those within it, as the purpose focuses the energy resulting from forces competing
within the organization. The aim is to achieve what is referred to as a flow state wherein all
organization members remain charged with the energy of purpose. This is compared with the
solid state flow, wherein managers aim to control rather than direct competing forces through the
imposition of rules and regulations, claimed to be typical of contingency theory. Again, let’s
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consider an example. Facebook has become the leading social networking mechanism in the
world and has grown exponentially in the past three years. The founder of Facebook, Mark
Zuckerberg, is a 26 year old billionaire who has created an organization with minimal rules,
casual dress codes and working conditions, and a free-wheeling senior management. What binds
them together is a shared enthusiasm for the sheer power of new technologies and the desire to
continue to search for “wow!” opportunities.
Other forms of postcontingency organizations include:
• the metatonic organization, in which barriers within the organization and between it and
the external world are broken down and the culture of the organization is claimed to be
refreshed by the culture of the external world.
• organizations with spirit, in which leadership is seen as being concerned with the
focusing of spirit and the enhancing of its power. This is suggested as being achieved
through managers creating context (the unquestioned assumptions through which all
experience is filtered, the ground of being from which we derive the context of our
reality, and that which determines the way we put things together in our minds)
(Gaffney, 1985).
• organizations which challenge what are referred to as self-limiting beliefs. This is
achieved through managers challenging their own beliefs and assumptions, and
encouraging others to do the same through experimentation and the taking of risks.
Perhaps after having briefly examined some of the postcontingency theory approaches, a radical
suggestion such the second law of thermodynamics having a relevance to project management
(which will be returned to in a later topic) may seem a little less far-fetched! However, it is all
too easy to mock ideas and concepts which do not readily fit with our accepted beliefs about the
ways in which things should be done, and this should not be seen as an acceptable thing to do.
Only by being willing to question the way things are currently done can we hope to find more
effective ways of doing things in the future. Adapt and survive!
2.9 Understanding test 1 Another scenario to work with:
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Assume that you are currently working as a project manager on a new product development
project. The project is to produce a prototype for evaluation with respect to possible future
commercial production (feel free to assume that the project is dealing with whatever “product”
you feel comfortable with). Before getting into the design stage of the project you feel that there
may be benefit to be gained from identifying possible risk areas with regard to relationships
between the project team members.
Using one of the contingency theory approaches, carry out an initial analysis of your project to
identify who are the stakeholders, and whether each stakeholder is to be in the internal or
external environment to the project. Having identified the stakeholders, consider any
interdependent relationships with a view to identifying where competition may be expected to
exist, and define the features of that competition; what are stakeholders competing for / against?
Finally, move on to considering how one of the postcontingency theories may be applied to the
issue of competition in advance of stakeholders actually forming their relationships. Suggest how
you would attempt to prevent creative energy blockages occurring in your project organization.
2.10 Summary
Several new subject areas have been introduced in this topic as the coverage of organization both
widens and deepens. The differences between the ICE and PAC system models, for example,
have been presented as an opportunity for students to think more critically about the ways in
which organizations, at any level, may be designed and developed. However, the systems, or
contingency theory, approaches to organization have been noted as having an important problem
for some researchers and consultants; the boundary problem. This has led to the suggestion of a
postcontingency theory in which organizations attempt to remove barriers, both in the internal
and the external environment, so as to maximize creative energy.
Doubtless some of the ideas put forward in this topic will seem strange, possibly even silly, to
some students; we all have our own individual credulity threshold, and some ideas are bound to
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cross that threshold from time to time. An important factor in developing a greater understanding
of organization is that, rather than worrying about ideas crossing our credulity threshold, effort is
directed at asking why an idea has crossed. What is it that you, as an individual, find
uncomfortable / ridiculous about a particular idea? In doing this there is an opportunity to
question the validity of the threshold, and perhaps discover that it is the threshold, rather than the
idea, which is wrong.
2.11 References
Ackerman, L. (1984) The Flow State: A New View of Organizations and Managing.
Transforming Work, Alexandria, VA. pp 114-137.
Banner, D.K., Gagne, T.E. (1995) Designing Effective Organizations. Sage Publications
Inc. California.
Gaffney, R. (1985) Systems Thinking in Business: Philosophy and Practice; and interview
with Peter Senge. Revision 7, pp 56-57.
2.12 Directed Readings
Please read the Van Der Merwe (2002) and Cooke-Davies et al (2009) articles from the lesson.