Modern Organization Theory – Systems Theory (2023)

The Modern Organization Theory describes organizations as an open social system that interacts with the environments to survive, known as the Systems Theory Approach. The System Theory Of Management approach is an external factor which measures the effectiveness based on long-term sustainability or growth.

A significant application of Systems Theory is in Business Organizations to elucidate a particular approach to management.. The Modern Organization Theory was not originally a business theory but was proposed during the 1940s.

Modern Organizational Theories is divided into two major types – Systems Theory and Contingency Theory. In this article, you will comprehend Systems Theory and its contributions and criticisms in a detailed manner.

System Theory of Management

The Systems Theory was proposed during the early 1960s. The Theory holds a conceptual and analytical base, and thus the system presents a great significance on the empirical research data.

In simple words, Systems Theory considers organizations as a network of systems. A system can be either an organized or complex whole, that is, it can be referred to as a combination or an assemblage of things or parts that comprise a complex unitary whole.

(Video) Systems Theory of Organizations

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A system comprises different parts known as the subsystems, which are interrelated to one another. Further, the various subsystems are arrayed based on a particular scheme so that the complete system is more than a summation of the various parts. This ensures the system's efficient functioning and secures every system with a boundary that separates it from its environment.

Organizational Systems and Its Environment

There are two types of organizational systems:-

Open Systems: Open Systems interact with their environment, and all living systems fall under this category.

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Closed Systems: Closed Systems hold no interaction with their environment, and all non-living systems fall under this category.

An organization is said to be an Open System if it incessantly interacts with its environment. Therefore, to understand the working of an organization, one must identify its boundary and through the organization's interaction with its environment as an input-output model. An organization's inputs are information, energy, and materials that an organization takes from its environment. The input consumed is then transformed with machines and people's help and then supplies the output to the environment.

(Video) Modern Organizational Theory

An organization comprises multiple subsystems like Social subsystem, Technical subsystem, and more. A few of these subsystems are independent and do not rely on the interlinking through any other processes.

Hence, the Systems Theory involves the study of an organization and identifies four major factors-

  • The nature of Interdependence between the parts of the system

  • The strategic parts

  • The lists of the goals that the system is trying to approach

  • The list of any systems or processes which link the parts of the systems together

Contributions of The System Theory of Management

  1. Systems Theory offers an open-view of an organization and presents the recognition of its environmental interface.

    (Video) Modern Theory of Organisation | System Approach | Contingency Approach

  2. Systems Theory of Management is adaptive and dynamic

  3. Systems Theory adopts a multi-dimensional and multilevel approach, and therefore, it considers both the micro and macro aspects of the environment.

  4. Cybernetics is another significant contribution to Systems Theory as it is the science of communication and controls the man-machine system.

  5. The Theory is drawn from several disciplines like Economics, Sociology, Engineering, Psychology, etc.

  6. The Systems Theory is descriptive, not normative or prescriptive, and the Theory is also probabilistic and not deterministic and significantly emphasizes the lateral relationships over vertical relationships.

Criticism of The Systems Theory

  1. The Systems Theory does not present any framework which does not apply to all the organizations.

  2. The Theory is not modern but is a synthesis of all the research contributions of previous theories.

    (Video) 1.3.6 Management Foundation - Modern Organization Theory

  3. The Systems Theory is too abstract to be practical and does not specify any precise and specific relationships between the social systems and the organization.

  4. The Theory is an amalgamation of multiple Theories like Contingency Theory, Decision Theory, and more and not a unified theory.

Modern Organization Theory – Systems Theory

Understanding the Modern Organization Theory- Systems Theory seemed to be a difficult task before you could put your hands on the above content.

However, understanding and comprehending something are two entirely different things. Students might have got the required knowledge related to the topic.

But, to test that, you need to attempt some papers so that you get to know whatever you've learnt.

Let's dive into some easy steps that can be followed to prepare for the topics of the subject.

  • Be Consistent: One of the most important steps that the students shall keep in mind while preparing for anything is being consistent. To start with, you have to create specific and realistic goals, make a schedule for yourself, set reminders for yourself and make sure to reward yourself whenever you complete something. The benefits of being consistent are many and the ones who try to maintain it surely scale heights. Students shall remember that it is important to keep going even when you make mistakes and also, it is very important to take breaks so that you’re able to improve your productivity levels when you start again. The game doesn’t change overnight and that is why it is important for you to give it some time to see appropriate changes.

    (Video) Theories of Organization: Classical Organizational Theory and Systems Theory

  • Be Passionate: Once you follow a passionate approach, you get what you want. You just need to be crazy about your dreams, your goals, and be very focused. Students shall understand that to convert dreams into reality, you don't just need to have goals but you need to have that hunger for it. Having a passion doesn't only mean to have a wish or a desire but also, real targets. While preparing, you need to set a goal for yourself and try your level best to achieve it. You should keep cheering yourself up and make your hunger for your dreams evident.

  • Work Hard: The biggest truth of life is that you don't get anything without hard work. It is the master key to success. Nothing is easy, everything has its own consequences. Some people would like some subject, some would like the other. You cannot be good at everything. Make a schedule for yourself but keep in mind that the schedule made by you should be realistic and according to your habits. There would be many times that your limiting beliefs would pull you behind but to be successful, you have to convince yourself to keep moving ahead despite the hurdles that come along the way.

  • Be Persistent: You can skyrocket your productivity by being persistent and that can be done when you plan things. The best way to do it is by planning tasks for each day in advance. With this, you shall also focus on achieving your daily targets. Of course, there will be many obstacles on your way but with proper discipline, you can sail through them. Apart from this, it is also important to maintain a positive and motivated mindset so that you’re able to take control of your actions. After you define your goals and wants, you shall be able to outline and develop your action steps.

  • Push your Limits: Another important step that you should include while preparing is pushing your limits up. Keeping a healthy competition with yourself is a great way to do so. This would help you to beat the targets and observe your study patterns. Thereafter, you can use these observations to improve your next plan of action.


What is modern system theory of Organisation? ›

Modern theory

This theory considers interactions between people within an organization and the surrounding environment, as well as the interpersonal interactions between members of the organization. Theorists based this approach on systems analysis and used both quantitative and behavioral sciences to develop it.

Is the systems theory relevant in today's Organisations? ›

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.

What is an example of modern organization theories? ›

An ideal example of organizational change theories in action is the creation of assembly lines. Henry Ford, the founder of Ford Motor Company, implemented this innovative design by modifying factory production. The assembly line method—new parts are added at every workstation—is still used in many modern factories.

What is systems theory in organizational development? ›

The systems theory of management asserts that any organisation is a single, unified system of interrelated parts or subsystems. Each part of the overall system is dependent on the others and cannot function optimally without them.

What is the main idea of systems theory? ›

The main assumption of systems theory is that a complex system is made up of multiple smaller systems, and it is the interactions between these smaller systems that create a complex system as it's known.

What are the 3 theories under modern management theories? ›

Modern Management Theory is actually comprised of three other management theories — Quantitative Theory, Systems Theory, and Contingency Theory.


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