Before the 1960s, traditional theories looked at organizations as closed, isolated systems. Over time, however, theorists added humanistic and holistic ideologies to the mix. Traditional theory ignored outside environmental influences, so most theorists and researches began to embrace open systems. Outside forces that influence business organizations include natural disasters, social changes, political changes and even employees’ personal problems.
Biologist Ludwig von Bertanlanffy developed open system theory between 1930 and 1956. By the early 1960s, theoretical psychologists applied the theory to organizational structures such as governments, universities and businesses. Any time an individual organization uses resources from its environment--including personnel--in its production, its system is open to outside forces.
When a business regularly interacts with its environment, and exchanges and processes feedback, it is an open system organizational structure. Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the business. The controllers of open systems pay attention to their external environment, internal environment and customer needs and reactions. Open systems tend to devise more than one way to accomplish goals or reach similar results with different conditions and operations--what von Bertanlanffy called “equifinality.” This is in direct contrast to closed systems that function under the assumption that there is only one way to achieve a result: a direct relationship between cause and effect.
Open Systems in Business
Businesses depend on employees, suppliers, customers and even the competition for research, development and profit. Because the business doesn’t have control of all the environmental forces, it relies on predictions and contingencies to cope with unexpected input. For example, an influenza epidemic can affect suppliers, personnel and even customers, causing lost production and lost profit.
Larger systems comprise subsystems that interact with one another. Subsystems operate somewhat autonomously inside of systems, so if a subsystem fails, it doesn’t mean the whole system will fail. For businesses, there are four main subsystem categories: the economy, technology, personnel and the political-legal sector. Failure in technology for an e-commerce business, for instance, won’t necessarily affect personnel, so employees can implement alternate ways to handle customer needs.
Open system organizational structures promote effective problem solving by clarifying the big picture. Continuous feedback and response results in better understanding, by leadership and management, of the organization’s structure within the environment and the interactive dynamics between them. That opens the door for better communication and more feedback. When the system and subsystems have enough feedback, the results can produce more clearly directed planning, intelligent design, useful products and necessary services.
Some organizations are part closed system and part open system. Businesses may have a closed structure with regard to proprietary research and development, but an open system with regard to the final marketable products. Or they may range somewhere along a scale between the two where certain departments or subsystems were closed in the past but are moving toward becoming open.
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