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Organizations as Open Systems

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The systems perspective, or the theory of systems, was first developed in the physical sciences, but it has been extended to other areas, such as management. A system is an interrelated set of elements that function as a whole. According to this perspective, an organizational system receives four kinds of inputs from its environment: material, human, financial, and informational. The organization’s managers then combine and transform these inputs and return them to the environment in the form of products or services, employee behaviors, profits or losses, and additional information. As outputs, these products are sold to the consuming public. Profits from operations are fed back into the environment through taxes, investments, and dividends; losses, when they occur, hit the environment by reducing stockholders’ incomes. Then the system receives feedback from the environment regarding these outputs. Finally, information about the company and its operations is also released into the environment. The environment, in turn, responds to these outputs and influences future inputs. The systems perspective is valuable to managers for a variety of reasons. The systems perspective helps managers conceptualize the flow and interaction of various elements of the organization itself as they work together to transform inputs into outputs.
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