The Systems Approach to Business Organization and Decision Making

Many variations of this definition exist, e.g., Brown Warren , “Systems, Boundaries, and Information Flow,” Academy of Management Journal, IX:4 (Dec. 1966), 318, defines a system as “a group or complex of parts (such as people, machines, etc.) interrelated in their actions towards some goal,” and Johnson Richard A. Kast Fremont E. Rosenzweig James E. , The Theory and Management of Systems (New York: McGraw-Hill Book Company, Inc., 1963), p. vii, state that “a system may be defined as an array of components designed to achieve an objective according to plan.”

Johnson Kast Rosenzweig , p. 6, n. 1, assert that von Bertalanffy was the first to use this term. For further information on von Bertalanffy's systems theory, see his Problems of Life: An Evaluation of Modern Biological and Scientific Thought (London: C. A. Watts and Co., Ltd., 1952) and a series of papers by von Bertalanffy Hempel Carl G. Bass Robert E. Jonas Hans , published as “General Systems Theory: A New Approach to Unity of Science,” in Human Biology, XXIII:4 (Dec. 1951), 302–361.

von Bertalanffy , “General Systems Theory,” 303.

Boulding Kenneth E. , “General Systems Theory—The Skeleton of Science,” Management Science, II:3 (April 1956), 197–208.

Ibid., 199.

Wiener Norbert , The Human Use of Human Beings: Cybernetics and Society (Boston: Houghton Mifflin Company, 1950), p. 8.

Ibid., p. 15.

Simon Herbert A. , The New Science of Management Decision (New York: Harper & Row, Publishers, 1960), p. 1.

A number of recent authors have studied the application of systems theory to business operations: Anthony Robert N. Dearden John Vancil Richard F. , Management Control Systems: Cases and Readings (Homewood, Ill.: Richard D. Irwin, Inc., 1965); Dearden John McFarlan F. Warren (Management Information Systems: Text and Cases (Homewood, Ill.: Richard D. Irwin, Inc., 1966); Dommasch Daniel O. Laudeman Charles W. , Principles Underlying Systems Engineering (New York: Pitman Publishing Corp., 1962); Malcolm Donald G. Rowe Alan J. , Management Control Systems (New York: John Wiley & Sons, Inc., 1960); McDonough Adrian M. Garrett Leonard J. , Management Systems: Working Concepts and Practices (Homewood, Ill.: Richard D. Irwin, Inc., 1965); Paynter Henry M. , Analysis and Design of Engineering Systems (Cambridge, Mass.: M.I.T. Press, 1961); and Prince Thomas R. , Information Systems for Management Planning and Control (Homewood, Ill.: Richard D. Irwin, Inc., 1966).

A review of the kinds of environmental information needed for business planning, control, and operational decision making can be found in the following: Bassie V. Lewis , Economic Forecasting (New York: McGraw-Hill Book Company, Inc., 1958); Bratt Elmer Clark , Business and Cycles and Forecasting (5th ed.; Homewood, Ill.: Richard D. Irwin, Inc., 1961); Due John F. Clower Robert W. , Intermediate Economic Analysis: Resource Allocation, Factor Pricing, and Welfare (5th ed; Homewood, Ill.: Richard D. Irwin, Inc., 1966); and Spencer Milton H. Clark Colin G. Hoguet Peter W. , Business and Economic Forecasting (Homewood, Ill.: Richard D. Irwin, Inc., 1961).

The following is a simplified statement of the planning process: (1) Define specifically what the company's planning effort is expected to achieve and to what use the plans will be put; develop an approach (including organization and management planning policies) to carry out the planning function within the corporation. (2) Determine the key factors (planning premises) which will have a major influence on planning, through a study of both the environment (the economy, society, public policy, industry, and market) and the company's strengths and weaknesses. (3) In the light of the planning premises, develop and evaluate alternative directions the company might follow over the long range and select the corporate objective (i.e., kind of company) which will enable the company to most profitably exploit the market opportunities identified during the premising stage of planning. (4) After developing and evaluating alternative policies and programs which will achieve the objective, determine the policies, programs, and procedures that best fulfill the corporate objective and still meet market, industry, and company criteria (premises), and establish a suitable organization structure and adequate budgetary and operational controls. (5) Review and refine the program periodically.

For further information on the approach to scientific planning, see: Branch Melville C. , The Corporate Planning Process (New York: American Management Association, 1962); LeBreton Preston P. Henning Dale A. , Planning Theory (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1961); Payne Bruce , Planning for Company Growth (New York: McGraw-Hill Book Company, 1963); and Scott Brian W. , Long-Range Planning in American Industry (New York: American Management Association, 1965).

McDonough Garrett , p. 9.