Systems Thinking

Systems Thinking and Organizational Performance

"Systems Thinking provides a necessary conceptual base and a powerful tool-set for working the most complex issues that confront us as individuals, in teams, or in organization" (Systems Thinking Collaborative, 2001, p. 1). Additional, this theory provides ways to view the world as a whole and enables a new level of understanding of why things are as they are. Performance management includes activities to ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on performance of the organization, a department, processes to build a product, service or employees (McNamara, 1999). This paper will compare and contrasts systems thinking in different organizations. In addition this paper will (a) analyze the relationship between systems thinking and organizational strategy, (b) evaluate the use of systems thinking in the selection of performance measurements in different organizations, (c) compare decision-making processes and tools used by different organizations, (d) determine how to institutionalize sustained performance improvement in different organizations, (e) assess how systems thinking solutions promote organizational goals, and (f) analyze the effect of process improvement on the goals of the organization.

Systems Thinking and Organizational Strategy

Organizational Strategy includes the organization's design as well as the choices it makes in its work processes. "As organizations evolve and grow, managers need to monitor internal and external environments continually for opportunities and challenges which may allow for expansion and continued organizational development" (Week Five, 2006, p. 1). According Webster Online Dictionary (2006), an organization's strategy deals with how to make management's strategic vision for the company a reality. This strategy presents the plan for moving the company into an attractive business position and building sustainable competitive advantages.

However, systems' thinking involves the use of various techniques to study systems of many kinds. Systems thinking consider that (a) a "system" is a dynamic and complex whole, interacting as a structured functional unit, (b) information flows between the different elements that compose the system, (c) a system is a community situated within an environment, and (d) information flows from and to the surrounding environment via semi-permeable boundaries (Wikipedia, 2006). Both theories focus on ways to improve the overall performance of the organization, enhance the goals and visions in order to provide continuous success, and enables managers to become apart of the organizational change.

Systems Thinking and Performance Measurements in Organizations

Performance measurement is an important function in an organization because the concept identifies tasks process against organizational goals, identifies the opportunities for improvement, and compares performance against both internal and external standards (From Quality to Excellence, 2001). Successful performance measurement entails choosing the

correct indicators and analyzing them in detail. Moreover, performance measurement helps companies identify key actionable areas and strategize for the future. In comparison, systems' thinking evaluates the whole organization, not parts of the organizations; performance measurement is not confined to a single measure. Effective performance measurement involves choosing the right mix of measures in order to improve the overall performance of the organization. When applied both are tools to increase organizational awareness, improvement management and employee understanding of functions and goals, and enhance strategic planning within an organization.

Decision-Making Process and Tools used by Organizations

Organizations and management systems should be set up to allow decision making at the lowest possible level. Managers within organizations make decisions and permeate everything an organization does. Decisions are the means by which organizations turn ideas into action and can have a positive or a negative impact. According to Wikipedia (2006) several decision making models have be developed for organizational use such as:

1. Analytic Hierarchy Process - the procedure for multi-level goal hierarchy.

2. Force Field Analysis - analyzing forces that either drive or hinder movement toward a goal.

3. Cost Benefit Analysis - process of weighing the total expected costs vs. the total expected benefits.

4. Grid Analysis - analysis done by comparing the weighted average of ranked criteria to options.

5. Strategic Planning - process applying the objectives, SWOT, strategies, and program process.

6. Scenario Analysis - process of analyzing possible future events.

7. Six Thinking Hats - symbolic process for parallel thinking.

Decision making refers to the strategic decisions made by the leaders in an organization, as well as the collective information processes within organizations that precede, support, or follow those decisions. These processes include (a) interpretation of issues, (b) deliberations conceiving data and information, (c) problem definition, (d) development of decision options, and (e) the selection of a course of action (Strategic Leadership and Decision Making, 2004, p. 3).

Institutionalized Sustained Performance Improvement

Organizational leadership is challenged daily to keep all managers and employees committed to performance, even when change is evitable. Managers must be experienced and knowledgeable enough to transition employees positively and transfer their valuable presence to the organization and its improving performance. Several key components play a vital role in sustaining performance improvement such as: (a) scorecards, (b) employee and customer surveys, (c) build quality in strategically critical business processes, (d) training, feedback and reward systems, (e) involving key personnel in planning and decision-making and (f) adapting support systems to enhance Job/Performance levels (Rummler, Brache, Chang & Morgan, 2003). In addition, applying the Three Levels of Performance is the primary way to improve performance. These three levels are:

1. Organization Level

2. Process Level

3. Job/Performance