SYSTEM THEORY OF MANAGEMENT

In 1960, a new thought to management appeared which tried to unify the prior theories. This theory is commonly known as 'System Theory'. The System Theory of management owes to origin of the General System Theory developed by Ludwig Von Bertalanhy.

In simple terms a system is a group of interrelated and interdependent part working towards a comman goal. It is a combination of several parts forming a complex whole. System Theory views the organization as a unified, purposeful system composed of interelated parts. It tries to give the manager a way of looking the organization as a whole. System theory tells us that the activity of any part of an organization affects the activity of other parts.

For any organization, the number one objectives is survival. To faciliate survival, a system may be viewed as consisting o four basic elements- inputs, tranformation process, outputs, and feedback.


Inputs are ingredients required to initiate the transfrmation process. They include human, financial, material, and information resources. Transformation process appies technology, operating systems, administrative practices and control techniques in order to produce the output. The output may be products or services, the sale of which creates profits or losses. The action of one element in the model influences other parts of the model. The process also has by-product outputs such as employee behavior, enviromental pollution, and information. A feedback loop is used to return the resultant enviromental feedback to the system as input.

The main features of system theory of management are as follows:

1. Sub-systems
2. Open System
3. Synergy
4. Flow
5. System Boundry
6. Feedback
7. Entropy.