System of management

‘The most appropriate structure and system of management are dependent upon contingencies of the situation for each particular organization’. Using examples assess the validity of this statement. Main Issue: Both external and internal environment are complex, a single and steady management system will not adapt to the dynamic situation. To survive in variable environment, contingency approach does not only provide a viable model of structure and system of management, but also helps to develop a thorough understanding of complex situations and to take appropriate action.

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Mr. Chuanzhi Liu, CEO of Legend, the biggest computer fabricant in China, once said, ‘Before we becoming grand and mature, pressure is following hard by heel’. Since 60’s of last century, new technology innovations have brought great changes on the enterprises’ management environment and operation mode, along with the drawling economic increasing in western countries, market uncertainty and global competition are becoming more and more furious.

External and internal, macroscopic and microcosmic, dynamic environment force most of the organizations to think about the most appropriate structure and system of management adapting to contingent situations. Taking MTSO1 as an example, from its organization chart (Figure 1. 1), we may briefly find out how this company constructs its structure and system of management:

The whole is divided into several departments: purchasing, production, technical, logistic, commercial, HR, IT, finance, etc. From material purchasing, production, inventory to sales, from R&D, marketing, finance to administration, those departments do not only operate on their own responsibilities as separated units, but also communicate with each other, transfer information and documents, co-operate together as a system.

Production send shop order to purchasing for raw material requirements, and deliver finished goods to logistic for storage, commercial department sell them to make profit and pass information to finance, cost and sales reports are then feedback to management for decision making. As stressed by Barnard, ‘people’s ability to communicate, and their commitment and contribution to the achievement of a common purpose, were necessary for the existence of a co-operative system’O2.

When discussing about ‘system’, as we all know, a ‘perpetual motion machine’ does not exists, ‘closed system’ does not work also. An organization is an ‘open systemO3’. MTS absorbs human resource, receives information from market, also been affected by government policy and technology innovation; meanwhile, its output, the finished goods become ‘input’ to the outside macro-system (or plenty of micro-system, such as distributors and consumers), and will generate input to the company again, such as feedback information, technology innovation and policy change.

Generally, we now have a picture of a company as a whole, to find out an appropriate management solution of contingencies of situations, we need to illustrate how a structure and system of management operates. Trying to image a vehicle, taking it into parts, it consists of driving system, braking system, shock absorber system and security system, etc (as departments in organization). These specialised functional parts are described by Burns and Stalker as ‘mechanic system’.

To make the car run, a man, ‘organic system’, capable of modifying driving, must be added to it. When comes to organization as MTS, official written structure, company rules, position description are all represented to be ‘mechanic system’, this system, like an auto-machine, deals with most of the rutting jobs, which are predictable by the company’s operation experience or managerial requirements.

For instance, when a sales order comes, firstly it will be input into BPCSO4 by sales department; secondly, ARO5 function will confirm the payment receipt or credit limitation are under control, and inform warehouse to prepare goods delivery. Nevertheless, actual situation are always complicated and variable, especially when it goes beyond above procedures. When the company wants to develop future relationship with a customer, the sales manager and financial manager have certain rights to decide to deliver goods even without payment received.

Here an ‘organic system’ is activated. As Burns and Stalker point out, “there are intermediate stages between the two systems which represent not a dichotomy but a polarity. The relationship between the mechanic and organic systems is not rigid. An organization moving between a relatively stable and a relatively changing environment may also move between the two systems. O6”