Organizations as Open Systems

The following post is adapted from my personal academic coursework.

Organizations as Open Systems

A classmate discussed the historic and present states of organizations and their memberships as they relate to organizational change over time. He explained that organizations must change in response to their environments and those that fail to do so will eventually cease to exist. The classmate stated this harsh reality succinctly, “Change or die!” Organizations are open systems and remain viable by through-putting environmental resources. This characteristic of organizations is evident in many examples and will continue to apply to organizations and their memberships in future contexts.

Organizations are Open Systems

Pondy and Mitroff stated that “it is precisely the throughput of nonuniformity that preserves the differential structure of an open system.” This means that organizations draw one set of resources from the environment and release another set to the environment. This change in resources is the organization’s work. Consequently, understanding an organization’s environment is vital to understanding the organization’s work, its purpose, and its boundaries.

Furthermore, organizations do not exist within isolation, but alongside other organizations in fields, industries, and locales. Each organization shares its environment with its organizational neighbors. As open systems, each of these organizations is withdrawing resources from the environment and contributing resources to the environment, leaving the environment in constant flux. Organizations that adapt thrive and those that do not fail.

Examples of Organization-Environmental Exchanges

Organizations respond to various environmental stimuli. Merida exemplified this in his description of Israel during the reign of King Ahab: “Baal worship was now state-sponsored…, Ahab married Jezebel who “evangelized” for Baal…, [there were] 450 prophets of Baal and 400 prophets of Asherah…, [and] Israel was ‘hesitating’ or ‘limping’ or ‘wavering’ between Baal and Yahweh.” Israel responded to the pro-Baal environment created by their neighbors and royal family by wavering in their devotion to God. The classmate cited the United States’ westward expansion, globalization, and the emergence of the gig economy as major environmental influences of organizational change in the past 150 years. Each of these movements led organizations to change which in turn changed the environment.

Westward Expansion

Western expansion led to the establishment of farm towns, frontier towns, mill towns, mining towns, and railroad towns. Each of these towns existed around a specific anchor industry and had a loose horizontal organizational structure. For instance, although each town had its own saloon, it was linked more closely to the town than to other saloon owners around the world.

Globalization

Globalization led to an interconnected world in which information, people, and resources are no longer localized, but instead incorporated into large vertical structures. These global hierarchies span across cultural and international boundaries. The result is that physical next-door neighbors may have more in common with people around the world than with each other.

Gig Economy

Petriglieri et al. stated that “globalization, technological change, and economic uncertainty have provoked a profound restructuring of workplace relations” and that “a growing segment of the workforce consists of people either loosely affiliated with an organization or selling directly to a market.” In this “gig economy,” there are those who work independently and those who are loosely affiliated with agencies which contract independent workers. The classmate described the appeal of these “temporary, flexible and freelance ‘jobs’ which allow individuals to control their schedules and largely removed them from corporate control,” stating “the entrepreneurial appeal was further enhanced by the ‘wild west’ nature of being effectively ‘self-employed’ with little or no hierarchy, a loose organizational structure, and a field relatively devoid of government regulations or taxes!”

Organizational Impacts on the Environment

Organizations not only draw from the environment, they also contribute to the environment. Organizations impact their environments by changing price points, supplier costs, customer expectations, and regulatory oversight. Rupert Murdoch, in explaining his decision to move NewsCorp online, famously stated: “The world is changing very fast. We are moving from an old model economy to a new one, and every business has to find a way of transforming itself for this new economy which is coming upon us with lightning speed. Big will not beat small any more. It will be the fast beating the slow.”

Murdoch is not entirely incorrect, but his statement misrepresents the complexity of the situation. The world does change quickly and organizations must respond to these changes. However, success and failure do not necessarily depend upon speed or size, but rather upon the appropriateness of the changes. These changes have internal consequences for the organization and external ramifications for the environment. Large organizations can help influence legislation and policy decisions that cause the environment to become more favorable to their interests. While small organizations lack this external influence, they are more agile and can respond more quickly to environmental changes.

Another shortcoming of Murdoch’s assessment is his neglect to mention that not every change is the right change. Being the first one to change is inherently risky. Even if organizations make the right change, there is the potential for organizations to act too quickly, overextend themselves into the future, and fail because they made the right changes too early.

References

Bannister, N. & Barrie, C. (1999, July 1). Murdoch’s spin on the web. The Guardian. https://www.theguardian.com/uk/1999/jul/02/3

Gambold, K. (2021, May 13). Changes of Organizations [Discussion post]. https://learn.liberty.edu/webapps/blackboard/execute/announcement?method=search&context=course_entry&course_id=_723076_1&handle=announcements_entry&mode=view

Merida, T. (2015). Christ-centered exposition commentary: Exalting Jesus in 1 & 2 Kings. B & H Publishing Group.

Petriglieri, G., Ashford, S. J., & Wrzenzniewski, A. (2019). Agony and ecstasy in the gig economy: Cultivating holding environments for precarious and personalized work identities. Administrative Science Quarterly, 64(1), 124-170. https://doi.org/10.1177/0001839218759646

Scott, W. R. & Davis, G. F. (2016). Organizations and organizing: Rational, natural, and open system perspectives (6th ed.). Routledge.