A good consultant understands that their client’s business is a system. When I use the word “system” people typically think I’m talking about computers and software, which is understandable. But, in fact, every business has three levels of systems nested within one another as depicted here:
1. Organization System:
The overarching system is your organization. Inputs such as capital, human resources, and supplies, are utilized to produce outputs of products and services.
2. Process System:
Within the organization there are processes. These processes are subsystems that have specific inputs that are converted into outputs. An example might be your Order Fulfillment process. The input is an order that is converted into an output of a shipment to the customer.
3. Performer System:
Performers are the employees who perform each step of the process. For example, the Order Fulfillment process may begin with a salesperson and then move to a finance employee for credit approval. If credit is approved, a warehouse employee who packs and ships the order performs the next step of the process. Each of these employees receives a different input and produces a different output as each step of the Order Fulfillment process is completed.
Given the nested configuration of these systems, it is easy to understand why making changes to a system at one level may have an unintended impact on a system at another level.
Looking at businesses as systems is not new yet many business owners and managers have not been exposed to the importance of this concept. The work that Jay Forrester of MIT completed in the 1950’s with General Electric is an early example of using systems thinking as a management tool. GE’s plant in Kentucky had a problem with employee turnover and they thought it might be due to external economic factors. Forrester was able to show how the instability in GE employment was due to the internal structure of the firm and not to an external force.
Once you experience the indisputable logic and power of systems thinking, you will never be fooled into thinking that issues of production can be solved with the implementation of new software or that your employees will produce more if you simply train them to work faster. You will know to consider all three levels of your business system and that only systemic solutions will move your business forward.