SYSTEM THEORY

System

Is an orderly group of interdependent components linked together according to a plan to

achieve a specific objective. The system breaks down whenever any of its components
are removed hence a system is considered in its entirety.

The system does some useful tasks and should be active and efficient.

All systems have got a boundary within which they operate. Outside the boundary is the
environment from which inputs are communicated and to which results are
communicated. Each system has other systems that communicate with each other i.e. a
sub system.

Importance of System Study

The study of a system is important for the following reasons:

 It provides a theoretical framework which allows performance of a system to be

improved.

 It stresses that all systems must work in harmony in order to achieve the overall
goals of a system.

 It recognises the fact that conflicts can arise in any system leading to sub
optimization thus making the system not achieve its goals.

 It allows an individual to recognize that he/she is a subsystem within a big system.

 The design of a system must support the goals of the total system.

 Help identify the effect of the environment on a system. The external factors that
affect an organisation include government, competitors, trade unions, creditors,
shareholders etc and all have an interactive link with the organisation.

Characteristics of a System

A system is established to achieve some specific objectives. The main characteristics of a

system include:

 it must be designed to achieve a predetermined objective.

 It must contain a set of interacting elements.

 It comprises of inputs, process and outputs.

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  It operates within specified boundaries and interacts with other systems.

 It has some control and these controls help it not to operate beyond its boundaries.

 It must give priority to the objectives of the organization as a whole compared to

the objectives of a subsystem.

Properties of a System
A system has the following properties −

Organization
Organization implies structure and order. It is the arrangement of components
that helps to achieve predetermined objectives.

Interaction
It is defined by the manner in which the components operate with each other.
For example, in an organization, purchasing department must interact with
production department and payroll with personnel department.

Interdependence
Interdependence means how the components of a system depend on one
another. For proper functioning, the components are coordinated and linked
together according to a specified plan. The output of one subsystem is the
required by other subsystem as input.

Integration
Integration is concerned with how system components are connected together.
It means that the parts of the system work together within the system even if
each part performs a unique function.

Central Objective
The objective of system must be central. It may be real or stated. It is not
uncommon for an organization to state an objective and operate to achieve
another.
The users must know the main objective of a computer application early in the
analysis for a successful design and conversion.

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Functions of a System

Outputs and Inputs

 The main aim of a system is to produce an output which is useful for its
user.
 Inputs are the information that enters into the system for processing.
 Output is the outcome of processing.

Processor(s)
 The processor is the element of a system that involves the actual
transformation of input into output.
 It is the operational component of a system. Processors may modify the
input either totally or partially, depending on the output specification.
 As the output specifications change, so does the processing. In some
cases, input is also modified to enable the processor for handling the
transformation.

Control
 The control element guides the system.
 It is the decision–making subsystem that controls the pattern of activities
governing input, processing, and output.

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  The behaviour of a computer System is controlled by the Operating
System and software. In order to keep system in balance, what and how
much input is needed is determined by Output Specifications.

Feedback
 Feedback provides the control in a dynamic system.
 Positive feedback is routine in nature that encourages the performance of
the system.
 Positve feedback encourages further output the way they are.

 Negative feedback is informational in nature that provides the controller

with information for action.
 Negative feedback regulates the system when non standard output is achieved.

 It works on the principle of trying to reduce fluctuations around a set standard e.g.
restricting credit limit of customers with outstanding debts.

Environment
 The environment is the “supersystem” within which an organization
operates.
 It is the source of external elements that strike on the system.
 It determines how a system must function. For example, vendors and
competitors of organization’s environment, may provide constraints that
affect the actual performance of the business.

Boundaries and Interface

 A system should be defined by its boundaries. Boundaries are the limits
that identify its components, processes, and interrelationship when it
interfaces with another system.
 Each system has boundaries that determine its sphere of influence and
control.
 The knowledge of the boundaries of a given system is crucial in
determining the nature of its interface with other systems for successful
design.

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Description of System Principles

 System Whole - A system is an assembly of procedures , processes, methods, routines or

techniques united by some regulated interaction to form an organised whole.

 Function - Each system is created to achieve a designed set of objectives for the organisation.

 Inter-relatedness and interdependence of components - All systems and sub systems are inter
related and interdependent. When any element of a system is changed or eliminated, the rest
of the system elements and subsystems are also impacted.

 Sub systems - Are the building blocks of the whole system. A ‘whole’ system must be broken
down into smaller units for easier development. The subsystems communicate with each
other.

 Entropy - It’s the amount of randomness or disorder that is present in the system.It brings
about decay/confusion leading to obsoleteness.

Types of Systems

i. Open System - It interacts and exchanges information with the environment

receiving input and influence from the environment and its output is also
influenced by the environment. The purpose of interaction is for information
gathering or conducting business otherwise disorder will increase e.g. a business
system.

ii. Closed System - It does not interact with the environment. They don’t even
exchange business transactions. Change in the environment does not affect it.
They move to a state of internal equilibrium involving increased disorder.

iii. Deterministic System - The outputs are known precisely from knowledge of
inputs. They have predetermined rules of obtaining the outputs.

iv. Probabilistic System (Stochastic)- Are those whose outputs can be predicted using
probability and statistical methods. Have a lot of uncertainity and include business
and economic systems.

v. Cybernetic Systems (Adaptive/Self Controlling) - Adapt to changes in the

environment and regulates their own behaviour and outputs using relevant inbuilt
mechanism e.g human body – temperature changes.
vi. Open Loop Systems - Output is determined and controlled by input and environment
which behaves as an additional input. Are systems that act in no controlled manner i.e. no
feedback and so no measure of performance against standards e.g. heater with a thermo
start.

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vii. Closed Loop Systems - Are systems that act in controlled manner i.e. there is
feedback. Feedback based on the output is fedback so as to make aproppriate
alterations to the input e.g. stock control system - the actual stock levels are
measured and compared with the plan and adjustments made to the stock
replenishment order quantities to bring stock levels in line with the plan.

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Information Systems
It’s a set of interrelated components that collect or retrieve, process, store and distribute
information to support decision making and control in an organisation.

Levels Of Organisational Information

Strategic

Tactical

Knowledge

Operational

Operational Level

 It deals with the day to day activities of an organisation.

 These are the basic activities that the organisation must perform inorder to remain
in business.

 Information is derived entirely from internal sources and is highly detailed e.g. a
report of daily orders.

 Decisions associated with these activities cover a relatively narrow frame and are
also delegated to the lowest possible level of the organisation where they can be
made quickly and effectively.

 The decisions tend to be recurring and as a result the decision making process
becomes routine and structured.

 A structured decision is one that is predictable and can be made following a well
defined set of procedures.

 The decisions have an immediate but short term effect on the firm.

 Information must be easily available, current and accurate.

Knowledge Level

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  Support knowledge and data workers in an organisation.

 They help interpret new knowledge into the business and help the organisation
control the flow of paper work.

 These are fastest growing applications in business today (especially in office

system).

Tactical Level

 Middle managers make short term planning and control decisions about how
resources may best be allocated to meet organisational objectives.

 The decisions range from forecasting future resource requirements to solving

employee problems that threaten productivity.

 The decision making domain of middle managers can usefully be characterised as

partly operational and partly strategic.

 The decisions are meant to implement the goals that the strategic management
have set.

Strategic Planning

 It’s concerned with setting long term goals and the decisions that provide
guidelines on which the firm will run e.g. which strategy do we follow in
competing against other firms.

 The strategic decisions are highly complex and unstructured.

 They have a high degree of uncertainity and such as demand the most experience
and good sense of judgement on the part of managers.

 The decisions have a long term impact on the firm and it’s difficult to reverse the
impact of strategic decision.

 Information to make such decisions is derived from internal and external sources
and is highly summarised.

Types Of Information Systems ESS

MIS, DSS
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KWS,OAS

TPS
 Transaction Processing System (TPS)

 Serve the operational level of the organisation.

 It performs and records the daily routine transactions necessary to the conduct of the
business e.g. sales order entry, employee record keeping.

 At operational level tasks, resources and goals are predefined and highly structured
e.g decision to grant credit to a customer is made by lower level supervisor according
to predefined criteria. All that must be determined is whether the customer meets the
criteria.

Knowledge Work Systems (KWS)

 They aid knowledge workers in the creation and interpretation of new knowledge in the
organisation.

 They promote the creation of new knowledge and ensure that new knowledge and
technical expertise are properly interpreted in the business.

 Knowledge workers are often members of recognised profession e.g. doctors,lawyers,

scientists etc.

Office Automation Systems (OAS)

 They collect, process, store and transmit electronic messages, documents and other forms
of communications among individuals, work groups and organisation.

 They aid data workers who tend to process rather than create information e.g. secretaries,
accountants, managers etc.

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 Typical OAS handle and manage documents (through word processing and desktop
publishing), scheduling (through electronic calenders) and communication (through
electronic mail, voice mail or video conferencing).

Management Information Systems (MIS)

 They serve the tactical/management level of the organisation that serve the functions of
planning, controlling and decision making by providing routine summary and exception
reports.

 Generally, they are dependent on underlying transaction processing systems for their
data.

 The managers are interested in weekly, monthly and yearly results not day to day
activities.

Characteristics of MIS

 They support structured and semi-structured decisions.

 Are generally reporting and control oriented. They are designed to report on
existing operations and help to provide day to day control of operations.

 They rely on existing corporate data and data flows.

 Aid in decision making using past and present data.

 Have an internal rather than external orientation.

 Information requirements are known and stable.

Types of Reports Generated by MIS

 Programmed/Scheduled/Periodic Reports – are reports produced at pre-

determined intervals e.g. weekly, fortnightly, monthly, quarterly, annually e.g.
payroll, financial statements.

 Exceptional Reports – are reports which show out of the ordinary data like when
production falls below specified level

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  On demand/Adhoc Reports – are reports usually requested for by a manager
when information is needed that focuses on a particular problem e.g. before
giving a loan, a report on the history of the customer account may be requested
for.

 Event Initiated Report – are reports that deal with a change in condition that
require immediate action such as out of stock report.

 Summary Reports – are reports which show total and trends e.g. report showing
total sales by office, product e.t.c.

Decision Support Systems (DSS)

 Are information system at the tactical level of an organisation that assist management
decision making by combining data sophisticated analytical models and user friendly
software to support semi-structured and unstructured decision making.

 Senior and middle management want a more interactive system that they could control
and run themselves with as many changes in data and models as they need and with litle
inteference from data processing professionals.

Characteristics Of A DSS

i. Offers users flexibilty, adaptabilty and a quick response.

ii. Allow users to intiate and control the input and output.

iii. Operate with little or no assistance from professional programmers.

iv. Provide support for decisions and problem whose solutions cannot be specified in
advance (unstructured decisions).

e.g.

 Senior management can use a financial DSS to forecast the availabilty of corporate funds
for investiments by departments.

 Middle managers within departments can use these estimates, the same systems and data
to make decisions about allocating department fund to projects.

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 Capital project managers within departments inturn can use these systems to begin their
projects reporting to the system (and senior managers) on a regular basis about how much
money has been spent.

Therefore DSS can be designed to facilitate group decision making.

Components Of DSS

 Database – collection of current or historical data from a number of applications

or groups organised for easy access by a range of applications.

 Model base –collection of mathematical and analytical models that can easily be
made accessible to the DSS users. A model is an abstract relationship that
illustrates the components or relationships of a phenomenon.

 DSS software system –Permit easy interaction between the users of the system, the
DSS database and model base. Provide a graphic easy to use flexible user
interface that supports the dialog between the user and the DSS.

 DSS User – are users at tactical and strategic levels

Executive Support Systems (ESS)

 Are information systems at the strategic level of an organisation designed to address

unstructured decision making through advanced graphics and communication.

 They filter, compress and track critical data emphasizing the reduction of time and effort
required to obtain information useful to the executives.

 The systems have maintained the ability to drill down (ability to move from summary
data down to lower and lower levels of details).

 It employs the most advanced graphics software (excel) and can deliver graphics and data
from many sources immediately to senior executives.

 The software act as the heart of their analytical tool base from which they can create
graphic comparisons of data by time, region, product, price range etc.

 ESS are not designed primarily to solve specific problems but instead they provide a
generalised computing and telecommunications capacity that can be applied to changing
array of problems.

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How ESS Benefits Managers

 Flexibilty: The systems put data and tools in the hands of executives without
adderessing specific problems or imposing solutions. They are free to shape the
problems as they need using the system as an extension of their own thinking
process.

 Ability to analyse, compare and highlight trends - look at data in less time with
greater clarity and insight then paper based system can provide.

 Allow executives to monitor performance more successfully in their own areas of

responsibility (timely data result in identified actions being taken)

 ESS can and do change the working of an organisations. Immediate access to so

much data allows executives to better monitor activities of lower units reporting
to them.

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