System Theory

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Topic 1: Systems theory, efficiency and effectiveness
Effective management is ‘making the right decisions and successfully implementing them.’ Contrast the concept of effectiveness with the concept of efficiency. Describe basic systems theory as it applies to organizations and discuss the concepts of efficiency and effectiveness in terms of inputs, throughputs (or ‘the transformation process’) and outputs. Include some examples in your discussion.

Abstract
Efficiency means doing things right, while effective means doing the right things. In management, managers will strive for low resource waste (high efficiency) and high goal attainment (high effectiveness). Systems theory is an extension of the humanistic perspective that describes organizations as open systems characterized by entropy, synergy, and subsystem interdependence. It consists of five components: inputs, a transformation process, outputs, feedback, and the environment. Inputs are the materials, human, financial, or information resources used to produce goods and services. The transformation process is management’s use of production technology to change the inputs into outputs. Outputs include the organization’s products and services. Feedback is knowledge of the results that influence the selection of inputs during the next cycle of the process. The environment surrounding the organization includes the social, political, and economic forces.

In management, there are two important concepts which are efficiency and effectiveness. Efficiency means doing things right, a manager must allocate the resources well without wastage in order to produce the most output for the least inputs. On the other hand, effectiveness means doing the right things, this relates to a manager must know the organizational goals before decides how to attain them. Here is the example of a situation to understand the difference of the two concepts. Truck driver A and truck driver B are working in the same transportation company. Both of them are given the job to deliver goods to the location which are 3000 kilometres away from the company. The delivery must be done within one week. After they received the order, they start their journey. Truck driver A delivered the goods after one week and spent RM600 for the petrol while truck driver B delivered the goods in five days but spent RM900 for the petrol. So in this situation, their goal is to deliver the goods to that destination, therefore the person who delivers the goods within short period of time is considered as effective. In other words, truck driver A is more efficient than truck driver B in saving delivery cost, because truck driver A spends less money for the petrol, but truck driver B is more effective than truck driver A in delivering goods within short period of time, because truck driver B spends less days to deliver the goods. As a manager, they must ensure that the organization goals must be achieved with efficiency and effectiveness because both of these aspects will affect the success of the company. Managers must know these two aspects because the resources in the organization are limited, therefore every resource must be used wisely without any wastage. Otherwise, it can increase the organization cost and reduce the profit that the organization can gain. For instance, the overuse of the papers for writing memo is a waste because electronic mail can be used to inform the employees about certain things. The money from the cost reduced for the papers can be invested in other projects. Managers have the responsibilities to ensure all activities are going well, so the organization goals can be achieved. Before that, a goal must be set correctly. This is important because it gives direction to the workers on how they should do their works. Without a goal, every activity will become wasted. So how efficient can be achieved by a manager who is effective? An effective manager is a person who is always does the right...
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