Organizational Systems: Managing Complexity with the Viable System Model

Citation

Dominici, G. (2013), "Organizational Systems: Managing Complexity with the Viable System Model", Kybernetes, Vol. 42 No. 2, pp. 340-348. https://doi.org/10.1108/03684921311310657

1 Introduction

To deal with complexity, firms need to be able to change and transform quickly and effectively. This implies far more than the response of individuals and organizational systems to their representations of environmental complexity; it implies making sense of disturbances through recurrent interactions. The management and design of organizations should assume a different epistemology – one that is not limited to the mapping of institutional resources, but embraces new approaches, new visions, to experience internal and environmental complexity and to model organizational variety accordingly.

Espejo and Reyes in this book bring to the reader their academic and consulting experience of many years of working with government offices and public and private enterprises. Reading this book brings to mind useful hints on how to deal with internal and external complexity in all kinds of public and private organizations. At a more detailed level, the book offers an in‐depth discussion of variety engineering that is not available either in the primary or secondary literature.

It is a book that presents an outstanding quantity of concepts with practical examples that help the reader to understand aspects of the viable system model (VSM). This model is seen as a heuristic to work out strategies for transformational communications in effective organizations. It offers a method for the study and design of organizations, and an approach to dealing with implementation problems.

2 Synopsis

In “organizational systems” the authors argue, in simple but very precise language, how many of the organizational and managerial problems in today's firms are rooted in fragmented practices that need to be connected as a whole through a systemic view, shedding light on applications of cybernetics (following the approaches of Stafford Beer's VSM and Ashby's Law of Requisite Variety) to organizational diagnosis and design.

2.1 Part I – concepts and the VSM

In the first part, the book spells out the main concepts and the practical applications of Beer's viable systems model for the analysis and design of organizations. The VSM is considered as a “problem solving heuristic” and “variety engineering” as a tool for the measurement of complexity and for the mapping of the growing states of everyday internal and external operations of a firm. The tools and techniques described in the book can be applied today thanks to the development of digital technologies that make it possible to deal with business tasks beyond anything that was feasible in the analogue age.

As the object of the book is the study of organizational systems, it starts by defining a “system”.

As the authors assert at the very beginning of the first chapter titled “On systems”:

A system is a set of interrelated parts that we experience as a whole. While we may be able to observe and bump into these parts their systemicity emerges from their relationships, which are abstract. As such, a system is different to a thing “out there […] We name them and by doing this we are bringing them into existence”.

So systems are not something “out there” even if for the limits of our brains we need to distinguish them from the environment as a set of interrelated parts that can be the object of our studies matching the variety of our understanding capabilities. The authors embrace an interpretivist and constructivist view of management cybernetics, beyond a positivist tradition (Harnden, 1989; Espejo et al., 1996; Schwaninger, 2004). Hence, the approach adopted in the book is that of “second order cybernetics” or “cybernetics of cybernetics” (von Foerster, 1974).

It is important to note that the authors' view of systems is different from that of other streams of systemic science such as “radical constructivism” or other systemic theories based mainly on “communications” (Luhmann, 1995, p. 9); they underline the role of “action networks” in the definition of systems:

In fact, our definition claims that a system, in a particular action domain, emerges from those distinctions that, as we mentioned before, are deeply grounded in the recurrent coordination of actions of the people acting in that domain. Therefore, social systems are closed networks of recurrent interactions producing, and produced by, people's coordination of actions.

The concept of systems embraced in the book is also different from that of the “holon” (Koestler, 1967; Dominici, 2008, 2012). As the authors state (p. 9):

Systems as defined above are different from holons (Checkland and Scholes, 1990). Holons are mental constructs, ideas, hypotheses of wholes triggered by observations in the world, regardless of whether they have as referent closed networks of interacting people. In this sense holons are offered only as intellectual (epistemological) devices to think about the world. They are important to support people's conversations for possibilities (Espejo, 1994).

From an observer's perspective a system is seen in two different complementary ways: as an entity “outside” (i.e. the observer is outside the system), or “inside” (i.e. the observer is inside the system) focusing on the internal interrelations among parts from which the system arises. It is this internal coherence, which constitutes the structure of the system and makes sense of the world “out there”, that moves the authors' approach from “psychology of cognition to biology of cognition” (Maturana, 1988, 2002).

In Chapter 2, the authors outline the foundations of cybernetics: the concept of “control” (Wiener, 1948) and “communication” (Shannon and Weaver, 1949). Even if these concepts are common knowledge for those in the field of cybernetics, it is important to be clear about them for those readers who come to a cybernetic approach for the first time. Concepts such as “control” are often misunderstood by those not aware of the foundations of the subject; for example, cybernetic control can be confused with the layman's meaning of the term control. Cybernetic control has to be understood in the meaning given by the founding father of cybernetics Norbert Wiener as the acknowledgment of the feed‐back mechanism of adaptation and the self‐regulation of autonomous units, which is quite different from the traditional concept of hierarchical control.

Another key concept addressed in Chapter 3 is that of “variety” (Ashby, 1964) as a way of measuring complexity. This is the basis of “variety engineering”, addressed in Chapter 4, which analyzes the aspects of people and organizations in which complexity‐variety amplification and attenuation take place, as part of complexity management. This chapter also introduces a variation of Beer's (1985) homeostatic loop.

In Chapter 5 the authors argue that: “organizations emerge when members of a collective produce a closed network of recurrent interactions or relations.” These interactions can be conversations (direct communication) or culture (indirect communication).

What the authors point out in Chapter 5 about direct and indirect communication and the creation of social meaning can be of great interest in many other fields of research (not mentioned in the book). Relevant fields extend from biology to physics and, of course, to business fields such as, for example, marketing, and specifically (among others) in consumer culture theory as a theoretical tool for the analysis of the rise of “subcultures of consumption” (Schouten et al., 2007) from the mix of these two kinds of active communication. This is just an example of how the concepts and the approach explained in this book can be usefully applied to a multiplicity of scientific fields.

These considerations introduce a discussion about finding and dealing with redundancy. Not all redundancy is wasteful since it is redundancy that is at the basis of the opportunity to share a common language that allows cohesion and internal resonance among parts and actors of the viable system. As the authors affirm:

A few simple words and gestures may be enough to express a wealth of information that otherwise would require a massive investment in communication resources. In this sense, and contrary to the common view of redundancy as a waste (i.e. duplication) of resources, we may recognize the importance of redundancy in the structure of organizations. In fact, the communications producing an organization depend to a significant degree in the redundancy built into their structure (Beer, 1979, 1981, p. 78).

Hence the organizational structure emerges from the mechanisms of communication that allow the parts of the organizational system to operate as a whole. This same view can be found in other “viable” methodologies such as the viable systems approach (Golinelli, 2010), where this same concept is called “consonance”. Here the authors underline the relevance of roles and action for the definition of structure as they tell us in page 78:

[…] basic components of organizations are not people but interacting organizational roles (Espejo, 2000). Notice that people are constituted as roles (for instance as members of a football club) only as they are actively involved in its production.

This distinction is relevant because it can be a valid compromise among the systemic theories based on the prevalence of communication that are prominent especially in sociology and based on Luhmann's late work (Vanderstraeten, 2012) and those organization theories based on operations processes.

The concept of “closure” is emphasised in Chapters 5 and 6 and connected to its implied distinction between operational and informational domains (Espejo, 1993):

[…] the medium belongs to the operational domain of an organization, environment belongs to its informational domain (p. 81).

A strong point in Chapters 5 and 6, which is recalled several times throughout the book, is the superiority of “recursive” organization structure over the traditional hierarchical pyramidal organization when dealing with complexity. The “control dilemma” (p. 99) is commonly experienced in hierarchical organization structures and is brilliantly explained as a consequence of Ashby's (1964) Law; it is the managerial anxiety for information and control coming from an excessive burden of responsibility on top managers for uncontrollable issues affecting the flexibility of the structure at the lower levels. Chapter 6 concludes the “conceptual part of the book” offering to the reader an in‐depth description of the VSM's complexity management strategies for policy making and implementation. The strength of the VSM lies above all in its diagnostic effectiveness but it is also a powerful conceptual tool to orientate organizational design.

2.2 Part II – the Viplan method

The Viplan (contraction of “viability planning”) Method is a useful heuristic that was initially developed by Raul Espejo (it was first published in his PhD thesis), and his collaborators to diagnose and design organizational structures (Espejo, 1988; Espejo and Bowling, 1996; Espejo et al., 1999). Part II of the book explains the various steps of the method and its applications. Viplan can be employed to highlight structural deficiencies as well to support organizational design.

Part 2 begins with a particularly interesting chapter on “Naming Systems”; it discusses naming systems as a device to investigate an organization's identity. Naming systems is considered as a process to highlight diverse and significant points of view concerning the identity of an organization (Espejo, 1994). Of course the points of view about what an organization is and does can be very different depending on the observers and their perceptions. There are several visual illustrations in the book which clarify this point.

Therefore, the question arising is: which one is the relevant point of view?

While other viable system approaches subscribe that the relevant point of view is that of the “government” of the organization, as the “decider” in Miller's (1978) Living Systems Theory or the “Organ of Governance” in Golinelli's (2010) viable systems approach, here the authors, more democratically, accept as relevant viewpoints those of all stakeholders. Hence, according to this view, it is not the “government” of the organization that decides its identity; the identity is constituted by the interactions of all stakeholders (internal: actors and owners, and external: suppliers, customers, and interveners). The meanings that stakeholders ascribe to the organization (which they see as a black‐box for this purpose) are their espoused theories (Argyris and Schön, 1978, 1996), while meanings emerging from their communications define the organization's “purpose‐in‐use”. This implies another pivotal aspect of viability that is the consonance (or alignment) among internal and external stakeholders:

If internal stakeholders (i.e. actors and owners) fail aligning their actions with the ascribed purpose, their management of complexity will not match the performative requirements of the VSM, thus implying the need to revise the ascribed purpose or to reconfigure resources to make possible the required alignment (p. 121).

This is a very interesting and relevant re‐reading of stakeholder theory (Freeman, 1984) according to a viable systems perspective. The authors through practical examples apply this reading to common organizational and managerial practices like just in time (Womack and Jones, 2003; Dominici and Palumbo, 2012).

Therefore, the “naming systems” process can be defined as a tool that through a conversational process, including negotiations, allows the stakeholders to align their communication channels to achieve consonance and their purposes to achieve resonance:

The outcome of this process is one or more declarations of identity that can be used as hypotheses to explore their structural consequences (p. 126).

As highlighted later in the book in Chapter 11 of the final part (p. 216), it is important to note that:

While the idea of naming systems comes from Checkland's Soft System Methodology (SSM), our understanding of systems is significantly different; the Viplan Methodology (VM) has evolved within a constructivist rather than phenomenological framework. The philosophical position of the phenomenological stance gives primacy to the mental processes of observers rather than to the external world (Checkland, 1981, p. 305), while the constructivist stance gives primacy to the communications producing coordinated action, thus constituting the life‐world.

Chapter 8 focuses on the transformation process according to the Viplan method. This step of Viplan aims to produce technological and structural models in order to move to the following step that is the organization's unfolding of complexity. A technological model is defined both in the diagnostic and design modes:

In the diagnostic mode this model shows the chunks that are used to produce a transformation according to a particular technology in a particular organization. In the design mode this model evolves to possible chunks, perhaps more ingenious and relying on different technologies, to produce the transformation (p. 139).

After explaining by means of several examples the concepts and relevance of technological and structural models, the chapter continues with an in‐depth analysis of how to unfold system complexity from the combined use of technological and structural models.

To explain this connection, the book first highlights the conceptual difference between “primary activity” and “regulatory function or activity”. Again the authors do not limit themselves to mere theory, but give useful examples to clarify the concepts – for instance, that of the university (p. 151):

Suppose that one of the purposes of a university is to deliver undergraduate courses in different topics. It follows that the teaching activities are primary activities for this organization. On the other hand, library services and market research to develop new courses are not primary activities vis‐à‐vis its named transformation; they are supporting (i.e. regulatory) functions for the university.

According to the authors, primary activities have to develop autonomy, while regulatory functions must integrate their resources within the primary activities without developing autonomy by themselves. If this distinction is not implemented at strategic level the organization's identity is undermined.

The book gives several examples of the application of these concepts from the consulting activity of the authors, and introduces another category of activities “secondary activities”, namely:

[…] those technological chunks that can be implied by the named transformation but eventually are outsourced and are not part of the unfolding of complexity (p. 153).

Hence the unfolding of complexity can be defined as a valuable device to portray and design how an organization could structure its primary activities.

The unfolding of complexity and variety engineering are the central topic also of Chapters 9 and 10. In Chapter 9 the focus is on discussing the distribution of resources from the organization's global level to the level of the most local primary activities. The authors here explain the last two steps of the Viplan method: distributing discretion and designing structural mechanisms. The topic of this chapter is that of the typical discussion in organizational studies about centralization versus decentralization of resources and decision power/responsibility. What the authors suggest is a systemic point of view on this issue. The “Recursion/Functions Table” is introduced as a useful tool to highlight the centralization and decentralization of organizational resources and decision‐making and applied to practical examples.

Chapter 10 illustrates the alignment of business processes with organizational and information processes. The problem of centralization versus decentralization is considered, highlighting the relevance of communication and the difference in the sense‐making among organizational actors. The authors recall Bateson's distinction between data and information: “Bateson (1972) defined information as the difference that makes a difference.” (p. 191) and point out how different organizational roles may give different meanings to the same data. To manage these differences they introduce the “information processing procedure” (IPP) as a “set of activities that transform data into information categories used by an organization.” (p. 192). Starting from this they create a restricted model as a practical example of implementation in which they comprise different systemic concept and methodologies (including soft systems methodology).

2.3 Part III – methodology and systemic thinking

In this part the authors tackle the relevance of systemic thinking for strategic management. They underline the necessity to overcome linearity, going beyond the reassuring patterns of linear causality. It is a conclusive part, which brings together all the aspects analyzed earlier in the book.

As mentioned earlier in this review, the approach proposed offers a very good compromise between action and communication, going beyond the arguments of Luhmann's late works and those of “action research” (Lewin, 1958; Argyris et al., 1985; Whitehead and McNiff, 2006). There are two phrases that clarify this point of compromise (p. 217):

Communications constitute the operational domain of participants in an action domain where they communicate and coordinate their actions. […] however if in the end these reflections are not geared with the organization's processes, these reflections remain as irrelevant in the organization's informational domain.

In other words: knowledge comes from communication, but it requires action (implemented in organizational processes) to become relevant and produce effects. This is also explained in this chapter with the intersection of the “cybernetic and learning loops”.

The chapter then proceeds with an interesting application of the VM to the Swedish nuclear waste management program.

Chapter 12 concludes the book with a graphic explanation of different “identity and structural archetypes”.

3 Concluding remarks: why read this book?

As the authors assert in the preface: “The scope of this book is the management of complexity in an uncertain world.” We can confirm that the book achieves its goal and gives some brilliant reflections about how to manage and engineer the internal and external complexity of organizations.

This book offers an in‐depth debate on variety engineering that helps in the design of organizational, business and information processes of organizations.

It is a book of great relevance both for academics and practitioners interested in getting to know a valid method for understanding and managing organizations.

The strong point of this book is that it offers a sound methodology for the application of the VSM, extending the work of Beer with practical examples and a solid epistemology to understand and analyze organizations.

For readers unfamiliar with the VSM, the book brings the essentials of the model, developing the theoretical framework and methodology. For those readers already familiar with Beer's VSM, the book extends and develops Beer's approach, presenting some valuable insights including interesting considerations about Ashby's Law of Requisite Variety about the management of variety in organizations, the organizational design and the relevance of redundancy.

An unavoidable limitation of the book is that the huge quantity of concepts it tackles need time to be internalised by readers who are not familiar with managerial cybernetics. Some of the definitions are repeated several times in the book, in different chapters. This may be a little tedious for those who are already familiar with the VSM, but on the other hand can be useful to readers coming to these concepts for the first time. The repetition links the concepts to the various aspects treated in different chapters, and allows individual chapters to be read in isolation.

Once the concepts of this book have been fully grasped, the reader may find that their relevance goes well beyond their application to organizational systems. The approach of this book to deal with organizational diagnosis, design and problem solving can be applied to many other scientific fields.