3. Open Systems Theory and Environmental Change
Why Open Systems Theory?: The open systems approach has been chosen to study the above issues because it has been commended for its potential usefulness in "synthesizing and analyzing complexity" (Simon, 1969) in "live" organizations. Comprehension of a system cannot be achieved without a constant study of the forces that impinge upon it (Katz and Kahn, 1966). Leavitt, Pinfield and Webb (1974) also recommended an open- systems approach for studying contemporary organizations which now exist in a fast-changing and turbulent environment. Ramstrom (1974) propounds increased emphasis on systems thinking to comprehend the increased interdependencies between the system and its environment, and between the various parts of the system. Classical and neoclassical organization theories have been found wanting because of their emphasis on organizations as fragmented and closed social systems acting independent of external forces (Baker, 1973). Scott (1961) argued that "the only meaningful way to study organization is to study it as a system" and had observed that the distinctive feature of modern organization theory was in its conceptualization of an organization as an open system. Though several empirical studies have been done for analyzing the impacts of IT at individual level, there is no conclusive evidence if these results would be consistent at the organizational system level. "Whether individual performance implies organizational effectiveness?" still remains a moot issue.
Open Systems Theory & Hypotheses about Environmental Change: It was Bertalanffy (1956) who had propounded the notion that closed system theory cannot apply to what he called "open systems," which characterize living entities, including individuals, groups, and organizations. To conceptualize an organization as an open system is to emphasize the importance of its environment, upon which the maintenance, survival, and growth of an open system depend. A systems approach to organizations begins with the postulate that they are open systems which, of necessity, engage in various modes of exchange with their environment (Katz and Kahn, 1966). The open systems approach to complex organizations emphasizes the consideration of the relationship between a system and its environment as well as what goes on within the system (Hall, 1977). Baker (1973) notes that organizations are changed in the course of interacting with and adjusting to their environment and also change that environment. Since environmental dependency inhibits the organization's ability to function autonomously, it must manage such dependency to survive as an independent entity (Kotter, 1979). Organizations typically manage environmental dependency by establishing and maintaining resource exchanges with other organizations (Levine and White, 1961).
Emery and Trist (1965) argued the need for the concept of "the causal texture of the environment" noting that the environmental contexts in which organizations exist are themselves changing under the impact of technological change - at an ever-increasing rate, and toward increasing complexity. Emphasizing the need for considering the processes in the environment itself which are the determining conditions of the exchanges, they offered a typology of four "ideal types" of environment and discussed the effect of differing environmental conditions upon an organization existing in each type of environment. In the context of formal organizations, they offer the general proposition:
that a comprehensive understanding of organizational behavior requires some knowledge of each member of the following set, where L indicates some potentially lawful connection, and the suffix 1 refers to the organization and the suffix 2 to the environment:
L11 here refers to processes within the organization - the area of internal interdependencies; L12 and L21 to exchanges between the organization and its environment - the area of transactional interdependencies, from either direction; and L22 to processes through which parts of the environment become related to each other - i.e. its causal texture - the area of interdependencies that belong within the environment itself.
In terms of Emery & Trist, L22 relations which they labelled as "turbulent field," i.e., the "interdependencies within the environment itself" comprise the "causal texture" of the field. Turbulence is characterized by complexity as well as rapidity of change in causal interconnections in the environment.
[The Environment-Organization Interaction Matrix]
Developing on the work of Emery and Trist, Terreberry (1968) concluded that an increasing number of organizational systems find themselves in environments of the fourth type [characterized by L22 processes]. She described turbulent situation as one in which the accelerating rate and complexity of interactive effects exceeds the capacities of prediction of the organizational systems which make up the environment and hence, these systems tend to lose control of the compounding consequences of their actions. Terreberry's turbulent environment parallels "dynamic- complex" environment of Duncan (1972), "high-unstable change" of Jurkovich (1974) and "unstable-heterogeneous" environment of Thompson (1967). Environmental turbulence is the extent to which environments are being disturbed by increasing environmental interconnection, and an increasing rate of interconnection (Emery & Trist, 1965; Terreberry, 1968). Turbulence refers not to chaos in the environment, but to an increasing causal interconnection that renders environments obscure to local observers (Aldrich, 1979). Several other organizational theorists besides Terreberry, have emphasized the importance of coping with environmental uncertainty as essential for organizational survival (Crozier, 1964; Duncan, 1972; Thompson, 1967).
Citing theoretical and case study literature on organizations (Drucker, 1964; Gardner, 1963; Hood, 1962; McNulty, 1962; Ohlin, 1958), Terreberry argued that the environments of formal organizations were evolving toward turbulent-field (L22 ) conditions that would selectively reward organizations that would develop efficient monitoring, screening, and information-processing systems. She further noted that existing literature (Adler, 1966; Blau and Scott, 1962; Dill, 1958; Evan, 1966; Levine & White, 1961; Litwak & Hylton, 1962; Thompson & McEwen, 1958) provided evidence that in the emerging turbulent environment organizations were experiencing decreasing autonomy and increasing interdependence. She posited that:
Terreberry offered two hypotheses.
- (1) organizational environments are increasingly turbulent;
(2) organizations are increasingly less autonomous; and
(3) formal organizations are increasingly important components of organizational environments.
Hypothesis 1: Organizational change is increasingly externally induced.
Hypothesis 2: Organizational adaptability is a function of the ability to learn and to perform according to changing environmental contingencies.
Terreberry concluded that "the selective advantage of one intra- or inter- organizational configuration over another cannot be assessed apart from an understanding of the dynamics of the environment itself." The framework proposed in this article will extend upon Terreberry's article to include IT as the primary element that organizations use to anticipate, react and respond to environmental change and to align their structures with the changed environment. Instead of focusing at the organizational subsystem level, this article will consider organizations in their entirety, and at the interorganizational level (L12> or L21 ). The analysis will consider the interaction of the focal organization (the organization that is the point of reference) with the various organizations in its environment, that is, its "organization set" (Evan, 1976) or its "task environment" (Galbraith, 1977). The "focal organization" (Gross, Mason & McEachern, 1958) would be considered a part of the "action set" (Aldrich, 1979: 281), a group of organizations formed into a temporary alliance for limited purpose. The concept of action set refers to an interacting group of organizations, whereas the concept of organization set is explicitly centered on a focal organization. Evan (1993) suggests that an organization has both an input and output organization-set. The former comprises those organizations that provide the focal organization with various types of resources, such as materials, resources, and legitimacy; the latter includes organizations in the market of the focal organization, such as customers and competitors.