Now, since we know about the different types of processes that an organization has, it is essential that we understand that these are just the pieces of the puzzle. How these pieces fit together is what creates a masterpiece or an average organization. However, understanding the components has given us a clear idea of what an excellent organization ought to do:

• Manage its day to day affairs effectively and efficiently
• Have control over its internal workings driven by constant feedback
• Be responsive and proactive to changes in the outside environment.

But achieving these tasks consistently in the best possible manner is contingent upon the ability to design impeccable processes and put them together in a seamless system. Here are some of the challenges that one expects to face in this endeavor:

Processes Fit No Fixed Pattern

Although we have succeeded in figuring out the component processes, there is no fixed formula for putting them together. It is very similar to the study of the human brain, the functioning of which continues to be mysterious and illusive. This is where the skill of the entrepreneur comes into action.

Idea of Complex Systems

What makes it so difficult to assemble the component processes into a system is the idea of complexity. Complexity means that all the processes are inter-related and have many interaction points. Hence a small change can have a cascading effect throughout the organization. Also information is being constantly produced in the organization. It is difficult to aggregate them and make sense of them so that feedback can be used to initiate corrective action. Complexity is a very large number of inter-actions happening at any instance within the system.

Idea of Dynamic Systems

To add to complexity, systems are dynamic. This means that they exchange energy and information with the environment on a real time basis. Systems are never in equilibrium but rather always searching for equilibrium.

For instance consider the recent sub-prime mortgage crisis. With the collapse of Lehman Brothers many companies had to write off huge sums, Lehmann owed them. The speed at which a highly rated company went bankrupt shows the idea of dynamicity. A few months earlier anyone would have given credit to Lehmann Brothers. But at that time, it would have been sheer folly to be associated with Lehmann in any way. This shows that there are no rules in a dynamic system as everything is susceptible to change.

Concept of Variety

The complexity and dynamic nature of an organization combine with variety to produce an incomprehensible system.

Variety is the idea of possible changes in the environment. The idea is to forecast the possible states an environment can take and be prepared with a plan for each of these states. This is known as Ashby’s law of Requisite Variety. It states that only variety can combat variety. Hence to ensure that an organization maintains homeostasis, the variety of corrective actions must be greater than the variety of the environment.

Managing A Complex, Dynamic System Exposed To Variety

Organizations all over the world are researching ways and means to successfully manage complex dynamic and variable systems. However at the moment, it is a game of imperfections. The organizations with the less imperfections i.e. relatively stronger systems is a better system. As a summary, here is what makes it difficult:

• The number of scenarios that an organization can be exposed to is very large and unpredictable. (Variety)
• These scenarios can go on changing very fast (Dynamic systems)
• The effects these scenarios have on the organization are difficult to understand and manage (Complexity)