Editor's Note: Take a look at our featured best practice, Organization Design Toolkit (103-slide PowerPoint presentation). Recent McKinsey research surveyed a large set of global executives and suggests that many companies, these days, are in a nearly permanent state of organizational flux. A rise in efforts in Organizational Design is attributed to the accelerating pace of structural change generated by market [read more]
The Viable System Model
Also, if you are interested in becoming an expert on Organizational Design (OD), take a look at Flevy's Organizational Design (OD) Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.
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Traditional organizational structures and management practices are characterized by a hierarchical model in which control and direction come from the top. These structures and practices have become obsolete and cannot adapt in response to volatile market conditions. Another issue with this traditional hierarchy is inadequate and sporadic communication between the various tiers of the organization.
Disruption through Innovation and external environment is affecting businesses today like never before. Stafford Beer, a British operations research theorist and cybernetician, developed the Viable System Model (VSM) to determine the chances of viability of a system or business during times of constant disruption and intense competition.
As per Stafford Beer, organizations and systems are quite varied and complex and are controlled through multiple interconnected, interactive layers. The variety and complexity are directly proportional to the size of the organization. Adaptability is one of the most prominent characteristics of viable systems and maintaining equilibrium with the environment is a must for viable entities.
The Viable System Model views an organization as a complete system. This system must maintain equilibrium with its surroundings. When this equilibrium is disturbed, the organization ceases to be viable. The Viable System Model emphasizes that the ability to adapt to a dynamic environment is crucial for the success of organizations.
VSM advocates a flat and self-organizing organizational structure to facilitate swift and effortless implementation of change. Self-organizing systems or organizations are those that preserve a core sense of self and direction, indicating clear and meaningful goals that guide their decisions and actions. Self-organizing enterprises typically have multiple levels of purposes, each of which must be viable and maintained for the organization to operate effectively.
A self-organizing system or enterprise is influenced by 3 key factors:
- Operations – integral to get things done.
- Management – critical to run operations.
- Environment – The context within which the other two factors operate.
The challenges and uncertainties presented by the external environment are typically greater in number and complexity than the challenges faced within the organization’s day-to-day operations. Similarly, the complexity and diversity within the operations of an organization will always surpass the complexities within its management structure.
The Viable System Model facilitates the following:
- Examining the internal and external equilibrium of an organization.
- Pinpointing shortcomings and issues.
- Improving organizational systems and processes.
Stafford Beer outlined 5 components, or subsystems, of the VSM:
- Operational Unit
- Management Level
- Coordination Level
- Cognitive Level
- Policy or Organization Ethos
These subsystems can be mapped to the elements of the organizational structure.
Let’s dive deeper into the first two components of VSM, for now.
Subsystem 1: Operational Unit
The first component of VSM—the Operational Unit—is responsible for the day-to-day operations and implementation of the operational processes. This component deals with carrying out the activities that directly contribute to the production of goods or services, or the fulfillment of the system’s objectives.
The Operational Unit of the organization or system interacts with its environment, both internal and external, and receives feedback on its performance. It engages in communication and coordination with other subsystems of the VSM, both vertically (with higher-level systems) and horizontally (with other operational units). Fostering open top-down and bottom-up communication helps organizations inculcate a culture of collaboration, teamwork, and adaptability.
Subsystem 2: Management Level
The second subsystem of the VSM serves as the coordination and control mechanism that oversees the functioning of the Operational Unit and ensures its alignment with the overall objectives of the organization or system. The Management level ensures the required communication channels, information flow, and Decision Making processes to facilitate cooperation and unity across different units.
This component develops strategic plans, policies, and guidelines to guide the operations of the Operational Units. It sets the overall direction and objectives for the system and ensures their effective communication and implementation. This level assesses the resource requirements of the units, assigns resources and budgets, and ensures optimal utilization and performance of operations within the organization or system. It is responsible for the system’s adaptability and learning requirements.
Interested in learning more about the other components or subsystems of VSM? You can download an editable PowerPoint presentation on the Viable System Model here on the Flevy documents marketplace.
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31-slide PowerPoint presentation
Organizational Design involves the creation of roles, processes, and structures to ensure that the organization's goals can be realized. Organizational Design span across various levels of the organization. This framework focuses on the following 3 initial steps of the full 10-step Organizational [read more]
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Organizational Design (AKA Organizational Re-design) involves the creation of roles, processes, and structures to ensure that the organization's goals can be realized. Organizational Design span across various levels of the organization. It includes:
1. The overall organizational "architecture" (e.g. decentralized vs. centralized model).
2. The design of business areas and business units within a larger organization.
3. The design of departments and other sub-units within a business unit.
4. The design of individual roles.
In the current Digital Age, there is an accelerating pace of strategic change driven by the disruption of industries. As a result, to remain competitive, Organizational Design efforts are becoming more frequent and pervasive—with the majority of organizations having experienced redesign within the past 3 years. This has only been exacerbated by COVID-19.
Frustratingly, only less than a quarter of these Organizational Design efforts are successful. Most organizations lack the best practice know-how to guide them through these Transformations effectively.
Learn about our Organizational Design (OD) Best Practice Frameworks here.
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About Mark Bridges
Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.
