1. Overview of Viplan Method1

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Syncho Research 2008 Viplan Method

Overview of the method as developed in Viplan Learning System

1

TheVIPLANMethodinLinearForm

RaulEspejowithDianeBowling1

Syncho1997

This chapter offers a linear presentation of the software Viplan Learning System

(VLS). The software includes dynamic diagrams and the content is supported by a

case study that cannot be replicated in the linear version included here. However, we

believe, that the advantage of this document is its easy reading. The text is basically

the same that is included in VLS; in some of its parts we highlight that the graphical

version of the software is superior and the advice is to visit it. Versions of thesoftware in English and Spanish are attached to this text.

Part1TheVSM

IntroductionPart 1 offers a conceptual introduction to the Viable System Model (VSM). This is a

model of the organizational structure of any viable system. Often structure is

understood as equivalent to the organization chart. Since there is a significant

distinction between a formal structure, as implied by this chart, and an informal

structure, as reflected by the way people relate to each other in their day-to day

activities, many people think that the organization chart is a poor instrument toobserve organizations. This VSM offers a more sophisticated model of organizational

structure, one which is not only concerned with lines of authority, but with the way

people relate to each other in their daily work. Today, the trend is to replace

hierarchies by networks. However we think that this change often does not account

for the huge complexity of organizations. Here, we argue that organizational viability

requires complex, adaptive structures. We call them recursive organizations.

The organization chart, Figure 1, is a model that reduces the complexity of an

organization by describing only relationships of authority and accountability. Those at

the top define tasks; those at the bottom are the doers. The links between them define

the chain of command.

1Viplan Learning System should be referred as follows: Espejo, R with D, Bowling (1997) The Viplan Learning

System, Syncho Ltd. (www.syncho.com). The following information is included in the software Viplan Learning

System: The Viable System Model is the intellectual property of Stafford Beer. Viplan is the intellectual property

of Raul Espejo. The Viplan book was written by Raul Espejo and Diane Bowling of Syncho Ltd. The tutorial was

implemented by Diane Bowling based on previous work of Oleg Liber of ICTU. The Software offers Espejos

interpretation of Stafford Beers Viable System Model (VSM). Beer does not agree with aspects of this

interpretation such as the account given in Viplan of System 2 and System 3 (the coordination function and

cohesion function in Viplan). Espejo takes full responsibility for the content of Viplan that although undoubtedly

based on Beers VSM offers only his views about the model and its use.


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Figure 1 The organisation chart hierarchy

In organizations, often hierarchy means that the viewpoints of most of those in the

organization have little relevance. They are there to carry out the tasks defined for

them by those at the top. This may reduce the organizations ability to create its

environment and to respond to threats and opportunities in this environment.

This is a scenario in which human resources are likely to be under-utilised.

Nevertheless, an organization chart provides an overview of formal relationships. This

information is often valuable for beginning to unravel the way an organization works.

The Viable System Model (VSM) is a different model of an organization. This is a

model of the structural requirements for organizations to maintain their independent

existence, that is, their viability. The model helps to:(a) diagnose organizational structures, in particular their structural weaknesses;

(b) to design new organizational structures;

(c) to assess structural weaknesses underlying specific problem situations.

The VSM focuses attention on the enormous complexity that, we argue, is inherent to

organizations. A job of management is to manage this complexity.

The model looks like Figure 2. However, before looking at the VSM in detail, we will

study the management of complexity. This is a key concept necessary to understand

the model.

Figure 2 The Viable System Model


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Chapter1Organization,StructureandViewpoint

OrganizationsIn an organization people carry out tasks. For this, they are constantly communicating

and using resources. An institution like a company or a government agency may notbe an organization if people outside the institution give closure to their interactions.

Giving closure to interactions implies that people create their own meanings and take

responsibility for the outcomes.

In the same way that a house is made up of bricks in particular relation to one another,

the structure of an organization is made up of people in particular relation to each

other. The relation between people and resources defines the structure of an

organization. This structure can be modelled. A model of the structure of a house is

the blueprint. A common model of an organizations structure is the organization

chart, which highlights hierarchical relationships. Another, the one developed here, is

the Viable System Model.

Figure 3 Cross functional relations

Performing tasks in organizations requires cooperation. It is natural for these tasks to

be highly interconnected, yet structures like those based on the organization chart tend

to fragment them. Companies that do not support cross functional relations frequently

encounter problems like the one in Figure 3. Functional structures may lead to a

narrow approach to organizational issues.

We can carry out many tasks on our own, but there are many reasons why people may

wish to come together and share work and/or work alongside others.Organizational tasks are generally highly complex. There are many complexity

drivers, as the following non-exhaustive list shows:Task requires more knowledge areas than one person can hold

We are constantly demanding more complex goods and services

The task requires more knowledge depth than one person can acquire

We need to cooperate with many others who do not see the world with the same eyes

We need to take care of the environmental effects of our tasks

We are dealing with a wide range of markets

We need to catch up with fast moving technologies


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We have access to wider geographic diversity

The physical dimensions of task are larger than one person can handle

Working out complexity drivers for any organization depends on purposes people

ascribe to it. However, the purposes we ascribe depend on our viewpoints.

Viewpoint

Figure 4 Viewpoint of the observer

Different observers see different things in the same situation. Depending on the

viewpoint of the observer, the purpose ascribed to an organization may differ. For

instance, as the picture in Figure 4 implies, whilst one person may see producing cars

as the obvious output of the factory, another may see environmental pollution as its

output; both may apparently be looking at the same thing but their different concerns,

histories and values are responsible for very different mental constructs. Ascribing a

shared purpose to the organization, with the participation of all its relevantviewpoints, is a way of focusing its concerns and therefore a means of working out its

complexity drivers. Relevant viewpoints are those of the stakeholders. For instance,

the purpose of producing cars within acceptable environmental standards may be a

shared outcome of the stakeholders interactions. A person may have one or several

viewpoints about a particular issue, so may a group of people.

Chapter1Summary

OrganizationOrganizations are closed networks of people in interaction; they have identity and

structure. An institution like a company or a government agency may not be anorganization if people outside the institution give closure to interactions.


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StructureStructure is defined by the relations constituted by the specific resources (e.g. people

and physical resources) producing the organizations relationships. The same

relationship may underpin different relations.

ComplexityComplexity is the outcome of people in interaction. It is produced by their different

viewpoints, by the demands of their shared environment and by the interactions they

want to develop with others; each is a source of complexity.

Organizations purposeOrganizations have no purposes of their own, it is people who have and ascribe

purposes. Sharing statements about ascribed purposes is a way of making an

organizations complexity more understandable.

Chapter

2

Management

of

Complexity

ComplexityComplexity surrounds us. The organizations we work in are hugely complex. The

environment of those organizations is likely to be more so. The management of an

organization is accountable for its overall task performance. Yet quite naturally,

managers are unable to be involved in everything personally, let alone to carry out all

the tasks of the organization. Managers must work through other people. To do this

they must manage the complexity of these relations.

We represent the organization by a circle. We represent the environment by a cloud. It

is bigger than the organization and surrounds it. We represent management by asquare, embedded in the organization.

Figure 5 Management of Complexity in Organizations

An organization may exist in a highly complex environment in which its people can

create a wide range of...- markets

- ideas

- technologies


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- opportunities

by interacting with:- customers

- suppliers

- collaborators

- competitors

- shareholders.

The environment may offer a wide range of opportunities and threats to any

organization. It is potentially highly complex. On the other hand, the capacity to steer

the organization depends on the functional capacity of management, that is, on the

capacity of managers and the functions or services supporting their action. The

arrangement of these functions is part of the organizations structure and we will

discuss this in later chapters.

But, in any case, more is likely to happen in the environment and the organization

than the organization and management can cope with respectively. Each of them is

more complex than the other side of the interaction.

Figure 6 Relative complexity

The arrows in Figure 6 illustrate this relative complexity. In this illustration, the

organization has only four responses to handle the seven complexity drivers in the

environment and management has only one response to handle the three complexity

drivers in the organization. Assuming that all these complexity drivers have to be

handled in order to remain competitive, or in more general terms, viable, the

organization has to find strategies to cope with seven rather than four complexity

drivers, and management has to find strategies to cope with three rather than one

complexity driver. Our next concern is to discover strategies to overcome theseimbalances of complexity. The VSM offers a way to do this.


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Now we introduce an important diagrammatic convention. We have said that the

management of an organization is part of that organization, which in turn is part of the

environment. To study the management of complexity between the three, we move

them apart diagrammatically (see Figure 7). The circle now becomes implementation

the part of the organization that produces its products.

Management must remain in communication with those implementing its tasks; and

those implementing must remain in communication with the environment.

Management communicates with the environment through implementation. Of course

this does not imply that managers never interact directly with people in the

environment; it implies that they depend on the complexity of implementation to close

the loops they open with the environment.

= Amplifier

=Attenuator

Figure 7 Managements communication with the environment

An important law is:

The Law of Requisite Variety (Ashbys Law): Only variety absorbs variety.

This law applies both to the relation between management and implementation and

the relation between implementation and the environment. Management must developstrategies to manage all the relevant complexity of implementation; otherwise

implementation will be out of control. Implementation must develop strategies to

manage all the relevant complexity of the environment; otherwise the environment

will overwhelm the organization.

There is an apparent contradiction: on the one hand the relevant complexities of the

environment and implementation are de facto larger than the complexities of

implementation and management respectively. On the other hand, these complexities

have to match each other for viability. Strategies to overcome this apparent

contradiction are fundamental to the VSM. This model helps us see how to use

organizational communication links with the environment to attenuate its complexity,

thus enhancing the organizations understanding of this environment, and to amplify


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the organizations action capacity, thus making the interaction with this environment

more effective. People supported by enabling resources as they go about their daily

work carry out amplification and attenuation. Equally, it helps us see how to

implement tasks with only minimum management interference (through amplifiers

and attenuators) to ensure organizational cohesion.

These amplifiers and attenuators exist in one form or another; the most common

amplifier being delegation and the most common attenuator being sheer ignorance.

The problem is not being ignorant; we are all ignorant! It is being ignorant of the

things we cannot afford to be ignorant of; the cost of this ignorance may be lower

(inadequate) performance or loss of control. Interaction of implementation with the

environment and of management with implementation requires considering

attenuators and amplifiers as the two sides of the same coin. It does not help to

understand the environment very well if there is no action capacity (amplification); it

does not help to have action capacity if there is no adequate understanding of theenvironment.

The VSM helps to focus on these interactions and design them to make the

organization more effective. Amplification and attenuation links will be

diagrammatically simplified in Figure 8.

Figure 8 Management of complexity simplified

Imbalances in complexity between the environment, implementation and management

are common and must be managed. Fortunately for the organization and management

much of the relevant environmental complexity and organizational complexity can be,

and to a large degree are, soaked up through self-organization and self-regulation in

the environment and implementation themselves. The remaining complexity, or

residual variety of the environment and implementation, must be balanced by the

ability of the organization and management to respond.


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Figure 9 Imbalances in complexity

In Figure 9 seven arrows or complexity drivers represent the environmental

complexity. They are critical success factors for the organisation, that is, they are

areas in which it must perform well in order to succeed. In this diagram there are three

complexity drivers in implementation. These are critical success factors for

management, that is, areas in which high performance is necessary in order to achieve

organizational cohesion.

Examples of self regulation in a companys environment i.e. customers doing work

for the company, are: bank customers using high street automatic teller machines;suppliers doing the work of the companys logistics through Electronic Data

Interchange (EDI), which allows to supply the company just in time.

Examples of self-organization and self-regulation in implementation are given by all

kinds of teamwork with local problem solving capacity on the shop floor.

The residual complexity, which is not managed in the environment itself, must be

managed by the organization otherwise performance suffers. Benchmarking, i.e.

necessary performance, helps to work out the level of this residual variety.

The organization needs to develop functional capacity to cope with this residual

variety; this capacity may relate to any function like R&D, sales, market intelligence,

production of goods and services and so forth.

The residual complexity of implementation is the complexity that is not absorbed

locally by self-regulating autonomous units and therefore relates to unresolved local

problems and the managing of the interfaces among all these units. Management has

to create the context for integration and coordination of all the autonomous units in

implementation; this is the level of response it has to cater for.

UnfoldingofComplexityA strategy to manage organizational complexity is self-organization. This strategy is

natural to any (complex) successful viable organization; in practice this implies the

emergence of autonomous units within autonomous units (see Figure 10). This

unfolding of complexity is the outcome of self-organization. Autonomous teams and


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teams within teams are instances of this general proposition. The VSM looks at

organizations in this way.

The complexity of organizational tasks implies autonomous (self organizing) units

within autonomous (self organizing) units viable systems in their own right, with

their own management. Exactly what form these units take varies from organization

to organization. These viable systems (primary units), if sufficiently complex, will

have further primary sub-units, and so on, each with their own management, until the

full complexity of the organizations task is absorbed. This is a top-down description

of complexity unfolding. A bottom-up description makes apparent that the

autonomous tasks of individuals or small teams need to be integrated in a cohesive

larger organizational unit, without loss of autonomy, in order to implement the total

task of the organization.

In general we refer to these units as the organizations primary activities; they are theones producing the products and/or services of the organization for its customers.

Indeed the organization in focus usually is a primary activity of a larger organization.

Complexity unfolding is often the result of performance pressures and natural efforts

to achieve viability in complex environments.

Each organization has its own relevant environment. Within the organization are the

embedded primary units. We can explode one of these units diagrammatically. This

unit has an environment that is embedded in the environment of the whole. This

process continues for any further embedding necessary to handle the complexity of

the organization. This cascading unfolding shows the organization and its embedding

environments alongside one another (see Figure 11).

When examining an organization we unfold its complexity showing only the

organization and its embedded primary units. This unfolding differs from an

organization chart in that it illustrates a global organisation containing local

autonomous organisations (primary units), rather than a relationship of authority

between managers and subordinates. The environment for each level is not shown and

the embedded primary units are exploded for ease of explanation (see Figure 12).


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Figure 10 embedded unfolding

Figure 11 cascading unfolding


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Figure 12 complexity unfolding.

PrimaryactivitiesandregulatoryfunctionsIn Viplan, those resources coordinating and integrating the primary activities into a

cohesive whole are called regulatory functions. These are the functions of an

organization that support and enable its primary activities, and provide functional

capacity to:- develop organizational cohesion

- integrate this organization, as a primary activity, into a larger organization, and

- cope with environmental complexity.

Within each unfolded primary activity of the whole organization there is a set of

regulatory functions that provide this functional capacity. It is important to distinguish

between these regulatory functions and those support functions that are not regulatory

but producing activities focused on the primary activities and not on the business

customers. They are not businesses of the organization; we call them secondary

activities. See Trident for examples.

Chapter

2

Summary

Management of ComplexityThis chapter has introduced a way of thinking about managing complexity implied by

organizational communications; their quality can be improved by designing effective

attenuators and amplifiers of complexity.

Residual complexityBut by and large, managing complexity relies on self-regulation and self-organisation.

The high complexity side in any communication has to absorb most of its own

complexity, leaving a manageable residual complexity as part of the communication

itself.


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Complexity unfoldingIn complex organisations autonomous units emerge within autonomous units; in

practice this implies the creation of different communication spaces, each relates to

total tasks that are parts of larger total tasks.

Primary activities and regulatory functionsTasks producing the purpose of the organization are called primary activities;

functions enabling the cohesion of primary activities and managing their performance

and the performance of the total organisation are called regulatory functions.

Chapter3TheVSM

PerformanceManagement:valuechainandtheenvironmentManagement manages the organizations overall performance in its environment.

Structurally, management is part of the organization, which in turn is part of the

environment. Diagrammatically, as said before, these have been separated for ease ofexpression in Figure 13. The circle no longer represents the organization as a whole,

but the ability of the organization to implement its tasks. Management is managing

the organizations value chain.

Figure13PerformanceManagement

A further modification is made in the drawing of the VSM in Figure 14. Now it is

easier to illustrate that the organizations management must communicate:- with implementation; this is what we call cohesion management, and,

- with the environment; this is what we call development management.


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Figure 14 Performance Management

Also, management communicates, through implementation, with the environment.

This is the management of the organizations value chain. This relation between

implementation and the environment is what we call achievement management.

Performance management is the total management of the organization in its

environment, that is, the synthesis of development management and achievement

management.

Cohesion

Management:

the

mechanism

The implementation-environment interactions define the organizations achievement

in its current environment. Managing the organizations production value chain, that

is, managing its inbound logistics, its production activities and its outbound logistics,

is key to this interaction. To achieve good results, management has to ensure the

cohesion of the organizations inner activities. We call the management responsible

for the integration of implementation resources, cohesion management.

In an organization, many roles may carry out cohesion management activities. Trident

gives examples of these. Cohesion management develops amplifiers and attenuators

to enable effective value chain management,


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Figure 15 Cohesion Management

Organizations are too complex to be managed completely from the top. As has been

said before most organizations have autonomous units, that is, primary activities,

within them. The one illustrated in Figure 16 has two. As autonomous units, they each

have their own management, implementation and relevant environments with their

own amplifiers and attenuators. Whilst autonomous, these units are part-of the whole

organization and, in the interests of cohesion, are managed by the organization as a

whole.

Cohesion management is responsible for the effective use of resources. As such, it is

accountable for the primary activities 1 and 2 in Figure 16. How cohesion

management is exercised is of particular significance to organizational achievement.

Below we illustrate the Control Dilemma in order to explain common problems

encountered in cohesion management. Look at Trident for further explanations.

We think that in organizations structured as hierarchies, cohesion management is

often misunderstood as command and control, giving commands to primary

activities and asking for reports confirming their status.


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Figure 16 Control Dilemma

Since primary activities are embedded in increasingly complex external environments,

as time passes, they are forced to respond directly, possibly without consulting, to

more and more changes in their local environments. This may lead to a sense of

unease in corporate management; there are more and more things happening in the

primary activities of which they are not aware. Management feels the need to takefirmer control. They issue more commands and demand more reports, eating into

primary activities flexibility. This leads to a situation where, in relative terms, more

of the primary activities resources are spent in dealing with control requests and less

with environmental complexity. This is occurring precisely when more effort is

needed to deal with increased environmental complexity.

In a changing environment it is important that primary activities can respond rapidly

to their relevant environments. However, if the controllers response leads to less

flexibility in responding to environmental demands, achievement as well as overall

performance will suffer. Cohesion management must, therefore, be far more

sophisticated than a simple command and control mechanism.

Management intervention will usually be part of cohesion management. However, this

becomes a problem if it is the main communication mode between cohesion

management and its primary activities.


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Figure 17 Cohesion Mechanism

If primary activities are to be autonomous, they must control resources of their own.

Organizations not only have limited resources but the way these resources are

distributed may vary according to strategic and technological considerations.

Therefore, cohesion management and the management of primary activities need to

get engaged in some form of resource bargaining for instance, the annual budgetingcycle employed by companies.

The bargaining processes also require accountability reports (see central channels of

communication in Figure 17). These reports must be low variety; otherwise they may

overload management. However, as said before, often managers feel they dont have

enough understanding of the situation and ask for more information, creating the

control dilemma. An alternative is to enrich their understanding of primary activities,

by developing monitoring channels (see left-hand channel of communication in

Figure 17). To achieve a shared understanding of accountability reports and gain a

better understanding of the organization as a whole, cohesion management depends

on using monitoring channels.

These channels are essentially high variety and sporadic communications between

people in cohesion management and people within the primary activities, by-passing

their local management. They may include such activities as financial and safety

audits, as well as ad hoc meetings with people in the organization and visits. They

should be made public to people in the organization. Well-developed monitoring

channels not only provide information to cohesion managers, but also engender the

feeling in primary activities that cohesion managers care about them.

But reducing the use of the resources bargaining central channel implies the need forcommunication channels among primary activities for them to solve locally common


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problems without the need for a third party (usually people in cohesion management).

Often, much of the cohesion management of an organization is to ensure that work is

carried out everywhere in similar ways, using similar standards. This reduces the

chances for oscillation between primary activities and ensures that work flows easily

between them (particularly when they are closely interrelated). By and large, these are

interactions of mutual adjustment between primary activities, requiring a context for

their coordination and not their external control.

Much coordination can take place through mutual adjustment and agreements among

primary activities rather than by direct supervision (see right-hand channels in Figure

17). However, whatever direct supervision is necessary from the centre it should be

there to assist those working in the primary activities and NOT to command them.

The complete mechanism for Cohesion Management the cohesion mechanism

consists of resources bargaining and management intervention, supported by

monitoring and coordination channels. The better designed these channels are, the lessreliant the organization will be on the central channel, giving the primary units more

discretion to respond to the environment whilst ensuring overall cohesion.

Cohesion management is only concerned with managing the inside and now of an

organization. However, managing the outside and then of the organization is equally

important to ensure a viable organization. Balancing the inside and now with the

outside and then is the concern of development management and for that, the VSM

offers the mechanism for adaptation.

DevelopmentManagement:themechanismforadaptationDevelopment management is concerned with organizational changes in order to

achieve viability beyond survival. It is not enough for the organization to achievegood results in a given environment; this is insufficient for its long-term viability. It

also needs to consider environmental changes and create new forms of operation and

develop new possibilities. For this it needs to be sensitive to environmental changes

and furthermore to possibilities of producing desirable changes. Taking responsibility

for these changes may imply identity changes, that is, in the relationships and tasks

defining the organization. This is at the core of organizational learning and

transformation. This section illustrates the mechanism to increase the chances for this

kind of viability.

Management must maintain communications in both directions; with the

organizations implementation and with the environment in which the organization isembedded. The complexity of management is much smaller than that of the whole

organization, so this communication must involve amplification and attenuation

working together. The purposes of these communications, as said before, are to

manage the value chain and to maintain the cohesion of the organization as a whole.

We referred to the management function that aims at achieving operational results and

cohesion as the cohesion function in the VSM.

The complexity of the environment is larger than that of its embedded organization,

so this communication must involve amplification and attenuation working together.

The purpose of these communications is to understand and influence the future

external environment of the organization. The management function that does this isreferred to as the intelligence function in the VSM.


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Management must, therefore, communicate with both the environment and

implementation. Look at examples of control and intelligence roles in Trident.

Structural requirements for effective organizational development are balanced

resources allocated to the organizations concerns with the outside and then

(intelligence function) and the inside and now (cohesion function), as well as

effective interactions between them. For particular issues of organisational

significance, resources representing in these interactions the views of intelligence and

cohesion need to be more or less of the same complexity. Moreover, they need to

provide effective checks and balances of each other, that is, they need to be richly

interconnected. Debates between these viewpoints should lead to the vetoing of weak

proposals from the perspective of one or the other viewpoint, and therefore, to

informed conclusions.

These debates occur in the organization as a whole, within the framework of itsvalues, beliefs, vision and mission as produced by the organizations policy function.

Structurally, policy is of much lower complexity than intelligence and cohesion

management. People in policy activities cannot handle the same level of detail as

those in the other two functions and therefore should not get involved directly in the

details of either. It makes sense for policy to consider alternatives only after they have

passed the intelligence and cohesion veto. This way policy makers are using the

organizations capabilities, including their own, to the best of their abilities. Policy

sets the context within which they work and therefore it monitors conversations

between them (see Figure 18).

Figure 18 Mechanism for adaptation

The structural mechanism to achieve balance between the outside and then and the

inside and now, all within the guidelines of the policy function is the Mechanism

for adaptation, Figure 18.


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More about the intelligence functionAny functional capacity (i.e. resource) of the organization that is focused on the

outside and then is part of the intelligence function. Although the main function of

some units (e.g. R & D) is to provide intelligence capacity for the organization, most

of the time the people providing this capacity are distributed across several units.

Therefore, the intelligence function does not map easily on to the organization chart.

It is important to recognize peoples intelligence activities and how they interact with

the rest of the organizations activities. Intelligence creates and manages the

organizations future environment. To avoid overwhelming the policy function,

intelligence needs to interact with those concerned with the inside and now, that is,

with the cohesion function. This allows many issues to be discussed, resolved and

dissolved from both intelligence and cohesion perspectives before they reach policy

makers.

More about the cohesion functionCohesion is responsible for the operational management of the organization, and is

focused on the inside and now of the organization. Although some units may have

cohesion as their main function (e.g. finance), it is more likely that people distributed

across several units will provide cohesion capacity. Cohesion manages the complexity

generated inside the organization by its operations, and as cohesion people interact

with intelligence people they filter out inside and now information irrelevant to the

policy process. Thus, to avoid overwhelming the policy function with information,

cohesion needs to be richly connected with the intelligence function.

More about the policy functionPolicy is responsible for:- defining and modifying the organizations purpose, mission and vision,

- allocating the resources to intelligence and cohesion to achieve effective interactions,

- adjusting policies as necessary

Usually policy makers, in order to discharge these responsibilities, rely on briefings

and reports produced for them by others in the organization. To get the most out of

these briefings they have to orchestrate organizational interactions (cf. mechanism for

adaptation). For this they need to have a good grasp of:

- who provides intelligence and who provides cohesion functional capacity for each

policy issue in the organization,- - which resources are required to achieve a balanced interaction between

intelligence and cohesion and

- how to bring them together as necessary.

RecursiveManagement:distributionofmanagementcapacityCombining the adaptation and cohesion mechanisms gives the complete VSM (see

Figure 19). Trident shows an example of the mechanisms for development

management and cohesion management together.


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Figure 19 Complete VSM

However, in addition to these two mechanisms, the VSM is recursive as is explained

below. The organization structure as modelled by the VSM is recursive; the same

structure that applies to the organization as a whole applies to each of the primary

activities (see Figure 20). In other words, each primary activity requires functional

capacity for development, cohesion and performance management. Indeed, each of

them must be a viable autonomous unit in order for the whole to increase its chances

for viability.

The five systemic functions policy, intelligence, cohesion, coordination and

implementation are always present in viable systems. As each primary activity is

(ought to be) a viable unit as well, each has to have the same systemic functions of

policy, intelligence, cohesion, coordination and implementation. This continues to the

lowest level of complexity unfolding in the organization. Trident illustrates recursion.

By clicking on parts of the models in Trident you can see examples of the recursivity

of policy, intelligence, cohesion, coordination and implementation at a number of

structural levels.


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Figure 20 Recursion

All mechanisms of the VSM appear at all levels of recursion.

The managerial implications of this model are significant. We talk about recursive

management. This implies that each primary activity, from the enterprise itself to the

smallest autonomous team in the shop floor, has to develop short and long term

concerns. Each has to have an entrepreneurial outlook, concerned with creating their

future and performing effectively as a whole business. The VSM defines the structural

requirements to achieve a non-hierarchical, highly distributed organization with

cohesion and capacity to operate effectively in its environment.

Chapter3Summary

Performance ManagementOrganizations need to manage their current environment, that is, the production of

value for their customers. To do this, they have to manage their interactions with

suppliers and customers. They also need to manage their future environment. For this

they need to create possibilities. Performance management is the synthesis of both

aspects of management.

Cohesion ManagementAn organizations performance will improve if it creates conditions for cooperation

among its participants. The purpose of cohesion management is improving

communications in order to align the purposes of primary activities with those of the

organization.

Development Management: AdaptationAn organization needs flexibility and capacity to change and transform itself over

time in order to maintain viability. For this, it needs policy processes that balance the

inside and now with the outside and then.


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Recursive ManagementThe above three managerial concerns apply to all primary activities in the

organization; this implies an entrepreneurial structure, with short and long term

concerns throughout it. The VSM is all about recursive organizations.

Part2TheViplanMethod

IntroductionHaving explained the Viable System Model, we now need to use it in the context of

specific organizations. Whether an organizations structure is effective or not depends

on its alignment with the organizations strategy. The Viplan Method is a tool to

assess the structure with reference to the strategic implications of its ascribed

purposes. The Viplan Method to Study Organizations looks at the structure of an

organization starting from these purposes. Since different purposes can be ascribed to

the same organization, a number of different structures may be relevant. Viplan can

be used in two modes to study organizations.

Mode I studies an existing organization. It is descriptive and permits diagnosis.

Mode II designs an organization. It is prescriptive and the design depends on strategy

and expert knowledge.

SummaryoftheViplanMethodsactivities:1 Establishing the organizations identity: Making clear what the organization is

about from a particular viewpoint. Defining the organizations primarytransformation, that is, the processes producing its products and/or services.

2 Structural modelling: Offering structural criteria to break the organizationsprimary transformation into smaller tasks. These structural criteria depend on theorganizations strategy.

3 Modelling structural levels: Identifying the tasks management wants to makeautonomous at several structural levels, that is, the organizations primaryactivities. These tasks define the organizations unfolding of complexity.

4 Modelling distribution of discretion: Allocating resources and discretion toprimary activities, that is, defining the functional capacity of primary activities.

5 Modelling the organization structure: Mapping the allocation of resources onto theVSM and identifying structural issues.

Chapter4Identity

IdentityandPurposeIdentity defines what an organization IS. Its purpose is what it DOES, as seen from a

particular viewpoint. This chapter explains identity based on our earlier discussions

about purpose. Stakeholders articulate identity. It is not fixed. It changes as the

stakeholders constitute new relationships. Stakeholders purposes give meaning to

these relationships. The stakeholders articulate purposes and reach agreements about

them. These agreements help stakeholders to align purposes and to coordinate their

actions. In particular it is useful to reach agreements as to which are the

organizations primary activities.


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Managers are often exhorted to define their organizations vision, mission and

strategy. Vision and mission help to establish the organizations desired purpose,

which often becomes the managers espoused purpose for the organization. This

purpose is transformed into purpose-in-use if resources are structured to make it

happen. The VSM offers a heuristic to relate resources to a strategy in order to

produce a requisite structure to achieve this strategy. The emergent interactions as this

structure in produced produce the organizations identity.

The identity of an organization is defined by the relationships between those

structuring the organization. In this chapter we offer methodological help to work out

who these stakeholders are and the purposes they see in these interactions.

People ascribe multiple purposes to their organizations. In fact, they are negotiating

their views all the time. This chapter helps to make the link between these purposes,

the related organizational processes and the stakeholders. The key tool is naming

systems.

StakeholdersAll organizations have stakeholders. Who they are varies, but Viplan recognises

FOUR main types of stakeholder. These stakeholders are not just the employees and

owners of the organization, but also those who provide inputs to or receive outputs

from the organization. Beyond stakeholders, we also identify participants on the

organizations transformation. Participants include all stakeholders and also those

who influence the organizations transformation without taking part in it directly.

Each participant views the organization differently. The ideas of stakeholders and

participants are illustrated with reference to a car company, a supermarket and a

charity.

Types of Participants Including Stakeholders- Those carrying out the work.

- Those providing the organization with resources

- The beneficiaries and victims of the organizations activities

- Those managing the organization

- Those with an influence on the organization

The following are examples of possible participants viewpoints about a car manufacturing

company, a supermarket and a charity:

Those carrying out the work

CarCompany

Employees An organization to provide jobs for skilled car makers.

Supermarket

Employees An organization to provide full-time and flexible part-time employment.

PovertyReliefCharity

Volunteers An organization to relieve poverty though the donation of time, moneyand goods.


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Paid Staff An organization to relieve poverty by the best use of donated money,

goods and services.

Those providing the organization with resources

CarCompanyParts suppliers An organization requiring parts made to price and on time

Machine maintainers An organization requiring their machines maintained by our

staff to an agreed schedule.

SupermarketGrocery Manufacturers An organization to distribute goods geographically to final

customers.

Farmers An organization to buy fresh produce in bulk at a discount price to sell to

the general public.

PovertyReliefCharityDonors of goods and money An organization to give money to help others and save

conscience.

Suppliers of bought goods An organization that buys our goods.

The beneficiaries or victims of the organizations activities

CarCompany

Distributors An organization supplying cars for us to sell to the public under their

terms.

Drivers An organization making cars for private use.

Fleet uses An organization providing cars in volume at a discount for fleets.

Supermarket

Householders An organization to provide locally, at convenient times, a wide range

and choice of groceries.

PovertyReliefCharityThe poor An organization to provide us with goods and services otherwise not

accessible.

Those managing the organization

CarCompany

Managers An organization requiring high levels of technical, managerial and selling

skills to produce and capture a significant part of the car market.

SupermarketManagers An organization to retail groceries in a catchment area.


Trustees An organization to carry out the mission of the charity.


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Managers An organization to carry out the mission of the charity and provide

charity workers with employment.

Those with an influence on the organization

CarCompanyDTI A car manufacturer who provides employment and contributes to the balance of

payments.

Ecology lobbies An organization producing vehicles that increase congestion and

atmospheric pollution.

SupermarketCompetitors An organization working in the same business and competing on price

and service.

Shareholders An organization providing a return on investment by working in foodretailing.


Government of charitys home An organization conforming to the countrys charity

laws.

The descriptions of the organizations above are brief. They make a stab at naming the

system as seen from a particular viewpoint when a person observes the company.

These descriptions need to be made more explicit. In the VSM language the car

company, the supermarket and the charity are primary activities. That is, they are all

recognised as autonomous organizations in the framework of their larger industries orsectors. We can also name systems for regulatory functions. The latter, as said before,

are resources allocated to a primary activity for its management and/or development.

Primary activities and regulatory functions may also be informal units, formed by

people from different units carrying out a joint process. This is the case of virtual

primary activities or virtual regulatory functions.

The supermarket is a primary activity. It is an autonomous business in the retail

industry, recognised as an autonomous and hopefully viable business over time.

The managers viewpoint is shown in Figure 21. This is the system that they are

running.


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Figure 21 Naming supermarket

The accounting department, Figure 22, is seen as one of the regulatory functions

necessary to run the supermarket as a business. It has been set up to ensure that the

money passing through the company is correctly handled and that the accounts are in

order, to support its management

Figure 22 Naming accounting department

Both primary activities and regulatory functions may not relate to existing formal

organizational units, such as a company or a department. Often they relate to specific

processes and the resources supporting them may be distributed in different parts of

the organization. Sometimes they may even be external resources. The example in

Figure 23 is of production scheduling in the car company. This regulatory function is

not just carried out by the formal scheduling office; it also involves people from


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Each named systems implies a transformation carried out by the system and a network

of people involved in making that transformation happen. Making the underlying

transformation and the network of relationships explicit, reduces the possibility of

misunderstandings.

TASCOIandIdentity

Viplan Method to Name SystemsEach name implies a particular systems transformation as well as relevant actors,

suppliers, customers, owners and interveners. We use the mnemonic TASCOI to

make explicit transformation and participants:

TASCOITransformation What inputs are converted into what outputs?

Actors Who carried out the transformation?Suppliers Who supplies the inputs?

Customers Who receives the output?

Owners Who must ensure that the transformation is carried

out?

Interveners Who outside the system influences the transformation?

TASCOI highlights the different ways in which the participants relate to the system

named. The transformation statement clarifies what the system does in the view of the

person naming it. The actors, suppliers, customers, owners and interveners are the

people who should be involved in the transformation. These are the participants.

Now look at the three systems named before and the TASCOI for each of them. Theseare names of a primary activity, a regulatory function and process across units.

APrimarySystemTheSupermarketA system to provide groceries in small quantities to individual consumers at locally

convenient outlets by buying in bulk from worldwide manufacturers and farmers, and

distributing them to provide a profit to shareholders and wages to employees

T Internationally bulk purchased groceries are transformed into groceries

available in small quantities locally

A All employees of the supermarket

S Farmers, grocery manufacturers

C Local consumers

O The management of the supermarket

I Competitors, consumer associations, Trading Standards Office, Customs and

Excise

RegulatorySystemTheSupermarketAccountingDepartmentA system to provide financial control for the supermarket by ensuring that all transactions

and monies are accounted for and financial control documents produced so that the

supermarket management is aware of its financial position.


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T Financial transactions are transformed into financial control

A Members of the accounts department

S Other departments with information, computer manufacturers

C Supermarket managers, other departments

O Accounts manager

I Accounting standards bodies, managing director of supermarket

CrossUnitSystemTheCarCoSchedulingA system to translate customer orders into machine schedules by developing procedure for

the company as a whole to translate customer orders into local schedules for the work force

at all levels, to ensure connect deliveries can be made on time.

T Information concerning customer orders into scheduling information

A Members of the scheduling department, also those scheduling orders from day

to day around the plant. These may not all belong to the owners team.

S Those collecting customer orders

C Those producing the goods

O The ownership of a system such as this is often not recognised or is disputed. It

may be that the owner is the head of the scheduling department or it may be the

head of production.

I Production department personnel, sales personnel, quality personnel, senior

managers

Look at the Trident examples.

For primary activities, the name is the organizations identity statement. It definestheir transformations and the various participants. Thinking about the relations

between participants helps us to understand the identity of the organization.

In other words, the TASCOI of an identity statement highlights the relevant

participants of the organization so that their relationships can be more fully examined.

At best an identity statement for an organisation may establish the following aspects: The products or services produced

The technological processes used

The customer needs satisfied by its products and services

Time

Location

Size

Life cycle of products and services

Key environmental issues

Related organizations

Economic variables

Financial variables

For particular organisations not all of these aspects may be relevant.


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Chapter4Summary

Identity and StakeholdersThe identity of an organization is what it is; isness emerges from peoples

interactions, hence the relevance of working out who are the stakeholders of anorganization. Working out the organizations ascribed purpose by relevant viewpoints

does this.

Naming Systems: TASCOINaming systems was introduced as a method to relate purpose to stakeholders. The

mnemonic TASCOI permits us to work out the participants actors, suppliers,

customers, owners and interveners relevant to a particular process or transformation.

Virtual organizationNaming Systems may be used to name bothformal units (e.g. the organization itself

or departments in it) and informalunits like processes, with their own identity,emerging from peoples actual interactions. These are virtual organizations.

Identity and TASCOIThe concepts of identity and naming systems help people to develop a common

language to improve conversations about their primary activities and organizational

context. This assists the alignment of interests and the alignment of purposes.

Chapter5StructuralModelsandUnfoldingofComplexity

ManagingBusinessComplexityThe transformation named in the identity statement is used as a first step to work out a

hypothesis of an organizations primary activities. The activities producing this

transformation are the components of the transformation itself. These activities can be

influenced by the technological processes of the organisation, their location, their

timing, as well as by possible customers of, and suppliers to, the transformation.

Particular technological processes produce the products of an organisation. Models of

these processes are what we call technological models. A technological model of a car

manufacturing company is shown in Figure 24. Here, manufacturing a car requires a

bodyshop, a power train shop and an assembly line. If this is a descriptivemodel of an

actual plant, we are in Viplans Mode I. If it is aproposedmodel, we are in Mode II.

In Mode I observing the transformation helps to produce these models. In Mode II

these models are produced using expert advice. At a higher level of resolution we canalso produce a technological model for the manufacture of engines within the car

company (see Figure 25). However, the drivers of this decomposition into lower level

activities may be more than technological. Different customers, different geographical

requirements and also time considerations may influence this decomposition as well.


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Figure 24 Technological model of a car manufacturing company

Figure 25 Technological model of engines manufacture

StructuralModelsOur concern is to work out the different structural factors affecting the complexity of

an organizations transformation. One factor is the technology, as is made apparent

above. We referred to these as technological models. Customers and suppliers will

also influence the way in which the owners of an organization will structure their

activities. For instance customers characteristics may support the formation ofprimary activities focused on particular market segments. Suppliers may also

influence this formation. In Mode I a customer-supplier model will help to describe

the organizations actual market segments. In Mode II this kind of model will help to

design the organization to carry out an organizations strategy. When owners consider

their strategy, they have to think about the availability of skilled labour (i.e. actors),

its cost and other local factors, like the proximity of suppliers and customers.

Frequently, therefore, geography must be taken into account, and a geographic model

can be produced. An organizations activities take place in time. Where the

production process requires it, it may be necessary to use the same machinery for

different products or use a shift system to run over 24 hours. Therefore time modelsmay also influence the structure of an organization.


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Examples of structural models

Technological ModelsFigure 26 shows a technological model to produce the cars made by Car Co.

Figure 26 Technological Model for Car Co.

CustomerSupplier ModelsFigure 27 shows a model to support the divisionalisation of a large holding that at

the time had many unrelated plants. Based on the plants markets it was possible to

see a rationale to create four divisions:

- Steel Foundry

- General Foundry

- Engineering Products, and

- Electrical Services

Each division served a distinct group of customers with as little overlap as possible.

This is an example of using the method in Mode II, that is, the design mode. In a

diagnostic mode, if the four divisions had existed, the model could be used to show

inefficient distribution of markets.


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Figure 27 CustomerSupplier Model for Holding

Geographic ModelsFigure 28 shows either the growth of a supermarket from one shop into several shops

or its restructuring as market opportunities made it possible to open stores in other

areas, or, of course, the strategic growth of an organization as the opportunities

offered by new geographic markets are realised. The availability of suitable personnel

and a range of other factors may also influence the siting of these stores.

Figure 28 Geographic Model for Supermarket

Time ModelsWhere a technological process must run continuously, a shift system may be

necessary. Each of these shifts must be able to produce the companys products or

service to the same standard. Each must therefore be a primary activity in its own

right. For perishable products, the time necessary to reach the market may lead to the

creation of units around the country. Some goods and services are produced on aproject basis, where each project lasts for a defined period and is not repeated exactly


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in the future. All these are examples where time has an influence on the structure of

the organization.

The first example, Figure 29, is of a shift system, based on the need for the factory to

work 24 hours per day. The second example, Figure 30, is production rotating over

time, each using the same machinery, but having different suppliers and customers

and requiring differences in the activities of the actors

Figure 29 Time Model for Shifts

Figure 30 Time Model for Different Products Using the Same Equipment


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UnfoldingofComplexity

Linking Structural Models to Complexity UnfoldingThe various structural models developed for an organization provide the information

to discuss its complexity unfolding. In Figure 31 we illustrate how to pass from atechnological model to a complexity unfolding model. The technological model for

Engine 1 shows the engine making facility a would be primary activity with its

four would be embedded primary activities. The question is: which of these

technological activities does the company want to make viable in its own right?

The highest level in this model is engine making as a whole. This includes all its

nested primary activities and is represented in the unfolding as a circle.

The nested primary activities are then represented as circles within the larger circle. In

our example only three of the technological activities are translated into the unfolding.

The fourth, Cast, is a necessary part of the process, but the company has agreed to

contract it out; it is technological activity but not a primary activity of this

organization. Therefore it is not part of the organization and does not appear in the

unfolding of complexity.

Figure 31 Technological Model and Complexity Unfolding

These models and the unfolding of complexity can be carried out in both diagnostic

and design modes. Trident illustrates this.

AnexampleapplyingthemethodsofarThe full connection between structural models and the unfolding of complexity is

illustrated for GB Quarry. Different complexity drivers can influence the unfolding at

different levels. This is a concrete area where strategy and structure get together.

We will look at GB Quarry to understand the positioning of structural levels within a

company. This is a British quarrying company with interests in Europe. It is part of a

British construction company (GB Construction plc). The structural levels of GB

Quarry relate to the transformation and suppliers and customers named in its identity.


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37

Identity Statement

GB Quarry Company Ltd is: a European, managerially autonomous, quarry based division of GB Construction plc

producing quarried products within the frameworks of the Mines and Quarries Actand the Factories Act as relevant

on an ecologically responsible basis

supplying in-house and external customers with dry and coated stone and concrete

whilst looking for new outlets for the products of quarrying through technical and

market development, moving downstream as necessary

to retain its position as a leading British company, ensuring a return for GB

Constructions shareholders.

TASCOI

T The conversion of rocks in situ into products suitable for theconstruction industry

A All employees at GB Quarry Co Ltd

S Landowners, industrial suppliers of bitumen and cement amongst

others

C Buyers in the construction industry, including GB Construction

companies and those using products within these companies

O Senior management team of GB Quarry Company Ltd

I GB Construction plc, Environment Agency, standards bodies,

regulators, local communities through pressure groups, local

authorities, ecology groups...

The owners must take into account:

the organizations transformation, as agreed by them, that is, producing quarried and

concrete products.

Figure 32 Technological model


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the customers/suppliers they want to service and work with, that is, the large and

small users of quarried products and concrete and the input suppliers:

Figure 33 Customer-suppliers model

the geographic coverage of their activities, that is, UK regions and other parts of

Europe, and

Figure 34 Geographic model

time.

Construction takes place largely in the open. Customers are very dependent on the

weather. They therefore need suppliers that can have goods on site quickly in hours

or even minutes. Two product categories have short shelf lives coated materials and

concrete. These products must therefore be delivered in as short a time as possible.

In Mode I, a diagnostic unfolding of complexity for GB Quarry is developed taking

into account all these models for the recognition of structural levels.


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Figure 35 Unfolding of complexity of GB Quarry

The technological process drives the first structural level; Concrete and Roadstone

frequently share the same customers, but the technologies used are different. The

second structural level is then split geographically by region. Roadstone and Concrete

unfold into geographic areas. At the third level, within Central, the unfolding is

driven by technological considerations (sand and gravel, hard materials, surfacing and

coating) and geographic considerations (hard east and hard west). Coating is the

production of black material for roads (coated stones). It uses bitumen and stone

produced by quarrying and has the road surfacing unit as one of its customers. Within

coating, the use and movement of equipment (plant) is determined by time. The plant

must be close enough to the place where the customer will use the product to ensure it

arrives in good condition. The product is useless if the time between its manufacture

and use is too long (this is expressed by the red circles in coating). The unfolding of

complexity of GB Quarry is the outcome of four complexity drivers.

Having offered a hypothesis for the unfolding of primary activities in theorganization, we can then look at the arrangement of regulatory functions throughout

the structure. This is done in the next step of the method.

Chapter5Summary

Structural ModelsThese are models to support decisions about the unfolding of complexity in an

organization. They offer a key tool to relate strategy to structure. These models can be

based on technology, customers-suppliers, geography or time considerations.


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Technological ModelsThese are models of the activities producing the transformation in the identity

statement. In Mode I these models are produced by observing the transformation. In

Mode II these models are produced using expert advice.

CustomerSupplier ModelsThese are models of the organizations relations with customers and suppliers. They

help to work out primary activities based on products and market segments. They can

be in Mode I or II.

Geography and Time ModelsIt is often necessary to consider geography and time when defining the organizations

primary activities. What geographic coverage is required? Are shifts necessary? Is

time a fundamental concern in delivering products?

Chapter

6

Distribution

of

Discretion

and

Mechanisms

DistributionofDiscretionPrimary activities are real or virtual autonomous units producing the

organizations products or services. In general they contain, and are contained within,

primary activities. This is reflected in their unfolding of complexity. Therefore, the

resources producing a primary activity are other subsumed primary activities and their

regulatory functions, which give cohesion to, and develop, the primary activity. In a

highly centralised organization most of this functional capacity is concentrated at the

global level. In a decentralised organization the functional capacity is distributed in

primary activities at all structural levels.

Strategies to manage this distribution of functional capacity are strategies to manage

the organizations complexity. Scarce, highly strategic resources are likely to be

centralised, while widely abundant resources are likely to be made available

everywhere in the organization. However, resource centralisation does not necessarily

imply functional centralisation. Today it is possible to have resource centralisation

and functional decentralisation. A globally located expert can be shared by multiple

primary activities and be accountable to several local managements. Communication

technology may even permit the expert to make this contribution from the centre,

without the need to be physically present in all places.

The Recursion-Function table is a tool to discuss different strategies to manage anorganizations complexity. The table can be used in Mode I, when the purpose is to

map the actual distribution of resources and discretion throughout the organization,

and in Mode II when the purpose is to offer an effective distribution of discretion.

Organizations with a functional structure are highly centralised since they depend on

central people to make links between functions. This approach often creates

bottlenecks. Organizations with effective autonomous units within autonomous units

(i.e. recursive organizations) have links between functions within the autonomous

units themselves, thus distributing complexity and functional capacity. Next we will

look at modelling the distribution of complexity.


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Figure 36 Recursion and Discretion

Modelling Distribution of DiscretionRegulatory functions are attributed to primary activities. Regulatory functions such as

legal services, capital expenditure, finance, personnel, sales and quality systems are

shown on the horizontal axis (see Figure 37). The vertical axis shows the primary

activities of the two lowest levels of recursion for the car company.

Function

Recursion Legal

CapitalExpenditure

Finance

CreditControl

Personnel

Training

Quoting

Sales

Marketing

Administration

Buying

ProductionManagement

ProductionScheduling

QualityAssurance

QualitySystem

ProcessDevelop

ment

EquipmentDeve

lopment

Maintenance

FactoryLogistics

Goodsin/out/Sto

res

Engine 1

Machine

Assemble

Finish

Figure 37 Table Recursion-Function for Engine 1


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Each primary activity has capacity in some functions; these are the symbols (,,)at

the intersection of the vertical and horizontal axes. Functions may be allocated at

different levels. In our example there are resources for training, production

management, quality assurance and maintenance in the two structural levels shown

for Engine 1. Personnel functional capacity, for instance, is only available at the level

of Engine 1 (i.e. first level). On the other hand a number of functions of the company

do not occur at all at these two lower structural levels; the columns for those functions

remain blank.

The Trident case study shows an unfolding of primary activities and the

corresponding Recursion-Function table for a range of functions.

In Figure 38 the symbols show discretion for that function within that primary

activity at that level of recursion:

Function

Recursion Legal

CapitalExpenditure

Finance

CreditControl

Personnel

Training

Quoting

Sales

Marketing

Administration

Buying

ProductionManagement

ProductionScheduling

QualityAssurance

QualitySystem

ProcessDevelopment

EquipmentDevelopment

Maintenance

FactoryLogistics

Goodsin/out/Stores

Car Co

Powertrain

Engine 1

Machine

Assemble

Finish

Engine 2

Gearbox

Body

Assembly

Figure 38 Table Recursion-Function for Car Co

This functional capacity may be found within a department or just as part of an

individuals job, or carried out by people in different parts of the organization. In this

latter case, if communications are not good, the function may not be effective. The

function may be completely centralised, as is sales, or completely decentralised, as

shown for production management, or something in between the two as for Goods

in/out/stores. The degree of decentralisation depends on the strategy of the

organization as well as on the technologies available.

People experience problems when there are inconsistencies in the waydecentralisation is carried out. For example, when the management of particular


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Diagnosis and Design of Organization Structures

This is the last stage of the Viplan Method to study organizations. The first four stagesof the method yield a number of diagnostic points and insights. However, it is only

this last stage, based on the mechanisms for cohesion and adaptation, and the idea of

recursion, that provides the opportunity to think systemically in order to diagnose and

design desirable structures.

In what follows we will show how the regulatory functions of the Recursion-Function

table map onto the VSM. For this, we will ascribe a systemic purpose to each of these

functions. These systemic purposes are to:- make policy for the primary activity in those functional aspects that are of

competence at that level of recursion

- provide intelligence capacity, if their purpose is to create within the primaryactivity an appreciation of its outside and then

- support resources bargaining, if their purpose is to negotiate the allocation ofresources to primary activities

- support corporate intervention, if their purpose is to give non negotiableinstructions to the contained primary activities

- make monitoring of primary activities possible, if their purpose is to bridge thecommunication gap between two levels of recursion, and

- enable coordination among primary activities, if their purpose is facilitating the

moment-to-moment alignment of operational activities, without interfering inthose aspects related to their main purpose.

The figures that follow (Figure 40) and the Trident case study give examples of how

to map business functions onto the systemic functions constituting the cohesion and

development management of an organization.

Figure 40 Mapping Recursion Function Table onto VSM


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CarCoIn this page our focus is on the discretion that Car Co is taking away from the rest of

its embedded primary activities. Car Co has centralised resources that support its total

management. The systemic purposes ascribed to these resources are mapped onto the

lower grid. The purposes ascribed to them are offered only as a means to think

systemically about them. Their systemic meaning may change from situation to

situation.

Function

Recursion Legal

CapitalExpenditure

Finance

CreditControl

Personnel

Training

Quoting

Sales

Marketing

Administration

Buyin

g

Produ

ctionManagement

Produ

ctionScheduling

QualityAssurance

QualitySystem

ProcessDevelopment

Equip

mentDevelopment

Maintenance

FactoryLogistics

Goodsin/out/Stores

Car Co

Policy

Intelligence

Corporate

Intervention

Resource

Bargaining

Monitoring

Coordination

Figure 41 Systemic Functions and the Mapping of the Recursion Function Table onto VSM

Car Co shows some form of distribution of resources between cohesion and

intelligence. For instance the legal function both understands Car Cos external legal

environment and ensures that the law is complied with through corporate intervention.

However, whether the requirement of balance between these two systemic functions is

achieved depends on specific issues and can only be assessed with reference to them.

Financial management has three systemic purposes in this table. Capital expenditurehas a strong element of intelligence plus aspects of coordination. Finance covers

budgeting, which is resource bargaining and audit that is monitoring. The use of

standard financial systems is helping coordination of Powertrain, Body and Assembly

(i.e. primary activities within Car Co). Dealing with long-term financial requirements

is intelligence. Credit control, as a common system, coordinates the company and

provides a centralised service.

Personnel, through its appreciation of future trends in the labour market, provide

intelligence. They also contributes to the resource bargaining process through a view

on the companys labour needs and coordinates through common personnel systems.

Monitoring occurs through the central personnel teams visits to Car Cos units. Fromtime to time Personnel gives direct instructions on labour regulations to the primary


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units; these instructions are corporate intervention. Training also provides

coordination and monitoring.

Sales also span all intelligence and cohesion functions at the Car Co level.

Administration is a function to coordinate the factory. Those working here do not

have direct input into the resources bargaining of the company but support the

process. The buying department monitors and coordinates buying throughout the

company and keeps up to date with potential suppliers.

Buying in Car Co shows a high level of corporate intervention, restricting local

autonomy. Production Management shows all aspects of cohesion management, with

Process Development as an intelligence function, concerned with product and process

development. Equipment Development is also an intelligence function. The Quality

System is coordinating and monitoring.

Factory Logistics both coordinates and monitors whilst the Goods In/Out coordinates

the flow of production.

In Mode I, the diagnostic mode, the symbols shown for policy are for those functions

that de facto influence the policy of Car Co. They define those aspects that are

considered of corporate competence at that level of recursion.

We can then transfer the syste

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1. Overview of Viplan Method1

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