4VVhat this book isntroducion. \/

Forevvord

THE VIABLE SYSTEMSectonOne ........................................................

SectionTwo ........................................................Section Three ....................................................

Secton Faur .......................................................55Sechon Five ......................................................73Section Six .......................................................9Sec1oriSeven

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Secton EgHt ....................................................1 23Completion of the ModeI

...................................135

APpendix.......................................................137

ii

VIABLE:

able to maintain a se parate existence- The Oxford En. g/ish D;ctonary.

An organization is viable if it can survive ir, a particularstofenvironrnent. For aithough its existence is separate, so that itenjoys sorne kind of autonorny, it cannot survive ir a vacuurn,

he foetus s called viable at the mornent wnen it is ao!e to'rnairtain a separate existence', which is long before it is actuaiiyborn. And afterwards, ~he individual rnaintains ties with motherand family, with a locality, with a culture . . existence is neverindependent of other existences, even though the individual has aseparate identity.

In the sarne way, other sorts of organization have identty, and arecapab!e of independent existence, even though they can surviveonly within a supportive environrnent. A village is a recognizableand viable organization, with its church and its school, itsbutcher's and i ts baker's: but it is ernbedded in a rural societv thatnourishes it, and in a lar ger social system beyond that whichunderwrites its cultural identitY.Similarly, a firrn may be the subsidiary of a larger corporation: it isa viable entity in itse!f, but in a specialiy defined way it 'belongs' lo(what is often called) the 'parert' company. lts wealth-generatingprofit centres likewise 'belong' to it aithough they could hehived-off, and sometirnes are.

In using this Viable System Model, or VSM, it is thereforeirnportant first o al to determine ecisely what is the organizationto be modefled, andtospecify its boundaris - although thesemay weH change as the organization adapts.Next, you will need to specify its viable parts, and the larger viablesystem of wHich it is itself a viable part. This takes sornedisentangling, and time and thought should be devoted to the task.

The big problern is this:you are not determining absolute facts:you are estabiishing a set of coriventions.

So renember:a model is neither true nor false:it is more or less usefu!.

Then will any sort o description o the organization suffice? Nondeed. in particular, the standard 'family tre& is quite unhe!pfuf

- except to estabiish who is ultimately to b!ame if things gowrong! This is because the organization chart makes no attempttomodelVlAB!LITY.

THIS SKETCHdepicts a viable .system in rough outlne.

But take a close look at it. The total system contains two systemswhrch.are identical with it. Like the foetus mentioned eariier, thesenNo embedded systems are themselves viable systems.They are RECURSIONS OF THE VIABLE SYSTEM. Wc shali makeuse o this mathematical terrn becaijse, while its meaning incontext is evident; it reminds us th.at

we are not talking looselyabout any kind o system contained inside another - but about anabsoiutely precise definition o vibility.Please look moreover at the large dotted square, and note that itscontent is identical with the red structure in the twa lowerrecursions. This is because the dotted square is a basic componento the nex higher viable system.

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sketch orovoked the thought thatthis version has no connexion with the outside world. Correct: weshafl turn to this omission repeatedly. Meanwhile, however, thediagrarn highlights a most i mportantfeature of viable systems: theyare self-referentiai. Their logic closesin on itseif. In thischaracteristic hes theexplanation for

the maintenance of identity self-awareness

thefaciiityof se frepair recursivity itseif.

1

Maybe your study of this nidal

it is worth refiecting on the potency of this arrangernent, and onthe fact that recursions of the viable system can be extendedupward to the terrestrial giobe (within the Universe) anddownward to the ccli (containing molecules, containing

.). Inpractce, the best plan is to consider a trio of viable systems at anyone time: the organization we wsh to study, that within which it iscontained, and the set of organizations contained by it - one leveof recursion down.

Look again at the diagram on the last pageto take this pointfuliy:the sets of viable systems shown in red themselves containviable systems, and so on down. But we shail concernourselves with the red ones ALONE.Hence, if the viable systems contained within the redorganizations call for explicit discussion, the methodologyproposes that we shift the whole trio of recursions to whichwe are anending one recursion down.Then the organization that we originaliy decided to studybecomes 'the next higher recursion', the contained redorganizations are now of prirnary concern, and the blobs-and-boxes lost within the red organizations now emerge as'the next lower recursion'.

Think this through in detail with the heip of the facing dia gram -there are four triple-recurson projects shown, each one focussingin RED on an organization one recursion removed from itsneighbour.

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POINTS TO NOTE

Each o these four squares ought to beenvisaged in terms o the VSM sktchalready studied.

How we specify the whole series andits elernents is a matter o choice, outility to our purose.

e There is no hierarchic significance inthe vertical listing o elernents. Thesemay be strongly or weakyconnected.

In this case, the strong connexionis actuatly sequential.

Let us re-affirm: any oreorganizational study wili focus on theRED SQUARE. It wifl take intoaccount this system's ernbedment inthe higher recursion o the big (back)box, and the content o the five(arbitrariiy five) small boxesembedded in it. The connectivitybetween evek o recursion isa majortopi o our study .

. . . for the moment it is surelyexciting to note that (just as the VSM isaways the same) the connectivitybetween any pair of recursions is thesame.fl The saving in time in

analysis, diagnosis,computerization - inducedbythis invariance isenormous.

e ANY ORGANIZATION, althoughquite property depicted as belongirgto 'THIS' set o recursions, belongs toan arbitrarily large numbenofothersets o recursions too. For example,ron and Steel aso breaks up

geographically, or by Companies.

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NOW DO THS:

You are a viable system. In which viable system are youembedded? H. ow many recursive systems can you listbefore you reach sorne kind of 'totality'?

This is to cast your own self in the role of 'fine wire'in the comparable tabulation of industry we just

-. exarnined - and to work upwards.

Please make sorne kind of diagrarn, so that these ideasbecome familiar and a record of your investigations isbegun.

Experience suggests that you may well have found it difficuit todecide which chain of systems you wanted to model. You belongto a family, which beiongs to a village, and so on (that chain wasmentioned earher). But you also have a job - which embeds vouin a firm or a service or whatever. The chain of systems is now adfferent one. You belong perhaps to a church, to a sports club, toan 'oid schooi' - and so forth. Each of these chains of systems,which embed each other and ultimately you, we can cali arecursjve dimension.Whatever viable system Wc wish to modd exists in a variety ofrecursjve dimensions. 'What business are we in?' is the classicquesnon for a board of directors to consder -- and Ehere may besevera! answers, So the SYSTEM-!N-FQCUS may have more thanone next higher and next lower recursion. t can be thought of as aviable system that Js central to a whole sphere of existence: thesphere is marked out by a coHection of recursive drnensionsrunning through the system-in-focus at the centre (as the rim of awheel is marked out by its spokes).Had you forgotten the admonition at the foot of the previous pagein doing this exercise?

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Although it is important to develoo an easy famliarity withrecursive dimensions, and with the shifting o the system-in-focusto another recursive leve!, there wili be no need to make afl thepossib!e mappings implied by the whole 'sphere o existence'. Tothe contrary: the whole point is that one should correctly choosethe triple ernbedment on whch to work. Usually it is obviousenough that certajn narned entities con stitute the system-in-focus,and the next higher and next lower recursions. It is only a properappreciation o dimensionality (as just defined) that permitsmost-usefu determ i nation o system ic boundares.

In the experiment just undertaken, how did the dimensions oyour own existence affect the boundaries o the systems ohigher recursion that you were able to specify withexactitude?

(That k, did you get your legal setf mixed up with yourvocational self, your reiigious self, your aesthetc self, andsoforth?

Since the integral you is the system-in-focus, a perfectidentity

o al these selves is ideal - at the centre of the

sp he re.

But in terms o management, the way in which a Jife isconducted dimensionality becomes important: manypsychiatric problems are rooted in iriter-dimensionalconflict that is not understood because boundaries have notbeen recognized.

The same goes for yourfirm.)

Secondly, in the completed experirnent, when you reconsiderall the organizations nominated, are you certain that each oneis actually a viable system as defined?

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Let's remember that a viable s ystem is capable of independentexistence

within a specified environment.Human beings are periect examples of viable systems - BUT suckal the air out of the room, and then see how viable they are.

On the other hand, the viable system is necessarHy a producer ofthe organization, and not just an adjunct to it, however irnportant.An invoicing department has no meaning uniess the product isthere to be invoiced; and it would surely be perverse to contendthat it is a viable system whose environment is the whplecorporation,

NOW DO THIS:Think oa manuacturing company known to you as theS ys te m - i n - oc us.List the organrzations of the next lower recursion ---- that is,the ernbedded suhsicliaries or departrnents that hetweenthem PRODUCE THE COMPANY.These are ah to be viable systemsn themselves. They areessentiahly proft centres. They can in principie be 'hivedoff' - soid as going concerns (and replaced by bought-inproducts or services),Next make a hrst of company systems or departments thatare NOT embedded viable, systems.

It is impodant to spend time on this exercise. Most of the incorrectinferences (and therefore the inopportune diagnoses andrecommendations) made in applying the VSM derive fromnominating activities that are not in themselves viable systems as ifthey were.

Look back to Figure 1 and observe that many structures are shown'that are NOT red embedments - viable systems in themselves.This exercise begins the process of discovering what they might be.P!ease do sorne writing or diagrarn sketching before turning thefacing page. The notes on self-reference may However aid thethinking process.

I ^- 'jou Sef-ReferencaMention was made earlier of the self-referential nature of viablesystems. Their logic closes in on itself, we said.

This 15 not to say that a viable system is a closed system: we shallsoon be studying its ecology - environmental interaction with an'outside'.

For the moment however, al! the emphasis is on what the biologistcalls the interna environrnent

Al of the systems that are not next leve! recursions are dedicated toSTAB!LIZING this interna! enviroflrnent. The biological narne forthis stabihty is HOMEOSTA,ss.

For exam p le, in the bodyrWhi!e the h-t, Junzs, !'ver, kidriv and so ori are a!!

cccfr t o ansm, c:/er supcortfveSystems are dedicared to the homeostatic ftinc+ions oFkeeping the temperature stable, maintaining the bloodsugar leve!, managing water leve!s, balancinghormonesSirnilariy, in the firm:

While the profit centres produce the company, costcontrol, quality control, managernent inventorv, stockcontrol - alt these are obvious examples of horneostatcregulaton, and financia accounting generates the balancesheet after al!.

But as you do the exercise on the facing pace, sorne activitiesought to give you pause. Wiat about the Board, the sales division,the engineers, the compute, departrnent, for instance?

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This noton is lfkely to be whoHy unfamiliar: try to understand it.I Se! f-ReproductIon is usual!y thought of as the outstandingcharacteristic of viable systems. But it is continuous andregenerative selF-production that undrwrites IDENTITY.

1

LHow did the exercise go?

One thing that may well have become obvious is that classicalorganizational forrnulae, such as 'production, sales, finance'cannot be o much help in thinking through the structure o aviable system. It is wholly unsafe simply to Iist major deparnents(however essentiaj, however poweul) as constituting the nextlower level o recursion

Here are sorne comrnents on typical problern areas, as mentionedon the p receding page:

The EngineersAssuming that this is not an engineering company (makingturbines or switchgear or boilers), 'the engineers' are probablyengaged in maintenance and n designing and making specialpurpose bits and pieces of machinery.

The Company could not operate without thern, yet they are nota viable system. Their job is to facilitate operations notanyoperations, but these operations.

Now here comes a vital distinction-. The engineers could formthemselves into a gui!d o jobbing engneers, resign as a body,and set themselves up as a contract meintenance outfit. Thislile cornpany would be a viable system. The distinction is this:the men and their joint engineering expertise can be 'hived off'in this fashion - but they do not take their function, the works'orders and the p!ant modus operandi with them. They take theirknowledge o such things, but no, whatthey actually do in the firm.This example makes a gentle start, because these folk do notoften think o themselves as 'separate existences'. This is notusually true o the next group o people.

The Sales Divis ion

In fact exactly the same considerations apply to sales as to theengineers assuming thatthe company is nota selling concern

entire. There certainly are companies that buy in goods, andthen selI them, and do nothing else. In that case, to seli 5 toproduce the cornpany.

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iLIn a manufacturing concern, however, the sales functionfacilitates the passage of goods from the viable units that makethem to the consumer. Obviously, this activity is focussed on themarket-place; and the whole operation takes place altogetheroutside the doma in of Figure 1 (although it is necessarilyanchored within it).Certainly the sales function is vital - so is the body's endocrinesystem - but it is not normatly a next recursion viable system.

NOTE: So the Sales peo p le were absolutely in order when(relatively recently) they began to say thattheydscharged a MARKETING FUNCTtON.No doubt it sounds better to be a MarketingDirector than a Sales Manager: this time the instincthas survival value.

The Computer DepartrnentAfter entertaining these two considerati.ons, the case of thecomputer (which often causes great dissention) will surely faileasily into place.Once more we have a facilitator: it is a unit intended to makethings happen more smoothly and more quickly. And onceagain we observe that the computer group may leave as a group,and set up shop as a viable system - as a bureau or as ac.onsultancy. But they cannot take the stuff of their computingwith them. To take the data relating to company managementwould be absurd as well as illegal; to take the software would befar from absurd and is usual y done, but it rernains theft.However, distinguishing between software created for theemployer's ownership and the programmer's files of personalknowledge is beyond the competence of the legal system (whichhas not begun to address such matters non-trivially so far).Next: if the firm is boid enough to have a computer unitthat isconcerned not merely to facilitate more smoothly and quickly,then its activities will necessarily be concerned with innovationinstead. This innovation will either he directed to managerialends (for example, in simulating alternative pc{icies) or itwill

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spawi cov: puter'. based activity that mg become asubsidiary compan y - and therefcre a viable system itseif. Ineither case, the computer department is not a viabe system in its.own right.

Finafly comes the specal case, which does occur. Just as there arecompanies for which engineering or seHing are (atypically)activites that produce the company, so are computer bureauxviable systems. Now it may happen that a firrn constitutes i f s ownfacility as a hureau which selis its output. If tbk product, or part

of it, goes toan outside custorner, then - if it is significant itmay best be regarded as an embedded viable system. lf tbeproduct is 'sold' only internally, under transfer pricing, then this isrnereiy conventional. In such a case, as in 'he interna!Iv-usedcomponent of the general bureau case, the un:t is not a viablesystem - espectaliy insofar as it nas no exposure to market rorces.Transfer price s ystems sirnply do not work wben there is external(and probably cut-throat) competition.The Board

1 The Board cannot possibly be a viable system1 The Board is a subsystem serving internal andhomeostasis.Not 211 Boards know this.

The outstanding problern in considering the role of the Board istied up with the self-reference characteristics of the viablesystm. Whose power does the Board embody? The l aw saysthat of the shareho!ders. But the Board also embodies the powerof its workforce and its managers, of its customers, and of thesociety that sustains it. The Board metabolizes the power of absuch participants in the enterprise in order to survive. If it fails inthis, the participants wiii use their power against the so-ca!ledviable system out of selfsh interest: to keep wages u p , to keepprices down, to preserve the ecoiogy - depending on theirroles. It is a fascinating feature of contemporary society that theparticipants (al those mentioned) seem willing to pursue selfishinteestto the point where the viable system in vvhich the y have

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a profound stake, as employees, as needy consumers, asregional inhabitants, is actually rendered viable no longer.If neither the prtici pants have undestood the viable system,nor the Board has recognized systemic seifreference, then theidentity - the survival - of the enterprise is under threat. Ita!ways was; but people used to behave in ways that wereconsistent with viabiiity most of the time. That they do so nolonger results from the increased social awareness of theunderprivileged, at home and throughout the world, thearchaism and disuetude of the civil and moral iaw, and thegeneral incomprehension of technologicai advance.The redesign of institutions, from firms to governments, fromeducational establishments to social services, is the end towhich survival-minded people must address themselves. Iftheprocess does not start with properly constituted Boards, it willstart (as we observe) with 'alternatives' - many of which (as wealso observe) involve violence.

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It may be that your interest is to model an organization quitedifferent from a manufacturing company. Unfortunately, it is notfeasibleto run through al the kinds of organization thatthere are.But if the organization is a viable system at al, it will containlower-recursion viable systems that produce it. ldentify them; anddo not be bullied by current practice or power pofitics intoincluding subsidiaries or units as viable systems when their rolesare supportive rather than productive of the System-in-focus.In particular, the argument that this treatment 'does not apply tous' is always spurious, because the approach concerns only thosefactors that are inariant in al viable systems. The biggest redherring of alamong these false contentions is the one that claims'we do not make a profit'. That makes no difference to the structureof viability at all. True, it poses problems of measurement, and thefixing of criteria of success: these will be discussed later. But ahospital or a school or a government department has to produceitself, continuously and regeneratively, to maintain the identitythat ithas just like any other viable system.

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Cho Ices abouternbedments will stilt have tobe made, and theywill be based on insight into the viable system and the judgment ofutihty in the emergent rnodej. For instance, what produces auniversity is its acitvity in teaching and research (and not itselaborate hierarchy of a court, a senate and a hundredcommittees, its famous library, its accommodation and cateringfacilities). But whether the teaching and research are embodied inviable systems called faculties, with embedded departments, or incourses, with embedded o ptians, depends on the model maker.5/he rnight ask the question: which account is more conducive tothe need for adaptation? It is often worthwhile to develop morethan one model, and to learn fron its elaboration.

1 L Elaboration there certainly will be. Qn the facin g oa ge vou wUl

recognize the model of total industry, and of its ore ernbeddedviable systern heavy industry, that we used before. Last time wepicked out ron and steel - and analysed that industry through acouple more recursions: In doing so, obviously, we discarded theremainrng elements of cadi leve! of recursion, because they didnot belong to the System-in-focus. The new diagram stops at thesecond leve! of recurs ion, and graphically ilustrates how theviable systems pro! iferate in the horizontal plane. The picture ispresented to he!p you 'get the feel' of rnodelling in this mode

and please do not blame the iheory of viable systems formaking fe so elaborate, because fe is that way - but especia!lybecause this approach is in fact a simpflfier of elaboration. Thepoint was made before about the vertical recursion: all theembedded systems, and al! their ernbedments, and so on, al! havethe SME structure. Now even the horizontal spread ofreplications, at every leve! of recursion, is seen as having that samestructure tao.

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Ir is bevond uman that 'total ndusny' s venv larga and veryeabote. No amount of ngenuity can rnake it iess so. Whatscience CANdo, however, by finding tha invariances that underiyviabilityl is to make aH of it susceptible to a uniform description.Contempiate this, then, through the eyes of Figure 1:

Very !arge viable systems indeed, such as the marine and fisheriesadministration of Canada, such as the whole social economy ofChile (in Allende's time), were modelied in this way in lessthantwo years. It is aH due to the parsirnony of natura! invariance.

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Probably you will not need to take advamage of the widespread(that is, vertical and horizontal) invariance of viability structures byrnapping everything in ight evenwithin your ownorganization.Even so, it is an excelient plan to envisage the wholeorganizational terrain in these terms befare narrowing down to thespecifics of the model that you intend to construct. This will giveyou a comfortable sensation of knowing where you are in relationto major features of the territory, and sorne confidence thatyou areusing a useful descriptive language of general application in thiszone. (It is al[ too easy to talk in the esoteric terms oan inheritednomenclature that beg the vital questions.)

NOW DO THS:Choose and c!early define the Systern-in-focus that youintend to model.Survey the sets of recursions o viable systems thatconstitute its organizationa! 'eco!ogy', hoth vertical!y andhorizontal! y . -Give the System-in-focus a well-chosen name.

(This is not altogether eas y . 4t is vital to dstinguishTHIS system from a!! itsemhedments, and from itsorganizational cousins' in the horizontal plane.)

Exactly specify, with a name, the viable system in whichyour systeni is embedded.

(lf there is more than one of interest, do the Job twiceand distinguish between names.)

Exactly specify, with names, the viable systems that yourSystem-in-focus embeds.

You know, alter this, precisely what you are dong in terrns of atriple recursion: the System-in-focus is in the centre of a higherlevel of recursion, in which it is embedded, and it contains a set ofviable systems whch exist at the next lower leve of recursion.

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SPECIAL TERMS OF ONE

VIABLE ah/e to maintain a separate existence.

RECURSION a next leve! that contains all the !evels beIow it.

SEU-REFERENCE property of a system whose /ogic closes in Qnitself: each part makes sense precise/y in termsof the other parts: the who/e defines itself.

HOMEOSTA5/5 stabi/ity of a systern's internal environrnent,

despite the system's having to cope with an -unpredictable externa 1 environmen t.

/NVAR!ANT a factor n a complicated situation that isuna fected by al/ che chan ges surrounding it(such as the speed of lightor the value of').

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The best place to start work is the embedded viable system of theSystem-in-focus. Let us pick it out of Figure 1, like this:

The red dagram is the sign of the viable system, and the blackcornponents belong to the System-in-focus. We shall start herebecause it is tbk part o the viable system that produces it. Ofcourse, your list of embedments will contain more than onesubsidiary (Figure 1 contained two of thern, and you might have upto seven or eight: not many more, 1 hope, or else you may bernissing a who!e leve of recursion).The set of these embedments will be known as SYSTEM ONE ofthe System-in-focus. Each component, such as the orie aboye, wIlreceive the sarne treatrnent as the others.

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To cometo methodo!ogcal grips with the problern of analysis, thefirst o our actions is to cut out the red part of the picture. Get rid ofit. This leaves for consideration simply a b!ack square and a blackcircie. Leaving aside the fact that this does not leave rnuch for us towork with (but there is!), p lease pause hereion- enough to answerthis question - which has a precise and important answer:

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PLEASE REPLY TO YOURSELFtWKy is the red portion of Figure 4 to he ehminated from

- consideration?

The answer is that this is not the Systern-in-focus. The redinfrastructure exsts at a iower leve! of recursion than you decidedto consder.

If this was not your own c!ear-cut answer to the aboye redquestion, then the meaning of systemic recursivity iseluding you - it would be advisable to return to theprevious section.

CON VE NTIO NS:

For ease of reference to other writings about the viable system, weshall keep to ,he dagrammatic conventions that have been in usefor . twenty years.

The square endoses al! the managerial activity needed to'run' (whatever that may mean)the circie, which endoses the relevant operations thatproduce th (total) viable System-in-focus.The amoeboid shape represents the environment of a!! this,which - until now has been kept in the background.

The red arrows refer to the necessary interactions betweenthe three basc entities: each stands for a mu!tip!icity ofchanneis whereby the entities affect each other.

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What can possibly be done with the picture at Figure 5, given thatit is inadmissahie to consider tHe infrastructure discarded fromHgure 4? It comes down to asking what is reaHy going on in thedynamics o any enterprise.

Perhaps what is going on is the manipulation o men, materials,macHinery and rnoney: tbe four M's. Yet there is a morefundamental manipulation that occurs: it app!ies to the biologicalceli as a viable system, as weli as to a giant corporation, orto agove rn m ent.

WHat is going on is the MANAGEMENT OF COMPLEXITY.

In order to discuss this, a special term is enrolled. It offers ameasure o the compiexity with whch management Has to deal.

The term is VARIETY.

Variety is a measure of complexity, because it counts the numberof possible states o a system.

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You may weli say that the number cf pos sble states in accmohcatd entracreneuria systrn s

:cseiy ccuncable.That is surev COaCt. However, it is cunabia in p:inciQie: it istherefore amenabieto the making of comparative statements (thishas more variety than that), and to the arithmetic of ordinalnurnbers (this product is the fUth most profitable).Adopting ths extrernely practicable usage straight away, we canstate that the square management box has lower variety than the

r circle that contains he operations. This is evident insofar as nomanagement can possibly know everything that Happens. Forexampie, this morning Bili (who was operating the thrd machineQn the left as you go in the third bay after No. 7 Gate) had a rowwith his VVC, and fumbed about in getting the work started - aour-minure set-up t!me took six minutes. It is a 'possible state ofthe system'; but vou did not know that t happened, and it is noteven usted as a possibiiity.

We can safeiy go on to assertthatthe (circular) operarional systemhas lower variety than the environment. For exampie, wemanufacture our kitchen equipment in eleven dfferent colours(there you are, then: you can sornetimes measure vanety exactly);but this morning a lady asked for heliotrope with yei!ow spots. Youdid not know this - and now you do know you will not doanything about it: uneconomical, you sv.

So the basic axiom will assuredly hoid, that the variety of theenvironment greatiy exceeds t 1hat of the o peration that serves orexploits it, which will in turn greatly exceed the variety o the

- management that regu lates or controls it.

Then what anyone wouid expect to happen does happen. Theclues to this are visible in th.e two examples just recounted.

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r H!GH VARIETY is necessariiy cut down or attenuated, to the1 number of possiHe states that the receiving entity can actually

han di e.

On a diagram ( it is useful to mark the high-variety input with the

(eiectrician's) symbol for an

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to show that variety is betng balanced (remember homeostasis) tothe variety that the receiver can accommodate.

ntNsexamp!e:the works' manager is not going to bother about thesesrnai! matters that make for high variety in the lives ofthose working on the shop fioor. They are fiiered out.NOTE: Coniputers are abie to capture, store, anddeliver more data than wiil go into your head.

BUTANSWERTHIS:is designing an attentuator of variety thesane th i ng as jettisoning data?

inthisexampie:the marketing manager knows that he canot expecthis reta!ers to stock more than a smaii range ofcolours. They are artificiaiiy reduced in number.

NOTE: In spectroscopic terms, the chemist is abie togenerate more distinguishabie coiours than the humanbeing can distinguish!

BUTASWER THIS:How do you design the attenuator ofvariety - by teHing the chemist to bequiet?

These exampies of variety attenuation belong in our diagram ikethis:

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A N SW E RS:

As to operational variety attenuation, it is a big rnistake - easiiy

made - to confuse data with variety (closely related as they are).Data are certainly distinguishing possibie states bf the system, butthey are generated b y/through ciassifications, categories,definmons These determine variety, and these arewrthin ourpower to desgn. !f we do not design them, a common fauit --es peciaily given cornputers - attenuation JUST HAP?ENS. Thebrain and the managerial culture between them will i!ter-outwhatvariety is left-in beyond the capacity, to assirnilate.

Typ ical example -a machine-sho p

has three ba ys, containing 22. 47 and 31machines. Allowing for al possibie variations of width,thickness, quaiity and so forth, there are 40,000 possibleproducts. The work-study people have been at this, tQhandle pay-and-producuvty. The cost accountants, too,caicuiating standard costs, computing variances It is alf inthe computer.Managers often allow themselves to be nundated with thislot, but they undertake \'ariery

24

attenution surreptitiously, pea ing at totals and budgets.Or they may boldly ask only for moving averages on eachof the three bays. Then they suddnly discover therelevanceofquality . orsornetHngelse.

As to the example from environmenta! attenuation, the answer tothe question is:

by rnarket research.Many people suppose (without rnuch thought) that because rnarketresearch 'flnds things out' it rnust be an arnpl/fier of manageriaivariety. Maybe this sornetirnes happens: inforrnaton about newtechnology, for example, may increase the number of mana-erialoptions. But in the case quoted, the idea is to reduce theimpractical and uneconomic expression ofdernand to a range(variety eleven in ihis case) that the works can handle.

/T,/

Ls

SUPROSE, however,that rnarket researchrepeatedly advises thatthe rnarket is lookingfor fourteenc'nlniirs

,- SUPPOSE, however, that labour

negotiations keep sturnbling/ sornething that is not in the computer: a/ general dislike of sorne particular/ combination of production orders, for

example.

1!

E. 2

?

Now two probiems have been generated, one by each of ourcompiete!y different exampes. But in terrns of variety engineering(as the manipulation of varietes by design may be cafled) they areidentical. An invariant has emerged.

IrirI

' NQWANSWERTHJSVVhat woud you firs of ah try to do in each situation?I r-What is the INVARIANT FACT that inks the two examles,and is represenrd by the single question mark completingthe previous page?

A NS W E R:

The invariant is the fact that each attenuator has reduced varietybelow the thresho!d of the required response.

We say that the responding system does not exhibit

REQVISTEVARIETY- a most important notion to whic'n we must often return.

Thus the most obvous recourse in both cases is to reduce thedegree of attenuation recently notifed..The works' manager wiMwant to register the chass of information, not so far registered, thatis causing abour problerns. The marketing manager wiH want torespond to the expected demand of fourteen cobours.

But suppose that the operation reah!y cannot (as originaHypostuited) accommodate the necessay stocks. And suppose theworks' manager is sirnphy forbdden to acknowhedge the nauseouscombination of orders (because of possibie legal consequences).What about the question mark now?

This is for certain: you cannot repeal

THE LAW OF REQUISITE VARIETY- which says that only variety can absorb variety.

26

LOW VARIETY is necessarily enhanced, or arnphfied, to thenumber of possible states that the receiving entity needs if it 15 toremain regulated.

So we mark the low-variety input on a diagram with the(electrician's) symbol for an

a5 LJ&-

(which is a triangie simply, and not a directional arrow). Thiscompletes our repertoire of ba!ancing actions (rememberhomeostasis again).

Here then is the completed diagram on which ,ve Have beenwo rk i ng:

-

-s

1 The dotted une comes in for the sake of compieteness. It will bediscussed later. For the moment, the management's interest in theI environrnent is mediated by the actual operations that itundertakes there (for I reality the operation is embedded in theenvironment, and dic management in it).1 27

rvdenty the two variety arnphflers have been invoked tosolutions to the two residual prob!ems.

THENDOTHJSNEXT:

Specify how you would use the varety amphflers to restorerequisite variety, and thereby to creae acceptabeconditions for homeostatic regulation.NOTE: We are not yet discussng the coHecton o DATA orL the flow o !NFORMATiON. This is about thethat are competent to engineer with variety.

ANSWERS

The works' manager may enrich the structure o the paymentsystem. He increases its variety to accommodate, through greaterflexlbiht'/ in ca]culating rewards, the probiems that he mustdisso)ve without specifc acknowiedgernent o the suppressedcauses. TIie empioyment, in short, rewards higher variety.

The rnarketing manager needs to 'increase' the variety o eleven toa variety o fourteen wthout an increase in stock. One way is todecoupe the production me through intermediate stocks (so thatone unpainted pot may be patnted either red or olue). Another wayis by advertisrng - that potent variety amphfier. A 'speciai offer'can be formulated; a projection implying more colours than areactually availabie can be mounted.

The reason why Figure 7 did not adHere soley to amplification,considering this separatey (as Figure 6 sepa cate consideredattenuation), shou!d be emerging in the head of anyone reaUyworking on these exercises. We are deaiing with continuous loopso variety invovement, not with isoated bits o apparatus.

11 28

rHence emphasis has been placed on homeostasis. We are seekngbalance through requisite variety.Therefore:

many management strategies are mixed between adj ustmentsto amplifiers and attenuators

(indeed, it 5 often a matter of choice as to whether aspecific contingency is viewed as one or the other,carrying a different sign - plus or minus)

- we need Ofliy to be satisfied that as the dynamic interactioqbetween entities unfolds, we have made provision that noentity will be swamped - inevitably out of control - by thepro liferation of another's variety.

In view ofthis, the problem of measurement is minimal. Weshall not find ourselves counting the number of possihlestates, but looking for assurances that counter-balancedvarieties are roughly equal.

To take a vivid and omnipresent example: The human brainhas about ten thousand mullan neurons - nerve celis

in it,and these are capable of generating who knows how manypatterns. The variety is legion. But whatever it is, anotherhuman brain roughly matches the first's variety. Thus if twopeople, who have pul in exacdy the same number of hours'practice, sit down to play chess, we would be wise to betevens on the outcome - and without counting the neuronsfirst.

The problem of management itself, which is that of regulatingan immense proliferation of variety, is less horrific once theunderlying homeostatic regulators are perceived, properlydesigned, and allowed to absorb the variety of each others'entities.

This is the essence of VIABILITY.

1

2Q

These explorations should make the fotlowing formal statementreadily accessibie:

The First Principie o Organization

ManageriaI operational and en vironmental varieties,diusing througi-i an institutiona / system,TENO TO EQUATE;they should be designed to do so with minimum dama ge topeople and to cost.

fthis Principie is indeed accessibie, it is by no means orthodox -and we have made a breakthrough in our managerial autlook: Forwhat 'he Principie is saying is that viable systems, and theseinclude giant corporations, are basicaity self-organizing. If it werenot so, then the management wouid be totalty overwhefmed bythe variety proliferated (as wc say) 'lower down'.But variety absorbs variety, and systems run to homeostasis,because al the subsystems are inter-connected - as we havebegun to see -- and complexities cancel each other out. Variety issoaked up on a football fieid by a redshirt marking a whiteshirt andvice-versa. The product 'marks' its market, and the market 'marks'its produdL

By the same token, in proliferation of variety terrns, management'rnarks' its opeation, and vice-versa. Let's he clear: at amanagement meeting called to scrutinize operational results, theoperations people will have managerial attitudes under equivalentscrutny. Then ideas that would be rejected tend not to beadvanced; and happenings that are disapproved tend not to havehappened at alt - that is (1 have been there) they sornehow don'tshow up in the records. In such a meeting there has to beenormous variety attenuation - otherwise, by the Law ofRequiste Variety , we shouid operate our businesses on!y inalternate weeks, and conduct enquiries into the operations in theweeks that atternate.

1

'(-IrIrIIIH

Here are iwo points re!ating to this:

are exceHent exam p les o horneostasis in high-varjety situations:

the meeting wiiI end in due course with sorne show ofagreemenwhether the meeting has been productive or not wiUdepend on how vadety has been absorbed.

Because the situation has high variety, heavy attenuators mustbe in use - notably an agreed iow-variety model of thesituation (standard reports, and so on).Thereafter, the design of the meeting

- agenda, protocol, rubrics - al! variety reducersis crucial to a productive outcome.

The function & management is emerging, as it must finaHy beunderstood, as a subsystem of the viable system - and not assorne hierarchic overlord.

A!l five subsystems to be encountered in the VSM have their

own ianguages, their own criteria, their own figures-of-speech and their own satisfactions.

Management is one such subsystem, and System One isanother. They, with the remaining three, are mutuaUy

- interdependent.

is this point, then, properly made?

Ifa!! subsystems are vitalto viability, then there is no meaningto 'more impoant'.

That managers 'give themselves airs' is merely a publicnotification of their subsystemic role, like carrying abusiness card. The good ones, as you would expect,know this.

Perhaps we have chattered enough to bring these notions horne,aithough it must take time and a!so exercise t become familiarwith what may weH be a whoUy novel approach. But this canhard!y be postponed any longer:

RETREVE YOUR !JST

of the embedded subsidiaries or departments that betweenthem produce ihe company (or whatever elsern

-ay he ycurSystem -1 n -foc u s).

This list adds up to SYSTEM ONE.

MAKE A LARGE DIAGRAM -ONE FOR EACH OF THEM -TO LOOK L1KE FIGURE 7.It s a good idea to omit the red captions (you know whatthe symbois mean), and to create enough space

f, J-

WRITENal! the mechanisms that pertain to variety engineering inpursult of horneostasis, and in recol!ction of the La\v bReciuisite Variety.

Nothing of any importance should be !eft out o these diagrams.For example, the market has been mentioned as part of theenvironment for a manufacturing company. But so is the 'eco!ogy'of raw material supply (how is that attenuated?) So is the socia!climate a part. You may wish to divide the environment intosections, and give each separately a box of amp!ifiers andattenuators t connect it to the operation.

B CREATIVE WITH THESE NEW TOOLS(3?

By way of refreshment before beginning tHis task, consider howvarieties come to equate in a public service organization withwhich everyone is familiar

The poi Ice force exercises two mal functions. One 15 to protectthe citizen from law-breakers, and the other is topreventthecitizen frombreaking the law himseif.

Since no individual citizen can do more than one of these things ata time, one policeman could undertake to safeguard him and alsotothwart his misdemeanours. They would seep and eat at thesame time!

This arrangement would provide Requisite Variety, but it is notpracticable. However, as soon as you give onepohceman twoctizens to watch, one o thern may commt a robbery or getmugged while the other is under observation. Hence crime, -venor received.

It turns out that in fact Britain has about fiveundred citizens icorevery policeman. tfollows that todo their job the pohce need toamplify their ordinary human capacities by 500 times. Note thebuilt-in assumption: Whatisit?f-To this end the pohce ampiify their variety - with guns, certainiy,but more routinely by using fast cars and radio. Computers andsystems o informers are best regarded, perbaps, as attenu ators oincoming variety: they reduce the number o possible states osuspicion by eliminating suspects.

It is good practice to examine familiar systems in terms o variety,and interesting thoughts may be provoked. Here are a coupie orthree:

How is expendituredivided between ampiifying protection,amplifying prevention?How does the tradeof between them actualiy work?

E.g.: alarm systemsiversus

1 33

4!

1-

u .

A

J

\'Vhat are tHa trade-ofs where technoogy is concerned?

E.g.: cars gc-t around more with fewer men;men get around less with far more penetraton o thepublic scene.

E.g: do you spend money on the sense-organs - tappinginformaton at saurce or on the 'central nervous system'- computers and data-banks.

Why al of this about police ampHfcation when homeostsismay 2iS0 be reached through attenuation of pubUc variety?That is, p reventative laws ('no access', curfews, identitypapers) w'hich restrict sodetary states imply ess poHceamplification - because monitoring is a lower variety actvitythan coping with the unexpected.

Howdoes this bearcn freedcm?

- is the second means of obtaining requisite varietyactuaily any more aiarming than the first (just becausethe connotations are unsavoury)?

MAKE A PRACTICE

of experimenting (mentally, and on a scribhling pad) '.viththe new concepts being disclosed here as they areexemplified in systems (such as the police (orce) with thefunctions, problems and shortcomhings of which any citizenis familiar.

Listen to puhhc debates in the media with these cyberneticconsderations in mnd. How much of what you ihen hearand see becomes fatuous?

VAR/E TY

THELAWQFREQJISITE

4 DIC

SPFCAL TERMS OF TWO

a measure of complex'ty: the numberofpossj/s,ates oa sysem.

only variety can absorb variety(Ashby's Law)

ATTENUATOR a de y/ce thaC reduces variety, depicted thus:

AI\4PLIFIER a clevice that increases variety, depicted thus:

THE HRST PRINCPLE OF ORGANZATION

Managerial, operational and environmenta! varieties,ditusing thiough an institutional system, tend Lo equate;they shoulc/ be clesigned Lo do so with minimal damage LopopIe and to cost.

ir

1R?ght at the start (look at Figure 1) the convention was establishedthat al! the elements of S ystem One clepencl from a SeniorManagement box. rrgure 1 seems to irn p l y

that the second usodepends from the first, the third from the seconcf, and so on. Notso: the central liMe, which might be ca!ied the 'comrnand axis', istaken tonteract with each subsidiary management boxindependently.

Moreover, what appears in Figure 1 as a single me w i ll obviouslvconsti tute a ,\'hole cable or separate tHreacs.

The next job to stat considering ',vhat those threacis epresent.

You shoulcl have your System One diagrarns besidevou,

1 and think about each case, as the (inevitably) more generalj discussion unfolds.\'

First of al! -

GRASPTHIS ETUE:The management of the System-in-focus, cal!ed the SeniorManagement, is IN PRINCIPLE unable to entertain thevariety generated by any one (never mmd a!!) of itssubsidiarv viable systems that constitute System One.

The begmnnings of a theory of autonomy, o de-centralization, hein this simple fact-

37

rather than in political tbeory. It k a 'nettle to grasp', because thesenior management often assumes - and likes to exercise - thepower to in the intimate managerial detall of its

subsidiarles in System One.

ButTHINK: the socaHed prerogative to intervene indiscrirninately

does not have Requisite Variety.It cannot be cornpetently done.It can be done in the sense that a bully can do what he likes:

Hing'usor puling rank san arnphfer of one's undoubtedauthority, and an atenuator of the subservient creature's ownvariety. But the Horneostasis that resuits is mornentary, and hencenc orn peten t.

In a modem organization, the fundamental variety balancers arethose shown in the diagrarn acing:

Legal anci Corporate Requirernents are those variety atten uatorsthat sig( the idenity of subsidiaries as corporate entities.Legahy, System One is bound into the parent System-in-focus byts Articles of Associ ation, and by al the provisions of the

Companies Act that concern affiliation. But the parent may, andusuaHy does, specifv other constraints On the pro!iferation ofSystem Ones vanetv. These range from delirniting technologies tospecifying the modus operandi.

VERY WELL:

List them or each of your embedded System One elements.The Resource Sargairi is the 'deal' by which sorne degree ofautonomy is agreed between the Senior Management and its juniorcounterparts.

THe bargain declares: out of al the activities that S'steni Oneelements rnight undetake, IHESE will be

38

14

'L1 ACCQUAE LIT'( L.!- s'lE Cor?or S

Ir' -rIJ

,,:. /.\ C- L rr.

taIeJ (ancl not those). and the resources flegotiated to these endswi!! be providedThe h omeostatjc loop sketched into the diagrarn roper!y i ndicatesthat a d y

namjc process is invo!ved t is essentiaHy attenuatjvebecause it exc!udes a buge range of al te,

This is ot to saythat the senior managernent neverprovicles variety arnp lifjcatjon tothe junior enter p rise within the attenuating scheme: it rnay, bysuperior know!edge or through un ex pected financjng open upopportunitjes not concejvecf by Syst em One on its own initiative.

NOW UST your mechanisnis for sthking the ResourceBargain for each subsidiary,

39

NOTE: ShouId it ftirn out that al! tbat Happens n reaHty l i s that theBoss says: Do This, or These are your norms, then you stiH have aresource bargain by unihteral edict. But planning ought to be acontinuous process whereby things are done flOvV

-expltcitly,resources are comrnjtted so that the future may be dtfferent.

Note on this Note:INVESTMENT IS A VARETY ATTENUATOR.

In any case, and hovvever autocratic or dernocratic (or evenanarcHc) yourResource Bargaining proves tobe. the governingmode of management is

Accountabilty. Please think about this responsibi!ity or '-esoucesprovided in terrns (not of financial probity, not of ernotionaldependency, hut) of variety engineering.Can you possibiy temize every single thing that the subsidiarydoes, dernand a report on t, and expect a justification? Obviouslynot. Therefore accountabWty is an attentuation o' high-varietyhappenings.

NOW EXAMINE precisety how . accountabiHtv is exercised,and especiaHy what attenuators (totak, averages, keyindicators . . .) are used. Summarize the findings.

fin the end, you are appaHed to discover that the machinery isinadequate, that Senior Managernent just does not Have RequisiteVariety, then you had better own up. Your Systern-in-focus has aSystem One that simply is not accountable.

Evidentty something must urgentty be done. But there is no need topanic:yours is the usual case.

People spend small fortunes on systems anaiysis,computers, and so on, but they don't understand the Law ofRequisite Variety. The effort avaits them nothing.

FI

It:1?11711)

40

IrirIrI[uf

Every management team has sorne sort of office attached to it, but

Figure 9 dignifies i ls a ctivit'y (and with good reason) ay calling it aRegulatory Centre.M

anagement in System One is charged with conducting itsoperations according to a Resource Bargain struck with SeniorManagernent Then the transrnission ofplans. programmes andprocedures to the operational circie shou!d be regarded as an actof regulation

This regulation, as the cilag ram shows, amplifies hianageria)variety: the basic details of the Resource Bargain musi beelaborated THis reguiaton also attenuates operatio,aI variety:operationa) potentialit'/

rnust be harnessed to agreed objectives,Thus the Regu!atory Centre (the activities ofwhich are markeddiagr

arnmaticajjy by a trangJe) is the focus of homeostasisbet\'een managernent and operations.

a

NOW DO THIS:

Make a lis' of re g u!atory actions that mediato hetweenSystem One m anagernents and their operations

These exis) in une ocus o t hofl?eo(j br analyticalp urposes: where are ther physicai ocations? Perhapsyou rennenibered the production control office, andforgot the Boss's outer bffice - vhere his ecretary isthe mos) effective variety manipulator u the set-un.

There is a question as to whether al! the regulatory actions, in theirvarious locations, actuaiiy cohere in providing Requisite Variety

and therefore whether the locus of h omeosatasis ought to bemore than a ogical concept of the Regu!atory Centre, marked by atriang!e. Perhaps it shoull have a more physical embodinient asan orgamzationJ entity

141

ir. This shft in emphasis from manioujations o variety in p rincipie totheir embodrment in pHyscai forrn is a transition worth comrneit- because people often confuse the two modes o management.Explicitly:ir

What strategies offer Requisite Variety?1 1 - remember the discussions around Figure 7 aboutmarketab!e coiours and about wage structures;

I LI'

What chanrie/s are in plae to contain the variety ofinformation fiow, and o data transmission?

Both aspects o varietv Hancfling demand the satisfaction of theLaw of Requisite Variety.

EXAMPLES:

. A library contans (guaranteed!) al -he knowledge there 5about bees. Then it Has in principie Requisite Variety tohandle al my bee-keeping queries.

Afterjoining the ihrary, discover that every one of the booksI is stored onlv in its Chinese version. it Has zero channelcapacity to transmit to me the adequate variet y ir houses.

Rushing to the librar',' next cloor, irfwhich all information is1 stored in Enghish, thereby assuring me that thematches my English-speaking variety, join.I But the storehouse dsell does not have Requisite Variety: theresnot a single item under 'bees' in the whole index.

1 NO USE to Have flexible pohicies capabie of generating Hundreds1 of product variatons, ifthe computer orrnat albows anly one-digitdiscriminaton between products.NO USE providing enough bits in the computer to.differentiateevery person in the world, if your strategy is to rnarket in your owncountry alone.

11

11142

OQ&or\S e. J:F'cwE O

1u

THis new figure, then, is clevoteci in thefirst p!ace to fndn thebaiance o Requiste Variet' in the charnels usec( to transnitvariety aready un, erstoocl to be provided in po!icy

ter (cfFigure 7Y

IN STANCES Qn tHe operational 000: a Resoui-ce Barajn rhat'knows WC Cdfl make 1000 units thiS

month Has lo be dinp!i/7ec/ into a p roduction schedulepoviding Requisite Variet\': e. exactly what each madiineHas todo shift

by shift.

operational activity tHt inciudes every kind o Happenstance,from broken bolts to streaniing colds, from hgHtning strikes topover fa lures, las to be monitored under varietvapenuatjopo a repor(Ing system.

In both cases, tHe channeis must convey more than the variety ofthe schedu es and reports concerneci, to aHow for a littlereclundancy.

Without a little redundancy (day plus date, machiname, figures plus wor te number pluscis, and so on) ambiguitjes will appear (dijeto ornission, bad writfng, mistakes, aoci so on) that cannot beresolved.

43

INSTANCES on He envIrOnment loop:

a producr strategy offers requrste variety in principie, but ithas to be amp/i,e/towards the market u practice throughchanneis carying

- products, .e. the disiribution system- norrnation e. advertising, premiurns, offersALSO u requisite variety.

the environrnent inciudes

I I,LI1

- suppiiers, whose channeis are their (amplifYing)catalogues, between which an auenuating protocoirnust be estabhshed

- customers, whose channeis are depietion oInventory (i . e. they purchase things) notified, returnof guaranrees w i th marketsegment data attached,ietters of cornplaint, and market research itself: ah

a notionahv infinita variety.

Again, the question is no longer vhether ah these activities cngenerate Requisita Variety (as to which we assured ourse!vescari ier), but whether there is channel capacity adequare to He datefiows involved.

J For example, do you know how much information can betransferred rhrough the chan nel o a magazine advertisement

1- chanceci upon, or throuh a roadside H11-board glanced upon?

n

NOW DO THIS:

- Make lists of your own instances reiating to the two-way1 channehs between rnanagement/operations and operations/environment.

CHANNEL capacity for TRANSMITTING VARIETY is Hediscussion point - not (as befare) He generation of variety,

- strategcalhy, as a source.

What measu res do you have - or need?11

44

Now that we have sufficiently cleariy distmguished betweerjRequisite Variety as manifested in the Iffiree entitites of thediagram, and Requiste Variety as available channel capacity, byexperiment as weH as by definition, we shouid formalize

The Second Principie of OrganizationThe four directional chan neis carrying information betweenthe management un it, the operation, and the environmentmust each have a highei capacity tu trar;srnt a givenamount of information relevant ro varietv sefection in agiven t;me than the or/ginacing subsystem has tu gene-ate tu that time.

THe second Princ;ple invokes a time base, whtch the first Principiedid not (except to speak of a tendency on which no !mits areplaced). This is because the capacity of an actual channel dependsabsolutey un the rate of data transmsson invoived. Note also thatdata are transmtted, not variety tsef. Vanety is ampl!fled orattenuated hv the nsructons that the data formu late; but thoseinstructions must he adequate to the relevant variety selection.

EXAMPLE:

Wc may seek tu modify a customer's behaviour (from not-buyng to buying),a variety of two, by writing hm a ietter.The ietter says: 'Dear customer . . advantages . . . flOW BUY'.The variety matches. The channel capacity required is also two(make, or not, a photocopy to aH customers: the Post Officetakes care of the increased variety in channels once the batch ofsay 1000 etters is mailed). The addressing machineautornaticatiy seralizes the addresses.

lfwe now personalize each letter, taking account of specialknowledge about each customer, we sha1. need a channelcapab!e of generating a thousand ietters, nstead of one, in thetime available.

11 45

ti..

U.

II

F

I

It shou!d ins f intly have occurred to you that whether the provisionof this channel caoacity is difficult or not depends aimost entireivon the technology in use.

Ifeach of a thousand !etters invoives data handling by a deskresearcher's consuiting a manilla folder and putting togetherappropriate paragraphs (even if each of these is stereotyped, and atypist is then needed to type out the result, then the channeHing oaH this selection of states that underwdtes the variety depioyedaccordng to the First Principie w 1 be a major undertaking.Speaking of rates, it rnight take ten days a l,a hundred !etters a day.Bu'

- o course the whoie job con Id be done in an hour or two insidea cornputerisecl system,

In drawing up iists of amphflers and attenuators, then, and inseeking to evaluate homeostatic variety balances, we shouidconsider that VARIETY GENERATORS rnay have to be dealt with,or may be designed to absorh naturaiiv prohferating vadety. if weiook on tecnnoiogy as such a variety generator, and not slrnpiy as aproducer of artefacts. rhen out reguiatory,

capabiiity is enhanced- as weM as our abHity to undertake novel things, or to runprocesses more econornicaiy.

I

L111-.1

Considering that our recursive modeiiing procedure does notpermit us to investigate the infrastructure of our three entibeswithout changng the Systern-in-focus, quite a lo',of manageriaiiy

powerfui conclusions are emerging. By treating the environrnent,the operatons, and the management unit simpiy as 'black boxes',

that is as opaque to analysis, and looking oniy at their interactions,we have been able to enunciate two Principies of Organization -and to draw up an accounting of varietal interactions that conduceto horneostasis If these !istings have been conscientiously made,and the relevant arnpiifiers, attenuators, and technologicalgenerators considered in terrns of Requisite Varieties, sorne te!iingdiscoveries about the viable systernunder study may 'nave beenmade aiready,

But we have not finished wi[h System One, even now.

11111

46

1The diagrarnrnatic Coflvenhions are pO\Vekfl. [ven tHough ourboxes are 'enipty', and our channes merely 1 nes, there has beenmuch to say: but are the conventions thereby exhausted? No.There are big red blobs on aH the hgures, and they have a speciaimeaning.

TRANSDUCTION is the vord Wc need: leading, across'. Each redbiob lis a transclucer, and it has this unctiofl:

or

4-* c&n,L

1o(t&t3

F/C4L,: '-4--- CjjThe Third Principie of Organization

111I 11!r

ItrIt.

Wherever the nformation carriecl on a ciiannel ca pable ofdistinguisliing a given var,ety crosses a hounclary, undergoesransduction; tlie valiety of the transducer mustbe atleast equivlent co the variety of che channel.

it is self-evident once pointed out!

Ihe point Is ro draw a clear distinction between channel capacityand transduction capacity: they are not at al the sanie thing.People think roo loosely about 'cornmun:cating the message', as ifany sor, of connexion must be abie to do the Job.

If47

f_j( cJfe.E II

1II There are eight transducers in our basic diagram. fHeseexampies are aH actual cases o inadequare variety in

transduction given that basic variety (First Principie) isI capabie o absorption, and channel capacity (Second Principie)can convey that variety.'.-- G .joL . .

& 6--

o &4ro .

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._c_ Pd.-C 5 '-

IIIII11-111

Note: Because these exampies concern only the transduction ofmessages, the queston whether fe message itse!f intends toarnplify orto attenuate variety is irrelevant. Ihe Job o thetransducer is to preserve variety, whatever it is.

48

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Taking these case exampies as guides:

NOW DO THIS:

Make similar anaivtic vignettes o the transducers thatpopu late your own System One

don't orget that you have more than one diagrarnto consider!

IIfj11

i

AND TRY TO MAKE- -

an enormous diagram of the double-loop (managementoperations environrnenl) for each one,

annotating for the THREE PRINCIPIES.

49

The whole Collection of dagrarns is now por together in aparticular Composire of very special signiiicance

(Al! other aspects of our work are implicit in this Figure ThLaw of Requisite Variety bicis us to be selective.)Here it is:

1

. ..4EFP

.., '!_._

-

-a-

- A 1

L1/ 3

THe star-iike networks are coHecting information which has veryhigh variety, anci rnust necessarijy be attenuated by themanagenlent strategies ciesigned to procure homeostasis (FirstPrincipie).T h e channe!s ae v a r ietyadequa te-

to Convey the data t h a t seiectthis Req uisite Variery (Second Principle).The transducers on the horizontal axis, which havejust beendiscussed, use coding rnechanisrns (Third Principie).

- 50

Irir

In ACCQUNTABI[lTy we meet our firsI transducer on the verticalaxis (compare Figure 9).Ibis 'leads across' the boundary between S'/stem One and theSenior Management - and of course it involves massive varietya tte n u a t Qn.

11111

II

Precisely:

Each System One mustattenuate its horizontal variety-Lthat wbereby its operations are made efective

itS environmentin order to d'schargeti Resource Bargain with the Senior1 tvianagement.

Ibis Bargain is concerned with the homeostass oresourceu/ness. Then accountabwty wouicl, i n a perfectlydesigned system. consist sirnply in transmitting a continuoussignal - a monotonous tone - meaning 'everythingproceeds as agreeci'.

Senior Managements are unhkely to accept that so great avariety attenuation (notifying only two possble states, OK ornot-OK) is Requisite in their terms. But the maximum varietythey can hande for each subsidiary is their own total capacitydivided by the number of subsidiarias in System One.

TH ERE FO RE:

The design of accountabilitytransducers and channeis mustconform to the variety attenuation a(ready huilt in to themanager] al strategy-

that 5: the Second and Third Principies can be interpretedonly in terms of the First.

AND:

Senior Management, having agreed to this designed accountabihty(and subject to safeguards to be discussed ater), must not oftenexercise its prerogative to conduct star-chamber investigations -or confidence wili be forfeit and autonorny clenatured. Inpartcular, it has no access to the subsidiary's Regulatory Centre -which fs the local managernent's service domain.

IIII

1i

1

Finaily, and in preparatiori or the next section (in WHCH SystemOne wiH be synthesjzd) please ook aain at Fi

9 anci thesurrounding discussjon of the Rescurce Bargain.The bargan itself Coflstitutes a massive variety attenuator: it is adynamic process whereby aH the states that the elemental SystemOne might adopt are chopped down to the programme it is agreecito undertake

AFTER this (essentialiy planning) process is complete, then routinemanagement must set up a routine interaction whereb y theResource Bargain is impiemented

Now no-one is going to arrive on Monday rnornings witbasackful

of golcl, saving: 'here are vour resources, brin- me the change onSatu rday:

Wd5 ka. t-? /

an ACCOUNTABILTY LOOPwhch is dra';vn here speciaHv toernphasize that it is a regularhomeostat

we are used to !ooking at ithorizontally.

5r.

CJ

AH the Principies of Organization applv to this loop.The RESOURCE CHANiNEL transrnjts permissions essenfialiy, andneeds ampiif;ers to expian their operation. The accountabilityreturn loop attenuates the whole Continucu5 saga oflife in SystemOne into requsite variety.

These remarks concern the SECOND Principie.

REFLECT NOW on all three Pr i ncipies as exemplified inthis sketch, and as they apply in your own System-in-focus

n

1

SPECIAL TERMS OF THREE

CHANNEL CAPACITY a measure of the amount of informationthat can be transmitted in a given amountof time

1 TRANSDUCER encodes or clecocles a message whenever('Ieading across') it crosses a system boundary - andI there [ore needs a c!i[ferent mode ofexpression.1 THESECONDPRINCIPLEOFORGANIZATION

The fcur directional channelscarrying information hetweenthe management unit, the operation, and Pie environmentrnust each have a higher capacity Lo transmit a givenamount of information relevant Lo variety selection n agveri time Pian Pie originating suhsystem has Lo generaLe itfc that time.

(Relies oc Shannon's Tenth Theorem)

THE THIRD PRINCIPLE OF ORGANIZAT!ONWherever the information carried oc a chancel ca pable odistinguishing a given variety crosses a boundary, itunderoes transciuction; Pie variety of Pie t rans cLycer mustbe atleastequiva!ect Lo the variey othe chance!.

11

With the enunciation o three organizational principies, we haveat last exhausted the spatial potentialities of the basic diagram thatdepicts an element o System One, an element that is itseif a viablesystem.

However, ,ve have not said rnuch about time. THe temporalcontext is obvious enough; ,,ve ackno\vvledge it by soeaking ab-outtendency in the First Principie, transducton (which is also atemporal process) in the Third, but abo ye al! in trw SecondPrincipie where rates of data transmission actuahy define capacityin a channel. Standing hack to observe the whole o this system inaction, however, we can see that we face more than a spatiaisystem ir a temporal context: it is a dynamic process. Here is agroup o vanety generators in contnuous production o systemicsa1es, so organzedby the Three Princp!es) as to absorb eachother s prohferaton o vanety. Then part ot this organzation musthave to do with the dynamo itself, and ,,ve adcl:

The Fourth Principie of Organization

The opera tion of the first three principies must be cvclica/lymaintained rhrough time without hiatus or lags.

Why was not tbk Principie inciuded with the others to concludethe last section? in fact, and aithough each elemental viable systemhas its own dynamic on the horizontal axis (wherein its localmanagernent enjoys autonomy), the general clynamics of theSystem-in-focus derive from the vertical axis, which we are oniynow ready to examine Fu!ly.

Please turn the page.

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then consder varyHg ther size as '.vay 131 COfl1muncatngtHis informatjon.The eye sees area, not radius. So turnover (or example) isthe area = r 2 , divide the turnover by (oh, roughly) 3, andtake the square root for the circle's radius.

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1 nothing worth COMMUNICATING is to be gainecl rom this

I approach cIOn't use it. Leave the circles uniforrn, andernphasize something else in the clagratH.(Requ site Variety for vour readers, after al

(u) about the Connecting squigglv unes - the basic convention Ol the operational axis is the same as

that Qn the command axis. That is, the simple arrangementshown in Figure 1 4 does not mean tilat the operations flowserially into each other: only that there are connexions

for instance, operations may be so loosely couplecl (e.g. in aconglomerate) tllat the con nexion is no more than acompetition for capital. In such cases, tlle conventions OFigure 14 are adequate (we shall see how adequate later)

Sornetirnes operations are very strongl y connected, and

indeed do How i nto each other. In such cases, arrange theoperations in the appropriate order ancl enhancsquiggly lines

(this puts ;nto empirical effect the discusson ofFigure 2)

or matters may be yet more complicated

It

58

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o-r iti'-

N SHORT:Always be as creativc as possible. A VSM cHagram tha Iooksexactiy Hke a stereoype irom one oi the books about tHe VSMcannot possibly be exploiting tbe model

HO WE VER:Keep to he diagramnia[ic convention5 tHenreives: uncianientaiblocs anci connectivities - as also the horizontal and vertical axes- have been found to be powertul in analysis and chagnosis.

1

1

1

1

1

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ESPECALLY:Ensure that modifieci diagrams co nol fiout iNc axioms, principiesand laws ofthe Viable System expounded here - which they arenieant precisely to Illustate.

/1

59

Assuming that a suitable depiction o the vertical operational axkhas been drawn (and suitably annotatod), consicler theenviro n me n ts.

Figure 14 again shows the basic convention: each elemental viable system has its own uniquely deined

environment.

which however at the very least, the organization's1 in te. rsects } narne is shared in the public rnind.the others se1 aitnough the convention (Figure 14, red intersects) joins oniyneighbouring environments.I Any feasible combination o environments is acceptable. It ispossible moreover to make very creative use o this diagrarnmaticspace which houses all the variety generators with which theSystern-in-focus has to cleal - by mncluching in it subsystems and1 transducers that you have analysed empirically 'in theHere are the two limiting cases:

the environrnents o aH the subsystems (elements) of SystemOne are identical.Then ah operational circies are connectecl to one and thesame environmental envelope.

cg.: a superrnarket- whose departrnents are al supphied by onecorporate vholesaler,- whose customers foral clepartrnentsindiscrirnmnately are the local population.

the environrnents o all the subsystems (elements) o SystemOne are geographicaliy separate.

cg; a countrywhose provinces are run by local governments.

The diagram facing, Figure 1 6, shows iiow to depictenvironrnents where the intersections are minimal, butin this caseCanadian, Canada-ness, Canada-hood, the Maple-

k Leaf-for-ever..3_ ...

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In Figure 1 6 Wc see huw lo begin sketcbing ib(2 Bg Diagrum \vitHwHicll we hope lo fin ish.

PRACTICAL NOTE:IP,vill prove very difficult lo display everything thaI isimportant on a single sheet of paper, ho\vever large (andIbis makes ibese explanations evcn more difticult un lliesesmall sheets). Then clecisions must be taken as lo how lobreak un He total account.

For instance, Figure 16 exernpliiies such a decision. 1I wantecl lo emphasize Pie handling of the environmentalpicture - anci so we have quite a respectable niap ofCanada. But because this is rnore-or-less proportionate,I ihere is no space in wliich lo 'make points' wi lb graphics onthe operational axis. The econoniically Llnclerpr!vilegedMariPme Provinces have srnaller circies - but so \hat?

BLP h the environmental 'map' can be expanded lo (say) 6feet high, Pien He circles can be macle proportional lo He'GNP' of He Provinces. Try lo visual ize 10W bloatedwea Ithy Ontario and British Columbia Pien lookl VVhenclisplayed a \/SM basecl on Ihis graphic clevice ingovern ment ci re les i n Ottawa

lo top ci i 1 servan 15 whoknew He acts - there were gasps of amazenient all round.Simi larlv, hhiave often presented management groups withwall charts of only bits of He VSM's subsvstems (thaIconvevecl al the details of important honieostatic hoops forexample), or had them poring over a tenfoot chart ofenvironmental subsvstems.

It is for you lo decide how lo present the Big Diagram whenPie svork is ah done.

It is at He moment my task lo decide ho\v lo presentihe Big Diagram lo YOU.

THESE TASKS ARE DIFFERENT.

You know what He Svstem-in-tocus actual y is (1llave lo general ize and exempl ify).

iLI

1

1111El111

62

*)'()u have bIs of space - USE IT. ake visualpresentations, rather tlian write reports.

NOW DO THS:Look agaH al Figure 14. -

Look al the dra\'ings you made of your ownOPERATIONAL AXIS - the Iast exercise.DRAW YOUR OWN FIGURE 14

- making appropriate environmental cOn\.'entions lolit lEe operational ories (which you might nowdecide lo alter)

- comp!ecing iNc mana-erial hox-a,d-trianglest ru c tu res

NOTE: You must decide in particular how much cletailabout the double-homeostats lo show: thai is, yourdeplovrnent o lEe Princples of Organization in dichandling of variety horizontally.

VVhether YOu enci up \vith a single Urge sheet of paper, or asummarv shcet vith detailed Appendices, you should al tUs poinibe able to sav svith salisfachon:'TH!S is mv fLil 1 acconnt of Svstem One'. Done.

Now we come lo a new topic with its own new concept. It is aspecific sickness of Homeostasis thai ,ve neeci lo understand.

p -

63

Take this cliagram lorepresent a horneostat.TEe bul l's eve Istandsfor iNc stable state oeacli subsystem. So tEinner red loop sIc 5the stability of t e wbVVhen the stabi poinwanciers o, it is la 4laacktoc.

X. n Oc

AH that looks very peaceul. Close insOection suggests why: there!ationship is soiiiewiiit incesluous. Tho system is closed.Ihe system we are studying is not at al! closed. In Figure 17(facing) we see a version of the familiar System One. Al the usualconventions apply; but we shall now concern oLirselves with Heelemental subsystem 8

surrounded, as you see, by A on the oneside and C on the other.

B has a role on the Horizontal axis. The 8 nlanagement has aduty to conduct 8 operations in He 8 environrnent

as eiiectively as poss ib/e.What are He constraints on this endeavour?

8 MUSI

(i) obey the dictates (few, we trust) of the corporateintervention,

(u) operate within He terms of He Resource Bargain,(iii) acknowledge He squigg!y-line relationships (strong or

\'eak) with He operations oA and C,ancl

(iv) note whatever environmental intersects impinge onreeclorn of action as to aclvertizing for instance.

But B, c!espite these four vertical squeezes stil! Has all hismanagerial virility . . . off He goes.

THe B management mounts his operations in the B circle.These repercuss alon,g He squiggly lines, ancl (because of B'signorance of A and C operations, of whose total variety he isnevitably ignorant) they Have expiosive impacts

. THeoperations then produce tHeir intended effects in the 8environment. And again, there are powerful reverberations inbotH He A ancl C environrnents .

WHat are tHe A and C managements to make of theseexplosions? Upsets in both tHeir environmenis anci Heir ownoperations are channeled back - ancl obviuusly tHev addresstheir colleague 8 management in outspoken f terms.

111E111[]1i11

64

1 HIi11.1

I1111

46 /

g __ __

- 1_ )4

1

( L1-. IGL!iE 117

B is a good colleague, and a loyal member of the enterprise.He tries to take ihese complaints into account.

BUT Meanwhile,

THE SAME THING is happening to A (who is beingassailecl by B and (say) Z) and to C (in the face ofcomplaints from 8 and D).

IN SHORT

Because every element is continuously trying to adjust toeverv element, nothing ever settes down.

The sickness o the horneostat 5:OS CILLA Ti QN.

And the cure for the sickness:OSCILLATION must be DAMPED.

65

itItIIf

Of course, in practice tHese events do lot take place in the orderedsec i uence useci Here for expository reasons - someone wouldintervene (one Hopes) and cal a conference lo resolve rnatters. THEpoint is tHat all these influences are 'in tbere pitcHing', and tHat wecan penetrate all the osci!latory confusion to understand (no, not'tHe cause') that it Has tobe damped. Moreover, ifwe look back toFigure 14, we can see by a graphical clue that tHe right-Hand sideof the diagram Has al its Horizontal elernents iloating in space:those triangles obviously need ancHoring sorneHow.

Yes, 1 craftily clrew it hike tHat to bring lome tHe point. Itseems to be necessary; otHerwise tHe Unitecl Siates and theSoviet Union would see wHy armament pohicies osciHate,and (as we expected of tHe olk in tHe previous two pages)would do sometHing about it.

The fact is tHat System Two

tHe viable system's anti-osci 1 latory cievice for System One

is al most tota Hy miso nclerstoocl and u ncicr-represen ted 111contemporary management tecHnique. It is always present, or tHeorganization wouid sHake itself to pieces. But because it is notproperiy Handled, enterprises come very close to clisintegration:

like tHe EastWest detente, like He NorthSoutH economic equiibriLlnl, like the Public Service Borroving Requrement's Homeostasis, hke tHe budget for HealtH or education, hke tHe Company's cash-flow stability, Hke He capital iockech into inter-process stocks.

AH tHese clemand tHe maintenance of balance in System Que. AHare tHreatened by He clisbalance inclucecl by inter-elementaloscillation, whicH He Senior Managernent does notcomrnand tHeRequisite Variet y

to resoive by clictat on He central axis (altHoughmany sucb managernents try tH is impossibie trick). Al actual y useSystem Twa devices -

66

1

67

inexpertly, because tliey are not reconized [o be precisely ANTI-OSCIL[ATQRY So sorne are Iiopelessly inorrnal, and sorne aretoo orrnal [o reac[ in time.It is vital [o understand System Two and its managerialembodimenis. Here is [he basic diagrarn:

II.

ft

r!

S YS T MTWo

,Z7,jE /g

Note irst o aH that the top triangle is the aguaory Ceotre for theSystem-n-focus unlike the regulatory centres on the Horizontalaxes o System One, it is in touch with System One asacompleteentity. The others are in touch with each other separately, asoperational neighbours.

This is wby the top triangle is drawn abo ye Pie restf tHestern inFigure 18: it belongs to the next leve/ of recursion.

HO WE VER:

System Two does not He on tbe central command axis. Ctsfunction is not to command, but to darnposcillations.

NOW DO THIS:

Concentrate on your own System-in1'ocus.

Think about the elements of System Que, and concentratein particular on the ways in which OSCILLATIONS mightset up between tbem.

There will SUrel\' be more tHan one mude o osci 1 lation, andusually tbey will not be directiy indicated by the'organization chart' (which does not acknowleclge theworkings o Figure 17 in departmental correlates as a mattero necessity).List tbe modes o osci 1 lation vou expect on the ieft, andthen iist on Pie right organizational correlates or specialactivities that seern to exert a DAMPING effect.

Please do not cheat in exercise by glancing ahead. There is nobetter way to fix the difficult concept o System Two as it is foundor may not entirely be found - in your own enterprise Pian bydiscovering about OSCILLATION from your own experience anclinsight.

There may be many surprises here.

E-68

The most accessible example oa System Two is

A SCHQQL TIMETABLE.

Think tlirougb lis status and funclion careul y, and you may nevermake a mistake in analysing INc role o Systeni Twa in anyappiicaton o the VSM.

These are INc main consiclerations:

' However you describe iba Svstem One o a school or auniversitv, its deparirnenis or lsacuties or its courses Or ,,Sclasses are each pursuing (correcdy so) selfisb encis whichengage them in compelition for scarce resources

notbiystaff but also olber facilities.

if each Svstem Que elerneni \vere lo determine lis OWnprograninie unilaterally, ihen tbe whole plan for ihe tuture\vOUlCI be rife \.\'Ith 'doubIe-booking The TtMETABLE takscare o this.

The timetable rl ecis managerlai policies and cecisions, butdoes nol make iNem.

It is accepted as al' thoritatjve throughout System One,because ji does fbi seize authorjtv, but js gratefullv acceptedas a 5cm/ce.

The tjmetable is rigid ti routine circumstances and js thereorea most conveneni variety attenuator.

Mere it not for thjs, teachers would Nave no timeto do anything except negotiate with cadi otier.)

The tjmetable js flexible \vhene.ver an e!ement o S ystem Que5 under cluress

(j not, a teacher coulcl nol go or emergencydental treatment, say)

1 and rs aciaotaiions are not den regarclecl as autocralic.1H15 ISA REMARKABLE FACT.

ANSWER. THIS:

\'hat is iNc mosi obvious example ol Systeni Two in aManufacturin Company?

Pause, and gel it.

69

'FI.I11..Ii11111I11

1111

The answer to that question might have baci to do with ono of theaccounhing functions (see later), bu the answer really exoectedwas production control..Read through the considerations on the Iast page, and note howclosely the script wiM match this entirely chfferent context:

We are in the presence of an invariant in the viable systeni

its name is System Twots unction is anti -osciflatory.

Bringing back from earber oags the concept &invariance ninyhave been startling: but ihere it is, ancl veiv powerftil it 15.

Bringing back ihe anti-osciNatory definition of tunction is morewearying than starding: but TAKE CARE.

There seems to be a compulsion on users of He VSM tocrani aU Sorts o corporate actvities -,[o System Twoeven when He job isnot anti-oscillatory by any stretch ofmagination.

This comoulsion, doubtless, derives from the pressure tuaccommodate the institutionahzed organizution chart inthis rendition. It is not a legitirnate pressure.

E SP E C AL L Y:

accountabi 1 ty does not reside in Sysem T\vo- riot routinely,- not through ad hoc enquiry;

accountabi ity, the discharge of He elemental role,is always to be found on the central axis - ancl issubject to its so-designed iltralion.

NOW:Look back three pagos to He list o SiX flicijOr 1SSLJCS whereoscil laiions thrcaten the equihbria mentioneci. \A hat are theSystef1 T\vo iailures, vulnerablities, ancl potentialities?

Ii11E -1

1Li

70

1 SPECIAL TERMS OF I OSCILLATION lailing Lo settle down in homeostatic equilibritjma dynam,c system over-corrects itseICon tinuous/y

FOURTH PRINCIPIE OF ORGANIZATION- The operation of he lrst three principies mus he cyclicaily1 maintained through time without hiatus or fags.11

alII

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71

You are walking down the street, and someone is 'valking straighttowards you. You will necessari!y pass this stranger on his !et oren his right. You make a tentative move towards your Ieft;smuItaneousIv he has veered to his right. A col! ision is inprospect, se each of you 'corrects'. You are new quite close teeach ether. Perh