Is your system viable?

How do you design and maintain an organisational system to be sustainable? How do you identify where you can be make the system at the same time more robust and more flexible?

Introduction

Over a period of 30 years, Stafford Beer developed the Viable Systems Model (VSM) as a way of understanding how an organization should be structured to be viable – that is, to be able to adapt and succeed in its environment. Beer famously used the VSM to model the industrial economy of a whole country, but the VSM can equally be used to model a small business, an enterprise, or a government agency – because its principles are universal and scalable.

The VSM describes relationships between the functions of an organisational system. These relationships may in practice be implemented via formal processes, job descriptions, or informal communications, in whatever combinations and permutations (including being absent). Looking at the organisation through the VSM can help us determine how to structure and fine-tune these relationships.

Description

VSM Overview

The following description of the VSM is somewhat simplified, but even in this simplified form the VSM contains much that is of interest and practical use.

The VSM is recursive (nested) – it can be applied at any level from the individual to the empire. Depending on our interest, we choose a level to be our “system-in-focus”. Most levels will contain embedded viable systems and themselves be embedded in wider viable systems.

As shown in the illustration, there are six interconnected “systems” within the VSM architecture. Let’s work up from the “hands on” to the abstract purpose.

Each system-in-focus has a System 1, which is the operational cluster that does the outward-facing work which justifies the system. The System 1 contains two or more elements which engage with the external environment. 

The System 1 elements may be delineated by various means to fit with the organisation’s operating model. Possible dimensions include products and services, technologies, customer segments or geographic location. For example, an IT developer may define its system 1 elements by product type or by customer segment, or it may have dedicated operations for individual customers.

Each S1 has three components: the environment in which it operates, the processes (operations) by which the work gets done, and its local management. In process management terms, the environment includes the process’s customers, suppliers and stakeholders. The process receives inputs from and provides outputs to the environment, and can be modelled using traditional process mapping and voice-of-the-customer methods. The local management is responsible for the process but in the VSM architecture does not interact directly with the environment.

The elements may be inter-dependent - for example, if the System 1 was structured into  design, manufacture, and sales then manufacture would depend on design for its product specifications, and sales would depend on manufacture to fulfil orders. Furthermore, the elements may have overlapping environments e.g. the external customer may engage with both design and sales.

Overseeing the ongoing operations of the S1 elements is the System 3 (S3). System 3 is concerned with the “here and now” of ongoing operations. The S3 negotiates accountability and resourcing parameters with the S1 elements and is responsible for integrating and balancing the elements to meet the needs of the organisation. These S3 – S1 agreements are high level; they focus on the “what” rather than the “how”. The agreements may be expressed in documents such as KPIs and position descriptions.

The “how” of S3 - S1 interaction is largely determined by System 2 (S2), which co-ordinates and regulates the System 1 modus operandi. There are often customer-supplier interfaces between System 1s that need to be managed, and the environments of the System 1s may overlap (for example an IT customer may interact with the design team and with the support team). Co-ordination is required to prevent the System 1s prioritising their own interests to the detriment of the whole. Co-ordinating mechanisms for IT development might include methodology, project management tools, standardised reporting, and collaboration platforms.

S2 also includes the provision of corporate shared services such as finance and HR that underpin and enable the operations of the S1s.

The two-way communication between the S3 and the S1s is filtered through S1 management. It needs to be augmented by a “reality check” or audit function that allows S3 to bypass S1 leadership to verify what’s really going on. This is provided by “System 3*” which supplements the linear management communication – it is is not a channel for the S3 to micromanage the operational activities of the S1. Typical S3* activities include customer surveys, resource audits, and corporate training.

The S3-2-1 complex provides a solid yet flexible framework for managing ongoing operations. However, management obviously needs to plan and to develop capabilities for the future. This is the role of System 4 (S4). Note that S4 interacts with a somewhat different environment than S3 – it is concerned with new technologies and changing social factors that may not be apparent to the day-to-day operations. S4 is also responsible for commissioning and monitoring projects to re-orient and improve S3-2-1 going into the future. Managers at whatever level need to balance their time and resources between working on S3 and S4 – too much of either is fatal, for different reasons.

Rounding out the VSM picture is System 5 (S5), which provides a sense of mission and purpose, together with a “conscience” that compares the performance of the system with its goals. System 5 is the classic function of governance bodies – including Project Control Boards and Company Directors. System 5 has duty of care for organisational ethics and values, and for responding to signals of crisis whether financial, regulatory or internal whistle-blowers (signified by the pentangle on this diagram).

The interaction of Systems 3, 4 and 5 is a metasystem for the System 1 operations. Systems 3, 4 and 5 jointly constitute leadership. When we expand the VSM into multiple recursions, we find that each System 1 element management "box" includes its own System 3, 4 and 5 for its area of focus. Because the VSM is fractal rather than hierarchical, leadership winds up being promulgated through the whole organisation. In practice leaders at all levels are involved with operational, developmental, and purposive perspectives.

Analysis

The VSM is grounded in information theory and cybernetics – the study of control. Specifically, the VSM addresses the management of complexity (“variety” in cybernetic terms). How does the process deal with the complexity of its environment? How does management deal with the complexity of its process? How does the organisation deal with the complexity of its parts?

The design objective is to localise the management of complexity by providing controlled autonomy, specifically to the S1 management, so that each area can focus on its own responsibilities whilst maintaining alignment to the overall goals of the organisation.

A full VSM diagnostic reviews the information and control flows along each of the connections between VSM elements, identifies where the flows are unable to manage the required level of complexity, and suggests strategies for improving the structure and connectivity.

However, even a simplified VSM as described above can inform and address such practical questions as:

  • Are the business functions grouped in an optimal way for the operating model? (S1)

  • Are the resources and expectations defined for each functional area? (S1 – S3 agreements)

  • Are the individual functions adequately co-ordinated and supported? (S2)

  • Do we have a way to check what is really going on (apart from management reports)? (S3*)

  • Are we devoting adequate resources to planning and development? (S4)

  • Do planning and operations support each other? (S3-4 balance)

  • Are the organisational purpose and values clear? (S5)

  • Do the organisation’s activities fulfil its purpose and values? (S3 – 4 – 5 interaction)

More Information

Stafford Beer lecture on YouTube

Beer, Stafford: Brain of the Firm, Wiley, 1972

Beer, Stafford: The Heart of Enterprise, Wiley, 1979

Beer, Stafford: Diagnosing the System for Organizations, Wiley, 1985

Flood, Robert L.: Solving Problem Solving, Wiley, 1995

Hoverstadt, Patrick: Fractal Organization, Wiley, 2008

Two notes: VSM functions should be linked to organisational positions, but not necessarily 1:1. Also, this description treats only one level of VSM recursion where there will typically be 3 – 5 levels.