This example was selected because of its common occurrence
and characteristics which may serve as parallels to organizations.
In its simplest form the thermostat influences the furnace, which influences the thermostat. The system adjusts to the temperature indicated by the thermostat.
System diagrams are models, simplified representations of the
real system, with sufficient relevant detail to enhance understanding
of the real system. A system is both a subsystem of some larger
system and composed of subsystems. The question is, to what level
of detail we model the system to understand it. Often this answer
comes through trial and error. Modeling the system too narrowly
has a tendency to omit some of the relevant influences. Modeling
the system too broadly may make the model too complicated to promote
understanding. There is always a trade off.
The assumption is that the outside temperature and the current temperature are below the thermostat setting. The initial example can be expanded by considering a number of subsystems that interact. These subsystems will be considered independently and then combined to depict the larger system.
This is a balancing loop. The thermostat interacts with the current temperature producing a gap. The gap influences the furnace, which influences the current temperature. Increasing the thermostat increases the gap, causing the furnace to run more, increasing the current temperature, thus reducing the gap. The system will adjust until the current temperature agrees with the thermostat, reducing the gap to zero.
My desired comfort interacts with the current temperature producing a gap. This gap influences me to increase the thermostat, influencing the furnace which influences the current temperature, thus reducing the gap. Desired comfort is an element of some other subsystem not considered here.
In heating my home I have an idea of what is an acceptable cost. The interaction of the actual cost with the acceptable cost produces a gap which influences me to turn down the thermostat. This in turn causes the furnace to run less reducing the energy usage and the resultant cost. This part of the system is not easily controlled because I don't see the cost until at least a month after the energy was used. Acceptable cost is part of another subsystem (income) not considered here.
The outside temperature interacting with the leakage factor influences the current temperature which influences the outside temperature. The leakage factor determines the rate at which this influence takes effect. Also, the degree to which the inside temperature affects the outside temperature is considered to be minimal. Leakage is part of another subsystem not considered here.
When these subsystems are integrated into a single diagram
one begins to appreciate the complexity of the system. This is
an open system because there are other factors which are not taken
into account, such as the energy usage influence on total available
energy, and the leakage being influenced over time by the internal
and external environment. The acceptable cost and desired temperature
are also elements of other subsystems.
Now that we have a composite system there are several points of understanding we can develop.
The system exhibits a characteristic of stability. The system
has its own agenda defined by the desired comfort and acceptable
cost which affect the thermostat setting. The system will adjust
to maintain the temperature indicated by the thermostat. If the
outside temperature declines the system adjusts. If you open a
window the system adjusts. If you build a fire in the fireplace
the system adjusts. If you turn on an incandescent light near
the thermostat the system adjusts. If the thermostat or the furnace
fails, the whole system fails.
Organizations have a tendency to maintain their stability in the same way. If you attempt to change things, the system adjusts to maintain things as dictated by control variables.
This system has two goals, desired comfort and acceptable cost, which are mutually exclusive and create oscillations. If I want reduced cost I turn the thermostat down and must tolerate less comfort. If I want increased comfort I turn the thermostat up and must tolerate increased cost.
If you desire to improve the system, where do you take action?
You could improve the efficiency of the furnace or you might improve
the thermostat. Neither of these actions will have any major effect
on the system.
The concept of leverage is based on the idea that there are points within systems where small changes can have a major impact on the entire system.
The real leverage in this system is the leakage. By reducing the leakage we can limit the effect the external temperature has on the internal temperature. This might be done by adding storm windows, better insulating the house, and other such actions. This action also has a cost, yet in the long run what it saves in energy costs should more than pay for the leakage reduction cost.
In a business organization there are a myriad of internal and external factors which interact to create an ultra stable system. Organizations often have conflicting goals not as easily realized as those in the heating system. Consider the differing emphasis caused by short term profits and long term growth and development. Internal factors being goals and objectives of individuals, established policies and procedures, structure of the organization, job responsibilities, appraisal systems, reward systems, management and leadership styles. External factors consist of market conditions, competition, politics, economic conditions, technological change, sociocultural factors, and imposed rules. These factors interact to create a stable system that changes its point of stability over time, yet resists being changed in any specific way.
If the dynamics are not understood, attempts to change the system will be resisted by the system, subsequently frustrating the change agent. Only thorough understanding the system and identifying leverage points can one determine appropriate ways of influencing the system to create lasting change.