This explanation of the VSM is derived from David Wastell's Managers as Designers in the Public Services:
No account of systems thinking would be complete without some mention of the Viable System Model (VSM), developed from cybernetic theory by Stafford Beer.
By ‘viable system’, Beer means a system capable of maintaining a separate existence, of surviving on its own. Organisations are seen by Beer as systems, i.e. goal-directed entities made up of interacting parts, operating in an environment of some kind. The central issue is: what form of internal ‘architecture’ is required if these systems are to be viable? Beer’s answer to this question is built upon a fundamental concept in cybernetic thinking, namely the Law of Requisite Variety. Crudely-speaking, this law stipulates that the ‘variety’ of a ‘control system’ must equal or exceed the variety of that which is being regulated (variety is defined as the number of possible ‘states’ a system can be in).
Beer sees organisations as structures for handling variety. For an organisation to survive in a particular environment it must be attuned to the variety of its surroundings. If the environment becomes more complex, the organisation must adapt itself in order to manage this variety and to preserve its viability. Such adaptation is not a simple process. Beer’s concepts of ‘variety attenuation’ and ‘variety amplification’ provide the two adaptive mechanisms whereby organisations seek to manage their variety and that of their environment. Variety attenuation describes the process of reducing the variety of the relationship between the organisation and its environment (e.g. a children’s social care agency restricts its services to only those children at very high levels of risk). Variety amplification describes the reverse, e.g. a hospital sets up a new diabetic clinic thereby increasing its variety from the perspective of the local population.
The concepts of operational system and meta-system are fundamental to the architecture of the VSM. All viable systems comprise these two elements: an operational system which performs productive work and a meta-system which is the means of regulating the operational system. These concepts are recursive in that the combined structure of ‘operational system/meta-system’ at one organisational level together constitute the operational system at another ‘higher’ level in the hierarchy (e.g. project teams organised in departments, departments nested in enterprises). VSM proposes a distinctive view of control in organisations which emphasises the need for self-organisation and localised management, whilst maintaining the integrity of the whole.
Conceptually, Beer sees organisational systems as structures with five component sub-systems. System One (the operational system) comprises a collection of entities, each carrying out an area of operational activity. System Two is concerned with coordination. It is the element which ‘dampens’ the instability caused by conflict between parts of System One and its sole function is anti-oscillatory. For example, a procedure manual might constitute a System Two where it provides a framework for cooperation between production teams. System Three is concerned with management. Its role is to steer the organisation towards its current objectives. It interprets the policy decisions of higher management and manages the operations of System One on a resources-results basis, facilitated by the ‘resource bargain’, an agreement stipulating that, in return for certain resources, System One will achieve certain goals. System Three can also gain additional information about System One through the sporadic use of an audit.
System Four is concerned with intelligence. It enables the organisation to learn and adapt. It is an intelligence-gathering and reporting function that seeks useful information about the environment, scanning for opportunities, threats, etc. Finally, System Five sets policy. An important part of this role is to arbitrate between Systems Three and Four, as conflict can arise between the imperatives to maintain the status quo and for change. System Five should also be open to the other elements of the viable system. A special kind of signal is the ‘algedonic’ signal which reaches directly from System One to System Five. In a well-functioning organisation the signal will simply say that all is well, but it can also quickly alert System Five to a sudden crisis (e.g. the failure of a new product).
It is important to stress that the VSM is entirely conceptual. It is a way of thinking about organisations and the conditions for viability. Whatever real-world structure we are looking at, all the conceptual elements must be present and working in smooth harmony if the organisation is to adapt and survive.
VSM in action: a case studyVSM is certainly of interest theoretically, as a way of thinking about the design of organisations. It is also useful as a diagnostic tool for probing and critiquing the design of actual organisations, attempting to pin-point areas where the current settlement is dysfunctional. With Peter Kawalek, I applied it in the late 1990s as a consulting tool first in a major IT organisation and subsequently in a UK manufacturing organisation, known by the pseudonym Heather Manufacturing Systems (HMS).
The subject of the latter analysis was the Sales Department. Following a long period of stability, in which 80% of sales had been to a single UK customer, the company had diversified itself into new markets across the whole of Europe. The Sales team had led this expansion; they had shown themselves to be innovative and entrepreneurial and, over a short period, 75% of orders now came from abroad. Despite this, Sales faced ever more ambitious targets and they decided they needed their own Sales Information System, being dissatisfied with the services they were receiving from the centralised IS function. Work began in 1997 on the project, dubbed the Whole Europe Information System for Sales (WEISS). It was developed by the sales staff themselves using Lotus Notes. The case for such a local development rested on the assumption that Sales had a high degree of local autonomy. However, although strategically aligned for Sales, WEISS seemed to be causing problems in the wider organisation. In particular, delivery time problems were on the increase, as a result of Sales staff quoting unrealistic estimates. Customers were becoming frustrated and there were signs that market share was being affected.
VSM was used in our analysis, which involved mapping real world teams and departments onto the conceptual structure of the model. In simple terms, our analysis served to challenge the assumption of Sales’ autonomy. In fact, they were closely and critically involved in a range of dependent interactions with other parts of the organisation, especially with Production. Both in the processing of new orders and the production of new parts, they had significant influence over scheduling decisions, though this was often informal and could be highly disruptive (for instance, when sales engineers went straight to the factory floor intervening directly in production decisions in the interests of favoured clients). Our main conclusion was on the need to formalise collaboration between Sales and Production. Accordingly, we recommended that a successful information strategy would have to recognise this: “the need to share information about scheduling between the Sales, Production and Engineering teams should be a prime concern”. We recommended that the WEISS project be developed to “come under the ownership of more teams than just Sales and hence address IS issues from a broader standpoint”.
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