Developing Business Competence: A model based on Viable Systems

Seminar on “Organisational Restructuring of SEBs” D.V. Ramana
� One of the important performance indicators of the distribution companies is
‘Collection as % of Billing’. Overall collection has declined from 71.2% (98-99) to 64.4%
(99-00) for the LT and HT consumers. The following table shows such reduction in collection
performance of the distribution companies
Collection as % of Billing
Wesco Nesco Southco Cesco
1998-99 90.9 86.3 78.4 75.9
1999-00 77.2 75.0 76.1 68.0
Source: Internal Records of the Distribution Companies
� The major shareholder of Cesco, AES is contemplating to sell its stake and withdraw
from the distribution business.
<strong>Developing</strong> <strong>Business</strong> <strong>Competence</strong> using VSM
For a problem of this magnitude, it is not possible to find solutions overnight. There is no quick
fix to the problems facing the power distribution business or the SEB who are engaged in power
distribution along with the other activities of transmission and generation. We need a paradigm
shift from the conventional thought of changing the ownership for improving the performance,
to developing organisational competence at the unit level. The focus should be on developing
viable business system. There are several <strong>model</strong>s to develop such competence, some focus on the
individuals and others on the organisation 10 .
One such <strong>model</strong> is Viable Systems Model (VSM). VSM of Stafford Beer 11 is <strong>based</strong> on the ideas
from the science of organisation. VSM portrays a powerful image of a well organised business
and focuses on organisation rather than structure (Jackson & Flood 1991). A viable organisation
must be able to 12 :
� Make all normal decisions effectively;
� Adapt itself to changes in the demands made by the world (includes customers, employees,
suppliers, competitors etc) around it; and
� Learn from experience.
Principles of VSM:
VSM is <strong>based</strong> on the following cybernetic principles(Jackson & Flood 1991):
� The whole system is replicated in parts. In other words, an organisation is a combination of
several viable sub-systems and it operates in larger system called meta-system.
� The sources of command and control are spread throughout the viable system, which
enhances self-organisation and localised management.
� The emphasis is on the relationship between the viable unit and its environment in terms of
influencing and being influenced by it.
VSM: A brief Introduction
The VSM is the arrangement of five functional elements called System-1 to System-5 that are
interconnected through a complex information and control loops. The emphasis on repetition
allows one to use the same basic <strong>model</strong> to represent, a company, its divisions and the wider
organisations of which it may also be a functional part (Jackson & Flood 1991).
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