Developing Business Competence: A model based on Viable Systems

Seminar on “Organisational Restructuring of SEBs” D.V. Ramana
Identify the System
The requirement for applying VSM is the proper identification of the main system. This can be
done by understanding the business activity undertaken by the organisation. At present, Cesco is a
licensee engaged in the purchase and sale of power in the central districts of the State of Orissa.
The business operation is divided into around fifteen accounting units. Each unit is responsible
for undertaking the business and maintaining the necessary books of account. Each division is
headed by an executive engineer , who is also in charge of the day-to-day operations. The
divisional managers often look forward to the corporate office for directions on various
managerial and operational decisions. The present organisation structure of Cesco is shown by
figure –I:
Circle-I
D1 D2 D3 D4
Cesco
Circle- II
D5 D6 D7 D8 D9
Circle-III
D10 D11 D12 D13 D14
Cesco is divided into:
� 3 circles
� 15 divisions
� Each division is divided into 3-4 subdivisions
Some of the limitations of the
conventional structure are as follows:
� The present structure is not stressing
on the main activities. The focus is
on the flow of authority i.e. topdown.
Under this conventional
structure, the budgets simply being
imposed by central authority
� Failure to delegate authority for
resource deployment
(decentralisation in form but
centralisation spirit)
� In-congruency in the corporate and
divisional goals
The problem of centralisation vs. decentralisation is dealt with in VSM by allowing to the
subsystems as much autonomy as is consistent with systemic cohesiveness. The meta-system i.e.
the top management will intervene only to prevent one of the parts acting in such a way that it
could threaten what the whole system is trying to achieve ((Jackson & Flood 1991).
Under VSM a division will be treated as the System-1. So Cesco will be described as a
combination of 15 systems-1s. If Cesco has to be viable, it is necessary to ensure that all system-
1s are viable. The main purpose of system-I (division) can be defined as follows:
� To ensure power is supplied to the consumers;
� To ensure all consumers are customers;
� To utilise all resources optimally; and
� To ensure financial viability.
It is important to note that these systems are affected by the local environment and corporate
environment. In order to maintain stability in the organisation and address the environmental
issues Cesco has to develop the System-2.
System-2 refers to individual rules and behaviour for coordinating operations in terms of current
needs. This system makes the teamwork possible by ensuring proper coordination among the
several System-1s (divisions). This can be achieved by frequent management reviews with
various levels of participation. An effective System-2 will:
� Enable various System-1s (Divisions) to solve their own problems
� Solve conflicts between System-1s (Divisions)
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