System dynamics: A lens and scalpel for organisational decision making

In organisations decision makers act as information converters, receiving and translating information flows into managerial actions. A system dynamics approach identifies how streams of decisions and resources interact to produce behaviours recognised as problematic for an organisation, for the purpose of intervention and performance improvement. It takes a view that most persistent organisational problems are of our own making, and that while external events can impact severely, the long-term quality of organisational responses is ultimately a consequence of internal decision making, and of the structure within which actions are framed and implemented. So the articulation of structure becomes the focus and has three significant components: (1) the relationship between elements that interact in actual decision-making processes; (2) the identification of circular chains of causality (cycles) formed from such links; (3) the estimation of time delays that act to induce lags in action-impact links and hence in the cycles. The modelling of decision-making structure in terms of nonlinear mathematical relationships is followed by simulation, which aims to reproduce the problem behaviour(s) of concern, or in the case of a new organisation to generate output that reflects what can be expected from the intended actions. There is then a basis for policy analysis and re-design to achieve improved performance. The article will discuss and illustrate systems models built to generate behaviours (typically cyclical) that a typical university exhibits over time with respect to matters such as faculty staffing, budgetary conditions, and the impact of supposed incentives to stimulate change and exercise leverage. Some broader implications of the system dynamics approach for addressing organisational problems are discussed.