The VSM: Key Concepts

What does the VSM contribute

How do we make decisions, and which decisions are made? This is treated as a subordinate question arising from a company's organizational and operational structure. Accordingly, problems resulting from inadequate decision-making structures and information channels are often only indirectly visible.

VSM adds a unique approach to addressing organizational problems by concentrating on these decisions and can, therefore, shed light on several issues:

1. Effective Communication and Coordination

VSM addresses problems related to ineffective communication and coordination within an organization. Its structured approach clarifies roles and responsibilities, ensuring an adequate flow of information and quick decision-making, reducing organizational silos.

2. Strategic Decision-Making

For organizations struggling with decision-making processes, VSM offers a framework that encourages the analysis of data, information flows, and feedback mechanisms. This holistic view helps identify potential bottlenecks and forecast future challenges, leading to more effective and strategic decision-making.

3. Steerable Organizational Structure

VSM aids organizations in designing structures for effective steering and control. By identifying critical systems, subsystems, and their roles. It assists in optimizing processes and resource allocation, balancing autonomy and initiative with alignment to organizational goals.

4. Continuous Learning and Adaptation

Organizations seeking to foster a culture of continuous learning and adaptation find VSM's emphasis on feedback loops and information exchange beneficial. This iterative approach allows for performance monitoring and implementation of necessary changes, enhancing adaptability in response to market shifts and technological advancements.

5. Controlled Scaling and Fractal Application

VSM's recursive or fractal nature makes it suitable for addressing issues at different organizational or abstraction levels. This allows for precise control over the impact of interventions, providing a significant advantage in risk management during change processes.

6. Complexity Management

VSM's holistic approach is ideal for organizations struggling with the complexity of their operations. It helps in understanding the interdependencies and interactions between different system components, making it a valuable tool for managing the inherent complexity of organizations.

7. Organizational Resilience

Organizations facing challenges adapting to change and surviving in dynamic environments can benefit from VSM. It aids in identifying weaknesses and inefficiencies, enhancing resilience and the ability to respond effectively to external disruptions.

8. Compatibility with Existing Methods

For organizations struggling to identify blind spots and improve decision-making and communication processes, VSM adds an additional perspective. It integrates well with existing structures, complementing them with cybernetic tools to make improvement opportunities understandable and actionable.

Key Concepts of VSM

• Cybernetic Nature: The Viable System Model (VSM) is a cybernetic model primarily focused on decision-making and steering within complex environments. This framework emphasizes the dynamics of control and communication in organizations.
• Beyond Traditional Org Charts: While VSM relates to organizational structures, it is distinct from conventional organizational charts. It offers a more profound and dynamic view of organizational functioning.
• Compatibility with Lean: VSM is not just a cybernetic model but also aligns with the Lean approach of 'value creation first. ' This is encapsulated in the phrase 'the system is what it does. '
• Recursive Nature of VSM: A key feature of VSM is its recursive nature. This means that the principles of analysis and design inherent to VSM can be consistently applied across different levels of an organization, with each level addressing its unique challenges and dynamics. This is why we decide on the unit we focus on whenever we conduct an analysis or design effort. This unit is called the System-in-Focus.
• Unique Cybernetic Language: VSM introduces a specialized language, a product of its cybernetic roots. Although initially unfamiliar, this language effectively articulates complex organizational concepts and can be surprisingly engaging once understood. For example, the primary value-creating elements or subsystems of the current System-in-Focus are identified as Systems 1.

Working Principles

VSM offers a distinct approach to managing complexity. It introduced six specific control mechanisms, which are named "Systems."

• Local Problem-Solving: In a complex environment, addressing challenges at the local level is often the most effective strategy. This approach allows for rapid response and leverages local knowledge and expertise. From a methodological point of view, it favors enabling and empowering its units, which are called Systems 1.
• Power of Horizontal Collaboration: VSM significantly emphasizes horizontal collaboration and synchronization between different parts of an organization. This method is recognized for its effectiveness, yet it remains underutilized in many organizations. The institutions, people, roles, and artifacts that enable and support horizontal communication are building System 2.
• Role of Management or Higher Authority: As a first option, management favors the units to solve their own problems. However, Specific conflicts, such as those over resources or compliance issues, cannot be solved locally and need intervention from a higher authority within the organization. Operational management is referred to as System 3. Like System 2 and the other systems, System 3 can contain institutions, people, roles, and artifacts. Most supporting units like HR, Controlling, etc., are mainly part of System 3
• Active Inquiry: Management needs an additional mechanism to stay grounded, i.e., to get real-life information on an ongoing basis. This can consist of audits, measurements, or practices like "management by walking around." These build System 3* ("three-star").
• Future-related Concerns: VSM acknowledges that someone within the organization needs to focus on research, future planning, and strategy. This is introduced as System 4.
• Balancing Operations and Future Planning: There is an inherent conflict between managing daily operations and preparing for the future. While challenging, this conflict can be productive if adequately moderated. System 5 moderates this conflict by identifying the „North Star" or the principal direction of the System-in-Focus and acting on it. System 5 decides as the final authority in conflicts.
• Feedback Loops Everywhere: VSM defines several dedicated feedback loops called channels. These channels are powerful mechanisms for designing the location and nature of decisions in and between the organization and its environment.