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The Viable System Model as a Framework for
Understanding Organizations
by
Raúl Espejo and Antonia Gill
Introducing the Model
The Viable System Model (VSM) is not a new idea. Created by Stafford Beer over twenty
years ago, it has been used extensively as a conceptual tool for understanding
organizations, redesigning them (where appropriate) and supporting the management of
change. Despite its successful application within numerous private and public sector
organizations, however, the VSM is not yet widely known among the general management
population. There are two main reasons for this. Firstly, the ideas behind the model are not
intuitively easy to grasp; secondly, they run counter to the great legacy of thinking about
organizations dating from the Industrial Revolution - a legacy that is only now starting to be
questioned.
To deal with the second point in more detail, organizations have been viewed traditionally
as hierarchical institutions that operate according to a top-down command structure:
strategic plans are formulated at the top and implemented by a cascade of instructions
through the tiered ranks. It is now widely acknowledged that this modus operandi is too
slow and inflexible to cope with the increasing rate of change and complexity surrounding
most organizations.
Technology developments have helped to usher in a new concept of a flatter, networked-
type organization with a wider distribution of data to reach all those who actually perform
the work - in real time. The ground is now fertile for viewing the organization in a new light.
However, there is also much confusion about the nature of this new-style organization. Ask
the members of any large organization to explain its structure to an outsider and a series of
confused, confusing and often conflicting interpretations are is likely to result. It is
becoming increasingly apparent that it matters much less who reports to whom, as who
needs to talk with whom and how all the pieces of a complex interrelated jigsaw fit together
to form a synergistic whole. Yet it is precisely this sense of the whole that is so often
missing.
A clear danger with these looser structures is that overall cohesion and synergy may be lost
in the attempt to spawn a multitude of business units and profit centres capable of
responding to different market pressures and organizational support requirements.
Knowledge and information then often become trapped in local networks reducing the
chances of people .working in co-operation with others across organizational boundaries.
People working in different parts of the enterprise are simply unaware of related issues and
activities which ought to concern them because the organization has lost its connecting
tissue.
The Viable System Model offers a way of gaining both functional decentralisation and
cohesion of the whole. It is underpinned by fundamental cybernetic principles of
communication and control in complex organizations. These principles offer a way of
providing true autonomy and empowerment within an integrated framework, together with
the necessary supporting links between the individual parts. In short, the VSM provides a
framework for designing flexible, adaptable organizations that balance external and internal
perspectives and long and short-term thinking.
Organizations as Recursive Systems
The idea of complexity is fundamental to cybernetic thinking. Put simply, we are all
surrounded by a far greater complexity than we can deal with by a one-to-one response.
We cannot possibly ‘see’ all the varied intricacies, that others ‘see’, of our situation, but can
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only hope that by correctly recognising salient features and patterns (often through
instinct), we can respond adequately to remain ‘in balance’ with those in our everyday
surroundings.
Similarly, organizations have far less inner complexity than their environments: there is a
natural imbalance that needs to be recognised and addressed through various leverage
strategies that the organization employs to bring this complexity within its response range.
And again, a management team or organizational steering group has far less complexity
than the organization itself: it too must find ways of understanding the organization without
knowing all the details seen by others.
A second key concept to understand, closely related to complexity, is that of recursivity.
This concept is about the architecture of complex organizations and is based on the premise
that all living systems are composed of a series of sub-systems, each having self-organizing
and self-regulatory characteristics. The sub-systems each contain further sub-systems, and
so on, right down to the level of the single cell.
These systems, at whatever level they occur, are by definition autonomous. They contain
within them the capacity to adapt to change in their environment and to deal with the
complexity that is relevant for them. Picture a Russian doll, only one that contains twins,
triplets, perhaps even sextuplets at every level; this will give an idea of how powerfully
complexity is simultaneously generated and absorbed at every level through this unfolding
process.
In the same way, we can unfold an organization from the most global to the most local
level. With the increasing pace of change and the scale of complexity facing most
organizations, the choice is becoming clear: devolve power, by supporting this natural
unfolding process, or face extinction.
Unfortunately, in their rush to ‘delayer’ and rid themselves of costly bureaucratic controls,
many organizations are currently charting their course to oblivion through other means:
instead of creating recursive structures that provide long-term viability, they are blindly
axing units without considering their actual and potential contribution to the viability of the
whole. Without a framework to examine the functioning of the organization as a complete,
living system, many cost-cutting exercises achieve one-off savings at the expense of longer
term organizational effectiveness.
Recursive structures, then, are both efficient generators and absorbers of complexity and
highly adaptive to change. They function in this way precisely because they consist of a
devolving series of primary activities (those responsible for producing the goods or services
of the organization) supported by sufficient regulatory and communication functions to
enable them to operate effectively at every level.
Elementary cells, at the level of the shop-floor in a manufacturing environment for example,
are thus effectively subsumed within larger primary (autonomous) activities. Each primary
activity, from the level of the elementary cell to the total organization, has its own value
chain, that is, its own inbound and outbound logistics and related (support) services. This
architecture of complexity - the recursive structure - enhances the operational complexity of
the organization and makes it more cohesive.
Once this point has been grasped, together with the principles for viability set out below,
organization redesign efforts and communication/information infrastructures can be directed
towards achieving viability for the organization at least cost - financially, materially and in
people terms.
The Five Essential Functions for Viability
An autonomous unit (or viable system) needs to have five key systems in place if it is to
operate effectively in its environment. These are: Implementation, Co-ordination, Control,
Intelligence and Policy. We set out below a description of the nature and purpose of each of
these different systemic functions.
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First, however, a word of precaution. Our discussion is particularly concerned to highlight
the management design principles behind these systems. We are necessarily concerned
here with ‘soft’ issues of management - with relationships between people and groups of
people. It is entirely misleading to attempt to use the model mechanistically: it is above all
a thinking framework which helps people to share a common language and model of their
organization to manage more effectively its complexity and aid debate and adjustment. Its
effective use requires a common understanding of the philosophy and relational
management approach behind the model. Therefore, the language we use is noticeably
different from that traditionally used by either business experts or information systems
professionals - although the model itself (which is shown at the end of this section) looks
anything but ‘soft’ in appearance! Our message is this: "there is rigour in this softness", so
please bear this in mind as we present the model’s features.
1 Implementation
Primary activities, those responsible for producing the products or services implied by the
organization’s identity, are at the core of the recursive model. The organization’s products
and services are produced at different levels of aggregation by its embedded primary
activities and the value chain of the organization as a whole implements its overall purpose.
We generally stop unfolding the structure at the point where a small team of people is
responsible for a complete work task (eg a manufacturing cell). Although in theory an
individual person is also a viable system, we are dealing with a model of organization or co-
operative work between individuals.
Therefore, we would expect to see most viable systems, at whatever structural level they
occur, containing further sub-systems as a way to help them handle the complexity of their
environments. These sub-systems are responsible for carrying out the value-adding tasks of
the system-in-focus.
2 Co-ordination
A viable system also has systems in place to co-ordinate the interfaces of its value-adding
functions and the operations of its primary sub-units. In other words, co-ordination is
necessary between the value-adding functions as well as between the embedded primary
activities. ‘Co-ordination’ is unfortunately all too often used as a substitute term for top-
down direction and control in today’s management vocabulary - as if by changing the term
used, the autocratic manager’s actions will somehow become more palatable. The sense in
which we wish to use the term is ‘co-ordination by mutual adjustment’ between support
functions and between autonomous units. This is an area where IT systems can be
extremely helpful in avoiding more direct and intrusive human intervention - provided they
are designed with the correct principles in mind.
The essence of workflow or business process redesign is to pay careful attention to this
requirement for co-ordination between value-adding and support functions through the
design of effective two way communications and mechanisms for mutual adjustment. In
particular, primary sub-units sharing the same ‘parent’ unit need to operate synergistically:
because of the way they are derived through the modelling process, they are logically
connected in terms of their operations and often, also, in terms of the external markets they
serve. It makes no sense to set them up in direct competition with one another, or to have
them operate blind to each other.
The more teams can share common standards, approaches and values, the greater the
chances that spontaneous lateral communication will occur, resulting in less ‘re-invention of
the wheel’ and more chance of synergy. The stronger these lateral links, which are of both a
technological and human nature, the less the requirement for management to attempt to
impose control from above and the greater the sense of autonomy and empowerment
experienced by the subsumed primary activities.
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3 Control
Although effective use of the communication channel can considerably lessen the
requirement for supervisory control, two-way communication between sub-unit and meta-
level unit remains a prerequisite for viability. This is the channel through which resources
are negotiated, direct line management instructions are issued (on an exception-only basis)
and accountability reports flow upwards to keep the meta-level management in touch with
events.
One way of reducing the use of direct commands is by designing good ‘exception reporting’
systems. ‘Management by objectives’ also plays its part in preventing too much direct
interference by management in the running of operations.
However, another important channel is used as an adjunct to direct control: the monitoring
channel. The control function needs an assurance that the accountability reports it receives
are indeed an accurate reflection of the status of primary activities. Often the information
provided in accountability reports tends to reflect personal biases and other natural
communication problems. There is thus a need to corroborate this information with an
alternative source. This is achieved by developing a monitoring channel that runs directly
between the meta-level management and the operations of the sub units, by-passing the
sub units’ management.
At a simplistic level, this is the ‘management by walking about’ principle. To be effective in
terms of organizational viability, however, this monitoring must adhere to certain design
rules. It must be sporadic, rather than a regular, anticipated occurrence. It must be
infrequent, otherwise it risks undermining the authority and trust vested in the
management of the sub unit. It must be an openly declared mechanism, of which everyone
concerned is aware: the intention is not to play ‘big brother’, employing secretive tactics
and games of subterfuge; it is simply to demonstrate an interest in knowing what is going
on at first hand. If employed sensitively, cross-checks and audits should communicate a
message of caring to those involved in the operations in question, without resulting in
defensive behaviours from the intermediate level of management. Lastly, the monitoring
channel should only link two adjacent levels of recursion: misusing it to conduct lower level
investigations from on high corrupts the integrity of the system, is unworkable at a practical
level because of the complexity involved and implies a complete breakdown of trust through
a significant cross-section of the organization.
4 Intelligence
The Intelligence function is the two-way link between the primary activity (ie.Viable
System) and its external environment. Intelligence is fundamental to adaptivity; firstly, it
provides the primary activity with continuous feedback on marketplace conditions,
technology changes and all external factors that are likely to be relevant to it in the future;
secondly, it projects the identity and message of the organization into its environment.
These loops must operate in balance, to avoid either overloading the system with a swamp
of external research data without the capacity to interpret and act on that data; or the
alternative risk of communicating outwards in a strong fashion, without having a
corresponding means to listen for feedback from the marketplace.
The intelligence function is strongly future focused. It is concerned with planning the way
ahead in the light of external environmental changes and internal organizational capabilities
so that the organization can invent its own future (as opposed to being controlled by the
environment). To ensure that its plans are well grounded in an accurate appreciation of the
current organizational context, the intelligence function also needs to have at its disposal an
up to date model of the organization.
5 Policy
The last function, giving closure to the system as a whole, is the policy-making function.
This function is by definition low-variety (in comparison with the complexity of the rest of
the organizational unit and the even larger complexity of the surrounding environment); it
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therefore needs to be highly selective in the information it receives. This selectivity is
largely achieved through the activities and interactions of the Intelligence and Control
functions.
The main roles of Policy are to provide clarity about the overall direction, values and
purpose of the organizational unit; and to design, at the highest level, the conditions for
organizational effectiveness. The decisions that the Policy function makes are few and far
between and constitute, in the main, a final sanity check against direction, values and
purpose after extensive debates and decisions have been carried out within and between
the Intelligence and Control functions.
One of the key conditions for organizational effectiveness relates to how the Intelligence
and Control functions are organized and interconnected. Intelligence and Control offer
complementary perspectives on the definition, adjustment and implementation of the
organizational unit’s identity. Each needs to be given weight in the policy-making process;
decisions over-influenced by either of the two filters are likely to be both costly and
ineffective. They also need to be highly interconnected, so that most of the emerging
Intelligence and Control issues can be cross-checked with reference to the other filter before
reaching the attention of the Policy function. This has important implications for designing
multi-function workgroups that do real work together and reach critical decisions after
careful debate and a sharing of perspectives. Only by designing these processes with
reference to a good model of how the organization works can the Policy function effectively
discharge its mandate.
The VSM in Summary
Below we illustrate the model in full through two levels of recursion.
the Viable System Model
Clearly, the five functions reinvent themselves at each level, giving the whole structure a
strength and integrity that comes from having well formed and well interconnected parts.
Each line (or channel) in the model is of course two way - a communication loop that needs
Envt
A
Envt
B
Envt
C
implementation
co-ordination
?
Intelligence
Control
Policy
Intelligence
Control
Intelligence
Control
Policy
Intelligence
Control
Policy
Policy
C
u
s
t
o
m
e
r
s
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to be designed and managed with the idea of complexity management in mind (filtration
from the high variety side, amplification from the low variety side, in order to manage the
complexity differential inherent in most relationships).
The VSM and the language of managerial cybernetics that underpins it are useful tools in
helping organizational members to take a systemic view of their communication processes.
A shared understanding of the organization as an integrated whole is a powerful platform
for various kinds of change. The modelling tools define an underlying structure for
communications in support of viability, whilst providing a valuable template for both
structural organizational design and the mapping of strategic IT architecture.
Being recursive in nature, the VSM has the advantage of being flexible and robust - both
prerequisites in fast-changing environments. It is flexible since new strategic business units
can easily be inserted into a particular level of recursion without having to make dramatic
changes to the surrounding structures. It is robust in having a long term focus that is rooted
in the very identity of the organization; therefore, integrated structures that are based on
the VSM evolve over time as the organization stays continuously in tune with its
environment and operational needs, rather than being victims of radical, discontinuous
change.
For example, many organizations tend to oscillate violently between centralised and
decentralised forms of control, reacting to different perceived pressures at different times.
This kind of oscillation can be costly, wasteful and ultimately damaging to longer term
effectiveness, as structures, systems and human relationships are thrown out of the window
with every ‘restructuring’ announcement.
The VSM, by contrast, provides the ability to respect the relational and recursive nature of
the organization, to nurture it into a healthy balance both internally and externally, making
it intrinsically adaptable to change. The process of reinvention then becomes a continuous,
spontaneous dynamic of the organization, rather than something that is imposed
discontinuously from some external source.
References
S. Beer, Diagnosing the System for Organizations, Wiley, Chichester (1985)
R. Espejo and R. Harnden, The Viable Systems Model - Interpretations and Applications of
Stafford Beer’s VSM, Wiley, Chichester (1989)
