An organization is a social unit which is created with a specific purpose. The systems approach recognizes that organizations have unique properties, capabilities and its components hold mutual relationships. A system may be either closed or open. A closed system does not have any interaction with the external environment. Modern organizations are more or less open systems.

An open system is in constant interaction with the environment. It is characterized by a continuing process of input, transformation, and output. The organizations get inputs from the environment and transform them into outputs which can be supplied to the environment.

The organization gets feedback from the environment and takes suitable steps to meet the challenges and expectations of the environment.

  • Inputs: Each system takes certain kinds of inputs from its environment. These may be in the form of Human Resource (HR), Capital, Technology, Material, and Information. The inputs received from the environment are processed within the organization to produce the desired output.

  • Outputs: Outputs may be both intended as well as unintended. Intended outputs are usually called objectives. For instance high productivity is an intended objective. An unintended objective may be informal relations among the group members. It may however, be stated that all unintended consequences are not undesirable.

  • Environment: An organization is called an open system because it is influenced by and also influences the environment. The suppliers of inputs, customers and many other organizations constitute the environment of a system. Through the process of feedback the system gets connected with the environment.

Thus, organizations do not exist in a vacuum. They are social institutions operating in the larger society of which they are a part. The organization and the individual both share a reciprocal relationship. For example, the nature of organizations and technology have all changed society. We are becoming used to modern amenities like computers, internet, mobile and other electrical appliances. Thus, modern technology has transformed the life style in many ways.

India has been primarily an agrarian society in the past, but with all the advancement it is moving toward an industrial mode of life. This shift has brought with it a change in the attitudes and values of the people. Competition and consumerism are becoming important in the context of growing market economy.