Collapsing Banks

Overview

The use of systems tools within an organization contributes to knowledge and understanding of the subject. Systems tools may be applied to just about everything. In the text systems structures, “can graph patterns of behavior overtime” (Anderson & Johnson, 1997).

The purpose of this paper is to apply systems tools to a simulated organization situation. In addition, a discussion of the value using casual loop diagrams, behavior overtime graphs, stretching timelines, and the importance that value of uncovering systems structures encounter.

Discussion

Simulated organization

Tools. In the case of the collapsing banks, the paragraph introduces the problem with bank failures. One problem that evolved focused on lost of trust within the bank systems (Anderson & Johnson, 1997). During this crisis, depositors began to withdraw funds. According to Anderson and Johnson, “the volume of these withdrawals threatened the solvency of the bank, and when bank funds fell too low, the bank failed” to refurbish (p.59). Moreover, this caused almost a chain reaction leading other banks to adapt the same trend due to nervousness. Over a period, a graph about the bank can be graphed to further explain the variables.

Casual loops

Within the bank case and virtual team, discussions there are variables that exist to problems called casual loops diagrams. Casual loops diagrams (CLD) are defined as, “one of the tools of systems thinking. Causal loop diagrams capture how variables in a system are interrelated. A CLD takes the form of a closed loop that depicts cause-and-effect linkages” over a system (Anderson & Johnson, 1997). These systems provide importance to better understanding organizations. For instance casual loops diagrams can be graphed over a period of time to show trends and behavior.

In the discussion about the failing banks, casual loop diagrams are used by formulating the problem, telling the story, choosing the key variables, and naming them precisely and graphing the key variables behavior over time (Anderson & Johnson, 1997). The importance of formulating the problem allows the company to focus on the issue and how it is seen. The telling of the story allows the company to talk about the concern and the reason behind the cause. The next step involves choosing your key variables and naming them precisely, allows one to pinpoint the main problems. In this particular case the significant variables that contributed to the case of the collapsing bank included bank failures, bank solvency, funds withdrawals and depositors’ confidence. All of these factors contributed to a problem within the case study. In addition, the last step allows one to graph the key variables’ behavior over time. In this case, the graph showed how the failure evolved over the years through decline.

Components. To understand the anatomy design of a casual loop diagram several components must be expressed. The CLD is primarily made up of two or more variables joined by links in the form of arrows (Anderson & Johnson, 1997). Within the realm exists a circle named the feedback loop. The feedback loop provides information about the occurring situation or problem. The relevance of this issue shows the links between variables and how they are interconnected. These links and variables contain signs to better inform the changes of the present environment. The variables that exist are either S’s or O’s. The sign S or O sand for the same direction change or opposite direction change. These variables are important since they affect one another. In some instances the systems signs are denoted by a + or – to alleviate difficulty.

Feedback Loops

Reinforcing. Reinforcing loops are unique since they compound change towards one direction (Anderson & Johnson, 1997). Placing the capital letter R inside the loop denotes reinforcing loops. These diagrams are used to show the cause and effect between the relationships and distinguish the difference between the reinforcing and balancing process. An example of a reinforcing loop is used in the text, which specifies the difference between positive and negative feedback from an employee. The positive feedback will enhance the employer’s performance, whereas the negative feedback can hinder or damage the performance. Another example of a reinforcing loop was displayed in the collapsing bank case. According to the graph and evidence presented, the bank solvency and depositors confidence continued on a downward spiral. For this cause withdrawal of funds increased over a period of two years. Ultimately, this trend is not positive for the bank and the reinforcing loop can be seen in growth or collapse. Another clear distinction includes the concept of compounding change in one direction. The example in the collapsing banks case compounds change as it moves in one direction.

Balancing. The balancing loop is an important since it acts as a stabilizer to the current situation that is involved. Placing the capital letter B inside the loop denotes balancing loops. Anderson and Johnson states, “balancing loops try to bring a system to a desired state and keep it there” (p. 56). For instance, in an inventory control system, adjusting the inventory when too much or too little is present contributes to the actions taken by a balancing system (Anderson & Johnson, 1997). In addition, the text states that reinforcing and balancing loops can combine to build blocks of complex behavior. An example is given about an employee that puts in long hours to impress their boss. Over a period of time this will cause the employee' to dwindle down or burn out. Ultimately allowing the employee to reach a plateau or decline in work performance. The best solution according to the text is to have a combination of reinforcing and balancing loops for healthy growth.

Behavior over time

Graphs. Another important factor includes drawing behavior over time graphs and sketching the timelines. In the case of the collapsing bank it was clearly seen the magnitude of impact present with this issue. The text states successful approaches to behavior over time graphs can be recorded by selecting a time horizon, sketching the graph and building theories about how the graph is variable are interrelated (Anderson & Johnson, 1997). An example of selecting a time horizon appears in the case for a period of two years. Once a time horizon has been selected, the key variables can be extracted from the situation in sketched on the graph. Then the hypotheses can be tested to gain valuable insight about the problem.

Value of uncovering systemic structures

The value of uncovering systemic structures correlates with the building of causal loop diagrams (Anderson & Johnson, 1997). A systemic structure provides value through the exploration of interrelationships, parts, location, time and test. These conditions add value to the situation by disclosing evidence. Although a good product, systemic structures can run into problems such as delays. Delays in a systemic structure can be viewed as neutral (neither good nor bad). Whether the delay turns into a problem or not depends solely on how it is handled. These actions can be measured, “by understanding the relationship between the length of time it takes to increase capacity and the delay between changes” (Anderson & Johnson, 1997).

Conclusion

Understanding the systems tools within an organization contributes to knowledge and understanding of the problem. In reference to the learning tools for the case study, reading and virtual teams, systemic learning provides insight. Interfacing on line and reviewing the cases resulted in understanding the existing problem. By using casual loop diagrams, behavior over time graphs, timelines and systemic structures, I was able to conclude the significance of the charts. As with the case of the collapsing banks, a problem was identified and dissected to find the root of the problem. The techniques used are impressive and will continue to add value to any organization with proper understanding.

Reference:

Anderson, V., & Johnson, L., (1997). Systems thinking basics: From concepts to causal loops. Pegasus communications. Waltham, MA