Throughout Beer’s written work on management, this kind of meeting is always emphasised: unstructured, informal connections between staff at different levels and performing different functions. Some of the ephemera — particularly his emphasis on the importance of having adequate supplies of cigars and whisky to facilitate the conversation — might seem comically dated, but the idea of ensuring that there are links across the organisation to spread information and build consensus is entirely modern.

Beer was trying to adapt hierarchical systems so they were fit for their purpose in a changing world. He saw a strict command-and-control approach as dangerously inflexible, while excessive delegation would destroy the organisation’s ability to act as a coherent system. The fundamental relationship between management units in the kind of structures Stafford Beer designed was a ‘resource bargain’. A unit would be allowed to operate autonomously, but only to the extent that doing so did not jeopardise the broader system, whether in terms of a financial budget, physical resources of space, managerial time and bandwidth or general goodwill.

Coordinating the activities of a group of different System I operations is the first real management function in Stafford Beer’s model, and it’s called System 3 — optimization or integration. This part of the system directs the management of each individual operation in order to coordinate their activities towards a particular purpose.

System 3 is where you start to find *management jobs — those that are entirely devoted to communication and administration within the organisation. It’s also where system-level accountability is established; the key activity of the integration and optimization function is to agree the resource bargains with the System I units, and to ensure that they are being kept. And consequently, it’s the first place you might start to look if you think that unaccountability is creeping into the system. We’ll be looking at this a lot, later.

It’s easy to get confused between systems 2 and 3. Both of them look like they’re doing the same thing, in making the operations accountable to one another and to the wider organisation. The difference is that System 2 is all about preventing clashes and managing conflicts, while System 3 is concerned with achieving a purpose. On the ground, a useful way of drawing the distinction is to look at the management functions which everyone agrees to be necessary as opposed to those that they complain about.

*Stafford Beer refers to the part of the system responsible for internal organisation as the ‘metasystem’, one of very, very many newly coined jargon words which I am going to attempt to shield you from.

If the System 3 middle management tries to fight the variety generated by the System I operations single-handed, it’s going to be overwhelmed. System 3 is a central coordinating function without the resources to handle that volume of information. Everyone who’s worked in a dysfunctional organisation will recognise this as ‘micromanagement’ and will be familiar with the ways in which it breaks down. The environmental variety coming in from the suppliers and customers doesn’t get handled at the right level because System I employees aren’t allowed to make decisions. Meanwhile, the coordination, communication, integration and planning functions are neglected because System 3 is spending all its time trying to do someone else’s job. Middle management becomes bloated and overstaffed as it tries to add variety to itself, while the operations are miserable because of constant interference from people who don’t really understand what they do.

On the other hand, the central functions can be neglected by taking the opposite approach — that of excessive delegation. If everything is left to the operating-level management, there is no coordination of the resource bargains and no planning. With no adequate System 3 function, the operating units have no means to resolve their conflicts other than through internal politics, with resources allocated by grabbing and hoarding them. Nobody talks to anyone else, and the System I level becomes bloated with ‘operational’ managers who spend all their time treading on each other’s toes and fighting turf wars.

The overlapping of different systems — and the tendency of individuals to have different roles at different levels of abstraction — is a key part of Beer’s theory, and one of the main reasons why his diagrams got so complicated. He claims that every ‘viable system’ needs to have all five of the functions described so far in order to be capable of long-term survival, but that every such system can also be seen as System I within a larger system. Similarly, since we defined System I as part of an organisation that could in principle be a viable separate organisation, the internal management of System I needs to have its own equivalents to systems 2, 3, 4, and 5; it needs internal regulation, optimisation and intelligence, and a balancing, identity-preserving function of its own.

Often, when you’re trying to diagnose why a system is failing, you need to consider both the larger system in which it’s embedded and the organisation within its operations. A great source of management problems, for example, is that organisations often fail to identify some of their operations as distinct systems, and so they lack their own internal ‘higher functions’. A division of this sort will generally be a ‘problem child’; unable to absorb its own environmental variability, it will bounce from crisis to crisis, taking up disproportionate time and effort on the part of the middle managers to which it has been assigned.