Capitalistic Firms as Cognitive Intelligent and Explorative Agents. The Beer’s VSM and Mella’s Most Views

Piero MELLA, Patrizia GAZZOLA

Abstract


In this paper we propose a general model to understand (not merely describe) the operating logic of Business Value-Creating Organizations and, in particular of the capitalistic firm - that is, the business for-profit organization. When viewed as autopoietic and teleological organizations, firms can be interpreted both as viable systems (following Beer’s Viable System Model, or VSM) and as operating systems for efficient transformation (following Mella’s MOEST, or Model of the Organization as an Efficient System of Transformation). Beer believes that organizations must be viewed as viable systems, which, through their structure, which is capable of learning and cognition, can achieve an enduring structural coupling with the environment, continuing in this way to exist for a long time through continually adapting to the environment. Mella asserts that organizations must be conceived of as transformation systems that carry out five parallel transformations: (1) a productive transformation of factors into production; this is a transformation of utility, governed by productivity and by quality; (2) an economic transformation of costs and revenues into operating income; this is a transformation of value, governed by prices and therefore by the market; (3) a financial transformation of risks, which transforms capital into returns and guarantees the maintenance of its financial integrity; (4) an entrepreneurial transformation of information into strategies, which leads to a continual readjustment of the firm's strategic position; (5) a managerial (organizational) transformation of strategies into actions of management control. The MOEST proposes a system of performance indices and measures and highlights the mutual relationships among these indexes. Based on VSM and MOEST, we will try to demonstrate that, just as individuals in a Social System are responsible for their own actions and behavior with respect to the other individuals in the system, Organizations, as vital entities that make up the Social System, must also necessarily be held accountable for the economic and non-economic consequences of their actions. The complex “thinking-action” interaction leads the organization to behave as a cognitive entity, as a vital unitary system, that must be held “socially responsible” for its own actions, as these are produced, in turn, by its own decisions. This results in the necessity and inevitability of CSR.Specifically, the MOEST shows that the action of every BVCO assumes a Corporate Governance that specifies stakeholder objectives and environmental constraints, in this way defining the various levels of CSR. The CSR thus represents a fundamental variable in the strategy of BVCOs, as corporate ethics and reputation is based on this. For this reason we have enlarged the original structure of the Kaplan & Norton’s Balanced Scorecard (BSC) by including in the model of four scorecards a fifth scorecard that measures the firm’s capacity to create well-being for the collectivity and demonstrate the firm’s social utility by indicating its capacity to achieve social and environmental objectives.

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