System design for performance control and deregulation: ‘Steersmanship’ in the new environment

Abstract

This paper uses the ‘steersmanship’ paradigm to analyze firms ' strategic policy responses to deregulatory forces of the mid-1970s and 1980s. Relevant concepts from a system-design-for-performance-control (SDPC) model are applied to the deregulation phenomenon, using examples drawn primarily from the U.S. airline industry. The SDPC model indicates that a firm facing the move from regulation to deregulation will shorten its planning horizon, trim its management staff, neglect its long-term safety efforts, redirect its short-term marketing focus from service to price, loosen its labor contracts, and expand its diversification strategy. To insure survival, a delicate balance will have to be maintained. As derived from Ashby 's law of requisite variety and Simon's concept of bounded rationality, survival depends upon the environment 's variety being exceeded (or equalled) by the firm's variety, which, in turn, must be exceeded (or equalled) by management's decision-making/information -handling capacity.