The open system recognizes the dynamic interaction of system with its environment. A simplified graphic representation of the open system appears in Figure 1-1
No student of organizations could build much of a defense for viewing organizations as closed systems. Organizations obtain their raw materials and human resources from the environment. They further depend on clients and customers in the environment to absorb their output. Banks take in deposits, convert these deposits into loans and other investments, and use the resulting profits to maintain themselves, to grow, and to pay dividends and taxes. The bank system, therefore, interacts actively with its environment, which is made up of people with savings to invest, other people in need of loans, potential employees looking for work, regulatory agencies, and the like.