Chaos Theory of Management - Explained
What is Chaos Theory?
Written by J. Mance Gordon
Updated at April 22nd, 2024
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What is the Chaos Theory of Management?
Chaos theory is a scientific theory has been applied to management practice. It was first introduced in this context by Tom Peters in the 1980s. He stated that managers must be prepared for environmental and technological changes.
Chaos theory focuses on the unpredictability in occurrences and behaviors. It regards organizations/businesses as complex, dynamic, non-linear, co-creative and far-from-equilibrium systems. Their future performance cannot be predicted by past and present events and actions. In a state of chaos, organizations behave in ways which are simultaneously both unpredictable (chaotic) and patterned (orderly).
Naturally, systems gravitate toward complexity. As such, they become increasingly volatile and susceptible to the effects of chaos.
Also, organizations require increased energy and effort to maintain their systems and stability. The effect is that these systems will ultimately fail if not split or combined with other systems.
While the occurrence of the unpredictable cannot be controlled, randomness can be accounted for within mathematical formulas.
Peters asserts that rigid hierarchical structures ultimately harm the company's ability to react to this ever-present randomness. He mainly espoused the need for responsiveness to customers needs and wants through organizational change.
Steps in Chaos Theory
To control chaos, the system or process of chaos has to be controlled. To control a system, what is needed is:
- A target, objective or goal which the system should reach. For a system with predictable behavior (deterministic) this may be a particular state of the system.
- A system capable of reaching the target or goal.
- Some means of influencing the system behavior. These are the control inputs (decisions, decision rules, or initial states).
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