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1. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Management and Chaos Theory
OBJECTIVES:
1. DESCRIBE THE BASIC FEATURES OF CHAOS THEORY
2. SPECIFY THE CHAOS THEORY IMPACT ON
MANAGEMENT

2. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Evolution of Management Thoughts
 CLASSICAL APPROACH
 HUMAN RELATIONS APPROACH
 BEHAVIORAL SCIENCE APPROACH
 OPERATION RESEARCH APPROACH
 SYSTEM APPROACH
 CONTINGENCY APPROACH
 EXCELLENT COMPANIES APPROACH
 RECENT TRENDS

3. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Approaches 1 – 7 (1)
 REPRESENT THE EVOLUTION OF MANAGEMENT
THOUGHT FROM THE END OF 19th CENTURY TILL THE
BEGINNING OF 90 ties
 THERE IS A SPECIFIC CONTRIBUTION OF EACH
APPROACH TO MANAGEMENT DEVELOPMENT

4. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Approaches 1 – 7 (2)
ON THE OTHER HAND – THERE ARE SEVERAL GENERAL
(COMMON) FEATURES OF EACH APPROACH
 THE ORGANIZATION AS A SYSTEM AND THE PROCESS OF
MANAGEMENT IS SEEN AS:
 DETERMINISTIC
 PREDICTABLE
 THEY REFLECT THE MECHANISTIC CONCEPT OF THE
UNIVERSE
 THE UNIVERSE = GIANT MECHANISM
 THE RELIABILITY OF THE MECHANISM IS DETERMINED BY THE
RELIABILITY OF ITS SINGLE PARTS
 THERE IS A RELATIONSHIP:
CAUSE EFFECT

5. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Approaches 1 – 7 (3)
 BOTH CLASSICAL NEWTON’S PHYSICS AND CLASSICAL
THEORIES OF MANAGEMENT ARE BASED ON THE SAME
MECHANISTIC CONCEPT OF THE UNIVERSE

6. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Management Implications (1)
 CLASSICAL APPROACH:
 HUMAN RELATIONS AND BEHAVIORAL SCIENCE
APPROACH:
MANAGEMENT
PRINCIPLES IMPLICATION
TAYLOR, FAYOL, WEBER
EFFECTIVE
FUNCTIONING
OF THE
ORGANIZATION
EMPLOYEE
MOTIVATION
EFFECTIVE
FUNCTIONING

7. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Management Implications (2)
 OPERATION RESEARCH APPROACH:
 SYSTEM APPROACH:
CRITICAL
PATH
EFFECTIVE ACCOMPLI-
SHMENT OF THE GOAL
INPUTS TRANSFORMATION OUTPUT

8. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Management Implications (3)
 CONTINGENCY APPROACH:
 EXCELLENT COMPANIES APPROACH:
ANALYSIS OF THE
CONTINGENCY
FACTORS IN THE
ENVIRONMENT
EFFECTIVE
FUNCTIONING
OF THE
ORGANIZATION
MANAGERIAL
IMPLICATION
OF EIGHT
PRINCIPLES
EFFECTIVE
FUNCTIONING
OF THE
ORGANIZATION

9. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
The Result of Mechanistic Concept
 CLASSICAL MECHANISTIC MODEL OF THE
ORGANIZATION (THE „OLD“ MODEL)
 TYPICAL FEATURES:
 SPECIALIZATION
 HIERARCHY
 CENTRALIZATION, ETC.
TOP MANAGEMENT
MIDDLE MANAGEMENT
FIRST-LINE MANAGEMENT

10. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Mechanistic Concept
 ADVANTAGES:
 RELATIVELY RELIABLE CONTROL
 CLEAR DELEGATION OF AUTHORITY
 SPECIALIZED (SKILLED) WORKFORCE, etc.
 DISADVANTAGES:
 LOW FLEXIBILTY
 THE ORGANIZATION IS „TOO FAR“ FROM THE
CUSTOMER
 THE ORGANIZATION IS LESS COMPETITIVE IN THE
COMPETITIVE ENVIRONMENT

11. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Recent Trends
 CLASSICAL PHYSICS HAS BEEN ELIMINATED BY THEORY
OF RELATIVITY AND QUANT MECHANICS
 CLASSICAL PRINCIPLE OF DETERMINISTIC
PREDICTABILITY HAS BEEN ELIMINATED BY CHAOS
THEORY
 CHAOS THEORY DEALS WITH THE NON-LINEAR
SYSTEMS (non-linear behavior)
 ORGANIZATIONS AS INSTITUTIONS ARE TYPICAL NON-
LINEAR SYSTEMS
 THE REASON: PEOPLE IN THE ORGANIZATION
 RESULT: CHAOS IS NOT A SYNONYM OF INSTABILITY

12. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Chaos Theory
ACCORDING TO CHAOS THEORY THERE ARE:
1. PASSIVE CHAOS = EQUILIBRIUM = MAXIMAL
ENTROPY
2. ACTIVE CHAOS = SYSTEM IS „FAR FROM THE
EQUILIBRIUM“

13. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Laws of Thermodynamics
 ENTROPY = THE TERM THAT COMES FROM PHYSICS
(THERMODYNAMICS)
 THE FIRST LAW OF THERMODYNAMICS SAYS:
MASS AND ENERGY IN THE UNIVERSE ARE CONSTANT
(Mass and energy cannot be „made“, produced or
destroyed. They can be only changed for another
form)
 THE SECOND LAW OF THERMODYNAMICS SAYS:
MASS AND ENERGY CAN BE CHANGED ONLY IN ONE
WAY (EX: FROM USABLE TO NON-USABLE)
MAX. ENTROPY = DISORDER = ALL THE ENERGY HAS
BEEN CHANGED FOR NON-USABLE

14. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Chaos Theory
 CHAOS THEORY DEALS WITH THE ACTIVE CHAOS
RESULT:
 SYSTEMS ARE NOT NECESSARILY HEADING TO THE
EQUILIBRIUM
 IN THE STAGE WHEN THE SYSTEM IS FAR FROM THE
EQUILIBRIUM THE NEW SYSTEM SPRINGS UP
 CHAOTIC SYSTEM THAT IS FAR FROM THE
EQUILIBRIUM – THE NEW SYSTEM – REACHES A
HIGHER LEVEL OF ORDER
ORDER OUT OF CHAOS

15. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Managerial Implication
HERE IS
YOUR
LIMIT
G
R
O
W
T
H
TIME

16. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
Managerial Implication
TIME
G
R
O
W
T
H

17. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
TAYLOR’S LEGACY
Principles of Scientific Management
1. SPECIALIZE ALL JOBS AND TASKS, REDUCING WORK
TO ITS SMALLEST AND SIMPLEST ELEMENTS;
2. ESTABLISH PRECISE POLICIES AND PROCEDURES SO
THAT WORK IS PERFORMED IN THE SAME WAY EVERY
TIME. CLOSELY MONITOR WORKERS TO ENSURE
COMPLIANCE;
3. CONTAIN AND COMPARTMENTALIZE ALL
RESPONSIBILITY, DECISION-MAKING, DISCRETION,
AND POWER EXCLUSIVELY WITH THOSE IN
AUTHORITY;
4. ENSURE THAT EACH WORKER IS WELL-MATCHED TO
THE SPECIFIC PRE-DETERMINED REQUIREMENTS OF
THE FUNCTION ASSIGNED.

18. © J. Rudy, Organizational Behavior, FMCU, Fall 2007
TAYLOR’S LEGACY
Principles of Scientific Management
5. ELIMINATE ALL DUPLICATION OF EFFORT, REQUIRING
THAT TASKS ARE
PERFORMED EXCLUSIVELY BY THOSE TO WHOM THEY ARE ASSIGNED.
A CHILLING PROPHECY
“WE ARE GOING TO WIN AND THE INDUSTRIAL WEST IS GOING TO
LOSE. THERE IS NOT MUCH YOU CAN DO ABOUT IT BECAUSE THE
REASONS FOR YOUR FAILURE ARE WITHIN YOURSELVES. YOUR
FIRMS ARE BUILT ON THE TAYLOR MODEL. EVEN WORSE, SO ARE
YOUR HEADS”.
Konosuke Matsushita, Founder
Matsushita Electric, Ltd.