Examining Management Theory Through Chaos Theory

Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and a PhD in Higher Education Administration.

Management includes planning, measuring, and controlling different resources. In this lesson, we'll see how some resources are easier to control than others - machine output vs. human resources, for example - and how chaos theory can help inform management.

Management Theory vs. Chaos Theory

Management theory and chaos theory are two seemingly competing theories. Any management theory has the objective of explaining how managers can best utilize and control resources, including raw materials, processes (i.e. assembly line or purchasing material) and people to accomplish organizational missions. Chaos theory, on the other hand, can be applied to many fields of study, including management, and suggests that even in predictable situations or processes, randomness is a primary determinant in the outcome.

Understanding both of these theories is important for the leaders of companies to understand. Should they invest high salaries in managers they believe to be effective, or will they be wasting their money because chaos will cause inefficiencies in production and organizational behavior that even the best leaders can't stop?

Disorder and Entropy in Organizations

To talk about these ideas in more detail, let's think of an example. We'll use a mid-size startup, GolfGear - a company that manufacturers golf accessories and sells them online as well as in some retail locations. GolfGear has about 100 employees total and the founder is still the CEO and primary owner.

As the CEO and founder, and because the business has grown so quickly, John has seen his company change a lot. But, as he looks down from his office to the production floor, and then down the hall to other offices - accounting, sales, and customer service - he feels like he doesn't have control of this company.

John feels like nothing that he has done with the company has been planned, but rather everything has been a reaction. When he didn't have time to keep track of the books anymore, he hired an accountant. Sales reached a high enough level that he had to break the country into regions and get each region a representative. Production is really just a reaction to what the sales people say they need.

The state of John's business right now is one that is pretty close to an idea from chaos theory called entropy. Entropy is a state of disorder. In science, entropy is the 'default' state of all matter. This means that without a proactive force to control matter, all things - down to the atomic level - would be in chaos.

If John's management style and situation were to be studied by external advisers, they would probably see John's business in a state of entropy. Product is made, sold, and priced - but not efficiently; rather, it's in a state of disorder that John's reactive approach to growth has caused. But John wants to be a manager, proactively determining his company's strategy, direction, and objectives.

Management Theories and Chaos

It may seem easy to avoid entropy in the business world; you simply need to manage proactively and closely monitor the processes and resources involved in your business. However, don't forget, this needs to happen with the resources (i.e. money) you have. Having one manager for every 2-3 people might help keep things under control, but that would be terribly expensive. But having one manager for 50 people would increase the chance that some of those 50 people would work at a sub-optimal level, leaving the organization in disorder.

John must ask himself the question: how can management theory help him fight off the factors contributing to chaos, or entropy? There is no shortage of management theories that address specific aspects of motivating employees. Starting with Maslow's hierarchy of needs, and moving through scientific management, total quality management, and then management by objectives, there have been numerous attempts to help managers find ways to manage the organization effectively.

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