1. Management and Chaos Theory
OBJECTIVES:
DESCRIBE THE BASIC FEATURES OF CHAOS THEORY
SPECIFY THE CHAOS THEORY IMPACT ON MANAGEMENT

2. 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. 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. 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. 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. 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. Management Implications (2)
OPERATION RESEARCH APPROACH:
SYSTEM APPROACH:
CRITICAL PATH
EFFECTIVE ACCOMPLI-SHMENT OF THE GOAL
INPUTS
TRANSFORMATION
OUTPUT

8. 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. 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. Mechanistic Concept ADVANTAGES: DISADVANTAGES:
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. 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. Chaos Theory ACCORDING TO CHAOS THEORY THERE ARE:
PASSIVE CHAOS = EQUILIBRIUM = MAXIMAL ENTROPY
ACTIVE CHAOS = SYSTEM IS „FAR FROM THE EQUILIBRIUM“

13. 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. 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. Managerial Implication
GROWTH
HERE IS YOUR
LIMIT
TIME

16. Managerial Implication
GROWTH
TIME

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

18. TAYLOR’S LEGACY Principles of Scientific Management
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.