International Journal of Business and Social Science Vol. 2 No. 14 www.ijbssnet.

com

The Effect of Change on Management Planning: Applying Chaos Theory

Dean Frear, Ph.D.
The Jay S. Sidhu School of Business and Leadership
Wilkes University
84 West South Street, Wilkes Barre, PA 18766, USA.
E-mail: [email protected], Phone: 570-408-4715

Abstract
Chaos theory has been applied qualitatively to the planning process. This paper develops a set of equations
that help further define planning and chaos theory. A model is developed that illustrates the planning process
and changes in the planning process. For the purposes of this model, planning is viewed as a procedure that
occurs prior to implementation of the plan and is therefore discrete and not continuous.
Keywords: Planning, Decision-making, Chaos theory, planning process
Introduction
Chaos theory is usually related to scientific studies. Originating with the work of Einstein, Bohr, Poincare and
others and was brought to light by Lorenz in 1961 when running a computer program trying to help predict the
weather (Gleick, 1987; Thietart & Forgues, 1995). Lorenz had a computer set up, with a set of twelve
equations to model the weather. It did not predict the weather itself. However this computer program did
theoretically predict what the weather might be (Rae, 2004). In mathematics and physics, chaos theory
describes the behavior of certain nonlinear dynamical systems that under specific conditions exhibit dynamics
that are sensitive to initial conditions (popularly referred to as the butterfly effect). The butterfly effect is a
phrase that encapsulates the more technical notion of sensitive dependence on initial conditions in chaos
theory. Small variations of the initial condition of a nonlinear dynamical system may produce large variations
in the long-term behavior of the system (Gleick, 1987).
Linear systems are very predictable and measurable. This is because they are either unchanging or the system
is not affected by change. Business systems such as management planning have a need to be responsive. A
responsive system means that the plans must be by their very nature changeable. This type of changeability is
called “sensitivity dependence”. Sensitivity dependence occurs when “tiny differences in input could quickly
become overwhelming differences in output…the Butterfly Effect” (Gleick, 1987: 8). The Butterfly Effect is
classically defined as “the notion that a butterfly stirring the air in Peking can transform storm systems next
month in New York” (Gleick, 1987: 8). Levy, (1994) and Thietart & Forgues, state that it is only possible to
predict the effect of changes in the short term and that a small change “can lead to an entirely different
evolution” (1995: 23).
The purpose of this paper is to develop mathematical models that illustrate the processes associated with
planning. Further, a model is developed that illustrates changes in planning. Cartwright (1991) stated that
although the scientific theories surrounding chaos theory are very important for the outcomes of planning,
there has been little attention been paid to the two. Planning is the procedure managers use to “identify
objectives and to structure major tasks of the organization to accomplish them” (Gomez-Mejia, Balkin, &
Cardy, 2008: 184). Managers try to create stability in the planning process using long range planning
(Tetenbaum, 1998: 70). The problem that exists with long range planning is, according to Lorenz in 1960, the
further we get from today, the more inaccurate the prediction (Gleick, 1987). Much like a prediction, the
planning process hopes to be able to predict the steps necessary to complete the project.
Uncertainty is an inevitable aspect of most projects…unforeseen uncertainty can't be identified
during project planning… projects subject to unforeseen uncertainty start out with reasonably
stable assumptions and goals, projects subject to chaos do not. Even the basic structure of the
project plan is uncertain… Often the project ends up with final results that are completely
different from the project's original intent (De Meyer, Loch, & Pich, 2002: 62).
Chaos theory provides “planners insight on where, when, and how predictability and controls are possible.”
They ask whether the unpredictability found in “non-linear feedback” can be transformed into the kind of
behavior essential to certainty (Djavanshir & Khorramshahgol, 2006: 18). Changes in the organizational
environment can create change when planning. Systems that can create change include economic,
technological, sociocultural, demographic, and political. Other sources of instability include experimentation,
innovation and individual initiative (Thietart & Forgues, 1995). Managers must be able to transform the
feedback from these sources into useable information to aid in planning.
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The review of the literature indicated that almost all of the research dealing with chaos and management is
qualitative and that all of the research regarding chaos and planning is qualitative. This paper fills the gap
between research in qualitative and quantitative decision-making. The quantitative research reviewed attempts
to explain the decision-making process using stochastic modeling and does not try to develop a model to
illustrate planning or the affect of chaos in planning. Prior model development dealt with trying to forecast
outcomes using probability and verify predictability using statistics.
This paper develops a mathematical model that illustrates the processes associated with discrete planning. The
development of the model assumes that there are stages in planning prior to implementation. The model builds
on the idea that plans are developed in some sequence. As learning occurs, plans change. Decision makers are
adaptable and will change plans when needed. The first model illustrates a sequential decision process. Then,
building on the first model, the second model illustrates changes in planning. In the model, the planning
process is expressed as a linear model. When changes in information occur, changes in the formula occur.
This model adds to the literature by presenting a conceptual framework of how chaos affects the planning
process.
Mathematical Model
Assuming that planning happens in stages then each part of the planning process may be represented as a
separate item i.e., p1, p2, p3, ... and so forth. Each of the factors could then be assigned an amount of planning
time p1t or a value as to the importance of the factor p1v in the plan. Of course, this process style is
cumbersome. Therefore, the formula needs to be simplified in such a way as to first generalize the planning
process. Generalizing the planning process allows for application of the formula by multiple and diverse users
irrespective of the type of planning. After generalizing the process, substitutions are made which further
reveal extensions of the model.
In this model, planning occurs prior to implementation of the plan and is therefore discrete and not
continuous. Planning is not continuous because it is assumed to be completed prior to implementation. Once
the plan is underway, other breaks in continuity occur due to intermittent feedback. Intermittent feedback or
conditional information causes the manager to make changes and corrections at various times throughout the
process. Planning is identified symbolically with the letter P. Next, there is an adjustment for individual
process periods. The planning process is represented by the following general model:
n
Pt  f ( w
i 1
i Pi ) (1)

where: Pt is the planning process, wi is a weight for each individual process, and Pi is each individual part of
the planning process.
This simple formula then represents the entire planning phase that happens prior to any implementation of the
plan. The problem faced by most organizations is that the management plans may need to be altered in
response to certain environmental changes. These changes can be influenced by competition, alterations in
service or manufacturing processes and procedures, complications created by suppliers and so forth. While not
endless, the list of possible reasons for change is too numerous to mention in this paper. Given that most plans
change at some point for some reason, we need to explain this variability.
Next, the idea of sensitive dependence is used to help explain this variability. For theoretical purposes, a plan
is sensitive dependent when the outcome changes if a planning variable in the planning process changes. It is
assumed that most outcomes do change and adapt based on changes in planning variables. Each planning
decision is based on a certain set of conditions that pre-exist in the company. It is with this knowledge that the
manager makes plans for the completion of the company projects. The decision criteria, (d) are contingent on
current factors known about the business environment and specific to the firm. Each part of the planning
process is based on many small and some large decisions that help to design the overall plan. If one of the
decisions were changed, then this could start a chain reaction that would affect the entire process from the
change point. Accordingly, when one change occurs, this may cause a series of unforeseen changes to occur
(De Meyer, Loch, & Pich, 2002).
The individual planning process is a function of different decisions required for this process,
Pi  f E (d i I i ) (2)
Where, E(di|Ii) are the expected decisions conditional on information (Ii) available.
Then,
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International Journal of Business and Social Science Vol. 2 No. 14 www.ijbssnet.com
n
Pt  f [ w
i 1
i E ( Pi | I i )] (3)

And
n
Pt  f { w
i 1
i E [ f E (d i | I i )]} (4)

Changes in information cause the expected outcome to change. The manager expected A, but, B was the
outcome. This is the beginning of chaos in the total plan; the butterfly effect is in play. Small changes create
the need to make other changes and these changes may require other changes.
This is illustrated using the following assumptions:
n
Pt  f ( w
i 1
i Pi ) (1)

Next, managers receive new information that is a surprise. This news is different from previously expected
when the plans were made. Therefore, information (I) has to change in our equation and become I’ which
contains the new information. If I and I’ are the same, then no change in the planning process would occur.
Where, E(di|Ii) are the expected decisions conditional on information available and information has changed,
then changes in information cause changes in the individual decision.
E(di|Ii) → E(di|Ii ’) (5)

So,
Pi '  f E (d i I i ') (6)

Then,
n
Pt '  f [ wi E ( Pi ' | I i ')] (7)
i 1

And substituting then,

n
Pt '  f { wi E [ f E (d i ' | I i ' )]} (8)
i 1

Conclusion
n
This paper developed a mathematical model to illustrate planning as a discrete process i.e. Pt  f ( w
i 1
i Pi ) .

The early stages of the planning process may be shown as a linear process. Plans have a direction based on
predictable outcomes. Managers plan using available knowledge and resources. Company vision helps to
direct the goals of management. The first set of formulas attempted to explain the planning process. They
illustrated the planning process in mathematical terms. Chaos theory applied to planning is about unplanned
change brought about by unstable environmental factors. New information brings about nonlinear dynamical
change.
Unplanned change is created when previously unknown information is discovered. When this happens, the
new information replaces the old information and is used to revise the old plan into a new plan. The new plan
also alters the ability to predict adequately the new outcome in the long-term. If the outcome is predictable, it
may be very different from the originally desired outcome. The new plan is explained by a sequence of
changes in the formula. This change concept is illustrated by the second set of formulas numbered 5-8.
The formulas create a new paradigm for the discussion of planning. They illustrate mathematically the
changes in the decision-making process post-implementation. The author encourages other researchers to
develop practical applications using both the theory as well as the formulas. This might be accomplished using
higher-level mathematical substitutions. There was no attempt at substitution in this paper as a secondary
purpose of this paper was to lay the groundwork for such future work.

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