Complexity theory and organizations, also called complexity strategy or complex adaptive organizations, is the use of the study of complexity systems in the field of

strategic management In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of Resource management, resour ...

and organizational studies. It draws from research in the natural sciences that examines uncertainty and non-linearity. Complexity theory emphasizes interactions and the accompanying

feedback Feedback occurs when outputs of a system are routed back as inputs as part of a chain of cause-and-effect that forms a circuit or loop. The system can then be said to ''feed back'' into itself. The notion of cause-and-effect has to be handled ...

loops that constantly change systems. While it proposes that systems are unpredictable, they are also constrained by order-generating rules. Complexity theory has been used in the fields of

and organizational studies. Application areas include understanding how organizations or firms adapt to their environments and how they cope with conditions of uncertainty. Organizations have complex structures in that they are dynamic networks of interactions, and their relationships are not aggregations of the individual static entities. They are adaptive; in that, the individual and

collective behavior The expression collective behavior was first used by Franklin Henry Giddings and employed later by Robert Park and Ernest Burgess, Herbert Blumer, Ralph H. Turner and Lewis Killian, and Neil Smelser to refer to social processes and events w ...

mutate and self-organize corresponding to a change-initiating micro-event or collection of events.

Key concepts

Complex adaptive systems

Organizations can be treated as complex adaptive systems (CAS) as they exhibit fundamental CAS principles like self-organization,

complexity Complexity characterises the behaviour of a system or model whose components interaction, interact in multiple ways and follow local rules, leading to nonlinearity, randomness, collective dynamics, hierarchy, and emergence. The term is generall ...

emergence In philosophy, systems theory, science, and art, emergence occurs when an entity is observed to have properties its parts do not have on their own, properties or behaviors that emerge only when the parts interact in a wider whole. Emergence ...

, interdependence, space of possibilities, co-evolution, chaos, and self-similarity. CAS are contrasted with ordered and chaotic systems by the relationship that exists between the system and the agents which act within it. In an ordered system the level of constraint means that all agent behavior is limited to the rules of the system. In a chaotic system, the agents are unconstrained and susceptible to statistical and other analyses. In a CAS, the system and the agents co-evolve; the system lightly constrains agent behavior, but the agents modify the system by their interaction with it. This self-organizing nature is an important characteristic of CAS; and its ability to learn to adapt, differentiate it from other self-organizing systems. Organizational environments can be viewed as complex adaptive systems where

coevolution In biology, coevolution occurs when two or more species reciprocally affect each other's evolution through the process of natural selection. The term sometimes is used for two traits in the same species affecting each other's evolution, as well ...

generally occurs near the edge of chaos, and it should maintain a balance between flexibility and stability to avoid organizational failure. As a response to coping with turbulent environments; businesses bring out flexibility, creativity,

agility Agility or nimbleness is an ability to change the body's list of human positions, position quickly and requires the integration of isolated movement skills using a combination of balance (ability), balance, coordination (physiology), coordination ...

, and innovation near the edge of chaos; provided the organizational structure has sufficient decentralized, non-hierarchical network structures.

Implications for organizational management

CAS approaches to strategy seek to understand the nature of system constraints and agent interaction and generally takes an evolutionary or naturalistic approach to strategy. Some research integrates computer simulation and organizational studies.

Complexity theory and knowledge management

Complexity theory also relates to knowledge management (KM) and organizational learning (OL). "Complex systems are, by any other definition, learning organizations." Complexity Theory, KM, and OL are all complementary and co-dependent. “KM and OL each lack a theory of how cognition happens in human social systems – complexity theory offers this missing piece”.

Complexity theory and project management

Complexity theory is also being used to better understand new ways of doing project management, as traditional models have been found lacking to current challenges. This approaches advocates forming a "culture of trust" that "welcomes outsiders, embraces new ideas, and promotes cooperation."

Recommendations for managers

Complexity Theory implies approaches that focus on flatter, more flexible organizations, rather than top-down, command-and-control styles of management.

Additional examples

A typical example for an organization behaving as CAS is Wikipedia – collaborated and managed by a loosely organized management structure, composed of a complex mix of human–computer interactions. By managing behavior, and not only mere content, Wikipedia uses simple rules to produce a complex, evolving knowledge base which has largely replaced older sources in popular use. Other examples include the complex global macroeconomic network within a country or group of countries;

stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...

and complex web of cross-border holding companies; manufacturing businesses; and any human social group-based endeavor in a particular

ideology An ideology is a set of beliefs or philosophies attributed to a person or group of persons, especially those held for reasons that are not purely epistemic, in which "practical elements are as prominent as theoretical ones." Formerly applied pri ...

and social system such as

political parties A political party is an organization that coordinates candidates to compete in a particular country's elections. It is common for the members of a party to hold similar ideas about politics, and parties may promote specific ideological or pol ...

communities A community is a Level of analysis, social unit (a group of living things) with commonality such as place (geography), place, Norm (social), norms, religion, values, Convention (norm), customs, or Identity (social science), identity. Communiti ...

, geopolitical organizations, and terrorist networks of both hierarchical and leaderless nature. This new macro level state may create difficulty for an observer in explaining and describing the collective behavior in terms of its constituent parts, as a result of the complex dynamic networks of interactions, outlined earlier.

References

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Complexity Demystified: A Guide for Practitioners
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