Chaos Theory of Management: Models, Benefits, and Criticisms

Introduction

The Chaos Theory of Management is a relatively new theory that has enjoyed considerable study but has also endured significant criticism. By examining the Rational Model, Ordinary Management, Extraordinary Management, and Chaos Management, one can identify differing views of the universe and the business world within it. Chaos Management, which is newer than the Rational Model and combines Ordinary and Extraordinary Management, is dynamic and creative. However, it remains a relatively young system that has yet to be validated by empirical data.

The Rational Model

The Rational Model is based on the assumptions that the universe is as predictable as clockwork machinery, that business organizations are equally predictable, and that good business management can obtain reliable outcomes from the organization (Rosenhead, 1998). According to this model, good business management consists of a Chief Executive Officer (CEO) heading a united team of management personnel, all of whom share a vision or strategy supported by a conventional culture. Furthermore, this management guides the organization to focus on core business and competencies, plays to its strengths, observes and adapts according to the market, and primarily concentrates on profit (Rosenhead, 1998). This model of good management also involves formulating goals, analyzing the business environment, formulating and evaluating strategies, implementing those strategies, and exercising strategic control over the organization (Rosenhead, 1998).

Ralph Stacey, along with many other theorists, challenges the assumption of a well-ordered universe underlying the Rational Model. According to Stacey, theorists have discovered the complexity and chaos — or creative disorder — of the universe, which undermines the Rational Model's orthodox notion of good management (Stacey, 2007). Ian Stewart's Does God Play Dice? The New Mathematics of Chaos illustrates that the complexity and creative disorder of the universe are observable in such mundane systems as weather, ecology, and fluid dynamics (Stewart, 2002, pp. 116, 175, 262). Given this universal complexity and creative disorder, an organization's analysis becomes less important, the determination of cause and effect becomes meaningless, the organization's vision becomes an illusion, agreement and common culture become dangerous, statistics become unreliable, and long-term planning becomes extremely difficult if not impossible (Stacey, 2007).

Ordinary and Extraordinary Management

Ordinary Management is focused on daily problem-solving to attain the organization's goals. Employing data analysis, options evaluation, definition and implementation of goals throughout the organizational hierarchy, rational choice, and performance evaluation, this management style is centered on control and based on a consensus of vision within the organization. According to Rosenhead, capable Ordinary Management is vital to cost-effective execution (Rosenhead, 1998). It should be noted that in Ordinary Management, rational choices are made based on certain assumptions.

In contrast, Extraordinary Management eschews rational decision-making because the assumptions upon which Ordinary Management relies are no longer dependable. As James Rowe summarizes Ralph Stacey's worldview, the world veers "from instability to instability or even chaos" (Rowe, 2008, p. 64). Extraordinary Management focuses on open-ended change and requires tacit knowledge and creativity through the use of informal structures. Those informal structures may include workshops, multidisciplinary teams, multi-unit teams, and multi-level teams. Ideally, these informal structures assemble spontaneously in response to unusual circumstances such as conflicts or anomalies arising in the course of ordinary management. Within these informal and spontaneously assembled teams, members draw on assumptions that are "analogical and intuitive" (Rosenhead, 1998), and decision-making becomes a political process in which members present arguments to persuade one another. The term extraordinary may be misleading, as some organizations necessarily operate under Extraordinary Management on a continuous basis due to rapid changes in the economy, the product, customers, and/or competition (Rowe, 2008, p. 63).

Conclusion

This paper explored different business management models. The Rational Model, the more traditional of these models, assumes that the universe is predictable, that business organizations are equally predictable, and that traditional business management can achieve predictable outcomes. The traditional business management team consists of a CEO and a united management team sharing a common vision and culture. The Rational Model moves in predictable ruts of focusing on profit, core business competencies, and perceived organizational strengths. It has been severely criticized for being obtuse to the fact that the universe and all its systems have been shown to be complex and chaotic. As critics argue, the complexity and creative disorder of the universe render the Rational Model, its elements, and its goals obsolete and/or unachievable.

Ordinary Management is the mundane and sometimes rationally based daily problem-solving activity of an organization. Based on control and a consensus of vision, Ordinary Management is deemed necessary for achieving an organization's goals. In sharp contrast, Extraordinary Management — notably propounded by Ralph Stacey — takes a far more freewheeling approach. In Stacey's worldview, the world moves from one unstable state to the next, with those unstable situations briefly interspersed with periods of stability. With this view in mind, Stacey advances the idea of focusing on open-ended change that requires tacit knowledge and creativity through informal structures. These informal structures — consisting of such activities and groups as workshops and eclectic teams — ideally form spontaneously in response to conflict or other anomalies arising in the course of usual management. Rather than viewing these conflicts and anomalies as bothersome disruptions, Extraordinary Management treats them as opportunities for creativity in which politically engaged team members think outside the box and present their arguments in efforts to persuade others.

Chaos Management, advanced by Parker and Stacey, essentially consists of a combination of Ordinary and Extraordinary Management. Since Parker and Stacey deem the interaction between these two modes the "key to strategic change," they welcome rapid business changes and organizations' creative responses to them. Charging senior management with the task of keeping informal, creative processes flowing, Parker and Stacey believe that rather than stolidly presiding over a rigid system, senior management must ensure a diverse organizational culture, promote intra-organizational politics, and promote a constantly adapting set of issues and goals. Consequently, rather than attempting to negate changes, senior management should play devil's advocate — acting as a catalyst for provoking conflict, upsetting equilibrium, turning small changes into large ones, and emphasizing the impacts of coincidental events. Senior management should also intervene rarely and only in exceptionally sensitive situations.

The importance of analysis in Chaos Management is debated among scholars. Stacey appears to believe that analysis and creativity are mutually exclusive, and consequently relegates analysis to minimal importance in organizational processes. Shallice disagrees, believing that some hybrid and complex situations necessarily involve both analysis and creativity in order to be effectively addressed. In very sharp contrast to Stacey's position, Poincaré deems analysis the very foundation of creative breakthroughs.

One challenge that Chaos Theory proponents must meet is convincing a traditionally reluctant management community to accept the theory as logical and beneficial. Stacey extensively explains the benefits of Chaos Theory, arguing that the chaotic combination of ordinary and extraordinary methods may enable an organization to adapt to — and even create — its environments; that contradiction as well as consistency can lead to success; that success may emerge from the processes of informal structures; and that the chaotic and creative process may result in revolutionary change. Clearly, Stacey views the chaotic business environment as far more beneficial than the traditional Rational Model.

Predictably, Chaos Management has received notable criticism. The sustained chaotic edge recommended by Stacey is considered by some theorists to be too dangerous and unnatural. There is also little empirical evidence beyond anecdote to show that the theory works. Furthermore, the parameters for studying its effects and the relationships between its component modes remain poorly defined. Finally, the sharp divide Stacey draws between organizational politics and rationality is considered unrealistic. In sum, while the Chaos Theory of Management propounded by Parker and Stacey is dynamic and creative, it remains a relatively young system that has yet to prove itself ultimately beneficial on the basis of empirical data.

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