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 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).

Ordinary and Extraordinary Management

Despite the fact that Ordinary Management and Extraordinary Management operate differently and necessarily engender a certain tension between them, both should exist in an effective organization (Rosenhead, 1998). Indeed, according to Parker and Stacey, the interaction between these two modes is the "key to strategic change" (Parker & Stacey, 2007, p. 70). This relatively new theory posits an open and complex framework in place of the traditionally "closed and simple systems" (Chatfield, 1997, p. 44). A capable organization must strike a dynamic balance between the two management models. Slavish adherence to Ordinary Management, which severely restricts the informal structures of Extraordinary Management, will hamper the organization's ability to operate creatively. Conversely, if Extraordinary Management is not sufficiently controlled, it will result in anarchy that prevents the organization from accomplishing daily tasks (Rosenhead, 1998). Fortunately, that dynamic and delicate balance means organizational members can trust that there are boundaries to the instability and that "a new order will arise" (Chatfield, 1997, p. 46).

The responsibility for attaining and maintaining this delicate balance belongs to senior management. In order to keep the creative process active, senior management must ensure a diverse organizational culture, promote intra-organizational politics, and promote a constantly adapting set of issues and goals (Rosenhead, 1998). To that end, senior management should intervene rarely and only at key points, understanding the probable outcomes of such intervention and resisting the temptation to force behavior into a preconceived path or pattern (Rosenhead, 1998). Senior management also plays the role of devil's advocate — provoking conflict, upsetting equilibrium, turning small changes into large ones, and emphasizing the impacts of coincidental events (Rosenhead, 1998).

Scholars disagree about the importance of analysis within this combined management method. Stacey draws a sharp distinction between rationality and creativity, believing the usefulness of analysis to be minimal (Stacey, 1992). In Stacey's estimation, senior management should provoke and facilitate dialogue rather than preside over elaborate analysis (Stacey, 1996). Shallice believes that certain unique situations involve complex thinking and a strong interplay between rationality and creativity (Shallice, 1996, p. 1410). Going even further than Shallice, Poincaré argues that exhaustive analysis can play an important foundational role in reaching a creative breakthrough (Poincaré, 1946).

Conclusion

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