What can chaos theory teach us about management and governance? A lot, as it turns out. Decentralization and self-organization in business, tech, and government are trends we often laud, and have even claimed that they will help societies avoid catastrophes by "collapsing upwards". But how does it work in practice, and how does it compare to traditional hierarchy in getting things done?
In a nutshell, decentralizing is a way to be as big as a dinosaur and as nimble as a cat at the same time. Consider a swarm of bees: it can effectively be an animal twenty feet wide, a hundred feet long, with a thousand eyes and sophisticated complex behavior--bigger and smarter than most dinosaurs--but it can turn on a dime (in several directions at once, no less!) and is unburdened by the metabolic overhead of a single huge body. Also because of its distributed nature, and the multiple redundancy of its many separate bodies, it is much harder to kill. Activists with cell phones have learned this lesson; some corporations are beginning to learn it as well. Giants such as BP and Toyota have flattened the hierarchies in their management structures to become more innovative and nimble while remaining large companies, and it is proving effective.
Both academic and practical research has been done on changing management structures to be less hierarchical and more flexible. The ICoSS Project at the London School of Economics studies how complexity theory (also known as chaos theory or systems theory) can change organizational and management structure. The New England Complex Systems Institute, who have said "the inability of conventional hierarchical control and the need to understand distributed control, self-organization and networks is increasingly apparent", have a book and even teach a course on the subject. Perhaps most widely known is the Society for Organizational Learning, founded by Peter Senge; his book The Fifth Discipline is a classic explication of systems-thinking for management.
More recently, The Economist mentioned a book (more of a pamphlet, really) that has been put out by Gerard Fairtlough, former CEO of Shell Chemicals UK and founder of biotech firm Celltech. Fairtlough's book, called The Three Ways of Getting Things Done, is a great intro for those looking to dip their toes into the water, and describes traditional hierarchy plus two proven-viable alternatives: "heterarchy" and "responsible autonomy". Heterarchical systems share power--for example, a board that votes to decide issues, or different branches of government that have checks and balances through separation and overlap of power. Responsible autonomy is purer self-organization--i.e. it has no inherent structure. It distinguishes itself from anarchy by holding decision-makers responsible for the outcomes of their decisions.
Even organizations with rigidly hierarchical governance-structures can do a lot to flatten their informal channels of communication and influence (which all management theory admits are as important--sometimes even more important--than an organization's formal structures.) For instance, the Society for Organizational Learning and other groups often recommend institutionalizing After-Action Reviews in companies. After-Action Reviews were first used by the US Army in the 1970's and spread to the business world in the 1990's; they encourage feedback up and down levels of hierarchy by creating temporary hierarchy-free times when criticisms and suggestions can be aired by everyone involved in a project. They are credited as being a useful tool in transforming top-down authoritative culture into both-ways collaborative culture, even when official management structures remain the same. This is especially useful because changing a company's culture is often one of the hardest things to do, especially in giant hide-bound firms.
Another example of alternative corporate structures is the co-op. A long-time favorite of labor justice activists, the co-op structure makes all workers owners, and usually requires corporate governance to be a democratic system rather than an autocratic system. Most co-ops flounder not because it is a bad structure, but because the personalities most likely to create a co-op are generally the least likely to be business-savvy. Some co-ops have been huge successes, perhaps most notably The Co-Operative Group in the UK. It runs a bank, over a thousand grocery & convenience stores, insurance, internet service, a travel agency, and many other businesses; it has been described by The Guardian as "Britain's biggest funeral business and its largest commercial farming operation".
Do you have examples of large successful non-hierarchical businesses (or large businesses that are becoming more competitive by flattening their hierarchies)? We'd love to hear about them.
