Complexity Theory and Strategic Change: an Empirically Informed Critique

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Complexity Theory and Strategic Change: anEmpirically Informed Critique*

ARTICLE in BRITISH JOURNAL OF MANAGEMENT · FEBRUARY 2005

Impact Factor: 1.52 · DOI: 10.1111/j.1467-8551.2005.00427.x

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Donald MacleanUniversity of Glasgow

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Complexity Theory and Strategic Change:an Empirically Informed Critique*

K. Houchin and D. MacLeanw

Curriculum Leader, Faculty of Business and Computing, Stevenson College Edinburgh, Bankhead Avenue,

Edinburgh, EH11 4DE and wSenior Lecturer, Department of Business and Management, University of

Glasgow, West Quadrangle, Gilbert Scott Building, University Avenue, Glasgow G12 8QQ, UK

Email: [email protected] [Houchin]; [email protected] [MacLean]

We present a four-year ethnographic study of a public-sector organization and usenarrative to describe its development in terms of four complexity theory concepts:sensitivity to initial conditions, negative and positive feedback processes, disequilibriumand emergent order. Our study indicates that order emerges at the boundary between

the organization’s legitimate and shadow systems. We suggest that the underlyingdynamic leading to the emergent order is the need to reduce anxiety. Our findings causeus to question the assertion that organizations are naturally complex adaptive systemsproducing novel forms of order. We propose an alternate view that in social systems,equilibrium-seeking behaviour is the norm; such systems can self-organize intohierarchy. We draw attention to some of the difficulties we found in applyingcomplexity-theory concepts to a social system and conclude by advocating thedevelopment of complexity theory through the incorporation of insights frompsychology and social theory.

Introduction

This paper uses complexity theory to help ourunderstanding of the development of specificorganizational characteristics in a newly formed

quango. In the last decade or so complexity

theory has been advocated as a way to help

understand organizational change and innova-

tion. Much of the literature promotes the theory

(Anderson, 1999; Colado, 1995; Stacey, 1995).

Organizational examples of how it is applied in

practice are not so frequent (Brown and Eisen-hardt, 1997; Pascale, 1999; Shaw, 1997; Stacey,

2000). This article helps to fill that gap by

describing how key concepts of complexitytheory can be used to explain how order develops

in an organization. To contain the research within

manageable proportions, we limited our study to

four complexity-theory concepts: sensitivity toinitial conditions, negative and positive feedback

processes, disequilibrium and emergent order.

We have seen the development of different

approaches to complexity theory; however, these

four concepts are common to them all. The

research tells a story, the development of

AYTAG, a new regulatory quango, during its first

four years, and the order that emerged in it. One

of the authors worked in a key change-agent role

to bring about the unification of a diverse group

of people into a fully functioning organization.

She gained deep insights into the actions of seniormanagers and staff as the organization developed

its identity through the emergence of patterns of

behaviour, which took the AYTAG away from

the order it originally set out to establish.

In this paper we offer the suggestion that

organizations can be considered complex recursive

systems rather than complex adaptive systems.

*The authors are grateful to Dr MacIntosh and DrMayer of the Department of Business and Management,University of Glasgow, and to two anonymous re-viewers for their helpful comments on an earlier versionof this article.

British Journal of Management, Vol. 16, 149–166 (2005)

DOI: 10.1111/j.1467-8551.2005.00427.x

r 2005 British Academy of Management

https://www.researchgate.net/publication/227672990_The_Science_of_Complexity_An_Alternative_Perspective_for_Strategic_Change_Processes?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/227672990_The_Science_of_Complexity_An_Alternative_Perspective_for_Strategic_Change_Processes?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/234827493_Complexity_Theory_and_Organization_Science?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==


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We highlight the circularity of complexity-theory

concepts when applied to human social systems.

We follow the lead of Stacey (2000) and argue

that when applied to human social systems,

complexity theory has to be informed by psy-

chology and social theory.

Theoretical approaches to strategy

The study of strategy is multifaceted. There are

strongly differing opinions on most key issues.

The word is generally used in different ways,

suggesting that implicitly we accept various

definitions, even though formally we tend to

quote only one. In order to compare and contrast

the many different perspectives, it is useful to use

a structured framework. Mintzberg, Ahlstrand

and Lampel (1998) and de Wit and Meyer (1998)both offer structured ways of looking at strategy

formulation and implementation. Whittington

(1993) gives us a useful model. He describes four

conceptions of strategy: classical, evolutionary,

processual and systemic, to help us distinguish

different strategic approaches. Tensions exist in

the literature, for example between strategy

content and process, strategies deliberate (An-

drews, 1987; Ansoff, 1984; Porter, 1980) or

emergent (Mintzberg, 1988), internally ‘driven’(e.g. the resourced-based view of the firm, core

competencies) and externally ‘driven’ (e.g. Por-ter’s five forces). There are calls for a more

dynamic view of strategy, which are essentially

seeking the reintegration strategy content and

strategy process; both strategic decision-taking

and strategy processes are emergent phenomena

(MacIntosh and MacLean, 1999).Whittington, Pettigrew and Thomas (2002)

have indicated that strategy research has to move

away from its modernist heritage and become

more creative, whilst Prahalad and Hamel (1994)

recognize that the strategy field needs a new

paradigm to break from the limitations of existing mindsets. Complexity theory may be

the theory to do this, reconciling the essential

unpredictability of industries and organizations

with the emergence of distinctive patterns (Levy,

1994). It offers the prospect of an holistic

framework that pulls together into a coherent

whole literature, covering a number of views of

strategy, some of which do not currently com-

mand much attention from strategy researchers

(Stacey, 1995). Many of the ideas which complex-

ity theory brings are not new. It is a reframing

that is provoking a second look at many of the

ideologically rooted management ideas and sees

them emerge from the theoretical foundations of

complexity (Anderson, 1999).

Complexity theory and the concept of emergent order

The study of non-linear dynamics has led to the

development of theories such as chaos and

complexity. These are now being applied to the

study of organizations. The terms chaos, com-

plexity, complex adaptive systems and complex-

ity science are increasingly found in the strategy

and organizational development and change

literatures. In this article we focus on one of these, complexity theory, developed from the work

of Prigogine and Stengers (1984). It has been

applied to social systems and offered as a dynamic

systems approach to the study of strategy (Parker

and Stacey, 1994; Stacey, 1991; Tsoukas, 1998).

Complexity theory deals with the nature of

emergence, innovation, learning and adaption

(Battram, 1998). It has developed along an

interdisciplinary path, taking insights and inputs

from mathematics, biology, computing and eco-nomics (McKergow, 1998). It can offer valuable

insights into management and strategic issues (seee.g. Brown and Eisenhardt, 1997; Cilliers, 1998;

MacIntosh and MacLean, 1999; Stacey, 2000).

Different interpretations of the theory are

offered (see e.g. Anderson, 1999; Brown and

Eisenhardt, 1997; Smith and Gemmell, 1991;

Stacey, 1995) suggesting that it is not a coherentbody of work underpinned by a robust theore-

tical framework. Complexity theory concepts

have been used to create a metaphorical language

for describing organizational change and devel-

opment (Lissack, 1997). Two interpretations have

emerged that share the common theme of emergent order, but differ in their basic assump-

tions about how order emerges. They can be

described as the rules-based and connectionist

approaches (Cilliers, 1998).

The rules-based approach has its roots in

artificial intelligence, abstract mathematical mod-

els and in linguistic concepts such as deep

structure. Self-organization leading to the emer-

gence of order is effected through the repeated

150 K. Houchin and D. MacLean

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application of simple rules. Connectionist ap-

proaches to complexity have neural networks of

interconnecting nodes as their basis, and are

supported by more interdisciplinary groups

comprising neuroscientists, psychologists and

engineers. The networks have no central control

in the classical sense. Processing is distributedover the network and the roles of the various

components change dynamically (Cilliers, 1998).

Change and transformation are dependent on the

capacity of the network to learn by changing the

nature and number of the nodes in the network,

the pattern of connections between them and the

strength of these connections (Wood, 1999).

Applying complexity theory to strategicorganizational development

Although there are different complexity theory

interpretations, a number of common concepts

are observable. These include the concepts we are

using in this study: sensitivity to initial condi-

tions, the presence of disequilibrium and feed-

back processes, all of which interact to produce

novel forms of order. These concepts form the

theoretical basis for our study.

Complexity theorists see organizations as

complex adaptive systems. They argue that oneof the major insights the theory brings to strategy

theory is that an organization can be viewed as anon-equilibrium system (Parker and Stacey,

1994). According to complexity theorists such

as Stacey (1996) the concept of the organization

moving from one stable state to another as a

result of change is flawed. Rather, complex

adaptive systems are non-linear and highlysensitive to initial conditions. The activities,

events, routines, behaviours and human interac-

tions existing in an organization at a specific

point in time form the initial conditions for the

emergence of future order. Some of these will be

amplified through feedback and others dissipatedthrough the system. Non-linearity can result in an

initial condition having a disproportionate effect

on an emergent outcome of the system as a

whole. Apparently insignificant transactions

within organizations can lead to large organiza-

tional changes (MacIntosh and MacLean, 1999).

Complexity theory is a departure from the

more traditional approaches to strategy, which

downplay the unpredictability of the long-term

evolution of organizations. Unplanned action is

inevitable and not necessarily a result of ignor-

ance or incompetence. Complexity theory makes

it difficult to avoid confronting the fundamentally

paradoxical nature of management, in which

managers must employ a rational loop within a

shared mental process when they are close tocertainty, and use other processes that generate

instability if they are to bring about organiza-

tional transformation.

Strategy theorists commonly use negative feed-

back models, in that action is informed by the

perceived need to ‘close the gap’ between desired

and actual behaviour. Action tends to be

‘corrective’ and/or in accordance with a prior

‘designed’ order. Such models, for example

Porter’s (1980) industry structure and value-chain

analysis, promote the continuation of regularity

and stability that are equated with success.Complex adaptive systems, in contrast, self organize. Self-organization is the natural result

of non-linear interaction, not of any tendency of

individual agents to prefer or seek out order.

Such systems are driven by positive and negative

feedback processes that are found in the different

organizational systems. The formal rules and

planning systems making up the legitimate

organizational system govern day-to-day organi-zational behaviour. They use negative feedback

processes, allowing the organization to carry out

these activities in a rational and stable mannerand push it towards equilibrium. The informal

system (Schein, 1992) or ‘organizational shadow

system’ (Egan, 1994) is where positive feedback is

seen to operate, which takes the organization

away from its desired state. There are interactions

in the shadow system where no one is ‘in control’,

but patterns of controlled behaviour appear, lead-

ing to emergent order that profoundly influences

the actual evolution of the organization.

Complexity theory limitations

Applying complexity theory to strategy and

organizational development is not without its

problems. The variety of definitions, the doubts

expressed as to whether it is a theory, theories or

a framework and the different meanings given to

the terminology associated with complexity are

all problematic (Morel and Ramanujam, 1999).

Complexity theory has developed out of the

Complexity Theory and Strategic Change 151

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study of physical systems. It is being applied to

social systems in keeping with the tendency of the

social sciences to follow the physical sciences.

Gersick (1991) has shown us how understanding

similar theories from different research domains

can suggest thoughtful insight for others. Others

ask if it is reasonable to apply theories that havetheir origins in the natural and biological sciences

to social organizations, without necessarily tak-

ing into account fundamental differences between

the physical and social sciences (Chia, 1998;

Goldstein, 2000; Reason and Goodwin, 1999).

Complexity theory concepts have been developed

by studying systems such as insect colonies,

chemical phase transitions and physiological

systems, in which the distinctive nature of the

human being is not an issue. The temptation is to

take findings from these systems and apply them

directly to human systems. Gemmill and Smith(1985) for example, use the human immunesystem as an example of a dissipative structure,

and then offer dissipative structures as a model

for organizational transformation. Beinhocker

(1999) states that, as both biological evolution

and business evolution are complex adaptive

systems, we can employ tools that help us

understand biological evolution to help us under-

stand the evolution of business strategy.Many of the results cited in the complexity

literature are the outputs of computer simula-

tions and not firmly grounded in empiricalobservations (Goldstein, 2000; Rosenhead,

1998). McKelvey (1997, 1999) argues that we

need a systematic agenda linking theory devel-

opment with computational-model development

and the testing of model structures with real-

world structures. It is difficult to see how such

models can account for the intricacies of human

behaviour that include the role played by

emotion, the options humans have to interpret

and adjust or break rules, and the fact that

humans belong to many systems which may or

may not have easily defined boundaries. Our bestuse of complexity theory for understanding

organization development may be as a metaphor

giving us new insights, rather than trying to

search for common principles across a variety of

very different systems (Morgan, 1997; Tsoukas

and Hatch, 2001). However, even that has to be

treated with caution; given differences between

human beings and, say, phase transitions in

physio-chemical systems, metaphorically derived

assertions about the natural fluidity of organiza-

tions have to be exposed to empirical scrutiny if

they are to be made the basis of an alternative

conception of organization and management.

The fact relatively few academically robust

empirical organizational studies are reported in

the literature is a concern for us. Case studiesundertaken by Brown and Eisenhardt (1997) and

MacIntosh and MacLean (1999) are examples of

trying to move complexity theory onto a practical

footing, but both are relatively short-term stu-

dies. Neither explored in sufficient detail such

issues as the effects of different social settings on

the firms they were studying. Stacey (1996), Shaw

(1997), Griffin, Shaw and Stacey (1998) and Seel

(2000), give examples of consultancy assignments

where they have applied complexity-theory con-

cepts to organizational-change initiatives. They

describe work that they did to create situations toincrease connectivity and positive feedback sothat novel forms of order could emerge. They do

not say how effective their interventions were

over the longer term. Relatively new and

insufficiently tested theory is advocated as a

sound approach to strategic change. According

to McKelvey (1999) ‘without a programme of

experimental testing complexity applications . . .

will remain metaphorical and if made the basis of consulting agendas . . . are difficult to distin-

guish from witchcraft’ (p. 21).

A major motivator for this paper is to increasethe empirical examples of the application of

complexity theory to strategic organization de-

velopment. Our study is of a complete organiza-

tion over a four-year period, allowing much more

opportunity to explore emergent order. Of

critical importance to this paper is human

reaction to change, such as the desire to avoid

anxiety, and the impact this has on human

behaviour. During the research process, Author

One was a contemporaneous participant in the

development process rather than a researcher or

consultant dipping in and out of the organiza-tion. This allowed us to access psychological

attributes such as defence routines, which require

close observation over a long period in order to

be identified and surfaced. As a result, our

conclusions differ considerably from authors of

previous empirical studies in the assumptions

they make about the application of complexity

theory to social systems. Our research has

allowed us to highlight the shortcomings in


https://www.researchgate.net/publication/239666269_Revolutionary_Change_Theories_A_Multilevel_Exploration_of_the_Punctuated_Equilibrium_Model?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/228683214_Complexity_Theory_in_Organization_Science_Seizing_the_Promise_of_Becoming_the_Fad_Emergence_Vol_1_No_1_pp_5-32?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/228683214_Complexity_Theory_in_Organization_Science_Seizing_the_Promise_of_Becoming_the_Fad_Emergence_Vol_1_No_1_pp_5-32?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/239666269_Revolutionary_Change_Theories_A_Multilevel_Exploration_of_the_Punctuated_Equilibrium_Model?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==


6/19

using some of the complexity theory concepts, as

well as to question the ease with which a theory

developed from physical systems can translate

readily to the social world of human systems.

The organization studied and thepurpose of the research

AYTAG is a quango and its business is environ-

mental regulation. Formed in 1996, it combined

River Purification Boards (RPBs), industrial-

pollution inspectors employed by central govern-

ment and some environmental-health functions

from local authorities. Author One joined

AYTAG a month after its formation as training

and development manager. In the reports pro-

duced about how the new organization should be

structured, in the first corporate plan and instatements the corporate management team made

to staff, there were clear indications of the future

order that the organization wanted to achieve.

AYTAG set out to be an organization with:

(1) wide spans of control;

(2) an emphasis on employee flexibility;

(3) empowered managers, delegation to its low-

est point;

(4) an emphasis on value for money;

(5) a strong centre to knit the business together

out of the organization’s predecessors;

(6) a reputation as an influencer in environmen-

tal matters as well as a regulator.

The authors’ interest in complexity theory and

the organizational situation offered the opportu-

nity for case-study research. The purpose of the

research was to study the organization through

the concepts of complexity theory identified

earlier, to gain insight into the order that emerged

in AYTAG and why it was similar to, or different

from, what was initially desired. The research

would allow us to take a view on the usefulness of

complexity theory to our understanding of strategic organizational development.

The research methodology

We have highlighted the fact that complexity

theory is relatively untested in social systems.

Parkhe (1993) argues that the development of

theory should follow a research route which

begins with exploratory research. A suitable

starting point is a single case study (Brown and

Eisenhardt, 1997; Eisenhardt, 1989; Parkhe,

1993; Yin, 1993). Tsoukas and Hatch (2001)

suggest that a narrative approach indicates and

supports the logic of complexity theory. The

dominant frame of reference for research inmanagement and strategy is quantitative. This

informs the goals and methodologies of research-

ers. From a complexity-theory perspective

reductionist approaches to researching organiza-

tions are likely to produce misleading conclu-

sions. Stacey (2000) deals with this issue by

arguing for a reflexive methodological position to

seek out the patterns of behaviour that lead to

emergent self-organizing processes. Such a posi-

tion is consistent with complexity theory, with

insights regarding the research coming from the

broad principles of the theory itself.As an employee of AYTAG, Author One was

not able to stand outside the organization as an

objective observer. This made it almost impossible

to use a positivist or post-positivist methodology.

Observations would be unavoidably observer-

dependent (Weick, 1979). According to East-

erby–Smith, Thorpe and Lowe (1991) the role of

the researcher as an employee is appropriate when

the researcher needs to become totally immersed,and experience the work or situation first-hand, as

sometimes it is the only way to gain the kinds of

insights sought. The authors took an ethnogra-phical approach. Such an approach favours local,

historically contextualized social inquiry and is

sensitive to the qualities of emergent phenomena.

There were elements of participant inquiry, as

Author One was a participant in the development

of AYTAG. Deep insights were gained as Author

One had an official role in a legitimate control

system while simultaneously participating in the

shadow system. Theory developed from deep

insights gained from working in both systems is

more accurate and more appropriately tentative

because the researcher must take into account theintricacies and qualities of the particular context

(Pettigrew, 1997).

The research process

Data gathering covered a four-year period from

May 1995 to August 1999. For information

about the setting up of AYTAG in the year prior


https://www.researchgate.net/publication/271776326_Messy_Research_Methodological_Predispositions_and_Theory_Development_in_International_Joint_Ventures?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/228864629_Complex_Thinking_Complex_Practice_The_Case_for_a_Narrative_Approach_to_Organizational_Complexity?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/234725802_Organizing_and_The_Social_Psychology_of_Organizing?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/227421954_What_Is_Processual_Analysis?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/228864629_Complex_Thinking_Complex_Practice_The_Case_for_a_Narrative_Approach_to_Organizational_Complexity?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/271776326_Messy_Research_Methodological_Predispositions_and_Theory_Development_in_International_Joint_Ventures?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/234725802_Organizing_and_The_Social_Psychology_of_Organizing?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/227421954_What_Is_Processual_Analysis?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==


7/19

to its becoming operational in April 1996,

historical data were collected. The remaining

data were collected as they were produced. Data

collection was a real-time activity from May 1996

to August 1999. The majority of the staff in

AYTAG were professionals who used research

information on a regular basis. This meant thatthere was a great deal of easily available explicit

information, which made secondary-data collec-

tion straightforward. The authors’ interest in

complexity theory ensured that both tacit and

explicit data were collected (Stacey, 2000; Seel,

2000). The main method of data collection was

participant observation. This allowed the authors

to examine situations first-hand from partici-

pants’ points of view and observe what people

actually did, rather than reporting what people

said they had done. Author One kept a personal

diary. She had access to operational, policy andadministrative staff at all levels of the organiza-tion through her work activities. During the four

years, informal conversational interviews were

conducted with all of AYTAG’s managers

(approximately 150) and semi-structured inter-

views were conducted with three members of the

corporate management team.

During the course of the research a great deal

of data were gathered. Hand-collected data suchas interview notes and the personal diary were

transcribed. All the data including corporate

plans, emails, management-team reports, work-shop outputs and transcribed, hand-written data,

were put in date order.

Once the data were in date order, mind

mapping (Buzan, 1991) and process mapping

(Langley, 1999) were used to group the data

around individual themes. As a result of this

exercise the dominant themes were:

the Business of AYTAG;

the initial structure and recruitment of man-

agers and staff;

the Budget crisis and subsequent restructuring; business planning in AYTAG;

the Science Reviews;

human-resource initiatives;

development of environmental strategies.

Each of these was written up as a narrative

account telling a chronological story of what

happened in AYTAG. The narrative accounts

were then used to map events and actions against

the key concepts of complexity theory – sensitiv-

ity to initial conditions, disequilibrium, feedback

and emergent order. There was continuous

checking back and forth between the original

data and the narrative accounts. In the following

sections is a discussion of the findings, ordered in

reference to the key concepts of complexity theory.

Complexity theory is relatively new; theresearch path is less well-defined, so it may be

perceived as high risk and overly subjective, with

knowledge produced that is not necessarily

generalizable. Throughout the data collection

and analysis, validity procedures were used to

minimize bias. These included a variety of data

sources, exposing findings to others for comment

(Yin, 1993) and maintaining a continuing aware-

ness of the collusive processes that can occur –

particularly when a researcher is also an employ-

ee (Gilmore and Krantz, 1985). These procedures

diminish some of the distortions which can occurin qualitative research. The perspective fromwhich the research conclusions are derived can

then be communicated more clearly.

The development of AYTAG

When AYTAG was formed there was a strong

vision for the organization contained in itsstrategic objectives and mission statement. To-

gether they expressed the new state which the

organization wanted to reach. Its complex initialconditions influenced the way in which it moved

forward. So many of its staff came into the

organization over a very short period of time –

not having worked together before and with so few

policies and procedures to guide them. Once

AYTAG became operational, disequilibrium-creat-

ing actions occurred, positive and negative feed-

back processes operated which altogether produced

the actual future state of the organization in

August 1999 when this research ended. This process

is described in diagrammatic form in Figure 1.

Initial conditions in AYTAG

AYTAG was a public body established by a

government that favoured the centralization of

services. It took over services previously provided

by public-sector organizations that were more

directly accountable to the local community. Its

formation was disliked and opposed by locally


https://www.researchgate.net/publication/239563835_Application_of_Case_Study_Research?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/240276181_Projective_Identification_in_the_Consulting_Relationship_Exploring_the_Unconscious_Dimensions_of_a_Client_System?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/239563835_Application_of_Case_Study_Research?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==https://www.researchgate.net/publication/240276181_Projective_Identification_in_the_Consulting_Relationship_Exploring_the_Unconscious_Dimensions_of_a_Client_System?el=1_x_8&enrichId=rgreq-58bfde67-811f-452a-9a06-3f94fd6bb724&enrichSource=Y292ZXJQYWdlOzIyOTY0MTkyMTtBUzoxMzE5NzkyODY2ODM2NTNAMTQwODQ3NzcyMjk5Ng==


8/19

elected representatives. AYTAG was required to

operate within a framework set by central govern-

ment for managing its business. Initiatives suchas ‘efficiency scrutinies’ and ‘key performance

indicators’ had to be implemented.

All the members of AYTAG’s Main Boardwere appointed by the Secretary of State. A chief

executive, a former civil servant was appointed in

August 1995 and ‘a lean structure with wide

spans of control’ was decided in September

1995. Five directorates were formed. Two,

Corporate Services and Environmental Strategy,

were based at the head office. The other three

were regional operational directorates. The five

directors, the senior and the middle managers,

had all worked in predecessor organizations.

With the exception of head-office staff, most

employees had worked in former River Purifica-tion Board offices.

The day-to-day operational business of AY-

TAG was carried out in the three Regions, in

science laboratories or in multidisciplinary envir-

onment-protection teams. Corporate Services

contained the support functions; finance, person-

nel, management services, information technol-

ogy and public affairs. The Environmental

Strategy Directorate developed policy in relation

to environment protection, sponsored research

and promoted the non-legislative aspects of

environment protection.Over 500 employees came from 63 different

predecessor bodies and around 150 were directly

recruited. AYTAG’s transferred employees re-tained their terms and conditions and rates of

pay. The RPB staff had worked in small

organizations with relatively undifferentiated

structures. Local-authority staff came from orga-

nizations larger than AYTAG with clearly

defined central-support departments. These for-

mer organizations were hierarchically structured

and paternalistic in their cultures. The nature of

their regulatory work was reflected in an aversion

to risk and a dependence on rules and proce-

dures. On transferring into AYTAG, many

managers found themselves managing interdisci-plinary teams and much more was demanded of

them. Multi-skilled teams of professional envir-

onmental-protection officers were seen as critical

to the development of a ‘one-door approach’ to

which AYTAG expected to move, as well as

efficient and effective use of staff resources.

To facilitate the integration of employees,

‘Introduction Workshops’ were delivered in

1996 and attended by every employee. The

Figure 1. The emergence of order



9/19

workshop facilitator commented in his report in

October 1996 that although staff were enthusias-

tic and committed to making AYTAG successful,

their public-service background did not prepare

them well for the changes they were going

through, nor for the relatively unstructured work

environment that was currently in place. Acomment by an environment-protection team

leader continues this theme: ‘we feel like the rump

of a benign dictatorship after the dictator had been

got rid of. Floundering, unable to take decisions’.

The nature of AYTAG’s work meant that it

employed a very high proportion of graduates

who, in their previous organizations, had jea-

lously guarded their professional expertise. The

front-line professionals coming into AYTAG,

and the managers that led it, were inexperienced

in organizational mergers and their aftermath. In

1996 there was enthusiasm for environment-protection work throughout the organization. Itwas this enthusiasm that held the organization

together in its early life.

Disequilibrium conditions in AYTAG

When looking at disequilibrium in AYTAG we

identified six themes – which might be seen as

facets (or drivers) of fluidity or instability. Theirrange meant that every employee was affected in

some way during the period of the research. Thefirst of these was the implementation of large-

scale staff-development programmes such as the

Introduction Programme, multi-skilling training

for environment-protection staff and a manage-

ment development programme for all managers.

The second theme was the high level of recruitment activity. There were several reasons

for this: an initial shortage of professional staff,

internal moves as individuals changed jobs to

increase their salaries, new regulatory duties

coming to AYTAG that increased its overall

numbers and high levels of temporary appoint-ments in administrative positions. Implementa-

tion of human-resource management initiatives

was the third theme. Following on from organiza-

tion-wide job evaluation and pay and grading

exercises, new job descriptions, pay structures and

terms and conditions were all introduced in

October 1998. An appraisal and development

scheme was implemented from March 1997. The

first attempt to develop this into a performance-

related pay scheme in 1998 was rejected by over

80% of employees. A revised scheme was imple-

mented without union agreement in March 1999.

Senior management change was the fourth

theme. One director, two senior environment-

protection managers and a regional scientist left.

These departures were used as opportunities forrestructuring, primarily affecting environment-

protection teams and corporate support staff.

During the research period for example, the

personnel department had four directors and the

finance department three.

The 1997 Budget crisis was the fifth theme. In

March 1997, AYTAG recognized that it was

unable to meet its tax bill and would be

considerably in debt at the end of its first

financial year. Discussions on funding continued

until August when additional money was secured

from central government. The budget crisis led tothe demise of the Corporate Services Directorate.At their meeting on 23 July 1997, the Corporate

Management Team agreed that the three Regio-

nal Directors and the Environmental Strategy

Director would have the responsibilities of

Corporate Services distributed between them,

except for finance. Part of the central-government

agreement for giving additional funding was the

recruitment of a finance director.While gathering data for this research we

became aware of a mismatch between what was

formally stated as wanted and what actuallyhappened. This formed our sixth theme. A diary

extract from 27.6.97 gives a flavour of this. ‘J said

he had spent six months with hydrology heads

developing a strategy for flood risk. He said it

was a requirement for AYTAG to do it. ‘‘I went

to the CMT and they threw it out saying we don’t

have to do it. I don’t know why they employ

experts if all they do is ignore them’’. The

mismatch between saying and doing caused

conflicting priorities, arising most frequently be-

tween policy advisers and the regions as opera-

tional managers did not want to release resourcesto enable government-led strategy implementation.

The variety of the disequilibrium incidents was

considerable. They affected every employee to

some extent. Employees could find themselves

either prevented from receiving training or

spending too much time on training courses as

a result of large and sudden fluctuations in

budgets. They could find themselves working

long hours because of recruitment shortages,



10/19

reporting to a rapid succession of line managers

with different ways of working or carrying out

tasks that they were told were important only to

find that their work came to nothing.

Feedback processes in AYTAG

Feedback processes acting against achieving the

desired new state

We identified feedback processes acting against

achieving the desired new state which we grouped

into seven themes.

(1) The moderation of expressed plans. Many

initiatives introduced in AYTAG failed to be

implemented in full, such as multi-skilling

environment-protection officers, and the im-

petus to achieve them tended to die away.

(2) Continuation of traditional ways of working.There were decisions taken and actions leftunchallenged that indicated to employees

both overtly and covertly that they could

maintain their old ways of doing things. For

example, inherited hierarchical structures

remained and budgets were not devolved.

(3) Perceived lack of a cohesive Corporate Man-

agement Team. One of the themes that

continued throughout this research wasemployees’ views of the corporate manage-

ment team, who were seen as not working as

a team, having disparate views, each memberworking to their own agenda.

(4) Actions weakening a corporate approach.

These actions included abolishing the post

of corporate services director and splitting

the sections he managed between other

directorates, creating a corporate planning

team chaired by a regional director and

failure to recruit new information technology

staff to the Corporate IT department.

(5) Non-acceptance of ownership and responsibility.

The Introduction Programme run in 1996

highlighted concerns relating to lack of trust,ownership of issues and an inability to take

action through a perceived lack of authority.

These themes continued to be raised through-

out the period of this research.

(6) Relationships are more important than tasks.

The consultants running the 1998–1999 man-

agement-development programme reported

that in AYTAG the maintenance of relation-

ships between people was more important

than carrying out tasks required if the

organization was to achieve its stated strate-

gic aims. An example is the slow implementa-

tion of management information systems.

When new work came to AYTAG, organiza-

tion-wide systems were installed. Inherited

local systems for capturing environmentaldata had been developed by managers who

moved into AYTAG. They were incompati-

ble and could not be used on an organization-

wide basis. However they were not replaced.

(7) Running away from ‘Bad News’ . On a number

of occasions, ‘bad’ news had to be given.

When this happened the ‘giver of the news’

distanced themselves from it either by taking

leave or arranging for more junior staff to

inform others. A high-profile example of this

was the Chief Executive going on holiday in

April 1997 after sending all staff an emailannouncing the size of the budget deficit.

Feedback processes working towards achieving the

desired new state

There were many feedback processes taking place

in AYTAG that encouraged the organization to

move forward to new ways of working. We

identified six themes in these feedback processes.

(1) Support for a strong centre and a corporate

approach. The initial structure of AYTAG withits two central directorates, one controlling

administration and the second directing strat-

egy and policy formulation and implementa-

tion provided the basis for a strong centre.

(2) Encouraging a sense of belonging to theorganization. One of the aims of the 1996

Introduction Programme was to act as a

unifying influence to help staff feel part of the

new organization. AYTAG also encouraged

a sense of belonging through its communica-

tion systems: all staff had access to email and

an intranet. There were regular social andenvironmental newsletters, and well-attended

sporting and recreation clubs.

(3) Encouraging staff empowerment. Throughout

the period of this research, staff were

encouraged to communicate their ideas and

opinions, and take on more responsibility

through participating in working groups,

project teams and attending corporate-train-

ing and development events.



11/19

(4) Encouraging staff with broader skills and

knowledge bases. The need to change skill

bases was recognized very early for environ-

ment-protection staff and scientists, all of

whom had previously worked only in one

environmental medium. Training and devel-

opment programmes were provided to all staff to achieve the changes required to skill bases.

(5) Developing the management process. The

majority of AYTAG’s managers had come

from small organizations where they had

managed others with the same technical

skills. In AYTAG they were increasingly

required to act differently. Team leaders

managed multifunctional teams. Managers

divided their time between their operational

work and contributing to the corporate

development of the organization.

(6) Increased focus on delivering the business.During the research period, AYTAG becamemuch more business-focused through its cor-

porate and business planning systems, through

target-setting, thorough its staff appraisal

schemes and through its external communica-

tions. The communication of its work to

industry and to the public at large continued

to expand. High-quality external communica-

tions were considered essential to its business.

Emergent order in AYTAG

Statements made and actions taken at the start of

AYTAG tell us about an organization that had

decided it needed a strong centre to unite its

members and drive it forward – one that wished to

be flexible and empowering, seeking to influence as

well as regulate. Early actions taken to promote

this way of working included the design of the

organizational structure, the Introduction Pro-

gramme and the work done by the Corporate

management team thinking through the culture

they wanted in the organization. The subsequent

development of management competences, the

management-development programme and multi-

skilling training also helped take the organization

towards a new equilibrium. However, over four

years, the changes that these initiatives were meantto bring about did not take root and the organiza-

tion did not reach the published desired state. Table

1 briefly describes the order that did emerge.

From wide spans of control to hierarchical

organization

In 1996 AYTAG had a flat structure, with no

more than three layers of management between

the chief executive and front-line staff. The only

exception to this was in its science function. From

the beginning of 1998, the chain of commandacross the organization began to increase. Incre-

mental structure changes in the operationaldirectorates and in central administration units

increased the layers of managers. Informal

hierarchical arrangements began to appear in

the policy teams. The reviews of the science

function brought little change and the inherited

organizational structures with their long chains

of command were retained. Over the period of

the research, AYTAG left in place hierarchical

structures that it had inherited, and acted to

increase hierarchy in areas where it initially had aflat structure. What emerged was a traditional

hierarchical organization.

From employee flexibility to emphasis on

traditional professional specialisms

Two important interlinked initial conditions for

AYTAG were the skills and traditional career-

development paths of its incoming staff. These

employees were skilled in well-defined, single

Table1. Emergent order

April 1996 – desired future state Actual future state – August 1999

The desired equilibrium The new equilibrium

(1) Wide spans of control (1) Hierarchical organization

(2) Emphasis on employee flexibility (2) Emphasis on traditional professional specialisms

(3) Empowered managers, delegation to its lowest point (3) Increasingly restricted managers, increase in bureaucratic procedures

(4) Emphasis on value for money (4) Emphasis on cost reduction

(5) Strong centre (5) Regional independence

(6) Influencer and Regulator (6) Regulator – target-driven



12/19

media disciplines; their career development was

based around membership of single-discipline

professional institutes. Flexibility was very de-

pendent on multi-skilling front-line staff and

building the confidence and management exper-

tise of the team leaders so that they could manage

multi-skilled professionals.Early actions that AYTAG took to broaden

the skills base of its workforce did little to move

the organization away from its initial conditions.

The influences of traditional working practices

remained strong, and they were reinforced

through delays to training programmes caused

by the 1997 budget crisis and the introduction of

new pay and grading structures in 1998, which

favoured specialists. The effects of incrementally

changing the structure, creating specialist teams,

reducing the number of managers and increasing

the number of single-discipline specialists all actedas organizational-level positive feedback, takingthe organization away from its desired equili-

brium. Interestingly, at the individual level, this

was manifested as negative feedback, as employees

sought to dampen-down organizationally sanc-

tioned change in order to retain the individual

practices that they brought with them to AYTAG.

Three-and-a-half years after AYTAG became

operational, the skills base and working practicesof its scientific and environment-protection em-

ployees remained much the same. The organiza-

tion had limited success in shifting from its initialconditions; its workforce, with few exceptions, did

not become more flexible. What emerged was an

organization with a workforce that retained its

traditional skill mixes.

From empowered managers to increasingly

restricted managers

Looking at AYTAG’s initial conditions, we see

that most of its employees came from hierarchi-

cally structured organizations with managers

having limited freedom to take decisions. All of AYTAG’s managers came from such organiza-

tions, and were unfamiliar with other ways of

operating. The organizational structure implemen-

ted in April 1996 gave managers considerable

freedom, but they opted out of taking control.

They did not take decisions they could have taken.

Instead they passed them on to higher levels.

These actions were largely tacit and they created

individual feedback processes. One result of this

behaviour was that the corporate management

team spent much of its time on non-strategic

issues and, as a result, was perceived as not giving

strong direction to the organization. In the

absence of direction, managers continued with

individual tacit actions to dampen-down change

and pursue a reversion to the conditions they hadknown before AYTAG. As the organization

developed, managers’ freedom to operate was

gradually eroded. Budgets, for example, became

less devolved. The desire for empowered managers

lessened, and what emerged were managers

increasingly occupied in complying with proce-

dures. Some felt very frustrated, while others felt

more comfortable, as they had disliked the less-

structured environment they had found them-

selves in when they joined AYTAG.

From value for money to efficiency and cost control

Although value for money was regarded as an

essential aim for AYTAG, in reality it was never

pursued. The emphasis from the beginning was

on the negative feedback mechanisms of effi-

ciency and cost control. The yearly corporate

plans made minimal reference to value for

money, referring only to cost control and

efficiency. It is likely that the organizationperceived value for money and efficiency as the

same thing. The cost control and procurement

measures put in place were feedback processesthat prevented the organization looking for value

for money, and what emerged was an organiza-

tion preoccupied with efficiency.

From a strong centre to regional independence

AYTAG’s ‘Centre’ was made up of two directo-

rates – Corporate Services and Environmental

Strategy. Directors and senior managers in

AYTAG’s predecessor organizations who trans-

ferred into AYTAG were in powerful positions in

regional directorates. Prior to AYTAG, thesemanagers had had control of their administrative

and planning functions. From the beginning, the

regions were quick to complain and criticize the

centre. This criticism came to a head after the

1997 budget crisis, with the Corporate Services

Director taking the blame for it. The collective

power of the central administrative departments

was weakened by giving control of both the

department and of corporate planning to regional



13/19

directors. These changes took AYTAG away

from the desired equilibrium it was allegedly

attempting to reach.

Gradually it became acceptable for the regions

‘to do their own thing’. Regional directors were

able to take independent actions such as restruc-

turing and offering salaries outside personnelguidelines. These actions continued to strengthen

the directorates at the expense of the organization’s

centre. What emerged was an organization with a

weak centre, which was unable to offer direction,

and AYTAG failed to reach its desired new state.

From wanting to regulate and influence to

regulator

The predecessor bodies making up AYTAG were

experienced in working locally in regulatory

activities. An initial condition for AYTAG wasthe lack of experience of the members of its

corporate management team operating nationally

as influencers. Non-regulatory matters were

drawn together into one policy section in the

Environmental Strategy Directorate. During

1996 this role began to be downplayed. Requests

to appoint an education officer were turned

down. Two years later, the jobs of the employees

in this section were downgraded in relation to

policy sections covering regulatory functions.Reference to AYTAG’s influencing role was

made in corporate plans. However by the timethe 1998/1999 plan was produced the organiza-

tion was still stating ‘AYTAG is also increasingly

seeking to develop policies to influence the

approach of others’ implying that very little

development had occurred. In August 1997, when

the production of the corporate plan was putunder the control of a regional director, the

emphasis shifted to target-setting for the regula-

tory functions, but there were no targets for its

influencing role.

Each year in the annual reports there was less

emphasis on reporting AYTAG’s educating andinfluencing role. The way in which AYTAG was

funded made it difficult to increase spending on

non-regulatory issues. Increased grant-in-aid was

not available to fund non-regulatory activities so

they had to be met by reorganizing and

reprioritizing other activities, which AYTAG

did not do. AYTAG did not shift significantly

away from its initial regulatory condition, and

what emerged was an organization that was

primarily a regulator with its influencing role

underdeveloped.

The effects of anxiety on emergent order

For some employees the move to AYTAG wasexciting; for others it was an anxiety-inducing

experience and they took action to attempt to

reduce the anxiety they felt. The anxiety-reducing

measures had two aspects: first, they were actions

taken in order to feel in control; second, they

were attempts to avoid conflict. Anxiety-reducing

activity created individual negative-feedback pro-

cesses, which attempted to bring the organization

back into a state of equilibrium as experienced by

individuals in previous organizations.

Negative feedback reduces connectivity be-

tween the elements in a system. AYTAG’sanxiety-reducing measures all gave rise to areduction in connectivity, as they progressively

reduced the quantity and diversity of interaction

between individuals. Initiatives in AYTAG gra-

dually involved fewer and fewer people. Working

groups became smaller, training and develop-

ment more localized. Such actions strengthened

anxiety-reduction. As a result, change initiatives

to bring about new ways of working and suitablysupporting styles of management were minimized

or died out altogether.

Order emerging at the boundary

When we looked closely at where order emerged

in AYTAG, we found that it was at the boundary

between the organization’s legitimate and sha-

dow systems. In this respect our work echoes that

of Stacey (1993, 1995, 1998), who has highlighted

the importance of this boundary. The legitimate

system tries to pull the organization towards a

new order; it is the source of stability. The tacit

processes of the shadow system, in contrast, arethe source of instability. In other words, the

boundary between stability and instability is the

boundary between the shadow and legitimate

systems.

AYTAG was sensitive to its initial conditions.

In the legitimate system, these were to do with its

formation, structure, remit and the appointment

of staff. In the shadow system there was a mixture

of anxiety and excitement. There were memories



14/19

of a prior organizational life and pre-existing

networks – some strengthened, others weakened

as a result of the positions key staff were given.

Disequilibrium was found in the legitimate system,

brought about by the expressed desire to create an

organization considerably different from any of its

predecessors. The shadow system of the organiza-tion was closer to a state of equilibrium, as there

was scope for individuals to retain old working

practices and networks. In the legitimate system,

negative feedback operated to drive the organiza-

tion towards a new order. Feedback in the shadow

system was negative when viewed at the level of

the individual, as employees attempted to get back

to the way in which they worked previously. At

the level of the organization, however, that same

shadow-system feedback could be viewed as

positive, a source of instability, as it took the

organization away from its desired new state.As AYTAG developed, what emerged was a

different organization from that which was

originally envisaged. Its published aims were

not realized. The former director of Corporate

Services made the comment after structural

changes following the 1997 budget crisis ‘the

window of opportunity is shutting. Our niche

will be regulation. AYTAG’s an immature

organization. When it settles it may be verystodgy’. What emerged was a hierarchical, regu-

latory organization, retaining traditional profes-

sional specialisms, rather than a flexible, influen-cing organization with broad-based professionals

and empowered managers.

Discussion

Earlier in this paper we briefly commented on

existing strategy theory, suggesting that a more

holistic approach is required for the study of

strategic organizational development. We can

now examine how complexity theory enables us

to describe the development of AYTAG. It hashelped us create a rich description of its devel-

opment and allowed us to make use of and

interpret a wide range of data within the one

framework. It has enabled us to take a holistic

approach to studying the organization, and to

include issues often ignored by the more tradi-

tional approaches.

Using key concepts of complexity theory to

describe the development of AYTAG has identi-

fied its emergent properties and provided an

explanation of why these properties developed in

the way they did. The emergent properties apply

to the AYTAG system as a whole. It is these

properties that shaped AYTAG’s dynamics, which

in turn shaped its approach to strategic develop-

ment. However, we also found in this study thatthere were difficulties in applying complexity-

theory concepts to a social system. These difficul-

ties justify Chia’s (1998) and Goldstein’s (2000)

comments on the need for circumspection in

attempting to transfer complexity-theory formula-

tions from the natural to the social world.

A general view put forward by complexity

theorists is that instability in systems results in

positive-feedback processes dominating to bring

about change, and new or novel forms of order

emerge (Mitleton-Kelly, 1998; Prigogine and Sten-

gers, 1984). Empirical organizational studies byBrown and Eisenhardt (1997), Shaw (1997) andMacIntosh and MacLean (1999) reflect this view.

However, the present research, in contrast, shows

that destabilizing a social system such as an

organization does not inevitably lead to novel

forms of order. Although there were continuous

destabilizing activities, ranging from training pro-

grammes to a budget crisis, the order emerging in

AYTAG was very little different from that whichhad existed in its predecessor organizations.

Calls for the creation of disequilibrium and

positive feedback to facilitate the emergence of novel forms of order are based largely on the

study of complexity theory in physical systems

(Prigogine and Stengers, 1984). Social systems are

different from physical systems in their complex-

ity. The rules that determine the interactions in

social systems are socially constructed, and are

not fixed by laws of nature (Berger and Luck-

mann, 1966; Weick, 1979). Human agency can,

for example, alter the parameters and structures

of social systems (Levy, 1994). In a social system,

everyone has a psychological state, and this has

to be factored in when considering the behaviourof that system. We found that negative indivi-

dual-level shadow-side feedback leads to the

social system attempting to return to a previous

order. That same feedback is perceived as

positive at a higher level. Thus, when infused

with human issues such as memory and desire,

the role and nature of feedback, and the

distinction between positive and negative var-

iants, become somewhat blurred.



15/19

Critical to our understanding of emergent order

in organizations is the role of anxiety and the

actions taken to reduce it by individuals and

groups (Stacey, 1993). Anxiety is present as a

general sense of unease. It is generated when

change is indicated or implemented and it is

found in the shadow system. Strategy theoristsin general focus their theories on the legiti-

mate system. With the exception of Stacey (1993,

1995, 1998) and Shaw (1997), the shadow system

is largely neglected by them. In order to study it, it

is necessary to draw on theories that do not have

their roots in physical systems. Such theories

usually come from the behavioural sciences.

Destabilizing activities and actions taken to

reduce anxiety were continuing features of

AYTAG’s development. Both can be traced back

to the organization’s initial conditions. This

finding caused us to consider that the conceptof disequilibrium as described by complexitytheorists may be less helpful in facilitating the

emergence of novel forms of order in a social

system. Novel forms of order will not necessarily

emerge as a result of destabilizing events. We

need another way of visualizing the concept of

disequilibrium if it is to be helpful to our

understanding of the behaviour of complex

adaptive social systems such as organizations.Complexity-theory researchers, for example

MacIntosh and MacLean (1999), applying the

theory of complexity to the analysis of socialsystems describe disequilibrium as a dynamic

between stable and unstable states. We offer a

possible alternative view of disequilibrium in

complex social systems such as organizations.

As a result of this research we would like to

suggest that this dynamic can be thought of as

anxiety. Indeed, in such systems, disequilibrium

and anxiety can be considered synonymous. It is

the presence of anxiety that keeps a complex

social system in disequilibrium.

The causes of anxiety or disequilibrium are

found in the organization’s legitimate systemwhich in AYTAG included changes to working

practices, reporting lines and organization-wide

development programmes. When organizations

make changes such as restructuring, merging,

shifting skill bases this causes anxiety levels to

rise or expressed in complexity-theory terms

causes disequilibrium in the system.

Anxiety is something that human beings try to

get rid of and they seek to replace it with the

equilibrium of comfort and security. Menzies

(1960) and Argyris (1992) are among the authors

who have written on how humans working in

organizations build defences against anxiety. The

natural tendency for humans is to seek equili-

brium and this can be done by reducing anxiety

through conflict avoidance, taking actions toretain control and minimising change (Janis and

Mann, 1977). These activities give rise to

individually-driven negative feedback and reduce

connectivity between the individual elements in

the social system. Disequilibrium is then dis-

placed as the system tries to regain equilibrium.

Actions to dampen-down anxiety that move the

organization towards an equilibrium position are

found initially in the shadow system; they are

usually tacit and at an individual level as they

were at first in AYTAG (Egan, 1994).

All systems including social systems are subjectto constraints. Stacey, Griffin and Shaw (2000)draw on the work of Elias and Scotson (1994) to

introduce the constraints placed on group mem-

bers in social relationships. Elias and Scotson

state that a basic social impulse is the creation

and maintenance of power differentials. This

theme is picked up by Streatfield (2001), who

argues that power is a constraint that excludes

some communicative actions and includes others.Reducing connectivity between elements in a

social system results in an exclusion of some

communicative actions and so leads to powerdifferentials. Power differentials in organizations

are expressed as hierarchy.

Are organizations naturally complexadaptive systems?

Authors such as Anderson (1999) and Mitleton-

Kelly (1998) argue that one of the major insights

that complexity theory brings to strategy theory

is that the organization can be viewed as a non-

equilibrium system. As noted earlier, viewed fromthis stance, the concept of the organization moving

from one stable state to another as a result of

change is flawed. However, the present research

leads us to question this view. Our suggested

proposition is that disequilibrium is anxiety;

organization is a defence against anxiety, and

organizations thus tend towards stability. Para-

doxically, though organizations can self-organize,

from the perspective of this case study when they



16/19

do so, they tend to retreat from the very fluidity

which enables self-organization. In the state

towards which they are attracted, they are not

naturally occurring complex adaptive systems such

as are studied in the natural sciences – if anything

they are our defensive responses to such systems.

Our research findings indicate that the ‘natural’tendency of a complex social system is the

creation of equilibrium rather than novelty.

When disequilibrium is present in the form of

anxiety, the shadow system initiates the creation

and maintenance of power differentials and self-

organizes into hierarchy to reduce anxiety and

suppress novelty (Stacey, 2000). The desire to

reduce anxiety produces patterns of stability, first

within the organization’s shadow system. Such

patterns include the repetition of behaviours

which are present in an organization’s initial

conditions. As these patterns stabilize theybecome part of the legitimate as well as theshadow system, and the drive back towards a

previously recognizable equilibrium is reinforced.

In AYTAG, what initially began as individual

actions, such as managers opting out of taking

decisions, resulted in organizational action that

took AYTAG away from having a devolved

structure with a multi-skilled, professional work-

force, back towards a traditional, hierarchicalorganization with single-discipline professionals.

In social systems, hierarchy is the result of self-

organizing, and anxiety-reduction actions areentirely natural emergent outcomes. The sugges-

tion here that, in the absence of anxiety and

power differentials, organizations would exist as

complex adaptive systems is tantamount to sug-

gesting that organizations would exist in the absence

of the fundamental processes of organizing!

The concept of an organization as a natural

complex adaptive system may well be a myth. We

are suggesting that equilibrium expressed as a

desire for harmony and security is the norm in

social systems as they seek to avoid anxiety.

Complex systems made up of human elementstend not to exist away from equilibrium. Such

systems are not pushed towards chaos when the

system is in disequilibrium. They tend to grav-

itate towards a previously experienced equili-

brium position. This is the exact opposite of what

complexity theorists claim about living systems

(Brown and Eisenhardt, 1997; Pascale, 1999).

Nevertheless, this is what happened in AYTAG

as it tried to return to previous operating styles

that had been in place in its predecessor organi-

zations. Stacey, Griffin and Shaw (2000) and

Streatfield (2001), in acknowledging that hierarchy

is an emergent property of organizations, appear

to be moving to a position which corresponds with

our observations that organizations stabilize over

time. However, rather than viewing organizationsas complex adaptive systems, following the lead of

Brans and Rossbach (1997), we can draw on the

work of Nicholas Luhmann (1982) and regard

them as complex recursive systems, continually

trying to reproduce themselves in the same way.

Our understanding from the study of living

organisms tells us that the majority only experi-

ence short-term survival. They do not adapt and

this is may also be true for organizations.

The circularity of key complexity-theory concepts

Tsoukas and Hatch (2001) argue that interpreting

the features of complex systems from a complex-

ity theory perspective is dependent upon the

position of the interpreter. From our position, we

encountered problems in defining and trying to

separate different key complexity-theory con-

cepts. There was a degree of circularity as initial

conditions, disequilibrium and feedback all ap-peared as facets of one dynamic. It was difficult

to define what exactly is meant by initialconditions. The actual circumstances created by

the formation of the organization such as its

designed systems mattered less than the precon-

ditions that existed as memories. The latter

formed a legacy which dominated the initial

conditions. We found that connectivity drove feed-back, which in turn influenced connectivity. Work-

ing at the boundaries of different organizational

systems was essentially working on connectivity.

Anxiety produced connectivity changes which

altered feedback mechanisms. Anxiety-reducing

actions caused people to withdraw, which re-duced connectivity and created negative feed-

back. This in turn further reduced connectivity,

so that connectivity and feedback appeared to be

different sides of the same coin. The unifying

phenomenon of anxiety was different from what

we expected from the complexity-theory litera-

ture. This may not have come to light previously,

as a result of there being relatively few examples

of empirically rich studies.



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The need for complexity theory to beinformed by psychology and socialtheory

This study of AYTAG shows that complexity

theory in its current form is only partially

successful as a device for describing organiza-tional development and change. Our study has

highlighted limitations in using the concepts of

complexity theory to describe human systems.

We recognize there are many questions still to be

answered for the theory to be as useful as some of

its advocates would suggest. Unlike physical

systems human systems have histories that

cannot be ignored. They contain psychological

drivers and do not necessarily tend towards

chaos. The study of psychological drivers in

management writings on complexity-theory ap-

plications is underrepresented, with the exceptionof the work of Stacey (1996, 2000) and those who

work closely with him (Streatfield, 2001; Stacey,

Griffin and Shaw 2000; Shaw, 1997). For com-plexity theory to be really useful to management

practice it has to move away from its reliance on

exemplars from natural-science systems and

embrace theories and principles from psychology

and social theory.

Complexity theory and strategic change

Earlier in this paper we suggested that complexity

theory could offer a different conceptual frame-

work for the study of strategic change. As a result

of this study we argue that organizations may not

be naturally-occurring complex adaptive systems.

We also argue that a behavioural-sciences dimen-sion has to be incorporated into complexity

theory for it to be of greater use. The theory

has provided us with a different perspective on

how order emerges at the interface between the

shadow and legitimate systems. This has not been

done previously with such empirical detail. Wehave suggested that organizations stabilize over

time, as stabilization is one of the primary

defences against anxiety.

Defensive behaviour

Complexity Theory and Strategic Change: an Empirically Informed Critique

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