Local rule theory: an ecological model of organizational stability and change

Theories of organizational change processes must necessarily be predicated on theories of organizational stability. This paper develops local rule theory which suggests that patterns of behaviour, generated at an individual or group level, are a major determinant of organizational stability. Local rule theory further suggests that human behaviour should be viewed from an ecological perspective where two key determinants of behaviour are competition and co-evolution. The central metaphor in this context is a fitness landscape where adaptive behaviours create peaks, which constitute increasing optimization of payoffs, for individuals and groups. Such adaptive behaviours are responses to the immediate and local demands of the environment. In this respect, local rule theory suggests that locally determined behaviour may be a significant determinant of organizational performance and stability. The organizing principle in the development of local rules is a bottom-up process of emergence where successful local rules will spread to wide localities and where the interaction between sets of local rules remains stable over time. Evidence from two organizations is cited in support of local rule theory. The first uses a catastrophe model to demonstrate the nonlinearities underlying stable patterns of behaviour arising from local rules and the second uses a System Dynamics computer simulation to demonstrate the effects that a set of local rules has on organizational performance. The paper concludes with some suggestions of the dynamic nature of the interaction between domains of local rules based an ecological model.