Changing student demographics, legislation improving standards and access, and increasing community expectations are creating instability in the nation's education system. Also, public confidence in schools' effectiveness has eroded. This treatise draws on sociology, corporate studies, and effective schools research to understand how education systems operate in a nonrational world. After contrasting decision-making processes in two fictitious school districts representing rational and nonrational organizational models, the study advances the latter as a more accurate and logical interpretation of reality. Two chapters further refine nonrationality in terms of decentralized goals, power, decision-making, external environment, and teaching process. Later chapters examine school organizational culture, strategic planning, empowerment, and leadership applications. The final two chapters apply nonrational theory to schools, showing how efficacy and integrity can be restored to schools in an era of change. The analysis shows that school organization need not be based on outmoded, centralized procedures that don't work. Instead, a school's central mission can accommodate multiple and competing goals, compromise, an open-ended power structure, a volatile environment, a wide range of teaching methods, and tenuously connected policies and classroom procedures. Included are 96 references. (MLH)