The Invisible Organisation

30 March 2009 Neil Farmer

In an extract The Invisible Organisation, author Neil Farmer explains why three quarters of the leaders in an organisation are not in the management hierarchy, and the benefits this offers.

Unlike the formal leadership structure of a traditional organisation chart, in reality there is not a single or small group of leaders in organisations but lots of them. Some leaders influence the views of many people and some of just one or two, influencing and leading at all levels across your organisation. The CEO, senior management team and all of the formal management hierarchy put together can probably identify less than a third of these dispersed leaders and the management team’s combined power to influence represents less than 20% of the total potential influencing capability across all employees.

More than three quarters of the leaders in your organisation are probably not in the management hierarchy at all. This is ‘the invisible organisation’: a world of influencers and informal employee networks that most accurately reflects the ‘real world’ in your business.

"More than three quarters of the leaders in your organisation are probably not in the management hierarchy at all."

The fundamental idea is that business can best be managed through a balanced implementation of formal and informal networks. The formal networks are represented by organisation charts, business processes, systems and formal procedures. The informal networks are made up of an array of ingredients: influence networks, communication networks, knowledge networks; even sub-networks of individuals experiencing bad behaviours, process problems or missed opportunities.

All your previous business designs have been based on management control through formal networks alone. For the first time, CEOs and senior managers can now seek to design and build their organisations by using the most effective mix of both the formal and informal elements, by getting the balance right.

Until the late 1990s, the practical use of informal networks was inhibited by difficulties in accuracy and reliability in two main areas:

  1. Identifying the key influencers at all levels across an organisation: those who are both highly influential and by nature change-positive, or at least open-minded on change.

  2. Identifying informal networks where sensitive information is required, particularly where named individuals are failing to perform effectively.

The breakthrough came when iterative interviews were used to identify accurately relevant key influencers at all levels. (This process begins by interviewing known change champions, getting their views on change-positive and open-minded influencers and then progressively repeating the interview process across the organisation – with only the individuals mentioned being interviewed at each successive stage, until no new names emerge. This eliminates major distortions inherent in representative sampling due to the inputs of change-negative and disinterested individuals.) Once the key influencers at all levels are known, they are then selectively engaged to guide the questionnaire design, sample selection and results analysis process that results in much more accurate and relevant informal networks being uncovered.

Now that these two difficulties have been overcome, extensive experience over the last five to ten years shows that balanced formal and informal networks can be used to resolve effectively many of the intractable problems that have beset businesses in the past.

Successful examples range from business turnarounds, large international mergers and acquisitions, major process and system driven change programmes, fundamental cultural change and continuous improvement, through to organisational problem solving, succession planning and employee motivation on a day-to-day basis. It is an approach that offers a permanent alternative to the stubborn 70% failure rule for business change initiatives.

It is in the management areas, however, that the main impacts of the effective use of balanced networks will be experienced. The high-performance workplace of the future will incorporate the following very different roles:

  • Executive leadership to develop strategic direction, with a little autocracy and a lot of collaboration for effective change implementation.

  • Middle managers to act as coordinators and enablers for the ‘high-performance workplace’, guiding and integrating a plethora of ideas and initiatives, mainly from below, all within the context of an agreed business strategy.

  • First-line management the real people managers in the ‘high performance workplace’ – most will be key influencers, so some 60% of incumbents probably need to be replaced – often with more women than men.

  • HR managers with a key role, to inform and guide senior managers in optimising the people resource through formal and informal mechanisms, but most will not make the transition.

  • Local influencers and those with extensive personal networks – get much bigger roles across all forms of business change – as these key individuals become the real change agents.

Balanced networks will also have a profound impact on outsourcing decisions. In many cases, outsource suppliers are forced to overcome one fundamental hurdle that does not apply if change is implemented internally – they have to fragment at least some of the relevant informal personal networks!

Because of the fundamental importance of using informal networks to drive successful business change, these increased pressures on outsource suppliers may well shape the future direction of the white collar outsourcing industry.

The traditional outsourcing model will be replaced progressively by an in-house ‘transform-operate-transfer’ model. This model is based on the service provider delivering a core team of change design and implementation specialists who will take transitional responsibility for selected areas of the business and will deliver agreed target changes in agreed timescales.

Once you know who the key players are across informal networks, it becomes possible to implement practical, effective ‘deep’ leadership – the fruitless search to develop ‘super managers’ is replaced by practical leadership through ‘super networks’. The real super managers are then those who can best engage and focus key individuals across the leadership ‘super network’.

Reproduced from The Invisible Organisation by Neil Farmer, £60.00, published by Gower.