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(originally published by Booz & Company)


The Organization Is Alive

Like a community or family, every organization has a clan structure built on the impressions people have of one another. Enough people, enough of the time, facing the pressures of work, make decisions based not on rational analysis (which would be impossible for all the decisions that have go be made), but instead on a mental shorthand, based on the perceived needs and priorities of the people at the core of the company (or their part of it). The “core group” varies from one organization to another; it may include the CEO, local bosses, some key executives, perhaps the head of the labor union or of a critical subsidiary, or someone who serves as an unofficial conscience. Every time people make decisions, even subconsciously, according to “what so-and-so might think,” they improve “so-and-so’s” position in the organizational culture. The result is an ever-changing but continually self-reinforcing core group of people who live in everyone’s mind, akin to the perceived leaders of a family or community. And like a family or community, the organization as a whole will do only what is perceived to be in the core group’s interest.

That’s why “walking the talk” is so important. It matters little what the CEO really thinks. Much more important is what he or she is perceived to think — and where he or she has been seen to pay attention. If the CEO changes his or her attitude in some way, it may take a while for the organization to catch up. Resistance to change occurs not because people fear change, but because they fear the consequences of contradicting the perceived priorities of the core group.

In any organization, the core group might range in number from a handful of people to thousands. (The larger the core group, the greater the organization’s capabilities need to be.) Its members are not necessarily people in authority, though they often are. Some organizations have one stable core group; others have many core groups in constant flux. Some core groups are good for their organizations; others are dysfunctional. But there is no such thing as an organization without a core group. Moreover, behind every great organization is a great core group — and behind every organization in trouble is a core group in crisis.

The clan (or core group) structure might be analogous to the endocrine system. If you want to change a person in a hurry, give him or her a drug. Similarly, if you want to change an organization, make a sudden and dramatic change in the core group. But be careful of overdoses. For what travels through a core group structure easily is emotionally charged information: legitimacy, pride, shame, misunderstanding, and loyalty. Change these cavalierly, and you can send an organization’s morale and performance crashing to the ground.

Putting It All Together

Clearly, there is much more to say, and to learn, about each of these systems. Vast bodies of research and observation relevant to each of them have been developed, drawn from the disciplines of organizational behavior and business management, and from other fields such as psychology, political science, economics, and anthropology. Most of that knowledge is fragmented and unsynthesized; nonetheless, a business decision maker can benefit from recognizing these four kinds of circulatory systems at play, and making moves that address the way they interrelate.

Imagine a manager relatively high in the hierarchy, well connected in the network, solid in the core group — and far removed from the flow of work or the market. This is a bureaucrat. A typical company can afford to keep only a limited number of people in such positions. Now imagine another manager, equally high in the hierarchy, thoroughly immersed in the network, crucial to the market’s workflow — but with no core group status. This individual may be heading for burnout. Such people are often crucial to the organization’s success, but they don’t receive rewards or recognition commensurate with the contribution that they make. There may be a great deal of leverage in two small moves: integrating the first manager more closely with the internal market and flow of work; and figuring out ways to increase the second manager’s perceived legitimacy. (This may include more deliberate counseling about his or her behavior.)

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  1. Art Kleiner, “Karen Stephenson’s Quantum Theory of Trust,” s+b, Fourth Quarter 2002: Introduction to network theory and “hubs, gatekeepers, and pulsetakers.”
  2. Art Kleiner, “Elliott Jaques Levels with You,” s+b, First Quarter 2001: The great theorist of hierarchies explaining his requisite structures.
  3. Art Kleiner, Who Really Matters: The Core Group Theory of Power, Privilege, and Success (Doubleday, 2003): The clan system and the nature of the core group, in detail.
  4. Gary L. Neilson and Bruce A. Pasternack, “The Cat That Came Back,” s+b, Fall 2005: How Caterpillar rebuilt its organizational DNA (and its workflow and hierarchy).
  5. Gary L. Neilson, Karla L. Martin, and Elizabeth Powers, “The Secrets to Successful Strategy Execution,” Harvard Business Review, June 2008: How implementing a strategy starts with information flow and decision rights.
  6. Sherwin B. Nuland, The Wisdom of the Body (Knopf, 1997): How biochemical interactions, via our circulatory systems, explain the quintessence of Homo sapiens.
  7. Authentic Leadership in Action Institute website: Programs include weeklong courses on social innovation, collaboration, and human systems dynamics. 
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