SOURCE: Booz & Company

Leading Outside the Lines

June 16, 2010 09:35 ET

Understanding the "Informal" Side of Companies Exposes Insidious Management Myths That Constrict Growth, Especially in a Tough Economy

Jon Katzenbach, Co-Author of "Leading Outside the Lines," Illuminates Leadership Myths That Can Conspire Against Growth and Organizational Effectiveness

NEW YORK, NY--(Marketwire - June 16, 2010) -  In a slow-growth economy, leaders and managers need to avoid crosswinds that can bog down organizational effectiveness and stifle critical resources like creativity, problem solving skills, speed and adaptability. Beware: Some of the strongest crosswinds exist in the form of accepted leadership perspectives that are actually incorrect, especially in the context of the informal -- i.e., the emotional, softer -- side of an organization.

That's according to Jon Katzenbach, senior partner at Booz & Company where he leads the Katzenbach Center for Organizational Innovation, and co-author, with Rockefeller Foundation Vice President of Strategy and Evaluation Zia Khan, of the new book, "Leading Outside the Lines: How to Mobilize the (in)Formal Organization, Energize Your Team, and Get Better Results" (Jossey-Bass, Spring 2010). 

"The slow recovery is continuing to prompt many organizations to keep headcount low, and, as a result, employee motivation can be shaky, if not dead in the water. Accordingly, leaders need avenues to additional performance potential -- and they need to get it for free, meaning without investing in new people and processes. Much of that potential may lie within the 'informal' part of the organization, which includes values, networks, peer interactions and multiple sources of pride that can instill motivation that leads to high performance," said Katzenbach.

"However, many leadership approaches, especially those implemented in lean times, discount the informal organization, and squelch or ignore it. That's dangerous, as the informal organization can work against you if you're not doing the work to influence and mobilize it to function in complement with the more formal, codified elements of the organization," he added, "and the informal elements can either accelerate or inhibit critical behavior change."

The following are some leadership misconceptions -- myths -- that Katzenbach and Khan believe can damage companies by preventing them from identifying and harnessing the so-called softer side of the organization and balancing it with the formal...

  • Myth: The soft side of the organization is just too fuzzy and uncontrollable to deal with, especially when you need to make critical business and market decisions.

    There are concrete ways to influence the informal elements of an institution's organization and culture to achieve concrete, quantitative objectives. In fact, informal approaches can be practical, powerful and teachable. The most successful organizations don't just have well-defined and effective formal approaches to compensation and reward, like pay, benefits, bonuses, and promotions. They also make sure that employees have emotional sources of motivation that commit them to specific results -- in ways that the formal mechanisms cannot.

  • Myth: Lean times call for traditionalists -- those who know how to fix what's broken by focusing on the nuts and bolts.

    Certainly, the formal is important. In fact, now perhaps more than ever, any leader who can't use the formal organization will have a very short career. They'll get weeded out quickly, and probably for good reason. But those who only know how to use the formal and take advantage of only one side of the "organizational brain" will fall short of their potential -- and end up as mediocre guardians of the status quo. And in a tough market where recovery challenges abound, that positioning won't work for long.

  • Myth: The best thing to do with the informal organization is to step back and let it grow organically.

    Stepping away from the informal organization is actually as bad as forgetting about marketing and hoping customers buy products by chance. The informal organization is an asset that needs to be used with purpose. It may adapt to support a leader organically if there are committed managers down the line, but it can also align against a leader or organization. Peer-to-peer resistance can inhibit or thwart even the most compelling top-down admonishments. It has a mind of its own which may not be in sync with the leader's priorities. More often than not, when left to evolve on its own, the informal organization works against you. Leaving it alone is like letting ivy find its own home.

  • Myth: The only organizations that can really make use of the informal organization are those that figured out a way to eschew and do without the formal, so "informal" thinking only applies to a small, rarified group of companies.

    The informal needs the formal just as the formal needs the informal. Leaders accelerate performance results by combining the best of both the informal and formal, and do so without having to make tradeoffs. They get the efficiency and consistency of the formal with the flexibility and creativity of the informal; the focused execution of the formal with the responsiveness to new opportunities of the informal; the rational compliance of the formal with the emotional commitment of the informal.

  • Myth: The managers who are able and willing to use the informal are "mavericks" and potential disruptors who come from outside disciplines or who cannot be controlled, and aren't seasoned or schooled in what works and what doesn't.

    It's seasoned people who have the benefit of trial-and-error experiences who are best at mobilizing the informal to accelerate the formal imperatives. These people have been around, are willing to spend time with people at any level, especially the frontline, and know they don't have all the answers. They're seasoned enough to know that they need to draw on emotional savvy as well as analytical intelligence.

  • Myth: Very few mainstream, top-tier companies consciously concern themselves with the informal organization. It's mainly a start-up, emerging-company thing.

    Actually, some of the largest, smartest companies have recognized that the best way to create lasting value for their businesses is to tap-into and nurture informal, non-hierarchical initiatives, rather than mainly relying on formal top-down rules of engagement. Examples include a surprising diversity: Aetna, Campbell's Soup, Google, HCL Technologies, Apple, Bell Canada, Bank of America, T-Mobile and Southwest Airlines.

"The most successful organizations are ahead of the curve in the way they balance the formal and informal," said Katzenbach.

To receive a copy of "Leading Outside the Lines" (and supporting materials) and/or schedule a conversation with Jon Katzenbach, please contact Frank Lentini of Sommerfield Communications at (212) 255-8386 or lentini@sommerfield.com.

About Booz & Company

Booz & Company is a leading global management consulting firm, helping the world's top businesses, governments, and organizations.

Our founder, Edwin Booz, defined the profession when he established the first management consulting firm in 1914.

Today, with more than 3,300 people in 60 offices around the world, we bring foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. We work closely with our clients to create and deliver essential advantage.

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For information on the Katzenbach Center visit www.booz.com/katzenbach_center.

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About the Authors

Jon Katzenbach is a senior partner at Booz & Company and leads their Katzenbach Center, where promising new approaches in leadership, culture and organization performance are developed for client application. His consulting career has been largely focused in these areas, and spans several decades across several different professional books, including "Wisdom of Teams," "Peak Performance," "Why Pride Matters More Than Money" and the new "Leading Outside the Lines." He received his MBA from Harvard, where he was a Baker Scholar. Jon is a founding partner of Katzenbach Partners.

Zia Khan, co-author of "Leading Outside the Lines," is vice president for strategy and evaluation at the Rockefeller Foundation, which supports innovations that help people share globalization's benefits more equitably and strengthens their resilience to social, economic, health and environmental challenges. Zia also advises leaders on the integration of strategy and organization as a senior fellow of the Katzenbach Center, which he co-founded with Jon Katzenbach, and as an individual consultant. Prior to joining the Rockefeller Foundation, Zia established and led Katzenbach Partners' San Francisco office and West Coast Practice and pioneered the firm's work on the informal organization. Zia hold a B.S. from Cornell University and an M.S. and Ph.D. from Stanford University. He currently lives in Brooklyn, NY.

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