Hierarchy, informal networks and how to navigate the full mess

Yesterday I was interviewed by a German OD Magazine on the topic of “Informal hierarchies”: are they useful? What are they? Why are they emerging? Are they the “dark net” of organizations, where “illegal goods” are traded with its own currencies?  Are they better than official hierarchies and a useful regulator of power abuse?

Here are some of my thoughts:

Are hierarchies good or bad?

  • Hierarchies are neither good or bad. They are a social phenomena of all social groups. They are either implicit or explicit and cannot be abolished.
  • Hierarchies are solving the problem or need for orientation, structure, safety, direction and reduction of complexity.
  • Hierarchies can show up in different shapes or forms (circles, squares, whatever), but the underlying logic is the same.

What are informal hierarchies?

I don’t see them as a parallel hierarchy, but rather as a network of relationships, nourished by hopes, fears, co-dependencies, interests, needs and loyalties. Informal structures are part of every social system, as organizations organize themselves in layers, while one layer has the lead (be it implicit or explicit)

What is the function of informal networks? Why do they exist? 

There are a few key reasons for informal networks/hierarchies to emerge. They compensate unmet needs of organizations, who always strive for an equilibrium of stability AND agility as well as to ensure survival. I observe hidden or informal structures thrive when the explicit/official structures become disfuntional:

  1. Too much structure: organizations have the tendency to “stiffen in” over time: more rules, more bureaucracy, rigid structures are weakening the organizations vitality and slowing decisions down. Informal networks can be useful to get direct access to decisions makers, to enhance necessary decisions or to simply get things done. The organizations naturally balances the rigidity by adding informal agility.
  2. Not enough structure: if organizations lack structure due to the idea of pure self-organizations, overwhelming chaotic growth or the need to stay “start-up” with an aversion to structures and processes, the need for safety and orientation stays unmet. Informal hierarchies are formed to balance stuckness, the lack of direction, the increasing complexity or slow, uninformed decisions
  3. Bad leadership, incapable managers, nepotism, power abuse: In a system where people get into position of power due to nepotism or other reasons (politics, state-owned companies, family businesses..) the organizations still wants to survive and creates work-arounds and informal structures trying to compensate for bad decisions or lack of competence.
  4. Power vacuum: If the official leaders don’t use their power by taking decisions, giving orientation and providing safe spaces for people to do their work, a power vacuum emerges. In this case other “informal” Leaders take the chance to get themselves into positions of power, not always to the best of the organizations.  People always look for someone to turn to for orientation and clarity and take it from whoever provides this (sometimes even consultants can form that parallel structure, second best).


Are informal networks good or bad?

They are neither good or bad, but for me a strong signal that the official structure is dysfunctional in one or the other way. The good part: Informal structure can be the reason why “anything is working at all”, a way to self-organize and muddle through – in order to survive and stay functional.

Still for me this is the second best option: Better than nothing, but worse than a functional official structure. Why?

  • The parallel existence of formal and informal structure (which is a natural state) can become problematic, when the systems are undermining each other or get into power fights.
  • Informal networks give rise to not always to the best and smartest people, but people who know best how to influence others, form coalitions and sticky relationships.
  • People can get confused an torn between loyalties and distracted from work. They don’t feel safe and will lose trust into the Leadership of the organization.
  • Informal Leaders can have a lot of influence and power, but they cannot be held responsible.
  • Operations that happen informally and unofficially tend to create “dark” structures of hidden networks, excluding and weakening “outsiders”: it creates a culture of in or out, of mistrust and anxiety.
  • After a while a once useful hidden structure can become dysfunctional too: then you have a toxic energy.

So what can Leaders and organizations do to avoid dysfuntional hidden structures?

By creating organizations that make compensatory hidden structures unnecessary:

  • great leadership, an open and transparent and inclusive culture and structures.
  • An operating model providing stability AND agility, that provides efficiency AND complexity.
  • Make sure to have great and skilled people in the key positions
  • By giving people the room to speak their mind, ideas and concerns openly
  • Empowering people to make decisions when needed.

My simple recipe:

  • Provide a simple hierarchical structure providing safety, orientation and a clear home base for people within their function/skill: this is where they have a disciplinary leader, that cares for their development, well-being and sense of belonging. In these home base teams people meet their peers,  exchange and develop their skills, or perform standard and repetitive operational work.
  • Use the basic hierarchy not as parallel structure but as underlying grid, from which all kinds and forms of agile working structures emerge: self-organizing teams, groups, project-teams, Scrum-Teams, agile teams, holacratic tools and circles, topic-groups, innovation teams… they form and dissolve around problems, needs and goals, they are fluid and open.
  • The function of hierarchy is then not to dominate others (“I am the VP, so my opinion is more important), but rather to hold the space for people to feel safe to work in these agile structures. Even if the rules are clear, sometimes you need an arbitrator with formal power. Imagine a soccer game without an referee, it would get brutal and unfair quite soon. The hierarchy is like the referee, that does not dominate the game but provides and holds the space for fluid self-organization.
  • Take hierarchical decisions from agile structures just in case they get stuck: in doubt, someone has the ability to just decide, this can be a huge help and relief and sometimes really helps to navigate complexity.
  • In that way people have enough opportunities to use and show their potential and the need for hidden networks will get lost.


These are a few thoughts, would be interested to hear about your experience, thoughts and feedback.


Related posts:

Selbstorganisation braucht Führung 

Your organization already is self organizing

Holacracy: not safe enough to try

Organizations come in layers not in models




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