GHENT UNIVERSITY
FACULTY OF ECONOMICS AND BUSINESS
ADMINISTRATION
ACADEMIC YEAR 2015 – 2016
Adaptive Organizations: The Informal
Organization Reinvented
Master’s thesis put forward to obtain the degree of:
Master of Science in Business Administration
Specialization: Strategic Management
Tom Verbrugge
under guidance of
Prof. Herman Van den Broeck
II
GHENT UNIVERSITY
FACULTY OF ECONOMICS AND BUSINESS
ADMINISTRATION
ACADEMIC YEAR 2015 – 2016
Adaptive Organizations: The Informal
Organization Reinvented
Master’s thesis put forward to obtain the degree of:
Master of Science in Business Administration
Specialization: Strategic Management
Tom Verbrugge
under guidance of
Prof. Herman Van den Broeck
III
Vertrouwlijkheidsclausule
PERMISSION
Ondergetekende verklaart dat de inhoud van deze masterproef mag geraadpleegd en/of
gereproduceerd worden, mits bronvermelding.
I, the undersigned, declare that the contents of this master’s thesis can be consulted
and/or reproduced, provided the source is acknowledged.
Naam/name student: Verbrugge Tom
IV
Adaptieve organisaties: de informele organisatie heruitgevonden
In de economie van vandaag, worden managers en organisaties constant geconfronteerd
met de uitdagingen van de omgeving. Vele wetenschappers omschrijven deze wereld dan
ook als VUCA: volatiel, onzeker, complex en ambigu. De nood voor bedrijven om zich te
kunnen aanpassen aan die omgeving is mogelijks nooit groter geweest. En alhoewel,
adaptatie iets heel natuurlijk is, zijn de constructies die de mens opzet dat vaak alles
behalve. Tenzij deze constructies relatief klein zijn en op een informele manier te werk
gaan, zoals bijvoorbeeld start-ups (Aghina, De Smet, & Weerda, 2015). Zowel de grootte
als het informele speelt dus blijkbaar een rol in de adaptieve capaciteit van organisaties.
Bedrijven proberen deze VUCA wereld aan te pakken door middel van meer efficiëntie,
meer regels, meer discipline,… (Katzenbach & Khan, 2010). Met andere woorden, ze
gebruiken een utopische aanpak in een chaotische wereld.
In deze thesis wordt een model opgesteld die de relatie tussen de formele en informele
organisatie in verband met het aanpassingsvermogen van bedrijven probeert te verklaren.
Hier
wordt
geredeneerd
dat
bedrijven
adaptief
kunnen
zijn
door
bepalende
karakteristieken van de informele organisatie. Deze karakteristieken, hier ‘powers of the
informal’ genoemd, zijn: zelforganisatie,
collectieve intelligentie, improvisatie en
samenwerking. Alhoewel de ‘powers of the informal’ soms moeilijk te onderscheiden zijn
in het formele en het informele, wordt hieronder aangetoond waarom ze het best tot hun
recht komen in het informele. Verder, kunnen de ‘powers of the informal’ versterkt worden
door, de zogenoemde, ‘strengtheners’. Dit zijn ontastbare aspecten die leden van de
organisatie kunnen ondervinden. Het gaat hier over vertrouwen en trots. Zowel bij de
‘powers’ als bij de ‘strengtheners’ zijn er meer mogelijkheden dan dat er hier worden
voorgesteld. De balans tussen de formele en de informele organisatie moet wijzigen
(Katzenbach & Khan, 2010). Immers, zo kunnen de ‘powers of the informal’ de ruimte
krijgen om optimaal te kunnen werken.
Het is vooral de bedoeling aan te tonen dat de informele organisatie een belangrijke rol
speelt in de adaptieve capaciteit van de onderneming. De informele organisatie werd
heruitgevonden, met name door de ‘powers of the informal’ naar voor te schuiven als
bepalende factoren voor het succes van de onderneming. De grootste tekortkomingen in
deze thesis zijn te wijten aan de theoretische en exploratieve aard van dit werk. Maar het
model dat gepresenteerd wordt, in deze thesis, kan een goede basis vormen voor verder
onderzoek.
V
Preface
This thesis is the end of a, challenging, four year education. One that took me five years,
but one I have truly enjoyed every part of. It is the final page of this particular chapter in
my book of life. One that I would gladly turn over, as I eagerly look forward to the next
chapter, starting my professional career. Honestly, if you would have told me five years
ago that I would have made this work, I would have not believed you. The subject matter
genuinely interests me, which made the reading part quiet easy. The writing part, on the
other hand, I had the most difficulties with. Furthermore, I am well aware of the fact that
this might not look like the conventional master’s thesis. But it is truly a representation of
the things I learned, and the person I have become through the last few years. A lot of the
presented arguments and connections give an insight in my thought process, which
makes this very personal. It is, therefore, with a lot of pride and satisfaction that I present
this dissertation to you. Of course this would have not been possible without the help and
support from a lot of people, who I would like to thank.
To Professor Herman Van den Broeck, thank you for making time for me, supporting my
ideas and giving me feedback and advice. But most of all, thank you for giving me the
freedom to figure the things, concerning this dissertation, out by myself. I feel in this way I
learned the most and I got to know myself better.
To my parents, thank you for always supporting me, both financially and emotionally. You
gave me the opportunities I wanted and provided me with everything I could ever wish for.
And I know I haven’t been the easiest person to live with, but know I truly appreciate
everything you do for me.
To Manue, thank you for supporting and motivating me, for providing me with distraction
and for calming me down when I most needed it. You got me through the toughest part of
this dissertation, thank you!
Finally, to my sister and brother, and friends thank you for caring, helping, and supporting
me.
VI
VII
Content
Vertrouwlijkheidsclausule ................................................................................................ IV
Adaptieve organisaties: de informele organisatie heruitgevonden ................................... V
Preface ........................................................................................................................... VI
1.
Introduction ............................................................................................................. 12
2.
A Utopic Approach In A Chaotic World ................................................................... 13
3.
Literature Review .................................................................................................... 16
3.1
Background ...................................................................................................... 16
3.2
Conceptualization ............................................................................................. 18
3.2.1
Adaptiveness ................................................................................................ 18
3.2.2
Formal Organization...................................................................................... 19
3.2.3
Informal Organization .................................................................................... 21
3.2.4
Culture .......................................................................................................... 22
4.
The Model ............................................................................................................... 23
5.
Powers Of The Informal .......................................................................................... 25
6.
7.
5.1
The Desert Island Metaphor ............................................................................. 25
5.2
Power 1: Self-Organization ............................................................................... 26
5.3
Power 2: Collective Intelligence ........................................................................ 29
5.4
Power 3: Improvisation ..................................................................................... 32
5.5
Power 4: Cooperation ....................................................................................... 35
5.6
Power 5:_ _ _ _ _ ............................................................................................. 37
Strengtheners ......................................................................................................... 38
6.1
Trust ................................................................................................................. 38
6.2
Pride ................................................................................................................. 39
Formal Organization ............................................................................................... 41
7.1
Leadership........................................................................................................ 43
7.2
Structure ........................................................................................................... 44
7.3
Ways of working ............................................................................................... 45
8
8.
Discussion .............................................................................................................. 46
8.1
Further Research ............................................................................................. 46
8.2
Synopsis – Balance is everything ..................................................................... 49
Bibliography ................................................................................................................... 51
9
Figure 1: Traditional Balance Between The Formal And Informal Organization ............. 20
Figure 2: The Link Between Formal, Informal, and Adaptiveness .................................. 24
Figure 3: The Informal Organization Reinvented ............................................................ 42
10
11
1. Introduction
In this increasingly VUCA world (Volatile, Uncertain, Complex, and Ambiguous), it
becomes increasingly harder for organizations to attain success over a long period of
time. The need for organizations to adapt may have never higher. Although the ability to
adapt seems to be one that is inherent to humans and nature in general. As it was and is
instrumental to evolution. The constructions - organizations, and political systems - we as
humans set up are often far from adaptable. When these constructions are adaptive,
they are most likely to be small and informal. This typically the case for start-ups (Aghina,
De Smet, & Weerda, 2015). As organizations grow larger and larger, they also become
more formal and seems to have more difficulties to be adaptive (Katzenbach & Khan,
2010). So it is apparent that both size and the degree of formalization play a vital role in
the ability of the organization to adapt. In this thesis the intention is to show that the
informal organization has certain characteristics that makes the organization adaptive.
The key characteristics will be called powers, as they can cause the organization to excel
in today’s competitive world. It is not at all the intention to belittle the significance of the
formal organization but merely show that the balance between formal and informal has
shifted (Katzenbach & Khan, 2010). This thesis will be based on existing scientific
research and literature, together with the application of general logic. As the major
constructs of this work are very hard to measure (meaningfully) and any causal
relationship would require multiple measuring dates.
First, the problem of an increasingly complex, ever changing world and the need for
adaptation is discussed. In the next part, the background, a couple of general theories
are presented in which the body of this work are clearly embedded in. Followed by a brief
explanation of the major concepts, which are: adaptiveness, the formal and informal
organization. In the third part, a model is explored were the potential links between, here
called, ‘the Powers of the Informal’ and the ability of organizations to adapt, are
discussed. Each ‘power’ will then be individually explained. ‘Strengtheners’ are provided
that potentially could influence these powers. Followed by a discussion of the reinvented
(in)formal organization. In the final part, the discussion, some possible research
questions are presented and the practical implications together with the shortcomings of
the work will be discussed.
12
2. A Utopic Approach In A Chaotic World
In an ‘ideal’, stable world companies, and their managers would be able to completely
predict and understand the world of tomorrow. After all that world wouldn’t be much
different than the one we live in today. That would also mean they could plan every step
of the way. From what workers should be doing at a specific time to the exact
performance goals the organization would reach to perfect inventory levels to … Every
process would be even more efficient than the previous ones. Rigid formal structures are
set up to ensure the delivery of the predicted performance. There would be no need for
change as that would only cost money. Shareholders would get their expected return,
manager their corresponding bonuses, employees their job stability, and so on.
Back to reality, climate change and globalization are only a draft of the problems today’s
organizations face. One more problematic than the other, but almost all of those major
problems are unpredictable and emerging. Many scholars have adopted the term VUCA
world to describe the current situation (Bennett & Lemoine, 2014). It is a world where
organizations have to operate in an environment that is characterized by ‘Volatility’,
‘Uncertainty’, ‘Complexity’, and ‘Ambiguity’. In other words an unstable, rapidly changing
environment where the ‘right’ information is hard to come by to make well-informed
decisions. Bennet & Lemoine (2014) suggested that the key to survive in this VUCA
world is to figure out the immanent threats and opportunities. Indeed, besides the
dangers unpredictability holds, it also offers a lot of chances to succeed. But all this
implies change, and thus, the need for the organization to adapt to its (new)
environment. As a general rule, a company is always better off exhibiting some form of
adaptability when the environment changes (Vega-Redondo, 2008).
The Titanic was doomed the unsinkable, computers were going to crash when they
reached year 2000, online shopping was never going to succeed,… It goes without
saying that no one can predict the future. The amount of organizations that do exactly
that, are ubiquitous. They assume that the world is going to turn out exactly like it was
predicted. Or even worse, they hope to change the world itself without expecting the
opposite to happen. This is what Taleb (2012, p. 4) calls “… the ‘Black Swan problem’the impossibility of calculating the risks of consequential rare events and predicting their
occurrence.” Some managers don’t even bother to try to understand the world and its
challenges. As they deem everything VUCA as insuperable (McKee, Varadarajan, &
Pride, 1989; Bennett & Lemoine, 2014). When organizations do try to predict the future
then scenarios are set up where every step is planned, where processes need to be as
13
efficient as possible, specific metric goals are created, resource levels minimized,… All
this in the name of ‘lean’, ‘Six Sigma’, and ’Just in Time’? Leaving little room for failure,
when what is supposed to be does not resemble to what actually is (Matuszak, 2012).
And even if an organization does not show that amount of arrogance, most
organizations, especially large ones, are set up in a way that inhibits change (Reeves &
Deimler, 2011). Rigid structures, heaps of bureaucracy, adamant job descriptions,
abundant hierarchy with rigorous control, a ton of metrics,…, are just a few things that
define these kind of companies. By 'over-formalizing', these organizations automatically
reduce their ability to adapt, this is what this thesis is about. In fact, these corporations
act like they were operating in a relative stable environment. Nassim Taleb (2012, p.
136) probably said it best: “Not seeing a tsunami or an economic event coming is
excusable; building something fragile to them is not.” In short, there are still a lot of
organizations that utilize a utopic approach in this chaotic world.
But luckily, more and more corporations see the advantage of adaptiveness as a way to
cope with the VUCA world. Organizations should not be fighting the VUCA world, but
embrace it to fully take advantage of it (Bennett & Lemoine, 2014). Many authors even
make a case for adaptability as the new competitive advantage (Oktemgil & Greenley,
1997; Reeves & Deimler, 2011). And it might be the most important asset a company
can have. As it is always applicable, unlike business models and strategies who can
become outdated (Reeves & Deimler, 2011). Crossan et al (1996) also were convinced
of the importance of the adaptive ability. As they stated that: “The best companies
distinguish themselves from all others by their ability to adapt to and capitalize on a
rapidly changing, often unpredictable environment.” (Crossan, Lane, White, & Klus,
1996, p. 20). The importance of adaptiveness is beyond dispute. As Oktemgil and
Greenley (1997) showed that organizations with a high ability to adapt achieve better
results, including higher return on investment (ROI).
As the importance of adaptiveness is established, the question is now, how can a
company be adaptive or attain an adaptive capability? According to Reeves and Deimler
(2011) an organization needs be able to quickly respond to signals of change.
Information becomes crucial. Not only the acquirement, but also the circulation of the
‘right’ information through the organization, is a cornerstone of any adaptive organization.
To achieve this, Reeves and Deimler (2011, p. 9) further explain: “Organizations
therefore need to create environments that encourage the knowledge flow, diversity,
autonomy, risk taking, sharing, and flexibility on which adaptation thrives.” Corporations
14
are slowly picking up on the idea of more decentralization and less rigid structures, with
concepts like ‘empowerment’ and ‘horizontal organization’ gaining popularity. This means
a shift in focus from process to people. Which is necessary according to Chan (2002, p.
99), as “Organizations are arguably more ‘human,’ not merely systems of rigid and
artificial regulations and responses.” Companies with a high adaptive ability also tend to
have higher resource levels (Oktemgil & Greenley, 1997). All these aspects seem to be
contradictory to the traditional (over-)formal organization. Empirical evidence suggests
that more companies do pay attention to the informal organization. For example, some
companies have taken the traditional after-work drink on Friday, and made it an in-house
socializing event. The goal of this thesis, is to further explain why the balance between
formal and informal needs to be shifted in order for an organization to be able to adapt.
15
3. Literature Review
3.1 Background
In this part, some general theories will be presented. These concepts had a major
influence on the body of the work but will not be elaborately explained. As the intent is to
show some insights in the thought process behind this thesis.
The first theory, is the Theory Y from McGregor. “McGregor believed managers could
accomplish more through others by viewing them as self-energised, committed,
responsible and creative beings.” (Sinding, Waldstrom, Krietner, & Kinicki, 2014, p. 17)
This utter positive outlook on the behavior of people is implied through the whole of this
master’s thesis. The logic behind this is simple. If managers could benefit from believing
in the good of the employees, then why should the same principals not apply to the
aggregate of those individuals? Theory Y has partially caused members of the
organization to receive more freedom. Especially in comparison to the rational-system
view of organizations by Taylor, Fayol and others (Sinding, Waldstrom, Krietner, &
Kinicki, 2014). But the group as a whole is still very much constricted. This work
connects the concepts of McGregor with, a second concept, holism. The believe that the
whole is greater than the sum of its parts. In other words, the potential of the group, even
very large ones, is far larger than that of its members. Organizations should be set up in
a way that takes full advantage of this principal.
Thirdly, the concept of ‘antifragility’ presented by Nassim Nicholas Taleb (2012) in his
book Antifragile, played a role in the development of this work. It mostly confirmed the
ideas about how organizations try to cope with randomness. By underestimating
randomness and making too many predictions companies become too fragile (Taleb,
2012). This leads to the inability of organizations to adapt properly, especially when
volatility strikes. Furthermore, adaptiveness is a natural phenomenon. As nature is
antifragile, which means it does not only survive random events but it gets better by them
(Taleb, 2012).
As it was clear that currently a lot of organizations handle the VUCA world in an
ineffective way. The question remained: how should they manage that chaotic
environment? This is where obliquity comes in. John Kay (2010, p. 3) explains obliquity,
in his eponymous novel, as the idea that our goals are best achieved indirectly. This
principal is the key to the model, which is presented later on. But the idea is as follows,
16
organization are unable to be adaptive through direct formal actions. But could achieve
adaptiveness indirectly through the informal organization.
Finally, the insights of ‘Essentials veranderen’ by Herman van den Broeck & Dave
Bouckenooghe (2011) helped further shape the model. In particular, it backed the
necessity for organizations to shift the balance between the formal and informal. With
that shift other aspects of the organization gain importance. In the book, this is shown by
the
opposition
of
‘voorprogrammeren’
and
‘vertakken’
(Van
Den
Broeck
&
Bouckenooghe, 2011). The former leans towards the formal organization, the latter to the
informal.
In what follows, it should become clearer how these theories and insights, one by one,
have shaped the body of this work.
17
3.2 Conceptualization
3.2.1 Adaptiveness
Dynamic, agile, or even learning organizations are hot topic concepts that can be
associated with adaptiveness. But this term was deliberately chosen as it better implies
the action, and the ‘why’ behind the change, which is the environment. Adaptiveness has
always been a part of life. Nature constantly requires living organisms to adapt to
changes in the environment in order to survive. Those that fail to adapt simply do not
survive. In business the same rules apply. The companies that can make sense of their
surrounding can survive and even thrive, the others will vanish. In the world renowned
bestseller ‘Good 2 Great’ by Jim Collins (2001), greatness is described as having
success over a long period of time. Great companies not only survive, they thrive through
adaptation. They are able to understand the situation they are in and react accordingly
(Oktemgil & Greenley, 1997). An organization’s adaptive capability can be defined as “a
firm’s capacity to sense and respond to environmental changes in a relatively quick and
flexible way.” (Xufei, Xiaotao, & Youmin, 2009, p. 1087), or as the ability to diagnose
emerging market opportunities and act on them (Oktemgil & Greenley, 1997).
Anyhow, not only are adaptive organizations able to read and react to the situation, they
go through that process relatively fast (Xufei, Xiaotao, & Youmin, 2009; Reeves &
Deimler, 2011). Which is exactly what is necessary in a VUCA-world. Concerning the first
part of the change process, reading the signals, the organization must monitor its
environment closely (Reeves & Deimler, 2011; Bennett & Lemoine, 2014). But then
again, too much focus on the surroundings can cause perverse negative effects (Carroll
& Burton, 2000). Adaptive systems operate in the sweet spot, the ‘edge of chaos’,
between too much and too little attention to the environment (Carroll & Burton, 2000).
Next, the acquired information needs to be filtered. Environmental changes are generally
emergent and can be big like an economic crisis, epidemics, or climate change, but can
also be relatively small. For example a supplier can go bankrupt, product requirements
as demanded by customers might change, sudden tax or regulation changes can occur,
and so. The impact on the organization of all these changes varies. So it is important that
companies asses this information carefully. As it contains what many call ‘noise’. Which
is data that contains no real indicators for change (Reeves & Deimler, 2011; Taleb,
2012). The better a company is at this, the easier it gets to react appropriately. Reeves
and Deimler (2011, p. 3) further explain how adaptive organizations approach the second
part of the process “They have worked out how to experiment rapidly, frequently, and
18
economically – not only with products and services but also with business models,
processes, and strategies.” This implies that the change in the environment can cause a
wave of change through the whole of the organization. This is logical as the adaptation
process has to be supported by management and carried out by lower-level employees.
But some employees will be better at this process than others. These people, sometimes
called ‘Fast Zebras’ (Katzenbach & Khan, 2010), are able to process information quickly
and come up with corresponding actions. Note that ‘Fast Zebras’ can be present in any
level of the organization. Provided with the right support they can lead the ‘herd’ through
the change process (Katzenbach & Khan, 2010). In short, adaptive companies find a way
to effectively deploy their greatest assets, the members of the organizations (Reeves &
Deimler, 2011).
3.2.2 Formal Organization
To fully understand what the informal organization is about, one must first know what the
formal organization is. Meyer and Rowan (1977, p. 340) define the formal organization
as follows, “… systems of coordinated and controlled activities that arise when work is
embedded in complex networks of technical relations and boundary-spanning
exchanges.” Most of it can be written down on paper or on electronic documents and is
stored throughout the organization. It comprises the job descriptions, policies, programs,
organization charts, and such (Meyer & Rowan, 1977). The official work-and information
flows are established here (Katzenbach & Khan, 2010).
Most organizations start out in an informal way, but as they continue to grow so does the
need for more formality (Katzenbach & Khan, 2010). This happens mainly for two
reasons, internal pressure and external pressure. Internally, members of the organization
require clarity with respect to the decision-making process. It has to be clear who is
responsible and accountable for the decision, and in what way the execution will be
supervised (Katzenbach & Khan, 2010). Externally, leaders in the organization feel
pressure to conform to the institutional environment. Meyer and Rowan (1977, p. 349)
argue that “By designing a formal structure that adheres to the prescriptions of myths in
the institutional environment, an organization demonstrates that it is acting on collectively
valued purposes in a proper and adequate manner.” So organizations build the formal
environment for their employees that is expected by the external environment. Labor
unions, guidelines by the governments, industry standards, employee expectations,…all
play a role.
19
The formal organization also has a couple of shortcomings. First, the formal organization
is unable to fully describe the organization in its entirety. For the simple reason that “no
abstract plan or pattern can (…) exhaustively describe an empirical totality.” (Rank, 2008,
p. 25). Maybe the biggest deficiency that can occur when designing the formal
organization, is ‘loose coupling’ (Carroll & Burton, 2000). Note the usage of the word
‘designing’. While the formal organization is deliberately build and planned, the informal
organization arises over time. As mentioned above, organizations are under a lot of
external pressure to set up more formal structures. But in the process of trying to adhere
to the institutional environment, gaps are created between the formal and informal
structure. Thus, the organization, in its entirety, can become loosely coupled (Carroll &
Burton, 2000) or even completely decoupled (Meyer & Rowan, 1977). So, the reason
behind the formal organization can have a huge impact on its effectiveness. According to
Rank (2008), the intention of creating the formal organization is to decrease the need for
vertical collaboration and information-processing. The idea behind it is to incorporate
rationality and uniformity in the organization. In this way, the organization can guarantee
a predictable outcome (Chan, 2002;
Katzenbach & Khan, 2010). Hence,
companies create formal ties to
control the informal, which is too
unpredictable (Rank, 2008). Every
informal action or behavior that is
not in line with the formal policies is
dismissed. In this case, there is no
room for the informal to flourish. In
fact, it is ‘chained’ to the formal.
Figure 1 is a representation of such
an extreme situation. Where the
arrows represent the direct control.
Figure 1: Traditional Balance Between The Formal And Informal
Organization
The informal organization has no influence on the formal and needs to follow the orders
exactly. It is very probable that these kind of situations still exist till this day, albeit
partially. As shown by Katzenbach and Kahn (2010), creating rationality is not a surefire
way to realize emotional commitment and the motivation that is needed in the
organization. This is where the informal organization comes in.
20
3.2.3 Informal Organization
The links between the formal and informal organization are plenty and have been
established. Many formal routines, processes, and other parts of the formal design were
once informal. Making it hard to distinguish the two, as the informal organization has no
clear boundaries and is much harder to recognize (Katzenbach & Khan, 2010). Even
though, members of the organization instinctively know what is formal and what is not.
This may be the main reason why the concept itself is so hard to measure. A clear and
comprehensive definition for the informal organization is also missing. The next part will
address this problem. This new definition will be a summary of existing definitions.
Chan (2002, p. 107) defines the informal organization exhaustively as “… relationshipbased structures that transcend the formal division of labor and coordination of tasks (…)
it comprises the various informal structures, connections, and procedures that people
use to get the work done, such as social networks, communities of practice, crossdepartment relationships, unofficial agreed-on processes, flexible division of work, and
such.” Although quiet extensive, this definitions is missing some vital elements that make
up the informal organization. One of those elements is voluntariness (Rank, 2008).
Relationships, and thus communication-flows, not only transcend the formal organization
but also happen in a voluntary, unforced, natural way. The next vital element of the
informal organization is behavior (Katzenbach & Khan, 2010). Actions are outcomes of
behavior. But one action isn’t necessarily only accomplished through one type of
behavior. So the ‘right actions’ in organizations, but also in life in general, are seldom
achieved through formal structures. For example, why do (most) people stop for a red
light? Predominantly because it can put them in a potential dangerous situation and not
just because there is a law about it. In this case the right behavior mainly comes from the
informal, the possible dangerous situation, than from the formal regulation. This is
supported by Chester Barnard (1938): “When we undertake to persuade other to do what
we wish, we assume that they are able to decide whether they will or not (…) When we
make rules, regulations, laws – which we deliberately do in great quantities – we assume
generally that as respects their subject matter those affected by them are governed by
forces outside themselves.” (Katzenbach & Khan, 2010, p. 37). Members of the
organization do not act as individuals but work towards common goals. (Fabac, 2010;
Katzenbach & Khan, 2010) This may or may not be the same goals set out by the formal
organization. This is the final vital element missing in Chans’ definition.
21
With all these vital elements in place, a new, more comprehensive, definition for the
informal organization can be formulated. Thus, it is a web of unofficial, voluntary
relationships and behaviors executed by members of the organization in order to get the
work done and to achieve common goals. It is the organization in its purest, most natural
form. Specifically, it can contain, among other things, traditions like buying a cake when
somebody in the office has a birthday, going for an after-work drink with the colleagues,
and such. But also actions that ignore the formal organization for decision-making. For
example an employee might ignore his/hers metric tool for ordering inventory and
change the quantity because he/she has more information. It is exactly this kind of
information processing that enables organizations to be adaptive.
3.2.4 Culture
Note that culture, commonly described as the way things are done around here, is not
the same as the informal organization. Although they seem to be closely related there
are some distinctions to point out. On the one hand, culture contains both informal and
formal aspects (Katzenbach & Khan, 2010). For example, a company where employees
are dressed in a very formal way but they communicate informally. On the other hand,
culture is more about company values and normative aspects. This where the link
between the two can be made. As values and norms can strongly influence behaviors,
and thus also those exhibited in the informal organization. Chan (2002) even suggested
that a strong culture might be essential for aligning the informal organization with the
company’s objectives. Such a culture would have to contain sufficient informal aspects
(human communication, flexible interactions,…) to support the informal organization
(Chan, 2002). This in combination with a more formal facet, discipline. Which has been
proven to be a vital part of the culture of most successful companies (Collins, 2001). The
specific cultures of organizations will not be further discussed, as that would lead to far
from the essence of this work. It is mentioned here, merely to demarcate the informal
organization.
22
4. The Model
On the next page, figure 2 is presented. This contains the model, which connects the
formal, informal organization and adaptiveness. First, let’s deconstruct the model. At the
left side, the actions organizations can take, are represented. These include everything
of the formal organization. Leadership, the structure of the company, and the way of
working all play a vital role in this (Aghina, De Smet, & Weerda, 2015). Here, the type of
leadership is seen as a deliberate choice of action. After all, managers undertake actions
to motivate employees, set up formal structures, initiate change project, and so on. On
the other end, the desired organizational outcome is represented, which is adaptiveness.
By now, it should be clear that every twenty-first century organization needs some form
of adaptiveness (Vega-Redondo, 2008). This does not mean that adaptiveness is the
only desired organizational outcome. But, adaptiveness is arguably the most important
one, as every other outcome can flow from it. Traditionally, companies would try to reach
this outcome through its formal organization, disregarding any input the informal could
have. When the desired results are achieved, actions from the formal organization are
credited. Here, it is argued that adaptiveness can only be achieved through the informal
organization. There are natural characteristics in groups, ‘Powers of the Informal’, which
cause them to have the ability to adapt. The informal organization is placed in the middle.
By doing this, the direct cause-effect-relationship between the formal organization and
adaptiveness is breached. Now, only an indirect relationship exist. The informal
organization is in a direct relationship with the adaptive capability of the company.
Organizational actions can determine the degree in which the ‘Powers of the Informal’
are able to pursue adaptiveness. The informal is also in a direct relationship with the
formal organization. As actions can be taken to align the two (Katzenbach & Khan,
2010). By understanding this, leaders can potentially better accustom their efforts to the
needs. More specifically, they could design actions that directly play in the hands of one
or more ‘Powers of the Informal’. And thus, indirectly pursuing the desired outcome,
adaptiveness. There is no need to go into full detail here. As all these aspects of the
model will be thoroughly discussed below.
23
Figure 2: The Link Between Formal, Informal, and Adaptiveness
24
5. Powers Of The Informal
Here it is argued that the adaptive capability of an organization comes from the
characteristics of the informal organization. The key characteristics will be further
referred to as powers. Thus, the powers of the informal are potential reasons why a
company could be adaptive. These powers seem to be interlinked and could enhance
one another. Although the degree in which the powers of the informal are visible in
organizations varies, they are present in each and every single organization. The powers
include: self-organization, collective intelligence, improvisation, and cooperation. These
will be extensively discussed in the following sections.
5.1 The Desert Island Metaphor
To further explain the natural characteristics groups possess that makes them adaptive,
imagine the following scenario: A shipwreck somewhere in the middle of the ocean.
Luckily most of the passengers and crew members survive, and are able to swim to a
nearby desert island. The island shows no signs of civilization. The group’s environment
has suddenly changed from planned and predictable to the opposite. In other words,
their world became completely VUCA. With all the vital parts of the aforementioned
definition in place, the survivors now form an informal organization, with as common goal
survival. And in order to survive, it is clear the group will have to adapt to the new
circumstances. Among other things, shelter will have to be build, food will need to be
provided, a fire needs to be made to provide warmth and to cook the food, wounded
need to be taken care of, and some sort of communication line to civilization needs to be
established. Survivors will instinctively work together (cooperation), as it is gives them
the best chance to survive. Leaders will stand up, tasks will be divided, each individual
will have a certain role,…(self-organization). To tackle the complex problems the group
faces, they will have to work creatively with the available resources (improvisation). And
this by relying on the total knowledge, intelligence and skills of the group (collective
intelligence) which transcends that of each individual (Singh, Singh, & Pande, 2013).
25
5.2 Power 1: Self-Organization
“(…) informal takes care of its own when the formal does not.” (Katzenbach & Khan,
2010, p. 19)
The first power of the informal organization is self-organization. Singh et al (2013, p. 185)
describe it as follows: “Self-organization broadly refers to the process through which a
system changes its internal organization to adapt to changes in its goals and the
environment without explicit external control.” It is how the members of the organization
coordinate their activities without formal control. Couzin (2008) even argues that
leadership itself is somewhat dispensable for the group to organize its activities. This
does not mean that nobody is in control, the control is just more equally distributed
among the members of the group. So the power is decentralized (Singh, Singh, & Pande,
2013). In this way people feel like the group made a decision or at least feel like most
members contributed to the decision. Additionally, people in groups, naturally tend to
take on a role. This in order to be truly part of the group, and thus, boosting their social
identity (Sinding, Waldstrom, Krietner, & Kinicki, 2014). For example, some people will
step into a leaderships role while others might deliberately choose a follower role.
It is self-evident that self-organization is not part of the formal organization. After all, the
formal organization implies external control. Furthermore, evidence also suggest clear
links between the informal and self-organization. According to Fabac (2010), selforganization occurs in organizations where members communicate spontaneously. This
entails that those interactions between the individuals happens in an unforced way, and
thus without any control (Singh, Singh, & Pande, 2013). Voluntary, spontaneous
communication flows are typical for the informal organization. Next to communication,
members of the organization also coordinate the activities in an informal way, in order to
get the work done and avert costly mistakes (Meyer & Rowan, 1977). All this happens
despite what is formally stipulated. As people have a natural tendency to test out the
limits of the formal, by trying out alternative work methods and shortcuts (Katzenbach &
Khan, 2010). The third link is role definition. In informal organization this happens in an
organic way. Opposed to the formal organization, where certain roles are connected to
certain job functions. The roles members take on in the informal organization are closer
to the real identity of the members themselves. This is logical, as Katzenbach & Kahn
(2010, p. 195) argue that “… the formal aims for homogeneity whereas the informal
encourages individuality.” But this might also cause problems as employees who excel at
the formal requirements get rewarded and promoted in the organization (Katzenbach &
26
Khan, 2010). It is clearly a myth that the best producer automatically should be promoted
to a leadership position. And luckily, more and more organizations realize this. Thus, it
might be in the organizations best interest to make sure that leaders in the informal
organization also formally become leaders. As too much discrepancy can heavily disrupt
formal plans and goals (Katzenbach & Khan, 2010). Finally, the informal organization
develops naturally over time and is in constant evolution. So it can be seen as “A living
organization”…” that carries on continuous nonequilibrium self organizing” (Nonaka,
1988, p. 59). It is the informal that decides which of the formal ‘laws’ get accepted and
which get ignored (Nonaka, 1988; Rank, 2008). In short, the informal organization has
the ability to self-organize but the formal often has contradictory intentions.
Self-organization implies adaptiveness from its definition. As Singh et al (2013, p. 185)
explains “A self-organizing system is able to respond to changes in the environment by
self-induced changes in its organization and this re-organization is a continuous process
of system evolution.” This should be the end goal for every organization. To create an
organization that can take care of itself and needs little to no interference. This is exactly
what great leaders do, they build something that can perform excellently, even long past
their departure (Collins, 2001). But generally this were organizations and their managers
fail. They underestimate the natural antifragility and the power of self-organization
(Taleb, 2012). Too much formal process can be harmful, in the way that it eliminates the
chance for the organization to prove its self-organizing ability (Taleb, 2012). In any
natural group, self-organization is the way for the group to respond to sudden, emerging
changes in their environment. So it helps to tackle unforeseeable problems. For example
when a member of the organization suddenly gets ill. In a company with a strong informal
organization, other members will almost automatically take over certain tasks. In a
company where the formal dominates this might happen more slowly and more difficultly.
As members of the organization do not want to go beyond their job descriptions, and lack
the general knowledge of what others in the organization are doing (power 2: Collective
intelligence). Furthermore, adaptive organizations use self-organize to avoid entire
formal procedures and hierarchical lines to accomplish their objectives (Krackhardt &
Hanson, 1993). No system can be truly adaptive without the self-organization. As Carroll
and Burton (2000, p. 320) explain that “… that most adaptive natural systems exist at a
poised state between too much and too little connection, often referred to as the ‘edge of
chaos’.” Self-organization enables the organization, just like a tightrope walker, to
balance on that very edge between stability and volatility (Aghina, De Smet, & Weerda,
2015). Furthermore, self-organization enables the informal organization to cope with the
27
disturbance in its environment. At the same time buying the formal organization time to
recover (Chan, 2002).
As shown above, organization who wish to be adaptive need to be aligned with its
surroundings. Through self-organization more power is distributed to the people who are
in direct contact with the environment (Reeves & Deimler, 2011). Which can lead to
faster reactions to changes in the environment, and thus, adaptiveness. Organizations
and their leaders should put more believe in the powers of the informal, in this case selforganization, to cope with the randomness of the world.
28
5.3 Power 2: Collective Intelligence
“Individual actors in a collective often have limited vision and capabilities. But
when they work together, interacting with each other in the process, they can
produce emergent intelligent behaviours.” (Singh, Singh, & Pande, 2013, p. 186)
Intelligence is about performing well in a variety of circumstances by using existing
knowledge and skills (Legg & Hutter, 2007). As collective intelligence is comparable to
that on an individual level (Woolley, Chabris, Pentland, Hashmi, & Malone, 2010;
Woolley, Aggarwal, & Malone, 2015). It can be defined as “… the general ability of the
group to perform well across a wide variety of tasks.” (Woolley, Chabris, Pentland,
Hashmi, & Malone, 2010, p. 687) What’s even more important is that collective
intelligence transcends the sum of the intelligence of the individuals (Singh, Singh, &
Pande, 2013). In short, the intelligence of the group is always bigger than that of the
individual.
It might be hard, if not impossible, to clearly distinguish collective intelligence in the
formal and the informal organization. After all, this power is not just a quality of the
members of the group, but also of the group itself (Gibson, 2001; Woolley, Chabris,
Pentland, Hashmi, & Malone, 2010). Gibson (2001, p. 123) further explains: “Thus
collective cognition does not reside in the individuals taken separately, though each
individual contributes to it. Nor does it reside outside them. It is present in the
interrelations between the activities of group members.” Nevertheless there is evidence
showing that collective intelligence is more present, and likely to be larger in the informal
organization. As, Couzin (2008) argues that the informal organization is crucial to how
information is obtained, shared and processed. This is supported by Singh, Singh and
Pande (2013, p. 182) who claim that “… collective intelligence is obtained only under
right structural and operational conditions.” Also, the way and frequency in which
collective intelligence is utilized might be influenced by the way an organization is set up.
And this for a couple of reasons. First of all, communication plays a vital role in the
development of collective intelligence. As collective intelligence depends on the
repeated, local interactions between the members of the organization (Gibson, 2001;
Couzin, 2008). Those interactions enable groups to solve problems, individuals cannot
(Katsikopoulos & King, 2010). In the informal organization, stories and anecdotes, about
the history of the company, are passed on. These tales deal with both past success and
failure, and are especially valuable to newer members of the organization (Katzenbach &
Khan, 2010). As it gives them information about how the company and its members deal
29
with certain situations. Also, Woolley et al. (2015) showed that the more communication
there is, the more collectively intelligent that group is. Communication in the informal
organization happens spontaneously and is not limited to work related matters.
Furthermore, people not only share ‘pure’ information but also share their own opinions
and interpretations of that information (Gibson, 2001). Enabling people to really get to
know each other, and in this can broaden the collective intelligence. Employees might
posses certain capabilities he or she doesn’t use during their job. For example an
accountant might organize a music festival in his/her spare time and thus possess
organizing capabilities. Through the informal organization, people can be aware of those
capabilities, which may come in handy in the future. Thus, broadening and amplifying the
collective intelligence. After all, when groups utilize the skills and knowledge of its
members to full effect, they are applying the collective intelligence (Woolley, Aggarwal, &
Malone, Collective Intelligence and Group Performance, 2015). Second, it is more likely
that in the informal organization, people can tap in a broader intelligence base. As the
informal transcends the hierarchy (Chan, 2002), and thus, connects more people on
various levels in the organization. Those interactions occur both in horizontal and vertical
directions. Horizontal connections happen on the same hierarchical level. It can occur
either between people in the same department or in between various departments.
Vertical interaction are those that occur across hierarchical levels. All this implies more
connections between more people with different backgrounds, with specific knowledge of
the different aspects of the company. Compared to the (over-)formal organization, where
collective intelligence often mainly is comprised of the intradepartmental interactions.
Formal limitations can even cause two distinct groups in the same branch, with each
their own way of working (Krackhardt & Hanson, 1993). Third, collective intelligence
enables individuals to identify the most informed individual, to gather specific information
or advice from. Krackhardt and Hanson (1993) showed the existence of the so-called
‘advice network’. “The advice network shows the prominent players in an organization on
whom others depend to solve problems and provide technical information.” (Krackhardt &
Hanson, 1993, p. 105). Those ‘experts’ can change depending on the situation that
requires different information (Katsikopoulos & King, 2010). Although managers would
like the advice network to run parallel with the formal ties, this is more often not the case.
After all, employees seem more likely to ask for help from their peers than their
superiors. In a strong informal organization, hierarchical lines do not really exist. This
enables groups to gather more information faster and thus also broadening the collective
intelligence. Now that it is established that collective intelligence is fundamental to the
30
informal organization, the next part will show the connection between collective
intelligence and adaptability.
Adaptiveness, as it is represented in this thesis, is mostly triggered by the (changing)
environment. Implying an abundance of information that one single individual cannot
possibly process. What many scholars refer to as cognitive limitations. But the collective
of individuals can overcome those limitations to some extent (Singh, Singh, & Pande,
2013). Couzin (2008, p. 36) stated “Information from multiple distributed sources can be
acquired and processed simultaneously, thus allowing individual (cells or organisms)
access to computational capabilities not possible in isolation.” Still, one could question if
groups are able to fully and effectively process all the information. By cooperating (Power
4), members of the group not only share hard facts but also interpretations, opinions and
creative solutions. All of which, will have an influence on the eventual decisions (Gibson,
2001). At the least, groups are able to process more information more quickly. Speed is
an important factor here. As organizations need to respond relatively fast to opportunities
and threats presented by the environment (Xufei, Xiaotao, & Youmin, 2009; Aghina, De
Smet, & Weerda, 2015). After all, the ‘right response’ in a VUCA world might become
outdated quickly. This might be best represented in the animal kingdom. Where making
the ‘right response’ quickly, can mean the difference between life and death. When there
is no room for error, group animals use collective intelligence, or swarm intelligence, to
identify the most informed individual and use their information (Katsikopoulos & King,
2010). The key to adaptiveness is information. The best organizations can distinguish
themselves by the way they gather and process that information. This exactly where
collective intelligence comes in. Support is provided by Couzin (2008, p. 41), as he
explains “Interactions with others can enable individuals to circumvent their own
cognitive limitations, giving them access to context-dependent and spatially and
temporally integrated information. This can result in more accurate decision-making even
in the face of distractions and uncertainty.” It should be clear that collective intelligence is
a powerful aspect of the informal organization and when it is supported and utilized in a
correct way, it can provide the organization with the adaptiveness necessary in today’s
competitive economy.
31
5.4 Power 3: Improvisation
“Traditional management tools help build planning and execution capability.
Improvisation can help to maximize opportunities.” (Crossan, Lane, White, & Klus,
1996, p. 34)
The term improvisation is mostly used in an artistic environment, specifically in music
and theatre. In these environments it is quiet easy to see that (groups of) people base
their actions and behaviors on those of others and the environment they are in. They
need to improvise (quickly) in order to adapt to the new situation. For example when one
actor forgets his line (formally planned) and starts to improvise (unplanned) the other
actors will have two viable options. First option, they continue the play as it was
rehearsed leaving the first actor in his own misery and hoping that he somehow gets
back on track latter on. In this way the audience might be left in confusion concerning the
general storyline. The second option, the other actors act (adapt) accordingly, as they
improvise to save the plot of the play. In fact, “…improvisation offers a different method
of approaching problems or challenges.” (Crossan, Lane, White, & Klus, 1996, p. 25). So
generally improvisation is used to solve problems that suddenly emerge. But it can also
be utilized in more deliberate ways. Emergent or even somewhat deliberate,
improvisation is always based on existing knowledge and intelligence of the participants
(Crossan, Lane, White, & Klus, 1996). The actor must be able to act before he or she
can improvise. In the same way a musician must be able to play an instrument and have
a basic knowledge about music before he or she can improvise. In the same way a
member of the organization must have basic knowledge about that organization and its
environment. The link with the previous power is evident, as an organization needs to
draw upon the collective intelligence to effectively improvise.
Improvisation can come in various forms and on different levels. But the focus here lays
on the consolidating term, namely, ‘Organizational Improvisation’. Which is defined as
“… the ability of the whole organization to improvise and … the institutionalization of
structures or practices that enable or lead to improvisation within the organization.”
(Hadida, Tarvainen, & Rose, 2015, p. 448). Thus, organizational improvisation includes
every single form of improvisation that occurs within the organization. From the
improvisation of a single employee to that of a team and the improvisation of the
organization in its entirety. Evidence suggest improvisation can happen independently on
different levels of the organization (Miner, Bassoff, & Moorman, 2001).
32
Through the emergent characteristic of improvisation, it cannot be a part of the formal
organization. As that would mean that the improvised strategy was planned. And thus
contradictory to the fundamental characteristics of improvisation itself: emergent,
unplanned and intuitive. Even though this seems to be a catch 22. That does not mean
that the (formal) organization and organizational improvisation cannot coexist. The
outcome of improvisation, the action itself, is impossible to plan but organizations could
formally ‘leave room’ for improvisation to happen. For example by stimulating
improvisation through certain routinized actions and processes (Miner, Bassoff, &
Moorman, 2001). Or by teaching people how to improvise (better) as it is a skill that can
be learned (Crossan, Lane, White, & Klus, 1996). For example, employees at Google,
widely recognized as one of the most adaptive companies, get to spend twenty percent
of their time on any project they like. This has resulted in highly successful products like
AdSense and Gmail (D'Onfro, 2015). And although, Google seems to have moved on
from the concept, it is an excellent example of the powers of the informal organization
(Katzenbach & Khan, 2010). As people, from different parts of the organization,
spontaneously come together (power 1: Self-Organization) to work (power 4:
Cooperation) on a project where they are able to come up with something (power 3:
Improvisation) that neither of them individually could (power 2: Collective Intelligence).
The formal organization can support the informal organization to better focus the
improvisation on the actual problem at hand (Hadida, Tarvainen, & Rose, 2015). So it is
possible for organizations to reap the potential benefits improvisation can have.
“However, some organizations make creative thinking difficult, where individuals are
constrained not only by conventional mind-sets, but also by conventional policies and
procedures that can create tunnel vision.” (Crossan, Lane, White, & Klus, 1996, p. 31).
So more often formal organizations are set up in a way that eliminates unpredictability
and randomness and thus also improvisation.
Further evidence for OI to be part of the informal organization suggests that
improvisation might be more a collective skill of a group, and not a skill that just a chosen
few possess. “Furthermore, the distinct competencies in improvisation did not appear to
reside in specific individuals; rather, they flowed from broader organizational routines,
cultures, and collective capabilities.” (Miner, Bassoff, & Moorman, 2001, p. 327). Again,
this shows the link between organizational improvisation and power 2: collective
intelligence. All this leads to the conclusion that improvisation is a part of the informal
organization. With the nuance that the organization formally can support and help the
33
informal to improvise. The eventual success of the improvisation can thus be depended
on the alignment of the formal and the informal organization (Katzenbach & Khan, 2010).
As previously mentioned, in this VUCA world random events just happen, which you
cannot really plan for. Then improvisation can provide a solution to tackle these problems
and take advantage of the emanant opportunities. As Crossan et al. (1996, p. 21) argue
that “… improvisation can be harnessed as a managerial technique for coping with the
new reality of rapidly changing business environments.” But why is that? Simply because
improvisation is the combination of planning and implementing and it happens on the
spot (Moorman & Miner, 1998; Matuszak, 2012). “A change process, especially one
where information technology plays a central role, seems to be an improvisational
endeavor, one where action is planned as it unfolds, drawing on available resources.”
(Cunha & Da Cunha, 2003, p. 182). In this way, allowing organizations to deal with
emergent threats and opportunities. Organizational improvisation itself is an emergent
phenomenon. Kamoche et al. (2003, p. 2041) explain that organizational improvisation
“is mostly triggered by the perception of a problem that has to be tackled hastily.” Indeed,
the perception of time pressure and a lack of routine solutions that can solve the
problem, are often antecedents for organizations to improvise (Miner, Bassoff, &
Moorman, 2001). To be truly adaptive, firms must allow their environment to mold
themselves. Or, as Crossan et al. (1996, p. 31) state that “In permitting your environment
to shape you, you must minimize preconceptions and biases that tend to focus your
attention on the familiar and expected.” This just might be the beauty of improvisation.
The ability to start from a blank sheet, and thus, total freedom in finding a solution
(Matuszak, 2012). Furthermore, the antecedents for improvisation can be both internal or
external, and will probably be a combination of both. In a VUCA world the most pressure
is likely to come from external triggers (Hadida, Tarvainen, & Rose, 2015). But, external
pressure might be partially translated into internal pressure. For example, internally
employees might feel enormous pressure from their superiors to meet their
requirements, because they are externally influenced by the environment. It might be
important to note that, although improvisation is an excellent way for organizations to be
adaptive. This does not mean that therefore all improvisation is automatically adaptive
(Moorman & Miner, 1998). But, at the least improvisation can provide organizations with
temporary actions for the random opportunities and threats that occur in the environment
(Miner, Bassoff, & Moorman, 2001). In short, improvisation, in combination with the other
powers of the informal, can help organization to deal with the VUCA world.
34
5.5 Power 4: Cooperation
“Blame is not for failure, it is for failing to help or ask for help.” Jorgen Vig
Knudstorp - CEO of the Lego group (Morieux, 2013)
Cooperation is often defined as “the process by which individuals, groups, and
organizations come together, interact, and form psychological relationships for mutual
gain or benefit.” (Smith, Carroll, & Ashford, 1995) An organization is generally seen as a
whole of cooperative ties. According to Morieux (2015) cooperation is the core of human
effort. This is linked to reciprocity (de Waal, 2012), the idea that one effort for somebody
else today, will be repaid by an effort of that person in the future. Cooperation has played
a crucial part in the evolution of mankind (Schonmann & Boyd, 2015). But not only
humans cooperate. Various experiments with chimps and even elephants have shown
that animals cooperate, even when one party has nothing to gain (de Waal, 2012). So,
cooperation is a very natural phenomenon. But often organization set up formal barriers
that inhibit cooperation and indirectly adaptiveness (Rank, 2008). As they deem it as
costly and unnecessary to get the work done.
Although that it might be hard to clearly separate the formal from the informal
cooperation, differences exist. Mostly, it is the reason behind cooperation that can have
determinative effects on the outcome. In the formal organization, members are obligated
to work together. Hierarchy is determined so everybody knows who he or she needs to
report to. But the formal approach is just unable to effectively forge cooperation (Morieux,
As work gets more complex, 6 rules to simplify, 2013). Forced cooperation rarely leads to
good performances. Take as a rather extreme example the typical activity where two
people get tied to each other, left hand to right hand and left leg to right leg. They are
now forced to work together, but they will most likely not be very performant. But formal
actions exist that stimulate cooperation. For example, by arranging feedback loops they
can bolster cooperation (Nonaka, 1988).
On the other hand, there is informal cooperation which is spontaneous. Smith, Carroll, &
Ashford (1995, p. 10) describe it as follows: “Informal cooperation involves adaptable
arrangements in which behavioral norms rather than contractual obligations determine
the contributions of parties.” Furthermore, in the informal organization people are related
by more than what is formally stipulated. They share stories, opinions and experiences,
they even might meet up after work hours, all creating behavioral norms (Gibson, 2001).
It is this relatedness in the group, that can only occur in the informal, that is vital to
35
cooperation (Schonmann & Boyd, 2015). After all, reciprocity in groups of related
members will probably be higher than in a groups of strangers. Informal cooperation can
potentially lead to better organizational performance (Smith, Carroll, & Ashford, 1995).
But this does not mean that there automatically is effective cooperation in the informal
organization. For informal cooperation to happen, some conditions need to be fulfilled:
“… these conditions include the parties’ perceiving they will be in contact with each other
for a long time, their believing it is to their advantage to cooperate, and their recognizing
they must reciprocate for any benefits received,…” (Smith, Carroll, & Ashford, 1995, p.
10). This also mean that when informal cooperation happens free riders have no chance,
as “… clusters of cooperators cannot be invaded by selfish individuals.” (Colizzi &
Hogeweg, 2016, p. 6). Other benefits of cooperation encompasses: “… fast cycle time of
product
to
market,
improved
quality,
high-quality
decision
making,
improved
competitiveness” (Smith, Carroll, & Ashford, 1995, p. 17).
All these benefits attribute to the success and adaptiveness of the organization. Although
cooperation will mostly generate adaptiveness indirectly. Since, it is strongly connected
to the other powers of the informal organization. Above it was established that collective
intelligence benefits from high levels of cooperation (Singh, Singh, & Pande, 2013;
Morieux, 2015). Self-organization is also positively influenced by cooperation. As shown
by Smith et al (1995, p. 11): “If work is accomplished in a fluid, ever changing pattern of
relationships that cut across functional, hierarchical, and national boundaries, high levels
of cooperation may allow for an efficient and harmonious combination of the parts
leading to high performance.” Indeed, self-organization and cooperation can cause more
efficiency. As people who work together generally use less resources in everything
(Morieux, 2013). Even improvisation benefits from cooperation (Cunha & Da Cunha,
2003). After all, potentially more creative solutions are generated (Smith, Carroll, &
Ashford, 1995). The powers of the informal are truely interconnected and enhance each
other. Cooperation is crucial to the success of a company in the VUCA world (Morieux,
2013), and it will probably become increasingly important in the future (Smith, Carroll, &
Ashford, 1995).
36
5.6 Power 5:_ _ _ _ _
The fifth and last power is purposely left blank. Not that there are no other powers of the
informal organization. As the opposite is more probable. It would have been a blunt
statement that just four powers and only those four can cause an organization to be
adaptive. Inherently more powers exist that contribute to the broad concept. For
example, a case could be made for resilience or robustness. Something can be
considered to be resilient if it is able to survive disruptions and continue to exist as before
the shock (Taleb, 2012). As previously discussed survival often implies some form of
adaptation. Thus, resilience might come in useful in a VUCA-world. Couzin (2008) even
stated that natural groups are in fact robust. Resilience of robustness, will further not be
discussed. Undoubtedly similar case could be set up for other (potential) powers of the
informal organization. But, it shows that more powers of the informal organization exist
then those that are examined in the preceding parts. Whether there are five, six, seven
or more powers, the number in itself is of lesser importance. As it may cause the
essence of the work to get lost in complexity. Which is simple, the informal organization
has certain characteristics which can cause adaptiveness. Managers and leaders in
today’s business environment need to understand this. Further, they need to make the
link with the formal organization. In the hope they see that some formal aspects are
drastically holding back the informal (Katzenbach & Khan, 2010) and, thus, the
organization as a whole. It might be easier for managers to comprehend this idea when
they know the ‘why’ behind the idea. After all, people are more inclined to do something if
the know the reason behind the action. For example, would anybody be recycling without
knowing why? In this thesis, four powers are defined and links between the informal and
adaptability are established. Exactly with the purpose to contribute to: why shifting the
balance between the formal and informal organization is important.
37
6. Strengtheners
Strengtheners are intangible aspects that individuals groups can have. These aspects,
as the name explains, strengthen the informal organization. Not only that, they enhance
the powers of the informal organization themselves. The degree to which the below
mentioned strengtheners occur in an organization make a huge difference. How the
organization formally operates can influence this degree, same as with the powers. The
strengtheners could be seen as moderators but as sufficient research is missing, this will
only be implied. Below, two strengtheners will be presented, by no means does this
entail exclusivity.
6.1 Trust
Trust is defined as “… an individual’s confidence in the good will of the others in a given
group and belief that the others will make efforts consistent with the group’s goals.”
(Smith, Carroll, & Ashford, 1995, p. 11). It is important in any organization, but becomes
increasingly so in a VUCA world. Due to randomness and the peculiarity of the
environment, people feel like they lost their grip (McKee, Varadarajan, & Pride, 1989;
Bennett & Lemoine, 2014). It is that loss of control that implies the necessity of trust. Or
as Crossan et al. (1996, p. 32) put it “When you relinquish control of a situation and you
do not know exactly where you are heading, you must have trust in your fellow team
members and in the process.” This is where adaptive organizations excel, they explicitly
develop trust (Reeves & Deimler, 2011). Trust is almost seen as the fuel of the adaptive
organization, as it is one of the few ways to incorporate change in people (Van Den
Broeck & Bouckenooghe, 2011). And although, there is no question about its importance,
trust can never directly affect adaptiveness. Subsequently, it has an indirect effect, thus,
trust can be seen as a strengthener of the informal organization. As previously
discussed, the informal organization is “the networks of relationships” (Vega-Redondo,
2008) and no relationship can truly exist without trust.
Moreover, there is support that indicates the strengthening ability of trust on the powers
of the informal organizations. First, trust has been shown to have a positive effect on
organizational membership (Green & Brock, 2005; Volbreda, Jansen, Tempelaar, & Heij,
2011). When people feel like a member of the group they will more likely be willing to do
the things the organization needs, and not just what the organization demands from
them. In other words, they will self-organize (power 1), as trust is “a co-ordinating
mechanism base” (Reed, 2001). Second, collective intelligence (power 2) benefits from
trust. As trust creates the right internal environment to stimulate knowledge sharing
38
(Couzin, 2008; Volbreda, Jansen, Tempelaar, & Heij, 2011). Trust also fosters
communication (Crossan, Lane, White, & Klus, 1996). All of which can lead to a broader
collective intelligence (Gibson, 2001; Couzin, 2008). Additionally, Crossan et al. (1996, p.
28) argued that “… improvisation requires a high degree of trust and mutual respect…”
Without trust individuals will not have all the right information, collective intelligence, and
support to freely improvise (power 3). Furthermore managers need to trust their
employees to solve emergent problems with improvisation. Hadida et al. (2015, p. 453)
referred to this kind of trust as the tolerance for surprise. This by creating an environment
that generates trust, which boosts creativity (Crossan, Lane, White, & Klus, 1996).
Finally, there is very little to no doubt about how trust benefits cooperation. Smith et al.
(1995, p. 11) explain: “Although research has identified many determinants of
cooperation, virtually all scholars have agreed that one especially immediate antecedent
is trust.” Trust ensures that cooperation occurs even in a VUCA environment (Reed,
2001).
Although further research is necessary to confirm the moderating influence of trust, it is
obvious that trust has a positive effect on the organization. It can be useful for the formal
organization to understand and map the trust network, this through network analysis
(Krackhardt & Hanson, 1993). In this way, it is possible to analyze and intervene where
necessary.
6.2 Pride
Katzenbach and Kahn (2010, p. 73) define pride as follows “… the inherent human need
to feel good about what we do and how we do it,…” Pride automatically causes informal
behavior. Van Den Broeck & Bouckenooghe (2011, p. 30) argue that “Iedereen die zijn
job als een goede huisvader of huismoeder ter harte neemt, zal voortdurend oog hebben
voor kleine bijsturingen die allerlei problemen uit de wereld helpen en/of allerlei
verbeteringen introduceren.” It is that organizational pride that causes people to do more
than what is expected of them (Hodson, 1998). Whether it is job descriptions or
hierarchical lines, people who have pride in their job, go beyond what is formally
stipulated. This is because pride is linked to intrinsic motivation (Katzenbach & Khan,
2010), which is widely recognized as a major antecedent of performance. Extra effort
due to pride can be associated to the first power of the informal organization, selforganization. After all, pride implies that no external control is needed to complete tasks.
Katzenbach & Kahn (2010, p. 72) made a striking resemblance with elite athletes:
“Multimillionaire athletes stretch themselves to the limit for the pride of winning the
39
championship – but also take pride in the rigorous training it requires.” Additionally,
Hodson (1998, p. 316) showed that cooperation (power 4), is an outcome of pride, as
“Everybody wants everybody else to succeed”. There is no direct evidence that’s
supports the links between collective intelligence, improvisation and pride. But, as the
powers of the informal are interlinked and enhance each other, pride potentially can have
an indirect effect on collective intelligence and improvisation. Above it has been
established that cooperation enhances collective intelligence, which in turn enhances
improvisation. And thus, an indirect effect is plausible.
It is clear that organizational pride has a positive influence on the overall organization.
According to Gouthier & Rhein (2011, p. 633-639), in a study of service employees, pride
leads to better customer service, more creativity and less turnover intentions (Hodson,
1998). Also, workplace behavior like job satisfaction is expected to be better in these
organizations (Hodson, 1998). Logically, some authors have argued that organizations
should design, so-called ‘pride programs’ (Katzenbach & Khan, 2010; Gouthier & Rhein,
2011). Which are formally planned actions to foster pride in the organization. This is an
other example of obliguity (Kay, 2010) or how companies can only indirectly reach their
goal, in this case the adaptive capabiliy.
For both pride and trust there are indications that support the model. And although, there
are undoubtely more potential strenghteners than those presented in this dissertation,
further research should first focus on these two. As there seems to be a consensus
about the positive influence of pride and trust on the overall organization.
40
7. Formal Organization
How can the formal organization play a part in this process to adaptiveness? In other
words, what are the actions an organization can take to be more responsive and align
with their environment? Well, in this case the word action might be misleading. As the
whole premise of this thesis is that companies need to start operating with less
formalities and believe in the powers of the informal organization. So, organizational
actions here could possibly mean non-actions. For example a company could choose to
not clearly formulate job descriptions. By not taken formal actions, the organization can
activate self-organizing behavior (power 1). The (non-)actions organizations take, can
determine the freedom of the informal or how well the powers of the informal can ‘play’ to
full effect. It must be clear by now that the way the formal organization is set up can have
a huge impact in the companies’ ability to adapt.
The title of this work is ‘Adaptive Organizations: The Informal Organization Reinvented’.
And thus, implies that the formal organization must also go through some changes. As
the formal needs to ‘make room’ for the informal organization to operate more freely.
Thus, the balance between the formal and informal needs to be shifted toward the
informal in order for organizations to be adaptive (Katzenbach & Khan, 2010). This
implies a formal organization with less hierarchy, less procedures, less…anything that
strongly inhibits the informal from behaving naturally. Another part of the reinvented
organization is planning, which is a formal tool. An adaptive company should not only
plan for success but also for failure. Reeves & Deimler (2011) showed that “Adaptive
companies are very tolerant of failure, even to the point of celebrating it.” Failure
provides the organization with valuable information and the opportunity to learn from it.
Furthermore, this ‘reinvented’ formal organization should be more tolerable for
redundancies. By planning for failure, the organization expects worse outcomes and thus
will prepare for this by building redundancies. On the other hand, they shouldn’t be
preparing for an apocalypse. As redundancies does not entail that adaptive organizations
cannot be lean. They should be, but up to a certain point. Taleb (2012, p. 45) explained it
best: “Redundancy is ambiguous because it seems like a waste if nothing unusual
happens. Except that something unusual happens – usually.” Adaptive companies
formally plan controlled redundancies to absorb the randomness of the VUCA world. As
they are ‘deliberately inefficient’ (McKee, Varadarajan, & Pride, 1989, p. 21).
41
All
this
is
exactly
what
figure
3
represents. The informal is illustrated
here by a variety of spheres. This doesn’t
mean that there is no connections within
the informal. But it signifies the ability to
move around more freely and change
over time. After all, multiple spheres are
able to take on any shape. It is clear that,
in this case, the informal is no longer
‘chained’ to the formal organization. In
comparison to figure 1, there are a couple
of other things to note. First, the box of
the formal organization is considerably
Figure 3: The Informal Organization Reinvented
thinner. This implies less formality. Second, the formal organization also changed
position, from the top to the bottom. This signifies a role change of the formal
organization, from control to a support and guiding role (Katzenbach & Khan, 2010).
Reeves & Deimler (2011, p. 11) describe what is needed in such a type of formal
organization: “What’s needed is some simple, generative rules to facilitate interaction,
help people make trade-offs, and set the boundaries within which they can make
decisions.” The ‘new’ formal organization is there to provide the informal with everything
it needs to effectively operate. But in the same way keep that informal organization from
drifting away (too far) from the organizational goals.
There are three types of actions organizations can take through the formal: leadership,
structure, and the ways of working (Aghina, De Smet, & Weerda, 2015). All of whom will
be further addressed in the sections below. Although these actions will not be elaborately
discussed, this for three reasons. First, it all comes down to that the formal organization
should leave room for the powers of the informal to operate more freely. Second, the
focus of this dissertation is on the connection between formal, informal and
adaptiveness. Specifically, the focal point is the reason behind adaptiveness, the
informal organization. Third, it would be contradictory to provide organizations with an
exact solution to be adaptive. Companies need to find their own balance of the formal
and informal organization. There simply is no silver bullet.
42
7.1 Leadership
First of all, there many views and opinions on what great leaderships is. In this part, it is
not the intention to add to those. But merely show that leadership plays an important but
different role in the reinvented informal organization. Katzenbach and Kahn (2010, p. 43)
described it as follows: “… leaders also need to become increasingly conscious of the
changing role of the informal organization, giving it the attention and resources it needs
to stay healthy and supportive.” The role change happens parallel with the changing role
of the formal organization, from control to support and guidance (Katzenbach & Khan,
2010). With this, people management seems to become increasingly important.
According to Jim Collins (2001, p. 27), great leaders have something he calls level 5
leadership. They credit their people for success and take full responsibility for failure on
themselves. Therefore, the impact of leaders cannot be underestimated. They have to
safeguard the powers of the informal. For example, Hadida et al. (2015, p. 453) has
shown that the tolerance of surprise of the leaders has a crucial impact on the degree of
improvisation that occurs in the organization. Some managers even try to force
interactions to improve the informal organization (Krackhardt & Hanson, 1993, p. 110).
Thus, it is the responsibility of the leaders of the organization to instill the powers of the
organization in every individual, this by formulating a clear vision and values. Not only
that, they also have to effectively communicate it to the members of the organization.
This is what Van Den Broeck & Bouckenooghe (2011, p. 50) call ‘inspiring leaders’.
Scholars agree that leaders need to lead by example (Collins, 2001; Katzenbach &
Khan, 2010; Van Den Broeck & Bouckenooghe, 2011). Here, this means leaders will
have to explicitly exhibit trust, pride and informal behavior.
So it is only logical that leadership programs in organizations need to take informal
capabilities into consideration, as current leadership programs favor the formal
(Katzenbach & Khan, 2010). In conclusion, great leaders understand the informal
organization (Xufei, Xiaotao, & Youmin, 2009) and know how to use both formal and
informal approaches to get the most out of the organization (Katzenbach & Khan, 2010).
It is in this respect, that this dissertation hopes to help to understand the impact of the
informal organization.
43
7.2 Structure
Great leadership is not enough, a so-called semi-structure needs to be build on which
the leaders can rely (Van Den Broeck & Bouckenooghe, 2011, p. 31). According to
Bennett & Lemoine (2014, p. 315) “Organizations should be structured to align with and
take advantage of environmental complexity rather than struggle against it.” Still the
question remains, what does such a structure look like and how can companies adopt it?
Two aspects scholars seems to agree on, are a flexible structure and autonomy
(Katzenbach & Khan, 2010; Van Den Broeck & Bouckenooghe, 2011; Volbreda, Jansen,
Tempelaar, & Heij, 2011; Reeves & Deimler, 2011; Tyulkova, 2014; Aghina, De Smet, &
Weerda, 2015). Both imply less hierarchy, or at least less fixed hierarchy, which favor the
informal organization. As Tyulkova (2014, p. 552) explains “Of course, each flexible
organizational structure has certain positions such as CEO and general accountant
according to the legislative requirements but other positions are adaptable and
changeable.” It is clear that elaborate job descriptions and functions are becoming
obsolete, as this only puts limitations on the organization. An adaptive company does not
operate on functions but on the overall capabilities of the members of the organization.
The structure needs to be designed in a way that it aligns the formal and informal
organization (Katzenbach & Khan, 2010). Which in turn enables the powers of the
informal organization to flourish. A flexible structure goes along with autonomy. Reeves
& Deimler (2011, p. 11) explain that by installing a flexible structure and autonomy
“adaptive companies drive decision making down to the front lines, allowing the people
most likely to detect changes in the environment to respond quickly and proactively.”
Many organizations only empower their employees as a reward but “Autonomy is not a
reward for having achieved success; it is a requirement of achieving success.”
(Katzenbach & Khan, 2010, p. 135). And with autonomy also needs to come
accountability (Morieux, 2013). It is the idea that success and failure is achieved
together.
The end goal should be to create an antifragile system that when it gets hit by the VUCA
environment, is one, not reliant on the leaders (Collins, 2001), and two, can handle itself
and grow stronger from it (Taleb, 2012). This only seems possible through the powers of
the informal organization.
44
7.3 Ways of working
Over the past couple of years, the concept of the workplace has broadened. It is no
longer constraint to the office building owned by the company. Flexible hours, working
from home, and satellite offices are just a few examples of the new ways of working.
Establishing a flexible structure and autonomy make flexible work arrangements
possible. Additionally, evidence suggests that more and more employees work and want
to work in a flexible work arrangement (Meister, 2014). Still some companies do not see
the potential benefits, but only the dangers. Their biggest fear is that employees might
get disconnected with the organization (Meister, 2014). Because it seems contradictory
to what is generally accepted, that connection with the organization is necessary for
performance. Some managers even try to force interactions among the members of the
organization (Krackhardt & Hanson, 1993). Does this mean that the informal organization
could be threatened by this? Not per se, but it is important that employees still have
enough interactions, and not get disconnected. There are several ways to do this. First,
organizations should make it individually useful for the members of the organization to
cooperate (Morieux, How too Many Rules at Work Keep You From Getting Things Done,
2015). Second, the organization needs to provide the necessary tools to be able to
communicate effectively (Meister, 2014). And although it might be preferred, face-to-face
contact simply is not necessary to interact with one another. Lastly, the organization
could formally plan or stimulate informal contact moments (Katzenbach & Khan, 2010).
In conclusion, new ways of working seem necessary for organizations to attract and
retain talent (Meister, 2014). But it is important that employees do not get disconnected
from each other. As this potentially could have negative effects on the organization. So it
might be best for companies to first establish the right balance between formal and
informal through leadership and structure, before moving to the new ways of working.
45
8. Discussion
8.1 Further Research
As this work is theoretical, inductive and exploratory, further research is necessary to
provide adequate support for the model, presented in this master’s thesis. Below a few
potential research questions are explored, along with the method and expected results.
First, the model could be tested in a elaborate lab experiment. Although this might be the
most intensive and expensive method, it also might provide the most valuable outcomes.
The aim of this experiment would be to show the existence of certain powers of the
informal and that these powers have an effect on the adaptive capability of groups. The
following research question could be posed: Do groups with a semi-structure outperform
highly formal and informal groups in a VUCA environment? To test this, three groups will
be tested in a controlled, laboratory environment. The experiment could be done with
students as there are no reasons to expect different behavior. Each groups should
consist of at least ten to fifteen people. This way a more realistic image of the informal
organization can be mimicked. In the formal group, clear roles will be assigned and
hierarchical lines will be established. Tight control and procedures will be the
characteristics of this group. The informal groups will be just be given the assignments
without any rules or limitations. In the semi structure group a vision and values will be
formulated. In this vision and values high emphasis will be placed on the powers of the
informal organization: self-organization, collective intelligence, improvisation, and
cooperation. Also, limited hierarchy and procedures will be set up. Which will only exist in
alignment of the informal organization. This could be achieved by carefully selecting and
screening participants. The duration of the experiment is preferred to be long and should
at least be 5 work days. This way the participants can get to know each other better
which favors the informal organization.
To simulate a business environment the groups will have to ‘play’ an extensive business
game. The VUCA world would be represented by changing data, which will be volatile,
uncertain, complex and ambiguous. For example, this could be a change in customer
demand, or an environmental disaster, or governmental pressure. In this way,
adaptiveness can be measured in the outcome and in the response time. This is the time
it takes for the change to happen and the groups to act. After all, adaptive companies not
only respond to the changes in the environment they do it relatively fast (Xufei, Xiaotao,
& Youmin, 2009; Aghina, De Smet, & Weerda, 2015). Furthermore the groups will be
46
observed to see if the powers of the informal organization occur during the experiment.
Additionally, participants can be questioned at the end of the experiment to see if they
experienced the powers as well as the strengtheners. This is really the only way to
measure the strengtheners as it is a very hard to observe pride and trust.
In line with this thesis, the results would be expected to show that a semi structure group
outperforms both the formal and the informal group. Furthermore it is expected that the
informal group performs the worst. As people in an organization require some form of
formal structure (Katzenbach & Khan, 2010). Ideally, it would also provide further support
for the model, presented in this work.
One of the biggest advantage of this kind of study, is that through observation other
factors, powers of the informal, could be discovered. A shortcoming of this experiment
would be the underestimation of time. After all, a real informal organization develops over
time (Rank, 2008) which has a influence on the powers of the informal. One way this
could be countered is that each group consists of members of the same organization,
preferably of various levels of that organization. Another shortcoming of this experiment
is that the groups itself are not large enough. Although one could question if employees
are truly connected with more than fifteen people even in large organizations. Scholars
will also question the generalizability of the results. But as the experiment would be quiet
extensive and no specific requirements are set, this problem is minimized. The results of
this experiment could potentially have considerable practical implications. As the way,
organizations are designed and structured could be reshaped.
Second, a case study could be done. This study would comprise of a comparison of at
least two firms of roughly the same size, a known formal company and a known informal
company. Also, the companies need operate in the same industry. In this way, one could
expect that the companies would have experienced very similar challenges of the VUCA
world. For example, a former governmental controlled company, like Bpost, and a
company of same size and in the same industry like DHL or UPS, could be compared.
As in general, governmental controlled organizations, are more formal than private
organizations. The opposite approach can also be taken. This by selecting firms, for the
case study, by performance. Then, the comparison could be between a top and a bottom
performer in the same industry of roughly the same size.
As the informal organization (and its powers) is very hard to measure meaningfully
(Katzenbach & Khan, 2010), only the formal organization and adaptiveness will be
measured. After all, less formalities imply less limitations for the powers of the informal
47
organization to operate freely. The formal organization could be measured by the
number of hierarchical lines, reporting lines, and number of procedures. Adaptiveness
could be measured in the financial success, as well as the customer satisfaction over a
long period of time. After all adaptive organization understand the needs of the customer
better (Crossan, Lane, White, & Klus, 1996; Oktemgil & Greenley, 1997). It is expected,
in line with this dissertation, there be a negative correlation between the level of formal
organization and adaptiveness.
Some scholars might argue that adaptiveness here is only measured as performance.
But consistently high performance over a long period of time implies adaptiveness. As it
is almost impossible for any company, in a VUCA environment, to achieve such results
without any form of adaptiveness (Bennett & Lemoine, 2014). Due to the nature of the
particular industry, generalizibility will be rather low. On the other hand, the practical
implications for the industry could be considerable. As such a study could lead to
industry best practices.
Third and last, research could be done to examine if formal leaders of the organization
know the informal organization. The method of this study would be an interview and/or
questionnaire. Also, network analyses need to be done for the particular companies to
test the answers of the leaders. This will be the way to measure the informal
organization. As the advice, trust, and communication network can be mapped, in similar
fashion as in the research of Krackenhardt & Hanson (1993). The formal leaders of the
company will be tested on the knowledge about these networks. Generalizability will be
insured by questioning leaders of all sort of organizations. This means managers from
private companies in different industries will be questioned, as well as managers in
governmental and non-profit organizations. Through regression analysis, correlation can
be tested among the variables. It is expected that the higher up the corporate ladder the
less the leaders know about the informal organization (Krackhardt & Hanson, 1993).
Additionally in companies with more formalities, for example governmental organizations,
leaders are expected to be less connected with the informal organization.
The potential research that is presented above are only a few examples, many other
studies can be done. For example a study could be carried out to see if the
strengtheners are truly moderators. Furthermore, fundamental research needs to be
done to find out how these complex variables can be measured properly. In conclusion, it
is important that scholars keep researching this field. As the VUCA world becomes a
48
more pressing issue. It might be vital for organizations to understand the reasons behind
why they can be adaptive.
8.2 Synopsis – Balance is everything
The intention of this master’s thesis was to show that for organization to truly be
adaptive, the balance between informal and formal has to shift towards the informal. It
was also the intention to create awareness about why companies can be adaptive. As
substantial research about why and how organizations can be adaptive is missing.
Existing research has mostly shown that, due to the VUCA environment, organization
need to at least show some form of adaptability (Vega-Redondo, 2008). Nevertheless, it
is evident that the current, utopic approach does not work in this chaotic world. As
knowledge and information sharing is crucial for an adaptive organization, but the formal
is just unable to foster this (Van Den Broeck & Bouckenooghe, 2011). In this dissertation
is has been further shown that the informal potentially plays a huge part in why
organizations can be adaptive (Chan, 2002).
The shortcomings of this work can mostly be attributed to the nature of this dissertation.
Which is exploratory, inductive and theoretical. Although, the presented arguments are
grounded on existing research and credible sources, this work is still not purely objective.
Since it is possible that romancing of the informal organization occurred. Which is
connected to the underestimation of the formal organization and the sheer size today’s
companies exist off. Furthermore, quantitative research is missing to provide support for
the model and its implications. Nevertheless, this master’s thesis can provide managers
with useful insights in how adaptiveness can potentially be achieved.
Albeit, the practical implications of this dissertation are limited, it seems clear that
balance is crucial to the success of the organization. And this in several ways. First, the
informal and formal organization need to be balanced and aligned. As Katzenbach &
Kahn (2010, p. 117) argue that “Both the formal and informal organizations are needed
to reach performance goals and both are strengthened by doing so.” By ‘de-formalizing’
the organization, the powers of the informal can operate more freely, which benefits
adaptiveness. A shift in the balanced needs to occur, hence the reinvented informal
organization. Second, the organization needs to balance effectiveness and efficiency.
McKee et al. (1989, p. 24) argued that “… the optimal performance would occur in the
organizations that balance adaptive and efficiency needs…”. Furthermore, it has been
shown above that adaptive organizations have slack resources (Oktemgil & Greenley,
49
1997), and are thus deliberately inefficient (McKee, Varadarajan, & Pride, 1989). So it
might change the view on lean management. Where organization might have to search
for a different optimal point of the lean organization. But there are many other things
organizations need to find the balance: between agility and stability (Aghina, De Smet, &
Weerda, 2015), and between too little and too much connection with the environment
(Carroll & Burton, 2000). It seems that balance is truly everything.
It is up to each individual organization to find that ‘right’ balance, there simply is no
golden gun. In the last couple of years, concepts like empowerment and horizontal
organization have gained popularity. This dissertation adds to that consensus that
organizations could benefit from less formalities (Krackhardt & Hanson, 1993; Rank,
2008; Katzenbach & Khan, 2010). The model and this dissertation as whole can be a
guideline and the basis for the necessary further research.
50
Bibliography
Aghina, W., De Smet, A., & Weerda, K. (2015, December 1). Agilty: It rhymes with
stability. Retrieved from McKinsey: http://www.mckinsey.com
Bennett, N., & Lemoine, J. G. (2014). What a Difference a World Makes: Understanding
Threats to Performance in a Vuca World. Business Horizons, 311-317.
Carroll, T., & Burton, R. M. (2000). Organizations and Complexity: Searching for the
Edge of Chaos. Computational & Mathematical Organization Theory, 319-337.
Chan, Y. E. (2002). Why Haven't We Mastered Alignment? The Importance of the
Informal Organization Structure. MIS Quarterly Executive, 97-112.
Colizzi, E. S., & Hogeweg, P. (2016). High Cost Enhances Cooperation Through The
Interplay Between Evolution And Self-Organisation. BMC Evolutionary Biology, 18.
Collins, J. (2001). Good to Great: Why Some Companies Make the Leap... and Others
Don't. Business Contact.
Couzin, I. D. (2008). Collective Cognition In Animal Groups. Trends In Cognitive
Sciences, 36-43.
Crossan, M. M., Lane, H. W., White, R. E., & Klus, L. (1996). The Improvising
Organization: Where Planning Meets Opportunity. Organizational Dynamics, 2035.
Cunha, M. P., & Da Cunha, J. (2003). Organizational Improvisation and Change: Two
Syntheses and A Filled Gap. Journal of Organizational Change Management,
169-185.
de Waal, F. (2012, April 10). Moral Behaviour in Animals. Retrieved from www.ted.com:
https://www.youtube.com/watch?v=GcJxRqTs5nk&list=WL&index=6
D'Onfro, J. (2015, April 17). The Truth About Google's Famous '20% time' Policy.
Retrieved from Business Insider UK: http://uk.businessinsider.com/google-20percent-time-policy-2015-4?r=US&IR=T
Fabac, R. (2010). Complexity in Organizations and Environment - Adaptive Changes and
Adaptive Decision-Making. Interdisciplinary Description of Complex Systems , 3448.
51
Gibson, C. B. (2001). From Knowledge Accumulation To Accommodation: Cycles Of
Collective Cognition In Work Groups. Journal of Organizational Behavior, 121134.
Gouthier, M. H., & Rhein, M. (2011). Organizational Pride And Its Positive Effects On
Employee Behavior. Journal of Service Management, 633-649.
Green, M. C., & Brock, T. C. (2005). Organizational Membership Versus Informal
Interaction: Contributions to Skills and Perceptions That Build Social Capital.
Political Psychology, 1-25.
Hadida, A. L., Tarvainen, W., & Rose, J. (2015). Organizational Improvisation: A
Consolidating Review and Framework. International Journal of Management
Reviews(17), 437-459.
Hodson, R. (1998). Pride In Task Completion And Organizational Citizenship Behaviour:
Evidence From The Ethnographic Literature. Work & Stress, 307-321.
Kamoche, K., Cunha, M. P., & Da Cunha, J. V. (2003). Towards a Theory of
Organizational Improvisation: Looking Beyond the Jazz Metaphor. Journal of
Management Studies, 2023-2051.
Katsikopoulos, K. V., & King, A. J. (2010). Swarm Intelligence in Animal Groups: When
Can a Collective Out-Perform an Expert? PLoS ONE, 1-5.
Katzenbach, J. R., & Khan, Z. (2010). Leading Outside The Lines. San Francisco:
Jossey-Bass.
Kay, J. (2010). Obliquity: Why Our Goals Are Best Achieved Indirectly. Great Britain:
Profile Books Ltd.
Krackhardt, D., & Hanson, J. R. (1993). Informal Networks: The Company Behind the
Chart. Harvard Business Review, 104-110.
Legg, S., & Hutter, M. (2007). A Collection of Definitions of Intelligence. Switzerland:
Institute Dalle Molle for Artificial Intelligence.
Matuszak, S. (2012, December 6). The Art of Improvisation. Blacksburg, Virginia, United
States of America.
McKee, D. O., Varadarajan, R. P., & Pride, W. M. (1989, July). Strategic Adaptability And
Firm Performance: A Market-Contingent Perspective. Journal of Marketing, 21-35.
52
Meister, J. (2014, October 30). 5 Ways To Make Workplace Flexibility The New Way Of
Working. Retrieved from Forbes:
http://www.forbes.com/sites/jeannemeister/2014/10/30/5-ways-to-makeworkplace-flexibility-the-new-way-of-working/#50db76a698cd
Meyer, J. W., & Rowan, B. (1977). Institutionalized Organizations: Formal Structure as
Myth and Ceremony. American Journal of Sociology, 340-363.
Miner, A. S., Bassoff, P., & Moorman, C. (2001). Organizational Improvisation and
Learning: A Field Study. Administrative Science Quarterly, 304-337.
Moorman, C., & Miner, A. S. (1998). Organizational Improvisation and Organizational
Memory. The Academy of Management Review, 698-723.
Morieux, Y. (2013, October). As work gets more complex, 6 rules to simplify. San
Fransisco, California, United States of America.
Morieux, Y. (2015, July). How too Many Rules at Work Keep You From Getting Things
Done. London, London, Great Britain.
Nonaka, I. (1988). Creating Organizational Order Out of Chaos: Self-Renewal in
Japanese Firms. California Management Review, 57-73.
Oktemgil, M., & Greenley, G. (1997). Consequences of High and Low Adaptive
Capability in UK Companies. European Journal of Marketing, 445-466.
Rank, O. N. (2008). Formal Structures and Informal Networks: Structural Analysis in
Organizations. Scandinavian Journal of Management, 145-161.
Reed, M. I. (2001). Organization, Trust and Control: A Realist Analysis. Organization
Studies, 201-228.
Reeves, M., & Deimler, M. (2011). Adaptability: The New Competitive Advantage.
Harvard Business Review, 1-15.
Schonmann, R. H., & Boyd, R. (2015). A Simple Rule For The Evolution Of Contingent
Cooperation In Large Groups. Philosophical Transactions B, 1-11.
Sinding, K., Waldstrom, C., Krietner, R., & Kinicki, A. (2014). Organisational Behaviour.
Berkshire: McGraw-Hill Education.
Singh, V., Singh, G., & Pande, S. (2013). Emergence, Self-organization and Collective
Intelligence - Modeling the Dynamics of Complex Collecitves in Social &
53
Organizational Settings. International Conference on Computer Modelling and
Simulation (pp. 182-189). Great Britain: IEEE Computer Society.
Six, F., & Sorge, A. (2008, July). Creating a High-Trust Organization: An Exploration into
Organizational Policies that Stimulate Interpersonal Trust Building. Journal of
Management Studies, 857-884.
Smith, K. G., Carroll, S. J., & Ashford, S. J. (1995, February). Intra-And
Interorganizational Cooperation: Toward A Research Agenda. Academy of
Management Journal, 7-23.
Taleb, N. N. (2012). Antifragile: Things That Gain from Disorder. New York: Random
House.
Tyulkova, N. (2014). A Flexible Organizational Structure as a way of Knowledge
Management in SME's. In J. Rooney, & V. Murthy (Ed.), Proceedings of the 11th
International Conference on Intellectual Capital, Knowledge Management And
Organisational Learning (pp. 549-557). Sydney, Australia: Academic Conferences
and Publishing International Limited.
Van Den Broeck, H., & Bouckenooghe, D. (2011). Essentials Veranderen. Tielt:
Uitgeverij LannooCampus.
Vega-Redondo, F. (2008). Network Organizations. EUI Working Papers, 1-15.
Volbreda, H. W., Jansen, J., Tempelaar, M., & Heij, K. (2011). Monitoren Van Sociale
Innovatie: Slimmer Werken, Dynamisch Managen en Flexibel Organiseren.
Tijdschrift voor HRM, 85-110.
Woolley, A. W., Aggarwal, I., & Malone, T. W. (2015). Collective Intelligence and Group
Performance. Current Directions in Psychological Science, 420-424.
Woolley, A. W., Chabris, C. F., Pentland, A., Hashmi, N., & Malone, T. W. (2010).
Evidence for Collective Intelligence Factor in the Performance of Human Groups.
Science, 686-688.
Xufei, M., Xiaotao, Y., & Youmin, X. (2009). How Do Interorganizational and
Interpersonal Networks affect a Firm's Strategic Adaptive Capability in a
Transition Economy? Journal of Business Research(62), 1087-1095.
54