It has long been thought that business organizations are hierarchies, islands in a vast sea of capital markets. This market hubbub over hierarchy has eclipsed the true value of a shadow organization called the network.
The term network has three meanings in social life.
• The verb “to network” refers to how people endlessly connect via virtual social media or face-to-face conversations.
• A statistical technique called “network analysis” refers to an analytical tool that maps and measures human networks.
• In management science, the noun “network” stands for a structure, like hierarchy but very different from it indeed. A network is a structured pattern of relationships typified by reciprocal patterns of communication and exchange among friends and colleagues. Reciprocity is the mutual and repeating pattern of give and take, which over time turns into a golden trust. The mythology of trust is that it is "warm and fuzzy", but in truth, it is a highly coercive form of social capital used to groom and maintain friends for monopolizing resources.
A network is a structure that can trump hierarchical scale. What do I mean by that? Let’s look at a simple monetary example. We know that CEO Donald Trump’s net worth increased or “scaled” from 10 million to 500 million to 3 billion. But what if there was an iterative pattern to the structuring of the five or so deals that produced Trump's 3 billion? In other words, what if there is a hidden structure of the deal such that when leveraged, accelerates growth?
There is.
Let's examine this idea by reviewing three archetypal patterns or network “roles”. The first repeating pattern in social life is to be central like the hub in a "hub and spoke" system on a bicycle wheel. This pattern represents an optimal distribution system for broadcasting and centralizing work processes. The second pattern is the gatekeeper located on the critical pathways between hubs connecting them to each other. These gatekeepers serve as important links or bridges along critical pathways connecting one part of an organization to another. The third pattern is the pulsetaker, someone who is maximally connected to everyone via the most indirect routes. Pulsetakers are behind the scenes types, but have their finger on the pulse of the organization. Are you one of these people? Most likely you are or have been at one point or another in your career. The big question is wouldn’t you like to know this information about you and the people you are about to meet with?
So let’s summarize. Organizations consist of not one, but two, structures that are in a symbiotic relationship with one another: hierarchies and networks. To give an apt analogy, there are maps of a city's highways system (hierarchy) and separate maps of the complex web of surface streets (networks). Each kind of map has its own rules that produce different possibilities for travel. Most organizational journeys require both kinds of maps. More importantly, the behavior of the transportation system depends fundamentally on the interaction of traffic on the highways and the web of surface streets. Any overload or failure of one system spills over into the other as drivers innovate to solve unexpected congestion problems. That is precisely what we do when we weave in and out of the hierarchical and network structure in our organizations. We do it unconsciously, but there is a science that can help us be smarter about it.
We need to learn about this science because what happens when organizations get so complicated that we lose track of how work gets done? Deepwater Horizon is an example of this type of complexity. It was less an oil spill and more a man-made collision of special interests. When multiple organizations such as Halliburton, BP and a myriad of insurers were locked in contractual relationships, they didn’t take into consideration the whole network of interacting organizations, but only their special part in it. Then, when disaster struck in 2010, oil bubbled into the Gulf.
Deepwater Horizon is an example of a heterarchy gone rogue, where organizations fought against each other to protect their special interests at great cost to the entire network of organizations and the natural resource of the Gulf of Mexico and its adjacent shores. Heterarchy is an organizational structure consisting of a network tying together three or more different organizations to each other, where no one organization is privileged over another. BP couldn’t get the oil out of the earth, without the help of special firms like Halliburton, or without special permissions from the United States or overseers and insurers in international waters. At issue was not a linear supply chain, but a non-linear network of relationships with different firms that formed a system of highways and surface streets within the heterarchy.
We know about heterarchies because of their spectacular failures, but a heterarchy isn't dysfunctional by nature; it becomes dysfunctional when leaders assume that their part is the only part that matters. And that is why BP was the unfortunate bearer of the costs of the gulf oil disaster. If insurers could look at how they insure risk as “a network” of interests and relationships, then we wouldn't end up with these unhealthy situations where one part of the whole organizational ecosystem has to die, pay or bear the brunt of blame.
So how do we change all this?
• First, regulatory policies today are clearly “anti-trust”, holdovers from the 19th and 20th centuries and designed to pervert, not sustain, heterarchies. These policies need to be revisited and revised.
• Second, management education is predicated on hierarchical leadership and has yet to seriously recognize networks and heterarchies as distinct organizational structures, which operate under a different set of rules.
• Finally, methods for analyzing heterarchies are derived from social network analysis, but until social networks are routinely performed in single-cell organizations, tackling heterarchical structures is well beyond our grasp.
We live in a small hot crowded world that is fertile ground for heterarchies to spontaneously form, ignite and disperse. We must understand how to develop and deploy best practices for managing these heterarchies, or we deserve the fate that failed heterarchies have demonstrated.
The opinions expressed in this article are those of the author, Karen Stephenson.
Dr. Karen Stephenson is a classically trained Harvard anthropologist and natural scientist that wandered in the deserts of Egypt and Mesoamerican jungles before stumbling into concrete jungles where she was last sighted. She was the H. Smith Richardson Fellow for the Center for Creative Leadership (CCL) and hailed in Business 2.0 as “The Organization Woman”. She is distinguished as only 1 of 4 women in Random House’s Guide to Management Gurus and was also featured by Malcolm Gladwell in The New Yorker for her innovative research on the workplace and corporate office. In 2006 she was appointed the first Kathryn Hepburn Fellow for her groundbreaking work in the social sciences. She is a subject matter expert on social network theory and on the tradecraft of social network analysis.
A global nomad, she has been sighted at the Rotterdam School of Management at Erasmus University in the Netherlands where she currently teaches. This was preceded by a 5-year appointment at the Harvard School of Design and 10 years at the UCLA Anderson Graduate School of Management. Her Ph.D. (Anthropology) is from Harvard University and her B.A. (Chemistry and Art) is from Austin College in Texas. You can visit her at www.netformresources.com and www.drkaren.us.
1ENRON, BCCI, Financial Meltdown of 2008
© 1-MAR-2017 Karen Stephenson
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You can also take a look at Karen's presentation from the 55th ICCA Congress in Kuching: Tribal Networks