Posted: June 6th, 2022

Logic only gives man what he needs. . . . Magic gives him what he
wants

13
Logic only gives man what he needs. . . . Magic gives him what he
wants,” author Tom Robbins once wrote.1
The tension between
the mind and the heart and the desire to integrate the two have been
grist for the writer’s mill for centuries. Management theorists, by
contrast, have focused their efforts on one aspect of this tension or
the other and have spent the past hundred years debating each other
about which is more important. Our intention in this chapter is to
show that it is not a question of either/or but rather of understanding what benefits the formal and informal offer, and why they need
to work together.
The Head-Heart Debate: A Brief History
The rational school of management dominated business organizations for the first half of the twentieth century. Its roots are in the
research of Frederick Taylor, often dubbed the father of scientific
management.2
Taylor stressed the need for using scientific rigor to
select, train, and develop workers. He believed in cooperating with
workers to ensure the success of his scientific methodology, dividing
The Logic of the
Formal; the Magic
of the Informal
1
Katz.c01.indd 13 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
14 leading outside the lines
work nearly equally between managers and employees as a rational
approach to optimizing performance.
Taylor’s principles made sense. Prior to World War II, they were
used in many factories, often with surprising improvements in productivity. Taylor advocated that all organizations could use what he
called “time and motion studies” to improve efficiency and unlock
hidden performance potential. Eventually, Taylor’s ideas about scientific management spread from Henry Ford’s automobile assembly
lines all the way to the home.
Later, a different school of thought emerged that took a very
different, much more emotional, approach to the practice of management. In 1960, Douglas McGregor published The Human Side
of Enterprise, in which he identified two theories of individual work
behavior.3
Theory X assumed that people dislike work, prefer to be
directed, and are motivated primarily by monetary rewards and punishments. This theory aligned with the rational approach to management. His second theory, Theory Y, assumed that people enjoy
work, seek responsibility, and are motivated by purpose, feelings, and
fulfillment.
Theory Y echoes the writings of other notable thinkers of the
era. In 1954, Abraham Maslow placed self-actualization at the top
of his hierarchy of needs.4
In essence, this hierarchy refers to how
people feel about who they are as individuals, what they do, and
why they do it—and often, the people they do it with. Frederick
Herzberg, in an almost desperately titled article, “One More Time:
How Do You Motivate Employees?” answered his question by arguing that people are emotionally motivated by meeting challenges,
taking responsibility, and doing work that they can feel good about
performing well.5
Advocates of both the rational and emotional approaches have
rarely sought to integrate their perspectives—in other words, to see if
there was a possibility for “and” instead of “either/or.”6
Stanford professor Harold Leavitt, author of many books, including Managerial
Katz.c01.indd 14 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 15
Psychology and Top Down, from which the following passage is taken,
describes how the two camps studying organizational performance
in the 1950s viewed each other:
One tiny skirmish of that great battle took place at MIT, where a
handful of us were graduate students. We were proud and perhaps
arrogant acolytes of McGregor, the pioneering humanizer of
Theory Y fame. Our hot little group called itself “the people-people”
and inhabited the third floor of MIT’s Building 1. Our systemizing
enemy—the hard-headed accounting, finance, and “principles of
management” people, along with Taylor’s progeny, the industrial
engineers—held down the first floor of the same building.
We people-people were sometimes required to take first-floor
courses, all sorts of systemizing foolishness about such inhuman stuff
as financial controls and cost-accounting. As you might guess, those
forays into enemy territory served only to shore up our faith in our
third floor’s humanizing creed. And as our commitment to that creed
grew, so did our scorn for the first floor’s apostasy. Those first-floor
guys were blind to Truth down there, intransigent, prejudiced, just
plain wrong. They had adding machines where their hearts should
have been. They didn’t even comprehend our sacred words: morale,
motivation, participation. We called the first-floor folks “make-a-buck
Neanderthals.” They called us “the happiness boys.”7
While Leavitt’s story may be a little tongue-in-cheek, it’s not
an exaggeration to say that similar battles still take place, and not
just among academics but also among leaders at all levels of business
organizations. There are serious disagreements about how best to get
employees focused on what the leaders believe to be important to
improve performance and achieve success in the enterprise.
We have watched and participated in many of these debates, in
many companies, and with leaders who inhabit both camps—and
a few who understood the importance of both. But our exposure to
the head-heart debate goes back much further, to well before either
of us got involved in management consulting.
Katz.c01.indd 15 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
16 leading outside the lines
How Katz Discovered the Informal
Katz graduated from Stanford University in 1954 with a degree in
economics, making him, by training at least, a charter member of
the formalist club. He spent his college days immersed in economic
analysis, structured problem solving, and rational decision making.
The United States was still in the Korean War when Katz graduated. Had he waited to be drafted, Katz would have had no choice
about which service he entered, so he decided to apply for the Navy’s
Officer Candidate School. He was accepted, graduated, then went
on to the Navy’s school for Supply Corps officers.
For a formalist like Katz, the military was fascinating. To this
day, he follows developments in the procedures, programs, and rules
of engagement that contribute to effective supply operations.
Katz got his first real assignment, as Disbursing and Helpant
Supply Officer, aboard the amphibious ship USS Whetstone. His
immediate superior, Lt. John Sandrock, had several years of experience in the Supply Corps and fit the stereotypical image of a good
naval officer. He was tall, well-groomed, and commanding in every
way. He maintained a well-defined arm’s-length relationship with
the members of his crew. He enforced rules and regulations to the
letter and demanded that his men do the same.
After a year aboard the Whetstone, Katz was transferred to the
USS Nicholas, then stationed in Pearl Harbor, where he served alongside Supply Officer Lt. Charlie Stewart. The Nicholas was a bit creaky
and rusty, since it was then the oldest active escort destroyer in the
Pacific fleet.
Charlie was Mr. Informal, or appeared to be, anyway, and this
baffled Katz at first. Unlike Lt. Sandrock, Charlie’s uniforms were,
like the ship itself, worn and rumpled. Nor did his conversation
suggest much interest in rules and regulations. But he had very
close relationships with the sailors under his command. And he
Katz.c01.indd 16 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 17
ran a remarkable supply operation. In fact, in Charlie’s final year
of duty on the Nicholas, the ship was awarded the Navy E Ribbon
(E for efficiency) for having the best supply operation in the Pacific
Fleet for its type of vessel.
The win was not accidental. Charlie and his crew had been
working toward the coveted E for three years. The ship had the tidiest store, its disbursing records were flawless, and the storerooms and
inventory were maintained as brilliantly as any Wal-Mart is today.
Even the galley was known for the quality of its food and its speedy
service. Not an easy trick aboard a creaky, rusty old ship at sea.
Although Katz didn’t apply the term at the time, Charlie’s
operation clearly had an informal advantage. Yes, every sailor had
the formal aspects of his job down pat. But that was not what distinguished the group—rather, it was the pride they took in their work
and the emotional commitment they had to their jobs. “I wouldn’t
want to disappoint Charlie,” they often said.
So effective was the supply group that Charlie’s role in it
seemed almost unnecessary. After all, the guys were almost entirely
self-regulated. Charlie rarely made a suggestion, let alone gave an
order. So Katz began to think he was the luckiest guy in the Supply
Corps. When Charlie eventually moved on to his next ship and Katz
took over the post, as was likely to happen, Katz figured that his
job would be easy. He would just follow the rules and procedures
already in place and keep things rolling as they had been. How hard
could that be?
Of course, Katz had so completely focused on the formal elements of Charlie’s organization that he had not really noticed the
informal aspects that Charlie was so good at, thinking them incidental, even irrelevant.
Then came a revelatory moment. It happened during an admiral’s inspection of the Nicholas, which was anchored in Pearl Harbor
at the time. The day before the admiral was due to arrive, the captain
Katz.c01.indd 17 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
18 leading outside the lines
of the Nicholas assembled his officers to review the procedure for
receiving the admiral as he boarded ship. Two of the officers, however, could not attend the meeting. Charlie Stewart was on shore
liberty and William Inskeep was on duty.
A key element of the formal reception of an admiral is a “sword
salute” that requires that the receiving officers smartly, and in unison,
withdraw their swords from their scabbards and snap the handles
to the proper position against their chests. The captain particularly
wanted to discuss the sword salute with his officers, because they
had never actually worn or used their swords, nor had they ever been
called upon to execute the salute. So the potential for serious harm
existed.
Unfortunately, the two missing officers, Stewart and Inskeep,
would be the “officers of the deck” on the day of the admiral’s visit.
That meant they would be the officers closest to the admiral as he
came on board and the ones to initiate the sword salute.
The day arrived. Stewart and Inskeep took their places. The
admiral stepped aboard. Inskeep grabbed the handle of his sword,
clumsily yanked the blade out of the scabbard, and started to raise
it into position. Charlie Stewart, at the same instant, sharply angled
his arm upward and snapped his hand to his forehead in a crisp
salute. Inskeep, his sword in motion, glanced at Charlie, wondering what was going on, and in that split second of wandering focus,
the tip of his blade poked the brim of the admiral’s cap. Everyone
gasped as the cap flew off the admiral’s head and went soaring into
the ocean far below.
Charlie’s informal organization had saved the day for him. It
turned out that, during the meeting with his officers, the captain
had concluded that the sword salute was too complicated and dangerous and had instructed his men to execute the standard hand
salute instead. As soon as Charlie returned from his shore leave,
his men informed him of the change so he was prepared when the
admiral arrived. Inskeep, however, did not have the same kind of
Katz.c01.indd 18 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 19
close relationship with his men and they had failed to give him a
heads-up on the change in procedure. The “it’s not my job, man”
attitude prevailed.
The image of the admiral’s hat slowly sinking to the bottom of
the sea has become a compelling reminder for Katz that the informal
takes care of its own when the formal does not.
It’s interesting that Katz learned the importance of the informal while serving in the military—an organization that surpasses all
others for its focus on hierarchy, formality, rules, and regulations.
And yet what he came to realize is that the Navy (and other armed
forces he has since studied) is so driven by emotion—trust, courage,
fear, loyalty—that it could not function at all without an informal
complement to its rigorous formal structure.
The Overlooked Influence of Emotions
If Katz had asked Lt. Sandrock—he of the well-pressed uniform and
well-thumbed rulebook—if emotional commitment was important
to his operation and if the feelings of his crewmen mattered, it is
likely that Sandrock would have said, “Yes, but not nearly as much
as process and execution.”
Today, when we ask that question of managers and executives,
especially in large companies, their answer tends to be about the
same as Sandrock’s would surely have been.
Formalists view the world through the lens of rationality—they
value logic, analysis, data, and frameworks. They manage through
formal processes and programs (usually devised and enforced by a
select group of senior executives). These formal elements are promulgated through the organization in protocols and memos and
enforced with comprehensive control-and-reward systems. If formalist managers accept that an emotional commitment is important, they tend to believe that it is a by-product of the right rational
Katz.c01.indd 19 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
20 leading outside the lines
approach—employees will eventually see the logic of a good plan
and will feel good about it.
These mechanisms rarely take emotional issues into account,
but that does not mean that people don’t react emotionally to them.
They do—it’s just that their reactions are often more negative than
positive. As a result, they adopt attitudes and engage in behaviors
counter to the plan and to what seems rational to the makers of the
plan. Over and over again, we hear executives say that they just don’t
understand why their employees are not “on board.” Didn’t they get
the memo?
However, rational clarity does not always create the emotional
commitment that motivates a desired behavior. And when emotional factors are not taken into account, organizations fall short of
their intended goals.
The fundamental issue is that formalist managers do not fully
understand or believe in the importance and power of emotions in
effecting change. They discount the degree to which human behavior is emotionally determined. They also see it as difficult, if not
impossible, to manage or control emotional forces.
We do not want to diminish the value of rational structures and
logical plans. At the same time, however, the bulk of our experience
and research over the past several years has caused us to believe that
emotional influences shape attitudes and drive behaviors as much
as logical arguments and rational influences—and often have more
impact.
The Logic of the Formal
Why do managers favor the rational approach and rely on top-down
execution efforts?
Largely because the mechanisms of the formal organization can
be clearly defined, named, captured in written form, and measured.
They include
Katz.c01.indd 20 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 21
• Strategy. A set of priorities, plans, and performance objectives
that guide choices throughout the organization in how to best
use resources and deploy capabilities.
• Structures. The lines and boxes that determine who reports
to whom for what and that help align the decision making
needed to achieve the organization’s strategy.
• Processes and procedures. The written ground rules that
determine the information and work flows needed to
efficiently carry out the organization’s day-to-day tasks.
• Programs and initiatives. Sets of goals, work plans, rules of
engagement, and resources dedicated to achieving specific
objectives within defined time lines.
• Performance goals and metrics. The explicit targets and
measures that can be used to monitor and evaluate the
performance of different groups and individuals.
Virtually all of these formal mechanisms can be found in official documents. In fact, the capture of these formal mechanisms in
written form is crucial. It enables them to become fixed, made available for approval and subsequent reference, and easy to distribute to
large numbers of people in precisely the same way every time. This
is how the formal lines of organization become well known.
Unlike face-to-face meetings, conversations, social networks,
and actions—which are more ephemeral—these formal documents
bring precision and permanence. They officially document the outcomes of rational and analytical problem-solving processes. They
carry a sense of authority. The organization chart, the role description, the scorecard—all can be referenced in ways that are especially
useful in times of disagreement or disruption.
All of this is sensible and good. The formal comprises the nutsand-bolts hardware that runs the machinery of business. Formal
mechanisms provide time-tested templates that users of leadership
systems can understand and follow and that can be passed along
Katz.c01.indd 21 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
22 leading outside the lines
from one generation of leaders to the next. The formal organization
helps create efficiency, clarify authority, communicate priorities, and
align rationally driven behaviors around common objectives. Every
company needs these logical things, so it’s no wonder that most
leaders rely so heavily on the formal—and therefore lead primarily
within the lines.
Rationality Has Its Limits
When formalist leaders want to make a change of some kind, however, their reliance on the formal organization may not serve them
so well. They invariably overemphasize the rational case, especially
when they want to make an unanticipated change of some kind,
explaining in excruciating detail why the new plan is important.
They will explore what competitors are doing, describe customer
segmentations, go through elaborate financial forecasts, discuss corporate objectives at length, and explain scorecards in endless detail.
Their assumption is that once the rest of the organization understands the logic of why certain behaviors are important, they will
get it and do what’s expected. If it’s rational and explained properly,
there shouldn’t be a problem.
But there often is. For a workforce to be motivated to make a
change in behavior, people need to believe that their individual and
team efforts have a meaningful personal purpose that connects them
emotionally to important priorities of their work situation. To that
end, leaders need to be able to translate vision, targets, and strategies
into personal purpose, accomplishments, and choices that each one
of their people can understand and feel good about pursuing.
It’s impossible to do this without drawing on strong emotional
support. That’s why formal methods frequently fail to elicit the level
of performance that many leaders want. They are “rationally conKatz.c01.indd 22 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 23
strained.” They simply don’t allow room for the emotional determinants of behavior. These exist outside the lines of rational argument
and the formal organization.
Any effort to create rational understanding has rapidly diminishing returns if it does not take into account that people’s choices
and behaviors are determined as much by emotional responses as by
logical argument—and the former seldom follow the latter.
That’s where the informal comes in.
The Magic of the Informal
The informal isn’t as easily defined as the formal, because it does
not have the clear structural boundaries that the formal has. Its elements often overlap and don’t follow the clean principles of “mutually exclusive, comprehensively exhaustive” that analytical thinkers
prefer. In essence, the informal is the aggregate of organizational elements that primarily influence behavior through emotional means.
And, unlike the formal elements, the informal elements of an
organization rarely appear as written instructions. Even so, they can
still be identified and named. They include
• Shared values. These are the shared beliefs and norms
for taking action and making decisions as demonstrated
individually and collectively. These often differ from the
values that are formally stated and displayed. For example,
some organizations have an unspoken (and unwritten) norm
for avoiding open conflicts, instead resolving them behind
closed doors.
• Informal networks. These are positive patterns of relationships
between people that may be based on knowledge-sharing,
trust, energy, or other characteristics. Savvy people—the
Katz.c01.indd 23 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
24 leading outside the lines
ones others seek out for their insight—are often called hubs,
and these go-to people play critical roles in forming and
maintaining informal networks. To envision one of your
networks, consider the people you go to outside the normal
hierarchy for career advice, political wisdom, or special
expertise. Or the ones you share speculations with about
“what is really going on here” when uncertainties prevail.
• Communities. These are more focused, cross-functional groups
that share a common identity and practice. In some ways, a
community is a more bounded network with a higher density
of intergroup relationships, in addition to a common focus
or reason for existence. One example might be a community
focused on environmentally sustainable ways to do business.
Another might be cigarette smokers who convene and interact
daily in the designated outdoor smoking areas. A third might
be minority groups who provide each other with informal
support and mentorship.
• Pride. People feel proud when they use their skills to realize
goals that are meaningful to them. The goals vary by
individual. For example, a CEO may be proud of closing the
latest acquisition deal, while a service representative may be
equally proud of solving a loyal customer’s complaint. Pride,
and the anticipation of feeling pride, is a strong behavioral
motivator. The pride is deepened when accomplishments are
valued by people the worker respects outside the workplace,
such as family members or mentors. Their approbation
multiplies the motivational impact.
It can be an advantage that the informal elements are not written down and fixed. For example, it’s easier to try new things when
the rules are not rigidly codified. Networks and communities spring
up faster when fueled by peer interactions within the informal orgaKatz.c01.indd 24 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 25
nization than when ordered with an edict from the top. A sales rep
who gets a spontaneous accolade from a customer feels far more
pride—and more immediately—than any formal metric or monthly
tracking system could inspire.
Sometimes we’re asked if there is a difference between the informal organization and culture. It’s a good question because the two have
common elements and therefore can seem to be the same, but there
is an important distinction. Our desk dictionary (Merriam-Webster’s
Collegiate, 10th edition) provides a good definition of culture as “the
set of shared attitudes, values, goals and practices that characterizes
(human behaviors in) a company or corporation.” This definition,
which we and many leaders would agree with, puts human behaviors at the center of culture, and human behaviors always involve
both rational and emotional dimensions, as well as formal and informal components. Culture can also be more simply and colloquially
described as “the way things are done around here.”
The informal organization is better described by its mechanisms, most of which can be clearly identified and consciously influenced, and that link very closely with other cultural elements. Charlie
Stewart’s men, for example, had an informal mechanism for keeping
him informed about fluid situations that enabled him to perform
effectively when the time came. The mechanism no doubt developed
over time as a result of the intense loyalty that Stewart and his men
felt for each other.
It is difficult, if not impossible, to change a culture directly by
trying to mandate a change in values like loyalty. It would not work,
for example, to command Inskeep’s men to be more loyal to each
other. What does that mean? How does one go about doing that?
However, had Inskeep been as sensitive as Stewart was in developing
specific mechanisms that built emotional commitment among his
men, they would have never let him down by not letting him know
about the change in “salute plans.”
Katz.c01.indd 25 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
26 leading outside the lines
Culture change can be effected, therefore, by adjusting the mechanisms of the informal organization in ways that tap into the underlying elements of human behaviors and result in the desired performance
improvements. While programmatic change efforts driven through the
formal organization can also change culture, they do so much more
slowly and often with undesirable side effects from negative reactions
and resistance to being programmed.
Unlike the formal, the informal construct is not strategic, analytical, logical, efficient, or enforceable. Nor is it manageable in the
usual sense of that term. It is intuitive, personal, emotional, immediate—and it can be influenced. It is uniquely good for motivating
people to go above and beyond their job duties, communicating
information quickly and meaningfully, catalyzing collaboration, and
accelerating behavior change. What exists outside the lines isn’t as
clearly defined as what exists within the lines.
The Organizational Quotient
The Spanish bank Caja Navarra—known as CAN—has pioneered
a new business model called “civic banking” that weds profit with
social responsibility. The informal played an important role in
enabling the company’s CEO to transform what had been a typical, hierarchical Spanish community bank. For example, CAN hires
people who do not have typical banking experience and places as
much emphasis on their ability to work with customers as on their
technical banking skills. The bank encourages employees to define
their roles more broadly than as the collection of the tasks required
in their formal positions. The focus on customers and civic service
leads to the creation of informal networks both within the company
and with people in the outside community. As a result, CAN has
achieved real and positive social impact along with healthy profits.
Katz.c01.indd 26 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 27
Although Caja Navarra helped create its transformation
through the informal organization, that does not mean that it abandoned its formal processes and practices. No bank could survive
without them, after all.
In fact, the employees who are most effective in any organization invariably recognize the importance of both the formal and
informal. People who take on a new position, in particular, find that
the best way to succeed is to get smart quickly about how the informal side of an organization actually works rather than learning the
formal processes governing how things are supposed to work. Some
companies, like CAN and Google and Southwest Airlines, make this
intuitive capability to sense the informal a criterion for new hires.
The characteristics of the formal and informal organizations
can be compared to the differences between the traditional measure of intellectual ability, the intelligence quotient or IQ, and the
emotional intelligence quotient or EQ. IQ purports to measure a
person’s rational skills and intellect through a battery of verbal and
numerical performance tests. In school, students with high IQs tend
to perform well and then attend prestigious institutions of higher
learning, from which they move to careers requiring “book smarts.”
Most of the activities in the formal organization involve IQ skills:
forming strategies, analyzing processes, designing structures, and
creating integrated performance metrics.
However, it has long been argued that IQ does not measure
all aspects of intelligence. In the past ten years in particular, the
idea of emotional intelligence, or EQ, has gained currency in management thinking, largely thanks to the book of the same name by
Daniel Goleman.8
The origins of the concept, however, go back to
Charles Darwin’s work on the importance of emotional expression
for survival. Darwin realized that empathy became an evolutionary
advantage for primates because it greases the wheels of sociability. In
the 1920s, Edward Thorndike, a professor at Columbia University,
Katz.c01.indd 27 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
28 leading outside the lines
coined the phrase “social intelligence,” which he described as the
ability to understand and manage people.9
Goleman’s book made such an impact, in the United States and
around the world, that he expanded the concept to the workplace
in his second book, Working with Emotional Intelligence. He writes,
“The rules for work are changing. We’re being judged by a new yardstick: not just by how smart we are, or by our training and expertise,
but also by how well we handle ourselves and each other.”10
IQ comes into play in the world of strategies, structures, and
metrics. EQ is necessary to instill values, build relationships, and
emotionally engage people with their work. A manager—indeed,
any employee—can achieve extraordinary performance by knowing
when to draw on IQ and when to employ EQ. Those who can do
this have what we call a high “organizational quotient,” or OQ. The
ability to achieve this balance distinguishes the best managers from
the formalists (who are highly reliant on IQ) and informalists or
“relationship cultivators,” who are much stronger in EQ.
Knowing When to Emphasize Logic or Magic
The formal is best used for predictable and repeatable work that
needs to be done efficiently and with little variance. The predictability and repeatability of the work warrants the effort to develop the
infrastructure of the formal organization, which can be documented
and constantly improved upon to improve efficiency and remove
variation. Payroll distributions are a good example.
Conversely, the informal is best applied against unpredictable
events. Issues that arise outside the scope of the formal organization
are often surprises that need to be sensed and solved. Increasingly,
people who need to do the solving need to be motivated outside
the reward system, collaborate across organizational boundaries, and
Katz.c01.indd 28 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
the logic of the formal; the magic of the informal 29
make decisions with little guidance from formal strategies. In many
cases, activity in the informal organization starts to repeat itself,
which is a signal for broader changes that need to be made to the
formal organization.
Another distinction is that the formal organization is typically
constrained by the doctrine of “best practice.” A common desire
across all organizations is the relentless pursuit of best practice as
a means of improving performance in various functions, departments, and levels of management. The theory is simple: “If we can
determine and apply proven best practices, we should be able to
perform at the top level in our industry.” However, great leaders are
seldom satisfied with the formal spreading of best practices. And to
go beyond best practice requires a level of insight, risk taking, and
trial-and-error responsiveness that demands understanding and harnessing of the informal. This is often the magic that separates “best
performance” from “best practice.”
Characteristics of the Formal and the Informal
Formal Informal
Efficient Adaptive
Scalable Local
Predictable Innovative
Controlling Motivating
Clear Ambiguous
Disciplined Spontaneous
Hierarchical Collaborative
Rational Emotional
Katz.c01.indd 29 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.
Katz.c01.indd 30 2/10/10 10:24 AM
Khan, Zia, and Jon R. Katzenbach. Leading Outside the Lines : How to Mobilize the Informal Organization, Energize Your
Team, and Get Better Results, John Wiley & Sons, Incorporated, 2010. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/upenn-ebooks/detaCreated from upenn-ebooks on 2022-03-16 17:29:22. Copyright © 2010. John Wiley & Sons, Incorporated. All rights reserved.

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