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Leading Outside the Rules: Corporate Culture and the Smell of the Place

May 13, 2010
Updated October 7, 2014

All organizations have rules, policies and procedures, regardless of whether they’re in the public, private or not-for-profit sectors. This can be called, for want of a more sexy expression, the “formal” organization. Companies and governments have been guided by formal organizational structures for hundreds of years: kings, queens, presidents, prime ministers, and (yes) despots and dictators like Stalin, Mao and Hitler.

In the context of corporate leadership, employees (at all levels, leading up to the CEO) have come to blindly accept that hierarchies and rules are a given, that they’re a necessary evil and that without them chaos would reign. Maybe so.

However, what often gets overlooked is that the REAL way that work gets done, how tough problems are solved and how an organization’s true leaders often emerge is through what’s called the “informal” organization. Call this the underground organization if you wish, but it’s the composite of the organization’s norms, expected behaviors, real values (as opposed to what’s espoused by senior management), tacit (undocumented) knowledge and informal people networks.

At this point some of you may be saying, “hey, this is the organization’s culture.” Indeed it is. I recall reading a management book many years ago in which the author referred to the “smell of the place” when one enters an organization. Reflect on this for a moment. When you enter your workplace, or think about a previous place where you worked, what do you sense when you enter it? Are people smiling and engaging with one another? Is the boss’s door open? Does management use the same cafeteria as staff?

I recall one organization I worked at some time ago. When being given the tour as a new employee, I was told by my guide that staff were forbidden from getting water from the assistant deputy minister’s cooler (similar to a VP in a company). Other places where I’ve worked have had senior managers behind locked doors with highly restricted access to employees.

In my 30-plus years in the workforce, it’s never ceased to amaze me how seemingly nice people who may be neighbors, friends, acquaintances, or folks with whom you do volunteer work can act so bizarrely at work. I’m sure that most people don’t wake up each morning, saying to themselves, “Today at work I’m going to provide crappy customer service.” Or, “Today, I’m going to hoard information and take down that idiot Fred who works in HR.” Or how about: “Today, I’m going to micro-manage Mary since she’s incompetent.”

Raise your hand if you’ve ever had thoughts similar to this.

As supposedly rational human beings, we’d never want to admit to such petulant thoughts, let alone carrying out such actions. Yet it happens every day in organizations. Why? Good question. Perhaps it’s related in part to compartmentalizing human beings in rigid, artificial organizational constructs, in which they’re treated as if they have the IQs of lampshades.

Waterloo The big challenge when it comes to corporate leadership is determining the minimum formal organizational structure against enabling the underground, informal organization to flourish. This is where you find the tension, which is constantly in flux, based on external opportunities and threats that affect the organization.

Finding the right formal-informal approach is a work in progress, with so much of it dependent on who’s leading from the top. Just when, for example, employees feel that things are improving and they’re being listened to, there’s a change at the top and the heavy, dark hand once again appears, dampening the flame of people engagement that was emerging. Of course, the reverse is true when new enlightened senior leadership enters the scene.

Leading outside the rules is a balancing act, both from a senior managerial perspective and from deep within the bowels of the organization. Given the emergence of new competitors from around the globe, as I’ve discussed in previous posts, it’s absolutely imperative that public and private organizations learn how to become more adaptable to change and to react quickly to both threats and opportunities. Many of an organization’s true leaders reside at what’s called the working levels. Whether they’re thought leaders, network leaders or relationship builders, these employees are extremely important to serving as catalysts to creativity, innovation and positive change.

The next time you enter your workplace, or any workplace for that matter, pause for a moment and use your senses to soak in the vibes being given off. What do you smell? And do you want to work there?

You can and should shape your own future; because if you don’t someone else surely will. (Joel Barker)

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5 Comments leave one →
  1. June 30, 2011 8:23 pm

    I think the reason this behavior you describe happens at work is that going to work often puts employees in competition with each other, in a similar way to the way brothers and sisters are in competition while growing up in the same household. I don’t think most people set out to behave that way (although some certainly do), but everyone wants to be viewed most positively by the boss, in the same way that children in the same family compete to be viewed most favorably by the parents–it’s probably an unconscious striving in many people’s cases.

    • June 30, 2011 9:11 pm

      Thanks Lynne. What senior management in many organizations, private and public, misunderstand is that unless “competition” among employees or work units is focused on common organizational goals and priorities, the result is mayhem. Crappy customer service and poor product quality.

  2. May 13, 2010 2:40 pm

    Great questions, Susan. It would be great to get the insights of an industrial psychologist, or someone who’s studied this subject. Maybe one reason is that organizations as artificial constructs dehumanize people, and some people assume different personalities. In a management context, people lacking a moral compass or who have a past bullying others, for example, are extremely dangerous to organizations as a result of the damage they wreak. Indeed, just look at some recent lawsuits against employers whose employees were bullied, harrassed, etc. by supervisors and managers. I’ve hot some hum dinger stories I’ll save for a later time.

  3. May 13, 2010 2:27 pm


    I’m raising my hand. Like you, I’ve wondered how seemingly nice people could be so dastardly at work. Is it just that you get to know the person well and so you see their true side? Is it that their power at work makes them feel entitled to treat others poorly? Or is it that they mistakenly believe that’s how to be effective in the workplace?

    I’ve worked in several companies where the corporate culture was comparable to a dysfunctional family. It’s always surprising that managers/leaders don’t perceive the problems and therefore don’t strive to fix them.


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