To be effective, business leaders need to fully understand how power operates in their organizations and the organizations of their customers. Since today’s organizational charts often do not reflect actual power structures or how decisions get made, it is vital to understand the dynamics. Here are a few observations of how power operates inside organizations.

💥 Power flows through informal human networks.

Unlike formal, public, or organizational structures, relationships within informal systems are negotiated as “social contracts” and are personalized in one-to-one communications. These informal human networks fail to tolerate excuses or breaches of confidentiality. They are also highly successful in getting things accomplished across organizational boundaries. Ultimately, invisible informal systems make both formal organizations and informal organizations work.

Example: The high-growth Internet service provider (ISP) Mindspring was founded in 1994, then exceeded a $1.5B valuation within five years, and outgrew many similar providers in the second half of the nineties. Only the giants of AOL, CompuServe, and Microsoft Network exceeded Mindspring’s growth. Yet Mindspring did virtually no advertising nor embarked on any heavy marketing campaign.

The enthusiasm of its customers spread the word like high-tech wildfire, not only over the Web but voice-to-voice and face-to-face. The Mindspring human network, as informal as such things get, made this brand-new company a marketplace winner. Fueling was their culture, notably one of their core values “We make commitments with care and then live up to them.” For more details on their success story read Mindspring Does a Mind-Flip

💥 True cooperation is not formalized.

Informal systems seek to remain private and hidden. The strongest currencies, i.e., vehicles of value exchange, in an informal system are delivering information, introductions, or ideas without taking credit. The informal system becomes harder to stay connected with as you move up the corporate pecking order where power, more formalized there, depends on receiving credit. In the informal system, however, do not expect credit to flow your way.

Example: Although he never held formal office, was not a wealthy man, nor was known for any special talents, skills, or knowledge, Mohandas (Mahatma) Gandhi is credited with driving the British Empire out of India. How did he do it?

In the beginning, Gandhi spent whatever time he could spare speaking to whoever would listen about the need for Indian independence, the potential benefits, and the implications for the future. He also shared his thoughts on the immorality of the British presence in his homeland.

After speaking everywhere he could for some time, Gandhi eventually stopped talking and began walking, specifically from Calcutta to the Indian Ocean. As he walked, an informal human network gathered around him, growing in greater and greater numbers each day to support his views and stayed by his side until he reached the sea. By the end of his trek, India’s newest leader had acquired such power of numbers that British authorities recognized their power had disappeared and quietly packed up all their belongings to depart their “possession” for good. True power—cooperation—is not formalized.

💥 The grapevine is a source of power.

It is worth understanding group dynamics and how opinion is shaped in an informal system. People tend to create their informal grapevines by clustering, generally, in groupings of four to six (just like grapes). Clusters of four to six are natural work groups and table sizes. Clusters usually get formed through self-selection, similarity, or common agendas. Clusters establish, automatically, their opinion leaders and interact well with the rest of the network.

Example: We’ve all observed, in just about every group we’ve participated in, that some individuals are quiet and some are not. Those who are not often become opinion leaders. Those who are quiet are asked if the group’s leader is alert to the problem, “Now, Joy (or Ben or Pete or Joan), we haven’t heard from you in a while. What do you think about this issue?”

To become an opinion leader in an informal human network, you must frequently contribute useful, fact-based, analyzed, and new information. That’s it.