There are three structures that exist in all organizations, with three different sources of power, and three types of leadership required for each structure. This is the thesis that Niels Pflaeging puts forth in Organizational Physics.
- Formal Structure – Hierarchy – Compliance Leadership
- Informal Structure – Influence – Social Leadership
- Value Creation Structure – Reputation – Value Creation Leadership
This model of structure, power, and leadership reflects how knowledge flows in a networked society and economy. It also reflects the types of networks we need to engage with in order to create value: Connectivity, Alignment, Productivity. These are described in my perpetual beta working model. Niels explains how we need to understand and design for our networks (Value Creation Structure) before we create the Formal Structure.
“It is Value Creation Structure that should come first – not Formal Structure. Only by putting Value Creation first, organizations can find balance. Achieve great leaderships. Become aligned with Org Physics as they are.”
This is the same perspective that individuals should have in their professional lives. If you have a large and diverse social (Connectivity) network, everything else will fall into place. Your reputation will be a result of the value you contribute to your professional social networks, including clients. From these networks you will be able to identify or build communities of practice to engage with fellow professionals (Alignment Network). With these established, getting work done in the formal hierarchy (Productivity Network) becomes an emergent practice of the other two networks. Engaging this networked knowledge triad is based on the discipline of personal knowledge mastery and the Seek > Sense > Share framework as we constantly shift between engaging with ‘un order’ so that we can create something of value in a state of ‘order’.
In the network era, connected leadership is about helping our networks make better decisions. To remain responsive to the requirements of our Value Creation Structures, we have to keep our hierarchies in perpetual beta. This outside-in perspective can counter the negative effects of institutional era tendencies such as ‘loyalty to the organization at all costs’, or the market era fixation of ‘profit above all’. The network era requires its own organizational structures, not something designed over a century ago.