Continuing the alternate week pattern of posting chapter extracts from the forthcoming third edition of my book “Guide to Organisation Design,” this week’s extract is the opening section of Chapter 8, Leadership, followed by an extract on external formal leaders from later in the chapter.  Next week will be a discussion related to this chapter.

Chapter opening paras

Organisation design success hinges on the complex interactions of four broad leadership groups:

  • Internal formal leaders – those appointed to a leadership role within an organisation
  • External formal leaders – those in government, regulatory or expert advisory roles
  • Internal informal leaders – those who take on a leadership role within an organisation but have no formal appointment to it
  • External informal leaders– those by virtue of visibility and/or credibility head movements or sway opinion

The way the power is wielded by the four groups of leaders continuously interacting is an important determinant of the passage and outcome of design work often raising challenging tensions, paradoxes and dilemmas that call for sensitive handling. 

Each of these groups is likely to have at its disposal four sources of power. 

  • Power over:  ability to control or dominate e.g. Power over people, Power over communication and messaging
  • Power to: individual ability to act to make a difference e.g.Power to use own expertise, Power to make meaning
  • Power with: ability to act with others to build across different interests or bring together resources and strategies, e.g. Power to develop collaborative relationships, interpersonal alliances and networks.
  • Power within: individual sense of self-worth, value, dignity e.g. Power to manage uncertainty, reputation, credibility

The chapter then discusses each of the four groups of leaders and the way they wield the four sources of power.  Below is the section on external formal leaders.

External formal leaders

The impact of external leaders on an organisation’s design is less frequently factored into the design work, except perhaps through stakeholder mapping and interaction. Nevertheless, it can have a powerful impact.  Using ‘power over’ government leaders and regulators can direct organisations to do something. This may well result in the initiation of a redesign project in order to comply. 

For example, the Chinese Government, in late 2020 suddenly ‘halted the $37bn flotation of Ant Group, the payments affiliate of Alibaba, China’s biggest e-commerce giant, days before it was due to list in Shanghai and Hong Kong’. [1]   Ant Group did not respond to questions on what this meant for them, but it is likely that a considerable amount of redesign work came into play. 

The shifting international geo-political landscape led by governments puts a burden of continuous design on organisations: the US’s sanctions on Huawei, was reported to have crippled Huawei’s smartphone business and curtail its international networking division. The UK government banned telecoms providers from installing Huawei equipment in the UK’s 5G mobile network from September 2020, other countries did similarly.  These rulings have led Huawei to look for other business opportunities, and several telecoms companies to determine how to re-design their operations in the absence of a planned for Huawei presence in their country’s 5G networks.

Other government rulings, for example on issuance of visas to immigrants, net-zero emissions targets, or disasters and emergency responses require ongoing re-design of aspects of many organisations’ operation.  

In the early part of 2020 US President Donald Trump used the powers of the Defense Protection Act to compel some manufacturers to produce supplies to support the response to the coronavirus pandemic.  Companies forced to comply included General Motors, General Electric, Hill-Rom, Medtronic, ResMed, Royal Philips, Vyaire Medical, 3M.

Vyaire Medical’s compliance response involved retooling and expanding its manufacturing capacity and scaling up the workforce dramatically, with the goal of increasing output, in CEO Gaurav Agarwal’s words to ‘exponentially, and as quickly as possible, to help frontline responders and health systems manage and treat critical conditions due to COVID-19’.[2]

Leaders of activist funds, using ‘power to’, can force design change.  In 2021, Emmanuel Faber, the Executive Chairman of Danone, a French, multinational food producer, was dismissed following what was termed a ‘revolt by activist funds unhappy at the group’s performance under him.’[3]  This triggered large scale re-design as Danone struggled to restore competitiveness. 

In much organisation design work, external consultants use their expert power to advise on and propose options for new designs, for the most part to senior leaders.  This can be beneficial, although over-reliance on external consultants can be detrimental as their own business models and the way consultants are required to meet their organisation’s objectives, may not always mesh with the best interests of the organisation they are providing advice to.

Trade Union leadership also has power to influence organisation design in various ways.  The Uber example (Chapter 6) of union leaders making the successful legal case that drivers be considered employees of the company rather than self-employed contractors is one example.  In the UK Union leaders helped the Government draft the Job Retention Scheme (part of the Government’s response to the Covid-19 pandemic), having significant impact on the way organisations were able to adapt their designs in response to the pandemic.

These types of external formal leaders typically use somewhat different power sources from internal formal leaders. Nevertheless, they can have a significant impact on an organisation and its design.  Usually, they appear on stakeholder maps but one of the limitations of stakeholder maps is that they are typically drawn from the perspective of the organisation to the stakeholders.  Stakeholders may have their own maps working, as it were, in the opposite direction, in many instances organisational leaders may not be able to dominate or manage the external leader relationship. 

Reflective question:  What external formal leaders beyond those discussed can have an impact on an organisation’s design?  What is the role of internal formal leaders in relation to these stakeholders? (NOTE the discussion of internal formal leaders precedes the discussion of external formal leaders)

Image: Transforming narratives. https://www.britishcouncil.pk/programmes/arts/transforming-narratives

[1] https://www.economist.com/business/2021/01/14/beijings-approach-to-business-grows-increasingly-muscular

[2] https://www.vyaire.com/news-events/vyaire-medical-steps-operations-response-coronavirus-pandemic

[3] https://www.thetimes.co.uk/article/clash-of-cultures-blamed-as-danone-boss-gets-the-sack-tddpm8tzp