Organization: Power lurks in the shadows

Where there are people, there is power and its quests.

Illustration Anja Reponen

Annukka Oksanen, 31.10.2017

Long forms

True power cannot be seen in an organizational chart, but lurks at the company’s seams, erupting as passive resistance or a sudden outburst of tears. Journalist Annukka Oksanen embarks on an expedition into power structures that are hidden.

Where there are people, there is power and its quests.  

Management, middle management, subordinates. Taskforce, team, network. Matrix, line organization, cellular model. Power outlined in an organizational chart denotes formal governance and authority, while informal, hidden power lurks in the shadows.

Although hidden power may sound like a dirty word, power as such is neither dirty or clean."

Although hidden power may sound like a dirty word, power as such is neither dirty or clean. It simply exists. But the way it is used is a defining feature. Does an agile, idea-rich network harness power as a resource, or does power outwork itself as fear-mongering conniving?

This article seeks to find out what type of power remains hidden from an organizational chart.

“I’ve never come across an organization without a power structure. Some type of system always forms even if by force – formal or informal”, states Eero Vaara, Professor of Organization and Management at Aalto University.

“Power is a neutral concept, which refers to social activity among human beings that can be harnessed either for good or bad”, characterizes Kristiina Mäkelä, Professor of International Business and Vice-Dean for Teaching and Learning.

The role of informal power along with the significance of social capital, networking, and expertise have become signs of our times. 

“Governance and power are two different things. We are now in an era where other types of power besides formal authority are increasingly prominent”, describes Pekka Mattila, Group Managing Director and Professor of Practice at Aalto University Executive Education.

“The role of knowledge and relationships are heightened. Power is more diversified”, continues Olli-Pekka Kauppila, Assistant Professor of Organization and Management.

***

In the conventional, hierarchical pyramid model, the authority of CEOs was established on their position, and their mighty orders were rarely questioned openly.

“The former way of thinking was that the director’s authority was reduced if he or she delegated power to a subordinate, whereas now sharing power is a mark of a good leader”, remarks Sari Kuusela, D.Soc.Sc., author and HR Director at Lähi-Tapiola, who has researched power in companies.

Power restlessly seeks out new routes."

As ways of working transform and the ideal of freedom of individuals strengthens, power restlessly seeks out new routes. This shift is further accelerated by technological advancements.

“We still have a far too linear and Taylorian view despite being at the brink of a major, disruptive change”, Mäkelä predicts.

Scientific management that became known as Taylorism was a theory coined by Frederick W. Taylor (1856–1915) that revolutionized industrial manufacture in the early 1900s. It refined a linear production process by dividing it into segments. 

Taylorism is no longer enough for directors, nor for employees.

If job ads are anything to go by, ideal employees are creative extroverts with a burning passion. The youngsters of the labor market, millennials, crave constant feedback, refuse to bow down to authority, and seek a deeper meaning for their work – a mission. They don’t see why someone’s power should merely be based on formal position. What?

You cannot motivate these people by shouting out orders from the top of the pyramid. And directors who are unable to motivate employees lack power. It’s high time we say our goodbyes to leadership based on giving orders, its Finnish specialty known as ‘Management by Perkele’.

Since the rise of the steam engine, electricity, and electronics, we are now in the throes of a fourth industrial revolution, which merges the physical, biological, and digital realms. In the tumult of this revolution, work is no longer the same.

An increase in personal freedom causes corporate power structures to break down.”

Mäkelä mentions three major changes in the world of work that reshuffle power in corporate organizations: the loosening of ties between work and leisure time, work and the physical workplace, and work and employment relationships.

“An increase in personal freedom causes corporate power structures to break down.”

At the same time, the traditional pyramid model based on giving and receiving orders crumbles.

“We are heading towards personal authority, which increases the role of expertise and social networks”, Mäkelä adds.

How to control and manage when employees are no longer bound by employment contracts? Or when they no longer abide by working hours or a physical workplace?

Organizational charts have already reacted to changes outlined by Mäkelä: they are lower and increasingly favor network-based, flexible cell organizations.

***

A couple of years ago, United Health Programs of America was accused of forcing employees to participate in prayer circles and say “I love you” to co-workers.

The practice known as Onionhead encouraged employees to share personal issues with one another, thank God for their jobs, and read out spiritual texts. Employees who refused to adhere to the doctrine were fired. The consultant who first introduced the practice wanted to kindle a sense of warmth in a gloomy office atmosphere, marketing it as a “unique heart-based corporate culture”. After losing their jobs, some employees sued the company for discrimination.  

The pyramid breaking down is evident also in corporate cultures."

The pyramid breaking down is evident also in corporate cultures. Now people are seen as holistic, fascinating characters rather than formal, dryish workers. Office dogs, a bar cart doing its rounds on a Friday, and co-workers taking part in a marathon together are all telltale signs.

The Onionhead practice may sound ridiculous, but according to Pekka Mattila, drawing parallels between companies and cults isn’t quite as absurd as first meets the eye.  

“It’s always first about being brothers and sisters. Usually, the end result is a dictatorship led by one or two, disguised under a hippy pattern”, illustrates Mattila.

Slipping towards a dictatorship can be explained by a shared, strong value system or mission that helps to tolerate discomfort.

Values bypass status.” 

“Values bypass status.”

In other words, a cult phenomenon requires a strong mission – a deeper meaning, which is what millennials are after in their work, too.  Body Shop is a fine example of a genuine mission evolving to a successful business.

“The Body Shop’s founder Anita Roddick was proud of the fact that her company’s first organizational chart wasn’t created until it employed over a thousand people. She didn’t have to face all the mess, which her workers tolerated thanks to the shared, strong value system.”

The phenomenon is particularly evident in the health care sector and church as a workplace, where work communities may suffer, but it is stomached, as work feels rewarding and there’s a higher calling.

Tech startups are increasingly scorned for their “bro culture” among sneaker-wearing, eternal young boys. Bro companies employ few women, as the mood is not only fun but often openly sexist. In the long run, also this shadow power structure is detrimental for a company.

***

“Does craving formal authority make me old-fashioned?” asks Elina Yrjölä, Key Account Director at Opteam, a Finnish staffing, recruiting and coaching company.

Yrjölä appreciates the clarity that comes with formal power relations, so her craving isn’t only based on having less power in her current role than before. Her previous positions include business unit head and member of executive committee. She also ran her own company.

“It’s interesting to notice this side in myself. I hope others identify their own power strivings, too.”

Yrjölä readily admits to wanting a lot of power and to use it a great deal, too.

“A lack of power is frustrating when something doesn’t go the way I want.”

Experts at Aalto University do not see Yrjölä as old-fashioned. A company is after all a group of people seeking to achieve a joint goal, harboring “the entire human spectrum, in good and in bad”, as described by Kristiina Mäkelä, Vice-Dean for Teaching and Learning.

Organizational charts, bureaucracy, and legislation have been created to curb the bad – otherwise companies end up in chaos.

Formal power creates a sense of fairness.”

“Formal power creates a sense of fairness”, states Pekka Mattila from Aalto University Executive Education.

Equal treatment is more straightforward and reliable once it is formalized. 

Also owners need to be able to control their capital; very few would be ready to trust others with what they own without any control in place.

“Formal power and structures form an organization’s foundation, if they are clear, transparent, and open”, summarizes Sari Kuusela.

***

Top management was recruited from outside to execute large-scale changes.

One by one, the existing CEO annulled every single decision made by a new executive. He listened to people of his own age lower down in the company whom he had worked alongside and befriended over the decades. The new executives found the situation incredibly frustrating. Finally, a major purge was carried out, and several elderly employees were let go. The company was accused of ageism, but it was actually a case of dismissing people with hidden power to allow new winds to blow through the company.

“In a buddy organization of this type, directors need a great deal of maturity and integrity for recovery to begin. A cleanse isn’t necessary if management gets a grip on leadership, but longstanding practices can be difficult to change”, analyzes Pekka Mattila.

Situations of this type are inevitable when directors fail to use the authority that belongs to them. Authority does not exist if it isn’t used.

Trust is built over a long period of time, but can be lost in a matter of seconds."

“Trust is built over a long period of time, but can be lost in a matter of seconds”, adds Kuusela. 

Tricky shadow power structures also ensue when the organizational chart is adhered to scrupulously, pretending that a shadow organization doesn’t even exist. A big enough gap between reality and appearances creates cynicism. Take Soviet Union for example. 

“It’s a dream of a linear world that can be drawn on paper, but that’s not how it goes”, says Mattila.

“Reality is never like the official organizational chart”, Vaara agrees.

Reality is never like the official organizational chart.”

But there are cultural differences; in South Korea, for instance, power being in other hands than outlined in the organizational chart isn’t covered up in any way.

“They can openly say that the papers have been signed, but it’s 80-year-old so and so who has the last word”, Mattila explains.

The phenomenon also exists in European and Anglo-American cultures. A retired boss or predecessor may continue to pull the strings for some time, although usually hidden power during the transition period wanes pretty quickly.

“Clinging obsessively to formal authority is a Germanic and Anglo-American phenomenon. It seems to be emphasized in countries where views on society and power are based on Max Weber’s Protestant Ethic and the Spirit of Capitalism”, Mattila notes.  

According to studies, the higher you climb in the organization and further east you go geographically, the more acceptable organizational politics become.

“People without power usually think of it as more absolute than it actually is”, assesses Yrjölä.

Emphasizing formal and frowning on informal power is evident in disputes that arise around new appointments."

Emphasizing formal and frowning on informal power is evident in disputes that arise around new appointments. 

“Squabbles often arise when people fail to see social capital as a reason to appoint someone, yet networks and relationships can be crucial for the task. The old-fashioned Finnish way is to take out a ruler and measure who has the longest career. Already in Sweden and Denmark, social capital can be more of a valid reason for an appointment”, Mattila highlights.

“Over here, networking can sometimes even be considered a bad thing”, Elina Yrjölä mentions.

According to Mattila, this inclination is taken to the extreme in Finland, where “protestant ethics and undervaluing social skills collide”.

In Mattila’s view, it’s rather easy to see why certain decisions have been made when you look at controversial appointments from the inside. “Sometimes it seems for the best of the person who wasn’t appointed.” Sometimes a person just doesn’t fit in even though s/he is formally competent.

Vaara thinks that rationality is taken to the extreme in Finland due to its consensus-oriented social model and key role of a handful of large corporations.  

“They have had a central role and exercised a great deal of influence in our national business system”, says Vaara. As a result, companies have gained their fair share of informal political power. 

***

In the 1900s, time and again large companies important for the Finnish economy had their way in terms of an advantageous monetary policy decision – devaluation.

The decisions were often preceded with downright public lies, while behind closed doors, a small informal circle decided on a vital matter for the entire nation – exchange rates.

Vaara emphasizes that unified formality easily overlooks significant, genuine phenomena. Justifying decisions with figures forms a discourse that may create a rational impression, but: “also figures that look like facts can be based on guesswork and scenarios”. 

“Also science and leadership theories reflect an idealized picture of how things should be, while politics is often seen as emotive manipulation”, analyzes Vaara.

Yes, emotions. A dirty word in Nordic economic and leadership traditions."

Yes, emotions. A dirty word in Nordic economic and leadership traditions.

“In the States, motivating employees by saying we’re doing this because it’s the right thing to do is much more common.  Moral and ethical codes are important. Finns need a rational explanation”, says Kauppila.

Another reason for emphasizing rationality is that leadership models are often based on a traditional process model from the manufacturing industry.

“But it’s no longer how companies operate. You need friction in terms of alternative views that challenge and complement each other, but also loyalty in terms willingness to move things forward”, Eero Vaara remarks.  

Sari Kuusela mentions that among like-minded rationality, a boss can get so comfortable that that he or she forgets to ask what others think, which in turn puts a stop to a culture of conversation. In this sense, homogenous boards of companies pose a risk. When everyone agrees and comes from a similar background, power can intensify and strengthen – for a little while.

“Power concentrating in an old boy network is a risk, as everyone thinks and talks the same. Of course it makes discussion is easy”, Vaara sniggers.

Seeking a powerful position is often exhibited as selflessness, even sacrifice – in both politics and the corporate world. It is very rare to hear someone say they want to become a leader because they want power, despite the person wanting to make a difference. That takes power.

Power clearly suffers from an image problem."

Power clearly suffers from an image problem.

While working on her doctorate, Sari Kuusela noticed that her interviewees didn’t want to admit they had any power at all. They would rather have talked about management and leadership. Playing it down may be explained because it is still a tabu or because of the responsibility that always goes with power. Otherwise it would be a case of irresponsibility.    

“You could even say that without change, there’s no power. Power is always established on the possibility of change and future expectations. Leadership always aims for change”, says Olli-Pekka Kauppila.

Eero Vaara assesses that the image problem associated with power could be related to the (Nordic) ideal of equality. 

“There’s power everywhere – among people of course, but it can also be deeper and more far-reaching. For instance, technology and discourse have power. People can be prisoners to certain thinking”, asserts Vaara.

He mentions forestry companies as an example of unified thinking: selling the same products and making similar deals. The same rings true for a number of other industries.

That’s why constant questioning is paramount. People often instinctively think along the lines of: “Of course I question, but how about keeping it to myself to seal that promotion, pay rise, even a friendly Friday beer with my co-workers?” Conformity can temporarily increase power.

“You have to constantly question whether the chosen line is the best one”, Vaara imposes.

***

“You’re in their country. Learn to speak their language”, stated Joan Holloway to Peggy Olsen, who had her sights on becoming a copywriter in the Mad Men television series.

During the series, mother of all shadow power holders Joan Holloway climbed the ladder from secretary to one of the ad agency’s shareholders.  

Shadow power often lurks in the junction points of an organization, such as in the hands of a receptionist in the lobby, who sees the company’s entire spectrum. Middle management has a great deal of power due to its position between employees and upper management, passing or blocking information up or down.

In Mad Men, Joan Holloway was a link between the company’s core activities – male advertising executives, and support functions – female secretaries. Other junction points exist between cells and teams.

The fewer employees with links between two groups there are, the mightier their position of authority becomes.

Although companies already recognize the importance of junction points, identifying employees who influence them is harder. According to studies, patterns of influencing are rarely in line with the organizational chart. Simply looking at roles and tasks makes it impossible to forecast who becomes an influencer, as a great deal depends on the person’s skills and how interested they are in networking and using shadow power.

Research shows that whenever directors think they know who their company’s influencers are, they are usually wrong."

Research shows that whenever directors think they know who their company’s influencers are, they are usually wrong (for example Tapping the power of hidden influencers, McKinsey Quarterly March 2014).

In an international company, connections and information routes can sprawl all over the globe like a spider’s web.  If the company manages to identify the junction points, these can be formalized to harness power in a controlled manner. 

Finnish company Vaisala, which specializes in global measurement services, has made a conscious effort to pinpoint junction points, which it has equipped with teams to ensure the flow of information. This way the global leader in its sector improved communications both geographically and between different business areas.

***

“As of 1 August 2016, the organizational structure of Secto Automotive was overhauled to support growth targets and development initiatives.

The renewal aims to boost activities and ensure smooth collaboration among different units, as Secto strengthens its position as a customer-centered service and process company.”

(Press release of Secto Automotive, 7 September 2016)

Even change can take hold of power in a company.

“If a company has a spring and fall organization, the performance of employees can no longer be assessed, as they are there for such a short time”, Mattila warns.

Ongoing organizational reconstruction conditions employees, who are no longer willing to give their best, as they assume their roles will be changing soon anyway. That’s when change has taken power.

Also an external change can take hold of power if given the chance, the company’s activities becoming reactive.

“It’s easy to blame an external change for your own failure. Better to be active than merely react to change”, Olli-Pekka Kauppila explains.

Power may accidentally slip outside of the company."

Power may accidentally slip outside of the company in a sudden case of economic or sectoral fluctuation, whereas stakeholders challenge a company’s power intentionally. Where a company was once a mighty monolith that informed surrounding society about its affairs, it is now a free-for-all.

In spring 2017, Nordea’s Group Chief Executive Officer and president Casper von Koskull threatened to move its HQ from Sweden, if fees collected from banks in case of a banking crisis continue to rise. Sweden’s Minister of Finance Magdalena Andersson responded that the potential move could have its benefits for Sweden.  

Stakeholders who used to look up to a company’s position of authority now see themselves as equals, openly criticizing, pressurizing, and scorning the company on social media.

Snarling from the top of the pyramid no longer works in this respect either, but instead companies need to throw themselves into the discussion, which like other negotiations they can aim to steer in the desired direction. Power is after all as fast as quicksilver. 

A change of heart can be a difficult task for corporate management, which needs to perceive power and even model of society in a completely new light. 

***

At the end of the 1990s, longstanding Finnish manufacturing company Valmet decided to outsource the maintenance services of its Pansio factory.

Electricians with a strong sense of belonging to Valmet found the thought of working for an electricity company a shock, but their professional pride soon returned when they realized they were now part of their new employer’s core activities. Having previously worked on the paper machine factory’s  side lines, they were now sent out to solve challenging problems at different sites.

Often hidden power is only revealed when a sudden change occurs."  

Often hidden power is only revealed when a sudden change occurs, such as a company being bought or sold, or during a merger.  

“Who has power is a key concern in a merger. A director of a new unit coming from the other firm means only some subordinates are familiar with the director’s leadership style”, describes Kuusela.

Shadow power activities increase in situations where some feel under threat.

In her book Organisaatioelämää – kulttuurin voima ja vaikutus (Engl. transl. Organizational life – the power and impact of culture), Sari Kuusela reflects on how ingrained a learned operating method can be in an old organization.  A new director may reveal it simply by being different.

Changes also prove the power of knowledge – something employees are rarely willing to admit.

“What you know allows you to shine when it sheds a positive light. But who would admit to using knowledge to advance their own agenda?”

Mattila states that quite logically an organization should seek the best possible operating models for changes that cause groups and territories to break up. “But these situations also foster games and opportunism.”

It can even take a decade for the organization to fall into place following a merger, providing plenty of time for power struggles."

It can even take a decade for the organization to fall into place following a merger, providing plenty of time for power struggles. One can only guess how much cash flow suffers from scheming that gets out of hand.

Outsourcing doesn’t simply mean less power for the people it affects or the outsourcing company, even if that is often the first thought. 

The business idea of Yrjölä’s current employer Opteam is largely based on the shift in the world of work and changing work methods: providing personnel for other companies.

In her own, previous company she also sold outsourcing in addition to temporary, rental work. At that time she used power as one of her selling arguments.

According to Yrjölä, she uses power as one of her arguments when she promotes the company’s solutions. 

“Outsourcing clarifies and increases power because the relationship between client and service provider is different from the relationship between superior and his/her subordinate in the organisation. When a buyer/client is managing an outsourced service, s/he deals with a service-minded contact person, who normally is very keen on keeping the service going and thus filling the needs of the buyer/client. Superior, on the other hand, deals with employees who have various motives, including change resistance. In other words, when done well, outsourcing translates as an efficient use of power”, Yrjölä explains, although she admits reality is sometimes different.

“Sometimes it’s a case of a bad commission and confusing contract. The tail can end up wagging the dog.”

Outsourcing activities requires that power remains balanced and the scales do not tip either way.

***

The Danish government decided to relocate its offices and 3,900 government officials to the provinces by 2020.

Only five per cent of the engineers affected by the change say they will be leaving Copenhagen after their jobs. 75 per cent of lawyers and economists will stay behind. While professionals are quick to find new employment, the transition will be painful for government administration with most key personnel resigning and key knowledge disappearing along with them. Now plans for bonuses and other are suggested to entice professionals to stay even for the transition period.

“Employees are stripped from a great deal of power when they succumb to the right of an employer to direct them. After all, an employment relationship is a continuous negotiation over power”, Elina Yrjölä states. 

Yet employees have plenty of power, despite being masters at downplaying this fact, as Kuusela says.

A specialist skill is one example of employee power."

A specialist skill is one example of employee power.

“It can be used classically to blackmail”, says Mattila. “Supervisors don’t step in when they know a person is hard to replace. The entire work community can be terrorized by a jackass who has managed to build an empire.”

A power-hungry employee can take on the role of the work community’s orator.

“Usually colleagues are fine with this, as they don’t need to voice views or put in the extra effort.”

Another way for employees to gain power is to tie contacts with those above their immediate boss.

“It makes the immediate supervisor’s work extremely hard, as there’s always a boss or two higher up who will say ‘let’s leave it’.”

Power is always connected with resistance."

Power is always connected with resistance. According to Sari Kuusela, passive resistance is the most popular form of expert power when the expert doesn’t want to do something. 

“It can even take the form of keeping quiet ­– not getting up in a team to say you disagree.” Also procrastinating and not dealing with things is a common method. In an expert organization, territorial thinking spreads quickly, which involves withholding information to secure one’s own area.

“Especially situations of change show that knowledge really is power”, says Kuusela.

When Elina Yrjölä is asked how subordinates use power, she answers: “For example by crying”. Tears at work are sometimes fine , but as a regular reaction, it’s a question of using power.

“Crying and other unexpected emotional reactions like throwing a fit, being nasty, and yelling are types of power use. When someone is in an irrational state, it is more difficult for the supervisor to use his/her normal authority.”

Efficient, but not exactly sustainable ways to use power.  

***

But how can employees put power to good use?

Similarly to how leaders use it well. Good leaders take hold of the power that belongs to them and use it fairly.

“Manipulation brings power, but it won’t necessarily last. Charisma can arise from your own ego, but is much more productive when it stems from humility and helping others”, highlights Assistant Professor Kauppila.

Charisma is particularly important in organizations of independent cells."

Charisma is particularly important in organizations of independent cells.

For employees, a positive use of power could be about viewing the big picture and perhaps going somewhat beyond one’s role to help.

Traditionally, social sciences have focused on researching the negative sides of power; how to keep excessive power strivings and Machiavellian sneakiness in check. But organizational research also concentrates on its positive uses.

“How much do you help others? What’s your contribution? The more value you bring, the more power you have”, outlines Kristiina Mäkelä.

Whether directors greet employees in the mornings and come over for a chat makes a difference."

According to Sari Kuusela, everyday activities have a huge effect on power at the workplace. Whether directors greet employees in the mornings and come over for a chat makes a difference.

“Daily life counts. Employees who feel undervalued will only do what’s necessary, whereas a strong sense of fairness motivates to excel”, says Kuusela.

Chatting with employees also makes strategic sense for directors, who gain information about the organization at the same time. A director who relies on communication from managers below will most probably get a censured version. The more directors observe the organization directly, the better they can lead.

If interested in leadership, experts at Aalto University recommend delving into humanities and social sciences as good soil for heightened awareness among those with prior studies in economics or natural sciences. 

Good directors understand that power affects them as individuals.

“Power does affect you. Because of this feeling of empowerment powerful people can find it hard to see why people don’t just get a grip and sort themselves out”, says Yrjölä. In addition to formal power attached to a leadership position, you can for example feel empowered when everyone laughs at your jokes. It could be that you are a very funny person but people also tend to try to please their superiors.

This turns some into bullies.

Right at the start of their careers, people should be taught how to get along and build social capital."

“Right at the start of their careers, people should be taught how to get along and build social capital”, comments Mattila.

A quick wit, good interaction skills, sensibility, and seeing the needs of others help along the way. Social capital is something you can increase. 

“The measure of human beings is how they treat someone with nothing to give, like my old supervisor used to say”, says Yrjölä.

In other words, all-around good behavior is the most beneficial way to use power that exists. 

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