The primary organizational challenge facing any business leader is much like the challenge facing a parent: to understand this living entity, placed partly in your care, well enough that the moves you make will lead to productive growth and change.
• The hierarchy is a circulatory system for messages of authority; specifically, for anything that can be expressed as a number. It is the means by which the organization seeks scale. It flows from and to the top: the CEO and then the shareholders or owners. It might be analogous to muscle coordination.
• The network conveys knowledge — in the form of gossip, guidance, information about opportunities, and anything else that people talk about easily. It is the means by which the organization develops its capabilities. It flows from and to a broad base of people throughout (and outside) the company. It might be analogous to neural networks.
• The market is the exchange of goods, services, and money within an organization and its value chain. It is the means by which the organization manages its workflow. It transmits anything that can be bought, sold, or traded, flowing ultimately to the customer. It might be analogous to the cardiovascular system.
• The clan is the family or community-like circulatory system, operating below the surface of every organization (and often subconsciously). It is the means by which a company’s culture is maintained, with a “core group” of its most important people at the center. The organization establishes its view of legitimacy through the clan. It might be analogous to the endocrine system.