In a world of increasing stakeholder expectations and decreasing resources, aggressive cost cutting programs have run their course. Where do you turn next? Increasing a company’s revenues and gross margins, and knowing where (and how) to reduce costs without negatively impacting customer satisfaction, employee productivity and morale, or business processes that are working effectively requires a precise and systematic understanding of exactly what organizational culture is and how it works in organizations.

Most managers struggle against the flow of overly complex structures and systems and are often frustrated by an invisible force that undermines their attempts to affect positive change. Their instincts tell them that the organization’s culture and people are preventing them from getting the results they want, but “culture” remains one of the least understood aspects of organizational life. Organizational culture often acts like an Invisible Bureaucracy™ that frustrates and undermines effective business performance. In fact, what many managers find most frustrating is that although they have little or no control over changing the ineffective structures and systems of the larger organization within which their work-group is embedded, they are still held accountable for delivering on commitments and goals.

Defining culture in a more precise and systematic way enables us to better understand what the Invisible Bureaucracy™ is and how it works. More specifically, organizational culture consists of four distinct (but interdependent) categories of business elements that interact with each other to produce an organization’s financial and non-financial results (see below). The interaction of these four elements creates organizational culture and many managers experience this as the Invisible Bureaucracy™.

1. Patterns of Interaction (POI)

2. Context of Interaction (COI)

3. Repository of Interaction (ROI)

4. Current Results

Here’s how the four elements work together to create organizational culture. Day-to-day operations occur as patterns of interactions (POI) within the context of interaction of an organization’s structures and systems (COI). Over time, the interaction of POI and COI functions like a group learning process that creates a repository of interaction (ROI) that becomes an organization’s knowledge-base and the tacit beliefs that managers and staff members have about the organization and the people in it. Over time, these first three elements settle down on an organization-wide pattern of interaction (POI) within the larger context of interaction of the business environment (COI) and the combination of these elements produces the financial and non-financial results that an organization actually gets. This is the underlying process that Dave Hanna is describing when he says that, “All organizations are perfectly designed to get the results they get.” Each of the four terms is briefly described below.

Context of Interaction (COI): After decades of research on organizations, it has become common knowledge that 85% or more of the root causes of performance problems are in the organizational structures and systems within which people work (COI). In other words, if you put good people in bad systems you’ll get poor performance. So focusing on improving performance in a work-group without understanding the context within which it is embedded almost guarantees that change will not be sustainable, because the managers and staff within the work-group are less then 15% of the real problem.

Patterns of Interaction (POI): What is not common knowledge is that the patterns of interactions (POI) that make up most day-to-day operations in companies are performed on autopilot, e.g. they are done out of habit and routine, seamlessly, without consciously thinking about them. It’s important to remember that automatic pilot operations are a doubled-edge sword. When done effectively, they can be your greatest ally because they increase your ability to compete and achieve your goals. But in most cases autopilot operations are self-defeating because they perpetuate problems with work performance, communication, interpersonal conflict, and decision-making and then derail attempts to create positive change.

Repository of Interaction (ROI): Culture is most frequently described as the underlying assumptions, tacit beliefs and attitudes that an organization holds in common (ROI), but this is only one of the four elements that organizational culture is made of. The ROI is a collective repository of group learning – a lens through which managers and staff members see (and interpret) day-to-day operations and the realities of organizational life. The ROI includes an organization’s accumulated history, key events, stories, heroes, prohibitions, rituals, ceremonies, traditions, and “folk wisdom” about how things should (or should not) be done. It also includes an organization’s accumulated business experience and knowledge base – its unique capabilities and intellectual property that allow them to create their products and services.

Current Results: An organization’s current results consist of things like its actual level of financial and non-financial performance and its actual level of customer satisfaction, as opposed to the goals or key performance targets that a company sets for itself. Over time, the four elements tend to settle down on an organization-wide pattern of interaction (POI) that emerges within the larger context of interaction of the business environment (COI) and this creates the actual results that an organization gets, as opposed to its planned results, e.g. its key performance indicators and goals. Because all four terms function interdependently, the actual results reinforce the other three cultural elements.

Bottom Line: So what enables the Invisible Bureaucracy™ to continue operating undetected time and time again? What gives the Invisible Bureaucracy™ the force and power to continue to derail positive change, even against the best efforts of managers and staff members to the contrary? Two of the four elements described above are the main culprits:

1. POI: Day-to-day operations that are habitual, routine, and happen on autopilot (POI), combined with,

2. ROI: Tacit (unquestioned) beliefs and attitudes that create decision-making bias and predictable errors in judgment, e.g. managers choose ineffective solutions to problems because they are “familiar” and are within their comfort zone

So the key to making the power of the Invisible Bureaucracy™ work for you rather than against you is to take ineffective day-to-day operations off autopilot, reconfigure them, and then migrate them back to autopilot operations that produce the desired results.” To reiterate, when done effectively, autopilot operations can be an organization’s greatest ally because they increase its ability to compete and achieve its goals. It also allows managers to focus on improving performance by increasing service to clients, streamlining delivery channels, growing markets, and delivering higher value to all of an organization’s stakeholders.