Once again, we visit with Stu Laura, CIO of a major corporation and a man who doesn't suffer fools lightly.

Laura: I'm still recovering from my last 360 evaluation, which was the worst I've had in the last 15 years. I'm quite shaken. It seems that the things I used to do well I'm all of a sudden screwing up monumentally.

Anderson: Why?

Laura: I'm really not sure, but I have a few ideas. Like every big IT organization, we have had problems--problems moving to the cloud, problems with understanding big data, problems with our operating divisions and platforms. And each time we think we have things solved, we've been plagued by bad implementation. We used to be able to build a team, attack the problem, and get it solved on time and on budget. But during the last few years, we've missed our benchmarks. We've had more than our share of runaway projects. And the divisional vice presidents are going from sullen to mutinous, sometimes calling in outside firms to do things we used to do and do well.

Anderson: You're a bright guy. What changed?

Laura: I think I genuflected too much toward Efficiency and forgot about Effectiveness and thought that the organizational structure I used would see us through. If I made any mistake it was thinking that the formal organization ruled, when in fact it was the informal network that really showed me where the power was.

Anderson: Don’t you have the power?

Laura: Ha! That shows you how much you know. Forget the title…it's the informal organization that you never want to cross. It's the informal organization that actually gets things done…that knows how to bend the rules and even break them when necessary. Cross the informal organization and things go "clank." Power comes from below, not from above. It seeps upwards—it's like WD-40.

Anderson: WD-40?

Laura: Understand what we have is a system of networks in the company. Not computer networks--we have all of them--but people networks. We have advice networks--who goes to whom for advice. We have friendship networks--who is trusted and who will do favors for whom. Sometimes our networks are broken out by age; the people in the same age category somehow implicitly will work together. Sometimes they break out by religion and sometimes by where they've worked in the company.

Anderson: Have you ever figured out who your best people are and backed them?

Laura: I tried. What I found out was most interesting. Some of our quiet people just knew what entire other parts of the company were doing and were invaluable. Some of our best people came from operating roles into IT, and they could understand requirements better than anyone else. And we found that those IT managers who understood the informal organization greatly outperformed those who were more technically qualified. And then we found the real bottleneck.

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Anderson: Which was?

Laura: Me! I took the pieces and thought that I could gerrymander the organization on a completely rational basis. I assumed that neat lines trumped human dynamics. I found that sometimes the Friendship network isn't fair--the friends did seem to favor each other--but it usually could get the job done on time and under budget.

Power kind of accrues to the people in the middle. I was finding that those who are gatekeepers of information seem to be able to gather the right resources at the right time--and that I was out of the information loop.

Anderson: Example?

Laura: We had resources that were underutilized--people, machines, etc.--and we had divisions that were resource-starved. But I didn't really know which was which, and when I tried to make sense of things, the informal network protected itself. Instead of using that accumulated expertise, I tried to convolute it, and it rebelled. Not drastically, but quietly.

Anderson: OK, so you got taken to the woodshed. What are you going to do differently?

Laura: The first thing is that I admitted to my boss that the evaluation was correct. I had thought that we needed a reorg, God knows why. The second thing is that I'm spending a lot more time finding out who the real leaders are. I have brought in HR to help me do that. I'm now instituting a system of rotating my people through the operating divisions.

Anderson: Good luck!

Laura: Thanks, I'll need it. And if this doesn't work, I'll have to go to Plan B.

Anderson: Do you even have a Plan B?

Laura: Sure, I'll call in McKinsey and they will suggest a very expensive reorg.

Anderson: That's a very cynical answer.

Laura: Tell me about it.

Howard Anderson, founder of Yankee Group and co-founder of Battery Ventures, is currently the William Porter Professor of Entrepreneurship at MIT. He can be reached at [email protected].

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