The observation
A growing organisation reaches a point where something that used to work — a verbal agreement standing in for a contract, a trusted colleague’s word standing in for a formal sign-off, a shared understanding standing in for a written process — starts producing visible problems: disputes about what was actually agreed, inconsistent decisions made by different people who each believed they were following the same unwritten rule, information that was assumed to have been passed along but wasn’t. The common interpretation is that something has gone wrong with the people involved — carelessness, a breakdown in the trust that used to hold things together, individuals not living up to standards they previously met.
This interpretation personalises what is, in most cases, a structural rather than a character issue. Informal systems are not lesser or more fragile versions of formal ones; they are a genuinely effective coordination method under specific conditions — small numbers of people, high mutual familiarity, frequent direct contact. When those conditions hold, informal coordination often outperforms formal process, because it is faster and carries less overhead. The problem is not that people have become less trustworthy. It is that the conditions the informal system depended on have changed, usually because the organisation has grown past the scale at which those conditions naturally exist.
What leaders usually conclude
Because the symptom shows up as specific incidents — a misunderstanding, a dispute, an inconsistency — it is natural to address each one individually, as an isolated lapse: a reminder to be clearer, a conversation about expectations, occasionally a more serious response if the pattern repeats with the same individuals. This treats each incident as evidence about the people involved, rather than as evidence about the system they are operating within.
The alternative reading, supported by research into organisational growth, is that these incidents are symptoms of a coordination method reaching the edge of what it can reliably support — and that the frequency of such incidents will keep rising as the organisation continues to grow, regardless of how carefully any individual incident is addressed, because the underlying mismatch between the informal system’s design conditions and the organisation’s current scale has not been resolved.
What the evidence suggests
Larry Greiner’s research into growth phases describes this as a structural, predictable transition rather than a symptom of declining standards: organisations move from an early phase relying on informal, personal coordination toward a phase requiring more explicit, formal systems, and the transition is marked precisely by an increase in exactly this kind of friction — misunderstandings, inconsistency, disputes about what was actually agreed — as the informal method is asked to carry more than it was ever built to carry.
Jay Galbraith’s research on organisational design offers a mechanism for why this happens with growth specifically. Coordination through shared, informal understanding depends on information reaching everyone who needs it, accurately and promptly, through relatively few, well-understood channels — proximity, frequent direct contact, a small enough group that everyone genuinely knows what everyone else knows. As headcount grows, the number of people who might need to share understanding grows non-linearly relative to the number of people, and informal channels that worked when a handful of people needed to stay aligned become unreliable once dozens or hundreds do — not because any individual channel got worse, but because the volume and complexity of what needs to travel through it has outgrown what informal, ad hoc channels can carry accurately.
This matters for how leadership teams respond, because the two readings point toward genuinely different remedies. If the issue is individual carelessness, the remedy is individual — clearer communication with specific people, closer supervision, addressing a performance pattern. If the issue is structural — the informal system itself reaching its limit — no amount of individual correction resolves it, because the next person, doing their best with the same informal method at the same scale, will eventually produce the same kind of incident. The remedy in this case is not behavioural but architectural: replacing or supplementing the informal system with something more explicit — written agreements, defined processes, documented decisions — that does not depend on proximity and shared memory to function reliably at the organisation’s current size.
There is a genuine loss in this transition worth acknowledging rather than minimising. Informal systems, at the scale they work, carry real advantages that formal systems often cannot fully replicate — speed, flexibility, low overhead, the kind of nuanced judgment that resists being written into a fixed process. Moving to formal systems is rarely a pure improvement; it trades some of that flexibility and speed for reliability and scale. This is part of why organisations often resist the transition longer than the evidence would suggest is prudent — the costs of the informal system’s failures are visible and attributable to specific incidents, while the costs of formalising are diffuse and immediate, felt as a general loss of the speed and ease that characterised how things used to work.
The timing of this transition is also rarely obvious in advance. Because informal systems tend to degrade gradually rather than fail sharply, there is usually no single moment that clearly signals “now is the point to formalise.” The incidents accumulate individually, each attributable to a specific cause if examined in isolation, and only in aggregate do they reveal a pattern consistent enough to justify the disruption of introducing more formal structure. Organisations that wait for a single, unambiguous trigger before acting often wait considerably longer than the evidence would suggest is prudent, simply because no such trigger reliably arrives.
The same pattern appears across many kinds of organisation; see Other Sectors for how it is read elsewhere.
Questions worth considering
- Which current coordination methods in this organisation still rely on proximity, familiarity or shared memory that may no longer reliably exist at the organisation’s current size?
- When a recent misunderstanding or inconsistency occurred, was it addressed as an individual performance issue, a structural one, or was that distinction never explicitly considered?
- What would be genuinely lost — not just gained — by formalising a currently informal system, and has that loss been weighed honestly against the cost of the incidents the informal system is now producing?
This perspective is part of Growth.
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