Logic is the explicit or implicit set of norms or rules with which we judge and make decisions in organizations. Depending on whether you make rank-or peer-based assumptions, you will use specific criteria in making critical decisions. Frequently these criteria are left unspoken or not even fully recognized by the decision maker, but the logic of our false assumptions in rank-based organizations creates decision making that does not serve human dignity and growth. Characteristics of each type of logic are outlined in table 3 and discussed in detail below.


Rank-Based Logic

Peer-Based Logic







Scarcity based

Abundance based


Community formulated



Exclusive vs. Inclusive

Rank-based logic regards leadership as an opportunity to be offered only to a few.

Rank-Based Logic

Power positions are reserved for the select few who climb to the top of the organization.

Peer-Based Logic

Everyone is invited to be a mentor to others and a creator of value, to participate in decision making, and to share in the exercise of power.

Rank-based logic creates an exclusive club. Your identity and value arbitrarily follow from your position in the hierarchy, and you genuinely relate only to those of the same rank. To support this club, organizations select individuals, put them through "cookie cutter " leadership development programs, and hope they come out the other end as leaders . Now they should have all the right habits and characteristics to act the part and fit into the hierarchy and the position that awaits them. In the process, however, these individuals become suspicious of their own unique and wonderful qualities that would allow them to make great and original contributions. Perhaps even more insidiously, such programs tend to reinforce an already common belief that our organizations should be rank based, where a fortunate few are placed in superior positions over the less fortunate many.

Peer-based logic creates an inclusive, participatory organization. There is no sense of a "top" of the organization and no exclusive club to belong to or protect. In the absence of rank, all members of the organization are peers, so genuine communication flourishes and productivity is high. It is a logic where a diversity of talents and abilities can be recognized within the realm of equality of worth and value. It brings in many different viewpoints and interpretations to better understand the world. Peer-based logic makes organizations wiser.

Commanding vs. Influencing

"Command and control" is the key phrase in rank-based logic.

Rank-Based Logic

Power is defined as command and control over things and people.

Peer-Based Logic

Power is defined as influence on things and people.

Rank-based logic seeks to coerce cooperation. Yet commanding a subordinate produces only compliance and dependence. Again, because of rank, the meaning and value of your life are falsely determined by how many people are above you and therefore can command and control you, versus how many people are below you, meaning you can command and control them. Such deliberate top-down management structures are very time consuming. When business conditions are changing constantly, it's essential to respond quickly ”something that autocratic, secretive, hierarchical organizations do very poorly. Rank-based logic tends to be inflexible and cannot respond quickly to rapid changes in the business environment. Commanding, also, as a rank-based concept, tends to develop the talents of only a select few while underutilizing the talents of the majority.

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One company that puts peer-based logic into practice is Motek, a twelve-year-old software company based in Beverly Hills, California. At Motek, all employees participate in organizational decisions, from office furnishings to job assignments to bonuses. There is no fear of failure, because there is no one higher up from whom to fear reprisal, so innovative solutions to problems are more likely. In a personal e-mail communication, founder Ann Price told me, "At Motek we believe in rewarding communication even if it's communication about failure." Their motto is "Fail sooner; succeed more often." Motek's inclusive approach to managing work engages the whole person. Price continued , "At Motek we believe that it's impossible to manage people. We can only manage process." In a peer-based organization, people manage themselves and cooperate with others in managing processes.

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Peer-based logic posits that influencing others creates commitment ”practicing the power of subtle influence evokes cooperation within the organization. Respect and commitment from others, as determined by the integrity of your choices, are what genuinely give meaning and value to your life. At W. L. Gore & Associates , the maker of Gore-Tex waterproof fabric (profiled in greater detail in chapter 4), there are no designated leaders. No one can command anyone else to do anything. If an employee needs assistance on some project, the employee must persuade other associates to join in the work. Such peer-based logic has created a remarkable spirit of cooperation at Gore, a company that even in times of economic recession has remained profitable.

Domineering vs. Participating

"Dominate and you will win" is the attitude of leaders who use rank-based logic.

Rank-Based Logic

You must dominate, intimidate, and use fear to motivate employees.

Peer-Based Logic

Getting things done is the natural path for people; people are self-motivated.

An extremely bright and dedicated executive called me one day. He was the vice president overseeing the software engineers in his organization. He told me that his engineers were unmotivated and not committed to the company. He wanted to give them an ultimatum: Either pledge commitment to the company or leave! I persuaded him to meet with me first. Over lunch , he filled me in on what was happening. I could tell he desired the best for the company as well as for the engineers. He truly wanted them to excel. Yet his thinking was dominated by rank-based logic. He planned to invite the underperforming team of engineers to a hotel room, where he would tell them what he thought their problem was and what he thought they should do. He was then going to have them stand against one of the walls in the room and ask them one at a time if they would commit to his vision. They would demonstrate their commitment by walking across the room to the other wall. Those who walked would still have a job; those who didn't would be fired .

In all sincerity , he believed this was what a leader should do ”make the hard decisions and demand loyalty. He could imagine no other way. Fortunately, he was also a reasonable man who would listen to counsel. I laid out for him why his plan would only antagonize the engineers and make the problem worse . Even those who walked across the room would check out of the organization with their hearts and minds. He would have their bodies, but not their passion. People support best what they themselves create.

We discussed an alternative strategy where I would facilitate a peer-based team analysis of their situation and possible solutions. He agreed to the meeting and to approach it not as the leader who would tell them what to do, but as an associate who was asking for their participation in solving a common problem. I enjoyed two fabulous days with him and his team of engineers, and we made real progress in creating a dynamic and successful peer-based team.

Peer-based logic tells us that if things are not getting done, or people are not motivated, it is because something is blocking them. It asserts that all problems and blocks are visible and that solutions are obvious to at least a few people in the organization. So, it invites participation in problem solving. At Motek, no one is told what to do or how to do it. Each employee is assumed to be competent and motivated to do excellent work. At the start of each week, Motek's software engineers gather to review needed tasks and projects. As they go down the list, each will volunteer to accomplish one or more of the assignments. No one is supposed to take on more work than he or she can accomplish in a week. On Thursday they meet to communicate to each other which of their assignments they would be able to complete by Friday. They then can arrange to help each other out if needed.

Scarcity Based vs. Abundance Based

With rank-based logic, everything is in scarce supply, including what people are willing to give.

Rank-Based Logic

People are selfish and unwilling to share.

Peer-Based Logic

People are willing to cooperate and share with those who cooperate and share with them.

Rank-based logic characterizes people as basically selfish and unwilling to share their resources, knowledge, or time. So you must ruthlessly compete to get your fair share before somebody else takes it from you. Of course, time and resources can be in short supply in the company, but knowledge is a resource that has no external constraints. In an information-and network-based society, knowledge shared with others can be used to find ways to create more time and resources. But, with the rank-based logic of scarcity, knowledge is withheld and all other assets decrease proportionately.

Peer-based logic characterizes people as altruistic and eager to share resources, knowledge, and time to create more success for all. We see that there is enough for everyone, and more can be created through shared effort. We leverage the knowledge-based talents of everyone in the organization to find ways to expand the pie and create abundance. Through peer-based logic we realize that the more a company shares the organizational wealth with all members, the more commitment and dedication it will receive.

Motek, for example, gives every employee, after ten years with the company, a leased Lexus LS300, or an automobile of similar value. Each employee has five weeks of vacation, and no one is allowed to work past 5 P.M. or on weekends. Because Motek believes employees should avoid long, stressful commutes, Motek subsidizes their purchase of residences in the Beverly Hills neighborhood.

Individualistic vs. Community Formulated

There is no sense of community in rank-based logic.

Rank-Based Logic

People at work are just replaceable cogs in the machinery of business.

Peer-Based Logic

People are by nature social animals who seek and enjoy working with others.

With rank-based logic, people see work as a burden and organizations as a necessary evil. We only grudgingly join up with organizations and then find life within them to be nasty, boring, and deadening to the spirit. When the organization encounters hardships, the assumption is that those below should be sacrificed to protect the privilege of those above. All too frequently we read in the financial section of the paper about this type of logic in action: another CEO who laid off hundreds of workers is awarded with a fat bonus at the end of the year.

Author Jason Jennings, in a USA Today (2002) editorial, said that many leaders believe downsizing in tough economic times is the right leadership thing to do. Citing a major 2002 research project of The Business Roundtable on the relationship between layoffs and productivity, Jennings challenges this conventional wisdom. The research revealed that the world's most productive firms make an explicit promise never to balance the books through layoffs. Instead, they look for more creative ways to cut costs and increase demand.

After evaluating the finances of more than 4,000 public and private firms worldwide, my research team and I settled on 80 that topped their peers by every reasonable measure of productivity. Simply put, these firms sold more, spent less and made more profit per employee than their competition, year after year.

The most striking trait these 80 productivity superstars shared was their passionate opposition to layoffs, even when the economy was in the dumps. Consider Nucor, America's largest steel maker, which manufactures rolled steel and steel joists. Nucor has reduced the time it takes to produce a ton of steel from 11 hours to 30 minutes ”while increasing its earnings for 30 years in a row.

In line with this study, peer-based logic stems from the fact that people are by nature social animals who seek and enjoy life with others in equitable work institutions. Because of the community orientation, everyone shares in both the sacrifices and the good times ”perhaps a greater portion is shared by those who can afford it. As Ann Price told me about Motek, "We believe that everything depends on the health of the group ." This peer-based logic makes good economic sense.

Inequitable vs. Equitable

Rank-based logic produces a serious imbalance in the way rewards are distributed.

Rank-Based Logic

Those higher in rank are entitled to a far greater share of the organization's resources in the form of compensation than those lower in rank.

Peer-Based Logic

Distributing the organization's resources more equitably in the organization will generate far greater returns to everyone in the long run.

Rank-based logic asserts that the large and growing gap between the salaries of the top executives and those of the frontline workers is natural and justified given the disparity in contributions leaders make compared to everyone else. It asserts that there is nothing anyone can do about the gross disparity in pay and compensation between the top and bottom of the organization ”that's just the way the game is played , so everyone should take advantage of it when they get to the top.

Peer-based logic retorts that this attitude is a result of the myth of leadership and does not reflect reality ”that the growing gap in salaries is a serious threat to the long- term viability of organizations and the communities they build. Gross inequities in pay make true community unachievable and genuine relationships impossible. Those organizations that achieve a real sense of solidarity have checks on excessive executive pay and more team-based compensation. At Motek, for example, there are only three pay levels, with no level more than $30,000 above or below the adjacent level. Management also realized that compensation practices and monetary rewards have to be tied to collective performance, not individual performance.

Epidemiologist Richard Wilkinson has spent a lot of time studying the effects of income inequality in social organizations. In Unhealthy Societies : The Afflictions of Inequality (1996), he points out that "among the developed countries it is not the richest societies that have the best health, but those that have the smallest income differences" (28). In his work, Wilkinson has shown both how income disparities create unhealthy organizations and how rank distinctions create a culture of dominance that diminishes the welfare of all. Although his work is focused on social organizations, I believe his findings are easily reflected in business organizations as well. The lesson is both clear and unmistakable: rank-based logic and inequities create unhealthy organizations.

The Myth of Leadership. Creating Leaderless Organizations
The Myth of Leadership: Creating Leaderless Organizations
ISBN: 0891061991
EAN: 2147483647
Year: 2004
Pages: 98

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