Companies can improve their innovation performance by getting their formal and informal organizations in sync. Production is largely governed through the formal side, which includes decision rights, reporting structures, established incentives, codified processes, and corporate metrics. Creative work, however, is typically generated by the informal side — the part that doesn’t exist on paper but that influences behaviors through mutually understood rituals, shared values, social networks, commonly held ideas, and emotional connections to the work itself. Because real innovation requires that good creative ideas be efficiently produced and launched, a balance between the formal and informal structures is critical.
