Where Does Organisational Reality Come From?

Why organisational reality is formed, not designed — a reflection on substrate, coherence, and the Four Modes of System Formation

There is something curious about organisations. We speak about them as though they possess an existence independent of the people who inhabit them. We describe them as innovative or bureaucratic, resilient or fragile, ethical or dysfunctional. We merge them, redesign them, transform them, and occasionally declare them broken.

Yet pause and ask a deceptively simple question: what exactly is an organisation? Is it the legal entity, the org chart, the strategy, the culture, the people? None of these answers feels entirely satisfactory. Remove any one of them and we would still recognise the organisation. Replace every employee, redesign the strategy, relocate the offices, and somehow we continue to speak of the same organisation. So where does its reality actually reside?

Management rarely asks this question directly. More often we ask how organisations can become more innovative, more customer-centric, more agile — questions that quietly assume the organisation already exists, as though waiting to be optimised. But what if organisational reality isn’t something that simply exists? What if it is something continually formed?

Phenomenology has long argued that we don’t first encounter the world as detached observers examining objective facts. We encounter a world that is already meaningful. Before we analyse, we perceive; before we classify, we participate. In my previous article I explored this through the idea of the lifeworld — the background of assumptions, relationships and expectations that quietly shapes how reality discloses itself to us, long before strategies are written or structures designed.

If this is true for individuals, might it be true for organisations too? Perhaps what we later call culture, structure or strategy aren’t the origins of organisational reality at all, but expressions of something that has already begun to take shape.

Over the past few months I found myself returning to this question while reading two essays by Dave Snowden, *The Lotus Eaters and [The Lotus Eaters: The Next Colour](https://thecynefin.co/the-lotus-eaters-2-3-the-next-colour). Presented as critiques of contemporary organisational thinking, I read them rather differently — beneath the discussion of leadership and consciousness lay a question that resonated with the journey of Soul-Guided Systems: where do we look when trying to understand how organisations become what they become? Snowden’s answer focuses on a single word: substrate*.

Substrate and the Search for Origins

The word ‘substrate’ belongs more naturally to chemistry, biology and ecology than to leadership or strategy — the material on which reactions occur, the medium that supports growth, the surface from which living systems emerge. Different disciplines use it differently, but they share the same intuition: nothing comes into being in isolation. Seeds don’t grow independently of the soil they’re planted in; rivers are shaped by the landscape they flow through. Even our own thinking is inseparable from the biological and cultural worlds that shaped us long before we became aware of ourselves as individuals.

For years, management thinking has focused on what organisations do — measuring performance, redesigning processes, reshaping culture. These are the visible expressions of organisational life, and they’re relatively easy to observe and change. But phenomena invite a further question: from what conditions do they emerge?

This is where Snowden’s use of substrate is so useful. Organisations don’t become collaborative because collaboration appears in a values statement, or innovative because leaders encourage creativity. Behaviour emerges from conditions such as governance structures, patterns of accountability, incentives, ownership, everyday routines. These quietly shape what’s possible long before anyone reflects on why they behave as they do.

For decades, much organisational thinking has located the source of transformation within the individual: become more self-aware, more authentic, more emotionally intelligent. These aspirations matter. But Snowden’s challenge isn’t directed at their value — it’s directed at the direction of causality. Do organisations become different because people become different, or do people become different because the conditions they work within have already begun to change?

Imagine an organisation that sincerely declares collaboration a core value, yet rewards employees almost exclusively through individual targets. Which reality will shape behaviour — the aspiration or the substrate? The answer is rarely found in the values statement. It’s found in the lived conditions through which organisational life actually unfolds.

Much of my own work over three decades, across customer experience, strategy and leadership, has repeatedly pointed to the same conclusion: organisations often fail to become what they sincerely aspire to be, not because their people lack commitment, but because the underlying conditions from which everyday behaviour emerges remain unchanged. Snowden’s concept of substrate gives language to something many practitioners have quietly observed for years.

But it also raises a further question — one that doesn’t challenge his argument so much as continue it. If substrate shapes organisational reality, where does substrate itself come from?

Is Substrate Given, or Does It Also Form?

At first the answer seems straightforward: organisations design their structures, leaders establish incentives, boards define governance. Surely these are the sources of substrate. But where did those governance structures come from? Why did one strategic direction seem obvious while another was never seriously considered? These questions push further upstream. Long before structures are formalised, they’ve already become imaginable. Before governance is designed, assumptions about authority have already begun to crystallise.

Systems don’t suddenly appear. They’re formed — and formation is rarely the result of a single decision. It unfolds gradually through countless interpretations, conversations and habits that eventually stabilise into what we later call organisational reality. By the time those structures become visible, much of the formative work has already been done.

This may be why transformation proves so elusive. We redesign reporting lines while leaving untouched the assumptions about authority that produced them; we rewrite values statements while overlooking the shared interpretations that keep shaping everyday decisions. The visible system changes. The formative conditions remain remarkably familiar — which may explain why so many organisations experience repeated cycles of transformation with relatively little transformation actually occurring.

At this point the inquiry moves beyond organisational theory and into philosophy. We’re no longer asking how organisations function, but how organisational reality comes into being at all.

Formation Begins Before Structure

If organisational reality is continually formed rather than designed, the search for its origins can’t end with governance or incentives — these are themselves expressions of something that has already begun to take shape. Before a reporting line is drawn, someone has already formed an understanding of authority. Before values are written, assumptions about what matters have quietly embedded themselves in everyday conversation.

A city offers a useful comparison. It is not simply the sum of its buildings, but the accumulated expression of countless historical decisions and shared understandings that gradually became embodied in streets and institutions. Remove a single building and the city remains recognisably itself, because its reality was never located in the building alone — it resides in the pattern that gave rise to it.

Organisations may be much the same. We speak of culture as something an organisation has — something to be designed, embedded, changed. But what if culture is itself already an expression of something more fundamental — one of organisational reality’s earliest visible manifestations rather than its source?

The same is true of leadership. Leadership programmes seek to develop capabilities and behaviours, but leadership never happens in isolation. Every decision is already taking place within a world that has been interpreted long before the moment arrives. Leaders don’t respond to objective reality; they respond to the reality they perceive, and perception is never neutral — it’s shaped by experience, language and countless assumptions that remain invisible precisely because they feel self-evident.

Every meeting begins long before people enter the room. Every customer interaction unfolds within assumptions about service and value that have been quietly forming for years. Meaning doesn’t follow organisational reality — it participates in its formation. Which is why organisations, seen this way, are not simply systems of activity. They are living worlds of significance.

Coherence and the Formation of Organisational Reality

If organisational reality is continually formed, a further question presents itself: why do some organisations grow more coherent over time, while others gradually fragment?

Every organisation begins with aspirations — to serve customers with exceptional care, to innovate, to act responsibly. Mission statements are written, strategies developed. Yet anyone who has spent time inside organisations knows these aspirations often bear only a passing resemblance to everyday experience. Customers encounter one reality, employees another, leaders a third — and somehow all belong to the same organisation.

It’s tempting to call this inconsistency, or poor execution. But these explanations stay at the level of symptom. What if fragmentation is itself a consequence of how organisational reality has been formed? An organisation doesn’t become coherent because it writes coherent values, and it doesn’t fragment because individuals lack commitment. Coherence and fragmentation both emerge over time, through the countless interactions by which people gradually learn what the organisation actually is — not what it says, what it is.

Every decision quietly communicates priorities. Every promotion reveals assumptions about success. Every customer interaction discloses what the organisation genuinely values when competing demands collide. People stop referring to the official values because they’ve learned the lived ones — not through instruction, but through participation. There is always an organisation that is described, and an organisation that is lived. Most of the time, they are not quite the same. Authenticity, perhaps, begins precisely where that distinction starts to disappear — not as a moral quality or a branding exercise, but as the point where the organisation people describe increasingly resembles the one they actually experience. At that point, coherence stops being an outcome and becomes part of the substrate from which future decisions arise.

This is also why authentic organisations often feel immediately recognisable — their coherence is experienced before it’s analysed. Not because every decision is perfect, but because the organisation seems to respond from the same underlying reality regardless of circumstance. Fragmentation is just as perceptible: an organisation may speak eloquently about trust while quietly rewarding internal competition, or describe itself as customer-centric while making decisions customers experience quite differently. The issue is rarely hypocrisy. More often, it’s formation — the organisation has gradually become coherent around a different reality from the one it believes it inhabits.

One of management’s most enduring assumptions is that organisations are objective realities we can describe with increasing accuracy — org charts, process maps, customer journeys, strategic plans, each treated as a more faithful representation of the organisation itself. But representation is not reality. A map may reveal something important about a landscape, but no one mistakes the map for the landscape. The danger begins when we forget the distinction, and decisions start responding to reports rather than relationships, metrics rather than meaning. Every process map eventually meets situations it never anticipated; every cultural assessment discovers contradictions that don’t fit its categories. It’s tempting to treat these as execution failures. But perhaps they’re simply reminders that organisational reality is always richer than its representations.

Korzybski’s observation that the map is not the territory has become almost proverbial; Goethe warned against letting abstract categories obscure the living phenomena they arose from; Bortoft argued that wholeness can’t be assembled from parts, because the parts only become meaningful within the whole they express. Organisations, perhaps, ask something similar of us. Organisational life is encountered first through relationships and decisions, and only afterwards formalised into structures that appear, retrospectively, to explain what has already happened. Reality is always slightly ahead of our descriptions of it — which is one reason transformation is so difficult: by the time we’ve successfully described the organisation we want to change, it has already continued forming.

The Quality of Formation

This raises a further question. Why do some organisations feel fundamentally different from others — not simply more successful, but different in kind? Most of us have encountered organisations that perform well by conventional measures yet leave behind a persistent sense of exhaustion or disconnection. Others, by no means perfect, respond to conflict and failure in a way that feels coherent rather than reactive. Employees sense it before they can explain it; customers experience it without knowing why.

We usually reach for words like values-driven, purpose-led, or culture — each capturing part of the experience without quite explaining how it came to exist. Suppose the distinguishing feature of these organisations is not primarily what they believe or how they behave, but how their reality is continually being formed. That reframes the questions we ask. Instead of asking whether an organisation has the right strategy, we ask how that strategy came to appear self-evidently right. Instead of asking whether leaders embody the organisation’s purpose, we ask how purpose is continually interpreted, renewed, or quietly forgotten through ordinary decisions.

Over many years of conversations, leadership programmes and transformation work across countries and industries, I began to notice that organisations weren’t simply forming with different degrees of effectiveness — they seemed to be forming through qualitatively different dynamics. Some realities emerged largely as downstream responses to inherited structures. Others formed much earlier, through shared interpretation and sustained dialogue about what the organisation was becoming.

The figure below is an early attempt to make those differences visible — not a maturity model, but a map of the different ways organisational reality itself appears to form.

The framework crosses two questions: does formation happen upstream, where situations are understood before decisions are made, or downstream, shaped in reaction to them and limited by existing structures? And is the way people see the situation shared across the system, or fragmented between its parts?

Fragmented Reaction — downstream and fragmented.

The system is shaped through response: issues are addressed as they arise, decisions made locally based on differing readings of the situation. Activity is high, coherence low. What looks like misalignment actually reflects how the situation is being seen — each part of the organisation is acting rationally within its own frame, yet the overall system fails to hold together. Coordination requires constant intervention; decisions stall and rework increases.

Adaptive Fragmentation — upstream, but fragmented.

The system is treated as dynamic, with multiple perspectives recognised and adaptation happening through local sensing and response. Change is continuous and the organisation grows more responsive. But because interpretation stays distributed — different parts of the system making sense of reality differently — the system adapts without fully cohering. Direction stays fluid, and progress depends on ongoing navigation rather than shared understanding.

Aligned Execution — downstream, but shared.

The system is shaped through design: structures, processes and goals provide a common frame for coordinated action, giving clarity of direction and consistency of execution. This creates real efficiency under stable conditions. But coherence here is maintained through effort rather than formed at source — so when conditions change, the limits of the design become visible, and the organisation has to work harder to sustain performance.

Coherent Formation — upstream and shared.

Attention goes to how situations are perceived and interpreted beforedecisions are made, so a shared way of seeing forms first. The system is shaped at source: decisions arise from a coherence held collectively across the system, rather than imposed alignment or local interpretation. It adapts without fragmenting and aligns without effort, because what holds it together is the quality of understanding it’s formed from — grounded in universal human values, with decisions beginning to reinforce one another as that coherence carries across the system.

Soul-Guided Systems is concerned with that top row: helping organisations shape how their systems form upstream, so decisions align, actions reinforce each other, and meaningful performance endures — rather than being rebuilt through effort every time conditions shift.

If organisational realities form differently, leadership may involve more than responding skilfully to inherited realities. It may also mean learning to participate in the formative processes through which those realities come into being — a question the next essay in this series will take up directly.

Returning to the Question

We began with what seemed a simple question: where does organisational reality come from? At first the answer seemed self-evident — through structures, strategies, cultures and leadership, the visible, measurable things organisational conversations usually focus on.

But following the question upstream, a different picture emerges. Structures are themselves formed. Cultures don’t appear spontaneously but arise through shared experiences that gradually become taken for granted. Strategies express ways of interpreting the world long before they become plans. Even substrate, so usefully brought into focus by Snowden, invites us to keep asking where the conditions shaping behaviour first came from. The further upstream the inquiry travels, the harder it becomes to locate a single point where organisational reality begins.

Perhaps that’s because there isn’t one. Organisational reality may be less like a building on fixed foundations than a landscape continually taking shape through the reciprocal movement of interpretation, relationship, decision and experience. Every decision becomes part of the conditions within which future decisions are made; every relationship contributes, however slightly, to the reality others will later inhabit.

Seen this way, familiar organisational questions start to shift. Instead of asking how to create a customer-centric organisation, we might ask how customer reality is continually being formed. Instead of asking how to build a stronger culture, we ask how shared meaning becomes embedded in everyday life. The emphasis moves — almost imperceptibly, but profoundly — from intervention toward participation, from implementation toward formation.

This doesn’t make organisations easier to understand. If anything, it asks us to live more comfortably with complexity — to recognise that reality is always richer than our models of it, and that the most significant organisational changes often begin long before they become visible in structures, strategies or performance indicators.

Some organisations acquire a quality that people instinctively recognise yet struggle to explain. Not because they function efficiently, or outperform competitors, or have a strong culture — but because there is an increasing coherence in the way their reality is continually formed. It’s this quality of coherent formation that I have come to describe as Soul-Guided Systems.

The name matters less than the inquiry behind it. And the inquiry points toward a further question: if organisations form in different ways, might it be possible to recognise those formative dynamics while they’re still emerging? And if so, might leadership become less about reacting to organisational reality, and more about participating consciously in its formation?

That is what the next essay will explore.