The Invisible Hand
Who actually makes decisions?
In college, we were introduced to the concept of Adam Smith’s “Invisible hand”, which is a metaphor to describe the unintended, beneficial social consequences of individual self-interested actions in a free market. It turns out, there are lots of other invisible forces in commerce.
For instance, in our world of small business, we often engage with an owner-operator who has been running their company for decades. The individual owns the vast majority (if not all) of the company. If we were to look at a formal org chart, this person would be at the tippy top.
At some point during a deal process, we’re usually introduced to the owner’s spouse, who may have no formal role in the business. Typically dubbed as a casual, social gathering, we’ve learned these are high-stakes meetings in disguise; a spouse’s blessing is often critical to getting the deal done. In our experience, most partners can sniff out BS a mile away. Thankfully, we’re very comfortable with family dynamics. That said, we imagine countless deals have fallen apart because a more corporate buyer failed to recognize this hidden power dynamic.
This concept, dubbed “The Invisible Org Chart,” was outlined by a recent CFO Secrets newsletter:
“The org chart shows you the formal lines of power. Who signs off on the decisions? Whose neck is on the line? But it doesn’t tell you how those decisions actually get made. If your boss is giving you grief about something, and it feels unreasonable, they’re probably not doing it for fun. More likely, there’s something, or someone, you can’t see who’s driving them. Understanding those influences and what they might be saying is crucial. Invisible power is everywhere…
Indirect power comes from people who don’t have formal authority but influence the ones who do. Sometimes they’re obvious: investors, advisors, exec coaches, mentors, industry friends, former bosses. Other times, they’re hidden in plain sight: long-time lieutenants, spouses, and even kids. If I had a penny for every time Mrs. Secret CFO said to me ‘I thought you had people working for you who are supposed to deal with this shit?’”
We’ve worked with business owners who closely follow the advice of behind-the-scenes service providers – many of whom we’ve never met. These invisible influencers can wield surprising power in a transaction. That can be frustrating, especially when we’re clearly not engaging directly with the true decision-maker. But over time, we’ve learned to accept that power doesn’t always follow the org chart, and deal negotiations rarely follow clean lines. In our experience, patience and relationship-building go a long way in navigating these dynamics. We also acknowledge there are some we’ll never fully understand. It may be messy, but it sure does keep us on our toes!
Have a great week,
Your Chenmark Team
