Since the 1990ies we discuss the networked organization as a specific organisational form, which stays in contrast to the traditional hierarchical form and market oriented structures. Myself I wrote my doctorate thesis on that topic around the year 2000 and had the feeling, that the concept is still more theoretical than practical at that time. But a lot changed since then and networks can help us significantly to understand and improve organizations. But first, some caveats have to be removed.
Before we go deeper into the benefits of this idea and concept, let me briefly define, what I understand when talking about the networked organization: Since the industrialisation, when larger structures replaced a part of the smaller craftsmanship oriented workshop structures, the pyramidal structure of hierarchical organization became the dominant paradigm for coordination and control of larger organizational setups. In comparison to the idea of the command and control pyramid, the networked organization emphasizes the cross functional and cross hierarchical coordination without a central head. As benefits of this type, things like lower costs and higher flexibility/ agility were discussed. Different coordination mechanisms like trust and reciprocity in comparison to power (hierarchy) and price (markets) were analysed and a lot of ideas were developed on how more network oriented structures can be implemented in real organizations.
Since then it seems, that the idea of networks still had a niche existence in business. But today it comes more on more into the focus, as popular business writers like Kotter saw the importance and picked up the topic (see Kotter, 2014). Also theoretical insights on network theory and network analysis developed a lot over the past few years, but not in the field of business and economics, but in the field of physics, biology and sociology.
Today we understand a hierarchy as a specific type of network (tree structure) with specific characteristics, strengths and weaknesses. What Kotter (2014) calls “networks as a new system”, I would call the visualization and emphasis of non-hierarchical interaction and communication links, which always existed and made all organizations running. In theory we understand more and more, how network structures, characteristics and dynamics influence the stability, resilience, efficiency and effectiveness of networks. What was missing in the past was a way to easily measure what is going on in the organization in terms of communication and interaction and make this visible to the employees and management for learning and improvement.
But this is now possible. At xm:institute we ran projects analyzing international centers of expertise or communities of practice by analyzing eMail communication or other data available in the organization to gain insights on patterns on a non-individual level. Other companies or research programs go even one step further using electronic badges to analyze movement and communication patterns of individuals, tracking their position over day, their interaction patterns with others and even their way they communicate. (Social Physics movement: Pentland, 2014).
One challenge, at least here in Europe is that people are very sensitive about privacy and have a high amount of reservation against analysis of personal data, even if the data is anonymized and aggregated. Talking to organizations, the first argument against network analysis projects is, that the work council and the data security officer will not approve the study. But from our experience, by explaining the concept and approach in details to those stakeholders fear can be avoided and you can even get their support on these studies. A lot of new insights can be generated for the benefit of the whole company, creating competitive advantages and better understanding of the company’s dynamics. Now only a few companies experiment with these tools, but we seen an increasing interest on a global level. Those few players were able to gain benefits, like the identification of critical units to pay specific attention on, specific beneficial or destructive patterns of interaction, white spots and broken communication chains. This could be used for faster, cheaper and more intelligent change initiatives, communication strategies, implementation of new strategies or improvements on leadership behavior via self reflection.
If we like it or not, the new technology and tools are already used for improvement on the global marketplace. What is already happening on a broad basis in social network companies like Facebook, Google or Twitter with customer data behind the scene, will be business as usual tomorrow also in more traditional industries with employer data inside the organization. If you prepare those studies well, inform everyone and make approach and results transparent, those kind of studies can help significantly to increase the ability of self-reflection of the whole organization.
Kotter, J. P. (2014). Accelerate: building strategic agility for a faster-moving world. Harvard Business Review Press.
Pentland, A. (2014). Social Physics: How Good Ideas Spread-The Lessons from a New Science. Penguin.