How Org Charts Lie

It has taken us years, and I think we are still not sure if we are getting things right even after substantial reengineering projects, a move to teams, new HR practices, two acquisitions, and a ton invested in technology. By now we should have reduced costs and created a more nimble company without a focus on hierarchy or fiefdoms. But it's tough to ensure that this is really happening. Most of us in this room have thousands of people we are accountable for stretched across the globe. It's impossible to manage or even know what's going on in the depths of the organization. I mean, each of us can fool ourselves into thinking we're smart and running a tight ship. But really the best we can do is create a context and hope that things emerge in a positive way, and this is tough because you can't really see the impact your decisions have on people. So you just kind of hope what you want to happen is happening and then sound confident when telling others.
—Executive vice president, commercial lending

This executive's frustration likely resonates with your own experience. Whether as a manager presiding over a department or as a member embedded within one, we are all dramatically affected by information flow and webs of relationships within social networks. These networks often are not depicted on any formal chart, but they are intricately intertwined with an organization's performance, the way it develops and executes strategy, and its ability to innovate. For most of us, networks also have a great deal to do with our personal productivity, learning, and career success.

Yet it's not always easy to know what is going on in these large, distributed, and seemingly invisible groups. Reflect for a moment on the network of relationships among the people you work with. You can probably describe your close relationships accurately, but studies show that as you move beyond your immediate circle, your accuracy likely begins to fall off.1 Given the importance of networks, this lack of understanding can have substantial implications for individual and organizational performance.

The frustrated banker quoted earlier realizes all too keenly that the work of a senior manager is largely about orchestrating the work of others. So central and essential is this role that an entire industry—maybe even several—has emerged, with the goal of revolutionizing the way people get their work done. Over the past two decades, waves of initiatives—such as de-layering, reengineering, total quality management (TQM), teams, supply chain integration, alliances, and implementation of myriad technologies—have washed through the corporate landscape, with varying degrees of success. These efforts to improve efficiency and eradicate bureaucracy have indeed transformed how work gets done. Employees are less constrained than before by formal reporting relationships or overly bureaucratic processes and procedures; important work in most organizations now gets done through networks of employees.

Because work, and the coordination of work, is increasingly negotiated in employee networks, new managerial challenges have emerged. Conventional wisdom suggests that you can't really manage these emergent groups, so executives often do little to support strategically important networks in their organizations. Managers may tout external networks established through alliances and strategic partnerships, and they are sure to acknowledge the importance of internal employee networks. But aside from developing a community of practice or implementing a collaborative technology, most of them don't take any concrete actions to support these networks.2 This oversight can be costly.

Consider a small network of executives in the exploration and production division of a large petroleum organization. This division was in the midst of implementing a distributed technology to help transfer best practices across drilling initiatives, and the managers were also interested in assessing the ability of the division to create and share knowledge. To help with these efforts, we were asked to conduct a social network analysis of frequent information exchange among the division's top executives. As you can see in Figure 1-1a, this analysis revealed a striking contrast between the group's formal and informal structures.

In addition to some political issues that impeded connectivity, three important points about this group's ability to leverage its expertise quickly emerged. First, as is often the case, the network analysis identified midlevel managers critical for information flow whom leaders had not anticipated would be so important. A particular surprise came from the crucial role played by Cole in overall information flow both within the group and between members of the production division and the rest of the network. Cole's reputation for expertise and responsiveness had resulted in his becoming a critical source of all kinds of information. However, the number of requests he received and projects he was involved in had become excessive, not only causing him stress but also often slowing the entire group. Through no fault of his own, Cole had become a bottleneck.

The social network analysis also revealed the extent to which the entire network was disproportionately reliant on Cole. If he were hired away, the company would lose both his knowledge and the relationships he had established, and in many ways these relationships were holding the network together. People would have to scramble to establish informational relationships, and the group's performance would suffer. As a result of the analysis, the organization decided to categorize the requests that Cole received and then allocate some of these domains to other executives. This simple solution unburdened Cole and made the overall network more responsive and robust.

Just as important, the social network analysis helped identify peripheral people who represented untapped expertise. In particular, many of the senior people had become too removed from the group's day-to-day operations. This is common. As people move higher within an organization, their work begins to entail more administrative tasks, making them both less accessible and less knowledgeable about the work of their subordinates. For example, Figure 1-1b reveals that the most senior person (Jones) was one of the most peripheral, and his lack of responsiveness often held back the entire network when important decisions needed to be made. The social network diagram helped turn what could have been a difficult confrontation with this executive into a constructive discussion, which led him to commit more of his time to the group.

The analysis also demonstrated the extent to which the production division (the subgroup at the top of the diagram) had become separated from the overall network. Several months before the analysis, this division had been moved to a different floor. After reviewing the network diagram, the executives realized that this physical separation had resulted in fewer serendipitous hallway meetings. Because this lack of communication had driven a series of recent operational problems, they decided to introduce more structured meetings to compensate for this loss.

The power of a social network perspective
The results of this organization's social network analysis are fairly typical. Even in small, contained groups, executives are often surprised by patterns of collaboration that are quite different from their beliefs and from the formal organization chart. Getting an accurate view of a network helps with managerial decision making and informs targeted efforts to promote effective collaboration. Rather than leave the inner workings of a network to chance, executives can leverage the insights of a social network analysis to address critical disconnects or rigidities in networks and create a sense-and-respond capability deep within the organization.

This is not a trivial issue. Most executives will tell you that effective collaboration is critical to their organization's strategic success. Most, in candid moments, will also admit that they have invested a great deal of time and money to promote collaboration, with few or no results. Often, managers undertake such initiatives without understanding the inner workings of a network, relying on an implicit philosophy that more communication and collaboration are better. For example, managers may implement collaborative technologies with the vague notion that they will help employees interact more seamlessly and that this will improve the quality of their work. They may plan culture change programs, such as efforts in the 1990s to create learning organizations, with the hope that promoting open and honest dialog will improve innovation and performance. Or they may establish communities of practice, as many organizations today are doing, with the intent of promoting knowledge creation and sharing as well as improving the quality and efficiency of work.

Sometimes these initiatives have the desired effect, but the results are not always positive. Organizations can get bogged down. Decision makers can become so consumed that most of their employees cannot get to them in time to seize opportunities. And individual employees get overloaded with e-mail, meetings, and requests for help to a point where their own work, job satisfaction, and even health are damaged.

We can't afford to continue along this path. Rather than pursue initiatives that create connections indiscriminately, managers need to take a more targeted approach, keeping in mind that collaboration has a cost.3 The power of a network perspective, whether applied to a group or an individual, lies with the precision this view offers.

Managers who target strategic points in social networks can quickly increase an organization's effectiveness, efficiency, and opportunities for innovation. We are not simply suggesting that more connectivity is always better. In networks of any size, it is not possible for everyone to be connected to everyone else, nor is it desirable. An indiscriminate increase in connections can be a drag on productivity. A crucial benefit of network analysis often comes from discovering excessive relationships. This discovery can help managers develop ways to alleviate overburdened people and decrease time-consuming connections.

In this light, network analysis can be very helpful in revealing patterns of connectivity in specific functions, divisions, or business units. Many groups found on an organizational chart can benefit substantially when viewed through a network lens. These groups include certain departments in a core business process, distributed practices in professional services, and critical support functions such as research and development. More often than not, however, important networks in organizations don't exist on the formal chart and are certainly not on most executives' radar screens, as shown in Table 1-1. Groups of people—such as those coming together in a post-merger scenario, alliances, new-product development initiatives, and leadership networks integrating a conglomerate or core business process—need to collaborate well for strategic purposes. Unfortunately, these networks are often starved of resources and unwittingly fragmented by organizational design and leadership. Network analysis can help ensure that such groups are collaborating appropriately and are not fragmented by physical, functional, hierarchical, or organizational boundaries.

Excerpt reprinted with permission from The Hidden Power of Social Networks: Understanding How Work Really Gets Done in Organizations, by Rob Cross and Andrew Parker. Published by Harvard Business School Publishing, 2004. All rights reserved.

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Robert Cross is an assistant professor at the University of Virginia's McIntire School of Commerce.

Andrew Parker is a research consultant with IBM's Knowledge and Organizational Performance Forum.