The 'long & short' of leveraging informal networks — for formal results

Patrons of Found|READ know that we’re big fans of The McKinsey Quaterly, an knowledge-rich periodical published by the consulting firm, McKinsey & Co., based on client-cases from the firm’s practice. This week’s edition has a great essay detailing the mangement benefits of one organizational tool which we, in the webified blogosphere, have long-appreciated: informal networks. The McKinsey authors start out by defining for us why the fundamentals of social networking has special value in corporate America.

Most large corporations have dozens if not hundreds of informal networks, which go by the name of peer groups, communities of practice, or functional councils—or have no title at all. These networks organize and reorganize themselves and extend their reach via cell phones, Blackberries, community Web sites….As [informal] networks widen and deepen, they can mobilize talent and knowledge across the enterprise. <!--more-->

In fact the authors conclude: informal networks are more valuable than formal networks.

As we studied these social and informal networks … we concluded that the formal structures of companies, as manifested in their organizational charts, don’t explain how most of their real day-to-day work gets done. So it’s unfortunate, at a time when the ability to create value increasingly depends on the ideas and intangibles of talented workers, that corporate leaders don’t do far more to harness the power of informal networks.

There are problems with informal networks, too, though. First of all, while valuable, informal networks can cause distraction “as tens of thousands of individuals search for knowledge and productive personal relationships in social networks, they generate much of the overload of e-mails, voice mails, and meetings…”

And, by definition, informal networks are not consistent, which makes them hard to leverage consistently, a cornerstone of effective manangemet: “…informal networks, as ad hoc structures, essentially rely on serendipity, so their effectiveness varies considerably.”

Here is the real value in the McKinsey essay: The authors tell us that “informal networks” can be improved upon, leveraged, or even “formalized” a bit, to create more value for your organization.

companies can design and manage new formal structures that boost the value of [informal] networks … [by] assigning “leaders” to focus discussion, and combining hierarchy and collaboration to bring together natural professional communities, formalized networks…enable leaders to apply the energy of diverse groups of professionals and managers to realize collective aspirations.

We’ve read their advice for how “informal networks” ougth to be leveraged to maximize vlaue, and we think several of the implied tips here are just as applicable to startups as they are to McKinsey clients. As always, we encourage your to read the whole piece here, but our interpretation of the highlights follow.

1) Invest. “Companies typically underinvest in the capabilities needed to make networks function effectively and efficiently.” So, look around and then invest in the things (software or gear, etc.) that you witness your staff using to stay connected to each other. To the extent that you can, support their informal networks, “formally” with infrastructure and by usign the stuff yourself. (May we suggest you start Twitter-ing?)

2) Identify and hug ‘the informal Hub.’ “An informal network often has crucial members…who serve as hubs to connect participants, but such members can hobble or even undermine the network if they become overloaded, act as gatekeepers, horde knowledge to gain power, or leave the company.” Ok, figure out who these value-adding hubs are in your organization and take very good care of them.

3) Set-up “formal” networks around specific work areas/tasks.

“A leading petrochemical company, for example, recently designed more than 20 formal networks…to focus on specific work areas, so that employees could share best practices [to] minimize downtime in these areas. In one case the company measured the impact of networks on engineers at an oil well, who used them to find experts with the knowledge needed to get the well back into production in two days rather than the anticipated four.” For a startup, you might consider establishing a “formal” network around these such tasks as: developing new sponsor-relationships; developing sales; sourcing new real estate opportunities; or recruiting.

4) Define additional “formal” leaders. “To formalize a network, the company must define who will lead it—that is, the network owner—and make that leader responsible for investing in the network to build its collective capabilities, such as knowledge that is valuable for all members.”

5) Establish protocols for particiaption. In addition to defining a “territory” for your networks, give the network a structure that describes “how it should work.” This can be a responsibility of a formal network “leader.”

6) Provide incentives for participation. On top of facilitating the networks with the infratstructure (software/gear, etc. that is needed), reward active members with treats like “community building off-sites” and “recogn[ize] people who contribute distinctive knowledge.” fr example, he would unearths the real estate lead for your startup’s next home gets the office with the view, or whatever.

7) Create accountability.

You can hold your network leader accountable for the network’s performance, or its members. McKinsey encourages assigning accountability to the network leader, because “the leader’s impact comes from controlling the investments and activities that make the members individually—and the network collectively—more effective, and much from the ability to inspire and persuade.”

You could also measure success through “qualitative assessments, made by members and senior leaders, of [the network’s] effectiveness…in the form of stories or case studies illustrating improvements in professional productivity.” At a startup, we’d suggest a company blog — that anyone can read — where such “network chronicles” could be shared and reviewed.

There is a lot more in the essay about the virtures of formalizing your informal networks, including some elborate diagrams, so do check out the whole piece.

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