Informal Organizations

Informal Organizations

The business value of social networking software lies less in creating relationships from whole cloth than in recognizing, analyzing and mobilizing existing relationships. “We all know there is a lot more to an organization than what you can see on an organizational
chart,” says Zia Khan, a principal at consulting firm Katzenbach Partners.
“There are hidden elements, personal
relationships and networks that people draw upon every day outside of the org chart. Until now, nobody has had a holistic view of those things.”

Khan calls that shrouded world of water-cooler conversations, school ties and common interests “the informal organization,” also the title of his book-in-progress on the subject. While the formal structure of a company is good for dealing with explicit metrics and strategies, the informal organization is the seat of “the values that help people make decisions.”

A formal organization, the stuff of managers and direct reports and scheduled projects, works well at addressing markets by parameters such as geography and time. An informal
organization might form around less obvious and diffuse groups that share an affinity for, say, NASCAR and turn out to be fans of a given product as well. “Formal helps with work the company thinks it needs to be doing, informal helps do the work that’s not predictable,” Khan says.
Informal culture is powerful stuff, with real potential to improve business
performance. Khan points to Southwest Airlines as an example of a company with formal structures and strategies similar to those of its competitors,
but also a culture of cheerful customer service, workers willing to perform tasks outside their narrow job functions, and a history of financially outperforming its peers.

“They are able to communicate and create emotional connections to work in ways that are fundamentally different
from other airlines,” he says. The cultural advantages at Southwest are organic to the company, but similar potential exists within its rivals.

That’s where the software is designed to help: by highlighting the relationships and informal networks that exist within any company, and fostering
the company’s use of them. It lets you “tap into the emotional commitment
that drives extra effort,” Khan says.

His caveat: Social networking technology
can help companies align informal
organizations with their business goals, but companies must start with business processes in mind to derive real value from the networks they track and nurture.
Over time, says Khan, companies will allow more personal and emotional focus in the workplace and employees will come to expect it.

“I see a kind of convergence” across formal and informal organizations, he says. “You are friends with someone in accounting, you did a project with that person and had a beer and now you have a social network, complete with pictures of your team outing, that replicates elements of your real relationships.”

It sounds warm and fuzzy, but if all goes according plan, the payoff will include cold, hard cash on the bottom line. —Edward Cone

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