Social networks and organisational hierarchies ~ Management 2.0 developing social capital

I’ve been talking to Josh Letourneau, sourcer and executive search consultant come social network analyst following his recent and insightful post ‘Social Capital… is about to change the world‘ in Ryan Leary’s equally interesting 2010 Recruiting Carnival series).

I agree with just about all of what Josh writes. I particularly like, and agree with, this:

“Ask yourself why there is so much focus on improving ‘within-employee’ factors (skills, competencies, etc.) when research is showing us that competitive advantage is more driven through the ‘patterns of connections’ (often called ‘networks’ or ‘between-employee factors’) than the mean level of organizational talent alone. According to Valdis Krebs, one of the foremost thinkers in the way of Social Network Analysis on the planet, “Teams are not made of talent alone. It is how the talents of individual players intersect and interact that distinguishes a good team from a collection of good players.”

However, another of Josh’ comments has had me thinking:

“Take a moment and ask yourself why organizations spend so much time focused on ‘maintaining the formal structure [command-and-control] Org Chart’ when they so rarely reflect how the day-to-day work gets done? Why is there such little focus on self-forming (in many cases) social networks when it is apparent ‘how much information and knowledge flows through them and how little through official hierarchical and matrix structures’?”

It’s not that I disagree with Josh – I think he’s made a very thoughtful and considered statement, that I also consider to be true.

But as social networking has been growing into a more popular theme, I’ve also seen a lot of people going a lot further than this – basically suggesting that hierarchies should be binned and that networks should be monitored / managed / influenced in their place.

Andrew McAfee has been posting on this too:

“Do we agree that a social revolution is taking place in business today? That corporate hierarchies are being replaced by self-organizing and -governing networks?

If they are, I haven’t seen it. I’ve seen plenty of examples where formal org structures have been supplemented by informal ones (whether tech-enabled or not). It’s also quite common for formal, pre-defined business processes to be supplemented by ad hoc and emergent ones, especially when the formal ones aren’t working perfectly.

Every time this happens, it’s social. But it’s not revolutionary. It’s not even new.

What would be new is a trend of companies throwing out altogether their org charts, management hierarchies, reporting relationships, job titles and descriptions, formal roles and responsibilities, review and promotion processes, and other aspects of classic, old-as-the-hills organizational structure and replacing them with an entirely new social contract. I’ve not seen or heard of a single example of this taking place.”

There are two points I want to make on this:

1. The social revolution doesn’t necessarily require flat, democratic, collaborative, self-organisation! (albeit that I think these all sound nice to have). It requires, above all, recognition that ‘social’ is important

To me, the social revolution that I believe is starting to impact organisations is about recognising the importance of – and then investing in – the relationships between people, as well as the people themselves.

It’s a revolution in the same way that HCM is a revolution (the people revolution) - they both put intangible organisational capital at the centre of business strategy, and align people and organisation management processes behind this capital, rather than to just achieve short-term business ends.

The people revolution puts human capital at the centre of business strategy, the social revolution extends this to social capital too.

The social revolution is potentially an even bigger revolution than the people one for two reasons:

The point of performance in most organisations is the team, not the individual – so social capital has even greater value than the human sort
Most organisations manage their people very poorly. They use up human capital rather than accumulating it. But at least the management of people is something that they try to do. Managing or even just influencing relationships is something that most organisations have not even thought about as yet.

So social capital’s more important, and it’s in a much worse state.

Also see my recent post on moving from human to social capital.

But changing things to start accumulating social capital doesn’t require throwing the baby (org charts, management hierarchies, reporting relationships and the other things McAfee mentions) out with the bathwater. My next point explains why (in my next post).