First Steps in Leveraging an Organization’s Informal Network

Richard Brady

Organization charts in the modern context likely date back to 1855, when Scottish-American railway engineer Daniel McCallum used a charting process to show lines of authority. The first chart was lost for a century and then found again, perhaps in an old filing cabinet. The same can be said for most ‘org charts’ in business today; occasionally located for times of right-sizing or recruitment activity then put to one side and largely forgotten. If an org chart intends to map the organization, managers struggle as that map is often lost and the landscape of how people actually network and relate to each appears very different. Most business leaders will also be aware that an enterprise is more than just a chart and is far more organic and subject to change than the hierarchy suggests – the value of any enterprise resides in its people and their relationships.

What Is an Informal Network?

The traditional organizational chart tells us little about the organization’s inner workings; it is used more to describe accountabilities and to support compensation and benefits. Organizational structures are increasingly becoming flatter with less hierarchical distance between the CEO and ground level. At the same time, matrix-working has become much more common with vertical reporting lines removed in favor of working across silos and in cross-functional teams.

A company’s intangible value is created by the manner in which people interact and the informal network that is created; often not following rules or structures mandated in a ‘top-down’ way. These informal relationships occur at an inter-organization level as well as within organizations.

To illustrate this informal network, the Covid-19 pandemic has starkly exposed how supply chains need rethinking in times of crisis. Many global supply relationships are as defined by individual relationships through email and telephone as they are by written contracts or formal structures. In this digital age, the peer-to-peer communication pathways that power global informal networks have overtaken the importance of geographic proximity.

The Value of Informal Networks

We all experience the benefits of a successful informal network from time to time; although we are perhaps more aware of these networks when they fail to work. Informal networks create a consensual social reality that works alongside formal relationships. If people operate in an environment where they don’t experience shared social reality, it fuels pressure and dysfunction, ultimately negatively affecting employees’ well-being and health.

A functioning social reality creates an environment of transparency and honesty. It creates an environment where people can thrive as individuals and as a team. Individuals sense growth and a positive dynamic as the informal network becomes larger, stronger and richer.

Beyond trust and reciprocity, informal networks bring considerable immediate and tangible benefits. Working across barriers improves communication and creativity flow, resulting in dissolving silos and effective collaboration.

The sense that the informal network is intangible can make it difficult to decide where to begin. The first step can be as simple as bringing other groups into team meetings. For example, the benefit of bringing an operations employee into a legal discussion brings different perspectives and opinions, and even without technical expertise, the group’s thinking is improved. Project managers will recognize this as the first step in creating high performing, agile teams.

The Risk of Getting It Wrong

Because the informal network is largely intangible and even invisible, the organization may fear it – even at a senior level. The informal network is often perceived as a base for gossip and rumor or the kind of corridor-discussion that circumvents or disrupts value. Indeed, the term ‘lobbying’ originates from the location of the corridor or the lobby where alliances and allegiances are struck, cemented or broken.

The invisible nature of informal networks means they don’t receive leadership attention. This highlights the distance between executives and colleagues as they may feel out of touch or employees may perceive them as such – it is lonely at the top and the circle of influence around a leader shapes their reality. Informal networks are real and powerful, but in the managerial sense that which isn’t seen doesn’t exist. And yet, it has a direct impact on performance. Acknowledging this brings up difficult questions about influence and even control.

The Five Dysfunctions of a Team delivers a useful paradigm for understanding what can go wrong. This is especially true of the top two dysfunctions. These are the ‘Absence of trust’ and the ‘Fear of conflict or confrontation’. Both arise when a network becomes insular and fails to build checkpoints with the outside world.

Without external references, the network becomes blind to risks and realities and more prone to relying on old ways of thinking and promulgating long-accepted truths. Many teams fail due to conformity and lack of diversity in their thinking. They act in silos, without bringing in people from different departments to enhance creativity and innovation. This can lead to the decline and death of industry giants, like Kodak and Nokia, well-known examples. An informal network can either grow or damage an enterprise.

Starting to Leverage Your Informal Network

Interpersonal power and relationships which reinforce, and indeed limit any network, are subtle and need careful handling. Some first steps to consider include:

  1. Insight: The first step is to make people aware of an informal network’s existence. Since an informal network is intangible by nature, visualizing an organization’s informal network will help in understanding its presence and impact. These relationships have been invisible until the advent of SONAR® – a map of the connections within people networks.

  2. Challenge: Using the visualization, start exploring the formal and informal relationships in your knowledge network. What is causing issues? Where does the network structure need to be improved? And how can we allocate resources more effectively?

  3. Transform: If you don’t measure it, you can’t improve it. Start measuring and monitoring the changes you make to optimize your informal network. There must be active involvement from multiple disciplines with management buy-in. A continuous improvement cycle is a prerequisite for leveraging your informal network in the long-term.

Case Study

An IT-Consultancy boutique approached Network Centrality® with what seemed to be a straightforward issue: declining sales.

Working through our three steps, we began to understand that the sales team worked in isolation. The salespeople had no connections internally. Sales remuneration was commission-based and staff were hence highly individualized, to the extent that there was no clear benefit in sharing any learning or even information at all – individuals had built silos around themselves. Again, the organization’s policies encouraged individuals to protect what they had, but consequently caused the organization to stagnate.

Through understanding of the informal network, Network Centrality® also found another critical element outside the sales teams. The analysis showed that the R&D team was also disconnected. This meant that anybody in the organization that was client-facing was not communicating with them at all. Cut off from important information streams, the R&D team missed key aspects for effective product development.

Final Thoughts

‘Informal’ can be a trigger word for many. The idea of the informal organization is easily mistaken for gossip or hearsay. By focusing on peer-to-peer relationships rather than positional power, we can get closer to understanding the gap between strategic vision and the ability to deliver on it. Analyzing and visualizing the formal and informal relationships in your organization helps you identify where your network structure needs to be improved and how to allocate resources effectively.

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