In a hierarchical organization, most of the information that answers key questions about the management and operation of the enterprise (what, why, how and when) is typically produced and aggregated at the top and then distributed downwards throughout the different levels and branches of the hierarchical organization. The information must often pass each level of management on its way down until it reaches the intended receivers. These are "information tollgates" which have the responsibility and mandate to communicate this information to relevant receivers further down in the structure. In doing so, they can often select which persons they think should receive the information, how they should receive it, when they should receive it, and what they should receive. A major drawback of this way of distributing information is that the probability is quite high that information needed by a coworker further down in the pyramid does not reach her:
- Management might be unaware of her need, which means that she does not receive the information she needs at all.
- They might have misunderstood her need, which means that she receices the wrong (insufficient, incomplete, inaccurate...) information.
- For some reason they might not want her to receive the information she needs, which means that important information is filtered out, or that information gets distorted along the way.
- It is also quite obvious that this is not the shortest or most efficient way for information to travel and that even if the coworker receives the information she needs, it is likely that it is not received in time.
All these things can be avoided if there is a direct communication and interaction between the sender and the receiver. Obviously this is not possible in very large organizations. Or maybe it is?
Informal networks have traditionally been treated as threats to organizations by the management. This is probably because informal networks do not follow the communication structure based on the hierarchical organization chart. Informal networks bypass this structure. Furthermore, they do this in a hidden way that cannot be controlled by management. Still, without those informal networks most organizations would not function.
If you search for "informal networks" on Google, you will find an article called "The Power of Informal Networks" that pretty well sums up the importance of informal networks (You will also find the MIT SMR article "Six Myths About Informal Networks - and How to Overcome Them" and the article "Harnessing the power of informal employee networks" from The McKinsey Quarterly):
It is imprudent for the meeting professional to underestimate the power of informal networks by saying they are merely "nice-to-have." These types of networks are increasingly having a major impact on organizational effectiveness. More importantly, these types of networks provide major business advantages for the participants and thus are known to advance many careers.
The main difference between informal and formal networks is the effort of the individuals to create and maintain them.
The formal network often has an organizational culture attached to it, such as a formal philosophy, mission, structure, leadership, membership, eligibility, and funding.
Informal networks are based on the objective of achieving a reciprocal exchange of information and favors—with no rules—share advice freely, expand the network at will, inspire each other, achieve personal goals, and help each other obtain business and career advantages. The "old boys network" is based on the informal network system, hence the phrase, "It's a man's world." Again, the emphasis is on a one-to-one networking effort, as opposed to an organizational system that characterizes the formal network.
In Wikipedia you can read the following about social networks:
"...power within organizations often comes more from the degree to which an individual within a network is at the center of many relationships than actual job title...//... Networks provide ways for companies to gather information, deter competition, and collude in setting prices or policies"
Social networks can be seen as digital representations of informal networks. The key word here is “representations” since social networks make otherwise hidden informal networks visible. And by making them explicit, they can in a sense be “managed” and used to their full potential for gathering and sharing information.
Social networks are also flat. They have no hierarchy and everyone in a social network is typically presented as being on the same level, even though there is often a reference to an individual’s position in a hierarchical organization. But these titles are less important in a social network than IRL. What is more important in a social network is the person behind the title and who that person is related to. This, together with the fact that people often are more comfortable with contacting people they do not know virtually than IRL, makes the barriers to contacting someone higher up in the hierarchy of an organization much lower. It enables important information to be communicated from grass-root level to top management and vice versa in a fast, undistorted, frequent and in a timely manner.
This is also the "threat" of social networks to hierarchical organizations. Well, it is not a threat to the business itself (rather an opportunity). It is threat to those in the middle of the pyramid who build their positions on their formal right to distribute information from the top and down, and vice versa. This is pretty much the primary function of a lot of people in the middle of the pyramid. But as this function is becoming less important and sometimes obsolete, it poses a threat to those managers who are not really good coaches, mentors, visionaries, sales people, networkers and so on.
Top management on the other hand can really benefit from social networks. By bypassing the cumbersome hierarchical communication structure and communicating directly with individual coworkers, they can practice a much more agile and proactive leadership. They can get access to vast amounts of uncensored information from any corner of the enterprise and interact directly with coworkers from which you need additional information. But this requires that they equip themself and their collegues with efficient tools and technologies for sharing information, such as a corporate social network, syndication (RSS), blogs, wikis and mashups. With these and other tools and technologies, management can access and filter out important information that is flowing through the informal networks and spot trends, capture important signals and increase their awareness about the health of the business.
In a sense, the emergence of social networks and the means to distribute and aggregate information within those networks can be seen as "Social Business Intelligence". Social networks put content in context of other content, but what is even more important is that they put content in context of people. And it happens in real-time. This is what is missing with traditional business intelligence solutions.
There are definitely opportunities for enterprises to capitalize on social networks. But you have to find out a way to deal with those individuals in the middle of the pyramid that do not like being flattened out.