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Open beats Closed: Tapping the Informal Organization

Submitted by on January 13, 2009 – 8:47 pm3 Comments

I have made a few changes to my Open beats Closed diagram (thanks to Hastings who commented on the original post ).   Making these changes led me to realize I needed to speak about the distinction between the formal and the informal organization.

First, what I changed:  I added “Formal Organization” to the “Your Company” icon in the center and “Informal Organization” next to the “Employees” at the top left.  In the first version of the diagram I had simply placed “Employees” (with no added note)  outside of  “Your Company”    That was confusing because most people think of employees as being “inside” the company.   Well, physically they may be there  but in terms of involvement and contribution, not necessarily.

Most organizations are not tapping into the value, talent and energy of their employees.  These people might as well be outside of the business…

Amending the diagram led me to draw the distinction between the formal and the informal organization.  The formal organization refers to the official titles, roles and responsibilities (the chain of command) that organizations use to produce goods or services.   Managing the formal organization, while far from perfect,  is the subject of  focus for how companies try to improve (change a process, hire talent, restructure, change lines of reporting etc.).  We have decades of experience with this type of management. That being the case the competitive advantage it provides is marginal since everyone is reading from the same few playbooks honed over the past 50 years.
The Informal Organization describes “the interlocking social structure that governs how people work together in practice. It is the aggregate of behaviors, interactions, norms, personal and professional connections through which work gets done and relationships are built among people who share a common organizational affiliation”.    The informal organization exists outside of the boundaries of traditional management structure and “controls”;  “how work gets done here” who is the “go-to-guy” on this issue, “what four things should you never try here” etc.   Much of the power of social technologies lies in its potential to tap into the power of the informal organization by surfacing these relationships, by allowing tacit knowledge to be expressed and shared and for disparate groups to collaborate across internal boundaries.

The power of this was captured in Wikinomics with the case of Dresdner Kleinwort where,

…employees started using wikis in the IT department to document nes software in an informal pilot. Soon afterward, wikis began to migrate out of the IT department and into the broader workplace environment, where teams picked up on them as a way to get collaborative projects up and running quickly.

When DKW CIO J.P. Rangaswami learned of the process, he was intrigued by the technology’s versatility. The company went ahead with more pilots, and after just six months of usage, the traffic on the internal wiki exceeded that on the entire DKW intranet. Today the wiki has more than two thousand pages, and is used by more than a quarter of the company’s workforce. Lead users have decreased e-mail volume by 75 percent
and cut the company’s meeting times in half.

There are dozens of ways to think about unlocking the power of the informal organization… Here was another that is emerging (we’ll see how it does when it hits legal…)  I was working with a Fortune 500 HR executive who said to me, “why is my department writing the job description for field managers?  There are 1000 stores with managers doing the real work… they know what the job description is better than anyone here in corporate.  Why shouldn’t I put that on a wiki and allow it to be edited?”   What a powerful idea.

With this simple, social technology (in this case again a wiki) the executive is considering allowing all of the tacit knowledge managers know about their job to be surfaced as a jointly authored job description.


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