Industrial Age Thinking Thwarts Potential of Internal Social Nets

About 15 years ago the CEO of the company where I worked decided that it was important that employees should learn to use the technology they were writing about. He asked my business unit to build a computer lab that employees could use at any time to play and experiment.

A large rectangular block of space was annexed in the middle of the open office and a spacious facility was constructed with spot lighting, tinted picture windows and all the latest PCs and Macs with large color monitors, color printers, a flatbed scanner and Bose speakers. There was even a NeXT machine.

The lab was christened with fanfare and highlighted in the company newsletter. It then sat unused for two years before it was quietly torn down and converted back to practical office space.

Why did the directive from the CEO of the company go unheeded? Because it was neither supported nor enforced by the managers below him. The managers – myself included – were given no incentives to make the CEO’s vision real. None of the executives used the lab themselves. Anyone who did could be observed by the entire office, as if to advertise that they had nothing else to do. The message was clear: Using the lab was equivalent to goofing off. Needless to say, people stayed away.

Unrealized Promise

That story popped into my mind last week as I was participating in a webcast with The Conference Board about internal social networks, their promise and the significant impediments that many organizations face to adopting them.

The social networking metaphor is increasingly expanding into the enterprise as a means to encourage knowledge-sharing among employees. Last month I attended Lotusphere and heard presentations by companies like 3M, Caterpillar, TD Bank North and Cemex about their successes in using Facebook-like technology behind-the-firewall.

Their stories, however, may be the exception. Recent research by InformationWeek found that less than 40% of users of internal social networks rated their usefulness as good or excellent. McKinsey reported last fall that only about half of the companies that met their definition of fully networked enterprises were able to maintain that state over time. “It appears that it is easier to lose the benefits of social technologies than to become a more networked enterprise,” McKinsey wrote.

This is despite the fact that internal social networks offer unprecedented opportunities to unlock the knowledge capital within organizations. For example, a sales rep trying to close a deal with a German company can discover an accounting employee who speaks fluent German and leverage that person’s skill to help get the business. The marketing department can discover the manufacturing employee who has outstanding Web design skills by simply posting an inquiry to the network. When employees can freely share knowledge and needs with each other, knowledge tends to bubble up in unexpected places.

Unfortunately, social networks challenge entrenched political boundaries and threaten the managers whose support is needed to make them work. They’re also incompatible with conventional organizational structures, which actually work against information sharing.

Factory Thought

Female Factory Worker, 1940sMost businesses are still built upon management structures that were conceived during the Industrial Revolution to optimize operational efficiency. Job descriptions, reporting structures, departments and business units were all needed to ensure that organizations produced the necessary goods on schedule and that each participant in the process was accountable. These structures have become a burden today as challenges have shifted from process management to knowledge management.

In most companies managers are rewarded based upon the output of their group. Incentives to share resources are few; in fact, such behavior is more likely to be penalized than celebrated. The accounting manager has no reason to share the German-speaking employee with the sales rep because gains nothing from doing so and others in the department have to pick up the slack of the absent employee.

Knowledge sharing initiatives don’t work if the organization doesn’t change. Executive vision must be supported by line managers who have goals and incentives that encourage them to share their treasured resources.

Getting started isn’t that difficult. Spot bonuses, recognition in company awards programs and articles in the company newsletter can highlight desired behaviors at little cost. However, to really optimize knowledge sharing within an organization, executives need to think bigger. They need to institutionalize practices that encourage the smooth flow of information and skills across the workplace. They need to rethink the knee-jerk approach to departmentalizing everything and rewarding line managers solely on the basis of departmental performance. They need to let teams form fluidly without penalizing people who wish to contribute outside the confines of their job description. They need to let people experiment and play without fear of recrimination.

The reward is a smarter business with happier employees who are engaged in work they love. That’s a concept the architects of the Industrial Revolution never even imagined.

McKinsey Research Again Validates Social Technology Benefits

Here are highlights from the fifth annual McKinsey study, “How social technologies are extending the organization” (registration required). McKinsey’s groundbreaking research in this area has consistently demonstrated that companies that leverage social technologies most aggressively see the payoff in market share gains, improved productivity and higher customer satisfaction. However, the research also indicates that becoming a fully networked organization is difficult, and remaining fully networked may be even harder.

Seventy-two percent of the respondents report that their companies are deploying at least one technology, and more than 40 percent say that social networking and blogs are now in use.

Executives at internally networked organizations note the highest improvement in benefits from interactions with employees; those at externally networked organizations, from interactions with customers, partners, and suppliers.

Executives at fully networked organizations report greater benefits from both internal and external interactions. Developing organizations [those with the lowest rate of social media adoption] report lower-than-average improvements across all interactions at their organizations.

Self-reported operating-margin improvements correlated positively with the reported percentage of employees whose use of social technologies was integrated into their day-to-day work.

Market share leadership in an industry, the final self-reported performance measure, correlated positively with the integration of social tools in employees’ day-to-day work.

Roughly half of the internally and externally networked enterprises slid back into the category of developing organizations; that is, they did not maintain the benefits of using social technologies that they had achieved earlier…It appears that it is easier to lose the benefits of social technologies than to become a more networked enterprise, which suggests that significant effort is required to achieve gains at scale.

The respondents affiliated with fully networked organizations are the likeliest to believe that greater process change will occur in their own organizations. In larger numbers than respondents in other clusters, they think that social technologies will lead their companies to adopt entirely new processes under current conditions and to do so even more aggressively if all constraints were removed.

They say that with fewer constraints on social technologies at their companies, boundaries among employees, vendors, and customers will blur; that more employee teams will be able to organize themselves; and that data-driven decision making will rise in importance.

Organization Type, Based on Social Media Benefits

Web 2.0 Carrots

From Innovations, a website published by Ziff-Davis Enterprise from mid-2006 to mid-2009. Reprinted by permission.

Back in the dark ages of the early Internet, some colleagues and I got hooked on instant messaging. We loved its immediacy, and IM quickly replaced e-mail as the preferred way to communicate among our far-flung staff. This frustrated our IT organization, which didn’t even know about our activities for over a year. IT briefly tried to restrict IM use but ultimately gave up and just shrugged its shoulders.

The group didn’t have time to wrestle with the problem. It was too busy trying to shove a corporate mandated group collaboration package down our throats. This expensive and over-engineered solution had been selected by someone at the corporate level without any input from the people who would have to use it. For two years, our IT organization tried to teach users how to tap the software’s powerful but Byzantine capabilities with little success. By the time I left the company, the collaboration suite was basically a bloated e-mail client. Meanwhile, IM flourished.

Mandates From Above
Top-down implementation comes naturally to IT organizations. Much of what they’ve been tasked to do over the years has involved driving technology into their organizations to achieve executive mandates for efficiency. But the new breed of Web 2.0 tools presents a new challenge.

New research by McKinsey reveals that Web 2.0 tools are turning in decidedly mixed results in organizations that are experimenting with them. Half of the 50 respondents to a detailed set of interviews indicated that they are dissatisfied with the performance of these collaborative tools so far.

Successful innovators are learning that a “high degree of participation” is required to make the tools pay off. This involves not only grassroots activity but also a different leadership approach: senior executives often become role models and lead through informal channels.”

That’s a cultural disconnect for the traditional command-and-control approach to IT management. Big hairy systems projects like enterprise resource planning, supply chain management and customer relationship management have always been mandated from the top in the name of efficiency and cost reduction. The technology didn’t work unless everyone used it, so employees had no choice.

But knowledge capture tools like wikis and social networks don’t succeed unless users embrace them, researchers found. “Efforts go awry when organizations try to dictate their preferred uses of the technologies…rather than observing what works and then scaling it up.”

In fact, Web 2.0 initiatives often yield results where least expected. McKinsey researchers cite the example of one company that put software in place to quickly train new hires. The package failed in that context, but the company’s human resources people discovered that the same application was effective in sharing information about job candidates. They turned out to be the ultimate end users.

Culture of Sharing

Web 2.0 technologies excel at helping people capture and share information, but that process works best when the motivation comes from within. The “give to get” culture of the new interactive web has tapped this human compulsion in a powerful way. It turns out that the desire to help one’s peers is more powerful than the motivation to fulfill a management mandate.

Not surprisingly, McKinsey found that incentives work better than commands in making organization successful with Web 2.0. Steel producer ArcelorMittal, for example, “found that when prizes for contributions were handed out at prominent company meetings, employees submitted many more ideas for business improvements than they did when the awards were given in less-public forums,” the report says. Celebrating the generosity of individual employees was also effective in stimulating activity by their peers.

Which means that when it comes to Web 2.0 technology adoption, the carrot proves far more effective than the stick.