Social Networking in Corporations

    November 9, 2006

The concept of social networking has been around in management research circles since the 1950s but advances in computing technology and the runaway success of online social communities has rekindled interest in the topic within business organizations.

In the latest edition of Knowledge (at) Wharton, Wharton management professor Lori Rosenkopf says that mapping social networks can be useful in many ways, but there are at least two reasons why corporate interest in the subject is growing: Companies want to be able to identify key performers and get a better understanding of the nature of the interaction among employees.

“Hopefully, you have organized your company the best way to get the job done,” she says. “But mapping out a network will give you a sense of whether actual work flow and communication flow match what you hope to achieve. Maybe there are bottlenecks where one person is managing all interactions. If you expect two groups to work together closely, and you don’t see them doing this, you might want to create liaison roles or other relationships to make information flow better. On the other hand, you may see groups talking to each other too much. When managers see network diagrams, they often realize they need to reconfigure their organizational chart.”

Network maps may also unearth what are known as “cosmopolitans” – the employees who are most critical to information flow in the company. “The formal organizational structure [in companies] does not necessarily describe who talks to whom,” says Valery Yakubovich, a University of Chicago professor who will join Wharton’s management department this summer. “Even if some jobs in an organization are designed to coordinate across different functional areas, it’s difficult to figure out who coordinates where in reality. So you ask people directly whom they go to for advice and who gives them the most valuable information to get things done. Then you map the whole network. Often you find that people you might not even think of as very valuable turn out to be important links in the structure of the organization.”

Despite the benefits that can be derived from analyzing social networks, the Wharton researchers say that corporations have only begun to scratch the surface of its potential.

Rosenkopf says that applied research on social networking in still in its infancy and that top leaders of many larger firms have still not been exposed to the idea in a signficant way.

“They may be aware of things like small worlds and The Tipping Point. It’s not yet reached the point where companies are using these ideas for business process reengineering. But I do think it’s coming.”

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Jerry Bowles has more than 30 years of varied experience as a writer, editor, marketing consultant, corporate communications director and blogger. For the past 20 years, he has produced and written special supplements on new technologies for a number of magazines, including Forbes, Fortune and Newsweek.