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How the Org Chart has Given Way to the Network and Why it Matters

As they try to keep up with disruptive forces, companies shift their focus from human capital to social capital.

In the 1970s, we thought of organizations as groups of individuals aligned and structured to enhance the planning, leveraging and controlling of resources to drive business outcomes. Economies of scale, role definition and specialization ruled the day. Since then, organizations have dedicated much of their efforts to optimizing human capital strategies in an effort to win the war on talent—building out comprehensive talent management systems, validating leadership competency models and designing the best possible leadership development programs.

Org Chart vs Network

Click on chart to enlarge.

In more recent years, emphasis has turned to enhancing employee engagement, refining performance management systems and leveraging people analytics. While it is hard to argue against the need for these human-capital-centric strategies, new research raises questions about whether they are as effective as currently believed. In particular, research suggests we need to more strongly consider social capital strategies in driving outcomes within complex organizations. By definition, social capital refers to the competitive advantage that is created based on the way an individual is connected to others.

Today’s organization needs to be fast, nimble and adaptive to adequately respond to the external disruptions. While organizations have always been confronted by challenges, the speed and velocity with which these disruptions emerge today has intensified. As a result, virtually every major industrial sector, be it telecom with free calling from WhatsApp, automotive with ride-sharing from Uber, or financial services with free trading from Robin Hood has been disrupted. In response, experts such as Babson University professor Rob Cross (and companies such as General Motors, Juniper, Cisco and Booz Allen) have noted the need for organizations to more fully leverage their social capital and act as a network (see charts).

Two primary aspects of social capital—group cohesion and brokerage—are particularly relevant to organizational practices. Group cohesion is best described as how connected an individual within a group is to others in the same group. Often referred to as clusters, groups are considered highly cohesive when they have many redundant connections within the group. The benefits of cohesive groups are that individuals are able to quickly share information and typically demonstrate higher levels of trust than less cohesive groups. Brokerage represents the bridge connections from one cluster to another cluster. It occurs as individuals, or brokers, act as connectors from one cluster to the next.

High performers tend to be uniquely positioned as brokers in the organizational network. These individuals generally perform better, get promoted sooner and are better compensated than others. The implications of social capital are even greater when it comes to adaptation and innovation. Brokers are more likely to discover and distribute novel ideas across an organization. On the other hand, ideas within cohesive sub-groups are more likely to be developed and adopted.

Successful innovation and adaptation inside an organizational context requires a thorough understanding of the interplay between cohesion and brokerage. Today’s organization must enable brokers to actively access novel ideas across the network, while also leveraging the capacity of cohesive groups to disperse and share information.

About Michael Arena

Michael Arena is chief talent officer at General Motors.