Informal Corporate Networks

Gerald Anleitner IEEE Engineering

Management Society German Chapter

g.anleitner@ieee.org

Daniela Forciniti Dr. Michael Riesenkonig Deutsche Lufthansa AG Lufthansa Systems GmbH

Frankfirthfain, Germany FrankfurVMain, Germany daniela.forciniti@dlh.de michael.riesenkoenig@Ihsystems.com

Abstract Modern organizations and corporations are becoming more and more dynamic and complex. Hierarchies are just one view at the sfructure of an organization. More and more research is carried out regarding informal networks within companies. These networks are un essential part of the company because they ease the way work is done within the company. In this paper, we describe informal corporate networks especially from the view point of em- ployees who recently joined a company, ways to creafe informal corporate networks andpotential benefici of these networks regarding the company and the employee.

Keywords Group Dynamics, Organizational Culture, Approaches to Unleashing Creativity, Social Networks, Employee Integra- tion

INTRODUCTION Depending on the strategy of a company, people value or employee value is a central aspect in steering the company towards its ever-moving aims. We assume that survival is a central aim of a company, based on three suh-aims which should be shortened by the words “customer”, “product” and “employee”. Within the scope of this paper, we will focus on the em- ployee and within this vast field, we look at informal social networks which exist in addition to the official structure of a company represented in monthly updated organizational charts and defined in organizational development divisions. In this paper, informal corporate networks are examined from several perspectives. We look at their value for the company, their value for the employee and discuss how to enable and support their formation and how to ensure their continuity. We do not claim that informal nekvorks are the golden cow of organizational development nor do we claim that they are absolutely necessary. But depending on the strategic orientation of the company and its HR philosophy, the sup- port for informal social networks and their “exploitation” within a comorate culture can add considerably to the value

\

\

\ \ \ \

Emotional Contract Mercenary Culture Network Community Community

Picture 1: Loyalty in Corporate Communities

Today’s Situation: Company and Employee Today’s situation in the economic world has gone through many ups and downs which do affect the strategies and organizational structures:

Downsizing and outsourcing

War for talents

Organizational restructuring

Globalization and internationalization The impact of these challenges can lead to disturbance of the employees and can even enforce fluctuation especially in case of insensible corporate communication strategies. Graduates (neither younglsenior professionals) might not be attracted to the company any longer. On the other band, a strong corporate culture and a com- munity spirit within the company is able to strengthen the company against possible problems and threats. This would not be possible if the company was a contract network or a mercenaly community only (see Picture 1: Loyalty in Cor- porate Communities, and see more on this topic in [I]).

Employee fluctuation and retention (brain drain)

and quality of a company and the value of the employees for the company. Informal Corporate Networks

One instrument to support a strong corporate culture and ~. corporate communityis the support of informal social net- works within the company (see [2]):

0-7803-81 50-5/03/$17.00 02003 IEEE 146

A network is a group of individual agents who share infor- mal norms or values beyond those necessary for ordinay market transactions.

Potential activities within networks (apart from the notori- ous coffee room chat or the beer in the pub after work) will be depicted later in the case studies section.

An interesting and important attribute of networks is that they can potentially span divisions, ranks and even geo- graphical borders thus allowing an addition means of com- munication and connections between employees that would not he possible otherwise.

Networks and Hierarchies Hierarchies in modem organizations are functionally nec- essatyto achieve its goals. It has to be taken into account that people need a certain amount of guidance and thus inherently organize hierarchically. Even then and espe- cially in a modem, project-oriented work space, informal networks can considerably reduce transaction costs.

Value for the Company Especially when spanning across the company’s organiza- tional structure, networks can immensely increase the em- ployees’ comprehension of the company. Other opportuni- ties and advantages include:

Knowledge exchange

Short information paths

Building and supporting communityicorporate Spirit

Retain talents by building up company-intemal peer groups

Reduce transaction costs

Leveling instrument ensuring a common set of values and norms

Dedicated employees

Value for the Employee For employees, there are a number of challenges when en- tering a new company. They range from getting to know “howlthings are done” to getting to know colleagues and to find <one’s way around the new location of the company and the city in general. Apart from getting to know direct colleagues and contacts for everyday work, opportunities to network with other employees during the first year is the most valuable way of getting accustomed to the new com- pany on:a broad basis.

Formation To “formalize” the development process of informal net- works and to ensure its existence, several aspects have to he considered:

Recruitment: Consider h e volunteering background of applicants

Appreciate input and allow time for the network

:,Raise awareness for the importance of networks within the%corporate management

Pillow for sensible budgevsponsoring Allow for fun

Continuity To ensure the continuity of informal networks, it is impor- tant to design them in an open manner, thus not allowing them to become “old-boys-networks” with no or difficult opportunities to enter them. To ensure an open and open- minded culture within the network, it is important that a large variety of people are allowed to enter the network. Additionally, people must he attracted to invest time and expertise in the network and to work for it. This can be achieved by appreciating commitment for the network or by offering special (but not costly) benefits for active mem- bers. Apart from this, it must be noted that managers can support the creation and continuity of informal social network by watching and adjusting the organizational context of their division and the whole company. This can include the or- ganization’s formal structure: A strong and hierarchical structure might prohibit the building of networks across divisions. In this case it might he sensible to form cross- divisional project teams and allow and encourage contact across divisional borders. A second aspect includes workiresource management: Sometimes it might be more sensible to assign two or three people to a task where only one person might be sufficient just to ensure communication and exchange of ideas, thus building up social bonds between the employees which can he very useful in future tasks. Employee management practice can further on ensure col- laborative and network-oriented practice among the em- ployees. This includes rewards for collaborative work or making “networking ability” a selection criteria when invit- ing employees for job interviews. Finally, the company’s culture should support collaborative behavior. This can he done e.g. by report about projects with a strong networking aspect in the company’s newslet- ter or promoting people with a strong collaborative com- mitment (see more on this topic in [6 ] ) .

Case Studies

Luflhansa The German company Deutsche Lufthansa AG is mainly known for its passenger airline service. Even though, the company has a diversified stmcture including business units like IT, cargoilogistics, airline maintenance, tourism and catering. The decentralized structure is in itself a chal- lenge for new employees. The so-called “Lutthansa Future Generation” is a com- pany-wide network of employees who recently joined the company. It is divided into several “programs” that repre- sent the different options of entering Lufthansa: direct en- try, entry into a trainee program, students being in an in- ternship, students of a joint Luftbansdniversity program and several others.

147

Each new employee of Lufthansa has the opportunity to join this allows an early contact with the company’s culture and this program of events and use this opportunity to network its top management vision in an atmosphere of discussion with other employees all over the company. The Lufthansa and exchange of ideas. Future Generation tries to generate a win-win situation in the context of the employee, Lufthansa as a company and society in general (see

Picture 2: Win-Win Situation within Lufthansa Future Gen- eration). Activities within the Future Generation are grouped into four categories:

Future Knowledge (Information, dialog, diversity, cor- porate strategy)

Future Navigation (Career development, performance management, skill management, personnel develop- ment)

Future Action (annual eve&, intercultural compe- tence, social work, management contacts)

Future Community (community, networking, friend- ships, corporate culture, diversity)

0

0

Activities include: Monthly Regulars’ table

Monthly presentations from top managers of the com-

Site visits to different divisions of the company (cater- ing, airport tire brigade, flight training center)

Annual week-end event at the Lufthansa training cen- ter with lots of activities and training

Social work (e.g. with deprived children)

Round Tables with management

Breakfast discussions

pany

The program of events of the Lufthansa Future Generation is always organized by employees in their second year on the job who themselves were a member of the Future Gen- eration in their first year and now decided to support this activity by dedicating part of their free time (!) to this ini- tiative. Nevertheless, some of the managers support the work by covering travel expenses or allowing the use of work time to support work for the network. During the 1.5-year-long membership in the Lufthansa Future Generation, the employees have many opportunities to get to know fellow employees from other parts of the company thus deepen their understanding of the working of Lufthansa. In addition, they have the opportunity to get to know top managers of the company (even the CEO talks to members of the Future Generation at least once a year). All

Competitive Advantage Stronger Position within

Corporate Citizenship 0 Attractiveness to potential

Society

employees

. Networking Knowledge Transfer Development of tech- Support company-wide nical and social skills thinking and awareness

* Get to know corporate Motivation and integra- tion of employees

Dialog Platform for Multiplier for strategic current and strategic topics and initiatives

Picture 2: Win-Win Situation within Lufthansa Future Gen- eration At the main, once-a-year event of the Future Generation, the young employees even have the opportunity to directly engage in projects not in the scope of the division they normally work in: On a voluntary basis, members are in- vited to form project teams that work in a small project additionally their normal job (e.g. an analysis of the useful- ness of recycling paper or a analysis of satisfaction with the cafeteria in one of the office buildings (read more on this in [Ill. Lufthansa Systems Another example of inter-company networking “happened” recently at Lufthansa IT subsidiary Lufthansa Systems and

148

is spreading into other parts of the whole company. Start- ing point was a small group of employees who communi- cated social events like after-work-parties or skater nights via email. From time to time, somebody was added to the set of email-addresses. Whenever someone wanted to send some information to the list, she or he just used the “reply to all” button of the company’s mailing system. After some time, a group of three people decided to establish a mail- system based mailing-list for the group to simplify the task of sending a message to the ever-growing group of people. In the meantime, the list had grown to several hundred peo- ple and was named BBB (“Beyond bits and bytes”): All of those people have never met at one occasion, but whenever someone sends information about an event to the list, there is a chance that up to ten or twenty people will show inter- est in this event and meet to enjoy the event together. Events range from mentioned roller skater nights or after- job parties to guided tours through museums or visits to parts of Frankfurt airport (airport’s fire brigade, cargo cen- ter and so on). It all; once again, just depends on the peo- ple, their will to do things together and their ability to form dynamic groups when necessary. A deeper insight into dy- namically formed interest groups can be found in [4]. Free time activities do not directly enhance work for the company, but once again: People meeting encourages dis- cussion and exchange about company topics, or enhances understanding of processes and habits within the company. At some point of time, people who got to know each other during one of these events might have to work together and then will find it easier to collaborate.

IEEE - Inter-company Networking Apart from the described inter-company networks, there is a vast amount of informal or social networks that span be- tween companies. Well-known are e.g. alumni clubs of former university students, sports clubs or ethnic groups. A special group of such networks are formed by professional- related organizations like the IEEE. Within the IEEE, the Engineering Management Society focuses on topics of en- gineers and management. Apart from company-intemal networks, organizations like the IEEE can play a vital role in establishing links between people working in the same profession and provide a plat- form for technical discussions not restricted by company borders. Within the German chapter of the IEEE Engineering man- agement society, this is accomplished by organizing at least quarterly seminars where a certain topic is discussed and presented by members of the chapter. These meetings allow people to discuss topics in a non-company related envi- ronment, thus allowing gathering the participants to gather different views on a topic and exchange ideas in a different cultural environment. Apart from the fact that a certain taciturnity regarding company-internal details is necessaly, these discussions can have a valuable impact on the com- panies work as well as new project ideas might arise or opportunities for collaboration might be discovered.

Experience and feedback from members of this group shows that there is a rather large demand for this kind of exchange platform with a wider range than just the em- ployees company.

Conclusion This paper states the value of social networks in companies who are supporting a cultural-community-approach as part of their strategy. The support of such networks can have different positive impacts on the company. Another interesting aspect is the impact of company- internal networks regarding the activities within neighbor- hood communities: Will the company become the central place of ‘‘life’’ regarding private activities as informal net- works require private time to maintain which is then no longer available for neighborhood-related activities? Which impact does this have on govemment and social issues? How can different groups of employees and their special needs be represented in company networks? Young parents? Elderly employees? Finally it should be noted that management-related issues of topics regarding dynamic, complex and networked sys- tems are addressed in works about system-theoretical (“systemic”) approaches to management and leadership. Current trends in management can leads to the proposition that systemic approaches to management are one of the hypes in current management theory and management lit- erature. Apart from all this, it has to be noted that companies are still made up of individuals. During the amazing speed and flexibility of the 90ies, it has often been forgotten that basic needs of human beings are not met when requiring increas- ing flexibility and increasing speed of economics (see [SI). The support for social networks can be a valuable contribu- tion to a human, but equally successful corporate and hu- man resources strategy.

ACKNOWLEDGMENTS This work is based on experience gathered during recent years in several large corporations in Germany. During this time, many people have contributed to this paper through discussions, email exchange and during trainings and semi- nars. Special thanks go to Karen Michler (T-Mobile Germany), Christine GeiRler (Deutsche Lufthansa AG) and the IEEE Engineering Management Society’s Germany Chapter Leadership team.

REFERENCES [ 11 Thomas Sattelberger: Wissenkapitalisten oder Soldner.

Wiesbaden: Gabler, 1999 [ 2 ] Francis Fukuyama: The Great Disruption. London:

Profile Books, 1999 [3] Christian Waldstrom: Informal Networks in Organiza-

tions. DDL Working Paper, The Aarhus School of Business, 200 I

149

[4] Howard Rheingold, Smart Mobs: The Next Social Revolution. New York Perseus Books Group, 2002

[SI Richard Sennet, The Corrosion of Character. London: W.W. Northon &Company, 1998

[6] Rob Cross, Nitin Nohria, Andrew Parker: Six Myths About Informal Networks - and How To Overcome Them. MIT Sloan Management Review, Vol. 43 No.3, Spring 2002

150