A Social Network Perspective on Human Resources Management

It is, of course, highly appropriate that the study of personnel and human resources management in fact focuses on individuals in organizations; and, it is to the credit of my industrial/organizational psychology friends that so much progress has occurred in the recruitment, selection, training, appraisal, compensation, and career development of employees. However, to focus on the individual in isolation, to search in perpetuity for the elusive personality or demographic characteristic that defines the successful employee is, at best, failing to see the entire picture. At worst, it is misdirected effort continued by the overwhelming desire to develop the perfect measurement instrument. There is little doubt (at least in my mind) that the traditional study of personnel and human resources management has been dominated by the perspective that focuses on the individual or the organization in isolation. We are, of course, continually reminded of the need for an interactionist perspective; that is, that the responses of actors are a function of both the attributes of the actors and their environments (cf. Schneider, 1983). Although our research sometimes seems to ignore this dictum, the predominant model in human resources management has been one of matching the characteristics of the worker with the characteristics of the organization (Betz, Fitzgerald, & Hill, 1989). The characteristics of the organization, or more recently, the organization’s strategy (Snell, 1992; Wright & McMahan, 1992), defines the relevant individual attributes to be considered in recruitment, selection, training, appraisal, and compensation and promotion. Even with this “matching model,” the environment is little more than a context for individual interests, needs, values, motivation, and behavior. Beginning with Cattell and Binet, our human resources management task has been to develop methods of measuring these individual differences. I do not mean to suggest that individuals do not differ in their skills and abilities and their willingness to use them. I, too, revel in the tradition of American individualism. I will not dismiss the dispositional approach or the lure of “macro organizational psychology” (Staw & Sutton, 1993) to suggest that individuals are merely the “actees” rather than the actors (Mayhew, 1980).

Informal Networks : The Company behind the Chart

Many executives invest considerable resources in restructuring their companies, drawing and redrawing organizational charts only to be disappointed by the results. That’s because much of the real work of companies happens despite the formal organization. Often what needs attention is the informal organization, the networks of relationships that employees form across functions and divisions to accomplish tasks fast. These informal networks can cut through formal reporting procedures to jump start stalled initiatives and meet extraordinary deadlines. But informal networks can just as easily sabotage companies’ best laid plans by blocking communication and fomenting opposition to change unless managers know how to identify and direct them. Learning how to map these social links can help managers harness the real power in their companies and revamp their formal organizations to let the informal ones thrive. If the formal organization is the skeleton of a company, the informal is the central nervous system driving the collective thought processes, actions, and reactions of its business units. Designed to facilitate standard modes of production, the formal organization is set up to handle easily anticipated problems. But when unexpected problems arise, the informal organization kicks in. Its complex webs of social ties form every time colleagues communicate and solidify over time into surprisingly stable networks. Highly adaptive, informal networks move diagonally and elliptically, skipping entire functions to get work done. Managers often pride themselves on understanding how these networks operate. They will readily tell you who confers on technical matters and who discusses office politics over lunch. What’s startling is how often they are wrong. Although they may be able to diagram accurately the social links of the five or six people closest to them, their assumptions about employees outside their immediate circle are usually off the mark. Even the most psychologically shrewd managers lack critical information about how employees spend their days and how they feel about their peers. Managers simply can’t be everywhere at once, nor can they read people’s minds. So they’re left to draw conclusions based on superficial observations, without the tools to test their perceptions.

Social Capital in the Creation of Human Capital

There are two broad intellectual streams in the description and explanation of social action. One, characteristic of the work of most sociologists, sees the actor as socialized and action as governed by social norms, rules, and obligations. The principal virtues of this intellectual stream lie in its ability to describe action in social context and to explain the way action is shaped, constrained, and redirected by the social context. The other intellectual stream, characteristic of the work of most economists, sees the actor as having goals independently arrived at, as acting independently, and as wholly self-interested. Its principal virtue lies in having a principle of action, that of maximizing utility. This principle of action, together with a single empirical generalization (declining marginal utility), has generated the extensive growth of neoclassical economic theory, as well as the growth of political philosophy of several varieties: utilitarianism, contractarianism, and natural rights. In earlier works (Coleman 1986a, 1986b), I have argued for and engaged in the development of a theoretical orientation in sociology that includes components from both these intellectual streams. It accepts the principle of rational or purposive action and attempts to show how that principle, in conjunction with particular social contexts, can account not only for the actions of individuals in particular contexts but also for the development of social organization. In the present paper, I introduce a conceptual tool for use in this theoretical enterprise: social capital. As background for introducing this concept, it is useful to see some of the criticisms of and attempts to modify the two intellectual streams. Both these intellectual streams have serious defects. The sociological stream has what may be a fatal flaw as a theoretical enterprise: the actor has no “engine of action.” The actor is shaped by the environment, but there are no internal springs of action that give the actor a purpose or direction. The very conception of action as wholly a product of the environment has led sociologists themselves to criticize this intellectual stream, as in Dennis Wrong’s (1961) “Oversocialized Conception of Man in Modern Sociology.”

Introduction

Spend some time in most any organization today and you are sure to hear of the importance of networks, in one form or another, for getting work done. In this age of increasingly organic, flat, and flexible structures, many managers and scholars are using networks as a central organizing metaphor for twenty-first-century firms (e.g., Dimagio, 2001; Nohria & Ghoshal, 1997). In large part, this focus seems a product of two trends. First, over the past decade or so initiatives such as de-layering, TQM, reengineering, team-based structures, and outsourcing, to name a few, have been undertaken to promote organizational flexibility and efficiency (Hirschhorn & Gilmore, 1992; Hammer & Champy, 1993; Mohrman, Cohen, & Mohrman, 1995; Kerr & Ulrich, 1995). One outcome of these restructuring efforts is that information flow and work increasingly occur through informal networks of relationships rather than through channels tightly prescribed by formal reporting structures or detailed work processes. Along with the drive to more organic structures in organizations we have also seen a rise in the prevalence and value of knowledge-intensive work (Quinn, 1992; Drucker, 1993). Early initiatives to support knowledge workers focused heavily on databases and organizational processes to ensure the capture and sharing of lessons and reusable work products (e.g., Stewart, 1997; O’Dell & Grayson, 1998; Ruggles, 1998; Davenport, Delong, & Beers, 1998). However, these investments rarely, if ever, had the intended impact on the effectiveness and efficiency of knowledge work. As a result, a “second wave” of knowledge-management advice is coming forth that pays a great deal more attention to knowledge embedded within employees and relationships in organizations (e.g., Brown & Duguid, 2000; Cross & Baird, 2000; Dixon, 2000; Von Krogh et al., 2000; Cohen & Prusak, 2001). Among other things, this work has illustrated the importance of trust and informal networks for knowledge creation and sharing within organizations. We suggest that in today’s de-layered, knowledge-intensive settings, most work of importance is heavily reliant on informal networks of employees within organizations. For example, networks sitting across core work processes, weaving together new product development initiatives or integrating strategic initiatives such as alliances or mergers can be critical to organizational effectiveness.

Knowing What We Know : Supporting Knowledge Creation and Sharing in Social Networks

The way in which this manager relied on his network to obtain information and knowledge critical to the success of an important project is common and likely resonates with your own experience. Usually when we think of where people turn for information or knowledge we think of databases, the Web, intranets and portals or other, more traditional, repositories such as file cabinets or policy and procedure manuals. However, a significant component of a person’s information environment consists of the relationships he or she can tap for various informational needs. For example, in summarizing a decade worth of studies, Tom Allen of Massachusetts Institute of Technology (MIT) found that engineers and scientists were roughly five times more likely to turn to a person for information than to an impersonal source such as a database or a file cabinet. In other settings, research has consistently shown that who you know has a significant impact on what you come to know, as relationships are critical for obtaining information, solving problems, and learning how to do your work. Particularly in knowledge-intensive work, creating an informational environment that helps employees solve increasingly complex and often ambiguous problems holds significant performance implications. Frequently such efforts entail knowledge-management initiatives focusing on the capture and sharing of codified knowledge and reusable work products. To be sure, these so-called knowledge bases hold pragmatic benefits. They bridge boundaries of time and space, allow for potential reuse of tools or work products employed successfully in other areas of an organization, and provide a means of reducing organizational “forgetting” as a function of employee turnover. However, such initiatives often undervalue crucial knowledge held by employees and the web of relationships that help dynamically solve problems and create new knowledge. As we move further into an economy where collaboration and innovation are increasingly central to organizational effectiveness, we must pay more attention to the sets of relationships that people rely on to accomplish their work. Certainly we can expect emerging collaborative technologies to facilitate virtual work and skill-profiling systems to help with the location of relevant expertise.

Designs for Working : Why Your Bosses Want to Turn Your New Office into Greenwich Village

In the early 1960s, Jane Jacobs lived on Hudson Street, in Greenwich Village, near the intersection of Eighth Avenue and Bleecker Street. It was then, as now, a charming district of nineteenth-century tenements and townhouses, bars and shops, laid out over an irregular grid, and Jacobs loved the neighborhood. In her 1961 masterpiece, “The Death and Life of Great American Cities,” she rhapsodized about the White Horse Tavern down the block, home to Irish longshoremen and writers and intellectuals— a place where, on a winter’s night, as “the doors open, a solid wave of conversation and animation surges out and hits you.” Her Hudson Street had Mr. Slube, at the cigar store, and Mr. Lacey, the locksmith, and Bernie, the candy-store owner, who, in the course of a typical day, supervised the children crossing the street, lent an umbrella or a dollar to a customer, held on to some keys or packages for people in the neighborhood, and “lectured two youngsters who asked for cigarettes.” The street had “bundles and packages, zigzagging from the drug store to the fruit stand and back over to the butcher’s,” and “teenagers, all dressed up, are pausing to ask if their slips show or their collars look right.” It was, she said, an urban ballet. The miracle of Hudson Street, according to Jacobs, was created by the particular configuration of the streets and buildings of the neighborhood. Jacobs argued that when a neighborhood is oriented toward the street, when sidewalks are used for socializing and play and commerce, the users of that street are transformed by the resulting stimulation: they form relationships and casual contacts they would never have otherwise. The West Village, she pointed out, was blessed with a mixture of houses and apartments and shops and offices and industry, which meant that there were always people “outdoors on different schedules and . . . in the place for different purposes.” It had short blocks, and short blocks create the greatest variety in foot traffic. It had lots of old buildings, and old buildings have the low rents that permit individualized and creative uses.

The Strength of Weak Ties

A fundamental weakness of current sociological theory is that it does not relate micro level interactions to macro level patterns in any convincing way. Large-scale statistical, as well as qualitative, studies offer a good deal of insight into such macro phenomena as social mobility, community organization, and political structure. At the micro level, a large and increasing body of data and theory offers useful and illuminating ideas about what transpires within the confines of the small group. But how interaction in small groups aggregates to form large-scale patterns eludes us in most cases. I will argue in this paper that the analysis of processes in interpersonal networks provides the most fruitful micro-macro bridge. In one way or another, it is through these networks that small-scale interaction becomes translated into large-scale patterns and that these, in turn, feed back into small groups. Sociometry, the precursor of network analysis, has always been curiously peripheral—invisible, really—in sociological theory. This is partly because it has usually been studied and applied only as a branch of social psychology; it is also because of the inherent complexities of precise network analysis. We have had neither the theory nor the measurement and sampling techniques to move sociometry from the usual small-group level to that of larger structures. While a number of stimulating and suggestive studies have recently moved in this direction (Bott 1957; Mayer 1961; Milgram 1967; Boissevain 1968; Mitchell 1969), they do not treat structural issues in much theoretical detail. Studies which do so usually involve a level of technical complexity appropriate to such forbidding sources as the Bulletin of Mathematical Biophysics, where the original motivation for the study of networks was that of developing a theory of neural, rather than social, interaction (see the useful review of this literature by Coleman 1960; also Rapoport 1963). The strategy of the present paper is to choose a rather limited aspect of small-scale interaction—the strength of interpersonal ties—and to show, in some detail, how the use of network analysis can relate this aspect to such varied macro phenomena as diffusion, social mobility, political organization, and social cohesion in general.

The Strength of Strong Ties : The Importance of Philos in Organizations

In 1973, Mark Granovetter proposed that weak ties are often more important than strong ties in understanding certain network-based phenomena. His argument rests on the assumption that strong ties tend to bond similar people to each other and these similar people tend to cluster together such that they are all mutually connected. The information obtained through such a network tie is more likely to be redundant, and the network is therefore not a channel for innovation. By contrast, a weak tie more often constitutes a “local bridge” to parts of the social system that are otherwise disconnected, and therefore a weak tie is likely to provide new information from disparate parts of the system. Thus, this theory argues, tie strength is curvilinear with a host of dependent variables: no tie (or an extremely weak tie) is of little consequence; a weak tie provides maximum impact, and a strong tie provides diminished impact. Subsequent research has generally supported Granovetter’s theory (Granovetter 1982), but two issues have been neglected in the research stream. First, there is considerable ambiguity as to what constitutes a strong tie and what constitutes a weak tie. Granovetter laid out four identifying properties of a strong tie: “The strength of a tie is a (probably linear) combination of the amount of time, the emotional intensity, the intimacy (mutual confiding), and the reciprocal services which characterize the tie” (1973:1361). This makes tie strength a linear function of four quasi-independent indicators. At what point is a tie to be considered weak? This is not simply a question for the methodologically curious. It is an important part of the theory itself, since the theory makes a curvilinear prediction. If we happen to be on the very left side of the continuum of tie strength, then increasing the strength of the tie (going from no tie to weak tie) will increase the relevant information access. On the other hand, at some point making the ties stronger will theoretically decrease their impact. How do we know where we are on this theoretical curve? Do all four indicators count equally toward tie strength? In practice, tie strength has been measured many different ways.

The Social Structure of Competition

A player brings capital to the competitive arena and walks away with profit determined by the rate of return where the capital was invested. The market production equation predicts profit: invested capital, multiplied by the going rate of return, equals the profit to be expected from the investment. You invest a million dollars. The going rate of return is 10 percent. The profit is one hundred thousand dollars. Investments create an ability to produce a competitive product. For example, capital is invested to build and operate a factory. Rate of return is an opportunity to profit from the investment. The rate of return is keyed to the social structure of the competitive arena and is the focus here. Each player has a network of contacts in the arena. Something about the structure of the player’s network and the location of the player’s contacts in the social structure of the arena provides a competitive advantage in getting higher rates of return on investment. This chapter is about that advantage. It is a description of the way in which social structure renders competition imperfect by creating entrepreneurial opportunities for certain players and not for others. A player brings at least three kinds of capital to the competitive arena. Other distinctions can be made, but three are sufficient here. First, the player has financial capital: cash in hand, reserves in the bank, investments coming due, lines of credit. Second, the player has human capital. Your natural qualities—charm, health, intelligence, and looks—combined with the skills you have acquired in formal education and job experience give you abilities to excel at certain tasks. Third, the player has social capital: relationships with other players. You have friends, colleagues, and more general contacts through whom you receive opportunities to use your financial and human capital. I refer to opportunities in a broad sense, but I certainly mean to include the obvious examples of job promotions, participation in significant projects, influential access to important decisions, and so on. The social capital of people aggregates into the social capital of organizations.

Making Invisible Work Visible : Using Social Network Analysis to Support Strategic Collaboration

Over the past decade, significant restructuring efforts have resulted in organizations with fewer hierarchical levels and more permeable internal and external boundaries. A byproduct of these restructuring efforts is that coordination and work increasingly occur through informal networks of relationships rather than through channels tightly prescribed by formal reporting structures or detailed work processes. For example, informal networks cutting across core work processes or holding together new product development initiatives are not found on formal organizational charts. Rather, these networks often promote organizational flexibility, innovation, and efficiency, as well as quality of products or services, by virtue of effectively pooling unique expertise. Supporting collaboration and work in these informal networks is increasingly important for organizations competing on knowledge and an ability to innovate and adapt. Unfortunately, critical informal networks often compete with and are fragmented by such aspects of organizations as formal structure, work processes, geographic dispersion, human resource practices, leadership style, and culture. This is particularly problematic in knowledge-intensive settings where management is counting on collaboration among employees with different types of expertise. People rely very heavily on their network of relationships to find information and solve problems—one of the most consistent findings in the social science literature is that who you know often has a great deal to do with what you come to know. Yet both practical experience and scholarly research indicate significant difficulty in getting people with different expertise, backgrounds, and problemsolving styles to effectively integrate their unique perspectives. Simply moving boxes on an organizational chart is not sufficient to ensure effective collaboration among high-end knowledge workers. Movement toward de-layered, flexible organizations and emphasis on supporting collaboration in knowledge-intensive work has made it increasingly important for executives and managers to attend to informal networks within their organizations. Performance implications of effective informal networks can be significant as the rapidly growing social capital tradition has indicated at the individual, team, and organizational levels. Yet while research indicates ways managers can influence informal networks at both the individual and whole network levels, executives seem to do relatively little to assess and support critical, but often invisible, informal networks in organizations.