"Social Network Analysis" Release 2.0

I've written before about "social networks," and  how they can be far more important than any relationships specified on your firm's organizational charts, but "social network analysis" (SNA) is still an emerging field, with its concomitant skeptics.  (What is SNA in a nutshell, for those not in on the prior discussions?  It's the creation of network maps analyzing how people in your firm really communicate, through email traffic patterns, for example, and can be deeply revealing.)

First-generation SNA diagnosed who were hubs of information flow, who were peripheral, and who were cross-functional nodes—say, someone who's totally wired into both your M&A group and your project finance group.  All very interesting, you say; but what's in it for my firm?

A truism is that we live in a knowledge economy, and that managing (read:  encouraging) collaboration among professionals is one of the few enduring bases for competitive distinction.  In one 2005 survey, more than 80% of senior executives said effective coordination across service, functional, and geographic lines was crucial to growth. 

And SNA could actually provide insight into who were the "go-to" people in your firm, and could help you diagnose syndromes such as:

• The hyper-connected person who might at first glance appear to be an invaluable connector, but who in fact was a completely overloaded bottleneck.
• The peripheral person out of the flow who adtually provided unique insights drawn from his arcane area of expertise.
• The "bridge" between two otherwise unconnected areas of the firm whose deep ties into two worlds yielded indispensable assets of "know-who" unavailable otherwise, but whose time spent cultivating his two networks appeared superficially unproductive.

And so on; but what benefits to the bottom, or the top, line does all this provide?

The answer is that we now have second-generation SNA, which attempts to answer that very question.

And if you foresaw McKinsey's fingerprints on this, right again.  This new piece extends first-generation SNA, which focused on individual effectiveness, to second-generation SNA, which attempts to focus on relationships that can create the greatest economic value. 

Back to first principles.  How do you develop an SNA map to begin with?  Actually, it's pretty straightforward. 

"Options for obtaining the necessary information include tracking e-mail, observing employees, using existing data (such as time [records] and [client billing] codes), and administering short questionnaires. Organizations mapping their decision-making processes might ask their employees, "Whom do you ask for advice before making an important decision?" Others targeting innovation might ask, "With whom are you most likely to discuss a new idea?" Questions are posed bidirectionally: if Joe says he was helpful to Jane, but she says she doesn't know him, his claim is disregarded."

As the authors say, "So far, so familiar." But the payoff comes when you move from mapping the network to "quantifying the benefits and cots of collaboration."

Swell; but what does that mean? 

Past approaches to improving collaboration among dispersed professionals have usually employed blunt instruments to make communication easier and improve connectivity in general.  The problem has been taking a diffuse rather than a focused approach:

"It's also possible to promote specific interactions that help generate revenue and boost productivity. Targeted action is dramatically more effective than promoting connectivity indiscriminately, which typically burdens already-overloaded employees and yields network diseconomies. A more informed network perspective helps companies to identify the few critical points where improved connectivity creates economic value by cutting through business unit and functional silos, physical distance, organizational hierarchies, and a scarcity of expertise."

Consider this case from a global consulting firm that used SNA to investigate the sales efforts of some 80 of its partners. The classic approach had simply looked at individual revenue production (sound familiar?). But with SNA, they identified two other crucial categories of behavior:

• Partners supporting collaborative efforts (joint sales calls, sharing expertise) were 10 in number, but they generated 60% of the group's revenue; the top 5 generated 38%.
• An entirely separate subset were "expertise contributors," helping colleagues save time and generate higher-quality work; here again they were highly concentrated, with the top 10 responsible for 48% of the value generated through time savings and the top 5 adding 32%.

Result?  The end of "a long-simmering disagreement about dual career paths for partners." 

Or take this example, from a global financial services organization, a close cousin to the larger law firms:

"After recognizing that a set of key brokers occupied central positions in the network, for instance, the company realized that connecting all of these people with each other and with just one person on the network's fringe would yield $140,000 a year in savings within business units and $865,000 across them. Facilitating these interactions would be far less costly than buying the group another unused collaborative tool or holding an off-site meeting."

The need to maintain and reinforce your firm's competitive distinction has never been more pressing, and genuine, meaningful collaboration among your high-priced, high-talent professionals is essential to that end.

Thanks to SNA 2.0, we are learning how to be smarter about it.  Installing Lotus "Notes" on every desk and hoping for the best may have been last decade's answer to enhancing connectivity, but now we are beginning to have a handle on how to strengthen connections with a rifle and not a shotgun.