Harnessing the power of informal employee networks

Formalizing a company’s ad hoc peer groups can spur collaboration and unlock value

Personal social networks, both within and outside of companies, increase the value of collaboration by reducing the search and coordination costs of connecting parties who have related knowledge and interests. They don’t necessarily fit into the organizational chart. Consider the case of an energy company staffer we call Cole (Exhibit 1). Although he sits relatively far down in the formal company structure, he acts as the hub in an informal network because he has knowledge that others find valuable. Without him, the production group would be cut off from the rest of the organization. His boss Jones, the unit’s senior vice president, is connected in the informal network to only two people, both in exploration.

This is increasingly typical in today’s large, sprawling corporations. Informal networks, slipping through the back channels, cross the lines of geography, products, customer groups, and functions—where the action is—and even through the thick silo walls of vertically oriented organizations.