Network attributes and economic performance

Finance session

Jens Martinus Pedersen (Unilyze and University of Southern Denmark)
Network attributes and economic performance – network as a potential design parameter in organizational design theory

More and more organization refers to themselves as being networked organizations. However the “network” term is often a metaphor for the implementation of matrix structures and/or more or less formal groups, teams, groups and task forces etc in and outside the organization. The use of network – as de facto networks or as metaphor, leaves the organizations with new challenges such as mapping, measuring and managing networks. How can the organization map collaboration, measure the benefits from certain network positions and personal network behavior and manage more or less informal ways of collaboration?

We have developed an approach where we combine relational data with actual personal and business unit level performance. Our aim is then to 1) provide insights into actual collaboration and knowledge sharing along a range of dimension – such as internal processes, customer service and advice seeking. 2) Find potential correlations between structural attributes and actual performance. 3) Develop a model for rewarding beneficial network behavior among employees.

Our data is collected within an organization in the financial sector. In total we have relational data from 503 respondents and 33 business units. The dataset is based on a social network analysis combined with parts of the competing values framework and a proxy for absorptive capacity.

The results so far indicate not surprisingly that business level performance measured as economic turnover is significantly influenced by the ability to engage local networks outside the business level. On the contrary, at this stage of our research we find that Business Unit performance is negatively correlated with a ‘market-oriented’ culture. This is rather surprising and needs to be tested further.

We find a strong negative correlation between the ‘clan orientation’ and business unit betweenness centrality and evidence that betweenness is positively related to the ‘market orientated’ culture. This is no surprise, but animates us to go further – can we implement the social network analysis of informal and formal collaboration into an organizational contingency approach?

We have several other findings at this level which needs to be tested. For example our data suggest and support previous results on employee turnover and advice seeking. We also find that on average 20% of all internal work related relations are not perceived as having any value for the employees. Our survey and research is intended to be redone in the same organizational setting and within the next 12 months to validate and improve results.