Insight No. 1

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The Networked Organization  
No. 1




An updated version of this Insight is available at

As organizations restructure to respond to their environment, there has been a growing recognition of the need for new kinds of organizational structure. The Networked Organization is one such response. It has been defined by Lipnack and Stamps as one:

"where independent people and groups act as independent nodes, link across boundaries, to work together for a common purpose; it has multiple leaders, lots of voluntary links and interacting levels."

Other types of organization have been described, such as the lattice organization, the spider's web, the holonic enterprise and the virtual corporation. All describe new ways of organizing which:

  • gain authority not from a hierarchy but from individual's recognized knowledge and skill
  • link people and teams across conventional boundaries (e.g. departments and geographies)
  • have members and structures that adapt to changing circumstances
  • where management is a sense of mutual responsibility vs. following orders
  • explore ways to work effectively vs. following pre-defined processes
  • readjust or disband teams as needed

and therefore exhibit characteristics of innovation, resilience, and self-management.

The notion of a network implies nodes and links. The nodes can be people, teams or even organizations - networks operate at many levels. Common examples are distributed geographic teams in large organizations, or small organizations operating as networks to compete against large corporations. The links are the various coordination and "agreement" mechanisms. In a network, high degrees of informal communications (both face-to-face and over electronic networks) achieve success where formal authority and communications in hierarchical organizations often fail. Two way links and reciprocity across the links are what makes networks work.

Benefits of the Networked Organization
  • Being closer to the customer - there is rapid communication between those at the sharp-end and those who support them.
  • Maximizing the knowledge potential of an enterprise; network members tap into expertise wherever it may reside.
  • Minimizing disruption; a network has resilience to operate even if some parts fail (e.g. in a natural disaster).
  • Responsiveness and adaptiveness. Like an amoeba, a network is sensitive to stimuli and adjusts accordingly.

How to become a Networked Organization

Despite all the BPR (Business Process Reengineering) and management change programmes taking place, shifting a bureaucracy to a network is no easy task. Our experience indicates a number of key principles to follow, particularly for the growing number of organizations who employ knowledge workers:

  1. Teams are the organization units that create focus and allow work to proceed.
  2. The most productive work teams for many kinds of work, especially knowledge work are small multi-disciplinary groups, e.g. 5-8 people with a variety of backgrounds.
  3. Many 'meetings' are not productive for knowledge work - they are really assemblies, gatherings, committees which may be used to pass information (often ineffectively), motivate (or demotivate), provide a sense of importance. Their most valuable use is creating and maintaining a sense of belonging, cohesion and reinforcing values.
  4. Every knowledge worker should belong to at least two separate teams. This helps the organization achieve cross functional co-operation; it helps the individual gain a broader perspective.
  5. Every team must have a clear purpose if it is to act as a team and not as a collection of individuals. Its must have its own vision, mission and goals which reinforce those of its partners.
  6. Every team should develop a strong set of cultural norms and values. Hence regular team meetings should take place.
  7. Each team should identify other teams carrying out related or dependent activities. It should draw a network diagram showing
    - itself (with its mission) at the centre
    - an inner ring of teams (nodes) where interdependencies are high (formal relationships)
    - an outer ring of collaborative teams (mostly information sharing)
    Where possible major activity sequencing should be shown (who provides what to whom)
  8. Individual members of teams should be encouraged to maintain their personal and professional networks, even beyond the identifiable needs of the current team.
  9. Some 'slack' should be built into the network. A certain amount of duplication/overlap should not be viewed as bad. This slackness permits a higher quality of output, plus a resilience to cope with the unexpected.
  10. Just as in electronic networks a set of protocols needs to be defined and agreed. These may be implicit (common standards set by cultural values or 'like minded people'). Often it needs to be made explicit what the various signals mean eg trial balloon, idea, request for action, demand, vote, decision etc.
    Appreciating the LEVEL of network dialogue is important. Is this communication within defined system boundaries or at a new meta-level?
    MISCOMMUNICATION is probably the worst obstacle any organization needs to overcome.
  11. Frequent communication throughout the network (including outer ring) must be encouraged. This is particularly valuable for half-baked ideas, tentative positions. A small group developing its own 'final communique' does not foster the network spirit.
  12. Also as in electronic communication NAK and 'NODE NOT RESPONDING' are important signals. If something has not registered, or some work is falling behind then a signal to ripple round the network so the repercussions can be analysed.
  13. Enabling technology is the most effective means of enhancing the quality of network communication. Good use of email distribution lists and groupware such as First Class, Net Meeting or Lotus Notes characterises the truly effective network from the merely efficient.
  14. Formal relationships (eg inner ring) are best cemented by having agreed written processes (hand-offs) and/or common members on both teams. Critical linkages need higher trust and openness rather than higher formality.
    In a sequenced set of tasks this can be provided by a device known as cascading teams.
  15. Recognize the unpredictability of the process for making decisions. Who makes decision will often be ambiguous. In general, decisions should be made when and where they need to be made, by whoever is appropriate. Types of decision which are fundamental should be agreed up front, and simple formal processes developed for these only.

In a network flexibility is key. Recognize that team players change and tasks change.

Where networks fail, we observe that it is usually due to three main causes:

  • not identifying all the stakeholders and network partners (principle 7)
  • having incompatible missions and goal sets - no strong driving force or, mutual commitment
  • having dominant nodes - a competitive or pressure relationship rather than a truly collaborative one.

but above all having organization cultures, management processes and individual mind-sets that act as major deterrents to this exciting and productive way of working.

Originally created by David Skyrme in 1988; Updated 1995. Minor revisions 1999.

© Copyright. David J. Skyrme. 1988, 1995, 1999. This material may be copied or distributed subject to the terms of our copyright conditions (no commercial gain; complete page copying etc.)


The New Organization: Growing the Culture of Organizational Networking, Colin Hastings, IBM McGraw-Hill (1993) -- the organizational aspects of networking illustrated by eight Pathfinder cases. More details.

The Team Net Factor: Bringing the Power of Boundary-crossing into the Heart of Your Business, Jessica Lipnack and Jeffrey Stamps, John Wiley & Sons (1993) - describes different types of networked teams with examples from many industries. More details.

The Age of the Network: Operating Principles for the 21st century, Jessica Lipnack and Jeffrey Stamps, John Wiley & Sons (1994) - organizing principles of teamnets, with practical hints. More details.

Related Insights on these pages include No. 2 The Virtual Corporation, No. 3 The Learning Organization, No. 4 Teleworking for Enterprise, No. 10 Knowledge Networking or see full list.

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Management Insights are publications of David Skyrme Associates, who offers strategic consulting, presentations and workshops on many of these topics.

Additional coverage of these topics can be found in our free monthly briefing I3 UPDATE/ENTOVATION International News, various articles, publications and presentations.

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