The Networked Organization

Although the term 'networked organization' is not as prevalent as it was in the late 1990s, many of us in our professional lives network as a matter of course. And at the organizational level the need for structures and arrangements that are agile and responsive to their environments are as important as ever. In this K-Briefing, we explore the key elements of organizational structure that can help organizations remain competitive and innovative in the highly connected global knowledge economy of the 21st century.

What is a Networked Organization?

A networked organization is one that recognizes that at the heart of an organization's success is its knowledge workers and how they collaborate and interact with each other. The term has been defined by Jessica Lipnack and Jeff 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 terms for similar 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 (see diagram). The nodes can be people, teams or even organizations - networks operate at many levels. In today's environment 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, "bridging" and "agreement" mechanisms. As well as formal teams with set tasks that network, many organizations also use Communities of Practice as an additional type of network where knowledge is shared and developed. Whatever the type of 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.


An organization that is highly networked - both internally through its knowledgeable staff, and externally with its stakeholders - offers a range of benefits over the more traditional hierarchical organization:

  • It is more sensitive to the changing needs of the marketplace - it's antennae (outward-looking nodes) are listening out for 'signals' of change in the business context.
  • It has a deeper understanding of its customers and their needs - there is rapid communication between those at the sharp-end and those who support them.
  • It maximizes the knowledge capital of the enterprise; network members tap into expertise wherever it may reside.
  • It can cope better with unexpected events; a network has resilience to overcome disruption even if some parts fail (e.g. in a natural disaster).
  • It can call on a wide range of expertise and resources to bear down on critical or apparently insoluble problems - even if one person doesn't have all the answers, they invariably know someone who does.
  • It is highly responsiveness and adaptive. Like an amoeba, a network is sensitive to stimuli and adjusts accordingly.

Defining Characteristics - The Hard and The Soft

There are two characteristics that underpin the performance of a networked organization:

  1. Human networking processes: the way that individuals interact with each other, share knowledge and collaborate for the common good; a networked organization is less about formal organizational structures and more about social behaviours and a knowledge-sharing culture.
  2. Intensive computer networking: the use of internet, intranet for information access, and the range of devices (e.g. PDAs, netbooks, Blackberry's, i-phone etc.) and supporting infrastructure for person-to-person communications wherever people are located.

But on top these foundations are some important building blocks that are needed for the networked organization to achieve its full potential.

The Building Blocks of a Networked Organization

Despite attention being given by organizations to 'transformation', 'business process re-engineering', 'change management' and so on, shifting from a traditional organization to a network is no easy task. Our experience indicates a number of key principles to follow, particularly for an organization which is heavily reliant on the creativity and expertise of its 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 commonly due to these 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.

Further Reading

1. Jessica Lipnack and Jeffrey Stamps wrote extensively about network organizations in their books
The Age of the Network: Operating Principles for the 21st century and
The Team Net Factor: Bringing the Power of Boundary-crossing into the Heart of Your Business
There is also a wealth of more up to date information on their Netage website.

2. 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.

3. The Future of Knowledge: Increasing Prosperity through Value Networks, Verna Allee, Butterworth-Heinemann (2003) - a useful book that links the principles of the networked organization with knowledge networking.

3. See also the related K-Briefings:
The Virtual Corporation, The Learning Organization, Teleworking for Enterprise, Knowledge Networking.

Originally created by David Skyrme in 1988 with various updates between 1995-2010.

© Copyright. David J. Skyrme. 1988-2010. This material may be copied or distributed subject to the terms of our copyright conditions (no commercial gain; complete page copying etc.)

Last updated: 24th March 2011



Our resources section has several articles that will give you a good grounding in some of the basics and practicalities of knowledge management.

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