The 21st-Century Organization

Big corporations must make sweeping organizational changes to get the best from their professionals.

Knowledge marketplaces are a relatively new concept, so they are rare. We have found that building an effective one in a large company requires significant investments to get the conditions in place — but that such a marketplace can indeed be built. A successful mechanism of this kind substantially improves the ability to create and exchange knowledge and dramatically cuts search and coordination costs.

Talent marketplaces. A company can create similar efficiencies by developing a talent marketplace that helps employees in a talent pool, either within a single organizational unit or across the enterprise, to explore alternative assignments varying from short-term projects to longer-term operating roles. Simultaneously, anyone with assignments to offer can review all of the people looking for new opportunities. As with marketplaces for knowledge, companies must invest in their talent markets to ensure that gifted men and women looking for new jobs hook up with managers seeking talent.

Companies must define the talent marketplace by specifying standardized roles, validating the qualifications of candidates, determining how managers receive the job seekers’ performance evaluations, and so forth. The other requirements include pricing (the compensation for a particular role or assignment), an exchange mechanism to facilitate staffing transactions, and protocols and standards (how long assignments run, the mechanics of reassignment, the process of conveying decisions to reassign employees). Talent marketplaces do exist — particularly in professional organizations — but like knowledge marketplaces they are at an early stage of development.

Formal networks. People with common interests — such as similar work (industrial engineers, say), the same clientele (the automotive industry), or the same geography (China) — naturally form social networks. These networks lower the cost of interaction while increasing its value to all participants. A network often provides them with increasing returns to scale: the larger it is, the more chances they have to find opportunities for collaboration.

Social networks do face problems. They often have limited reach (for example, because they don’t extend to many potential members in far-flung units and geographies). What’s more, they sometimes operate inefficiently (several conversations might be required to reach the right person), may rely too much on the participants’ goodwill, and, most particularly, can fail to attract enough investment to serve the common good of all members effectively.

The solution, for a company, is to boost the value of the network by investing in it and formalizing its role within the organization. One such move is the designation of a network “owner” to build common capabilities (for instance, by making investments to generate knowledge). Others include developing incentives for membership, defining separate territories (the existence of more than one social network may confuse would-be members), establishing standards and protocols, and providing for a shared infrastructure (say, a technology platform supporting the network’s activities).

In fact, a formal network with specific areas of economic accountability can undertake many of the activities that have inspired companies to use matrix management structures. A formal network relies on self-directed people who work together out of self-interest, while a matrix uses a hierarchy to compel people to work together. In addition, a formal network enables people who share common interests to collaborate with relatively little ambiguity about decision-making authority — ambiguity that generates internal organizational complications and tension in matrixed structures.

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