The business value of social networks

Tuesday night I was on a panel for the NSW Knowledge Management Forum with three others, Laurie Lock Lee, Tania Maley & Jodie Miners who was roped in as Tania was running late. I have to admit I was a bit hesitant before the event given Laurie has just completed a PhD in the value of social capital to enterprises!

However in preparing for the discussion I reviewed Laurie’s blog and previous work and found I should be able to contribute positively based on my perspective of social networking for HR.

Over the next hour and a half the four of us discussed all sorts of topics, including the value of social software to business! I suspect we could of kept talking for another hour or more. At the end of the day it came down to four high levels of value, recruitment, retention, sharing knowledge amongst silos and leveraging the hidden networks within an organisation. This is a vast simplification of things but a good summary.

From an HR perspective there are several specific areas where leveraging social networks through social software adds value to businesses. Many of these areas are very specific and small but they all add up to larger benefits.

  1. Driving employee engagement
  2. Leaveraging disengaged talent
  3. Sourcing of passive talent
  4. Candidate relationship management
  5. Background checking
  6. Team development
  7. Learning and development
  8. Self service support forums
  9. On boarding

I’m not going to cover all in this blog post, as that would take a long time. Instead I felt I might cover the major factors driving my list; that of Mark Granovetter, Frederick Hertzberg, Emilio Castilla and Alex Edmans. There is also the work by Watson Wyatt on corporate communication, while I feel it is important there could be an element of commericla biasis in their studies.

Mark in 1973 as part of his book “Getting a Job” (and paper entitled “The Strength of Weak Ties”), documented that 56% of participants in his studies found their existing job through a personal contact. Granovetter also found that 55.6% of the connections were made through “weak ties” who were seen “occasionally” (more than once a year but less than twice a week), and 27.8% “rarely” (less than once a year). These “weak ties” are more likely to professional contacts rather than family members or social contacts.

Research by Professor Emilio Castilla from MIT Sloan School of Management found that employees recruited through employee referral programs can have a higher performance over employees recruited through other means. While Professor Castilla’s research was for a single call centre, the findings have been confirmed further by organisations in the US and Australia.

Frederick Herttzberg in 1959 released a book called “The Motivation to Work” where he divided workplace factors into two groups. Motivators and Hygiene. The Hygiene factors of Job Security,Salary,Relationship with Peers,Work Environment and Company policies were needed otherwise people will complain. However along the would not motiviate people to want to work. Whereas the motivators (Achievement, Recognition, Work Itself, Responsibility, Advance, Growth) were all required for employees to feel engaged.

The work published in 2007 by Alex Edmans, Business Professor from Wharton School, found that happy employees do in fact drive company performance. He measured an annually rebalanced portfolio of Fortune magazine’s annual “100 Best Companies to Work for in America” from 1998 – 2005. Companies on the list returned 14% during that time compared to 6% for the overall market.

The Watson Wyatt reports on communication found that organisations with “most effective” communication programs provides a 91% total return to shareholders from 2002-2006 compared to 62% for “least effective”. Improved communication effectiveness is associated with a 15.7% increase in market value and effectivly communicating organisations had an employee engagement level 4 times that of least effective.

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