FEATURE

Making the invisible visible

How network analysis can lead to more
successful organizational redesigns
Tiffany McDowell, PhD, and Siri Anderson

PART OF A DELOITTE SERIES ON THE FUTURE OF WORK

Making the invisible visible: How network analysis can lead to more successful organizational redesigns

Organizational network analysis (ONA) can help leaders better understand

the formal and informal networks in their company and might provide
critical insights leading to more successful organizational redesign and
business performance.

T
ODAY, NINE OUT of 10 companies are ex- How do you take the applicable concepts from agile,
ploring organizational redesign,1 often breaking for example, and improve an organization’s design
down functional silos and replacing them with so they are more flexible? And how do you imple-
cross-functional collaboration models in an effort to ment this complex mix successfully?
better drive innovation, speed, customer value, and These are high-stakes questions and imple-
operational efficiency. Surprisingly, only 10 percent menting the answers is not for the faint of heart.
of leaders feel confident these changes will achieve With more than 80 percent of company reorgani-
the desired results.2 The challenge is knowing how zations failing to realize intended value in the time
to balance both adaptable networks of teams and planned, and up to 10 percent causing real damage
more traditional hierarchical models to drive better to the company,4 the need to use both art and
results.3 If we think of one end of the spectrum as science in the design of the organization has seem-
being silos and the other as swarms (see sidebar, “The ingly never been greater. One generally essential
spectrum of silos and swarms”), what is the optimal element for success is to understand the informal
balance and combination for each organization? structures—or the way work actually gets done in

THE SPECTRUM OF SILOS AND SWARMS

In heavily siloed organizations, leaders are the main pathway (and often bottleneck) to cross-functional
collaboration. At the opposite end of the spectrum is the swarm, where the organization is flat and team
members are free to swarm around problems as they arise without a clear decision-making process.
Both come with their benefits and challenges—and so organizations are challenged to find the optimal
balance based on their goals and the needs of their customers.

FIGURE 1

The spectrum of silos and swarms

SILOS
SWARMS
Source: Deloitte analysis.
Deloitte Insights | deloitte.com/insights

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 Making the invisible visible: How network analysis can lead to more successful organizational redesigns

your organization—using organizational network more nuanced view: Many hierarchies benefit the
analysis (ONA). In this article, we will discuss the performance of the groups they lead.7 In fact, in a
opportunities and challenges of hierarchy and broad review of research on organizational hier-
team-based structures, and how ONA can offer archy, researchers found that hierarchy has positive
some of the critical information needed to find the effects more often than negative.8 When imple-
right balance for your organization. mented positively, hierarchy can not only facilitate
efficient communication and motivate employees,
but can also offer group members clear markers for
Efficiency vs. adaptability: success and progress, a sense of order and security,
Balancing hierarchy and and even a sense of place and identity.9
Of course, in today’s dynamic market environ-
flexible networks of teams
ment, agile or flexible networks of teams also tend
to play a critical role in organizational performance
“What we need is not some new kind of and success. Flexible teams are believed to result
organization. What we need is managerial in higher team productivity and morale, faster
hierarchy that understands its own nature time to market, better work product quality, and
and purpose … We need to stop casting lower risk than traditional approaches.10 In a 2017
about fruitlessly for organizational holy Deloitte study, 94 percent of participants reported
grails and settle down to the hard work that “agility and collaboration” were critical to their
of putting our managerial hierarchies in organization’s success.11 This helps demonstrate the
order.” importance of designing for adaptability and freeing
up people from slow, bureaucratic decision-making
—Elliott Jacques, “In praise of hierarchy”5 that can hinder customer responsiveness, which is
needed for market success.
Organizations have always needed to update In general, we find that adaptable networks of
their strategies based on changes in their external teams should be prioritized for groups that interact
environments—whether that has required striving frequently with the external environment. These
for cost efficiency, customer relationship-building, are often customer-focused, growth-oriented teams
or cutting-edge innovation to compete. Popular (such as sales and product development) organized
structures over time have reflected the needs of in a cross-functional, decentralized model. On the
their market environment, evolving from formal to other side, the efficiency that more traditional hierar-
functional hierarchy models 50-plus years ago, then chical models provide should be prioritized for teams
more recently to matrixed organizations, and now that internally support an organization. These are
toward flexible networks of teams—a shift many often execution-focused, operational teams (such as
organizations are still trying to figure out today. But finance and legal) organized as a centralized shared-
even as we move toward more agile team-based services function. However, organizations need to
models, it seems that we shouldn’t throw out all ele- find their own unique way to balance the benefits of
ments of hierarchy. teams and the efficiency of hierarchical models.
Hierarchy is often criticized for (even equated Previously, finding this balance was a daunting
with) creating intransigent bureaucracies. Critics task, one that has seen mixed results when imple-
believe it impedes the free flow of information, mented based on approaches that relied on opinions,
stifles individual initiative, fosters infighting and hunches, and trial-and-error. Now, with the appli-
power jockeying, and ultimately chokes the ability of cation of ONA, leaders can garner critical insights
an organization to innovate.6 But while these things into how best to adapt their organization for a more
can happen, research and our experience present a successful future.

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Making the invisible visible: How network analysis can lead to more successful organizational redesigns

Organizational network ONA shows you who is working with whom to get
analysis: A key to a more their jobs done on a day-to-day basis. The analysis
results in an organizational map that represents,
successful reorganization
through nodes and ties, everyone in your organiza-
ONA relies on data collected actively (for tion and how connected or disconnected they are
example, through surveys) and/or passively (for (see sidebar, “Network science 101” and figure 2).
example, through emails, calendar invites, shared This information can highlight where breakdowns
drive access) to reveal the invisible communication could occur, affecting important elements of your
patterns and flows of information, and, often, the business, ranging from efficiency and productivity to
motivations behind them that the traditional or- diversity, inclusion, and retention to creativity and
ganizational chart cannot capture. In other words, innovation. This is critically important information,

NETWORK SCIENCE 101

Through the analysis of communication patterns within an organization, we can objectively identify
key people and relationships that help your organization function:

• Central node. These are the people who seem to know everyone. Central nodes share lots of
information and influence groups quickly. They can be located anywhere in an organization’s
hierarchy, are often well-liked, and are highly engaged in company news and developments.

• Knowledge broker. These people create bridges between groups. Without knowledge brokers,
information and idea sharing grinds to a halt.

• Peripheral. Easily overlooked and unconnected to the rest of the company, high-potential
peripherals can be a risk to organizations. For example, exceptional Java coders who don’t
teach others best practices might not only stagnate product development but can also be easily
convinced to take their talent elsewhere.

• Ties. Ties are the formal and informal relationships between nodes. Establishing optimal relational
ties between central nodes and knowledge brokers can help ensure that useful information moves
easily between and within groups.

FIGURE 2

A visual representation of an informal network within a company

Dots represent individuals; shades represent job function; and circle size represents the number
of connections of the individual.

Peripheral
Knowledge
broker Central node

Ties
Source: Deloitte analysis.
Deloitte Insights | deloitte.com/insights

4
 Making the invisible visible: How network analysis can lead to more successful organizational redesigns

FIGURE 3

Organizational design indicators could be considered similar to adding MRIs and brain
scan capabilities to standard X-rays to help with a medical diagnosis

X-ray MRI Brain scan

Source: Deloitte analysis.

Deloitte Insights | deloitte.com/insights

yet surprisingly, in a 2017 Deloitte survey, only 9 ONA: How it makes

percent of business leaders truly felt they under- invisible networks visible
stood their internal networks.12
Put simply, ONA offers a powerful suite of “The structural designers of organizations,
analyses that reveals the relationship patterns those who mandate reporting relationships
driving your organization’s success—or dysfunc- or memo distribution lists or access to da-
tion. Adding this capability to other organizational tabases, are much like architects who try to
design indicators could be considered similar to predict where the pedestrian traffic will be
adding MRIs and brain scan capabilities to stan- or should flow on a university campus. They
dard X-rays to help with a medical diagnosis (figure lay their cement, install fences and other
3). The organizational chart is like an X-ray, al- obstacles, but inevitably the flows of people
lowing you to understand things such as spans of and classes carve bare spots in the grass
control and layers of management. However, for where the sidewalks need to be.”
more information, you need an MRI, which is like
including governance, decision-rights, and supervi- —Gerald Salancik, “Searching for structure”13
sory burden data to add depth and richness to the
formal expressions of the organization. But both of Organizational theorist Gerald Salancik com-
those don’t fully reveal information flows—and so, pared organizational design to the process of
like a brain scan, we have ONA, which allows us to building sidewalks on a university campus. Your or-
go beyond the surface of formal information flows ganizational structure is the pavement, and people
to understand levels of trust, markers of innovation, in your organization will use it so long as it’s efficient
and how people actually work together. and makes sense for where they need to go and what
But, knowing this information and putting it to they need to do. Where it doesn’t help, people will
work are two different things. It’s time to put this create shortcuts along the way. These shortcuts are
data to work. akin to the informal relationships and communica-
tion networks that ONA reveals. While people will
always find shortcuts, the design of the formal path-
ways can either help or hinder how easily people
reach their destination—in other words, the extent

5
Making the invisible visible: How network analysis can lead to more successful organizational redesigns

to which your organizational structure supports with the customer usually benefit from lower align-
your people in getting their work done. ment scores, as they need to share information
To design an optimal structure, we should better broadly to meet their goals. On the other hand, core
understand how people collaborate to get work done, business teams more focused on efficiency usually
and we also should be able to detect the systems benefit from higher alignment.
in place that create the most value. To do that, we Effort analysis. The formal versus informal
have developed a set of ONA metrics based on new network assessment can be taken a step further and
algorithms that can help an organization identify used to measure how cumbersome a hierarchical
where improvements can and should be made to its structure may be for each employee. In this analysis,
structure. Ultimately, these measures when evalu- ONA looks at individual employees and who they
ated alongside the goals of an organization, can actually work with. It then calculates the average
guide us in allocating certain parts of the design to number of steps through the formal hierarchy that
an efficient hierarchical structure and other parts to it would take to reach the same people. Usually,
fluctuate in networks of teams. the fewer the steps, the better the structure is at
enabling work because it takes less

To design an optimal structure, we effort to negotiate resources and

to escalate, delegate, and approve
should better understand how their work product. Again, for

people collaborate to get work

very high-stakes or consequential
decisions—for instance those that

done, and we also should be able involve policy or legal decisions—a

more challenging approval process
to detect the systems in place that may be worth the effort. However,
if customer service and marketing
create the most value. or sales are having difficulty deliv-
ering a unified experience to the
Formal structure to informal network customer, fewer steps and structural barriers can
comparison. In its simplest form, the comparison help to resolve those challenges.
of formal to informal network indicates how closely Cross-functional opportunity identifica-
an employee’s formal grouping mirrors the in- tion. Understanding the degree to which people
formal network they belong to on a scale of 0–1. If are already trying to work around the structure is
an individual employee has the same connections an important indicator, but it isn’t the whole story.
both formally and informally, the alignment is high It’s also important to understand the level of col-
and receives a score of 1. Low alignment, or closer to laboration employees feel is required to help the
a score of 0, means that employees are more often quality of their work. Through ONA surveys, we can
working outside of their formal reporting structure identify not only who people are working with today,
on a day-to-day basis, thus working around the but who they would like to work with to be more
structure to be successful. In this evaluation, no effective. One company, looking at the current level
score is good or bad. High alignment can predict of cross-functional collaboration, found that 26
team characteristics like higher cohesion, ease of percent of employees were working outside of their
work, simplicity of interactions, and a fast and ef- function. However, when the same people were
ficient pace. However, it could also be indicative asked who they felt they should be working with
of siloed thinking. It’s important to consider the to deliver the mission, they found that 60 percent
goals of each team to identify how closely aligned desired more cross-functional access (see figure 4).
the formal and informal networks should be. Teams Adaptable readiness indication. Just be-
focused on innovation or that are tightly connected cause employees say they want to participate in

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 Making the invisible visible: How network analysis can lead to more successful organizational redesigns

FIGURE 4

Current and desired collaboration networks within the same part of an organization,
as reported by the employees
The colors represent two functional groups that were analyzed within the organization.

Current collaboration network Desired collaboration network

26% of employees work

cross-functionally today 60% of employees desire to
work cross-functionally

Source: Deloitte analysis.

Deloitte Insights | deloitte.com/insights

more cross-functional work, it doesn’t mean they’re understanding how subtle differences in patient
fully prepared to do so. It’s important to look at hand-off protocol led to big differences in health
other factors as well to understand whether your outcomes.15
organization is ready to work in adaptable net- In one example, a Fortune 500 company wanted
works of teams. These teams require higher levels to explore how an innovation team within the busi-
of collaboration skills, a sense of trust in other de- ness could scale into the core. Prior to integration
partments, and, often, a higher tolerance for risk. attempts with the core business, the innovation
ONA can provide indicators of these characteristics team had been a great success. However, as the or-
for each individual, based on how other people in ganization tried to bring more of their ideas to scale,
their network see them today. With this analysis, it was met with challenges, the root of which was
organizations can understand how much change unclear at first.
management and coaching is required for a suc- Using ONA, the company found that the innova-
cessful redesign into a more adaptable model. tion team and other functions had remained siloed.
It also showed that these networks were being held
together by a single employee, a significant risk to
ONA insights in the business should the employee leave. However,
action: Unlocking the network analysis also identified a number of
employees who had strong influence with many
organizational power
people within each of the groups.
The insights available in these network maps What was the reason for this polarization? The
can lead to transformative change for an organiza- network analysis identified lack of trust as a systemic
tion. What does this look like in practice? Insights issue for the organization. Any attempts to foster
from ONA have led to a catalog of creative and, collaboration were likely to go nowhere until this
often, counterintuitive solutions—from redesigning was addressed. It also highlighted that employees
the office layout to improve team performance14 to facilitating connection between the two sides were

7
Making the invisible visible: How network analysis can lead to more successful organizational redesigns

lacking in trust, and solving this would be a key Organizational designers have long tried to
factor in breaking the divide. Understanding who reconcile the tension between the unpopularity of
the key influencers were in this dynamic gave clues hierarchy and its apparent necessity and figure out
about where to dig further and whom to bring in as what to do about it going forward. By understanding
champions for a new solution. and then changing the network architecture—the
In addition, they performed a customer survey, landscape of formal and informal networks that
which helped them to see that while their goal was drive the interaction patterns of an organization—
to be proactive and strategic, information flow we can finally resolve this tension. Leaders should
began with customer outreach 71 percent of the first understand the differences between the tra-
time. They were also able to identify that their cus- ditional vertical organization design and the new
tomers were happier when they had multiple expert horizontal network design and then, based on their
points of contact instead of a single middleman or organizations’ unique strategy and culture, deter-
liaison who might not have had the right expertise mine what should remain in the hierarchy and what
to help them right away. should be built into the network to allow for the
Without these analyses, the company might agility and speed-to-market necessary to survive
have tried to implement a new organizational now and thrive into the future.
model without addressing the root cause of the There is no one-size-fits-all model. However, as
original divide—and without understanding key you embark on this effort, it’s important to consider
markers of success from their customers. With this the following:
knowledge, the company was able to take steps to
address the issue of trust, which could have resulted • Start with your goals and a high-level
in the failure of the theoretically “optimal” model. identification of where teams may benefit
Without taking the time to uncover the invisible from hierarchy vs. adaptable structures.
networks and how they supported the actual results Remember that often those removed from cus-
of the organization, this reorganization could easily tomers or focused on “behind the curtain” critical
have fallen into the long list of failed transforma- support areas tend to function better with more
tions. The company is now using these insights to hierarchical and efficient models. Applying tra-
optimally adjust their structure to be highly proac- ditional design analytics such as spans, layers,
tive and strategic to their customers. These changes and supervisory burden assessments largely still
will take into account the existing organizational makes sense. Adaptive team-based models tend
energy and how work truly gets done to drive adop- to work better where people are more on the
tion and accelerate their results. “edges” of the organization—mission- or outcome-
oriented initiatives often aligned to customers.

No one-size-fits-all solutions: • Compare your current formal structure

Finding a balanced structure to the informal network within your or-
ganization. ONA analyses can help you verify
for your unique organization
and/or identify new groups that should work
together or that would benefit from delayering
“We’re agile on the edges. We’re stable at some of the hierarchical structure.
the core. And that’s what an adaptive orga-
nization should really look like.” • Identify your ideal state. Don’t get stuck
in what’s happening today—or what you think
—Michael Arena, chief talent officer at GM 16
should be happening. Use ONA to understand

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 Making the invisible visible: How network analysis can lead to more successful organizational redesigns

where your employees see opportunity for cross- undergo ongoing modifications to optimize
functional collaboration and verify that with performance.
your original assessment of which teams might
benefit from more cross-functional work. It bears repeating that this type of change is not
for the faint of heart. Organizations must decide
• Diagnose how ready your people are to how much autonomy, flexibility, and agility is re-
make this change. Remember that wanting quired for their particular strategy. The road map
to work more collaboratively doesn’t equate to becoming an adaptable organization is typically
with having all the skills today. Use ONA to a series of small, incremental changes, rather than
understand just how much culture change your a big bang. It also generally requires an ongoing
organization may need for a successful transi- process of optimization, without a final destination.
tion to a new way of working. However, through ONA, the invisible variables that
may have caused challenges in the past can become
• Prepare for continuous change. Org- visible, finally giving leaders the tools they need to
anizational design is not a “set it and forget it” guide their organizations more successfully into
discipline. Business needs may demand certain the future.
disciplines and team models to change and

Endnotes

1. Jeff Schwartz et al., Rewriting the rules for the digital age: 2017 Deloitte Global Human Capital Trends, Deloitte
Insights, 2017.

2. Ibid.

3. Tiffany McDowell et al., Organizational design: The rise of teams, Deloitte University Press, February 29, 2016.

4. Stephen Heidari-Robinson and Suzanne Heywood, “Getting reorgs right,” Harvard Business Review, November 2016.

5. Elliott Jacques, “In praise of hierarchy,” Harvard Business Review, January–February 1990.

6. Robert L. Cross and Robert J. Thomas, Driving results through social networks: How top organizations leverage
networks for performance and growth (US: Jossey-Bass, 2009), p. 47.

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Making the invisible visible: How network analysis can lead to more successful organizational redesigns

7. Cameron Anderson and Courtney E. Brown, “The functions and dysfunctions of hierarchy,” Research in
Organizational Behavior 30, 2010, pp. 55–89, DOI: 10.1016/j.riob.2010.08.002.

8. Ibid.

9. Harold J. Leavitt, “Why hierarchies thrive,” Harvard Business Review, March 2003.

10. Darrell K. Rigby, Jeff Sutherl, and Andy Noble, “Agile at scale,” Harvard Business Review, May–June 2018.

11. Josh Bersin et al., The organization of the future: Arriving now, Deloitte Insights, February 28, 2017.

12. Schwartz, 2017 Deloitte Global Human Capital Trends.

13. Julien Clement and Phanish Puranam, “Searching for structure: Formal organization design as a guide to network
evolution,” Management Science 64, no. 8 (2017), DOI: 10.1287/mnsc.2017.2807.

14. Humanyze.com, “A pharmaceutical company introduces cultural changes to improve performance,” accessed
February 15, 2019.

15. Lippincott Solutions, “Bedside shift reports can save lives,” November 18, 2017.

16. Michael Arena (chief talent officer at General Motors), in-person interview with Tiffany McDowell and Anh Nguyen
Phillips, January 16, 2019.

About the authors

TIFFANY MCDOWELL, PhD, leads Deloitte’s Organization Strategies Market Offering. McDowell focuses
on delivering operating model, organization design, talent strategies, and global change management
solutions for large-scale transformation projects. She has recently brought organizational network
analysis and adaptable organization design thinking to her clients to help unlock networks of teams.

SIRI ANDERSON is a researcher and writer at the Deloitte Center for Integrated Research, specializing in
developing thought leadership in the areas of future of work and digital reality.

Acknowledgments
The authors would like to thank Tara Murphy and India Mullady for their support in developing this
content. They would also like to thank Jeff Schwartz, Kelly Monahan, and Anh Phillips for their review
and guidance.

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 Making the invisible visible: How network analysis can lead to more successful organizational redesigns

About the Deloitte Center for Integrated Research

Deloitte’s Center for Integrated Research focuses on developing fresh perspectives on critical business
issues that cut across industries and function, from the rapid change of emerging technologies to
the consistent factor of human behavior. We uncover deep, rigorously justified insights and look at
transformative topics in new ways, delivering new thinking in a variety of formats, such as research
articles, short videos, and in-person workshops.

Contacts
Tiffany McDowell, PhD Siri Anderson
Organization Strategies leader Researcher and writer
Principal Deloitte Center for Integrated Research
Deloitte Consulting LLP Deloitte Services LP
+1 619 237 6611 +1 206 607 1222
[email protected] [email protected]

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