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Informal loopholes don’t disappear when data comes into play

 

Talking about the merits of big data often means emphasizing increased transparency, efficiency and a frictionless way of getting things done. This emphasis is sometimes accompanied by the desire to reveal hidden, informal structures that develop in the absence of a perfect representation of formal processes, namely the informality of an organization. These hidden or informal structures are commonly perceived as dysfunctional, while an accurate compliance with the formal set-up of the organization seems to promise frictionless and successful working routines that are less dependent on human interference. While more data certainly implies more transparency, we would argue that informal structures will not disappear in the face of big data – informality is part and parcel of a successful organisation.

Why is this such an important notion? A common argument on the revolutionary power of big data and one that can also be found in Schöneberger/Ramge’s bestselling book ‘Reinventing Organizations in the Age of Big Data’ is that data and digital solutions serve organizations as modern engines for value creation along the entire value chain- up to the point that organizations will increasingly be replaced as a framework to organize the division of labour. (Big) data fuels that process by increasing the volume, velocity and variety of insights that are necessary to organize processes and decision-making – to the extent that data itself becomes a currency of its own.

This line of thought is built on an assumed mechanical and static relationship between organizational design and organizational reality. The underlying assumption is simple: Everything that was, or is, formally decided in an organization can be modelled in data streams, domains, business processes and so on. Consequently, consultants and data scientists who aim to build a data driven organization usually combine architectural models of the hardware, application and process landscape of an organization and integrate them into an overall business architecture framework. In such a framework the formal side of the organization is highlighted, while its informal side is often completely neglected or ignored.

However, irrespective of the amount of data feeding into work processes and corroborating management decisions, the structural set up of an organization can always be categorized into formal and informal structures. While formal structures, like reporting lines or processes, are designed through conscious and active decisions, informal structures emerge, as a reaction to any specific formal set up, in the form of deviations from formal structures. Informal structures comprise of coordination and communication norms between colleagues via unofficial channels, as well as unspoken rules, values and behaviour around cooperation within a company. They may comprise of both, informal loopholes to circumvent formal rules or guidelines, in order to achieve (at least subjectively perceived) better outcomes and agreements for the organization, as well as common practices all organization members are aware of, but which would not be formally written down (think of unquestioned and often unpaid overtime in agencies). Understood from this perspective, informal structures are actually synonymous with corporate or organizational culture.

While often being blamed for the malfunctioning of an organization, it is important to note that informal structures have a worse reputation than they deserve:

Obviously, deviations from formality exist that harm the organization, for instance when incentive structures allow for personal advance at the expense of the well-being of the company. However, more often than not, informality is a necessity allowing for additional structures that help the organization to operate in the most efficient way. One only needs to think of time saving shortcuts in time-sensitive engineering processes where formal coordination with the board of directors might mean waiting for various BOD meetings and formal clearances before entering into the next development phase.

The emergence of informal structures in certain areas does not automatically mean that the respective formal structures are flawed. Formal structures provide necessary orientation and guidelines for employees while their bulkiness is often a by-product of legal or governance requirements. Informal loopholes are consequently a common feature of organizational set-ups and they are widely and intensively used and applied in organizational reality.

So, what is the role of formality and informality when (big) data hits the organization and is accompanied with the promise of a more efficient organizational set-up? In short: the formal structures tend to become the blueprint for digital solutions that are installed to replace manual work or human decision making while the positive and negative roles of informality are often neglected or ignored. This has a major effect on informal behaviour: although putting data and digital solutions into place may initally appear to impact informal behaviour, informality as such does not disappear – it just becomes more hidden and safeguarded in data driven organizations and therefore ends up being more costly to maintain.

Consider a common example in companies:

Tracking tools in the workplace put more and more pressure on employees to report their productivity and activities. Yet, in many companies (especially in those that aim for low overhead costs) you find informal coordination routines in order to trade billable hours between higher and lower performing teams. The aim of this coordination effort is to avoid automatic blacklisting by the system which might otherwise happen to lower performing teams as a result of their productivity being tracked. In this case, data based performance measuring leads to more transparency, but at the same time to new informalities and even more (costly) informal coordination.

Accepting the fact that an organization entails both, formality and informality, we would suggest considering that every new data driven or digital solution will come up against existing informal structures in an organization. Consequently, the speed of datafication and digitalization won’t necessarily follow the path of what is technically possible, but will be heavily influenced by the level of informality that is kept alive by the ones whose working environment is “digitally improved”.

 

AUTHORS


JOHANNA MESCHEDE

is Senior Consultant at Metaplan Germany.

ZELJKO BRANOVIC

is Senior Consultant at Metaplan Germany.

 

Stay tuned – we will be publishing the following propositions on ‘when data hits the organization’ in the coming weeks.

4. Power games will not vanish due to increased transparency through data – they will shift!

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