Networks Are the New Organization Charts

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Organization chart
In the tangible economy, power and knowledge flowed primarily from the top down. An organization chart was used to explain how resources and authority were distributed. To show who reports to whom. What is the extent of the control of an individual manager? How are resources allocated? Just about every organization had and needed an organization chart.
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Our understanding of organizations continues to be influenced by the organization chart (org chart for short). It is a rare company that does not have one. And they are still used as a basic tool to understand the organization and to manage personnel. Every person in every organization needs to “report” to someone to, at a minimum, facilitate communication and personal development. But the org chart is losing its value along with a company’s financial statements—neither does a very good job at explaining how value is being created in the knowledge era. The task of putting knowledge to work does not fit inside the neat models that we have used in the past.

In the industrial era, factories were the dominant kind of organization. Although every factory was different, each was basically converting raw material of some kind into a tangible finished product. This linear, physical process could usually be drawn in a standard sequence. And certain roles to organize this process became commonplace and standardized. Most organizations had a specific person in charge of sourcing, production, logistics, and customer service in addition to functional support areas. The way that these roles and organizations were/are communicated was through an org chart.

However, the value creation process is much less standardized today. That means that organizations are harder to draw using the traditional graphs and org charts. Rather than resembling a sequence of tasks, organizations today are a network of connections and combinations of knowledge assets. While there is still a role for organization charts in management, the network map has become an indispensable tool to explain how things work.

Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak.