Many companies are currently examining how collaboration, and more specifically social networking within the enterprise, can increase productivity. There are many reasons why – globalization, new ways of working within and outside of your company, emerging Web 2.0 technologies, and the shifting demographics of the workforce to name a few.
In this article, I am going to focus on the changing workforce. An article entitled, “The Next Revolution in Interactions” from the McKinsey Quarterly 2005 November Number 4, examined the rise of the tacit workforce.
The premise of the article is simple – the way we work is changing and it has a dramatic impact on performance. We are becoming a workforce that is more and more focused on tacit interactions, rather than transformational or transactional interactions. The workforce now consists of people who largely or wholly spend their time interacting.
The article looks at the three types of interactions:
- Transformational – Extracting raw materials or converting them into finished goods. These are transformational activities because they involve more than just jobs in production.
- Transactional –Interactions that unfold in a generally rule-based manner and can thus be scripted or automated. Recording a shipment of parts to a warehouse, for example, is a routine interaction.
- Tacit – More complex interactions, such as managing a supply chain. Complex interactions typically require a higher level of judgment, involve ambiguity, and draw on experiential knowledge.
A New Workforce is Emerging
The article begins by examining why the tacit workforce has emerged. From the article, “The Next Revolution in Interactions”:
For the past 30 years, companies have boosted their labor productivity by reengineering, automating, or outsourcing production and clerical jobs. But any advantage in costs or distinctiveness that companies gained in this way was usually short lived, for their rivals adopted similar technologies and process improvements and thus quickly matched the leaders.
But advantages that companies gain by raising the productivity of their most valuable workers may well be more enduring, for their rivals will find these improvements much harder to copy. This kind of work is undertaken by, for example, managers, salespeople, and customer service reps, whose tasks are anything but routine. Such employees interact with other employees, customers, and suppliers and make complex decisions based on knowledge, judgment, experience, and instinct.
The tacit workforce is growing in number and importance throughout companies. By the end of 2011, the workforce will be broken down as follows:
- 47% Collaboration (Tacit)
- 38.2% Transactional
- 14.8% Production (Transformational) 1
The demand for, and cost of these employees is on management’s agenda (salaries are 55-75% more than those employees who perform more basic production and transaction tasks). Companies need to make these employees as productive as possible, much like we have for transactional and manufacturing labor.
Because of the complex nature of their jobs, however, boosting the productivity of the tacit workers can not be accomplished in the same manner as the transactional and manufacturing employee (by standardizing their work or replacing them with machines). Instead, you have to make the tacit worker more effective at what they do.
From the article “Using technology to improve workforce collaboration,” published October 27, 2009:
Raising the quality of these (tacit) interactions is largely uncharted territory. Taking a systematic view, however, helps bring some of the key issues into focus. Our research suggests that improvements depend upon getting a better fix on who actually is doing the collaborating within companies, as well as understanding the details of how that interactive work is done. Just as important is deciding how to support interactions with technology—in particular, Web 2.0 tools such as social networks, wikis, and video. There is potential for sizeable gains from even modest improvements. Our survey research shows that at least 20 percent and as much as 50 percent of collaborative activity results in wasted effort. And the sources of this waste—including poorly planned meetings, unproductive travel time, and the rising tide of redundant e-mail communications, just to name a few—are many and growing in knowledge-intense industries.
How Executives Can Improve the Productivity of the Tacit Workforce
The tacit workforce must interact with a wider group of people to make better decisions – since they are dealing with complex challenges – and because of industry competitiveness, do this in less time. In order to enable these valuable employees to work more productively, leaders must take into account two critical changes. From the article, “The Next Revolution in Interactions”:
- First, the way companies deploy technology to improve the performance of the tacit workforce is very different from the way they have used it to streamline transactions or improve manufacturing. Machines can’t recognize uncodified patterns, solve novel problems, or sense emotional responses and react appropriately; that is, they can’t substitute for tacit labor as they did for transactional labor. Instead machines will have to make tacit employees better at their jobs by complementing and extending their tacit capabilities and activities.
- Second, a look back at what it took to raise labor productivity over the past ten years shows that the overall performance of sectors improves when the companies in them adopt one another’s managerial best practices, usually involving technology.
But in the world of tacit work, it’s less likely that companies will succeed in adopting best practices quite so readily. Capabilities founded on talented people who make smarter decisions about how to deploy tangible and intangible assets can’t be coded in software and process diagrams and then disseminated throughout a sector.
Collaboration, Web 2.0 and Productivity
This last point speaks to the business value of collaboration, and why social networking tools are so intriguing. The Web 2.0 toolset (blogs, wikis, discussion boards, instant messaging, micro-blogging, video, user profiles, associated colleagues, ratings, tags, notes, web meetings) are a huge component to boosting the productivity of the tacit workforce. These tools enable employees to shorten the time needed to make critical business decisions by allowing them to find communities of experts easily, regardless of geographic location.
From the white paper, “The Return on Collaboration, Assessing the Value of Today’s Collaboration Solutions,” published in April, 2010:
New collaboration technologies (Web 2.0 tools) can help organizations share information and expertise in ways that simply have not been possible. Much the way that databases revolutionized sales and marketing efforts, email transformed communications, or ERP systems remade corporate operations, new networked collaboration technologies promise to radically improve the way that people interact and share information.
In order to understand the importance of collaboration today, it is helpful to go back to the beginning. The first generation of business collaboration tools began with a focus on documents that were created and shared by individuals who used one device: the PC. Information resided safely within the walls of the enterprise, and personal productivity improved.
Collaboration 2.0 shifts the focus from documents and PCs to people and social sessions, defined as the new fundamental unit of collaborative work, in which groups of individuals interact across company and geographic boundaries. The goal of a social session is to create the effect of presence within the reality of absence.
This new collaboration experience helps us cope with information overload by delivering only what we need, just when we need it. We can find experts in an instant and participate in blogs, videos, wikis, social networks, team spaces, and conferences from a variety of devices. Thanks to advanced security and policy management, we can include partners, customers, and suppliers in our one-to-many communications.
Technology and the Tacit Workforce
Companies have three ways of using technology to enhance and extend the work of tacit labor:
- First, they can use it to eliminate low-value-added transactional activities that keep employees from undertaking higher-value work.
- Second, technology makes it possible to boost the quality, speed, and scalability of the decisions employees make.
- Third, new and emerging technologies will let companies extend the breadth and impact of tacit interactions. Loosely coupled systems are more likely than hard-coded systems and connections to be adapted successfully to the highly dynamic work of tacit employees. This point will be particularly critical, since tacit interactions will occur as much within companies as across them.
The Power of Communitites
Since the work of tacit employees is highly dynamic, and we need to boost the quality, speed, and scalability of the decisions these employees make, the ability to quickly create communities around areas of expertise becomes critical.
From the report, “Making Collaboration a Reality: Insights from the Collaboration Consortium, Year One,” published in February, 2010:
One of the great benefits of collaboration technologies is that they empower people to solve problems and eliminate the intermediaries of hierarchy and time. These technologies help connect the people who have specific information and expertise with those who need it.
People on the front line can access the expertise or information they need instantly, instead of reporting a problem and waiting for it to go up the chain, over to an expert at another location, and back, with delays throughout the process. Human latency in business processes is removed, time is saved, and better decisions are made.
This new state of work processes empowers front-line employees (tacit employees) to operate as autonomously as possible by giving them the latitude to plan and execute their tasks based on their awareness of a situation.
Communities can be short-term or long-term in nature, but the value of the community is in the flow of information and how it engages people. The more active the community is, the more value produced. The image below, entitled the Engagement Cycle, is from Leader Networks, a firm that focuses on building on line communities for business, and highlights the flow of information within a community.
The changing workforce can be a major competitive advantage for a company. By more effectively utilizing the tacit workforce – via improved collaboration – companies can begin to claim sustainable competitive advantages again, as witnessed by these findings:
- Cisco saved US$691 million and increased productivity 4.9% in fiscal year 2008.2
- International energy company Statoil and peer energy companies operating on the Norwegian Continental Shelf estimate that, in 2007, they captured benefits worth a net present value of approximately 150 billion Norwegian kroner, or about 24.9 billion U.S. dollars. The benefits that Statoil has gained from collaboration are concrete, tangible, and capturable: Close to 80 percent of the value came from increased reserves and accelerated production, while the remainder resulted from reductions in drilling and operational costs.3
Industry wide gains from utilizing Web 2.0 tools is provided within data picture below (click on the image for the large picture), which comes from “How companies are benefiting from Web 2.0: McKinsey Global Survey Results”
- “Using technology to improve workforce collaboration,” What Matters, October 27, 2009; James Manyika, Kara Sprague, and Lareina Yee.
- Creating a Collaborative Enterprise, 2009 Cisco Systems, Inc.
- Making Collaboration a Reality: Insights from the Collaboration Consortium, Year One, February, 2010.