Issue:Managers can increase organizational effectiveness in both the private and public sectors through the study of informal networks (i.e. trust, advice, and communication networks).I.IntroductionII.

Discussion on the industry contexts for Healthcare Delivery Systems, Pima Utilities, and State Compensation Fund.A.Description of companies industrial objectives.

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B.Discussion of company histories’ and strategies.III.The relevant problems concerning informal communication net works are:A.Managers should not rely on their own perception of communication networks within their departments.

1.Managers should study the informal communication networks.2. They should be more aware and encourage two- way communications in informal networks to increase employee productivity.

B.Mangers must be aware of informal networks in order to develop effective teams.1. Teams bring diversification of ideas and experience.2.Teams who utilize the same informal networks do not effectively promote new ideas and strategies.

C.Managers should re-examine the current trend of decentralization,due to the loss of informal networks.1.Work-at-home programs impair informal networks.2.Digital (i.

e. e-mail, voice mail) substitutes for informal networks are not effective.IV.Discussion of current communication strategies within:A.Healthcare Delivery Systems.

B.Pima Utilities.C.

State Compensation Fund.V.Threats and opportunities of external environmental factors on informal networks within:A.Healthcare Delivery Systems.B.

Pima Utilities.C.State Compensation Fund.VI.

Strengths and weaknesses of informal networks within:A.Healthcare Delivery Systems.B.Pima Utilities.C.State Compensation Fund.VII.

Evaluation of informal network strategies based on survey results.A.Survey questionnaire.B.Survey parametersC.

Survey results.VIII. Recommendations and conclusions.

IntroductionThe informal communication networks that are present in organizations are resources often overlooked by management. Informal communication networks enable tasks to become completed with greater ease and efficiency. By understanding these informal communication networks, managers can more effectively develop teams to complete organizational tasks. The three parts of the informal communication network are the advice network, trust network, and the communication network. The advice network are channels used by employees seeking guidance primarily utilizing lateral communications with their peers.

Trust networks are lateral communications between employees regarding topics for which the members of the group protect their own interests. Communication networks are those interactions between employees of all levels that dictate the direction the group should follow. Industry Contexts In 1927, the Arizona Industrial Commission was formed to oversee the implantation and administration of the “Single Remedy Doctrine”. The “Single Remedy Doctrine” were laws passed by the legislature to help injured workers’ recover from their work related injuries both monetarily and physically. The laws did not contemplate which party (employer or employee) was at fault. In other words, the payment of medical and compensatory claims was not based upon the negligence of the employer or the employee.In 1969, the State Compensation Fund was founded.

The formation of the State Compensation Fund relieved the Industrial Commission of Arizona from the day to day operations of workers’ compensation insurance. The State compensation Fund was primarily responsible for writing workers’ compensation insurance policies and processing claims. The Industrial Commission of Arizona no longer took an active roll in daily administration and processing of claims. The State Compensation Fund remained a governmental entity. All regulatory powers, however, are vested with the Industrial Commission of Arizona and the Arizona Department of Insurance. The State Compensation Fund has a limited relationship with state government. The governor appoints the Board of Directors for the State Compensation Fund.

The only other connection that the State Compensation Fund has with state government is that the Joint Legislative Budget Committee oversees the annual budget of the State Compensation Fund. The Joint Legislative Budget Committee maintains this oversight even though the State Compensation Fund requires no money from the state government. All budgetary expenses are paid through the collection of insurance premiums. Figure 1 demonstrates the separation and function of Arizona’s workers’ compensation agencies.

The State Compensation Fund’s marketing strategies are simple. The State Compensation Fund provides employers a stable and reliable market for workers’ compensation insurance at the lowest possible cost. The State Compensation Fund also provides injured workers with immediate medical coverage and equitable compensation for work related injuries. Due to these simple strategies, the State Compensation Fund writes workers’ compensation insurance for sixty percent of the businesses in Arizona.

This equates to forty-nine percent of the premium dollars spent in Arizona for workers’ compensation insurance. In recent years, the workers’ compensation insurance market has become more competitive. Five years ago, four companies were authorized by the Arizona Department of Insurance to conduct business in Arizona in the workers’ compensation insurance industry. The number of insurance companies applying to become authorized carriers is increasing every year. Workers’ compensation insurance becomes more profitable when the economy is health. In the past several years, the economy in Arizona has been strong. Therefore, more insurance companies have wanted to operate in the Arizona workers’ compensation insurance market.

Pima Utility is a privately held water, waste water and Cable Television (CATV) utility serving the Phoenix and Tucson markets. Pima Utility or “Pima” has 33 employees. It has 1 General manager, operations manager and 1 Legal Affairs Manager, figure 2 shows the organizational structure for Pima Utility. The companies industrial objectives are those of a typical regulated utility. The company is allowed a guaranteed rate of return of 7 % and very little effort goes into cost reduction or profit improvement. The CATV division is some what different in that they have moved into a highly competitive market place and face competition from different providers. Pima is a very small company in relation to other municipal corporations that provide services to residential customers.

Relevant ProblemsManagers are not fully aware of the importance of informal communication networks. Often the managers perception of how his/her department operates is usually not the case. Most managers do not see or take advantage of the informal communication networks that have developed within the department.

To thoroughly utilize the established communication networks, managers need to understand how the networks operate. However, understanding how these networks operate is very difficult. Optimum utilization by the manager would require that the manager be a part of the established networks. Managers may already be a member of certain groups, however they are usually not members of each group.

In other words, managers many be involved in advice networks, however they may not be included in trust or communication networks. In order to understand these networks, managers must make a conscious effort to observe the individual networks.To understand these networks managers can promote two way communications between staff members. By promoting two way communications, managers can take advantage of advice and communication networks. The only way managers can utilize trust networks is to observe the individual groups. When teams need to be formed, managers can develop the best teams to complete the assigned tasks. Managers must be careful to form effective teams.

In other words managers, managers do not want to form teams of individuals who formulate similar ideas and methodologies. Team diversity will ensure effective team building.One current business trend has threatened the formation of informal communication networks. Decentralization may cause a disastrous effect on informal communication networks.

Organizations with several satellite offices are re-distributing employees from central locations to the out lying satellite offices. The belief is that by placing the centralized employees into the satellite offices, the staff will better be able to respond to the needs of the company’s customers. The customers may be better served, however informal communication networks that have developed within the organization are either dismantled or not allowed to function due to the separation caused by decentralization. Efforts to decentralize organizations has also led to the development of another cost saving measure for organizations.

These programs are known as “work at home” programs. These programs have developed to allow for employees to work out of their own houses rather than commuting to an office every day. These programs are another threat to the formation of informal communication networks. Employees may still be able to establish communication and advice networks without face to face interaction. For trust networks to develop, employees must be able to “get to know” each other. Many organizations are enabling certain employees to “telecommute.” This allows for the employee to use electronic mail, faxes, voice mail, and telephone communications to complete their daily tasks.

Again, without the availability of face to face communications employees may be able to develop advice networks and communication networks but trust networks may not be easily formed. Managers must take these facts into account before developing new plans for the organization using new technologies. If employees are allowed to interact with each other team building will be difficult and ineffective.Communication StrategiesIn an effort to increase efficiency, the State Compensation Fund changed the organizational structure used since the inception of the State Compensation Fund in 1969. The reorganization of the organizational structure took place January 1, 1996.

Figure 3 shows the organizational structure prior to January 1, 1996. The division of labor was taken to the extreme in this organizational structure. Divisions within similar work specialties kept informal communication networks from growing. By not facilitating the development of the small informal communication groups, tasks were often duplicated. Miscommunications as to the function of one department versus another department kept the State Compensation Fund from operating in an efficient manner. This type of organizational structure also made the lines of communication one way for the employees on the lower levels. In other words, managers claimed to use an “open door” policy for employee communications.

However, due to the highly structured levels of the organization communications usually only flowed from top to bottom.In January, 1996, the top management of the State Compensation Fund developed a new organizational structure that made better use of the division of labor. Top management utilized the team concept, which filtered down through all departments. Figure 4 shows how the new organizational structure looked.

The “A Team” was developed to include all administrative functions. This division was separated from the “B Team” which included all departments involved with benefits and claims processing. The “E Team” was developed to aid the employers. Each division was now responsible for similar types of work specialization.

Informal communication groups began to form soon after the new structure was implemented. By grouping the divisions by specialty, people had more in common. Having more in common soon gave way to small groups who communicated with other groups as well as with themselves. Figure 5 shows the organizational structure of the Audit Section of the Policy Administration Department at the State Compensation Fund. Prior to January, 1996, the Policy Administration Department, Audit Section was the Audit Department. There were only eleven people in this department.

When the new organizational structure was implemented, the staff of the Audit Department was not interested in forming new communication groups. In a short period of time, new advice, communication, and trust networks were formed. These new networks have greatly increased the productivity in the Policy Administration Department. These new groups have also developed into teams who have helped in eliminating some of the massive amounts of paperwork needed to perform certain tasksPima Utility has 2 diverse organizations that are within the organization. The water and sewer division are autonomous from the CATV division. The GM of the water and sewer division has a authoritarian style and this does not facilitate 2 way communications. The operations manager and the field supervisor have a good relationship and this helps build bridges to communications.

The CATV division has a more open style of management that helps build a good organization. We studied this division closely.A bulk of the communications that go on are verbal. The communications medium of choice is by telephone. The exception is progress reporting during the major reconstruction program that is now underway and written communications from outside stockholders like engineers, contractors and government interests involved in the permitting process.

These written communications are principal directed to shared management. The balance of the communication efforts are oral communications, principally because feedback is instantaneous and alternatives can be discussed prior to implementation.Upward communications are infrequent and consist of construction progress, as shown in figure 6.Lateral communications, as shown in figure 7 are principally oral in nature between field personnel and the customer service center. Downward communications are principally oral in nature from the GM and the legal staff after receiving written communications from outside stakeholders, as shown in figure 8. You could label the communications pattern at Pima as a telephone tree. A phone tree is setup by one person receiving a message and then calling several people down the tree who in turn call several other people down the tree until the message is returned to the send, as can be seen in figure 9.

This structure is subject to a certain amount of filter and interpretation Stoner ; Freeman (5th Ed) however a phone tree is the fastest and most efficient means of communication used today. The phone tree method works from the bottom up to correct and misunderstandings and consider alternatives without the need to pass through the keyboard (typing) filter that occurs when communications appear in written form.Threats and Opportunities The new organizational structure utilized by the State Compensation Fund greatly reduced the friction between various departments. The friction was reduced by using a labor division that organized the different teams into specialized groups.

The threats that face this new structure are similar to the problems that existed prior to the reorganization. The first threat for the new informal groups is that the groups that were established prior to the new organizational structure may not allow new members into their groups. By not allowing the established groups to develop into new larger groups, efficiency and functionality may suffer. Another threat to the informal network using the new organizational structure is that one division may be able to complete the tasks of another division making the original division obsolete. This obsolescence could turn into absorption. In other words, if one division takes on the role of another division then the original division could be absorbed by the more aggressive division.

This could result in a loss of jobs or job titles. This situation could cause another threat to the communication network in the organization. If one department is fearful of being absorbed by another, the tasks requested by other divisions may be given low priority by the staff in the threatened division.The new organizational structure could also bring opportunities for the informal networks between divisions. The first opportunity is that of growth. Again, the old well established informal groups have the opportunity to bring in new people.

These new people can help create a healthy environment for interpersonal growth and task completion. Since other divisions have been assigned different tasks, the competition between the divisions has decreased. A decrease in the competition between divisions allows for groups to develop informal communication networks. These new relationships between divisions help to develop “cross-specialty” advice networks. These groups can help in creating new ideas and directions for other divisions to follow. Conversely, individual divisions no longer need input from other divisions to complete tasks. In other words, work groups can perform tasks with greater ease when they are not dependent upon other groups for input on the projects they are performing.

Some of the threats Pima faces come mainly in the external communications from other stakeholders without the company. The water and sewer division is very rigid in their line of authority. This can lead to slow response from the provider and tends to irritate its customers and vendors. This does not occur as they water and sewer division in its field operations. They must be on call 24hrs a day to make sure service is continually available.

The field operations manager has a separate communications net work that he uses to get the facilities back on line. This informal network in the field tends to be a opportunity that has not been acknowledged by the GM. The CATV division follows a communication pattern similar to the one that well-known management author Tom Peters (1988) suggests in his book “Thriving on Chaos”.

Peters suggests that management should give front line personnel more authority , information and latitude to make decisions in the field without a lot of management time consumed by second guessing the field personnel. Peters justifies this rational by suggesting that front line personnel know what the problems are and usually have the best solution to the problem. They only lack communicated authority to implement the solution.Comparatively, management at the water and sewer division does provide authority to the field personnel.

The GM does not provide as much information as Peters suggests. For example, financial loading (debt allocated to operations), overhead, legal and profit matters are not shared with front line personnel as Peters also suggests. This information is communicated orally first to the field manager and then to the front line employees at budget time. However, this is not a regular occurrence.The CATV division on the other hand has the same informal communications pattern and authority delegated to the front line is endorsed in ” Tearing up the Organizational Chart” a Business Week article by Dwyer, etal, (1994).

They suggest as Peters does that management must “encourage information and innovation throughout the company” if the organization plans to succeed in a global marketplace. These authors suggest the model now in effect at CATV division may be as efficient as the one they advocate. It could be enhanced by pushing more information into the field with the installers and leadsmen. The net effect of pushing information and authority down the organizational tree and into the field at the CATV division would likely cause less communication from the top down and more communications would occur laterally between customer service and the field personnel.

The opportunities for the water and sewer division are to learn form the good things that are now going on a the CATV division and find a common ground to work from in a highly diverse environment.There are many strengths when informal communication networks are utilized in large organizations. The first strength is greater diversity among the individuals in the small groups. The diversity helps to supply new ideas and strategies for the completion of tasks.

Without diversity, the same ideas and strategies are continuously used to perform assigned tasks. The State Compensation Fund, as with most companies, needs a constant flow of new ideas to remain competitive. As mentioned earlier, small groups are more likely to prioritize tasks requested by group members in other areas of specialization. Members of informal communication networks can sometimes have tasks completed faster due to the alliance between the specialty areas developed by the informal network.There are also some obvious weaknesses that can be seen by the utilization of the State Compensation Fund’s new organizational structure. As addressed in the above paragraph, informal communication networks tend to develop between people with similar interests. When groups are formed from individuals with similar interest, new ideas do not easily evolve.

Informal communication networks can promote isolation form the groups. Isolation can develop between specialty divisions or even within the individual groups within a division. Isolation can seriously detract from the accomplishment of tasks. Isolation from other groups or divisions has been shown in the past to not be a successful method of achieving the goals of the group as a whole. Informal communication networks can also be distracted by rumors that may be passed throughout a company. Rumors can distract in both negative and positive ways.

Regardless of the overall effect of the rumor, the spread of rumors is rarely productive for the group.This trust and advice networks are part of the communications patterns at Pima. This informal network is frequently the most results oriented communication pattern in this company. The Informal network within Pima is one that relies heavily upon their field supervisor in both divisions. I attribute this to the nature of the organization.

Its a service provider that has a obligation to be delivering services or commodities 24hrs per day. This provides the field people a great degree of latitude in the creation and use of informal networks within the company. This provides for great service delivery to the customer but doesn’t work well in coordination with other depts.

and external stake holders.This weakness in the communication network has been and continues to be a problem with both divisions of the company. Many times the engineering and the regulatory issues are left by the way side to deliver services to the customer. This informal network in the hands of the field people sometimes requires duplication of work and often reinstallation of expensive infrastructure.

Reduction of these duplicitous efforts are critical because we cant recover these cost in the rate base. EVALUATION OF INFORMAL NETWORKSIn order to study informal communication networks, certain questions can be asked to derive a map to distinguish the three sub-groups of the informal communication network. So that these questions could be asked, a survey was developed.

The questions that were used on the survey to obtain information on the informal communication networks that exist at the State Compensation Fund, Healthcare Delivery Systems, and Pima Utility are:1)Whom do you talk to every day?2)Whom do you go to for help or advice at least once a week?3)With one day of training, into whose job could you step?4)Whom would you recruit to support a proposal of yours that could be unpopular?5)Whom would you trust to keep in confidence your concerns about a work related problem?The surveys were distributed among six to twelve members of a single department at each company listed above. The departments used to gather the information, from the surveys, are the departments were the sturdy group members are working. The data from the surveys was then mapped.

The maps appear as diagrams in the appendix of this paper.The survey conducted at the State Compensation Fund involved the Policy Administration Department Audit Section. Whereas the group is small, interesting relationships were diagrammed from the information obtained from the surveys.Figure 10 is a diagram of the advice network in the Audit Section.

As expected, all of the technical staff members rely upon each other to obtain guidance. When a large number of rules, procedures, and laws must be followed, getting advice from several sources is not uncommon at the State Compensation Fund. The next diagram,figure 11, shows the communication network in the Policy Administration Department Audit Section.

The lines of communication follow the seniority of the work group. The supervisor gives company directives to each of the members of the staff. The senior auditor also gives lower ranked members instructions regarding the company’s goals and objectives. The trust network, shown in figure 12, demonstrates some unexpected findings.

All of the members of the work group trust each other, however some people trust each other more than others in the work group. The group is made up of primarily women. The single male in the work group is not as privileged as the other women of the work group, excluding the supervisor. The supervisor is not trusted the same by other staff members simply as a function of her higher rank.

Managers are sometimes included within the trust networks, however they are more often not included within these groups.I studied and provided questionnaires to the employees and management at the CATV division to find out how communications really worked in contrast to what the Manger thought that worked. Only oral interviews where given to the water and sewer divisions. The strengths of the CATV division where the style of management. Karri Kelly is the Manager and she has a collaborative and deligatory style. She relies heavily on her field Forman who she trusts and whom she seeks advise from.

She is also open to more input from her subordinates. She also is concerned about the differences in the office staff and their lack of ability to “step into another job with only one day training”. We were surprised by the differences in the informal network between the field people and the office people. Their was only one informal network between these different areas, although many of the field people said they could do the office work without training.Conclusion and Recommendations The State Compensation Fund made great strides in creating a functional work environment when the organizational structure was changed.

The new organizational structure helped new informal communication groups to form. The new organizational structure also assisted established groups grow with a more diverse orientation. The State Compensation Fund utilizes the use of teams to accomplish organizational tasks. Informal communication networks within individual departments or sections is primarily dependent upon the size and perceived power that the departments have obtained.

The State Compensation Fund has adopted an efficient communication network, therefore no changes are recommended.The written communications patterns at Pima are not as effective as they could be, but the oral communications patterns are very effective. In fact the oral communications and the telephone tree concept is the best communications concept available. I would recommend that more authority and information be moved down the organizational tree.

I would further suggest that training be offered in interpreting external written communications and create a management reporting system to provide information to shared management.I would try and cross train one office person in the CATV division to create a informal link from the field to the office in order to strengthen the informal network between the office and field. Once this cross training g is completed and additional links are created we would then move the same benefits to the water and sewer division.AppendixFigure 1.

Pima Utility’s Organizational StructureFigure 2.Healthcare Delivery SystemsOrganizational StructureFigure 2.State Compensation Fund Organizational StructurePrior toJanuary, 1996Figure 3.State Compensation Fund Organizational StructureAfter January, 1996Figure 4.State Compensation Fund’sPolicy Administration DepartmentAudit SectionOrganizational StructureFigure 5Informal Trust Network atPima UtilityCable TV Division Carol SCust Service / BillingBeckyKarri K Tracy TOffice MgrGeneral MgrCust ServiceOfficeFieldTodd B Tony BCassy TLeadmanForman InstallerTim V Jeff JSenior InstallerInstallerScott P Dave WInstallerInstallerFigure 9Informal Advise Network atPima UtilityCable TV Division Carol SCust Service / BillingBeckyKarri K Tracy TOffice MgrGeneral MgrCust ServiceOfficeFieldTodd B Tony BCassy TLeadmanForman InstallerTim V Jeff JSenior InstallerInstallerScott P Dave WInstallerInstallerFigure 10Advice Network at theState Compensation FundAudit SectionShanne O’BriantSupervisorLisa HuttonMichelle WilliamsJake AdnersonMelissa CoheaFigure 11.29Communication Networkat theState Compensation FundAudit SectionShanne O’BriantSupervisorLisa HuttonMichelle WilliamsJake AdnersonMelissa CoheaFigure 12.30Trust Networkat theState Compensation FundAudit SectionShanne O’BriantSupervisorLisa HuttonMichelle WilliamsJake AdnersonMelissa CoheaFigure 13.

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