Is Web 2.0 creating a staff productivity paradox?

Web 2.0 platforms offer a great opportunity to harness collective intelligence and foster innovation, which can empower staff to improve the customer experience. However, there is also a productivity paradox at work...

The loudly trumpeted Web 2.0 business revolution has been frustrated by a powerful paradox. Advocates claim that Web 2.0 platforms, such as wikis, boost staff productivity by harnessing collective intelligence and fostering innovation, which in turn can improve the customer experience. The hard reality, however, is that many corporate managers fear that these same tools will actually undermine productivity at the office. So how can the productivity paradox be reconciled?

It’s important to grasp the basic dynamics of Web 2.0 platforms. Wikis, blogs and online social networks are essentially horizontal and open. This explains why they are frequently regarded as threatening inside corporate hierarchies, whose architecture is vertical and closed. The social architecture of Web 2.0 tools is thus considered incompatible with organisational environments.

Corporations are not cocktail parties. The idea of open-ended wikis or Facebook Fridays would be a non-starter in most companies. Indeed some employees are getting dismissed or disciplined when caught logged onto social networking sites at the office.

Web 2.0 sceptics invariably raise issues legitimate issues like security risks, legal liabilities, and privacy invasion. The most often cited problem with Facebook at the workplace, however, is time-wasting. There is a strong belief in many companies that, if you’re logged onto Facebook, you’re not working.

Here are some cold numbers. Roughly 65% of UK companies deny employee access to social networking sites like Facebook, MySpace and Bebo. In government, figures released under the UK Freedom of Information Act revealed that British departments had disciplined hundreds of employees for using Facebook and similar sites at work. In the period from 2005 to 2007, 132 British government bureaucrats had been sacked, 41 had been forced to resign, 868 had received formal warnings and 686 had been demoted or punished - all for the same crime: logging onto social networking sites at work.

Some estimates have put the negative impact on the UK economy at £132 million a day. Yet, at the same time, many CEOs are intrigued by the business case for Web 2.0. Surveys conducted by consulting firms McKinsey and Forrester Research reveal that executives are showing more openness to web-based collaboration and social networking tools. Some Fortune 500 CEOs, like Jonathan Schwartz at Sun Microsystems, even keep their own blogs.

Wiki while you work

There is a growing acceptance that, if productivity case can be made for Web 2.0, perhaps a new workplace motto will be “wiki while you work”. Organisational behaviour research has shown that collaborative Web 2.0 tools are particularly effective where technical knowledge is valued. In complex organisations like multinational corporations, finding someone who possesses highly specific expertise is often difficult. One reason is that expertise remains hidden – and consequently unexploited – within organisational structures.

In vertical corporate hierarchies characterised by institutional silos and hierarchical organisational roles, however, there is no incentive for employees to look beyond their familiar workplace setting of nearby colleagues as informational resources.

Most managers and employees consult colleagues with whom they have close professional ties, regardless of competence. When seeking solutions problems, most people do not diversify their human options. While this instinct is understandable, countless studies have demonstrated that it’s also counter-productive. The only winner is the status quo.

Web 2.0 software knocks down corporate silos, moats and walls by encouraging open communication and information sharing. Expertise and solutions to problems no longer remain “hidden”, they are actively sought out and exploited. Since Web 2.0 tools foster transparent communication visible to all, the collaborative input of any employee, even far down the formal hierarchy, will be known, recognised and perhaps rewarded. Status and prestige incentives are thus built into the collaborative process. When collaboration is a win-win for everybody, buy-in is universal.

Competitive advantage

Web 2.0 tools can offer competitive advantages to firms in sectors where innovation produces winners and losers. Senior executives in large-scale corporations are increasingly aware that innovation is not restricted to R&D departments but is a dynamic social process. Proctor & Gamble, for example, now outsources more than 50% of its new product development through horizontal collaboration.

The UK-based think tank, Demos, believes that social networking sites such as Facebook and Bebo can be used to encourage staff to forge productive relationships with their colleagues. “They are part of the way in which people communicate which they find intuitive,” says Peter Bradwell, author of a recently published Demos report. “Banning Facebook and the like goes against the grain of how people want to interact. Often people are friends with colleagues through these networks and it is how some develop their relationships.”

Most experts agree that the key to implementing a successful Web 2.0 strategy in the workplace is to encourage openness, don’t impose many restrictions, encourage bottom-up participation, and don’t over-react to criticism when it comes. One common pitfall is allowing a company’s Web 2.0 strategy to get highjacked by IT departments and middle mangers who attempt to control and neutralise its potentially destabilising impact – especially on them.

Ironically, despite widespread resistance to Web 2.0 platforms in many corporations, senior managers and HR departments actively use the same platforms to collect information on employees as part of recruitment efforts.

Web 2.0 tools are gathering momentum, especially now that the world’s most powerful high-tech brands - Intel, IBM, Cisco, Google, Jive - have embraced Web 2.0 software. In 2006, Intel led the pack by releasing Web 2.0 applications called SuiteTwo. IBM followed a year later with its Lotus Connections suite, dubbed “MySpace for the Workplace”. Global corporations that have integrated social networking into their organisational strategies include FedEx, Shell Oil, Motorola, General Electric, Kodak, British Telecom, Kraft Foods, McDonald’s, and Lockheed Martin.

Forrester forecasts robust corporate spending on Web 2.0 software – including blogs, mashups, podcasts, RSS, widgets and wikis. It projects global Web 2.0 spending growth at 43% annually, from $764 million in 2008 to $4.6 billion in 2013. While $4.6 billion looks like a big number, it’s only a tiny fraction (less than 1%) of global corporate spending on enterprise software.

Matthew Fraser is senior research fellow and Soumitra Dutta is Roland Berger chaired professor of business and technology at INSEAD. They are co-authors of the book Throwing Sheep in the Boardroom: How Online Social Networking Will Change Your Life, Work and World .