Shared Understanding in Networked Organizations

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DOI: 10.1109/ICE.2012.6297688 Conference: Engineering, Technology and Innovation (ICE), 2012 18th International ICE Conference

Shared Understanding in Networked Organizations Kateryna Bondar1, Bernhard R. Katzy1, Robert M. Mason2 1

CeTIM @ UniBw München, Werner-Heisenberg-Weg 39, 85577 Neubiberg, Germany [email protected], [email protected] 2 The Information School, University of Washington, PO Box 352840, Seattle, WA 95195-2840, USA [email protected] Abstract: Creating shared understanding has always been seen as a factor for achieving corporate goals in management. Traditionally hierarchy and bureaucracy have been organizational coordination mechanism to align the efforts of employees towards organization performance. Today, we must recognize that a new set of communication tools, new social media, is challenging the impact of formerly successful organizational practices. With social media employees build their own independent networks and exhibit work practices and professional behavior that are outside any norms of planned bureaucratic structures. In this paper, we explore this shift in attitudes and behavior and re-conceptualize the notion of shared understanding in a network environment. Early examples of networked organizations, like concurrent engineering, show that shared understanding remains a strong impact factor on organizational performance and that there are managerial measures beyond hierarchy and bureaucracy to create shared understanding among network members. Keywords: shared understanding, network environment, coordination

1. Introduction All organizations consist of people doing work towards some common goal. Organization theory has for decades been concerned on how to coordinate the activities of the members involved into the organizational processes (March & Simon, 1958; Stinchcombe, 1960; Thompson, 1967). Starting from the pioneering work of Taylor (1911), organizational theorists have been preoccupied with searching for coordination mechanisms that could help organizational leaders to achieve their corporate goals. Hierarchies of specialized work under managerial supervision and control through bureaucratic standardization have been identified and researched as the most powerful tools for coordination. Shared understanding became a focal issue when management techniques like concurrent engineering emerged. Concurrent engineering can be interpreted as a reaction to a perceived loss of shared understanding between increasingly specialized organizational units and individuals that caused organizational inefficiencies, such as long product development times, failure cost, or failure to meet user requirements. So-called “cross-functional teams” with better communication and more intense cooperation are a key organizational mean for concurrent engineering. In other words, those teams coordinate through shared understanding among their members. From initial focus on creating shared understanding between distinct departments inside the firm, especially development and manufacturing, the scope has constantly broadened to include more functional departments and partners outside the firm borders in open innovation (Hart, Hultink, Tzokas, & Commandeur, 2003; Hauser, Tellis, & Griffin, 2006). The more recent focus on user-centricity, in this respect can be interpreted as a perceived need of creating shared understanding not only amongst team members but with stakeholders at large including producers and customers. Discussion about living labs, innovation labs, co-creation labs and so forth can be taken as indication that the search for organizational means for systematic creation of shared understanding under such conditions is on-going.

The issue of integration organizational networks is not confined to engineering but a challenge for New Ways of Work (NWOW) in general, which is challenging virtually all existing assumptions about knowledge work and organizational structures. Emerging from the introduction of new social media and information technologies, NWOW open organizational boundaries and permit information dissemination into the cloud, putting the question of the whole organizational restructuring in front of the senior managers who have to lead their organizations in this revolutionary time. Many organizations already form teams regardless of their location providing them with more opportunities and flexibility (Griffith & Neale, 2001). Others use interactive learning environments to find, use, store and get access to an enormous amount of information available (Smith, 2001). Young people, digital natives, flood organizations and seem to have different working preferences and styles as the baby boomers (Katzy, Bondar, & Mason, 2011). They have always been online and prefer to stay connected either at work or at home, not treating information as a valuable commodity. Communities of practice cross organizational boundaries (Katzy, Bondar, & Mason, 2012), suggesting that firms lose control over the knowledge assets and have to look for the new ways of operation in this knowledge-based ecosystem. Both theorists and organizational leaders now acknowledge that firms are more networked than ever. Of course, this notion of organizations as actor-networks puts certain constraints on the applicability of existing theories of the firm and the usefulness of traditional beliefs of firms as fixed places with physical boundaries (Gergen, 1992; Inns & Jones, 1996). When physical boundaries disappear, organizational leaders have to make sure that the vision, values and strategy are shared among all the members (Michel, 2007). Several authors (Sandelands & Stablein, 1987; Simon, 1981; Weick, 1995) have pointed out that without shared understanding among its members, organizations do not exist. In spite of this, there are many organizations that neglect to develop a shared understanding of what they stand for (Fahey & Prusak, 1998). And how can they give attention to this if they maintain inflexible assumptions about the efficacy of hierarchy and bureaucratic mechanisms? What does shared understanding mean in the network context? How can it be created in networked organizations? These are the questions that occupy us in our current research. We begin by positing that actor-network theory is an appropriate conceptual framework for developing an understanding that will enable us to address these questions. The paper is structured as following. First, we summarize theoretical foundations of shared understanding and its mechanisms discussed by organization science researchers as well as the main concepts of the actor-network theory. Then we propose and discuss a new view on what shared understanding in the network environment is, followed by the implications of our propositions for theory and practice. We conclude with the summary of our findings and the roadmap for future research.

2. Theoretical Foundations of the Main Concepts 2.1 Shared Understanding and its Mechanisms Klimoski & Mohammed (1994) conclude that when shared understanding is created among team members, trust is more likely to be generated and performance improves. Feldman & Rafaeli (2002) similarly confirm that shared understanding helps organizations keep a certain pattern of behaviour, which strengthens the coordination of individuals and provides more opportunities to adapt to the changes in internal and external environment. Shared understanding has been previously studied from two theoretical perspectives: knowledge management and organization science. Organizational theorists like Schein (1985) support the idea that firms need to maintain shared understanding about their values,

assumptions and priorities. His colleagues from the same field (Adler, Goldaftas, & Levine, 1999; March & Olsen, 1989; Quinn, 1991) also argue that shared understanding has to be viewed in the context of organizational goals accomplishment. From a knowledge management perspective, on the other hand, shared understanding is required to manage organizational knowledge as a corporate asset so that knowledge creation and sharing becomes an organizational capability (Nonaka & Takeuchi, 1995). For our research, we concentrate the study on how firms in a network environment create shared understanding about information security and quality of services. This choice is opportunistic: both elements represent organizational goals, are under intense discussion in many organizations, and because of high awareness and frequent interactions can easily be observed. Information security represents a routine standardization or process outcome while quality of services is customer related performance outcome. We take the mechanisms as described in the organizational literature and interpret them from an actor-network perspective to construct a model for what shared understanding in the network means. 2.1.1 Routines Organizational routines have often been used as a form of coordination (Cyert & March, 1963; Nelson & Winter, 1982; Simon, Smithburg, & Thompson, 1950) and are defined as recurring patterns of behaviour of different members involved in conducting organizational tasks (Feldman & Rafaeli, 2002). Routines put organizational members into a position of constant verbal and non-verbal communication, which helps to create connections among them and thus enable shared understanding (Feldman & Rafaeli, 2002). Even an occasional contact with one another produces a sense of connection (Zajonc, 1968); when this is done more frequently or on a systematic basis, the connections become stronger and people start to understand better the ideas of others (Homans, 1950). Creating and sustaining a network of connections through routines permits the collection of different perspectives transformed into collective shared understanding among routine participants as well as the whole organization. Connections made through routines as pointed by Feldman & Rafaeli (2002) can help organizational members to clarify organizational goals and priorities, create the image of the mutual tasks performed and get a better overview of organizational power and identity. For example, involving members from different departments into a hiring routine of the new organizational members promotes the facilitation of better understanding of how the organization functions, what its priorities are and what kind of specialists are in demand, as well as what different departments are responsible for (Feldman & Rafaeli, 2002). Another example (Westley, 1990) illustrates the positive relation between shared understanding and conversation routine. This same example emphasizes the value of including middle managers into the strategic planning meetings, as this inclusion provides them with the opportunity to understand the sense-making of the decisions taken. 2.1.2 Processes Organizational processes play an important role in establishing shared understating among different members. Involving a set of established routines to take actions or make decisions, processes help to correlate organizational members with the organizations they work for by creating shared context, shared identity and the mutual view on the internal and external environment. Organizational actors are always searching for ways to continuously understand of what is happening around them. Therefore, sense-making process allows members to make sense of

what is taking place in their working environment in order to construct a shared interpretation for future organizational actions (Choo, 1996). Exploring the ways actors understand the reality and then make decisions or take actions serves as a powerful tool for making associations among members and thus creating their shared understanding. This is especially true when viewing organizations as interpretation systems (Weick & Daft, 1983) that translate events taking place in the environment, develop models for understanding and give meaning to the facts. The process of reflection sheds more light on processes for creating shared understanding. When members constantly reflect on different events as well as get engaged into the informed participation, this leads to ownership and a stronger sense of community (Arias, Eden, Fischer, Gorman, & Scharff, 2000). Brown, Duguid & Haviland (1994) similarly illustrate that by supporting the process of reflection, information that is collectively constructed is put into the problem-solving context allowing everyone involved to participate from a more meaningful perspective. For example, ‘around-the-table’ interactions permit information exchange and creation of a feeling that every member in the organization is heard and valued. Shared understanding can also be created through the process of interdependency. Performing tasks where the level of interdependency is high permits greater shared understanding (Janz, Colquitt, & Noe, 1997) compared to breaking tasks into less dependent where the interactions are limited and thus shared understanding is less likely to be formed (Hollingshead, 2001). Furthermore, employees need to take different decisions every day. Therefore, standardizing decision making processes by standardized protocols such as performance reviews, individual objective agreement or strategic plans promote communication as well as frame recurring decisions to achieve high efficiency and help employees to do the things in the right way (Michel, 2007). Such processes facilitate sharing and coordination. In the same way, knowing how things need to be done provides more flexibility, especially when employees align their behaviour and decisions with the standards of the organization (Beer, 1997). Due to the fact that employees have shared beliefs, they can apply the same standards to the new situations, but still remain flexible in the fast changing environment. In addition, rule-based trust helps to create shared understanding regarding appropriate behaviour in the organization (Kramer, 1999). There is a consensus in literature that trust contributes to organizational stability (Heide & John, 1990). Rule-based trust in a similar manner assures confidence in organizational members and mutual trust is taken for granted, therefore promoting higher interaction and socialization among the members. 2.1.3 Practices We define practice as a rehearsing behaviour over time which in the organizational context determines organizational culture. Schein (1985) illustrates culture as a ‘pattern of basic assumptions’ (p.9) developed by individuals as they deal with problems and find solutions to them. The key point concerning the organizational culture is a set of assumptions on how organizational members take actions, identify relevant information and decide when having enough information whether to act or not (Schein, 1985). Organizations are very much cultural entities (Cook & Yanow, 1993), and independently from organizational activities, organizational culture has much influence on different practices (McDermott & O'Dell, 2001). De Long & Fahey (2000) treat culture as reflected in values, norms and practices, where values are transformed into norms and norms influence practices. Moreover, culture shapes behaviours of its employees (De Long & Fahey, 2000), providing different ways for social interactions among its members (Gold, Malhotra, & Segars, 2001; Trice & Beyer, 1993).

An example of the influence of culture is the practice of spontaneous communication. Spontaneous communication is defined as informal and unplanned interactions among members (Kiesler & Cummings, 2002; Monge & Kriste, 1980), helping them to build social ties (Festinger, Shachter, & Back, 1950). If the work culture does not provide the opportunity for its members to spontaneously interact, then it can inhibit the development and maintenance of shared identity (Hinds & Mortensen, 2005) and decrease the perceptions of community (Sarbaugh-Thompson & Feldman, 1998). The culture of communication is also very important. It is necessary to open and develop a variety of communication lines (Mohr & Spekman, 1994) in order to foster information sharing and creation of shared understanding (Ireland & Bruce, 2000). It is needed to create different points of contact in the organization in order to overcome the lock-in effect and create an atmosphere where innovative thinking is encouraged (Barratt, 2004). In addition, communication between rationally similar members should be fostered. Rational similarity is defined as similarity in background characteristics (Preston, Karahanna, & Rowe, 2006). Those individuals with similar demographics and experience would have similar beliefs and perceptions and can easier transfer their understanding of what organization stands for to their colleagues as well as form more intensive relations. Openness and honesty also play a vital role for organizational culture (Spekman, Kamauff, & Myhr, 1998) as they develop respect, trust and commitment among organizational members as well as position a firm as a reliable and stable employer (Whipple & Frankel, 2000).

2.2 Actor-Network Theory Since employees started to have more than the one exclusive link to their hierarchical superior simple hierarchical organograms fail to describe organizational reality. A graphical description of the multiple vertical and horizontal linkages rather resembles a web or network with each member as actor that is engaged in several concurrent relationships. Actor-network theory (ANT) (Callon, 1986; Law, 1992) proposes a theoretical shift from any form of centrality to initially autonomous actors whose role is defined by the network they are engaged with (Somerville, 1999). Actor-network theory perceives actors as active entities where everyone has a certain degree of influence on the others (Somerville, 1999). In this view, macro-actors may not be more powerful than micro-actors (Wise, 1997), which is consistent with observations in innovation research where macro-actors, e.g. corporations or institutions, are strongly influences by micro-actors like individual organizational members as promoters or technology. ANT sheds light on an actor because of its particular role in the network, but not because of its size. Even more general, ANT does not only include human actors but artefacts alike, machines or technology, which can have the role of an actors in the network (Stanforth, 2006). ANT is concerned with studying the mechanisms constituting the networks made of human and non-human actors (Tatnall & Gilding, 1999), thus exploring the ways the networks are composed, maintained and become stable over time. It also investigates how actors influence other actors and change their behaviours, visions and motivations (Latour, 1996). Law (1992) explains that firms, agents, technological artefacts and society are all interrelated actors in diversified networks, from which we conclude that the research focus from ANT perspective should concentrate not on a specific actor or artefact, but on a complex phenomenon of their interactions. Latour (1987) similarly confirms that technology and science have to be observed in action and that researchers have to put more attention on studying dynamics of their interactions rather that stability of their relationships. Combining diversified actors in a network calls for a process of stabilization of their relations, or coordination. Therefore, coordinating the expectations of heterogeneous groups in the

network was one of the new ideas brought by ANT to the academic field (Callon, 1986). ANT indicates that coordination of the interests of different actors in the network involves the translation of those interests into a common one (Callon, 1986). In other words, the process of translation shows how different elements are interconnected in the network. As a consequence, it becomes valuable to study what different actors are doing to one another (Akrich & Latour, 1992). In conclusion, Latour (1987) highlights that ANT is aiming to trace new association, meaning that all the social (e.g., existing and new networks, coalitions, communication patterns, etc.) and non-social (e.g., decision-making processes, work plans, computer networks, etc.) elements have to be explained, and not assumed (Bryson, Crosby, & Bryson, 2009). What looks complex in comparison to a traditional organogram, is meant to add necessary precision to the understanding of associations that include more than a single link between two nodes in a network; including links that consist of shared understandings, agreements, responses, or commitments.

3. Discussion 3.1 Re-conceptualizing Shared Understanding As stated earlier, ANT portrays an alignment of many organizational elements including incentive structures, organizational roles, routines and system modules. Given that we assume that there can be no strict top-down control over this collection of artefacts (Monteiro, 2000) and order is no given but always an emergent process (Nicolini, Gherardi, & Yanow, 2003). Undoubtedly, allowing actors to act and giving interpretations to the associations they make, ANT becomes a powerful tool in constructing participatory, democratic and inclusive strategic planning (Bryson et al., 2009) which helps to coordinate the organizational goals with the expectations of the members. And this undeniably brings shared understanding to this network of heterogeneous actors. In the actor-network theory organizational members, technology they use as well as firms they work for are viewed as actors. Routines, processes and practices that permit them to more intensively communicate and collaborate become associations. Therefore, the more associations are there between heterogeneous actors, the more shared understanding permitting coordination is there in the network. In other words, shared understanding is viewed as strong relations among the actors involved (Figure 1). Postulate: The creation of shared understanding in the network is facilitated by intensive associations among heterogeneous actors (organizational members, technology, organizations) created through a set of mechanisms, and shared understanding helps maintain network coordination.

Actor1 Intensive associations

Routines Processes Practices

Actorn create

Shared Understanding helps maintain

Coordination in the network Figure 1. Outline of the argument

3.2 Implications Our analysis provides the basis for the new approach to thinking about shared understanding and coordination in networks. This approach emphasizes the process of shared understanding as well as the outcome. While shared understanding and its mechanisms have been vividly discussed in the organization science and knowledge management literature, viewing shared understanding as a set of associations among heterogeneous actors may require new emerging mechanisms. This does not mean that we neglect the previous research or claim that routines, processes and practices do not any longer contribute to the creation of shared understanding. What we are seeking is testing the established mechanisms together with observing the ones that can only be found in the network organizations. As control over the resources is diminishing, the boundaries between professional and private life are blurring, information access and dissemination become as easy as the mouse click and flat hierarchies starting to dominate, coordination mechanisms have to adapt as well. Participatory decision making, promotion of shared responsibilities and diversified roles, communication of clear goals and promotion opportunities as well as collaboration based on trust and result-orientation are just few indicators for coordination in the network environment (Bondar, Katzy, & Mason, 2012). Shared understanding is one of the main contributors to organizational success; therefore, false assumptions on this matter can cause severe damage to organizations and their competitive advantage. Under such circumstances acknowledging firms’ network direction, as many researchers and senior managers are already doing (Katzy et al., 2011), and viewing shared understanding through the lens of actor-network theory becomes an urgent necessity for both theory and practice. Studying shared understanding especially about information security and quality of services comes as an important issue for the current organizational environment. What can be shared

online? How to protect devices in case they are lost, the information will not be disseminated? Are the firms that position themselves as fully open still have something to be protected? How to be open, but still assure the customer that his problem is not going to be spread online or that his product is a unique one? All these questions occupy both researchers and practitioners, and we seek answers to them in our research.

4. Conclusions and Roadmap for Future Research In the paper we tried to shed light on what shared understanding in network organizations means. It was a point of our departure and our analysis explains how this can be done. Actornetwork theory changes our traditional views on organizations with fixed boundaries and organizational members participating in a single (firm constrained) network. With respect to this, we are observing, as we are still involved in the research, that resource coordination in the network environment becomes a more complex task than traditional hierarchical view suggests. What our analysis contributes is that shared understanding in the network environment arises from intensive associations among heterogeneous actors (organizational members, technology, organizations) enabled through a set of mechanisms. It was not previously explained this way and we also hope that future research will be able to identify a set of concrete mechanisms being used to create shared understanding about information security and quality of services in the network context. In order to answer the question what mechanisms are used to create shared understanding about information security and quality of services in the network organizations a case study approach can be chosen. The case study approach is a useful tool for answering questions “how” and “why” when the researcher has no influence on the researched environment (Yin, 1994). Previous researchers studying shared understanding have mostly used quantitative methods investigating the effect of the particular routine, process or practice on creating shared understanding. Due to the fact that the topic of creating shared understanding about information security and quality of services in the networked organizations is relatively new and it is important to explore rather than prove what mechanisms networked organizations use to create shared understanding and whether they are the same as we find in organization science literature or new ones emerge as well, qualitative methods can be more preferable. Therefore, a comparative case study approach done through semi-structured interviews seems to be the most appropriate. Of course, case studies have certain limitations which can be overcome in the following way. Hussey & Hussey (1997) state that while doing a case study, it can be difficult for a researcher to get access to a suitable case as well as it is time and resource consuming. This problem from our perspective can be tackled in the following way. The organizations to be studied are the ones identified from our previous research conducted in Switzerland (Katzy et al., 2011). Four organizations that have changed in the past 2 years can be chosen in order to have the most interesting cases of what balance has been achieved in those organizations between information security or quality of services and having members doing the work. We have already got good contacts there as well as a good understanding of the network environment in which the chosen companies are operating. Another issue with the case study is the lack of external validity as it is often difficult to say how much information can be generalized from a particular case. This limitation can be addressed by studying multiple cases and comparing the obtained results. Certainly, the problems of information security and quality of services are considered to be trans-industrial ones, therefore cases from different industries can be chosen. The optimal sample for the study could be conducting 5 interviews in each organization with CEOs, CIOs, project managers and 2 employees addressing the main issues with information security and quality of services and how they have been tackled, what tensions among the employees were created because of the problems with information security and

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