ROI of Internal Social Networks? Zero if the Network isn't Used

Just about a year ago, I discussed the factors driving ROI of internal social media networks.  But most companies are NOT realizing the benefits they expected.  The reason is fairly simple.   

Employees aren't showing up.

The InformationWeek 2012 study of enterprise social networking revealed that 87% of participants had an internal social network.  Only 13% rated the usage success as excellent.  The likelihood that a company viewed its success as average to poor?  A chilling 62%.

What makes an internal social network successful?  There are many details, approaches, and stories to success.  Primarily, though, a company has to embrace the change that the network will both enable and cause.  A social network functions most effectively within a social business; it does not attract adoption within the old, bureaucratic, staunchly hierarchical business models.  What's critical to success and what standard thinking doesn't work?  Here are my top 5:

1.  Flexibility, not strategic goals - Having a strategy and an objective for implementing an internal social network is important, but flexibility is more important.  By their very nature, social networks evolve and adapt and find their own reasons-to-be.  Organizations too focused on achieving a specific goal, on determining ahead of time how the network will be used, tend to flounder.  The social network becomes just another system that employees need to use; it becomes a burden rather than a benefit.  Deloitte Australia, a winner of the Forrester Groundswell Award, began using Yammer because they thought it looked "cool."  Three years later, Pete Williams, CEO Deloitte Digital, says "we're finding new value in the tool everyday."
2. Leadership, not grassroots -  Social media is the tool of the 99%, and successful internal social networks flatten hierarchy.  Social networks do not flourish under a command and control management model, but they do require leadership.  The active involvement of senior executives is critical to the effectiveness and usage of the system.  Unisys CEO Ed Coleman was an early adopter in the company, using the social network to communicate with employees, to listen, and to engage.  His executive team quickly followed, and employees began to use the network and then began to develop new uses for it.  Internal social networks, like external social networks, emphasize respect and collaboration across all levels.  Leadership needs to be willing to engage with employees without fear.  Deloitte Australia CEO Giam Swiegers talks about a first year analyst who challenged his point of view, and the debate was visible to all employees.  Swiegers liked knowing what employees were thinking and appreciated having the opportunity to discuss the issues; the ability to engage with leadership drives loyalty in employees.
3. Organic Evolution, not controlled growth - Staying up-to-date with the latest in social media is a challenge; new applications and uses appear frequently, because users keep trying out their ideas - and some stick.  It's the same with internal networks.  Should an executive team have some idea of how a network might be used before implementation?  Of course.  But then let it evolve.  "People are trying to rationalize, police, and control the tool," says Chris Laping, CIO of Red Robin restaurant chain, but "the power of information technology is sharing information.  What we naturally do with systems is lock them down, which prevents us from sharing information."  As more employees join a network, uses and needs also change.  Smaller groups form around projects or interests; new connections drive new ideas.  Users need to be able to adapt the network to meet their needs.
4. Communities of Interest, not just work - Employees with friends at work are happier and more productive (lots of data on this issue that I will spare you at the moment), and work issues are often intertwined with personal considerations.  Many companies strictly limit internal social networks to looking up data, working with project teams, or posting official pronouncements.  Yet communities of interest create friendships, help develop new policies and introduce new perspectives, and often both align with and drive corporate objectives.  Deloitte Australia employees have created a variety of communities of interest, from a "Mums Group" to "Audit Specialists."  At IBM, the gap between employee-produced content and corporate-produced content is large and still growing.  Leaders need to be actively engaged with the network, but users need to have a strong hand in shaping it.
5. Operational Virtue - Less controversial than the 4 points above, but also important; an internal social network must operate well in 3 ways.
• Ease of Use - If the system is not largely intuitive, if employees need a separate sign-on, or if the network does not integrate with e-mail and other critical enterprise platforms, employees will stay away.  The internal social network must be user friendly and agile, not cumbersome.
• Productivity - Social networks should improve the daily work of employees.  Project teams might work more efficiently and with greater speed; employees might be able to locate information more easily; work flows might be streamlined.  Not only should a social network create greater engagement and community, it should enable employees to be more productive.
• Measurement - While the uses of a social network will morph over time, it is always important to measure the real business results.  A McKinsey survey found that social business reduces time to market by 20% and increases the number of innovations by 20% on average.  Several companies that I have worked with have measured decreases in the amount of time spent finding information and, as a result, more efficient workflows.  Measurement is critical.  It just needs to evolve with the usage.   

What have been your keys to success?  What have been your pitfalls?

Related and of interest:
The ROI of Internal Social Media Networks
Behavioral Change Before ROI
IBM's Journey to Social Business
Deloitte Australia: A Yammer Customer Case Study
Increase Your Company's Productivity with Social Media

Internal Social Networs - Behavioral Change Before ROI

Intranets are everywhere, and companies are rapidly adding social networking features - wikis, blogs, tagging... Yet satisfaction with these tools is stunningly low.  Prescient Digital reports that only 23% of executives rate 2.0 tools as good or very good, and 38% rate them as poor or very poor.  (http://ww.prescientdigital.com/articles/intranet-articles/intranet-2-0-becomes-mainstream)

Technically, a LOT of good tools are out there.  So what's going on???

•  Tools increase efficiency

• Tools improve productivity

• Tools make it easier for employees to find information and the experts they need

• Tools alone don't work

Prescient points out, "Those organizations that don't have intranet 2.0 tools are not getting executive approval to proceed as they don't have a proper plan or business case that convinces senior management of the need."  Is the failure to achieve the promised savings the reason behind the dissatisfaction of those who do have intranet 2.0 tools?

Maybe in a few cases.  But overall it's not execution or the lack of a plan or business case that is the problem.  The problem is the core need to justify internal networks with business cases.  ROI is critical, and I have written about it many times (see, for instance, http://bit.ly/internalROI), but the anticipated ROI will not be realized if the social network does not reflect fundamental shifts in organizational and interpersonal behavior.

The objective of social media is lifestyle, not initiatives (http://bit.ly/kYsQ6u).  And lifestyle within the corporate walls needs to change before internal or external social media strategies have lasting and measurable value.

When Starbuck's introduced MyStarbucksIdea.com, the driver was CEO Howard Shultz's belief that the company needed to reconnect with its customers.  Look at the site (really, even for non-coffee drinkers, it is a great site).  Yes, Starbuck's is engaging its customers.  It is also engaging its baristas, those rarely listened-to front-line employees who see it all, who talk to and listen to customers, who execute the policies and operational procedures and know what works and what doesn't.  Effective social media ignores hierarchy and organizational silos.  The results probably do drive greater employee efficiency, but that is a by-product of the new social lifestyle. 

One of my favorite corporate activities was the "feel good" campaign by Canadian credit union Servus.  Servus gave 20,000 people $10 CDN and asked them to create a "Feel Good Ripple" by giving the money to someone else.  Buy flowers for the grocery store cashier; buy coffee for the person behind you in line at the drive-thru; give $10 for a lunch to a homeless shelter.  (http://www.springwise.com/financial_services/feelgoodripple/)

To have a positive impact, internal social network initiatives similarly have to change the interpersonal dynamic.  

• Reward employees for sharing what went wrong so that others can learn.  
• Reward people for helping others when it didn't affect their own jobs.  
• Have people track how much time the intranet saved them, and allow them to donate that time to help someone else. 

Internal social networks work when they help corporate lifestyle and culture to change.

What has your organization done to make the intranet a lifestyle change agent? 

Internal Knowledge Sharing and ROI - It's Personal

Why would you give away your knowledge, not to a competitor, but to an internal colleague?  Team work is great, but in the end one person gets primary credit for the sale; one engineer is the lead developer; one customer service manager drives the highest customer satisfaction scores.  And that person gets the promotion, the biggest bonus, and the greatest ego boost. 

Yet organizations are adopting internal social networks with the hope of improving productivity and innovation through greater knowledge sharing.  Prescient Digital (www.prescientdigital.com) reported in their Intranet 2.0 Global Study 2010 that the main reasons that companies invest in intranet 2.0 tools are employee collaboration (76%) and knowledge management (71%).  Does knowledge sharing naturally follow?

Knowledge is far more than data; it includes the analysis and experiential wisdom that we bring to information.  Understanding when we need to share true knowledge and when we need to facilitate the transfer of information helps organizations build effective internal social media networks.  It is critical to driving the ROI of internal social media.

Knowledge versus Information Sharing

Two of the three factors that drive ROI for internal social media depend on knowledge sharing.  Only one factor is primarily data or information driven.  (see http://goo.gl/fb/pdpSI 3 Benefit Measures - The ROI of Internal Social Media Networks) Recognizing the distinction helps the change management process; employees can share at the level that benefits both themselves and the organization.  

v  Enhanced Employee Engagement depends on the give-and-take of knowledge sharing.  Numerous studies have linked higher levels of employee engagement to increased customer satisfaction and loyalty, lower turnover and higher sales.  By facilitating greater sharing of both personal and professional knowledge, internal social media networks boost employee engagement.  Within about 3 weeks of launching its new social networking site, The Hub, SAS had almost 50% of its employees using the site and 425 groups established.  The Hub intentionally blurs the line between the professional and personal, creating stronger, more multi-faceted ties between employees and the company.  Becky Graebe, internal communications manager at SAS, describes the site as “kind of like a Facebook/LinkedIn behind the SAS firewall.” Sharing knowledge creates friendships and connections, across and up-and-down the organization, which drives employee engagement and positive ROI. (For more information, see http://www.ragan.com/InternalCommunications/Articles/SAS_internal_social_network_attracts_5000_users_in_42751.aspx)

v Better, faster innovation requires more structured knowledge sharing.  Success depends on governance structures that facilitate and reward cross-silo and cross-functional work - while continuing to recognize the primary sources of both inspiration and execution.  A key is bringing together individuals with complementary skills and reducing redundancy. Merely sharing data is insufficient for innovation; sharing must involve insight, analysis and creativity.  $21.8 billion pharmaceutical company Eli Lilly implemented an internal social networking solution to enable more efficient and cost-effective processes for new drug development.  R&D scientists and subject matter experts are now in touch throughout the product development process, across multiple divisions and around the globe.  Increased knowledge sharing has helped reduce costs and accelerate innovation.  Personal brands are enhanced not threatened.

v Streamlining operations depends on information sharing, not knowledge sharing.  Many tools enable employees to find data and experts more quickly, and allow executives to ensure that activities are focused on the key strategic initiatives.

Many internal social networks facilitate data sharing; doing the same things more efficiently yields a positive ROI.  Knowledge sharing multiplies the benefits that an organization receives.  Unlike data, however, knowledge is personal and reflects an individual’s value and builds his or her personal brand.  Internal social networks that enable true knowledge sharing must recognize the individual as well the organizational benefits.  The ROI of these networks rocket upward. 

3 Benefit Measures - The ROI of Internal Social Media Networks

The use of social media inside your organization will help to increase your bottom line.  Really.

A recent Gallup study found that firms with engaged workforces have 2.6 times the earnings per share growth rate compared to their industry counterparts.  And an Aberdeen Group study found that companies using Web 2.0 achieved an 18% boost in employee engagement.

The Gallup study also identified the danger of failing to engage employees: $300 Billion in wasted productivity.

The benefits side of the ROI of internal social media networks depends on how effectively the social media tools help drive:

·        Enhanced employee engagement

·        Streamlined operations

·        Better, faster innovation

Enhanced employee engagement has, in numerous studies, been shown to increase customer satisfaction and loyalty and to drive higher sales.  Greater employee engagement is also predictive of lower turnover, yielding significant savings in recruiting and on-boarding costs.  Employee engagement is no longer a nice-to-have; it makes hard, bottom line business sense.   (for one interesting study on these relationships, see: http://www.towersperrin.com/tp/getwebcachedoc?country=usa&webc=HRS/GBR/2008/200805/ENGAGEMENT_IMPROVES_BOTTOM_LINE.pdf)
As organizations become more comfortable with internal social media, the personal and professional lines often begin to blur, creating even greater employee engagement.  Sabre Holdings Corp, which owns Travelocity, was a pioneer in internal social media, beginning Sabre Town in 2007.  Since that time, a number of specialized groups have formed over the social media networks, including Mom2Mom.  Participants in these groups report creating strong bonds and a sense of belonging and being understood.  In a recent study, Professor Jennifer Aaker of the Stanford Graduate School of Business, Assistant Professor Cassie Mogilner of Wharton, and doctoral student Melanie Rudd noted that “although spending time with bosses and coworkers tends to be associated with some of the lowest degrees of happiness, two of the biggest predictors of people's general happiness are whether they have a 'best friend' at work and whether they like their boss. Therefore, people should try to reframe relationships and workplace goals…. Building a workforce of highly qualified, hard-working, and loyal employees is an essential aspect of staying competitive in today's global markets.” ("If Money Doesn't Make You Happy, Consider Time," Jennifer Aaker, Melanie Rudd, Cassie Mogilner, Journal of Consumer Psychology, 2011)

Streamlined operations help to cut costs, the second direct benefit of the use of internal social media.  The range of opportunities for cost cutting – while improving employee engagement! – is tremendous.  The use of discussion boards and central project sites, for example, enables executives to spot quickly time being spent on rogue efforts that don’t further corporate objectives.  Employees benefit by being able to place their projects within the big picture and make appropriate decisions.
Cisco attributes millions in savings to the use of wikis.  Geographically dispersed staff can efficiently work on single documents, share ideas and comments, and decrease development time.
Search capabilities, blogs and LinkedIn-like networks enable employees to find data quickly, identify and consult experts, and seek the advice of colleagues beyond those at the coffee pot.  Both the speed and quality of work benefit.

Better, faster innovation provides a long-term benefit.  Internal social media helps organizations expand innovation beyond the R&D walls, from the engineers to employees dealing with customers.  (How many disruptive innovations do you know that have sprung from established R&D departments?  How many corporations incent their R&D staff to spend time on them?)
Breaking down the functional silos speeds up innovation and time-to-market.  When IT, engineering, marketing, customer service, business development…can share ideas, project status, and roadblocks together across geographies in real time, problems are resolved more quickly.

52% of organizations using Web 2.0 ranked as best-in-class performers according to a study by Aberdeen Group.  Using social media internally simply makes smart business sense.

Clover Architecture – the 4 Leaves of Extraordinary Social Media

Making social media an important and seamless element of an organization is like growing clover.  You get a lot of good efforts and almost-there’s, a lot of 3-leaf clovers. But 1 out of 10,000 times, you get a 4-leaf clover.  That’s when social media transforms an ordinary organization into one that truly stands out.

The four leaves of a clover traditionally symbolize hope, faith, love and luck.  The four leaves of the internal social media clover?  They represent:

§       Leadership (hope)

§       Governance (faith)

§       Culture (love)

§       Technology (luck J)

Each of these leaves is necessary for an organization to benefit as much as possible from social media.  Drop any one leaf, and the impact becomes ordinary.

Three veins keep each leaf healthy:

Leadership – Executives must be

v   involved

v   passionate, and

v   bought-in with strong ROI.

Governance – Strong social media implementation requires that silos tumble.  

v   Governance must be cross-functional

v   Expertise must be integrated across and within units, and

v   HR policies must take social media into account.

Culture – Key cultural characteristics of break-out social media organizations include

v   openness

v   trust, and

v   collaboration.

Technology – The final leaf of every 4-leaf clover is smaller than the other three, and for social media the fourth leaf is technology.  Technology is an important enabler, but without the leadership, governance, and culture, great technology is wasted.  Many platforms can be implemented that enable engagement and dialogue.  Keep them

v   simple

v   inexpensive, and

v   designed for social interaction, not for file sharing!

I have discussed each of the 4 leaves of social media in previous posts and will continue to delve into these internal issues.  (See, for example, http://goo.gl/fb/wthL8, http://goo.gl/fb/PBENn, http://goo.gl/fb/zUijJ)

What has been most instrumental in turning your organization into a social media model inside and out?

Measuring What Matters – the 4 Big Buckets on the Benefits Side of Social Media ROI

Social media ROI:

 the measure of what matters (profit…revenue…mission…) versus the resources required to achieve it.

“What matters” varies by organization, and helps to create the unique culture, vision, and market positioning that distinguishes one organization from another.  Across organizations, however, 3 big benefit categories emerge:

·        Revenue

·        Profitability

·        Mission

While non-profits might not talk about “revenue” and “profitability,” the need to generate “funding” and to maximize “cash after operating costs” are equivalent when we are calculating ROI.

Leaving aside “mission” for the moment – not because it is less important, but because it is more variable – the critical issue is how to assign returns to social media activities.  Returns are rarely one-to-one, and are often viewed as the cumulative effect of many initiatives.

No question that synergies across digital and non-digital activities multiply returns.  ROI calculations should, then, prove to be conservative and attainable!

Generally, I use 4 categories of benefits when developing a social media business case:

·        New Direct Revenue

·        Impact Revenue

·        Cost Reduction

·        Brand Image and Fundraising

New Direct Revenue is the easiest to measure.  At times, new direct revenue results from social media activities opening new sales channels. 

Greater customer insight can also create new revenue opportunities.  iRobot, for instance, used a customer support forum to glean insights about how customers used the product.  To their surprise, the company learned that customers were treating their mini vacuums as pets and using them to play games.  As a result of that insight, the company started a multi-million dollar revenue stream selling paints and “skins” for the vacuums.

Impact revenue measures the incremental sales that social media activities drive through traditional channels.  Intuit established a community forum and monitored the conversations for lead generation.  The company was transparent, openly engaging in conversations when they thought an upgrade or alternative product would resolve a problem and inviting the customer to call if s/he wanted to pursue the option.  In the first year, Intuit realized a 4% increase in their share of market (a feat for the already dominant company!) and a 30% bump in sales. (For more on Intuit: http://www.businessweek.com/magazine/content/09_28/b4139066365300.htm and http://www.webpronews.com/social-media-lessons-from-the-big-brands-intuit-edition-2010-03 )  

Cost reduction, usually associated with a decline in customer service calls, is the most common go-to benefit measurement.  Every deflected call increases the bottom line.  Customer service via community sites, Facebook, and Twitter have often also improved customer satisfaction as a result of decreased response time and more knowledgeable “super users” providing insight and guidance.

Brand image and fundraising is the final big bucket of benefits, serving both financial considerations and mission.  In the non-profit world, I have seen greater interest from sponsors when the organization is actively involved in social media.  Corporate partners note that the digital activity provides greater reach and a more vibrant network. 

Examples of corporations using social media to re-position themselves are legion, illustrated by the by-now famous MyStarbucksIdea that enabled Starbucks to reconnect with customers and employees.  When Starbucks began to focus on digital and social media, the company realized its first gain in same store sales in 2 years.

Each of these buckets of benefits yields measurable financial return. 

Along with the costs discussed yesterday, the measures enable realizable ROI – the third of the 3 key actions needed to convince CEOs of the value of integrating social media into all aspects of the business.

1.       Get the executives personally involved

2.    Conduct show-and-tell education sessions

3.      Demonstrate the ROI