social networks at sempra energy's it division are key to building strategic capabilities

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© 2007 Wi ley Per iodicals , Inc .Publ ished onl ine in Wi ley InterScience (www.interscience.wi ley.com)Global Business and Organizat ional Excel lence • DOI : 10.1002/ joe .20129 • January/February 2007

Social Networks at Sempra Energy’s IT Division Are Key to Building Strategic Capabilities C H R I S C H E N

How does an IT division, faced with new and chal-lenging strategic goals, get technical people tounderstand and appreciate the impact of humanrelationships on individual and organizational per-formance? It turns to social network analysis(SNA)—a nifty tool for quantifying and visualizingthe number and strength of connections betweenpeople. Taking advantage of a large menu of SNA’sanalytical options, this organization learned how itcould better identify succession candidates, buildsocial capital, lessen dependence on the senior lead-ership team, and improve interdepartmental collab-oration and communication—in short, move to thenext level of organization effectiveness. © 2007Wiley Periodicals, Inc.

For Sempra Energy, a FORTUNE 200 energy servicescompany based in San Diego, California, its futurecontinued success hinges heavily on its ability toleverage information technology to provide innova-tive services, streamline business processes, andmeet the growing demands of an increasinglymobile workforce. For the IT organization thatserves the company’s two utilities, greater expecta-tions to significantly contribute competitive advan-tage to the company means functioning at evenhigher levels of effectiveness—with communication,collaboration, speed, innovation, and leadershipbeing just a few of the organizational capabilitiescritical to fulfilling its strategic role. But the socialaspects of these capabilities are not always wellunderstood, or comfortably addressed, in a techni-cal organization with a penchant for hard data andconcrete concepts. The IT organization turned tosocial network analysis (SNA)—a data-drivenmethodology with visual tools for quantifying and

clarifying the mysterious nature and magnitude ofhuman interactions—to understand how individualsand the organization currently function and howthey can improve their effectiveness.

The Impetus for Change

Sempra Energy employs a workforce of 14,000and in 2005 generated revenues of nearly $12 bil-lion. The holding company comprises two busi-ness units: Sempra Global, which houses itsunregulated businesses such as energy generationand trading; and the Sempra utilities, whichinclude two California regulated utilities, SanDiego Gas & Electric and the Southern CaliforniaGas Co. The Sempra utilities boast the largest cus-tomer base of any U.S. energy utility, with an esti-mated 21 million customers.

Sempra Energy’s strategic goal of leveraging infor-mation technology to create competitive advantageclearly influences the mission of the Sempra utilitiesIT division, whose 600 employees provide informa-tion technology and telecommunication infrastruc-ture and application support to the utilities businessunit. The division is organized into three applicationdevelopment groups, two infrastructure groups, anda group that develops and oversees strategy andgovernance as well as client relationships. The ITorganization is led by the Chief InformationTechnology Officer (CITO), six directors reportingto the CITO, and approximately 70 managersthroughout the organization.

The IT division was confident it had created a highlycompetent technical workforce adept at delivering

17Global Business and Organizat ional Excel lence DOI : 10.1002/ joe January/February 2007

reliable IT systems and services, as past performancedemonstrated. However, to meet its new challenge—becoming a driver of business success by leading thetransformation of business processes through techno-logical innovation—the organization would have tomove to the next level of performance and, to achievethat, find ways to function even more effectively.

Strong leadership would be one key—the right peo-ple with the right skills in the right roles. To thisend, Sempra Energy’s formal succession planning,leadership development, and performance manage-ment processes would be vital. Another key wouldbe improving organizational processes to better sup-port innovation and a stronger client focus—forexample, ensuring the unimpeded and timely flowof information. These were all areas where the ITdivision’s organizational change management staffcould provide valuable support.

Why Social Network Analysis?

The IT division’s organizational change manager(OCM) had experience using social network analy-sis in other companies to improve organizationaleffectiveness. Believing SNA would help the IT divi-sion drive leadership and organization developmentin service of its strategic objectives, he proposed thetool to the leadership team.

What Is Social Network Analysis?Social network analysis is the behaviorally basedmapping and measuring of connections betweenpeople. Each network is made up of “nodes”—people who are linked to each other throughhuman relationships and the flow of information.As both a visual and a mathematical analysis ofhuman relationships, its function is to create easi-ly understood visuals (network maps) and metricsthat can shed light on how connections betweenpeople affect behavior. SNA has a wide variety ofapplications in economics, marketing, organiza-tion development, facility planning, health ser-vices, and even fighting the war on terror.1

What SNA Would Bring to the IT DivisionWhile Sempra Energy has formal succession plan-ning, leadership development, and performancemanagement processes in place, the IT organizationneeded credible and actionable organizational andindividual feedback to support these processes. Itregularly put all of its managers through a 360°feedback process, and it administers an annualemployee survey to help it gauge employee percep-tions of how the organization is doing—both help-ful tools for making the leadership and organizationdevelopment processes more effective. However, theleadership team quickly saw SNA as a way to bringmore objective, measurable data to bear on deci-sions historically reliant on more subjective input,such as opinion surveys and focus groups. The data-based foundation, visual maps, and mathematicalanalytics of SNA are especially appealing to aninformation technology group that is more comfort-able with hard data, logic, and analysis than with“touchy feely” processes.

By helping the IT organization to model how andwhat work was really getting done, SNA wouldbring visibility to, and greater understanding of,the relationships and connections among ITmanagers and the senior leadership team. Thiswould be valuable input for several key process-es: succession planning, leadership development,creating social capital, and maintaining strategicfocus.

Succession Planning. SNA would provide a behav-ioral measure that would help identify the keyplayers in the organization: whom people went to

SNA has a wide variety of applications in econom-ics, marketing, organization development, facilityplanning, health services, and even fighting thewar on terror.

18 January/February 2007 DOI : 10.1002/ joe Global Business and Organizat ional Excel lence

when they wanted to discuss critical issues; whowas making decisions with a broad range ofinputs; who was helping bridge the gaps betweenthe boxes on the organization charts. Armed withthis information, the IT organization couldapproach its succession planning process withgreater intelligence and confidence.

Leadership Development. SNA would help the IT divi-sion proactively identify and address staff develop-ment opportunities and needs, including

• Any isolated team members for whom develop-mental opportunities could help them becomemore integrated into the network

• Potential gaps in the network that the divisioncould take action to close through staff reassign-ment, role redesign, or other organizationalinterventions

Creating Social Capital. Although the IT organizationhas smart, capable people (human capital) in itsleadership positions, the leadership team wanted tounderstand and improve “social capital,” the peo-ple and resources a person has access to through hisor her relationships. Based on the belief that a per-son’s social capital, or connections, is critical toeffectiveness as a leader, one goal of the leadershipteam was to create more social capital, as well asmake sure it was deployed efficiently throughoutthe organization.

Maintaining Strategic Focus. In analyzing SempraEnergy’s strategic plans, along with employee and

client feedback, IT leadership had identified fourkey areas of focus for delivering the technologyand services necessary to support the businessstrategy:

• Agile decision making• Technology innovation• Understanding and meeting internal client needs• Strategic thinking

The flexibility of SNA would allow an analysis cus-tomized around these critical areas in order to deter-mine whether the IT organization was focusing anappropriate amount of effort on each of them.

The SNA Project Methodology

The IT division’s OCM group led the SNA projectand action planning. The group’s manager alsosought the assistance of Valdis Krebs, a leading con-sultant in the SNA field who developed and licensesthe InFlow 3.1 SNA software application, whichallows users to create their own network maps, runnetwork measures, and do “what if” analyses.2

The NetworksThe IT leadership team decided to gather data onnetworks associated with six focus areas, with allmanagers, directors, and the CITO as the targetedparticipants (approximately 75 nodes in all). Fourwere the areas of strategic focus mentioned earli-er. To provide some context for the results forthese networks, the IT team included two addi-tional networks in the analysis, the “task” and“grapevine” networks, both of which are com-mon in SNA.

Each network under study generates its own mapand analysis based on participants’ answers to thefollowing questions (one question for each network):

• Task network: “With whom do you exchangeinformation, documents, schedules, and otherresources to get your job done?”

Although the IT organization has smart, capablepeople (human capital) in its leadership posi-tions, the leadership team wanted to understandand improve “social capital,” the people andresources a person has access to through his orher relationships.


• Grapevine network: “With whom do you discusswhat is going on in the company—rumors, news,and organizational changes?”

• Decision network: “From whom do you seekinputs, opinions, and advice before making a keydecision?”

• Innovation network: “With whom do you discussnew ideas and innovations in technology prod-ucts and services?”

• Client needs network: “With whom do you dis-cuss client needs, requests, and feedback?”

• Strategy network: “With whom do you discussstrategy and the outside technology/businessenvironment?”

Each person (network node) specifies every otherindividual (other network nodes) with whom heor she interacts for the specified purpose, and howfrequently interactions with that individualoccur—daily, weekly, monthly, quarterly, or year-ly. For a contact between two nodes to be count-ed as a connection in the network, it must meettwo criteria:

• The connection must be confirmed by both parties.• The frequency of the interactions between the

two parties must be at least monthly.

Participants were apprised of the criteria ahead oftime to discourage people from trying to “game”the process by claiming connections they knew didnot exist.

The OCM manager developed the survey instru-ment using a Microsoft Excel spreadsheet, whichwas distributed to the participants in the targetedpopulation. They, in turn, entered their responsesinto the spreadsheet and returned it to the OCMmanager for data consolidation and input to theInFlow software licensed to Sempra Energy.

Key MeasuresThe InFlow application analyzes each node in a net-work and develops several key metrics. Three node-

level measures gauge an individual’s centrality—howhe or she is connected in relation to others in thenetwork—which helps determine that person’simportance to the network. One network-level mea-sure indicates the overall health of the network.

Betweenness. This metric specifies how often a per-son is a bridge between others in the network.People with high betweenness scores often controlthe flow of information within the network.

Closeness. Closeness measures how quickly (fewestjumps between people) a person can access all theother people in the network. People with high close-ness scores have good visibility into what is hap-pening across the entire network.

Power. The betweenness and closeness measures arecombined to produce a power score. People withhigh power scores have both access to informationin the network and control over the flow of infor-mation, which represents a high level of informalorganizational power. They are the key influencersin the network.

Weighted Average Path Length (APL). The APL indi-cates how easily and quickly everyone in the net-work can reach everyone else. Shorter APLs implyless distortion of information as it travels through-out the network. However, very short APLs implytoo many connections (indicating redundant andlikely wasted time and effort spent in overcommu-nicating). Overly long APLs imply too few connec-tions, requiring excessive time for information toflow throughout the network. Historical SNAresearch provided the IT organization with a targetrange for APL based on a network’s size.

People with high closeness scores have good vis-ibility into what is happening across the entirenetwork.


Network MapsVisual diagrams produced by the InFlow tool depictmaps of a network, as shown in the sample dia-grams in Exhibit 1. The nodes, represented by indi-vidual points, can be coded by color and/or shape todesignate organizational level—in this case, CITO,director, or manager. Each node can be further iden-tified by the person’s initials, except where ananonymous view is preferred. The connectionsbetween nodes are shown as lines joining the respec-tive nodes, or as arrows if the information flow is inone direction only.

Each network was analyzed under three differentconditions, each with its own map:

• Prescribed network: Nodes are organized/grouped by work unit according to the official,or formal, organization structure (View A inExhibit 1).

• Emergent network: Nodes are organized by thecentrality of their actual relationships as deter-mined by the analysis of participants’ input tothe SNA survey (View B in Exhibit 1).

• Adaptive network: The nodes and connectionsbelonging to the senior leadership team (CITO

and directors) are removed to reveal howdependent the remaining network is upon theorganization’s leadership team (View C inExhibit 1).

The SNA “Pilot”

The IT organization launched its first use of SNA in2002. Since SNA was a new concept and Inflow anew tool to everyone except the OCM manager, theinitial objectives were modest and stated verybroadly:

• To understand how managerial relationships andconnections impact organizational effectiveness

• To identify ways to improve the organization

To keep the process and outputs as nonthreateningas possible and allow the staff to become comfort-able with them, the results were kept anonymousfor all but the senior leadership team. However, anyparticipant interested in his or her own results couldrequest them.

Following data collection and analysis, the resultswere shared at an annual manager all-hands meet-ing, beginning with a brief overview of SNA and the

A.

Prescribed Network

B.

Emergent Network

C.

Adaptive Network

ManagerDirectorCITO

Exhibit 1. Network Maps


metrics it generates. The leadership team made it apoint to tell the attendees that this was not a con-test, and that the results were not inherently right orwrong but rather a snapshot of the current condi-tion, which would help the organization identifyways it could be more effective. Nonetheless, it wasprobably inevitable that some people would per-ceive high network scores and many connections asgood and low scores/few connections as bad. (Onedirector whose data, like that of the other directorsand CITO, was identified by name did reactadversely to the data.)

One significant finding revealed by the pilot’s curso-ry view of the networks was that activity in the net-works associated with the four strategic focus areaswas weaker than desired. The average path lengthsin the networks were longer than the size of the net-works would warrant, indicating that too few con-nections existed, implying sluggish information flow.

Another finding pointed to an overreliance on thesenior leadership team, revealed in the “what if”analysis illustrated in the adaptive network diagram(see View C in Exhibit 1). When the CITO and sixdirectors were removed from the networks, alongwith their connections, most of the networks suf-fered significant deterioration—i.e., lengthenedAPLs, with some groups isolated from others.

Even though the 2002 pilot was largely to create alevel of comfort with the tool (understand its powerand credibility) and tapped only a few of the typesof analyses available with SNA, the insights theproject provided gave the leadership team cleardirection for taking action to improve the organiza-tion’s effectiveness. The leadership team added moreorganizational and individual goals to direct greatereffort toward client needs and strategic thinking. Todecrease the organization’s dependence on the lead-ership team, it created cross-department managerteams and increased individual delegation, therebyempowering managers to make more decisions atthe managerial level.

With even a limited application of SNA so aptlydemonstrating its value, the manager of OCM tookthe opportunity to prepare the group for future usesof SNA by providing an overview of the many other“what if” analyses supported by the InFlow tool.

Unleashing More of SNA’s Power

In 2005 the IT division took its second plunge intoSNA, this time with a more ambitious agenda. Thesame networks were studied and the same processesfollowed as in 2002, but since the staff now under-stood SNA and, for the most part, believed in thecredibility of the process, names were visible on thenetwork maps, giving maps greater value as organiza-tional tools—and greater impact on the participants.

Many of the staff were surprised at the person-to-person connections that were not confirmed by theanalysis. Much like one director’s response in 2002,some individuals whose data indicated few connec-tions were initially defensive, and although furtherdiscussion led almost everyone to conclude the datawere accurate, some of these less-connected individ-uals felt even more threatened. One asked that “wenever do this again.” But others believed that theirjob did not require a lot of interaction and werequite comfortable with their lack of connections.Fortunately, those whom the analysis showed tohave many connections were publicly gracious, ifprivately proud, about their network prowess.

The range of emotional reactions notwithstanding,the 2002 and 2005 social network analyses have

One significant finding revealed by the pilot’s cur-sory view of the networks was that activity in thenetworks associated with the four strategic focusareas was weaker than desired.


had a positive impact on the IT division. The bene-fits have been felt at both the individual and organi-zational level.

Improving Individual EffectivenessIndividually, the participants increased their under-standing of whom they effectively connected with inthe organization. Some had their perceptions vali-dated, while others were surprised that people theythought they frequently connected with did notshare that view. This has motivated some partici-pants to change their behaviors to strengthen rela-tionships that were not as strong as they believed.

The overall map of relationships represented in anetwork has also enabled people to identify who arethe key links to certain parts of the organization.For example, one of the managers in an applicationdevelopment group was clearly the bridge betweenhis department and the rest of IT. The maps alsoshowed that enterprise architects and account man-agers played a liaison role between the infrastruc-ture and application development departments.Individuals who saw gaps in their personal net-works could begin to bridge those gaps by buildingconnections with these and other key players.

Improving Organizational EffectivenessThe 2005 SNA analysis gave the IT division theability to assess how much progress it had madesince 2002 in addressing its key strategic focusareas—decision making, innovation, client needs,and strategic thinking. By examining the weightedaverage path length (APL) for the network associat-ed with each area, the IT organization learned thatits networks in all four key areas were stronger: The2005 APLs were shorter than those in 2002, indi-cating more connections and a better flow of infor-mation. The measured degree of progress in eacharea was not equal, however, and the IT organiza-tion prioritized its action planning to focus onimproving those areas with the greater need.

Another finding of the analysis confirmed that theorganization had become less dependent on itssenior leadership team in making decisions, com-pleting tasks, and addressing its areas of focus.Although the 2005 “what if” analysis showed somedeterioration in network health with the removal ofthe senior leadership team—but less than in 2002—the adaptive networks that remained were resilientenough to operate effectively.

The 2005 analysis also revealed some critical gapsin the prescribed (formal) networks. For instance,as seen in Exhibit 2, the strategy and innovationnetworks had almost no connections between thethree application development groups—only onetie between application groups 1 and 3, one tiebetween application groups 2 and 3, and nonebetween application groups 1 and 2. This indicat-ed too little intergroup collaboration on impor-tant topics. It was a significant surprise toeveryone who saw the data and has motivated theIT organization to aggressively address the issue.A “what if” analysis highlighted for the leadershipteam which specific connections, if strengthened,would produce the most improvement. This hasenabled the leadership team to facilitate formalmethods—e.g., cross-departmental teams, rota-tion of personnel—as well as informal actions—

ManagerDirectorCITO

Prescribed Network

Application

Group

3

Application

Group

2

Application

Group

1

Exhibit 2. Example of Gaps in the Prescribed Network


e.g., luncheon meetings—to strengthen cross-department relationships and help participantsbuild social capital.

A “what if” analysis also identified what newlinks, if created, would significantly improve net-work strength and information flow across allnetworks with less-than-optimal average pathlengths. The leadership team then worked withthe staff to encourage connections between thesekey people, including the creation of some func-tionally based dotted-line reporting relationshipsbetween departments.

The IT organization used the power scores to iden-tify key nodes/people in each of the networks. Manyof the most powerful players would not have beenpredicted by their position title or place in the orga-nizational hierarchy. The leadership team has usedthis data in succession and leadership developmentplanning to include worthy candidates for promo-tion who would not have been identified throughother processes.

SNA has been helpful in mitigating the effects of keypeople leaving the organization. Sempra utilities IThas experienced some turnover among the staff, andbecause of the network analyses, the organizationunderstood what connections were lost, theirimportance to the network, and the degree of needto rebuild or replace them.

Additionally SNA analysis has facilitated leadershiptransitions. For example, the division welcomed anew IT director to the group shortly after the 2005

analysis. Using the latest network maps, he was ableto quickly identify the key contacts who could helphim connect quickly and effectively with variousparts of the organization.

Challenges to Using SNA and Next Steps at Sempra Energy

Perhaps the largest challenge the OCM managerfaced in introducing SNA to the leadership teamand IT managers was simply their lack of familiari-ty with the term and its concepts. For most, the term“social network analysis” had little or varied mean-ing. (In some organizations the word “social” isviewed with suspicion, a problem that IBM, whohas used SNA both internally and externally withclients since 1993, circumvented by calling theprocess “organizational network analysis,” orONA.) Recent events, such as media coverage of theNational Security Agency’s use of SNA to analyzephone records, has increased the visibility of SNA,but most people in organizations considering its usewill still need to be educated on its application andvalue in the workplace.

Actual implementation of SNA is relatively straight-forward. The only noticeable problem that the ITdivision encountered was having all members of thetarget population complete and return their sur-vey—an issue certainly not unique to SNA.Executive sponsorship (pressure), a manageablenumber of participants, and constant remindernotes helped to overcome this issue.

Despite what they had been told to the contrary,many people naturally placed a value on theirnumber of connections. As mentioned earlier, get-ting them to move past their defensiveness aboutthe data posed a challenge in some cases. To avoidfurther exacerbating this dynamic, people’s powerscores were shared only with the senior leadershipteam rather than in the group sessions, and in aconfidential feedback session with any individualwanting to know his or her own power score.

Perhaps the largest challenge the OCM managerfaced in introducing SNA to the leadership teamand IT managers was simply their lack of famil-iarity with the term and its concepts.


The challenges of using SNA are few, however, rela-tive to its benefits. The IT division of the Semprautilities has found SNA to be a worthwhile andinsightful tool to drive productive organizationalchange. As a data-driven methodology, the tool hasprovided the division with a credible basis forassessing individual and collective effectiveness, andfor testing alternative scenarios, in areas importantto the division’s—and the company’s—future. Thedivision hopes to further improve its ability to useSNA effectively and plans future analyses to period-ically monitor changes in its networks, includingmodifying the networks it analyzes to reflect anychanges to its mission, key initiatives, or environ-ment. The IT division is also working with SempraEnergy’s organization development department inthe human resources division to make SNA avail-

able to all of Sempra Energy—testimony to thegrowing perception of SNA’s value.

Notes

1. [Editor’s Note: For more information on social networks,see R. Cross & A. Parker, Charged up: Creating energy inorganizations, Journal of Organizational Excellence, 23 (4),(2004), 3–14.]

2. InFlow 3.1 software is specifically designed for the busi-ness market. For more information online, visit http://www.orgnet.com/inflow3.html.

Chris Chen is an organizational change manager withSempra Energy in San Diego, California. He has led organi-zation development functions in the shipbuilding and aero-space industries, has been a program manager for the Centerfor Creative Leadership, and is the author of four books.

social networks at sempra energy's it division are key to building strategic capabilities

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