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Social Networking ROI : It Boosts Productivity and Transaction Prices

September 7, 2009

Note: this post was originally published on Early Strategies blog

Demonstrating the ROI of Enterprise 2.0 is like squaring the circle. Since you’re presenting to decision-makers who live in a 1.0 world, you need to build the numbers in that (old) frame, and concepts such as increasing innovation power, being more adaptable to the market – not to say ‘in synch’ -, developing entrepreneurship spirit, and becoming a Learning Organization don’t easily translate into 1.0 figures.

So, although we’re convinced that the biggest benefit are in transforming the organization, we still look for some easy figures to serve as ice breakers, and let us open the discussion.
Here are two of the noticeable down-to-earth parameters recently discovered.
The first one was unveiled this spring by the University of Melbourne. Dr Brent Cocker, from the Department of Management and Marketing, has worked out a concept of ‘Workplace Internet Leisure Browsing’ that basically says: the more your employees surf on the Internet, including for social networking, the more productive they are. The equation delivered by their survey of 300 workers is that spending up to 20% of the work-time surfing increases the overall productivity of 9%.

The second one is hot from the press and comes from Pr. Brian Uzzi and Assistant Pr. Ryon Lancaster, from Kellogg School of Management. They studied law firms and came to the conclusion social networks affect transaction costs: the price of a billable hour increases in function of the social interactions law firms have with their clients, and of their brand recognition. Brand recognition, rendered in Kellogg’s study as ‘status of the firm as perceived by their peers’, is also function of social networking ties. Status and social interaction are found to be finely interconnected. And it’s a win-win deal, since the more connections there are between a law firm and its client, the fewer hours necessary for complex legal work – although hours might be at a higher rate, the final total will be lower.

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