Strategic Leadership from the Social Network Perspective

Abstract

This chapter explains social networks as an important construct when it comes to strategic leadership. The importance of understanding interactions between strategic leaders, organisational members and other important factors encourages the development of discourse that departs from a static, one-dimensional perspective of leadership. There is a myriad of all kinds of forms of social networks that differ by their main characteristics and levels of structural and relational network embeddedness. It is particularly important to understand the concepts of weak and strong ties in a social network and this chapter provides detailed overview of this important constructs. In addition, this chapter explains the structural hole theory and network-based perspective of strategic leadership, concepts relevant for strategic leadership. Strategic leaders need to get involved in important social networks and delve into their essence in order to better influence others and achieve their intentions and goals. If they are well-connected, they are more likely to have greater power in the network. Good position in the network can guarantee that they will need to invest less effort in getting people on board with the direction and patterns of action that they advocate.

Social Network and Leadership

The collective can be seen as a place of interwoven interests that creates socio-political and economic relations within its boundaries and beyond; in this context, strategic leadership can be seen from a different perspective, as a relational and multi-level phenomenon that involves social processes connecting individuals and other social entities.

Whittington (2001, pp. 26–27) noted that people’s economic behaviour is embedded into a network of social relations that includes their families, country, professional and educational backgrounds, and even religious and ethnic groups they belong to. As a result, a strategic leader’s reality cannot be understood without understanding the social embeddedness of those affected by that reality (Granovetter, 1985; Whittington, 2001, p. 26).

Strategic leadership is interwoven with relational processes between actors operating at multiple organisational and interorganisational levels (Cullen-Lester et al., 2017). The social processes that connect actors indicate the importance of network relations when it comes to leadership; or in other words, the need to develop and manage connections and relationships within organisations and beyond them (Carmeli et al., 2011).

Social networks are important when it comes to strategic leadership. Numerous empirical studies highlight the importance of network structures as factors connected with superior performance both of the organisation and of its managerial elite (Burt, 1992, 2005; Krackhardt & Porter, 1986; Mehra et al., 2001; Poppo & Zenger, 2002; Zaheer & Soda, 2009). Networks in which leaders themselves are embedded are key when it comes to individual and organisational effectiveness.

The importance of understanding interactions between strategic leaders, organisational members and other important factors encourages the development of discourse that departs from a static, one-dimensional perspective of leadership.

A network is characterised by a particular kind of connection that is usually more important than the actors that constitute it. People’s inevitable embeddedness in networks reveals the weakness of the perceived position of a “free individual.” Things that happen to others via networks can reach us and have a major impact on our lives. The illusion of being separate from the all-encompassing social fabric in which everyone is mutually connected may help relieve anxiety for a while, but it often clouds the reality of an individual as merely a “node entity” in a myriad of social networks that are outside of their control.

Christakis and Fowler (2011, p. 38) underlined: If we want to understand how society works, we need to fill in the missing links between individuals. We need to understand how interconnections and interactions between people give rise to wholly new aspects of human experience that are not present in the individuals themselves. If we do not understand social networks, we cannot hope to fully understand either ourselves or the world we inhabit.

Direct networking has an information-based limit that is conditioned by evolution. On average, people take part in direct networks of no more than 150 individuals. This is the so-called Dunbar’s number, which represents the cognitive limit to the number of people with whom one can maintain stable social relationships (Dunbar, 1993). This is a group of persons with whom one can continue a meaningful relationship after a time of absence without the need to re-establish the initial positions and viewpoints.

In larger networks, information that flows through the network gets filtered and modified; the network does not have the characteristic of directness, and actors interconnect through others in a smaller or larger number of steps.

Networks can have shorter or longer paths between participants. The shortest path is found in networks where all actors can reach everyone else via a single tie. The longest paths never exceed five or six steps, even in the largest of networks.

Unbelievable as it sounds, it is possible to easily reach anyone on the planet by making six or fewer social connections (steps), as demonstrated by the famous experiment conducted by social psychologist Stanley Milgram in mid-1960s, and later verified by a similar experiment in the virtual world performed by Dodds, Watts and Muhamad by e-mail in 2002. Any person on the planet can be connected to any other person on the planet through a chain of no more than six individuals. This is referred to as six degrees of separation.¹

The social network analysis helps to focus the lens through which we view networking of people on all levels. It gives a solid framework for analysis of various organisational phenomena at a micro-level (leadership, power, trust, teams, and alike) and at a macro-level (relationships between organisations and enterprises, strategic alliances, network management, and other) (Miles, 2012, p. 297).

A social network normally reflects a cluster of same or similar ties. It is also possible to analyse different types of network relationships between the same actors, depending on the type of ties observed. This kind of multidimensional analyses can provide a better insight into content-related aspects of relationships between members, but they can also create confusion and unclarity when one attempts to arrive at an all-encompassing interpretation.

There are many possible types of ties in social networks. They can be grouped in different ways, but for the purposes of this book, we have opted for the adapted taxonomy of four types of mutually interwoven ties (Blau, 1964). We recognise social fabric held together by: (1) hierarchical ties, which reflect the relationships of power and authority (managing director, sector director, head of department, or other); (2) reference ties, which validate status and/or identification-relevant relationships created by belonging to a special group (e.g., member of a supporters’ group, university alumni, or member of a political or civil movement); (3) social ties, which reflect emotional, affective and other ties (e.g., kinship, friendship, trust, advice-giving, information exchange); and (4) exchange ties, which show the market-based, financial, competition-related or other business relations between members of a network.

People don’t usually think of themselves as of indivisible constituents of social networks. However, the reality proves otherwise, especially nowadays, when we are living in a world full of limitless potentials for networking in a virtual world, where relational one-dimensionality and tendency to over-inflate has completely substituted the original quality of human relationships.

People are heavily influenced by their relationships with others and by the structure of the network that they are part of (Granovetter, 1985). Network positioning defines an individual’s social position. Various positions inside the network either facilitate or hinder access to resources, and individuals who occupy the central position in the network have irreplaceable advantage (Gnyawali & Madhavan, 2001). Moreover, the structure of the network itself can facilitate or make it harder to reach resources, thus affecting the range of accomplishment available to the individual (Burt, 1992, 1997; Granovetter, 1973; Coleman, 1990).

There are two different perspectives on the social network construct.

Social network can be observed: (1) as a whole, i.e., as a sociocentric network, encompassing all its nodes and ties in their entirety (as shown in the hypothetical social network in Fig. 8.6) or (2) as an egocentric network, which outlines and analyses relationships between an individual and parts of the network formed around such individual as its centre.

For instance, if we observe a highway construction project with several construction companies participating in it, then a sociocentric network would represent the totality of relationships between all actors who are taking part in the project, interacting and communicating one another.

An association of MBA students also has the characteristics of a sociocentric network, just like a network of formal and informal ties that connect middle management in a company.

If, on the other hand, we observe ties between a CEO of a large food company that establishes and maintains relationships with everyone that the CEO comes into contact with in the course of doing business, then we are effectively analysing an egocentric network.

An egocentric network comprises a central node (the “ego”), other actors that surround it (the “alters” and all the ties that connect them (Borgatti & Foster, 2003). Everyone who comes into direct or indirect contact with the CEO represents their “alters” and acts as a constituent of their social network.

Detailed observation and breakdown of egocentric networks of strategic leaders can help understand how the leadership process is effected and how it can be improved.

Leaders are rarely able to directly reach every person who is important for the performance of their tasks. It is important to have high-quality connections and networks in order to build social capital that is so greatly needed in an age of information intensity and variability of the environment.

On a daily basis, leaders create, improve, maintain and change network structures within which different transactional relationship based on reciprocity are established. Needs, expectations and aspirations are developed and expressed in such networks. Networks can be built on power-based, interest-based and influence-based relations, friendship bonds, exchange of services, data and information, etc. Besides the simple structures where simple, direct transactional dyads can be observed, complex network structures emerge from multiple relations that are not easy to grasp and conceptualise or systematically analyse (Fig. 9.1).

Fig. 9.1

Leadership network

It is a common practice to observe networks established by leaders within and without the limits of the organisation, although some networks extend regardless of the fluid lines that by convention denote the division between the organisation and its environment.

Relational and Structural Embeddedness

There is a myriad of all kinds of forms of social networks that differ by their main characteristics and levels of structural and relational network embeddedness.

Relational embeddedness indicates the content and quality of relations within the network, or as noted by Slišković (2014), it indicates whether there are: (1) affective or cognitive ties (McAllister, 1995; Chua et al., 2008; Casciaro & Lobo, 2008),² (2) strong or weak ties (Granovetter, 1973), (3) positive or negative ties between members of the network (Labianca & Brass, 2006), (4) relationships based on similar or different perspectives (McPherson et al., 2001), and (5) hierarchical relationships with individuals in subordinate or superior positions (Chua et al., 2008).

It is particularly important to understand the concepts of weak and strong ties in a social network. The strength of a tie depends on emotional intensity and history, interactional frequency, time and other resources invested, and relational reciprocity in the relationship between actors that are part of the network. Individuals cannot have too many strong ties, considering the restrictions of time and space. For this reason, the quality of their weak ties is of fundamental importance to the strength of their position and achieving an advantage within the network.

Weak ties are very useful for acquiring new information and knowledge (Granovetter, 1973), whereas strong ties are useful when it comes to transferring tacit knowledge (Hansen, 1999). People tend to interact and communicate more with those they feel strongly socially and emotionally connected to. The level of emotional connection or commitment is extremely important because it influences the actor’s motivation to provide assistance or support to others and consequently strong ties have greater motivation to be of assistance and are usually more readily available (compared to weaker ties) (Granovetter, 1973, as cited in Slišković, 2014, p. 78).

Strong ties bring together and connect people within a group, while weak ties act as important bridges between groups (parts of the network) and important building blocks for extended social networks through which we acquire or disseminate resources in the form of information, knowledge, influence, reputation or other.

Slišković (2014, p. 59) noted the argument of importance of weak ties made by Granovetter (1973). Person A has a group of close friends, but also a lot of acquaintances who mostly do not know each other. Each of those acquaintances has a small group of close friends of their own, which means that one such acquaintance - B - also has a connected group of close individuals who are not acquainted with A. The connection between A and B (a weak tie) connects two separate groups of people and helps influence and information spread within the network even beyond the narrow space limited by the boundaries of small groups. In other words, those who have no ties to their acquaintances will not have access to information from a remote part of their social environment and they will only be limited to sources of information obtained from their closest friends (Granovetter 1973).

People at the far reaches of our social universe, reachable only through weak ties, can be the source of important, idiosyncratic, inaccessible or completely new resources that are not available in the close-knit networks that surround us. Such resources are that much more valuable because they cannot be accessed independently through direct contact with persons close to us.

Leadership of larger organisations and social networks has to be based on developing and managing weak ties. They help expand the scope of the leader’s influence and enhance distribution of messages sent, but also provide better feedback on common action in remote organisational or network segments. It can be said that having a greater number of weak ties is a very desirable characteristic in persons who assume the role of organisational leaders.

Another fundamental characteristic is structural embeddedness, a characteristic of a social network that depends on the number and constellation of nodes and ties that are mutually interwoven to create its fabric.

Networks can be very small, with only a small number of nodes (e.g., a network of three individuals) but they can also be large (comprising, for example, hundreds of thousands or even millions of actors). They can be all-virtual or all-physical; or a combination of the two.

Moreover, networks also differ by their density and level of cohesion (Ahuja et al., 2012). Density pertains to the number of ties in a social network with respect to the maximum possible number based on the number of nodes. The maximum possible number of ties in a network is n(n − 1) / 2, where n is the total number of nodes in a network.³

Density is a measure of cohesion in a social network: it indicates its internal connectedness and degree of interwovenness. Where social networks are dense, it is more likely that members will share similar attitudes and perceptions of the leader.

Another important notion is network robustness, which measures how difficult it is to disconnect the network by removing nodes or lines (Borgatti et al. 2013, p. 155). The more nodes we need to remove to disconnect the network, the greater the cohesion within it, and vice versa.

Dense networks are those in which leaders are surrounded by a large number of followers already on the first relational level. Strategic leaders with strong charisma or potential to inspire others are networked with the collective members directly, creating strong emotional connections with them and skipping the intermediary nodes.

Structural Holes in Networks

Networks can be socially closed or open, exhibiting larger or smaller holes in their structure.

Socially closed networks are characterised by cohesion and strong ties, whereas open networks are characterised by numerous structural holes and weak ties between actors.

Closed networks have certain advantages and can be the source of social capital. They are characterised by the quick spreading of reliable, high-quality information, building greater trust, developing a sense of responsibility, greater level of cooperation and mutual assistance, fewer instances of opportunistic behaviour in the network due to reputational risk, and other (Coleman, 1988).

Slišković (2014, p. 68) noted: The fact there is more trust in closed networks means there is a greater threat of sanctions in case of breaking the norms within the network, and cited Coleman (1990, p. 318) who underlined that [r]eputation cannot arise in an open structure, and collective sanctions that would ensure trustworthiness cannot be applied (Coleman, 1990, p. 318). Slišković further noted that this type of network gives its members greater reliability when it comes to exchanging information and thus reduces transactional costs of information validation.

We associate leadership in socially closed networks with situations that normally occur in smaller groups with mutual interactions of all members. Leadership of smaller work or project teams can be analysed, among other things, based on structural characteristics of that type of networks where there is a direct connection between the leader and the followers.

This possibility is eliminated in larger organisations and social networks. The need to extend the scope of influence and informational connectedness focuses attention to indirect ties that the leader has with the actors in the network. Besides, openness of networks is naturally prominent in larger collectives where social closing cannot be achieved even if there were an intention to do so.

That is why strategic leadership can never be based solely on networking in a tightly-knit group of close co-workers with whom one exchanges advice, information, ideas and other resources. Without the spreading of influence across the entire organisation one cannot actually assume the role and tasks of strategic leadership.

Structural hole theory proposes that leaders should structure their networks by using a relatively low number of ties to reach different network constituents and create better access to resources and information (Burt, 1992). This is based on the assumptions of Granovetter (1973), who found that weak ties were more important than strong ties in situations when information and knowledge are shared within a network.

Structural holes exist when individual components of the network are not mutually connected in any other way except through ties found in special members of the network referred to as brokers. Social network brokers connect such unconnected structural components and hold the most influential position in the network (Burt, 1992, 2000). Their role as potential leaders emerges in and of itself from the position of an intermediary in the network.

Let us take the example of the two networks presented in Fig. 9.2. In the network shown on the left, the position and strength of the leader does not depend on the position in the network, because all members are mutually connected independently of the leader. This is a dense, socially closed and completely interwoven social network with the maximum possible number of ties between eight participants. The position of the leader (represented by the black square) does not contribute to network efficiency, and the leader does not exhibit a greater degree of centrality than other members. If the leader were to be removed from the network, that would not substantially change its structural determinants.

Fig. 9.2

A socially closed and a non-redundant open network

In the non-redundant open network, shown on the right, there are three separate network fragments that are mutually connected only via the leader (also represented by the black square). With three ties, the leader bridges the structural holes and connects the fragments into a single network that is completely dependent on the leader. Without the leader in the network, actors from the left fragment would not have any connection with actors from the central and right-hand fragments of the network, and vice versa. The network as a joint entity would de facto be inexistent. Re-connecting the parts of a network torn as described above would create additional transactional costs in terms of additional time and effort required to establish the connections between the separate components.

The network-based perspective of strategic leadership involves (1) developing, identifying and utilising weak ties and (2) appropriate spanning of structural holes in fragments of important social networks.

To paraphrase Burt (1992, 2000), strategic leaders need to be skilled intermediaries who bridge the structural holes between different parts of the social network in order to achieve maximum possible effects in the given circumstances.

The leader’s mission is to gain and maintain network advantage. If the leader connects separate components of the social network, then, according to theoretical postulates, they have better access to information and other resources than other actors do. Burt (1992) underlined that, in networks with numerous structural holes, leaders and managers manage information better than if they were to control them through bureaucracy. That way, information flows more quickly among a larger number of people than would be the case if official memos were sent.

Burt argues that efficiency and power are far removed from redundancy in networking, i.e., from additional leaders’ networking with others with whom they are already directly connected. Efficient networks are directly connected by having non-redundant ties, and the best ones are those where each tie opens up the door to another social world. If direct ties cross structural holes in the social network, leaders strengthen their position and exert greater influence, enjoy better access to resources and greater scope of information.

Successful bridging of structural holes offers other benefits as well. Strategic leaders have greater social capital, better potential for coordination and influence in the network, and a more comprehensive view of the overall situation; they can monitor information flow better, transfer information to different parts of the network faster, and recognise and resolve organisational issues more efficiently.

The position of a bridge in the network provides better prospects of innovation, growth and network influence. Leaders holding those positions have a broader perspective, allowing them to see the bigger picture, and they have easier access to remote network worlds, compared to other actors. The number of their connections does not have to be related to the position of the bridge or broker: many important weak ties are not easily noticeable by others in the network (Hoppe & Reinelt, 2010, p. 603). Normally, leaders who are at the same time network brokers enjoy a special status due to the reputation and influence they have on members of their network (Burt, 1992; Lin, 1999; Slišković, 2014, p. 64).

This form of egocentric network implies, in an ideal network strategy, inclusion of fewer trusted associates with whom the leader maintains strong ties and who are in charge of bridging the mutually weakly connected or unconnected parts of the network, and of managing the relations in their own parts of the network (Burt, 1992, 2005).

To use strategic leadership jargon, well-connected managerial elites (e.g., boards of directors, teams of top managers or dominant coalitions) need to develop “network extensions” toward separate fragments, which get connected and integrated via their role as intermediaries.

Theoretical sources generally recommend the division of a social network into parts that do not overlap, in order to reap the benefits of social capital through intermediation of information and other resources between the divided groups (Balkundi & Kilduff, 2006).

Capable leaders need to position themselves in the network structure in a way that ensures maximum effects of networking. The best leaders recognise the competitive advantage that lies in bridging holes in their networks and they tend to create new networks with many structural holes (e.g., Burt, 2000).⁴ Research goes in favour of this hypothesis, having shown that the most productive teams are those with strong internal cohesion and members who have their own networks with numerous structural holes (Reagans et al., 2003; Zaheer & Soda, 2009).

Strategic Leadership Networks

Leadership is ipso facto a type of social network characterised by processes of exerting influence that connect members of that network (Carter et al., 2015).

There are numerous intertwining formal and informal social networks that surround strategic leaders. They participate in the construction of the leader’s reality: they facilitate access to information, resources and available options, and expand the decision-making space.

Formal networks are the result of contractually established or otherwise imposed lateral and/or hierarchical relationships, which are mostly based on certain imposed rules regarding the division of labour and activities, and on chains of formal authority and responsibility.

Informal networks are created voluntarily (without anything being imposed): the relationship between the leader and other participants involves the creation of cognitive relations (based on knowledge and information), and/or affective relations which involve some form of emotional connection (McAllister, 1995; Chua et al., 2008)

First and foremost, the social network creates room for the leader’s and other actors’ action, which is guided (to a great extent) by their shared interpretations of events and activities. Ties between members provide access to information in the process of discovering meaning and interpreting reality in circumstances that are not entirely clear (Weick, 1998).

Acceptance and adoption of a network-based perspective is a necessity for leaders: it is the prerequisite which, if missing, makes it impossible to make the right moves and make sense of the world beyond the boundaries of the network of close associates. As Balkundi and Kilduff (2006, p. 434) claim: Leadership requires the management of social relationships. Starting with the cognitions in the mind of the leader concerning the patterns of relationships in the ego network, the organizational network, and the interorganizational network, social ties are formed and maintained, initiatives are launched or avoided, and through these actions and interactions, the work of the leader is accomplished.

Networking and creation of social connections are some of the distinctive traits found in the best of leaders.

It is beyond contestation that a strategic leader is a true homo dictyous (network man), who has to contemplate the world around him by keeping in mind the characteristics and dynamics of social networks to which he belongs. Christakis and Fowler (2011, pp. 211–212) coined this very appropriate term (from Latin “homo” meaning man, and Greek “dicty” meaning network), to refer to a perspective that distances man from the pure selfishness inherent in Mill’s homo oeconomicus model, and moves him toward selflessness, owing to the need to take into consideration the needs and welfare of all those around him.

Leaders have to be able to understand the existence, nature and structure of important ties within their social networks: not only those close to them and surrounding them, but also those that are remote from them, as well as ties between other relevant actors in the ambience in which their leadership is manifested.

The method and quality of networking with others and the structural determinants of their social networks define strategic leaders’ relational and resource success. Their efficiency depends on the capacity to utilise and improve their relative positions in intra-organisational and inter-organisational social networks. Networks of relationships and connections facilitate access to and creation of important resources, thus helping increase the leader’s efficiency and effectiveness (Burt, 1992, 1997, 2000).

Strategic leaders need to get involved in important social networks and delve into their essence in order to better influence others and achieve their intentions and goals. If they are well-connected, they are more likely to have greater power in the network. Good position in the network can guarantee that they will need to invest less effort in getting people on board with the direction and patterns of action that they advocate.

Different layers of networking can be identified among the upper echelons of an organisation.

The inner circle is the network that the leader builds and maintains with actors with whom they are directly connected, in terms of physical presence. These are people with whom the leader directly communicates, interacts and exchanges ideas and information. In most cases these will be the leader’s closes associates: a senior management team, a layer of managers with whom the leader communicates directly, various consultants, supervisors, major external partners, and friends. The inner circle is mostly characterised by strong ties.

The leader, alone or together with a handful of top managers, holds the central position and instruments of power in the inner circle. All other members of the collective are situated at the periphery of the social network.

A strategic leader can have either a small or a large inner circle. A large number of members of the inner circle increases the level of social capital if ties between members are based on positive emotions, exchange of knowledge and experiences, and expected synergy effects deriving from networking. On the other hand, a larger inner circle can cause certain negative effects as well.

Networking within the organisation involves not only the leader’s direct ties but also indirect ones within the boundaries of the organisation.

Most actors in the network do not have direct access to the strategic leader, nor does the leader have such access to them. Relationships with members of the collective who are outside the inner circle are manifested twofold: via intermediaries who usually assume managerial roles in middle or lower management, or through direct impersonal communication via written messages or speeches intended to create an emotional connectedness and a feeling of togetherness. This encourages collective alignment and creates space for understanding and identifying with others, which facilitates the process of exerting influence in the leader-followers network.

Inspiring visions and spirited narratives reach organisational members the easiest if they are communicated via developed communicational paths within the organisation. The more developed those networks are, the greater the success in transferring and communicating important information within the collective. On the other hand, developed social networks provide the possibility of including more members in the processes of creating and shaping strategy, as well as obtaining important feedback before they are turned into organisational action.

In this context, one has to take into account the three degrees of influence rule (Christakis & Fowler, 2011, p. 34). Everything a leader (or any other actor in a network) says or does affects the closest associates in the inner circle (first degree), the contacts of those closest associates (second degree) and contacts of the closest associates’ contacts (third degree). Beyond that network horizon of three degrees, the influence gradually disperses and weakens, and insights into behaviour, feelings and information transferred via the social network diminish. The opposite applies as well: the leader is under relative influence of the closest three layers of the social network; beyond that, it is hard to expect any influence on the leader.

If, for instance, a strategic leader has twenty close associates in his/her inner circle, who each have twenty associates or contacts of their own in their part of the network, who in turn have about twenty associates or contacts of theirs - this means that the leader’s influence reaches as many as 8000 people. Christakis and Fowler (2011, p. 34) underlined: If we are connected to everyone else by six degrees and we can influence them up to three degrees, then one way to think about ourselves is that each of us can reach about halfway to everyone else on the planet.

A good example of validity of the three degrees of influence rule is evident in the method of operation of Rotary International. The President of Rotary International communicates directly with more than 500 district governors through letters and presentations at conferences, with the aim of transmitting the slogans and key messages that are intended to unify and inspire the membership. Each of the governors transfers and interprets the information received to other presidents of Rotary clubs in their districts (a single district may comprise between 50 and 120 clubs: there are more than 33 thousand clubs worldwide). In the third degree, the club presidents are responsible for transferring and interpreting the information received to members of clubs in their own districts (between 20 and several hundred members per club). Through these degrees of influence, key messages reach more than 1,200,000 Rotarians.

Furthermore, networking beyond organisational boundaries is crucial considering the role strategic leadership plays in aligning the organisation with its present and future environment. External networks that leaders have with important environmental actors affect their actions. Belonging to professional and interest groups strengthens the leader’s network connections and increases their social capital.

The more social networks the leader participates in, the better their position in those networks and the greater the likelihood that they will be able to acquire the network resources beneficial for the organisation.

We find logical the presumption that there is great chance that the leader will be precisely the person who occupies the best position in the network and easier access to other influential networks.

One should add, however, that networks are not stable and change almost on daily basis. Ties change or disappear, some actors disconnect, and centrality shifts. Moreover, in the overall social ambience, networks continually lose and gain importance depending on their relative position with respect to other networks, organisations, institutional arrangements and the society as a whole. Strategic leaders have to take into account those phenomena, considering that decreased importance of some networks or the severing of ties with important actors in networks can diminish their social relevance and sometimes even threaten their positional survival (Fig. 9.3).

Fig. 9.3

Layers of a strategic leader’s networking

Organisations are influenced by social networks created by the leader’s external connections; networks enable them to acquire resources and information from their environment. Lateral connecting beyond the organisational boundaries helps to build their social capital.

We can list examples of connecting between members of boards of directors in several different companies.

External networking can be strengthened by board interlocks (interlocking directorates), which represent a unique mechanism of connecting of top management and organisations themselves.

A direct interlock is the case when one or more directors of one company is also a member of the board of directors of the other company. The organisations are directly connected because one person acts as a board member in both companies at the same time.

An indirect interlock is the case when directors of two (or more) different companies serve as members of the board of a third company. The two organisations are in this case connected via those board members who both sit on the board of a third company.

The network of connections based on interlocking directorates can be an important source of external social capital (Hillman & Dalziel, 2003). External social capital represents the board of director’s external connections to other companies. Directors use board interlocks as a means of analysing the environment in order to access timely and relevant information (Useem, 1982), which is considered to be reliable because it has been obtained first-hand through personal connections with other members of the business community (Carpenter & Westphal, 2001).

Mešin (2013) noted the results of a research according to which board interlocks expose leaders to various leadership and management styles, different managerial techniques, but also innovations, which means that they can be a valuable source of knowledge and experience (e.g., Haunschild, 1993; Young et al., 2001).

Networks into which leaders are included can be observed from one other perspective. Hoppe and Reinelt (2010) proposed an interesting taxonomy with four different possibilities of strategic leaders’ networking.

The first type is referred to as peer leadership networks, where leaders share the same or similar identities, interests and affinities and give one another reliable information and advice in a safe ambience protecting them from aberrant behaviour or adverse consequences. Sincere relationships enable openness and development in discovering and exchanging important knowledge, advice and information, without any uncomfortable queries that could be raised within their own primary organisations and threaten their integrity or power based on position. In other words, these are voluntary alliances or networks that expand knowledge and broaden influence. Examples of this type of network could be associations of general, financial or project managers, members of boards of directors or supervisory boards, and other.

The second type are organisational leadership networks, where leadership is about “getting things done” (establishing directions, bringing people together, and building commitment), which implies the opening of new possibilities, focusing of collective attention, integrating and mobilizing resources, and inspiring others within the collective (LeMay & Ellis, 2007, as cited in: Hoppe & Reinelt, 2010, p. 607). According to the authors, these are informal networks of leaders (beyond the lines of formal authority and responsibility) that help raise the level of innovation, efficiency, and productivity. This type of network usually involves lateral connections between heads of organisational units in their communication and exchange of ideas and information. Recently we have seen the popularity of so-called “tribal leadership” in the organisational structures of companies. This is a version of organisational leadership network that can raise the level of corporate innovativeness and help develop organisational agility.

The third type are referred to as field-policy leadership networks. In these networks, one attempts to influence the ways problems arise and to identify approaches, standards and methods that can help solve those problems. The objective is to mobilise the members of the network to act together to make their shared vision a reality. The logic behind networking lies in development and implementation of innovative solutions to complex problems and members’ active participation in key policy-related decisions.

The fourth type are collective leadership networks and they rely on self-organising members who share a common goal and who are capable of acting quickly and solving problems in a complex and turbulent environment within the network. Hoppe and Reinelt (2010) emphasise that collective leadership emerges from adaptable collective action of a group of leaders, directing the collective to achieving the common goal tacitly or openly agreed upon among the actors.

Finally, one should also point out the massive impact of the Internet when it comes to development and spreading of social networking in the virtual world, which also has a significant impact on leaders’ networking.

The scale of virtual social networks, the number of individuals they can reach, and increasing number of ties that could exist between them, is beyond anything anyone could ever have dreamed of. There is also the increased volume of information shared and the broadening of the scope of collective action (just think about some self-emerging social movements that reached global impact by connecting over the Internet, such as the Black Lives Matter movement, which reached global proportions after a policeman used unjustified excessive force resulting in the suffocation of African American George Floyd in the USA in the summer of 2020).⁵

In such situations, leadership normally emerges through capillary action, so to speak, without coordination from a single place: it is the result of dynamics of network structures, the strength of the ties and motions that expand horizons and give sense to collective action in mutual interaction of a large number of actors occurring primarily online.

Social Capital and Network Relationship Management

The identification of values brought into the collective by strategic leadership helps to recognise the importance of network relationships.

Novicevic and Harvey (2004) identified four components of those values, which they referred to as strategic leadership capital. These are: (1) human capital, which is described as the productive potential of organisational leadership that is based on knowledge and skills and created and safeguarded through the leader-members relationship; (2) social capital as the sum of actual and potential resources that can be mobilised through membership in social networks of organisational actors (leader and followers); (3) political capital, recognised as the leader’s ability to use their political skills to influence others in the organisational context⁶; and (4) cultural capital, comprising long-standing dispositions and habits acquired from the leader in the process of socialisation in various settings, accumulated as valuable cultural symbols in organisational memory and tacitly passed on from one generation of leaders to the next.

Social capital is strategic leaders’ most important asset. It can be defined as the sum of existing and potential resources that are incorporated in, available in, or resulting from a network of relationships that an individual or social unit has (Nahapiet & Ghoshal, 1998). It indicates the value of relations that the leader can create and maintain with other actors within the organisation and beyond it.⁷

Social capital truly is capital because it can be used and mobilised, transformed into other forms of capital, and relied on in order to improve efficiency. It requires maintenance and continual effort; unlike other types of capital, it increases as it is utilised, through greater attention being paid to maintaining relationships between people (Adler & Kwon, 2002).

Social capital is the least researched aspect of leadership (Brass & Krackhardt, 1999).

It is observed based on the concept of social similarity, as well as on the basis of the individual’s personal social network and belonging to associations and groups relevant for achieving social influence (Belliveau et al., 1996). It is formed in social networks, through reciprocity norms, helping one another and developing trust (Putnam, 2003, p. 2), and it is determined by the density and the overlapping of different horizontal networks of cooperation beyond the circle of primary groups (Šalaj, 2003).

It is connected with important resources that are comprised in relationships between people and that can significantly increase the efficiency of their action. It emerges from formal and informal social connections, establishing of relationships of trust, and norms applying to collective action (Liu & Besser, 2003). Selflessness is the prerequisite for successful social bonding.

Social capital is manifested by having a secret network of more or less institutionalised relationships through mutual exchange of information and knowledge and/or mutual recognition, or in other words, through the ongoing obligations arising out of a sense of gratitude, respect and friendship or from institutionally guaranteed rights arising from belonging to a family, a company, a class or a school. (Bourdieu, 1985). The network of relationships creates a valuable resource for the implementation of social relations, enabling its members collective ownership of capital, which entitles them to attain credit, in various conceptions of the word (Bourdieu, 1985, p. 249, as cited in Slišković, 2014, p. 45). Bourdieu observes social capital first and foremost as an instrument of domination of privileged groups in a society.

Everything that can be mobilised through the network for the purpose of creating value, just like the network itself when it serves this function, represents a constituent of social capital (Burt, 1992, 2000). A key characteristic of social capital is its dependence on the relationship: if, for example, an actor were to withdraw from a dyadic relationship with another actor, their social capital disappears as well (Brass & Krackhardt, 1999, p. 180).

Putnam (2003) differentiates between two types of social capital: bridging capital and bonding capital. Bridging social capital is about bringing people from different social segments closer together, and it is based on reciprocity and information sharing, whereas bonding social capital strengthens homogeneity and solidarity and increases loyalty in a close-knit group or network fragment.

Social capital has a structural, relational and cognitive dimension (Nahapiet & Ghoshal, 1998). Dimensions represent conceptual simplifications serving to facilitate understanding of this complex construct. In practice, manifestation of social capital involves complex inter-relationships and partial overlapping between dimensions.

The structural dimension pertains to the characteristics of the social system and relationship network as a whole. It describes the impersonal configuration of relationships between people and/or organisational units. It involves roles, rules and procedures, and other configurational elements. It is a tangible component of social capital.

It is recognised by the characteristics of social networking: what a person’s connections to others are like and how strong they are, and with how many other people they have contact. Structure indicates the value of the network. Specifically, networks differ by character, appropriateness and basic characteristics (e.g., density and heterogeneity); as such, they can (to a lesser or greater degree) facilitate exchange and ensure access to actors who have special types of competencies, they can reduce transactional costs and increase the likelihood of common action to the benefit of everyone involved (e.g., Andrews, 2010; Ansari et al., 2012; Davenport & Daellenbach, 2011).

The relational component reflects the type of relationships that have developed between individuals over the course of the history of their relations (Granovetter, 1992) and that affect their behaviour. The nature and quality of relationships comprises the relational component of social capital. The following factors are important: trust, norms, sanctions, obligations, expectations, and identification between the actors involved. Relationships such as those of respect and friendship enhance, while distrust and confrontation reduce social capital.

Putnam (2003, p. 183) underlined the correlation between trust and cooperation in human relationships: The higher the degree of trust within a community, the greater the likelihood of cooperation. And cooperation in turn reinforces trust. Social capital increases in proportion to the increase in the intensity of trust and cooperation, spilling over to remote actors via indirect ties in social networks.

In creating relational social capital, another element that is important - besides the foregoing - is connectivity, or in other words, readiness to put the defined collective objectives before one’s own (Lazarova & Taylor, 2009).

The cognitive dimension pertains to characteristics of social capital that enable presentation, interpretation and creation of systems of meaning between people. It is important because of the effect of creating a common language, a shared identity, the use of metaphors and narratives within the organisation (Nahapiet & Ghoshal, 1998; Slišković, 2014), which all builds the foundation for communication between participants. In addition to that, cognitive social capital is also evident in the culture and it is expressed through common goals and visions shared by members of a collective (Inkpen & Tsang, 2005).

Social capital is the foothold of strategic leadership.

Strategic leaders have to be aware of the complex social networks that surround them. They must understand the characteristics and structures of their networks, ways to create and appropriate new value in them, and methods with which to strengthen key ties with their associates and other members of the network (for example, through respect, trust, exchange of information, and exerting influence).

It is important that they are aware of the simultaneous existence of formal and informal networks. If, for example, they fail to perceive and understand informal organisational networks, a negative climate will be created and numerous problems could arise as a result (Krackhardt & Hanson, 1993). Conversely, excellent understanding of informal networks can, in and of itself, be the basis for their additional power and advantage over others in their environment (Krackhardt, 1990).

Moreover, they need to make appropriate decisions with respect to the networks, which will enhance their efficiency. It is important to have the ability to understand structural determinants, as well as the ways one has to influence and improve their relative position within the intra-organisational and inter-organisational social networks (e.g., Anand & Conger, 2007; Bartol & Zhang, 2007; Balkundi & Kilduff, 2006; Cullen-Lester et al., 2017).

A strategic leader’s social capital is highly dependent on existing ties and actors embedded in the network. Withdrawal of important actors from the network has a direct impact on reduction of social capital (Brass & Krackhardt, 1999). Apart from that, members’ moving up the organisational ladder, lateral shifting within the organisation, or leaving the organisation are events that require special attention when it comes to network relationships.

Leaders have to make sure to develop appropriate strategies for building and utilising relationships within networks, but also to provide certain elasticity when networks get torn or become irrelevant. In this context, Ibarra and Hunter (2007) highlighted the need for developing operational, personal and strategic networks which leaders have to be build or become members of.

Balkundi and Kilduff (2006, pp. 423–424) underlined that being an efficient leader in the collective means being aware of: (1) key relationships between actors in the collective; (2) the extent to which those relationship involve embedded ties including kinship and friendship; (3) the extent to which social entrepreneurs extract value from their own personal networks in order to facilitate (or threaten) the achievement of organisational objectives; and (4) the extent to which the social structure of the collective involves cleavages between different factions.

Centrality in the network is one of the key characteristics of social capital. Achieving the central position in the network is a necessary prerequisite for leadership. This is based on two possible strategies: (1) connecting with other actors who hold the central position via strong ties, and (2) creating connections between other, mutually unconnected actors by using weak ties (Brass & Krackhardt, 1999).

The strong ties strategy secures the central position in the network for the leader, by connecting them with close and trusted associates who have many direct ties of their own; this way leaders indirectly acquire good access to remote sections of the network.

The weak ties strategy helps bridge network gaps and connects fragments of the social network by bridging structural holes; it helps in the acquiring of non-redundant information and new ideas that can support organisational management. The importance of this strategy is all the greater in an ambience characterised by quickly-occurring technological changes, virtualisation of every segment of social life, and increased overall uncertainty in the environment.

Both strategies have to be implemented simultaneously in order to maximise their effects.

Not all networks are good, nor is networking always useful in and of itself. Some leaders rely on poorly structured networks, which reduces the efficiency of their work. Cross and Thomas (2011) noted that strategic leaders should carefully manage their networks and build them in a way that ensures access to all kinds of information and expertise, good-quality feedback on their own actions, as well as to powerful individuals and persons who assist them and give them a sense of purpose.

Actual and assumable resources contained in and derived from social networks are the substance of a strategic leader’s social capital, but they are not sufficient as such. Building new and improving existing social networks is a constant imperative, just like careful management of complex network relationships.

Cross and Prusak (2002) underlined the usefulness of social network analysis in helping managers understand informal networks in organisations and make smart investments in the development of their network structures. Anand and Conger (2007) proposed four strategies that leaders can use to modify their networks: (1) seeking connections with other, informal leaders, (2) actively managing social connections, (3) interacting with others in friendly exchange, and (4) meeting people with complementary skills that could benefit from mutual cooperation.

In summary, a leader’s keen observations of social movements and structures of their social connections influence the success of their action (Balkundi & Kilduff, 2006), and the multiple networks they build within the organisation and outside it facilitates access to important information, knowledge, influence, and opportunities, and also mitigate risks (Tipurić, 2011).

The main question is how to determine the proportion that relying on hierarchy (formal authority chain) should bear to using social networks in implementing organisational change as the central element of strategic leadership. The answer to this question depends on the situation and the characteristics of the organisation, but we know that creating networks and managing network relationships is inevitable. The most successful strategic leaders make significant investments in social networks: they improve existing networks, strengthen their own position in them, and develop new network structures than can be beneficial for them in the performance of their primary task.