DP8040 Measuring the Impact Factor of Agents within an Organization Using Communication Patterns

Author(s): Ignacio Palacios-Huerta, Andrea Prat
Publication Date: October 2010
Keyword(s): impact factor, organizational economics, pagerank
JEL(s): d20
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8040

Organizational economics predicts that communication patterns within an organization should reflect the relative value of their members to the organization. We propose to measure the impact factor of an agent by applying the Invariant Method?also known as Google?s PageRank algorithm?to electronic communication data. To explore the validity of this measure, we analyze email exchanges among the top executives of a large retail company. We construct their individual impact factors based only on email patterns and we compare them to standard economic measures of organizational importance. We find that: (i) The impact-factor ranking of executives mirrors perfectly their hierarchical ranking; (ii) Impact factor variability is significantly correlated with salary differences; (iii) Subsequent promotions (dismissals) affect executives with unusually high (low) impact factors. We conclude that simple communication-based impact factors may be a useful tool to measure the relative importance of agents in organizations.