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[Business 2.0]: Many employees might feel that such a system is akin to management eavesdropping on water-cooler discussions. The internal weblogs I’ve seen work are those that track an idea’s progress from offhand notion to fully matured proposal. I have seen three such blogs, always-on virtual whiteboards that have sped development and kept the status of projects clearer than they’d been before. They don’t attempt to capture an organization’s mood.
Such systems are not for every company, and they’re far from widespread. And such success depends entirely on an individual firm’s culture. If the company personality is too buttoned-up or secretive, a blog initiative will either fail to take off (there’s nothing lonelier than a blog that doesn’t get updated) or deteriorate into something unhealthy. The internal blogs that succeed will be safe, clean, well-lit virtual places in which diverse opinions are welcome and ideas — not people — are judged. Companies should always explore new ways of getting messages out and new tactics for fostering idea-exchange among the staff, but right now the blogging action is almost exclusively for external readers.

Some useful looking links as well.