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Although online networking sites are rapidly becoming commonplace in the business landscape, social networking - face-to-face - has long been the proven method of establishing long-lasting relationships in the corporate world. But do you really know all there is to know about gaining a competitive advantage through your network? Does being part of an exclusive, closed network where you are "well-connected" really provide an edge? How much do social networks influence salaries and promotions, anyway?
Speaking with members and guests of the Chicago Booth Alumni Club, Ronald Burt, Hobart W. Williams Professor of Sociology and Strategy, turned everything we might have believed about social networks upside down. Burt discussed his research at the club's annual member dinner, held at Gleacher Center on October 4.
"Professor Burt teaches our students in the Executive MBA Program and [tonight was] an opportunity to have our alumni hear him speak," said Elizabeth Bleakley, '02, the newly elected president of the board of directors on the Chicago Booth Alumni Club, which offers continuing education for Chicago Booth alumni and holds monthly forums on topics ranging from economics and public policy to strategic planning.
"We chose social networking because it's a hot topic and people are sometimes overwhelmed by it and don't know how to utilize it effectively," said Bleakley, of organizing the dinner and its topic.
Burt began his studies in pre-med, but a strong interest in accounting for people's behavior led him to physiological psychology, and later, social psychology. He has since spent his career "applying the Chicago approach," as club secretary and former president, David Burrus, '92, described, "to the intuitive field of relationships between people, turning it into a mathematical or more quantifiable exercise."
During his discussion, Burt defined networks as a complex series of clusters and bridges. Clusters are groups that are made up of similar people who are so interconnected that they develop a certain type of tribal language, or "jargon," to demark those on the inside. The main focus of people in the group is to drive variation out of the cluster.
In the gaps between clusters are bridges, the contacts made in these different groups. These ties are easily maintained relationships and simple to resurrect. A network's main source of value is in its bridges. When "knowledge becomes sticky," said Burt, there is an advantage to people who regularly position themselves in manning these bridges, where wealth often accumulates and can systematically introduce variation into a cluster.
People with access to and the ability to move, interpret, and translate information between clusters are network brokers, he said. Rather than try to reach a lot of people, network brokers look to connect with many different clusters of people and to take advantage where disconnects, or "structural holes," between the groups exist. According to Burt, "the worth of your network is not in the people you know; it's the holes to which you have access." He further added, "Bridging across structural holes increases the risk of a productive accident."
"Most creativity isn't about getting outside of the box," Burt said. "It's about finding a different box, seeing through someone else’s eyes."
People who have more varied and disconnected networks often make more money, are promoted more often, and have more favorable performance evaluations than those who keep to a closed cluster. "Social capital," said Burt, “is a forcing function for human capital.” The ability to deal with people who could not deal directly with each other was the real value in such disconnected networks.
But how big is the value in being such a connector?
For positions such as investment bankers or stock analysts, Burt showed that as much as 55 percent of job success, as measured by bonus or salary, is due to the direct effects of the network. In organizations that are more structured, such as human resource officers in large commercial banks, where job rank was the biggest predictor of performance, the network contributed only 10 percent of job success. However, when examining who actually was promoted up the job ranks in a stratified organizations, the network, the "crude contrast" between a more disconnected or a more closed social network, predicted 64 percent of the variance, of who actually did get promoted.
In the end, Burt said, "If you think being connected to people is what’s going to matter, it won't. What gives you the margin is actively engaging people who think differently. This is the single best case for diversity I know of."
— Kalliope Dimitrakopoulos
Photo by Beth Rooney