Understanding the Power of Networks
s it who you know rather than what you know that really matters? People hope that they will be rewarded for their ability and effort, but fear that rewards actually go to those with well-connected friends. That suspicion does not seem so far-fetched. Look around the office. Those who are doing well tend to be colleagues who know people who have an extensive network of contacts. Thus, it would be quite reasonable to assume that the success of a well-connected neighbor could somehow spill over to them.
Just how much of an advantage a neighbor’s network provides is the subject of Neighbor Networks, a thoughtprovoking book by University of Chicago Booth School of Business professor Ronald S. Burt. The answer turned out to be not quite what Burt expected: There is no advantage at all to having well-connected friends.
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Image: Minal Shetty
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Although Burt found a strong correlation between the performance of managers and their affiliation with well-connected colleagues, the relationship disappears when the manager’s own network is held constant. That is, if two people have well-connected friends, then the person who is herself well-connected performs well and the person who does not have her own network of valuable contacts does not do well. Well-connected people have their own interests and need not associate with those who contribute nothing to the relationship and only seek to use them. What really matters for performance is a person’s own network and not that of her friends.
This finding has strong implications for business policy and for understanding the process underlying the value of networks. Information and behavior are almost never observed directly and so are inferred from the way relations are structured. In particular, those who were accustomed to thinking of networks as pipes through which information travels between people might be disappointed. “We seem to have misunderstood how networks work,” Burt says.
Bridging Structural Holes
People tend to cluster into groups and communicate more frequently within rather than between groups. As a result, people within the same group develop similar views. They tire of repeating arguments and stories explaining why they believe and behave the way they do, so they make up shorthand phrases, jargon, and a whole system of phrasing, opinions, symbols, and behaviors defining what it means to be a member of the group. Over time, the tacit knowledge that is meaningful to insiders becomes more complex, making knowledge more difficult to move to other groups. Information becomes “sticky,” such that holes tear open in the flow of information between groups. These holes in the social structure of communication are what are known as “structural holes.” Structural holes present two opportunities for networks to affect the productivity of individuals and groups: brokerage and closure.
Closure is about staying on one side of the structural hole, such that the members of a group keep to themselves and are not exposed to variations in opinion and behavior. As a result, members of such a closed network think less about alternatives but are able to focus more on getting better and becoming even more efficient at the one thing that they already know how to do well.
Brokerage is the opposite. Unlike closure, network brokerage is about building connections across structural holes and taking advantage of a person’s exposure to variations in opinion and behavior.
In a corporate organization, for instance, the staff of one department typically talks more to people within their group than it does to people in other departments, such that structural holes tear open between departments. A manager who seeks to connect these diverse groups by maintaining contacts in a number of departments will be able to quickly see alternative ways to go, synthesize new ways to go, and find a broader range of ways to support an initiative, thanks to his exposure to diverse ideas and behaviors. The ability to do these things is what is correlated with higher salaries, better evaluations, and faster promotions.
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