Maximize Your Social Capital

It is common knowledge that managers have to build strong networks of personal relationships to accomplish their business goals, and that the general rule is to build for diversity. But not all networking structures are created equal according to University of Chicago Graduate School of Business professor of sociology and strategy Ronald S. Burt. In his 1997 report "The Gender of Social Capital," Burt finds that the entrepreneurial network structures associated with early promotion for senior-level men do not work for women. Is climbing the corporate ladder still a man's game? The answer has less to do with gender than with legitimacy.

"Some portion of the value a manager adds to a firm is his or her ability to coordinate other people, identifying opportunities to add value within an organization, and getting the right people together to develop the opportunities," says Burt. An individual's "social capital" refers to the value of having a contact network that reaches many, disconnected people. Burt refers to these networks as "entrepreneurial," from the French root verb "entreprendre," to add value from a position between others.

Entrepreneurial networks offer several career advantages, primarily access to disparate business information and opportunities to broker the flow of information between groups. An entrepreneurial network rich in "structural holes," or gaps of communication that must be connected, means that an individual is at the crossroads of important information, receiving it first and controlling its flow to the next source. These individuals are better able to read diverse agendas in the firm and assemble others from key constituencies to forge business policy.

"People who have contacts in separate groups have a competitive advantage because we live in a system of bureaucracies, and bureaucracies create walls. Individual managers with entrepreneurial networks move information faster, are highly mobile relative to bureaucracy, and create solutions better adapted to the needs of the organization," says Burt.

At the other extreme are clique networks in which one's contacts are few and strongly connected with one another. Clique networks cloister individuals in a social world of mutual friends isolated from other groups. Clique networks provide the pleasure of security but at a cost to the manager's ability to add value.

Using recent developments in network analysis to measure manager social capital, research in different types of organizations shows that managers with entrepreneurial networks more often get early promotions, high compensation, superior job performance evaluations, and serve on more successful teams.

The essential caveat to the general rule is that it does not hold true for the women in Burt's study population. Women who built entrepreneurial networks are significantly less likely to experience the career advantages enjoyed by their male counterparts.

Why? The answer lies deeper than the usual explanations. First, the gender difference cannot be attributed to women preferring the support and cohesion of cliques because men and women are equally likely to build clique networks. "What's different between men and women is not the kind of networks they build; it is the way they are treated when they build certain kinds of networks," Burt says. Second, there is no evidence that women suffer because of "pink-collar" -- or low-opportunity -- jobs since there is no association in the study population between gender and the kind of work a manager does. Third, men more often build same-sex networks, rejecting the explanation that women with entrepreneurial networks do poorly because their networks are too often built around other women.

The real explanation, says Burt, turns on women being excluded from the informal communication networks among senior managers. Familiar with the rules of informal communication between men, established male managers have little experience with women as colleagues. Normal business involves conflict and complexity sufficient to make outcomes uncertain. Managers can avoid the added complexity of gender by focusing on projects proposed by male colleagues.

Herein lies the importance of a "strategic partner." The best network for a woman in Burt's study population involves a strong relationship with a strategic partner who has an entrepreneurial network. The strategic partner assures skeptical colleagues of the woman's ability, and adds the woman's name to lists of candidates being considered for key project assignments. The strategic partner's value does not come from telling the woman how to develop as a manager; it comes from persuading colleagues to give the woman opportunities to develop as a manager. The presence of such strategic partners in a manager's network, easily measured with social capital models, turns out to be the key factor distinguishing successful women from the unsuccessful.

But the solution transcends gender. When the success of a kind of manager -- such as the women in Burt's study population -- is contingent upon social capital "borrowed" from a strategic partner, that kind of manager has a legitimacy problem in the firm. Managers of that kind are perceived as "outsiders."

"All of us are illegitimate in certain contexts," says Burt. "If you're an American selling to a Japanese firm, expect to require an insider to make introductions. In some American firms, it's women who are considered outsiders."

The same is true for young men just entering Burt's senior management population. Entry-rank men, like women, are more successful in the firm when they are attached to a strategic partner. In other words, the legitimacy difference is less about gender as it is about insiders versus outsiders. Insiders succeed when they build an entrepreneurial network. Outsiders succeed when they build a strong relationship with an established manager who has an entrepreneurial network.

The practical implication for managers is to be aware of the distinction between insiders and outsiders. Don't build a network patterned after the networks of successful people. Build it for the kind of social capital benefit that you personally require. "What social capital models do," Burt summarizes, "is let us identify managers most in need of a strategic partner, identify senior managers most suitable to be a strategic partner, and determine the consequences of having a strategic partner."

"When women and entry-level men are recruited to the study firm, they're told to build networks like successful men," observes Burt. "But that is the kiss of death for certain managers. What works for insiders doesn't work for outsiders. Outsiders need a strategic partner to bring them into the networks of informal communication."

"I've studied many firms, and all but one of them had the same pattern," he concludes. "Every kind of manager is illegitimate in certain circumstances, but the cure is the same in all circumstances. Find the strategic partner with social capital who can make you an insider."