Professional services firms try to limit personal networking as the executives will take clients with them when they leave. But this also limits the value executives could bring to the firm.
Your network is your net worth, they say. As it turns out, professional service firms also have a lot to gain – and little to lose – from the personalised ties their executives build in the course of their work.
Naturally, a firm’s growth and survival depend on its managers’ ability to look for new business. Well-connected executives are often recognised as valuable in this regard. However, professional services firms often try to de-emphasise the personal interactions of their executives with clients. Fearful of executives taking clients with them when they leave the company, firms put in place more formal processes and routines which limit the ability of individual managers to build personal networks.
But this puts firms at a disadvantage. It turns out that managers who build personal networks are more valuable to the firm, bringing in more new business and knowledge to the firm.
Michelle Rogan, an Associate Professor of Entrepreneurship and Family Enterprise at INSEAD and her co-author Louise Mors, an INSEAD PhD graduate and now a Professor of Strategic Management and Globalisation at the Copenhagen Business School, examined the links between business development and personalised networks (vs. networks mostly acquired as part of one’s official role). The results of their research, Managerial Networks and Exploration in a Professional Service Firm, have just been published in Organizational Studies.
They find that managers who use personal assets (such as their knowledge, experience and interests) to build professional relationships are more successful in seeking new business than managers who chiefly network using their firm’s processes and resources. In addition, Rogan and Mors found that broader networks, with contacts loosely linked if at all, amplified benefits for the firm.
“A firm’s growth and survival depends on the ability of its managers to explore for new business. However, the specialised roles, routines and procedures companies create can limit the exploration of individuals working for them,” said Rogan.
Why a sparse, personalised network is best
Rogan studied the professional networks of 77 managing partners in a large, global consulting firm. Face-to-face interviews provided insights into their networking styles. Some executives retained a formal approach, while others preferred to keep things personal, with less emphasis on their official role in the firm.
Results show that managers with a personal touch do more to help their firm expand. This could be due to at least three reasons, says Rogan. Firstly, such managers have access to a greater diversity of information. For instance, a manager could be exposed to – and incorporate – ideas from other industries. Secondly, managers are not constrained by their role or their firm’s resources as they go about networking. Thirdly, the reciprocity principle is known to be stronger in relationships imbued with a personal dimension.
The impact on firm expansion was magnified when the executive’s network was composed of individuals hailing from different industries who were unlikely to know each other. Such a network provided managers with more novel knowledge, propitious to innovation.
Controls ensured that findings weren’t influenced by the resources or skills held by individual managers. In essence, the research showed that the managers’ knack for business development was directly correlated to their tendency to use their own knowledge and resources when networking.
Firms need not fear
In small firms, managers will naturally leverage contacts made in their own name. These contacts could be people they met in school, at conferences or even in situations removed from their job. In larger firms, interactions with clients tend to become more formal, relying less on individual affinity. This often suits employers worried that clients will follow executives who leave.
“The findings suggest it would befit top managers to encourage their executives to nurture and use individual ties when exploring for new business opportunities or knowledge. Doing so may place the firm at a greater risk of losing clients if an executive should leave, and give executives more leverage when bargaining for position or salary, but the overall benefits to the firm outweigh these vulnerabilities,” Rogan added.
