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Reading 19

Th e Vital Role o f Soc ial Capital

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,The key role of I

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social capita l i n leveraging

hUm a n capital

within and across

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Successful finns are well aware that the attraction, development, and retention of talent is

a necessOIy but not sufficient condition for creating competit ive advantages. In

the knowl -

edge economy, it is not the stock of human capital that is important, but the extent to which it is combined and leveraged. In a sense, developing and retaining human capital becomes less important as key players (talented professionals, in particular) take the role of "free agents" and bring with them the requisite skill in many cases. Rather, the development of social capita l (that is, the friendships and working relationships among talented individu - als) gains importance, because it helps t ie knowledge workers to a given firm. Knowledge workers often exhibit greater loyalties to their colleagues and their profession than their employing organ izat ion, which may be "an amorphous, distant, and sometimes threatening entity."Thus, a firm must find ways to create "ties" among its knowledge workers . Let's look at a hypothetical example. Two pharmaceutical finns are fo rtunate enough to hire Nobel Prize-wi nning scientists. In one case, the scientist is offered a very attrac - tive salary, outstanding facilities and equipment, and told to "go to itl" In the second case, the scientist is offered approximately the same salary, facilit i es, and equipment plus one additional ingredient: working in a laboratory with 10 highly skilled and enthusiastic sci - en tists. Part of the job is to collaborate with these peers and jointly develop prom ising drug compounds. There is little doubt as to wh ich scenario will lead to a higher probab ility of retaining the scientist. The interaction, sharing, and co ll aboration will create a situation in which the scien t ist will develop firm -specific ties and be less like ly to "bo lt" for a higher salary offer. Such ties are critical because knowledge -based resources tend to be more tac it in nature, as we mentioned early in this chapter. The refore, they are much more di fficu lt to protect against loss (i.e., the individual quitting the organization) than other types of cap i- tal, such as equipment, machinery, and l and. Another way to view this situation is in terms of the resource-based view of the firm that we discussed in Chapter 3. That is, competitive advantages tend to be harder for com- petitors to copy if they are based on ''unique bundles" of resources. So, if employees are working effectively in teams and sharing their knowledge and learning from eac h ot her, not on ly will they be more likely to add value to the f inn, but they also will be less like ly to leave the organization, because of the loyalties and social ties that they develop over time.

How Social Cap ital Helps Attract and Retain

Talent

The importance of social ties amo ng talented professionals creates a significant challenge (and opportunity) for organizations. In The Wall Street Journal, Bernard Wysocki described the increase in a type of "Pied Piper Effect," in which teams or netwo rks of people are leav- ing one company for another. The trend is to recruit job candidates at the crux of social relationships in organizations, particu larly if they are seen as having the potential to bring with them va luable colleagues. This is a process that is referred to as " hiring via personal netwo rks ." Let's look at one instance of th is practice.

Gerald Eickhoff, founder of an electronic commerce company called Third Millennium Com-

munications, tried for 15 years to hire Michael Reene. Why? Mr. Eickhoff says that he has ''these Pied Piper skills." Mr. Reene was a star at Andersen Consu tting in the 1980s and at

IBM in the 1990s. He built his businesses and kept turning down overtures from Mr. Eickhoff.

However, in ear ly 2000, he joined Third M iIl elUl ium as chief executive officer, with a

salary of just $120,000 but with a 20 percent stake in the firm. Since then, he has brought

in a raft of former IBM colleagues and Andersen subo rdinates. One protege from his time

at Andersen , Mary Goode, was brought on board as executive vice president.

tapped her own netwo rk and

brought along fonner co ll eagues.

She promptly

Wysocki conside rs the Pied Piper effect one of the Wlderappreciated factors in the war for talent today. This is because one of the myths of the New Economy is rampant individualism, wherein individuals find jobs on the Internet career sites and go to work for complete strangers. Perhaps, instead of Me Inc., the truth is closer to We Inc.

Another example of social relationships causing human capi ta l mobility is the emigra- tion of talent from an organization to form start-up ventures. Microsoft is perhaps the best- known example of this phenomenon. Professionals frequently leave Microsoft en masse to form venture capital a nd techno logy start-ups, called "Baby Bills," built around teams of software developers. For example, Ignition Corporation, of Bellevue, Washington, was

formed by Brad Si lverberg, a former Microsoft se nior vice president. Eight former Micro -

soft executives, amo ng others. founded

the company.

Social relationships can provide an importan t mec hanism for obtai n ing both resou rces a n d information from individuals and organizations ou tside the boundary of a finn. Strategy Spotlight 4.3 describes how alumn i programs for rece ntly laid -off emp loyees be n - efit both the individuals and the firm.

Social

Networks: I mpl ications f or Knowledge Management

and Career Success

Managers face many challe n ges driven by such factors as rapid changes in globalizatio n and techno logy. Leading a successful company is more than a one-perso n job. As Tom Malone recently put it in The Future of Work, "As managers, we need to shift our think- ing from command and control to coordinate and cultivate-the best way to gain power is sometimes to give it away." The move away from top-down bureaucratic comrol to more open. decentralized network models makes it mo re difficult for managers to understand how work is actually getting done, who is interacting with whom both within and outs ide the organization, and the consequences of these interactions for the long - term health of the organization. In short, coordination, cultivation, and co ll aboratio n are increasi ngly becom -

ing the mode

of wo rk at every level.

Bu t how can this be done? S ocial network an a lys is depicts the pattern of interac - t i on s among indiv idua l s and h elps to diagnose effective and ineffect ive patterns. I t h elps identify groups or clus t ers of individ ual s th at comprise the network, indiv iduals who lin k

th e clusters, and other network members. It he lps diagnose commu nication patterns and,

consequently, communication effectiveness. Suc h

ana lysis of communicat io n patterns i s

>L04.4

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f The importance

of social

netwo r ks in

 

~ knowledge managemen t and in promoting career success.

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social ne tw ork

analysi s ana lvs is of t he pa tt ern o f social int eractio n s among individuals.

helpful because the configu r ation of g r oup members' social ties within and outside the group affects th e exte n t to which members connect to indiv iduals wh o:

convey needed resources,

have the opportunity to exchange information and support,

have the motivation to treat each other in positive ways, and,

have the time to develop trusting relationships that might improve the groups' effectiveness.

However, such relat ionships don't "just happen."

Developing socia l capital requi res

interdepende nce among group members. Socia l capital erodes when peop le in the network become independent. And increased interactions between members aid in the develop - ment and maintenance of mutual obliga tions in a social network. Social networks such as Facebook may facilitate increased interactions between members in a socia l network via Internet-based communicat i ons.

strategy spotlight

Don't Go Aw ay Mad A re a Valued Al u m !

.. .

No w Yo u

Trad itionally, when an employee is laid off, the relat i on - ship between the company and that person comes to a

bitter end. Inc reasingly, leading-edge

companies such as

Dow Chemica l and J PMorgan Chase are trying to main - tain ties with their "alumni," even if they are moving on to

other companies. What benefi t s do these efforts provide to the company and its ex-employees?

SO\l=: Baker, S. 2009 . You're 4 : 53-55.

Fired -

But Stay in Touch. Bu.rjne:s.r~ek. May

4 . 3

These al umni networks, which are often organized on

Facebook

or Linkedln, offer their members valuable ben -

efits such as f ree job ads and connections to others who

might help them in find i ng neurial opportunities. For

new jobs or facilitating entrepre- the fi rm, these networks consti-

tute a laboratory for l earning . Former employees who have nice things to say about a company are essentia ll y "b rand ambassadors N who can he lp in future recru iting efforts. The companies can also track the discussions in the netwo rk to

identify hot topics, companies, products, and techno l ogies. Best of all, when the economy recovers, this is an enor-

mo us talent pool for recruit i ng

workers who are already

fami liar with t he company and socialized into its culture.

Let's take a brief look at a simp lified network analysis to get a grasp of the key ideas . In Exhibit4.6, the links are used to depict infonnal relationships among individuals involv- ing communication flows, personal support, and advice networks. There may be some indi - viduals with litera ll y no linkages, such as Fred. These individuals are typica lly labe led "isolates." However, most people do have some linkages with others. To simplify, there are two primary types of mechanisms through which social capital will flow: closure relationships (depicted by Bill, Frank, Geo rge, and Susan) and bridging relationships (depicted by Mary). As we can see, in the fanner relat i onships one member is centra l to the communication flows in a group, In contrast, in the latter relationship, one person "bridges" or brings together groups that would have been otherwise unconnected. Both closure and bridging relationships have important implications for the effective flow of information in orga nizations and for the management of knowledge. We win now briefly discuss each of these types of relationships. We will also address some of the impli - cations that understanding social networks has for one's career success.

• Fred Geo rge Susan
Fred
Geo rge
Susan

Exhibit 4 ,6 A Simplified So cial Network

This document is authorized for use by Emily Chen, from 1/3/2015 to 5/18/2015, in the course:
This document is authorized for use by Emily Chen, from 1/3/2015 to 5/18/2015, in the course:

MGMT 101: 001-003 Introduction to Management - Haas (Spring 2015), University of Pennsylvania. Any unauthorized use or reproduction of this document is strictly prohibited.

Closure With closure, many members have relationships (or ties) with other members. As indicated in Exhibit 4.6 , Bill's group would have a higher level of closure than Frank, Susan, or George's groups because more group members are connected to each other. Through closure , group members deve l op strong relationships with each other, high levels of trust, and greater solidarity. High levels of trust help to ensure that informal norms in the group are eaSi ly enforced and there is less "free riding." Social pressure will prevent peop le from withholding effort or shirking their responsibilities. In addit ion, peop le in the network are more willing to extend favors and "go t he extra mile" on a colleague's behalf because they are confident that their efforts will be reciprocated by another member in their group. Another benefit of a network with closure is the high level of emotional sup- port. This becomes particularly valuable when setbacks occur that may destroy morale or an unexpected tragedy happens that might cause the group to lose its focus. Social support helps the group to rebound from misfortune and get back on track. But high levels of closure often come with a price. Groups that become too closed can become insular. They cut themselves off from the rest of the organization and fail to share what they are learning from people outside their group. Research shows that while managers need to encourage closure up to a poi nt, if there is too much closure, they need to encourage people to open up their groups and infuse new ideas through bridging relationships.

Bridging Re l atio n ships The closure perspective rests on an assumption that there is a high level of similarity among group members. However, members can be quite heteroge- neous with regard to their positions in either the formal or infonnal structures of the group or the organization. Such heterogeneity exists because of, for example, vert ical boundaries (different levels in the hierarchy) and horizontal boundaries (different functional areas). Bri d gi n g re latio n sh i p s, in contrast to closure, stresses the importance of ties con- necting people. Employees who bridge disconnected peop le tend to receive timely, diverse information because of their access to a wide range of heterogeneous information flows. Such bridging relationships span a number of different types of boundaries. The University of Chicago's Ron Burt originally coined the term "st ru ct u ra l holes" to refer to the social gap between two groups . Structural holes are common in organizations. \¥hen they occur in business, managers typically refer to them as "silos" or "stovepipes." Sales and engineering are a classic example of two groups whose members tradit ionally interact with their peers rather than across groups. A study that Burt conducted at Raytheon, a $25 billion U.S. electronics company and military contractor, provides further insight into the benefits of bridging.

r

closur e the degree to which

A

~ with other group \. members.

  • l all members of a J social network have re l ationships (or ties)

b rid g ing

r e lat io n ship s relationships in a social network that connect otherwise disconnected people.

st r u c t ura l h o les social gaps between groups in a social network where there are few relationships bridging the groups.

Burt studied several hundred managers in Raytheon's supply chain group and asked them to write down ideas to improve the company's supp ly chain management. Then he asked two Raytheon executives to rate the ideas. The conc lusion: The best suggestions

consistently came/rom managers who discussed ideas outside their regular workgroup.

Burt found that Raytheon managers were good at thinking of ideas but bad at deve lop-

ing them . Too often , Burt said, the managers discussed their ideas with colleagues already

in their informa l discussion network. Instead, he said, they should have had discussions outside their typical contacts, particularly with an infonnal boss , or someone with enough power to be an ally but not an actual supervisor.

Before we address how to overcome barriers to collaboration and the implications of social network theory for managers' career success, one might ask Which is the more valu- able mechanism to develop and nurture socia l capital-dosure or bridging relationships? As with many aspects of strategic management, the answer becomes: "It all depends." So let's look at a few contingent issues. First, consider firms in competitive environments characterized by rapidly changing technologies and markets. Such firms should bridge relatio n ships across networks because

they need a wide variety of timely sources of infonnation. Also, innovation is facilitated if the re are mUltiple , interdisciplinary perspectives. On the other hand, finns competing in a stable environment would typically face less unpredictability. T hus, the cohesive ties asso- ciated with network closure would help to ensure the timely and effective implementat ion of strategies.

A second contingent factor wou l d be

the type of business strategies tha t a firm may

choose to follow (a topic that we address next in Chapter 5). Managers with social net -

  • I I

1

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:,

un i f i c ation leve r

method fo r making people mo re willing to collaborate by

crafting compelling

common goals

articulating a strong va l ue of cross-

company teamwork,

and encou r aging

co ll ,bo"lion in

orde r to send strong signals to

~ lift people's sights

" beyond their na rrow

.~ interests towards a ~, commo n goal.

network

lever method for

making people more

wi lli ng to collabora t e

by b u ildi ng nimble

Int e rpe rsona l

networks across the \. company.

T-Shaped

management

f people's dua l focus on

t he pe rf o r mance of

" their un it (the vertical

t

part of

th eT) and

~ across

bounda r ies

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(t he horizontal part of

\, t heT).

( people lever

  • I method fo r making

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people more willing to collaborate by

getting the rig ht

  • i people to work on \. t h e right projects.

works characterized by clos u re would be in a preferred position if their firm is following an overall low cost strategy. Here, there is a n eed for control a n d coordination to implement strategies that are rather constrained by pressures to reduce costs. Alternative ly, the unce r- tainties generally associated with differentiation strategies (i.e., creating products that are perceived by customers as unique and highly valued) would require a broad range of in for - mation sources and inputs. Social networks characterized by bridging relationships ac r oss

groups

wo ul d access the diverse informatio n al sources n eeded to deal with more complex,

multifaceted strategies. A caveat: In both contingencies that we have discussed-compet itive environment and business strategy--closure and bridging re lationships across groups are necessary. Ou r purpose i s to address where one type should be mo re dominan t.

D evelopin g Social C api t a l: O vercomin g Ba rriers t o C oUaboration

Soc i al

capital within a group or organization deve lops through r epeated interactions among its members and the resulting collaboration. Howeve r, collaboration does not "just happen." People do n 't collaborate for various reasons. Effective co ll aborat ion requires overcoming four barriers:

The n ot-Invented -here barrier (people a r en 't wi ll ing to prov ide help)

The

hoarding barrier (people aren't willing to provide he lp)

The search barrier (people are unable to find what they are looking for) The transfer barrier (people are un able to work w ith the people they don't know well)

All four barrie r s n eed to be low before effective co ll aboration can take place. Eac h one is eno ugh to pr eve nt peop le from collaborati n g wel l. The key i s to ident i fy which barriers are present in an organization and then to dev i se appropriate ways to overcome them. Differe n t barriers require differen t solutions. Motivational barriers require leaders to pu ll levers that make peo p le more willing to collaborate. Ability bar ri ers mean that

leade r s need to pull levers that

enable motivated people to collaborate throughout the

o rgan ization. To be effective , leaders can choose a mix of three levers. First , when motivation is the prob lem, they can use the unification lever, wherein they cr aft compelling common goals, articu late a strong value of cross-company tea m work, and encourage collaboration

in orde r to se n d

strong sig nals to l ift people's sights

beyo n d their narrow interests toward

a common goal. Second, with the people lever, the emp h asis i sn't on getting peop le to collaborate more. Rath er, it's on gett ing the right peop l e to collaborate on the right projects . T h is means culti - vating what may be called T-shaped management: people who simultaneously focus on t he performance of their unit (the vertical part of the T) and across boundaries (the h or izontal part of the T). People become able to collaborate when needed but are disciplined enough t o say no when it 's not required. Third, by using the network lever, leaders can build nimble interpersonal networks across the company so th at employees are better able to collaborate. Interpersona l net -

works are more effective than fonnal hierarchies. However, there is a dark s ide to net- works: Whe n people spend more time networking than getting work done, collaboration can adversely affect results.

4.4

, Pic as s o versus van Gogh: Who

, More

S uc c es sful and W hy ?

Was

Vincent van Gogh and Pablo Picasso are two of the most iconoclastic-and famous-artists of modem times. Pa int- ings by both of them have fetched over $100 million. And both of them were responsible for some of the most iconic

images in the art wor ld: Van Gogh's Self·Portrait (the one

  • i sans the earlobe) and Starry Night and Picasso's The Old

Guitarist and Guernica. However, there is an important dif·

ference between van Gogh and Picasso. Van Gogh died

penniless. Picasso's estate was estimated at $750 million when he died in 1973. What was the difference? Van Gogh's primary connection to the art worl d was through his brother. Unfortunately, this co nnection didn't

feed directly into the money that CQuid have turned him

into a living success. In contrast, Picasso's myriad con-

nections provided him with access to commercial riches.

  • I As noted by Gregory Berns in his book Iconoclast: A Neu-

roscientist Reveals How to Think Differently, "Picasso's

. wide ranging social net wo rk, which inc luded artists, writ-

ers, and po liticians, meant that he was neve r more

than

a few peop le away from anyone of importance in the

world."

In effect, van Gogh was a loner, and the charismatic

Picasso was an active member of multiple social circles. In

social networking terms, van Gogh was a solitary "node"

who had few connections. Picasso, on the other hand ,

was a "hub" who embedded himself in a vast network

SOllIl,:CS: H~hi, A. M. 2008 . Why Picas so Out Earned van Gogh. MIT $I04n Managemem Review, SO(l): 11-12; and Berns, G. 2008. A Neuroscientist

Revea/.r How 10 TlH"nk Differently. Boston, MA: Harvard Business PM8$.

strategy spotlight

4.4 , P ic a s s o versus van Gogh: Who , More S uc

Picasso was far more financially successful during his lifetime

than van Gogh largely because of his extensive social network.

that stretched across various social lines. Where Picasso

smoothly navigated multiple social circles, van Gogh

had to struggle just to ma intain connections with even

those closest to him. Van Gogh inhabited an

alien wor ld,

whereas Picasso was a social magnet. And because he

knew so man)' people, the world was at Picasso's finger-

tips. From his perspective, the world was smaller.

Implications for Car eer Su ccess

J p nv a e

i

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t

  • Ii info rm at i o n

Let's go back in time in order to illustrate the value I" information that is

of social networks in one's career success. Consider two of the most celebrated artists of all . not ~vailable from

time: Vincent van Gogh and Pablo Picasso. Strategy Spotlight 4.4 points out why these two . publ~c sources,

artists enjoyed sharply contrasting levels of success during their lifetimes.

~ and IS uS~allYd ' h

EffectIve SOCial networks proVlde many advantages for the firm. They can playa key ij context commUnicate of personal t

...

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In

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role in an individua l's career advancement and success. One's social network potentially , relationships.

can provid e three unique advantag es: private information, acce ss to diverse skill sets, and '

power. Managers see these advantages at work every day but might not consider how their

networks regulate them.

f

....

publi c mforma t lo n

information that is

.

.

.

Private lltform ation We make judgments, using both public and private information. Today, t" available from public

pu

bI

IC ' miormation . IS aval '1 a bI

C

••

e

fr

om many

sources, mc I u d'

'

mg t

h e

In

ternet.

H

owever, Since It

..

d ,~ internet. sources such as the

is so accessible, public information offers less competitive advantage than it used

to.

....

In contrast, private information from personal contacts can offer something not found in publicly available sources, such as the release date of a new product or knowledge about what a particular interviewer looks for in candidates. Private information can give manag- ers an edge, though it is more subjective than public information since it cannot be easi ly

verified by independent sources, such as Dunn & Bradstreet. Consequently the value of your private infonnation to others-and the value of others' private information to you-

depends on how much trust exists in the network of relationships.

Access to Diverse Skill Sets Linus Pauling, one of only two people to win a Nobel Prize in two different areas and considered one of the towering geniuses of the 20th century, attrib- uted his creative success not to his immense brainpower or luck but to his diverse contacts. He said, "The best way to have a good idea is to have a lot of ideas. " Whi l e expertise has become more specialized during the past 15 years, organizational, product, and marketing issues have become more interdisciplinary. This means that success is tied to the ability to transcend natural skill limitations through others. Highly diverse network relationships, therefore, can help you deve l op more complete, creative , and unbi- ased perspectives on issues. Trading information or skills with people whose experiences differ from your own, provides you with unique, exceptionally valuable resources. It is common for people in relationships to share their problems. If you know enough people , you will begin to see how the problems that another person is struggling with can be solved by the solutions being developed by others. If you can bring together problems and solu- tions, it will greatly benefit your career.

Power Traditionally, a manager's power was embedded in a firm's hierarchy. But, when corporate organizations became flatter, more like pancakes than pyramids, that power was repositioned in the network's brokers (people who bridged multiple networks) , who could adapt to changes in the organization, develop clients, and synthesize opposing points of view. Such brokers weren't necessarily at the top of the hierarchy or experts in their fields , but they linked specialists in the firm with trustworthy and informative relationships. Most personal networks are highly clustered; that is, an individual's friends are likely to be friends with one another as well. Most corporate networks are made up of several clusters that have few links between them. Brokers are especially powerful because they connect separate clusters, thus stimulating collaboration among otherwise independent specialists. Before moving on, Strategy Spotlight 4.5 discusses an interesting research study. It points out how women may differ from men in how they develop their social networks.

The Potential Downside of Social Capital

groupthink a

tendency in an

f . organization for

, individuals not to

~ qu:stion shared

"\ beltefs.

We'd like to close our discussion of social capital by addressing some of its limitations. First, some firms have been adversely affected by very high levels of social capital because it may breed "groupt hink" -a tendency not to question shared beliefs. Such thinking may occur in networks with high levels of closure where there i s little input from people outside of the network. In effect, too many warm and fuzzy feelings among group members prevent people from rigorously challenging each other. People are discouraged from engaging in the "c reative abrasion" that Dorothy Leonard of Harvard University describes as a key source of innovation. Two firms that were well known for their collegi- ality, strong sense of employee membership, and humane treatment-Digital Equipment (now part of Hewlett-Packard) and Polaroid-suffered greatly from market misjudgments and strategic errors. The aforementioned aspects of their culture contributed to their problems.

This document is authorized for use by Emily Chen, from 1/3/2015 to 5/18/2015, in the course:

MGMT 101: 001-003 Introduction to Management - Haas (Spring 2015), University of Pennsylvania. Any unauthorized use or reproduction of this document is strictly prohibited.

4.5

Developing So cial Capital: Do Women and Men Differ?

Several years ago, Boris Groysberg conducted a study in

which he warned managers about the risks associated

with hiring star performers aw ay from companies. His

research investigated more than 1,000 star stock analysts, and he found that when one of them switches companies, not only does the star's performance plunge, but also the market value of the star's new company declines. In addi-

tion, the

players don't tend to stay w ith their new firms

very long-despite the generous pay packages that lured them in the first place. So everyone loses out. However, when Groysberg further analyzed the data, he gained some new insights. One group of analysts main-

tained their stardom after changing employers: women.

Unlike their male counterparts, female stars who switched

firms performed just as well, in aggregate, as those who

stayed put.

Why the gender discrepancy? There were two expla·

nations. First the best female analysts appear to have built their franchises on portable, external relationships with clients and companies they covered-rather than on relationships within their firms. In contrast, male analysts

Sourc e : Groysbel'8, B . 2008 . How Star Women Build Portabl e Skills. Harvard Business RClliew. 86 (2): 74-81.

strategy spotlight

built up greater firm· and team·specific human capi·

tal. That is, they invested more in internal networks and

unique capabilities and resources of the firms where they

worked.

Second, women took greater care when assessing a

prospective employer. They evaluated their options more

carefully and analyzed a wider range of factors than men

did before deciding to uproot themselves from a firm whe re

they had been successful. Female star analysts, it seems,

take their work environment more seriously yet rel y on it

less than male stars do. And they tend to look for a firm that

will allow them to keep building their successful franchise

their own way.

There is a clear explanation as to why the female

analysts spent more time developing their external net·

works . Most salespeople,

traders, and investment bank·

ers are men. And men tend to spend more time with other

men. Not surprisingly, the star women in the study were

generally thwarted in their efforts to integrate themselves

into the existing power str ucture. Thus, they went to

greater lengths to cultivate relationships with clients and

contacts at the companies they covered. Their decision

to maintain such an external focus rested on four main

factors: uneasy in· house relationships, poor mentorships,

neglect by colleagues, and a vulnerable position in the

labor market.

Second, if there are deep-rooted mindsets, th ere would be a tendency to develop dys-

functional human resource practices. That is , the organizatio n (or

group) would continue to

hire, reward, and promote like-minded people who tend to further intensify organizat iona l

iner ti a and erode

innovation. Such homogeneity would increase over time and decrease the

effectiveness of decision-making processes.

Third, the socialization processes (o rientation, training, etc.) can

be ex pensive in terms

of both financial resources and managerial commitment. Such investments can repr esen t

a significant opportunity cost that should be evaluat ed in terms of the intended benefits. If

such expenses become excessive, profitability would be adversely affected.

Finally, individuals may use the contacts they develop to pursue their own interests

and agendas that may be inconsistent with the organization's goals and objectives. Thus,

they may distort or select ively use information to favor their preferred courses of action or

withhold information in their own self-interest to enhance their power to the detriment of

the common good. Drawing on our discussion of social networks, this is particularly true

in an organization that has too many bridging relationsh ip s but not enough closure rela-

tionships. In high closure groups, it is easier to watch each other to ensure that illegal or

unethical acts don't occur. By contrast, bridging relationships make it easier for a person to

play one group or individual off on another, with no one being the wiser.