Humans are hard-wired to be more likely to trust people who look, think and act like they do. They unconsciously gravitate towards similar types. And this is how business networks in Australia have evolved.
Same same: Tight-knit networks whose participants are similar can lead to stale ideas.
A network is simply a set of connections. Networks can link people, computers and businesses. Connections between entities facilitate the flow of information or resources. Your network might help you learn about something new or provide assistance when you need it.
Networks take two main forms.
Intensive networks are tight-knit connections with similar ideas and characteristics. The similarity of the participants means that they trust each other and communicate easily, but this can also lead to stale ideas.
The problem with both the old boys’ network and the old girls’ network is that while they might be great for trust and communication, they deepen inequality.
Diverse networks are sparse connections with different ideas and characteristics. The diversity of participants means that trust and communication might be more difficult, but successful connections are likely to be innovative.
Since the 1910s, Australia’s corporate networks have been persistently populated by a very homogenous group. My research – The Boarding Pass – indicates all have been middle-aged or older, more than 95 per cent white and mostly male with accounting, law, engineering or management degrees. But this is beginning to change – slowly.
Old girls’ networks – it’s a start
Women have been appointed to company boards in much greater numbers in recent years, although we still don’t have gender equality. While this is an improvement, many of the women appointed are similar in class, ethnicity and education to their male counterparts. These women have now created their own professional networks and, unsurprisingly, appoint other women who look, think and act like they do to corporate leadership positions.
Same old: Like their male counterparts, women appoint other women who look, think and act like they do to corporate leadership positions.
The problem with both the old boys’ networks and the old girls’ networks is that while they might be great for trust and communication, they deepen inequality by ensuring that the people in power usually stay in power. Fresh ideas are stifled and groupthink is maintained.
This can lead companies to engage in the sort of conduct that prompted the Royal Commission into banking.
The challenge is to produce networks that balance trust with different ideas. In other words, diverse networks.
Networks are inevitable and necessary
Businesses rarely have all the information or resources they require within their own entity, so they need to connect with others. A firm needs to be connected to its stakeholders – suppliers, contractors, employees and investors. And they need to be connected to government to ensure compliance with regulations.
It is often also beneficial to cooperate with competitors, to pool labour resources, or infrastructure, or knowledge about the industry. For example, the Big Four accounting firms (Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers) are all competitors but often hire from the same pool of recruits. They know that members of the pool have the necessary knowledge and skills.
My research considers an historical example of this. In Melbourne in the 1920s, more than 120 smallish woolbroking firms had offices within a three block radius, centred on Collins Street. They co-operated to pool necessary infrastructure, including sharing space in the main auction house.
Leaders of the community (representatives of the largest firms) also co-operated through professional associations to ensure the success of the industry. They were competitors but the trade required they cooperate.
Extra importance during COVID-19
Business networks are an acknowledgment that you can’t do it alone. They are there to help; to mitigate some of the uncertainty of the environment. They are a resource. If something unexpected comes up, and you don’t know how to fix it, your network may have a solution.
In times of crisis, such as the current pandemic, networks are more important than ever. Some of my research has found that co-operation between firms mitigates the effects of external uncertainty.
Referring back to the woolbroking example, leaders of Melbourne’s main firms worked together to provide a united voice when negotiating with the government over the regulation of wool-selling systems and the establishment of a central bank.
Five tips for successful networking
- Unfortunately, it is inescapable that your gender, ethnicity and class will matter. Being aware and educated about unconscious bias is an important step.
- Use this to your advantage to develop tight-knit connections. Find people who are similar to you, who you trust and who can advocate for you. If you are a woman, join women in leadership groups, and so on.
- Diversity is a benefit. Intensive networks can be stale, while diverse networks are often innovative.
- Highlight how your unique experience or knowledge can contribute a new perspective.
- Mentoring is important. Seek it out for yourself and provide it to others.
Dr Claire Wright, pictured, is a Research Fellow in the Department of Management at Macquarie Business School.
