INSEAD KNOWLEDGE – ALVIN LEE
Alvin Lee New hires often seek professional advice from colleagues of the same nationality or background as a means of settling into a new environment. But this reliance on compatriots can work against you.
“B
irds of a feather flock together” is often used to describe the concept of “homophily”, a term coined by sociologists Robert Merton and Paul Lazarsfeld at Columbia University. It describes how people tend to associate with those who share similar characteristics with them, ranging from ethnicity to gender, religion etc. This commonly observed behaviour has been the subject of extensive studies, but for INSEAD Professor of Organisational Behaviour, Martin Gargiulo, one aspect of homophily has not been adequately addressed: how it affects work performance. In a Working Paper entitled “ Does Homophily Affect Performance?” Gargiulo and Assistant Professor of Strategic Management at Singapore Management University, Gokhan Ertug (INSEAD Ph.D. in Management, 2008) focused on nationality as a shared characteristic, and how it affects job performance on investment bankers. “ If you are new, you’ve just been hired at an investment bank or consulting firm, it’s a difficult environment, you are likely to look for people who could be more helpful,” Gargiulo explains. “ You don’t know it, but you would expect people of the same nationality as you, especially if you’re a minority, will be more naturally inclined to help. That’s why we chose nationality.”
Gargiulo continues, “ We chose investment bankers because we wanted a context in which informal relationships of knowledge transfers are very consequential for the performance of the individual. I mean, this is true of any organisation today, but in this knowledge-based organisation such as investment banking and consulting, it is particularly the case.”
“For new hires, the accessibility of others is more important probably than the quality of the knowledge that they have. They’d better get something rather than nothing,” says Gargiulo. “But once you have gone through your first promotion, now you’re a player. We have hopes that you may continue to become a managing director, partner, depending on the particular system.
For new hires, the accessibility of others is more important probably than the quality of the knowledge that they have.” Show me the money! The paper studied 1,746 investment bankers at a major international bank, with their performance measured by the bonuses they earned. These bankers were classified into four ranks, from most junior to most senior: Associate Director; Director (VicePresident); Executive Director (Senior Vice-President); and Managing Director. After controlling for factors that might affect how much bonus a banker earns e.g. tenure, rank, age, function, etc, Gargiulo came to one main conclusion: homophily helps a new hire, but hinders an experienced banker gunning for a promotion into senior management.
Now we’re taking you seriously. You don’t need to go around relying on people like you anymore.” Gargiulo elaborates, “At the same time, if I rely on people like me, almost by definition, I restrict the pool of potential suppliers, if you will. There may be some good people that could be providing advice and help to me that I don’t seek.” Choose your office friends wisely This is consistent with another finding of the research: a junior banker is likely to approach a senior banker of the same nationality for advice even if he knows of a senior banker with superior knowledge CEO MAGAZINE
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