New INSEAD research into how information flows across formal and informal networks within organzations has revealed that homophily can help junior employees access important information. But that benefit diminishes and actually reverses for more senior people.
Homophily is a long name for a common phenomenon: the tendency of people to seek out those who remind them of themselves. Researchers Gokhan Ertug and Martin Gargiulo studied the relationships of workers in the equities division of a global investment bank and found that people were indeed more likely to seek out those like themselves when they needed information or advice on a task-related topic.
For junior people, relying on homophily resulted in gaining access to more senior people with useful information. But for senior people, relying only on others who are like themselves actually led them to ignore colleagues who could provide valuable information – to their detriment.
Their research shows how the homophily trade-off works. “We argue that, while homophily might make it easier for workers to request and obtain knowledge from colleagues, it might also prompt them to approach less qualified colleagues.”
They add, “As is the case with other properties of informal networks, whether homophilous ties can help or hinder someone’s performance depends on the position the actor occupies in the formal (and informal) structure of the organization.”
Factors like ethnicity, gender, age, religion, education, and occupation all impact homophily. While controling for other factors, Ertug and Gargiulo focused on nationality. Because the investment bank they studied was global, employees came from a broad range of geographies.
They found that homophily affects people of different ranks in different ways.
“While there may be a number of factors that might make it harder or easier for a knowledge worker to secure attention from his or her colleagues, the worker’s position in the formal hierarchy of the firm is a particularly salient one. The position an employee occupies in the formal hierarchy of the firm is typically associated with specific levels of power and legitimacy. Because such a position is known to colleagues, it should affect their behavior towards the employee.”
People at the lower levels who have not yet “proven” themselves may have more difficulty gaining access to people with the information they need. Seeking out senior people of the same nationality was an effective strategy for gaining this information.
But, the researchers continue:
“Finally, we find that while the tendency to build homophilous ties has a positive effect on the performance of people in the entry rank among bonus-eligible bankers (associate directors in our sample), the same tendency has a negative effect on the performance of employees who are above this entry rank.”
When it came to senior people, relying primarily on homophilous ties for information led employees to ignore qualified colleagues who could help them succeed. And that showed through in their performance.
This finding is supported by previous research, the paper says, that “found that CEOs were more likely to venture beyond the familiar territory of homophilous relationships when seeking advice when they faced strong pressure to perform, either through stock ownership or performance-based bonuses.”
Diversity and Homophily
The results of the paper add an interesting layer to the notion of networking and diversity. While this research focuses on nationality, the researchers posit that the effect would be similar on other measures of diversity – like gender or race.
At the lower levels, networking and building relationships with senior people of the same nationality, gender, race, etc, may help employees gain access to task-related information that can improve their job performance. But just past the entry-level, the importance of networking with a broad range of people becomes critical. Ertug and Gargiulo write:
“Relying on similar people to form instrumental ties can be an effective survival strategy for people facing significant difficulties in securing access to the information and knowledge they need to carry out their jobs in the organization. At the same time, sticking to such a strategy when it is no longer necessary can harm performance.”
This should also provide an incentive for firms to facilitate a more inclusive work environment. When senior people perform better, the firm performs better. Creating an environment where all individuals are able to effectively communicate and network with those who are different from them will help companies fully leverage the value of diversity.