Thursday, 27 December 2012

Your Network Balance Sheet

Monday 13 October, 2008
Like so many good ideas, actually doing networking is harder for many of us than reading about it. And, unfortunately, most networking discussions and articles stop far short of the "how".
Networks and networking are a hot topic. Both academic research and mainstream business publications suggest that networks are important in business and that getting it right may relate to your performance. 
"How" do I create a network that fits with my situation and objectives to maximise my performance? What is the current value of my network and how can I improve my network and networking approach? These are questions of considerable personal importance that should be thought through before embarking on what otherwise might be pointless and painful networking.
We should stress, before we start, that this is all about "objective oriented" networking, i.e. networking done in the pursuit of some specific objective. What we are suggesting here should not, in any way, be seen as being manipulative, duplicitous, or suggesting "inauthentic" relationships.
Nor should it be seen as a substitute for "having a real life". In fact, we strongly believe that networking is very much a part of having a rich and successful "real" life, and what we propose might help the reader achieve that objective.
Since the whole point of networks and networking is to create "social capital", we'll now borrow from our finance colleagues and propose a "networking balance sheet" to assess the value of your current network.
The objective of this article is to help you think about your network strategically, especially the people in it and your relationships with them, and to suggest an approach to increase the value of your network relative to your specific objectives.

The network balance sheet: Why does this make sense?

Every network is composed of three basic elements:
  1. The people in the network
  2. The type of relationships you have with them
  3. How the individuals are connected or network structure
For each of us, these network elements have varying strengths and weaknesses depending on our objectives and business or industry environment. Most network research relies on a technique called Social Network Analysis (SNA) to look at and measure networks. SNA focuses on the structure of networks by graphing the relationships between network members.
The results tend to define the roles individuals play within network structures and the level of trust within the network as a whole. The problem with SNA is that it considers only a part of the personal network value.
In contrast our "network balance sheet" approach focuses more on the characteristics of each person in your individual network and the types of relationships you have with those people, characteristics that are also important in your networking success and characteristics which you have control over to improve the value of your network.
If you were asked to assess the value of a company you would ask to see the company's annual report. The balance sheet would be an important piece of information in your assessment. Think of it as being a scorecard of business, which provides insight into the performance and prospects for the organisation.
Now let's think about developing a similar scorecard for our own performance and prospects, relative to building a network of relationships for better ideas and opportunities.
By constructing a networking balance sheet to assess the social capital of our networks at a specific point in time, and then employing a more "financial" assessment to assess our network, relative to a particular project or objective, we can give ourselves a better chance to see the strengths and the weaknesses of our network, and to consider the actions we might take to improve the situation.

Assessing your network

To apply this networking balance sheet idea, let's start with a simple approach:
  1. List the people in your network

    Write them down ... Your boss, your colleagues, family members, college roommates, clients, advisors, your daughter's teacher, your Monday night squash partner, etc.

    Get out your address book, or look at who you are connected to on LinkedIn, Plaxo, Xing or Facebook. Who have you e-mailed in the past three months? Look at your mobile phone; who have you called more than twice over the past 6 months? Write all of those names down on a piece of paper.
  2. Categorise the people in your network

    Simple categories like Colleagues, Clients, Family, and Friends are a good start. A slightly more advanced approach might be by industry, age or geographic location.
  3. Try to define the types of relationships you have with these people

    For example, it could be based on the length of time you have known them or the level of trust you have with them. "People I'm in contact with every day", "People I interact with once a month", "People I never see, but whom I can call anytime" and "People I haven't seen in years who may not remember me". Or "People who love me", "People who trust me", "Acquaintances", and "People who dislike me".

    What is important is that you think which categories and relationships are important to you and your objectives.
  4. Place the people in your network onto the balance sheet

    Who would you list as an asset? Who may be a network liability? How would you characterise your equity in terms of help you have given to others and your own reputation? What is your attitude toward networking and your skill at it - is it an asset or a liability?

    What other assets might be listed here besides people? These might include your own attitudes, behaviours, positions, memberships, etc. that give you an advantage in meeting interesting people and converting those meeting opportunities into networking relationships. So, assets include actual contacts, plus those personal conditions and fortunes that are advantageous in building and holding contacts.
Trust is one of the important elements in your relationship with the people in your network, and in a similar approach, Stephen M.R. Covey defined "trust accounts" such that "by behaving in ways that build trust, you make deposits, and by behaving in ways that destroy trust, you make withdrawals. The ‘balance' in the account reflects the amount of trust in the relationship at any given time".
When we get to what might be considered a network liability, we're probably more involved with recognised gaps in your current networking membership (e.g., I don't have enough young people; enough people working in venture capital, etc.) as well as shortcomings in attitudes, behaviours, positions and memberships.
The idea is not to beat yourself up here, but to be candid and honest about what you have and do not have going for you in the quest to build more effective networks. If, for example, you've got no one with China experience in your network, that's most likely, in most industries these days, a liability. Recognise it, and then determine if, and how, it should be remedied.
Just as shareholder's equity is the difference between the firm's assets and liabilities, so too is your own personal equity on your networking balance sheet. If my assets, as I've listed them, are much more positive than my liabilities, my equity should be high, revealing considerable personal value from my networking situation.
If, on the other hand, my liabilities are outweighing my assets, then I probably already realise that my networking situation is in a sorry state, and my personal networking equity is negative, signaling a need for future investment if I am to improve the situation.
The point here is not to strive for a precise value, but for a subjective assessment.
In thinking about your assets, liabilities and equity, a few questions may come to you such as:
  • If a person is an asset today and you don't spend time with them, does the value of that particular asset go down? Covey suggested that it is important to make "deposits" in your trust accounts: deposits that mean something to the person with whom you have the relationship. In addition, he suggested that withdrawals are typically larger than deposits. As Warren Buffett has said, "It takes twenty years to build a reputation and five minutes to ruin it".
  • You may wish to differentiate between "fixed" and "current" assets. I have lifelong friendships which would take a lot to dissolve ... hence, they are fixed. On the other hand, my "current" assets might be the result of my present position and could erode quickly if not maintained.
  • If someone I know thinks that I have forgotten them, or worse, dislikes me, are they a liability?
  • What is your own reputation or status within your organisation? Jensen suggested that status and reputation are signals about your quality and are especially important in new situations to help reduce uncertainty. Status is based on your position in your organisation and ties that you have with others, while reputation is based on your past performance.
The table below suggests an approach to categorising the contacts and types of relationships you have with them into a networking balance sheet:
 Assets  Liabilities and equity
Current assets:
  • People with whom I have a less close relationship with but that I can call on immediately
  • People who are less close and less important but on whom I can call for more factual information
  • My attitude to networking and my level of skill (positive things)
Fixed assets:

  • People that I have a strong, trusting relationship with and that I can call on immediately
  • People with whom I have a good relationship and who are important, but who are distant from me
  • My status and position (physical, geographic, professional, title, company)
 Current liabilities:
  • Favours that I owe to less-important people
  • People who dislike me who are less important
  • My attitude to networking and my level of skill (things to improve)
Long-term liabilities:
  • Favours that I owe to important people
  • People who dislike me who are important
  • Favours I've done for others with no recompense
  • My reputation - My image - My record
  • The sum-difference between assets and liabilities, indicating, in spirit not numbers, the "value" of my present networking situation

After doing a first cut at your networking balance sheet, how do you assess its value? Are there many people with whom you have a strong, trusting relationship that you could call immediately if you needed them, i.e. your fixed assets? Are your networking skills well-honed and is your attitude toward networking positive? And what about your liabilities? Are there many important people who dislike you? Do you owe a lot of favors? How difficult would it be to meet new people? Cultivate new interests?
It may be surprising to readers that we include "People who dislike you" or "People I do not trust" in an article on networks and networking. After all, who wants to network with people they don't trust or like? But the fact that you know these people means that you cannot ignore them. They are in your network. Since they dislike you, they may spread bad rumours about you or actively seek to hurt your career. They are a liability, and ignoring a liability does not make it disappear.
You must deal with this liability, so better to acknowledge it and include it in your action or investment plans. 
Managers have almost 500 years of experience with dual-entry financial accounting, but only recently have people begun to try to understand how to place a value on their networks.


Networks are fundamentally about relationships with people. While we may hesitate to look at these relationships analytically for fear of being too manipulative, taking an honest look at our networks and relationships can be helpful to be sure that we are building effective and strong networks that will help us achieve our objectives.
A balance sheet is a snapshot at a moment in time. It tells you the value today, but doesn't tell you what you should do to increase the value in the future. In today's connected, fast-moving world, part of your success is built on the people you know and your ability to network. Improving your networking skills will be an advantage relative to your competition and will improve your efficiency and ability to find new ideas and solutions.
Believing that the value of your network can be improved and realising that increasing it requires effort on your part, will assure you of an asset that will increase in value over time that will be there when you need it.

Author Credits

Jim Pulcrano, Director IMD Switzerland, Janet Shaner, Director IMD MBA Marketing and Alumni Network and Bill Fischer, IMD Professor of Operations & Technology Management. IMD, a business school in Lausanne, Switzerland, is recognized as one of the world leaders in executive education.

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