Getting Deals Done: The Use of Social Networks in Bank Decision Making *

Economic actors confront various forms of uncertainty in their decision making, and the ways in which they deal with these obstacles may affect their success in accomplishing their goals. In this paper, we examine the means by which relationship managers in a major commercial bank attempt to close transactions with their corporate customers. We hypothesize that under conditions of high uncertainty, bankers will rely on colleagues with whom they are strongly tied for advice on and support of their deals. Drawing on recent network theory, we also hypothesize that transactions in which bankers use relatively sparse approval networks are more likely to successfully close than are transactions involving dense approval networks. We find support for both hypotheses. We conclude that bankers are faced with a strategic paradox: their tendency to rely on those they trust in dealing with uncertainty creates conditions that render deals less likely to successfully close. This represents an example of the unanticipated consequences of purposive social action. A primary goal of sociologists has been to demonstrate that the structure of social relations, or networks, has consequences for behavior and/or outcomes. More recently, a number of researchers have described actors' personal networks in terms of social capital, which they see as a resource that helps actors achieve particular ends. Increasingly, social capital has been viewed not only as a resource that we possess by virtue of our position in a social structure, but also as something that, within limits, we can create, or tailor, to serve our goals. But even if we construct our own social networks, the structures that we create may not have the consequences that we anticipated. In some cases, what appears to be a perfectly reasonable use of social capital can have consequences that are exactly the opposite of those we intended. This paper is an examination of the means by which organizational actors, members of a major commercial bank, use their social networks within the bank to close deals with their corporate customers. Our analysis consists of two stages. In the first stage, we propose hypotheses to account for the types of networks bankers construct. Building on a sizable literature in organizational sociology, we suggest that high levels of uncertainty will lead bankers to rely on their social ties within the bank. In the second stage, we argue that the structures of the networks created by these social relations affect the probability that a banker will successfully close a transaction. We show that the tendency of bankers to rely on those they trust in dealing with uncertainty leads them to create dense networks that actually reduce the probability of success. This strategic paradox, we argue, represents an example of the unanticipated consequences of purposive social action