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 be successful. This represents an example of the unanticipated consequences of purposive social action. Uncertainty is a fact of life. The lack of knowledge about possible options and the outcomes of the choices associated with those options is a driving force in virtually all aspects of human decision making. From decisions on where to live, what school to attend, whom to marry (or whether to marry), and what occupation to pursue, social actors must almost always make their decision without knowledge of the consequences. We may seek control over the outcomes of our decisions, but we are never entirely successful in gaining this control. And as much as we bemoan the existence of uncertainty, life would be boring without it. Uncertainty bedevils organizational life as well. Non-profit organizations struggle to gain information on ways to improve their funding base. Government agencies fear potential budget cuts in the legislature. And corporations merge in attempts to gain control of their markets so as to increase the predictability of their performance. Some organizations have as their primary basis of existence the management of uncertainty. Perhaps there is no better example of such an organization than a bank. Whatever their line of business, banks' primary activity is to take risks. Banks are therefore an ideal laboratory to study how social actors manage uncertainty. This paper is an examination of the means by which organizational actors, members of a major commercial bank, manage uncertainty. We argue that although actors in risktaking organizations will rely heavily on formal assessment criteria in evaluating a potential transaction, these criteria will be insufficient under conditions of high uncertainty. When uncertainty is high, actors will rely on information obtained from their social relations with colleagues. The structures of the networks created by these social relations, we argue, will 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. Our primary foci, then, are on two issues: first, the relation between the level of uncertainty and the use of social networks with one’s colleagues within the