Way to Grow

Why Networking Matters

When you started your business, you probably did a lot of networking. I hope you haven't stopped. Building a business takes time, and it grows faster with referrals. But that's not the only reason to network. People you meet through networking can turn out to be good resources for your business. When you need specialized professional services, for example, someone in your network can probably refer you to that specialist.

Patrick Carney had a wonderful metaphor for describing what works in business relationships:

Southern California is home to many huge, tall, lush eucalyptus trees that topple over fairly easily in the high winds that occur almost every year.  When they’re uprooted and blown over, you can see that their root system is broad and wide but not very deep at all. Imagine your network in terms of those eucalyptus trees – for it to be strong it must not only be broad, but also deep

So keep networking to deepen those roots, so those relationships will be there for you when you need them.

How You Pay Makes a Difference

Michael Sturman at Cornell's School of Hotel Administration found in a study that while raises increase performance, bonuses increase performance significantly more.

Simply spending more on employee pay would yield minimal results. Improving the merit-increase pool by one percentage point but otherwise not making any allocation changes, for example, would be projected to increase performance only by roughly 2 percent. However, if the same money was applied to pay-for-performance bonuses, the analysis suggests a performance increase of better than 15 percent. Indeed, the results suggest that providing a strong pay-for-performance link for bonuses rather than raises had the greatest potential benefit, predicted to improve employee performance by nearly 20 percent.

Sturman acknowledges that his study covered just one company of 700 employees. Further research might turn up differences. The result could be tied to other factors that weren't measured. But my gut tells me that while performance improvement may not always be as large as in the group he studied, there is a genuine motivational factor at work here. If employees believe, for example, that a pay raise is a cost-of-living adjustment, there is little challenge to them to perform better. However if they are told the increase is a bonus that is related to performance, there is a clear incentive to improve work habits.

Interesting. Even though the bonus is a delayed increase in compensation, it is valued more by hard-working employees.

A nod to Guy Kawasaki for uncovering the report.