Investigations
The business of spreading gossip

Quality work and behavior may seem like the most logical ways to earn professional prestige, but it’s gossip that builds business reputations, says Ronald S. Burt, PhD’77, the Hobart W. Williams professor of sociology and strategy in the Graduate School of Business.

Sound and noble practices, of course, are important, Burt tells a group at the May 14 Graduate School of Business Management Conference, but “good work has the duration of morning dew.” If no one discusses it—recommending a company to peers or a colleague to managers—then no reputation, good or bad, builds. “You don’t own your reputation,” he says. “You’re the object of it.”

Bounding around the front of the semicircular Gleacher Center conference room, now and then running his hand through his thick, graying hair, Burt offers an example: the GSB. While teaching in the school’s Singapore and Barcelona programs, he’d hear alumni there complain about a lack of name recognition. Like Intel processors, he says, alumni “should have a stamp: Chicago inside.”

Burt himself would carry such a mark, having earned his Chicago doctorate in sociology. Later he took up consulting (the better to pay his children’s tuition costs), beginning to focus on business reputations after his 1992 book Structural Holes (Harvard University Press) was published. “I noticed in my consulting how important reputation was to being a network entrepreneur”—a person who communicates with many cross-company or cross-industry groups. When he joined the GSB faculty in 1993, he says, “I turned to getting a better understanding of how reputations were formed and sustained.”

He’s put his acquired knowledge to use in the business world. Taking leave from the GSB in 2000–01 to launch and direct Raytheon Company’s leadership institute, he’s continued working with the defense and government electronics company, currently through the GSB’s executive education program. At Raytheon he’d hear managers say things like, “Just do good work and your reputation will follow”; “Your behavior defines your reputation”; “In time people will forget the mistakes my service people made” and, with some expensive leadership and PR changes, the company’s reputation will improve; and “The way to inoculate my staff against” groupthink “is to ensure they have clear information.” As Burt will tell you, all of those statements are false.

In truth, reputations build daily. People tell stories to foster their own relationships, based on a common experience. As he reported in “Bandwidth and Echo: Trust, Information, and Gossip in Social Networks,” a chapter in the book Networks and Markets (Russell Sage Foundation, 2001), a worker is more likely to reinforce a colleague’s preconceived notion about a third employee than to add information.

“People will share data consistent with the tone of the conversation,” Burt tells his management conference audience. “If you say, ‘I’m so excited, I got promoted and get to work with X,’ I don’t want to rain on your parade, so I’ll sample from the good stuff [I know about X]”—and vice versa if the person begins in a negative tone. The conversation, he argues, is not about the person being discussed but about building ties between the two conversants.

How a reputation gets defined, Burt says, correlates with whether a person is a network entrepreneur, with contacts across groups, or if contacts are limited to one clique, where gossip flourishes. In a 1999 study he asked managers in electronics-equipment and financial-services companies, “Who has made it the most difficult to carry out your job responsibilities” and why? If citing a network entrepreneur, the managers often blamed the situation—for instance, the person had “a different management style and motivation.” But when citing workers insulated in one group, almost 70 percent of managers blamed the employees’ character, calling them “dishonest,” “egotistical,” or “a backstabber.”

Reputations affect more than popularity; they reach into a worker’s success level. Surveying investment bankers in 1995–96, Burt found that the more colleagues who liked a person at evaluation time, the higher the employee’s compensation level and the more likely he or she was to remain at the firm that year. Staying clear of office gossip altogether didn’t produce the same effects—when no one discussed an employee, his or her reputation had no stability from year to year. That’s why, Burt emphasizes, “it’s not enough to do good work.”

Once, for example, Burt contacted French companies, looking for business. “As an American calling on French firms,” he says, “I was blown off.” But when he asked executives at other French firms to accompany him, the earlier companies accepted him. “I needed some kind of reputation,” he says, “to get the people on the other side to buy into my ideas. This is why reputation matters.”

Recently Burt has found more reasons to build bridges and avoid cliques in the workplace. Not only do network entrepreneurs garner disproportionately higher compensation, positive performance evaluations, and promotions, but, he reports in the September 2004 American Journal of Sociology, their ideas also are judged to be better than their closed-off colleagues’.

“These brokers between groups in the organization,” he writes, “are more likely to express their ideas, less likely to have their ideas dismissed, and more likely to have their ideas evaluated as valuable.” Because they have access to many networks, they see and hear alternative concepts, and often they know where such plans can be put to use. “Creativity is no more than finding someone more ignorant than you,” Burt tells the group. “When you introduce an idea, people think you’re a genius. The value happens when you bring an idea to someone who can do something with it.”—A.M.B.