The Economic Theory of the Professional Networking Group

A salesman typically must incorporate dozens of calls, meetings, and administrative work in a single 8 to 16 hour shift, placing a great deal of value in the salesman's time. Separate these duties and you've got telemarketers, field reps, and back-office support, not to mention, decreased the firm's cost of having the salesman encounter prospects. The economic theory of the firm, then, holds true, in where firms get larger to reduce the cost associated with each transaction (as long as job responsibilities are gradually separated and delegated to other people in the firm). But the catch-22 is that the firm also experiences diminishing returns from its former size, encouraging growth perpetually.

This being the case, a salesman for the firm that becomes part of an external network of other salesman effectively does the same thing: reduces the cost of each encounter with a prospect, while simultaneously preventing diminishing returns from his or her fully utilized work shifts and increasing that most intangible of benefits, opportunities for personal and/or professional development.

Thus, a professional networking group can be said to be composed ideally of entrepreneurs who utilize the network in the same way firms utilize their workers. So, what motivates salesmen to network is self-interest more than interest in the firm they represent; this is comparative to how the firm employs a salesman to further its own interests, rather than to serve the interests of the salesman. The fundamental difference is that when a salesman is successful within the firm, everyone else in the firm benefits (emphasizing the importance of internal communications); but when a salesman is successful within a networking group, he/she is the only beneficiary. Although the network can benefit from the opportunities a successful member may present, there is no universal interest in the success of the group as a whole the same way there is a universal interest in the success of the firm.

Evidence of this is supported by the fact that salesman join multiple networks, but are seldom employed by more than one firm. As a result, a salesman can continuously reduce his cost of encountering prospects merely by joining many groups; while the firm can only reduce its cost by employing other salesmen.

Although a salesman's cost of encountering prospects can also be reduced as a networking group accepts more members, the returns the network's size offers the salesman diminish faster than the costs of encountering prospects. In other words, it is theoretically better for a salesman to join many networks than remain committed to one that grows (and churns).

Does the depth of a network relationship slow the diminishment of returns, offsetting the need to join other groups? No, since it's not a prerequisite of commitment to a single network to deepen a relationship; in fact, commitment encourages complacency, often causing a salesman to postpone enhancing relationships from natural procrastination. In other words, they find it difficult to appreciate the short moments they have to develop a relationship because they fully anticipate having many such moments during the course of their membership in the network. Meanwhile, a non-committed salesman appreciates and values each moment spent with new networking groups, motivating the salesman to quickly develop relationships since his or her time is too scarce to commit to one network for any extended period of time; he has other networks to access and activate for his own means.

Thus, as the logic clearly demonstrates, it is fully in the best interest of networking group participants (not the group as an entity) to join multiple groups for shorter timeframes than commit to fewer groups for longer time frames. This strategic networking ultimately enhances a salesman's own value to each network he or she joins.

Normatively speaking, no professional network should be "closed" - meaning only one CPA, banker, or mortgage broker per network - since the network exists for the sole benefit of individual salesmen, not the group. That's to say that a salesmen won't depend on a broker solely because said broker has exclusivity within the network (so it would be unrealistic to expect exclusivity within the network to increase a broker's opportunities and consequently, reduce their cost of encountering prospects). More importantly, "open" groups naturally encourage higher caliber salesmen to participate, since poor participants are weeded out while participants in the same profession are simultaneously motivated to deliver a greater service than the competitor.

Furthermore, no professional network should charge substantial dues for access to its network since value is expected to diminish for anyone who's committed. More effective than "pay-to-play" would be to operate open groups with quality controls such as minimum standards for access, strictly enforced through screening and a democratic process, whereby members exercise voting rights on allowing new candidates into the network; sponsorship/endorsement by current members; and natural peer pressure to participate as a resource for the network, encouraged by the natural thanking of other members for their patronage and support of the salesman.

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