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Networking is simply meeting and getting to know others. Knowing people will help you in your job search, so logic would dictate that the more people you know the better your chances are. Networking can be very targeted (going to an event put on by a firm) or nontargeted (meeting random people through friends, on the subway, or at a nightclub). You'll find that a lot of successful business people get where they are because of their ability to be "on" all the time (always ready to go the extra mile to meet new people and make others like them, no matter where they are or the time of day).
Networking does two important things for you in your job search:
1. Many people don't realize this, but the vast majority of job openings are never advertised and the positions are filled (if they ever are) by someone recommending someone else. This is why certain jobs that involve a lot of relationship building (like consulting and public accounting) give you so much job portability--you get to know your clients extremely well and, if you're competent, they'll know that.
2. Those in charge of the hiring process have several heuristics they use to narrow down the vast field of applicants when all of the applicants look the same. These heuristics can be tossed out the window, however, if that person has met certain applicants several times and has a better idea of whether or not that person is a good fit for the job/firm. Being a recognizable face helps and can compensate (a lot, in some instances) for a low GPA, having the wrong major or having no experience.
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