What is Social Capital and Why is it Important in Business?
Social capital is a set of shared values that allows individuals
to work together in a group to effectively achieve a
common purpose. (Investopedia)
You may have heard the term floating around, but what is social capital and why is it important in business?
Essentially the idea of social capital, is that social interactions bring about positive (economic) outcomes. It is a broad concept and for the purpose of this article we are focusing on social capital within business environments.
There is a couple of ways we can look at social capital within business, external social capital, and internal social capital.
External social capital refers to an individual’s relationships outside of the organisation. What connections does this person have if I am going to employ them on my sales team? This potential employee has come personally recommended by someone I trust, am I going to be more likely to employ them? What external relationships do they have which might benefit my business?
And internal social capital is the connections within my organisation.
We like to think of internal social capital as a bit like glue. It is the stuff that holds us together. It’s our shared values, our team behaviours, the things that bring our team together. It’s the calls we make to each other to make sure we are all doing ok and on track, and those small conversations that we have every day that over time build our relationships, trust, and levels of reciprocity.
Why is social capital important?
Social capital is important because without it there are no connections. There is no sharing of ideas, there is no communication. When a team or organisation is ‘in-sync’ and working towards a shared purpose, everyone within the organisation knows their part to play. Without some level of social capital there is no trust. And here at MyPeople we believe trust to be THE critical factor when it comes to team performance.
How do I recognise a lack of social capital?
Recognising a lack of social capital can be obvious. It is a team that does not want to socialise together. A team that eats lunch on their own. A team that does not help each other when there is an upcoming tight deadline. It is a team that deliberately only offers to make a few of the team a coffee. It is a team that is competitive with one another.
But additionally, in larger organisations it can be seen by a lack of communication between departments, a lack of shared organisational values and a lack of knowledge of what goes on within the wider organisation.
What are the benefits of improving social capital within my organisation?
- Facilitates innovation
- Facilitates cooperation
- Facilitates sharing of information
- Improves profitability
- Improves performance
- Increases productivity
- Improves efficiency
- Increases employee retention
- Increases employee happiness and well-being
What can I do to increase social capital within my organisation?
- Provide team building events
- Provide opportunities for teams to socialise
- Provide training and development opportunities
- Provide opportunities for teams or individuals to present to each other what they are doing, what their roles may be, and what projects they may be working on.
- Clarify your company values and culture
- Measure and improve levels of trust
- Build strong teams, based on strong relationships and shared purpose
- Get early indications of team problems before they cause performance issues
- Improve the fit of new hires to your teams
- Understand how well your team understands each other
- Measure how aligned your team is
It is clear. A team that does not get on is not going to perform to the same level as a team that is closely aligned with high levels of social capital. There are numerous things that can be done to improve social capital within your organisation. Not sure where to start? Contact us to find out more about how we can help improve performance, efficiency, trust and more.