What is Social Capital and Why Does It Matter?

Welcome, in these next few sessions, you’ll learn about the power of developing mutually supportive relationships. Let me begin by asking you a few questions. First, what is social capital? And why is it important to your success? If you can take only one thing away from the session, I believe it should be a greater understanding on what social capital is, and why it’s important to the success of individuals, organizations, and societies. The next question is, if someone needs an important piece of information, do you think they’d be more likely to go to the person who has the best information, but who is hard to deal with?

Or would they be more likely to go to a person who has less than perfect information, but who is easier to deal with? Another question is are you more likely to find a job through people you know very well? These would be called your strong ties, or people you don’t know very well. And these would be called your weak ties. And what are structural holds in networks, do you have them? And are they a benefit to you and the people you work with? In this session, and the sessions that follow, you will learn the answers to these questions, as well as why the answers are important to your success. Now, I teach an MBA course about creating high performing teams.

One of the student’s course assignments is to ask 12 people who know them well to spend 20 minutes completing and online questionnaire about the student’s style, strengths, and weaknesses. Inevitably, a few students tell me that they don’t know 12 people who can give them thoughtful feedback. And I gently tell them that the fact that they can’t think of 12 people who they can count on to spend 20 minutes to complete an online assessment for them is, perhaps, one of the most important takeaways they’ll get from the course. One of the most robust findings among researchers is that the ability to cultivate mutually supportive relationships is central to professional success and personal well-being.

No matter how conscientious and gritty you are, and no matter how deep your expertise, no one succeeds alone. The mutual goodwill, trust, cooperation, and influence that you develop through your relationships helps you get the resources you need to add value to your organizations, achieve your career goals, contribute to your communities, and take care of yourself and the people you love. Researchers refer to the resources you get through your personal and professional relationships as social capital. These resources include things like information, contacts, opportunities such as job leads, mentoring, reputation, money, encouragement and support for your ideas. These resources also include tacit knowledge, that would be hard to learn on your own.

For example, how to get along with a cranky boss or neighbor, what not to say during an important meeting. Which courses to take, and where to meet people who share your interests. Despite the power of relationships, some people don’t take the time to invest in relationship building. And this is often because they believe the following myths that can hold them back from achieving their goals. Myth number one, it’s not what you know, it’s who you know. What you know, your knowledge, skills, expertise, as well as your dependability, are as important as who you know. After all, people want to work with people they trust, and who will add value.

People that are unlikely to put their reputation on the line, and recommend you for an opportunity if they don’t think you live up to their endorsement of you. Myth number two, proactively networking is manipulative. Many people assume that there’s something insincere about connecting with others for instrumental reasons. For example, to ask for help on a task, or to get introduced to a contact who can give you information about a potential job. But the most effective instrumental relationships, like all relationships, are those that are built on authenticity, respect, good will and reciprocity.

And if your job is to add value to your organization, then it’s your responsibility to reach out to let others in the organization, to let them know what you’re good at, where you need help, and how you can help others, so that they can place you where you could add the most value and make your best contributions. Myth number three, extroverts have better networks than introverts. Although it seems intuitively likely that extroverts would have more effective networks than introverts, research is quite mixed on this. The general consensus is that if there is a significant relationship between extroversion and network size, it is small.

Researchers have found that extroverts may spend more time talking to other people, but they may not be more strategic or more skillful than introverts in developing effective networks.

Myth number 4, I’m so busy, I don’t have time for building relationships. By now, I hope you’re convinced that building mutually supportive relationships is a need to have, not just a nice to have. If you are responsible for adding value at work, building relationships is a significant part of your real job, because your relationships help you and others get better results in less time, using fewer resources. And if you want to create a home environment in which you and the people you care about thrive building relationship both inside and outside, your home will be central to making that happen. My point is, that you should never underestimate the power of relationships in making important things happen.

Societies depends on people connecting with each other in order to alleviate poverty, increase civil rights, fuel entrepreneurship, stimulate economic growth, and create safe communities. The World Bank called social capital the glue that holds societies together, because it provides the solidarity, the trust and cooperation that encourages the exchange of critical information and resources, as well as the means for communicating common goals, gaining influence and mobilizing action. For example, newly arrived immigrants with strong network ties have more access to opportunity such as jobs, living arrangements, and religious institutions.

In a meta analysis of the relationship between social capital and children’s well being, researcher Kristen Ferguson found that children who grow up in families with strong connections to each other, as well as to the people and institutions in their community, are more likely to stay in school and less likely to be depressed and get involved in delinquent activities. She concluded that social capital was second, only to poverty, in predicting children’s well being. Organizational success depends on relationships and social capital as well. Now, just think about it. Organizations have long known about the competitive advantage of financial capital, that’s money structural capital, that’s buildings and equipment. Technological capital, that’s information and communication technologies.

And human capital, which refers to employees’ skills, education and experience. More recently, however, many organizations have come to understand the competitive advantage of social capital. The benefits the organization gains by fostering mutually supportive relationships inside and outside the organization. Now, notice that there’s a difference between human capital and social capital. Human capital refers to individual benefits that employees individually bring to an organization. Social capital refers to the benefits that employees bring to the organization through their relationships, inside and outside the organization. These benefits include things like increased commitment to common organizational goals, fast exchange of reliable information and resources, and increased cooperation and coordination.

Now, it’s important to understand that organizations can copy each other’s financial, structural, technological and human capital, for example, by benchmarking best practices and hiring each other’s employees. But they cannot copy an organization’s network of mutually supportive relationships that help employees get things done better faster with less cost and more commitment. Consider Google, the company has grown from a two person start up in 1998 to over 53,000 people in more than 40 countries. It’s one of the world’s most valuable brands, and it often claims the number one spot in Fortune Magazine’s rankings of the best places to work for. It’s a magnet for talent, with 2 million hopeful people applying for jobs every year.

Google’s mission is two fold, to organize the world’s information and make it universally accessible and useful. And unofficially, don’t be evil. The work is challenging, and their perks are famous. Including free gourmet quality meals, net pods, on site physicians and laundry and subsidized haircuts and legal counsel, interactive players encourage that many of their sites through bowling alleys, billiard tables and other games. Employees can bring their pets to work, employees receive 6% matching retirement contributions. And when an employee dies, the company gives their surviving spouse or domestic partner half the employee’s salary for ten years, and their children are given a $1,000 a month.

The company designs relationship building into every day work, because they know that relationships drive innovation, employee satisfaction, retention, and organizational growth. No detail is too small in Google’s people analytics department’s obsessively data driven efforts to create one of the happiest and most productive and creative work places on earth. To encourage informal interactions among employees, they figured out that the optimal amount of time people should wait in line for meals is about three to four minutes, because that encourages conversation.

They installed long tables in their cafeterias so that employees are more likely to sit near someone they don’t know, and the long tables are placed close together, so that employees are likely to bump into the chair behind them, encouraging brief interactions. Google employees, known as Googlers, call it the Google bump.

Discussing the design of their New York offices, Craig Nevill-Manning, Google’s engineering director in Manhattan, explains Google success depends on innovation and collaboration. Everything we did when building our Manhattan office was geared toward making is easy to talk. Ben Waber, author of the book, People Analytics agrees. He says the data are clear, that the biggest driver of performance in complex industry, like software, is serendipitous interaction. For this to happen, you also need to shape a community. That means if you’re stressed, there’s someone to help to take up the slack. If you’re surrounded by friends, you’re happy, you’re more loyal, and you’re more productive.

Now you know the different ways that social capital is essential to the success of societies and to organizations, and rightly so. It’s also critical to your own success. Regardless of whether you work for the private, public, or nonprofit sector, regardless of your position, and regardless of the focus of your particular job, the quality of your relationships will significantly determine your ability to achieve your professional and your personal goals. Researchers have found that people who develop strong a network of mutually supported relationships, are more likely to find jobs more easily through personal contacts, be more satisfied with their jobs, and stay longer at their jobs.

They’re more likely to add value to their organizations, because they can harness the power of their relationships inside and outside the organization, to get the resources and support they need to get better results. They’re more likely to get promoted more often, and paid more, because they are likely to add more value. Hear of more opportunities, have more visibility, both inside and outside the organization, and have more sponsors who endorse them. They’re more likely to get more venture capital for their entrepreneurial endeavors, and they’re more likely to be able to help their children achieve academically, stay in school, and go to college. They’re also more likely to be happier, healthier and longer lived.

In part, because social relationships enhance the immune system and buffer the negative effects of stress associated with every day life. Now that you’ve learned more about the value of social capital In the next sessions you’ll learn specific strategies for building mutually supportive relationships. Thanks for learning about the power of social capital, and I’ll see you again soon.