In the world of business, there are three distinctive types of capital that largely determine the success of individual companies. While both financial and human capital is essential to business success, social capital may in fact be the king of capital for large corporations, small businesses, and entrepreneurs alike. Unfortunately, because social capital doesn’t always produce tangible business results, employers and employees often neglect it for more measurable forms of financial wealth. The truth is, however, that building social capital will assuredly lead to business success and should be considered the most important capital of all.
Not only is building social capital important for business owners, executives, and entrepreneurs, it is equally important for all individuals to focus their attention. By operating with a mindset that replaces the age-old adage of ‘It’s about who you know‘ with ‘It’s about who knows you,‘ each of us can scale our personal brand and enjoy greater levels of personal well-being.
What is Social Capital:
To gain a clear understanding of what social capital is, we can first differentiate it from the more commonly known forms of financial and human capital. Financial capital, as you probably already know, is the economic resources used by businesses and entrepreneurs to start, develop, and grow their products and ventures. Human capital, on the other hand, comprises the skills, experience, and expertise possessed by the employees of a company, or entrepreneurs themselves, and is viewed in terms of organizational value or cost. At last, social capital is made up of the value stemming from the social networks that connect individuals, businesses, and communities together. The Harvard Kennedy School of Government sums it up like this:
The central premise of social capital is that social networks have value. Social capital refers to the collective value of all ‘social networks’ [who people know] and the inclinations that arise from these networks to do things for each other [‘norms of reciprocity’].”
In nearly every aspect of life, there are forms of social capital found within the connections of both businesses and individuals. Unless it is built on mutual trust, cooperation, reciprocity, and open communication, however, it won’t produce the benefits it is capable of. When corporations or small businesses exchange services or information with other entities or each other, they are utilizing their social capital to their advantage while also supplying their partners with equal equity.
That’s why businesses that are starting a business mastermind group find that their productivity skyrockets after just a few sessions. Sharing advice is key to building trusting relationships between businesses, which in turn leads to bigger advances and a stronger business community. For individuals, social capital can be found across a wide range of social networks in their lives. Depending upon the person, they may have social capital in not only their network of close friends and work colleagues, but also in the connections they make in schools, clubs, associations, and churches.
It should be pointed out that while there are a vast amount of social capital resources available to all, the most important objective is to create a common good for all. By freely and honestly exchanging ideas, information, contacts, and referrals, societies can prosper in many different ways.
Why Building Social Capital is Important:
Just as there is a wide range of ways to build social capital, there are far-reaching benefits that stem from it. For both organizations and individuals, there are numerous positive outcomes that come as a byproduct of creating and utilizing a reservoir of it. From a professional perspective, since business and career success largely depends upon strong connections and social skills, it is imperative to build social capital.
More importantly, when companies and individuals commit themselves to act with trust, morality, and fairness, whole communities benefit from increases in economic development, safer neighborhoods, greater citizen participation, and ultimately better outcomes for all.
Sticking to the theme that social capital is necessary to develop businesses and individuals, let’s look at why it is important for both:
The Importance of Social Capital for Businesses:
The truth is that unless companies take the time to develop, cultivate, and manage their social capital, they will fail to keep up with the competition. When companies make social capital a priority, however, they will assuredly see an improved business performance, steady growth, greater levels of employee satisfaction, and enhanced relations across the various actors in their supply chains. By fostering an organizational environment that centers around transparency and fairness, businesses can also enjoy the greater social trust and a natural increase in consumer reach. Put simply, by prioritizing social capital, organizations can significantly increase their bottom line.
The Importance of Social Capital for Individuals:
Over the past two decades, an ever-expanding base of research has shown how social capital is not only linked with career success but can also be used as a predictor of individuals’ happiness and health. Professionally speaking, increases in social capital can undoubtedly improve sales, enhance individuals’ attractiveness as employees, and give them greater security, leverage, and flexibility. While outside of a professional setting, increases in social capital help individuals feel safer in their communities and more connected to others, while also allowing them to enjoy greater trust when buying or exchanging services.
As you can see, there is a wide range of reasons that social capital should be prioritized by both businesses and individuals. By developing and cultivating relationships both professionally and personally, the lives of those around us can be greatly enhanced. It is important to remember what leadership expert and author Robin Sharma tells us:
The business of business is relationships; the business of life is human connection.”
Strategies and Tips for Building Your Social Capitol:
Now that we have a good idea of what social capital is, and have explored the far-reaching reasons that it is important to have, let’s move on to discussing the numerous ways that we can build social capital. As we have done throughout the article, we can look at strategies for both businesses and individuals:
How Businesses Can Build Social Capital:
For entrepreneurs, small business owners, and upper management of large corporations, it is imperative to promote a culture of transparency, trust, and fairness. By doing so, individual employees will naturally act as capital-building agents in their communities. Additionally, there are three distinctive ways that companies can build social capital that produces major benefits.
First, it can be useful for organizations to actively give back to the communities they serve, as this will help to build social trust. Second, businesses can target specific services they need and work to form relationships and service exchange partnerships with companies that specialize in those areas. Third, it is important for organizations to become active voices in their given professional arena by promoting open and honest dialogue with similar companies in a way that advances the larger field’s capabilities.
How Individuals Can Build Social Capital:
While organizations have clear and definitive products and services to promote, individuals need to think of themselves as their own personal brand. One of the most important things each of us can do is to begin looking at networking as an everyday opportunity. Instead of limiting our professional connections with others to networking events, we can begin to approach each day with the goal of increasing social capital.
To do this, it will be important to become genuinely interested in others and actively seek a multitude of opportunities to meet a diverse group of people. It is also important to develop the habit of giving organically without expecting anything in return, and always remember that who you know isn’t nearly as important as who knows you.
As you can now see, building social capital, for both businesses and individuals, really comes down to developing and nurturing relationships with others. When companies and citizens work together and form close professional and personal bonds, whole communities can transform for the better.