Corporate social capital, the true value of a successful company
The key factor that separates the highly successful companies from the rest is not what it used to be – now it is social capital.
It is not their physical assets, or their product, or even the talent of their employees. It is the way the talent, the product and the physical assets can be utilised. The way employees work together, share information, collaborate, and make decisions.
The real value of a company
What I am saying is the real value of a company lies in the way the company goes about doing business, ie the culture of the organisation. The way people behave in the company that help to shape the flow of information and improve innovation, productivity, efficiency, effectiveness, etc. This is the corporate social capital – the productive benefits embedded in social relationships.
Organisational culture is more important than it has ever been before. In the digital age organisational procedures are more complex, and information overload and time poverty exacerbate the challenges. Organisational cultures that encourage collaboration and information sharing help to grease the wheels which improves productivity.
Highly successful companies become a place where people want to work.
Often salaries are higher and the appeal of innovation and prestige attracts the best people. They also have less employee turnover allowing social relationships to develop and strengthen which further enhances the company’s social capital and further reinforces the company’s success.
The true cost of employee turnover
The costs of high employee turnover rates are typically understood in terms of direct and indirect costs.
But the costs to the company’s social capital is rarely considered or understood.
We know a new employee will need to be trained in organisation procedures, but they also need to build relationships with other employees to enable them to work efficiently.
They need to know who is who and who does what, but they also need to develop trust and reciprocity, and deeper connections that allow for information flows, collaboration and innovation.
Investing in social capital
The investment required to build good working relationships is very difficult to quantify. We can calculate the cost of a full day workshop to introduce new employees to everyone to allow them to understand their roles in the company. But trust and reciprocity is built over a long period of time.
So the social capital lost by the previous person leaving cannot be replaced in a single session, or even several sessions. It needs to rebuild slowly over time, and the true cost of this, and the loss of productivity in the meantime, is virtually impossible to quantify.
Digging deeper into the value of social capital for a company
A good working relationship with a colleague that has been built over many years has many benefits. You may have built deep trust that allows you to be honest and cut through formalities to get right to the point.
For example they may have difficulty with some simple aspect of their work, but they can ask you to help without feeling embarrassed or fear of being accused of incompetency.
You may know their strengths and weaknesses and be able to capitalise on their strengths and help them with their weaknesses.
For example you may know that they studied undergraduate geology so be able to seek help on something that is outside their current role. Similarly you may know that they like to sleep on important decisions so you don’t force them to make decisions immediately.
Strong working relationships can take years to develop and can result in highly productive and innovative teams.
They may have helped you numerous times previously and you may be prepared to “take a bullet for them”. This can give you the confidence that they will support you and help when needed.
The value of all this to the company is very significant, but hard to quantify. In the above example of the geology expertise, what would the cost have been to contract a geologist to provide that advice? What is the cost of an employee making mistakes because they are too scared to ask for help? What is the value of collaboration that results in innovation?
What does a negative organisation culture look like?
Most of us have worked in an organisation dominated by a culture of CYA (cover your actions) and we know the damage that this does to productivity, and even worse, to innovation.
Distrust, dissatisfaction and disharmony often dominate these workplaces.
This is clearly a negative organisational culture that lacks positive social capital. Many of the same forces that shape positive social capital can also result in negative consequences for the company in different contexts.
We have the human capital, what about social capital?
Your company may have the best people at the top of their fields. They may be experts and there may not be anyone more qualified to do the job. But any manager will know it takes a lot more than talented people to make a company successful. The individuals need to work together and collaborate effectively.
Consider the way an employee normally responds to a mistake being made. I use the word normal to indicate that this is the normal, culturally defined, way to respond. If they expect understanding and a problem-solving approach from colleagues then they are more likely to report the problem, allowing for solutions to be implemented and lessons learnt.
Social capital is constantly changing
This norm is created, reinforced or changed by the actions of everyone in the company with every social interaction. It’s like it is alive. It is constantly changing and evolving based on the actions of everyone in the company, with influence from the wider society and culture.
This can be used to our advantage if we know how to affect cultural change within our organisation to improve social capital outcomes.
How can I change corporate social capital?
Because social capital is constantly changed by the actions of the people in the company, the leadership needs to take the reins to channel the direction of these changes toward more positive social capital outcomes.
How an individual will act in a given situation is based on a range of factors.
Some factors you can’t control:
- Previous experiences from acting in that way (expected outcomes)
- How they have observed others acting in similar situations
- How colleagues have told them they should act
- Wider societal norms from previous experiences, media, family and friends, etc
Other factors you can control:
- How managers have told them they should act
- Company documentation, policies, regulations, operating procedures, etc
- And a lot of other factors such as the built environment, access to resources, etc that can be quite context specific based on the type of company and its operations
So with the right strategies and interventions you can shape your corporate culture and create the type of company that can be truly successful and a place where everyone wants to work.
Tristan Claridge has a passion for technology, innovation and teaching. He is an academic and entrepreneur, and he uses his cross-discipline knowledge and experience to solve problems and identify opportunities. He has bachelors and masters degrees from the University of Queensland in Australia. He has qualifications in environmental science, social theory, teaching and research, and business management.
Tristan is dedicated to the application of social capital theory to organisations. His diverse experience in teaching, research, and business has given him a unique perspective on organisational social capital and the potential improvements that can be achieved in any organisation.