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Social Capital: Why It Really Is "Who You Know"

Capital: Accumulated wealth, especially as used to produce more wealth.
Social capital: Wealth (or benefit) that exists because of an individual's relationships. The value created by fostering connections between individuals.

Here is a terrific example of the value of social capital in the workplace, from Tom Stewart, the editor of Harvard Business Review. New software designed to help employees fix problems was installed in a customer service call center. When the call-center operator typed words spoken by a customer, the software searched its memory bank of diagnoses and then offered a variety of possible solutions. Trouble was, employees weren’t using the new software. So management held a month-long contest in which employees earned points whenever they solved a customer problem, by whatever means. Managers were hoping that the benefit of using the new system would become self-evident. But that wasn’t what happened.

The winner of the contest was Carlos, an eight-year veteran with loads of practical experience who almost never used the software. And, while his success might have been expected, the second-prize winner was a real shock. Trish was so new to the company that she didn’t even have the software—nor could she rely on her personal experience. But she did have one unique advantage—she sat next to Carlos. Trish overheard his conversations, took him to lunch, asked questions and persuaded him to help her build a personal collection of notes and manuals about how to fix problems. Trish won the contest because she utilized her social network.

Here’s another example of social capital in action. In the 1980s, Xerox Corporation was looking for a way to boost the productivity of its field service staff. An anthropologist from the Xerox Palo Alto Research Center (PARC) traveled with a group of tech reps to observe how they actually did their jobs—not how they described what they did, or what their managers assumed they did. The anthropologist discovered that the reps spent more time with each other than with customers. They’d gather in common areas like the local parts warehouse or around the coffee pot and swap stories from the field. An old model company manager would have viewed the time spent socializing as a “gap” to be eliminated for higher productivity, but the anthropologist saw the exact opposite.

At Xerox, the informal gatherings didn’t represent time wasted, but rather money in the bank. For it was here, within these self-organized communities of practice, that the reps asked each other questions, identified problems and shared new solutions as they devised them. And it was through conversations at the warehouse—conversations that weren’t part of any formal business process or reflected in any official organizational chart—that people really learned how to do their jobs.

The social network—those ties among individuals that are based on mutual trust, shared work experiences and common physical and virtual spaces—is in many senses the “true structure” of an organization. Because leaders are beginning to realize the economic implications of these networks, organizations are having them analyzed and mapped.

A social network analysis consists of a survey of the individuals in a “network” (a group or an organization). It outlines who they rely on for information, for learning or for specific knowledge needed in decision making. Then visual maps are created showing who goes to who—revealing knowledge flow, powerful connections and potential blocks.

But you don’t have to map social networks to realize the importance of personal connections. Every work group or team has potentially two positive outcomes—(1) achieving the team’s objective—and (2) building the social capital of team members. That’s why the most successful offsite meetings encourage participants to socialize at meals, during breaks, in the workout room and at the bar. The “war stories” and insights shared informally build trust and nurture relationships, and that, in turn, fosters a more creative, successful and engaged workforce.