Social Capital and Stakeholder Relationship Management
What is social capital and how does it fit in with stakeholder management or engagement? We look at social capital definitions, why it matters, and how it’s created.
Curious about what social capital means and how it applies to your organization, project, or stakeholder strategy?
If you’re not yet confident with the concept of social capital, that’s understandable — it is used and defined in a number of different ways.
But whether you’re a project manager, stakeholder professional, or business leader, it’s well worth getting your head around social capital, because these days, success really does come down to ‘not what you know, but who you know’.
So, let’s go through some of the main definitions, why it matters for your organization, and how you can incorporate it into the stakeholder management processes you already have in place.
Defining Social Capital
Generally speaking, the idea behind social capital is that social relationships can help people or groups be more productive or effective.
When we talk about ‘social capital’, we’re referring to the potential represented by those relationships — potential information, resources, or favors.
But social capital can also mean different things in different contexts. For example…
Types of Social Capital
Research shows that there are three main types of social capital created between people or groups, based on how their relationships are formed:
- Bonding – Social capital created within a group based on shared goals and interests
- Bridging – Social capital created across groups, with individuals in those groups discovering and collaborating on shared goals and interests
- Linking – Social capital created across groups of differing power or status
But social capital could also be used to refer to types of underlying social structures, like:
- Structural – The elements of a social structure that provide stability and enable productive outcomes, like roles, rules, precedents, and procedures
- Cognitive – Shared beliefs, values, attitudes, and norms that make people more inclined to work together for a mutually beneficial outcome
- Relational – Aspects of social relationships (like trustworthiness, obligations, and expectations) based on a history of interactions and nature of the relationship
Social Capital for People
This is the idea that individuals can benefit from being connected to others in their community, workplace, family, and other groups.
Potential outcomes of your relationship with another person include:
- Getting referred a job or client (word of mouth recommendations are far more powerful than advertising)
- A mutual friend introducing you to your future partner
- Exchanging professional contacts or innovative ideas over coffee
- Sharing useful information with a friend who’s travelling to your hometown
- Ridesharing with colleagues
- Grandparents babysitting for date night
- Borrowing your parents’ truck to pick up large furniture
- Neighbors feeding your cat while you’re on holidays
These sorts of exchanges can help you get stuff done at work, achieve your career goals, and even improve your wellbeing.
The interesting thing is that the more you give and receive social capital, the stronger your connections become — and the more potential social capital you have at your disposal. Because each successful relationship or collaboration leads to more connections and greater trust, which can then fuel future endeavors.
Social Capital for Organizations
Businesses, nonprofits, and government organizations can benefit from social capital, too. There are two main ways to look at this:
- Stronger relationships between employees inside a company can help to improve trust, productivity, and efficiency — which leads to better performance
- Stronger relationships between an organization’s internal and external stakeholders can help the company achieve its goals
Here, we’ll focus on the second — social capital and how it relates to stakeholder relationships.
Social Capital + Stakeholder Relationship Management
Social capital theory states that relationships are resources. This lines up pretty nicely with stakeholder theory, which argues that an organization should create value for all its stakeholders (customers, employees, supplies, shareholders, and communities) — and that its success comes from relationships with all those involved in or impacted by its work.
With that in mind, if you want to strategically build social capital as a resource for your organization, investing in good stakeholder relationship management is key — and you should expect to get a return on your investment.
And if you’re already managing relationships with stakeholders, the concept of social capital will give you and your team another lens through which you can look at your work — and help others understand its potential impact and value.
Why Social Capital Matters
Social capital isn’t a ‘nice to have’. It’s essential to the success of your organization or project. Here’s why it matters — and some of the benefits that come along with it:
1. Build Better Relationships
One of the most critical assets to any organization (and one that is often overlooked compared to more tangible assets) is its relationships. Social capital places a strong focus on building and strengthening relationships, and through these relationships, you can accomplish more, be more successful, and gain a competitive advantage.
Because building better relationships is really what opens the door to everything else…
|Note: An interesting distinction between a social capital approach and a typical stakeholder approach to relationships is that social capital tends to focus more on individual relationships, rather than stakeholder groups.|
2. Share More Information
In today’s knowledge economy, an organization’s value depends a great deal on what their people know, because this flows into new ideas, better practices, reduced risks, and smarter decisions. So, it’s not surprising that studies show that social capital contributes substantially towards information sharing. That’s because better relationships can help organziations:
- Tap into knowledge from internal and external stakeholders
- Gather insights and perspectives from different groups
- Merge internal and external knowledge
- Contribute knowledge back to the community
- Discover new opportunities
- Do a better job of managing knowledge
Of course, in order to support this information sharing, it’s important to first work on developing a trusted relationship and a shared purpose — and treat information sharing as a two-way street.
3. Share More Resources
Similar to shared information, social capital can help support greater resource sharing. This can provide benefits on both sides:
- Stakeholders may offer access to resources that can add value or help your organization achieve its goals
- Your organization might be able to offer resources that add value back to the community and other stakeholders
And again, similar to information sharing, a shared vision and commitment are essential prerequisites to resource sharing.
4. Build More Trust
Trust is very closely tied to social capital — your connections with others won’t necessarily lead to social capital without trust.
Trust doesn’t just happen overnight — it’s built over time and comes from consistently doing what you say you’ll do. But by building social capital, you can also develop a reputation for trustworthiness.
And that can be helpful in other ways, like gaining a social license to operate.
5. Get More Done Faster
Sharing information, sharing resources, and gaining higher levels of trust can help your organization get things done more effectively and efficiently. In other words, building strong relationships with your stakeholders can help your organization achieve its goals faster — especially if you can collaborate on these goals with your stakeholders.
6. Keep Up With Social Change
One of the biggest changes in recent years is the rise in social network platforms. Social networks can put social capital on steroids — enabling people to:
- Connect directly with their existing network
- Form new relationships and groups based on shared connections, interests, and experiences
- Ask for help, information, recommendations, and resources
- Share information, introductions, reviews, and resources that might help people in their network or groups
Of course, this impacts organizations, too. Brands that have good relationships with their stakeholders might benefit from more positive mentions, shares, recommendations, and support on social media platforms. Those with poor relationships might have the opposite experience.
7. Encourage Reciprocity
Social capital ties nicely into the psychology of reciprocity. That is — when you do something positive for someone, they’re more likely to feel obligated to return the favor. Even if this doesn’t happen immediately, it can store up goodwill that may be needed in future.
8. Encourage Participation
Participation in groups is considered to be an important part of social capital. But it’s interesting to note that communities with more social capital are likely to have higher levels of participation and civic engagement. And we know that stakeholder participation and engagement can have many benefits for organizations and projects.
9. Measure and Build Resilience
Social capital is seen as a component of social resilience — in other words, it can help communities, organizations, and individuals prepare for or face disasters. This makes sense — if you picture an entire community connected by a web of relationships, the more relationships (and stronger the connections), the more able it is to withstand various forces, bounce back, and hold together.
Similarly, organizations that invest in their relationships (and help their communities build stronger relationships) can also help to build resilience, with greater access to information, resources, and support that can get them through fast-changing and unstable periods.
10. Measure Success
Increased social capital can be a measure of success for your stakeholder engagement.
Some ways to measure social capital include:
- Group memberships & community participation – Volunteering rates, participation in events, memberships or links to faith-based, social, and sports organizations
- Sense of community – Feeling of belonging, community pride, attachment to community, population stability, shared community goals
- Social support – Help received and given, ability to call upon neighbors for help, believing in altruistic nature of neighbors
- Civic participation – Satisfaction with government information, decision making, and opportunities to influence decisions
- Shared values – Collective identities, shared cultures, shared language
If your organization is seeing an increase in the above factors, it could be a sign that you’re on the right track.
11. Develop a Competitive Advantage
Increasingly, the value of an organization rests on its web of relationships that enable it to create and exchange goods, services, and knowledge. Unlike other assets, an organization’s relationships can be difficult for competitors to replicate — giving companies with strong social capital a unique competitive advantage.
Build Social Capital with Stakeholder Relationship Management
The benefits of social capital illustrate just how important it is to invest in your stakeholder relationships. So, let’s look at five ways effective stakeholder management can help you grow your social capital.
1. Analyze Stakeholders to Find Shared Interests
Stakeholder analysis can reveal a lot about your stakeholder groups. The analysis method we recommend is the 3 Is:
From here, you can use these insights to effectively build or strengthen your relationships. For example, your project team might connect with a community group or individual over a mutual interest, like an environmental concern or social outcome.
2. Map Stakeholder Relationships
Stakeholder relationship maps offer a way to visualize your stakeholders on a chart, with lines used to represent how stakeholders are linked (and the strength of each relationship).
This process may reveal opportunities to build new (or stronger) connections that might benefit stakeholders, the community, or the work you’re doing.
3. Overcome the Dark Side of Social Capital
It’s interesting to note that social capital isn’t all sunshine and rainbows. Organizations need to be aware of the dark side of social capital so they can anticipate problems and mitigate the potential risks. For example:
- It can exclude outsiders – Social capital is often created unequally, benefitting some groups, while making it hard for others to join in or discover opportunities (often based on socioeconomic standing or geographic location)
- It can fuel peer pressure – Strong bonds within groups may put pressure on individuals to conform with the majority view and even restrict their freedom
- It can be used to manipulate – When certain individuals or groups connect, they may use their increased power to drive changes that benefit them and disadvantage others
This is one reason why it’s so important to ensure all stakeholder groups have an opportunity to be represented and participate in stakeholder engagements. Especially those groups that may face additional barriers to participation.
It’s also worth considering how different stakeholder groups might act if they were to unite over a particular issue. In some cases, linking together certain stakeholders could prove disastrous.
4. Stay in Touch
Keeping in touch with your stakeholders over a long period of time will help to build stronger relationships and greater levels of trust.
Plus, the cool thing about social capital is that it will continue to build on itself over time (each connection leads to further connections). Your social capital will only go backwards if you stop building relationships and stop connecting with your stakeholders.
5. Use Stakeholder Software to Support Your Efforts
Last, but certainly not least, it takes a lot of work to manage and keep track of your stakeholder relationships so that you can build social capital for the long run. In order to do this efficiently and effectively, you need stakeholder relationship management software that:
- Records your stakeholders and relationships
- Tracks your interactions and keeps a detailed history
- Supports analysis
- Maps stakeholders (based on influence, interest, and impact)
- Allows you to collaborate on tasks
- Shows you who you need to engage with next
- Keeps on top of follow ups
- Helps you measure and report on your progress