Primer: Measuring and Valuing Social Capital

This primer explains the concept of social capital and why and how it should be measured.
NBS September 24, 2017

What is Social Capital?

Relationships are familiar territory. Social capital is a formal way of thinking about relationships. Technically, the term refers to:

an individual’s or group’s ability to secure or obtain resources, knowledge and information through relationships with and among individuals and groups.

These relationships exist inside an organization (e.g. among employees) and outside an organization (e.g. between it and external stakeholder such as consumers and regulators).
Screen Shot 2015-03-24 at 11.02.51
Three Dimensions of Social Capital

Social capital has three aspects:

Why is Social Capital Valuable?

Internal Social Capital

Good relationships among employees make companies more efficient and reliable, in operations, product and innovation management. Benefits come because social capital improves:

External Social Capital

External social capital focuses on employees’ and the firm’s relationships with external stakeholders, such as neighbouring communities, customers and regulators. External social capital leads to competitive advantage and cost reductions. These benefits come because external social capital improves:

How to Assess Social Capital (1): Measures

Measuring social capital can help firms enhance it, and is also necessary to respond effectively to integrated reporting guidelines.

Each of social capital’s three dimensions is associated with particular measures. We describe these here and then provide specific tools.

SOCIAL NETWORKS

TRUST AND RECIPROCITY

NORMS AND VALUES

How to Measure Social Capital (2): Tools

Directly: Companies can assess these measures by asking employees and other stakeholders for feedback. Companies can adapt existing employee or corporate surveys, drawing from using other surveys, such as the World’s Value Survey’s Social Capital Index, or the World Bank Integrated Questionnaire for the Measurement of Social Capital (SC-IQ). They can also use interviews and focus groups.

With social network analysis tools: Tools exist for analyzing social capital data: for example, Relational Proximity Mapping (see Transnet case study).

Conclusion

We need each other to survive. Organisations depend on diverse internal and external relationships. As with other forms of capital, effective management social capital enhances the success of organizations and society. This primer draws on the best available research, but more work is needed to translate our understanding of social capital into effective management approaches. The NBS network and stakeholders have much to contribute to knowledge of social capital. Please contact NBS-SA to share your experiences and ideas.

Related Resources

Executive Report

“It’s not what you know but who you know.” This guide shows how businesses can make social capital part of their decision-making and reporting.

NBS
Systematic Review

This comprehensive review describes what social capital is, how it is measured, and the value it provides to individuals, organisations and communities.

NBS
Topic Blog

One year after one of the worst mining strike in South Africa’s history, has South African business learned the importance of social capital?

Ralph Hamann
Reports and Articles

There is much to learn from looking at relationships. Here's what one South African company found.

NBS