Discover how bonding and bridging capital fuel change. Insights from Raising Social Capital show why trust is your company's hidden engine...
At a time when trust is in short supply, the relationships that bind organizations together have never mattered more than they do right now. Yet social capital remains one of the most valuable and least understood assets in business.
In this live Book Club conversation, authors Heather LaMarre and Gregg Feistman join IMD Professor Sophie Bacq to discuss the ideas behind their book, Raising Social Capital: Corporate Advocacy and Impact in a Time of Social Change.
So what exactly is social capital?
LaMarre describes it as the connective tissue that holds organizations together and underpins key stakeholder relationships. “It is probably the most important asset you hold that you never think about,” she says. Yet it is rarely treated as such. And that is precisely why they chose to write the book.
In fact, upwards of 90% of the value of companies in the S&P 500 now stems from intangible assets, according to merchant bank Ocean Tomo. Beneath much of that value, argues Feistman, sits social capital.
Trust is the currency of social capital, he says. It may be intangible, but its presence is unmistakable. “Without trust, you don’t have a sustainable business,” Feistman adds.Â
He argues that social capital, far from any wishy-washy concept, delivers hard business results. Recruitment often becomes easier, retention can improve and stakeholder relationships then strengthen. “If you have social capital and are trusted, people will be drawn to you,” says Feistman.Â
Yet if social capital is such a valuable asset, why do so many companies still overlook it?
One reason is that it’s so tough to pin down in concrete terms. Businesses use different terms to describe it, and there is no universally accepted definition.
Also, trust generally speaking is near historic lows, while political divisions have deepened and people have become increasingly insular. Feistman argues that firms therefore find it tough to cultivate the relationships that social capital thrives on. “We’ve lost the ability to have dialogue with people who don’t think like us,” he says, depressingly.
That matters because social capital tends to be most valuable precisely when companies come under strain. Indeed LaMarre argues that strong social capital acts as “organizational weatherproofing”.
Oftentimes its presence goes unnoticed because things simply tick along as they should. But when a shock hits, firms can draw on years of accumulated goodwill. “It’s like a savings account,” she says. “You draw down on it when you need it.”
Feistman argues that social capital is indeed easy to take for granted. “We don’t think about it until it is broken. It’s baked into the fabric of society.” That’s why many people assume it will always be there, but that’s not the case.
Only when those foundations begin to crack does its importance rise to the fore. That, the book argues, is exactly where society is at right now.
More often than not, the priority should be gauging which audience is affected, and tailoring a specific response to them.
The challenge, then, is first understanding social capital’s value and then working out how to build it.
LaMarre pens a distinction between two forms of it: “bonding” capital and “bridging” capital. At work, the first exists among close allies and trusted colleagues. The second is found in the weaker ties that connect people from other parts of the business, or further afield.Â
Both matter, no doubt. But LaMarre argues that bridging capital is a more potent force for change in an organization. “Focusing on building loose networks widely across your organization is how you move things fast culturally,” she says.Â
One of the biggest misconceptions, she goes on to say, is that social capital is built through a small number of deep relationships. Not so. Building just a handful of new connections each quarter can, over time, have a steady compounding effect.
For business leaders, the lesson here is that social capital only grows through deliberate and prolonged investment in nurturing new relationships. However, building social capital is one thing. Drawing on it when difficult decisions arise is another.
In recent years, companies have faced mounting pressure to weigh in on a growing range of hot button issues in society, from social justice to geopolitics.Â
However, Feistman warns against knee-jerk responses to calls for public interventions – most especially social media backlashes. Partly this reflects his belief that much apparent outrage online is not coming from people at all. “We live in an age of bot storms,” he says. “Is it real? Or is it an LLM?”
Not every social media storm reflects genuine public opinion. Feistman points to country-themed US restaurant chain Cracker Barrel, which faced a wave of online criticism last year after unveiling a new logo. Subsequent analysis found that almost half of the X posts pushing the backlash came from bots.Â
The lesson? Before drafting a response, first establish whether the outrage is genuine and where it is coming from. LaMarre insists not every issue demands a statement to the wider public either. More often than not, the priority should be gauging which audience is affected, and tailoring a specific response to them.
Silence is, moreover, not necessarily a misstep. According to Feistman, what matters truly is whether companies explain their reasoning for a given stance.Â
The greater risk, he suggests, is inconsistency. Too many companies have bowed to public pressure and abandoned long-held positions nearly overnight, sowing confusion over what they actually stand for. Feistman says: “Speak from your values. And if people may not like it, they will get where you’re coming from. That’s all you can ask for.”
Somebody somewhere has to step back and say wait a minute, who are we really?
The discussion returns to a consistent theme: firms cannot strengthen social capital unless they first understand the state of the relationships on which it depends.Â
And while social capital may be overlooked, Feistman concludes, that does not make it any less critical. Cultivating it demands that organizations take an honest look in the mirror. “The problem is that everybody is busy with their day to day stuff. But somebody somewhere has to step back and say wait a minute, who are we really?”
For him, the question is the starting point for building trust from which social capital flows.Â
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