In 1941, as America entered WWII, the need was critical to massively expand the merchant marine fleet--the mainstay of which was the all-welded Liberty cargo ship. During the next four years, 16 shipyards delivered 2,580 ships--the largest production run ever for a single ship. What's even more amazing is how the efficiency of these shipyard teams continued to increase at over a 40 percent rate each of those years. For example, at the Calship shipyard, the first Liberty ship took 1.73 million labor hours to build. Only three years later, the fastest ship constructed there took only 406,000 labor hours to build--a 426-percent increase in efficiency! This case is often used as a classic illustration of the growing efficiency of teams.

In the early 1980s, one of the founders of Sony (Akio Morita) made it a priority to visit the engineers at his various labs. During these visits, he sensed the importance of bringing together the team that was miniaturizing stereo cassette players and the team working on new headset technologies. From these meetings the Sony Walkman was born, creating a brand new market and revolutionizing personal audio at the time. This case is often cited as a clear example of innovation in action.

Social Capital at Work

So, what's the common thread between these two stories? Each illustrates a different yet powerful characteristic of social capital at work--the importance of group cohesion and strategic connections. Social capital has risen to global prominence over the last decade. Simply put, it explains why (and enables us to measure how) those who are better connected tend to perform better overall.

Why does it matter? Everyone knows that who you know is just as important as what you know. The problem is that having the bigger Rolodex isn't necessarily better. It's the quality of the connections and your position in that web of contacts that counts. Few organizations have recognized the influence that social networks, organizational norms, and even the nebulous concept of trust have upon both individual and organizational performance.

Social capital is an asset similar to other forms of capital--such as physical, financial, and human--and thus possesses a measurable degree of value. It consists of the interconnected aspects of trust, norms, and networks among any group of people functioning for mutual benefit. A metaphor for understanding how these aspects comprise social capital may prove helpful. Think of trust as the mortar between the bricks--the glue of the organization, if you will. Norms are the bricks themselves, lending solidity and form. Lastly, networks are the shape and architecture that the bricks and mortar take. Each aspect is dependent upon the others, yet distinct in its own right.

Comparing social capital to other, more familiar, forms of capital can also be instructive. For example, like human capital, social capital actually grows with usage and can enable you to leverage other forms of capital. Further, as with human capital, it is not directly transferable to another person, though you can sometimes borrow, with permission, someone else's social network in accessing a new group of people.

Unlike human capital, however, the structural framework of social capital is based on a group dynamic. No one person directly owns the social capital of a group--instead it's the actual connections and cohesion itself. In this respect, it is most akin to financial capital's concept of credit, which is an agreement and relationship that only exists between at least two parties.

Thus, social capital as an asset is distinct and equal to other organizational resources. Social capital offers a framework for understanding how our organizational relationships and culture affect performance. In practice, it has become one of the truly cutting edge technologies available to a number of fields (including Human Performance Technology) by quantifiably analyzing this critical facet of organizations. While more work remains in standardizing the practice of this theory, HPT practitioners can gain a powerful new set of tools by increasing their awareness and understanding of social capital and how it functions.

Social Capital is a Complex Entity

It is important to note that social capital isn't always good or constructive. In fact, gangs and terrorist cells are often considered to have high social capital, even if their overall effects are viewed as destructive. Social capital is a complex entity within an organization, with power and influences reaching well beyond organizational boundaries. Therefore, its nuances must be not only appreciated, but carefully applied in order to optimize its positive effect on performance.

Studies show that (all else being equal) groups with higher social capital are better performers than those with lower social capital. The key to peak performance lies in balancing the two types of social capital--bonding and bridging.

Looking at a simple social network (See figure 1, below), we quickly notice that Person A and B have different positions in the system. Both are contributing to the social capital of the group at large, yet in different ways. Person A is an example of the bonding type of social capital, while Person B is an example of bridging.

Most are quite familiar with bonding--teams do it all the time. Like Person A, it's being connected to people who, in turn, are connected to each other. The advantages to this, and teams, can be powerful:

• Engines for efficiency and task execution

• High degree of trust (they know and look out for one another)

• Strengthening of norms (peer accountability and support)

• Self-managing and self-correcting

• Ownership of work (pride in group outcomes)

Unfortunately, tight-knit cohesion can have distinct disadvantages, such as echo and groupthink. Echo is encountered when you look for new perspectives or opinions and encounter bias in the form of who we ask and how we ask it. Teams can become so insular that they don't allow fresh points of view. Worse, they can suffer from groupthink where the group can actually influence and override individual thoughts and opinions.

The other type of social capital is bridging. Like Person B, it's when you reach out of the group you're in and connect to others. The advantages to bridging can be equally powerful:

• Great source of innovation (new ideas, new markets, new applications)

• Marshalling disparate resources

• Better alignment of ideas to organizational vision

• More creative ideas in terms of organizational capabilities

Studies have also found that those who consistently form and maintain bridges with individuals in other groups perform better in terms of compensation, evaluation, and promotion. Then why not have everyone bridging all of the time? Nothing would ever get done. More importantly, these bridges should be strategically valuable to the organization in order to have maximum benefit for both the individual and the group. For social capital is often seen as simultaneously both a private and public good--and is most constructive when applied in that manner.

Ultimately, the promise of social capital is clear:

Increasing constructive social capital within an organization, through the balance of bridging and bonding, results in enhanced performance, greater employee satisfaction, and a positive return on investment.

2005 ASTD, Alexandria, VA. All rights reserved.