Social Capital and Impact on Executive Leadership

Business Meeting, diversity

What Is Social Capital?

As the world continues to champion diversity and inclusion within all industries, we’re seeing a resurgence of a popular term whose ideas go back more than a century: social capital. Social capital derives from a concept in social science that “involves the potential of individuals to secure benefits and invent solutions to problems through memberships in social networks”. It was first introduced in 1916 by Lyda Hanifan who wanted to champion neighbors to work together to oversee schools. While the term has adapted over the century, there are three main categories of social capital:

  1. Bonds- This can apply to interconnected networks of relationships between individuals and groups who have a common identity, like family or close friends. These are “people like us” who share our culture or ethnicity.
  2. Bridges- These are bonds that stretch beyond a shared identity or set of values such as colleagues, distant friends, or associates.
  3. Linkages- Linkages connect people across various class systems and social standings.

One of the foundational components of social capital lies in the trust between the various networks of participants that help them collectively unite to pursue shared objectives and goals. While social capital can be applied to various personal and professional relationships, it can also be used to create social participation in areas like the workplace.

The Significance of Social Capital For Diversity Among Leadership and Senior Executives

Social capital has a large impact on the ethnic enterprise, which has grown sustainably as we’re seeing a rise in minority-owned businesses. However, despite the increase in minority-owned businesses, we’re still seeing an outdated combination of C-suite executives and senior leadership that are out of touch with the cultural climate. Investing social capital is a beneficial resource for a business because it establishes you as a leader in your industry, creates stronger teams, and breaks the stigma of traditional networking. Companies and organizations can benefit from social capital by fostering internal and external ties with individuals outside the status quo in order to diversify their leadership and senior executives members. Diversity amongst senior executives can be categorized into five business rationales:

  • Talent
  • Market
  • Litigation
  • Employee Relations
  • Governance

Each of these categories can have a significant impact on the financial performance of a company, as research shows diversity is a focus for stakeholders who are placing pressure on investors to improve leadership diversity. Having diverse senior leadership and executives brings in equity of social capital that differs from non diverse members which can help bridge new resources that can often be overlooked. One of the key attributes leaders can use to maximize the power of social capital is to integrate and coordinate through social capital to create a path to sustainability.

Social capital serves a role in governance and rises to the standards of other rationales for senior executive and leadership diversity that can help become a strategic resource for diverse groups like women and minorities. For the members of STRIDES, social capital is the foundation upon which our company is built because we provide the connection between board members and diverse leaders in order to help close the executive gap.