Teaching and Learning Research Programme

Annual Conference Papers

5th Annual Conference, 22-24 November 2004

Cardiff Marriott Hotel

Social Capital and Productivity: How might training affect a company’s social capital? Does the literature indicate how this might happen, and whether we might expect a significant impact on productivity? Can these effects be measured?

Liam Aspin, The Management Centre

King’s College London

University of London

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Social Capital and Productivity: How might training affect a company’s social capital? Does the literature indicate how this might happen, and whether we might expect a significant impact on productivity? Can these effects be measured?

Liam Aspin

The Management Centre

King’s College London

University of London

This paper presents the results of a literature review carried out as part of the
ESRC/TLRP Adult Basic Skills and Workplace Learning Project,
directed by Professor Alison Wolf (KCL) and Professor Karen Evans (IOE)

University of London

September 2004
Introduction

When workers receive training, especially within the workplace, the expectation is that their skills will be increased. Higher levels of skills can be expected to translate into higher levels of efficiency or productivity. This is something that we are currently attempting to measure.

However, the impact of training is unlikely to be confined to its influence on skill levels. Indeed, if we were to concentrate solely on skills this would imply a narrow and inadequate conceptualisation of how organisations become more productive and of what motivates organisations and managers to sponsor (basic skill) training. In fact, there is a large body of work which supports the notion that skills are only one element of organisational efficiency. We are therefore interested in ‘social capital’ as a concept that groups together factors which influence productivity, yet are not directly related to the individual skill levels of employees.

Thus, this survey focuses on a specific issue. We are interested in the impact of training (specifically in basic skills) on ‘social capital’ within a firm. We are also interested in whether increases in ‘social capital’ can be shown to influence productivity.

What is social capital?

There are a fairly large number of authors who have developed important criticism of the ‘social capital’ literature, primarily based on the ambiguity of the term. Having said this, one finds in the literature, a strong implicit concept concerning the broad nature of ‘social capital’:

Social capital is the set of relationships between individuals and within groups which make…possible the achievement of certain ends that would not be attainable in its absence.’ (Coleman, 1990, p302, emphasis added)

‘Social capital’ (unlike physical and human capital) is a concept that goes beyond the bounds of anything that is possessed by any individual. It is not surprising then that all authors agree that ‘social capital’ is multifaceted and that no single measurement is likely to be able to capture its complexity. Coleman’s definition is appropriate for our work because, as discussed above, we are interested in factors which influence productivity which might be influenced by training, yet are not directly related to the individual skill levels of employees. On a practical level (i.e., measurement), it is useful to think of Coleman’s notion of relationships in terms of three elements: networks, reciprocity and trust (Stone and Hughes 2002). Networks and reciprocity are essentially outcomes of trust.

How does social capital affect productivity in theory?

If training increases ‘social capital’ and thereby influences output, then the question we need to ask is: which measurable and ouput-related factor is likely to be influenced by this?[1]. There seems to be broad agreement in the literature concerning the mechanisms by which ‘social capital’ can positively influence economic performance. Below I consider the theoretical justification for these mechanisms that are likely to be important at the firm level:

  • lower transaction costs;
  • lower turnover rates
  • sharing of knowledge and innovation;
  • risk-taking and
  • improved quality of output.

Low transaction costs

This relates to the classic market failure problem of moral hazard where worker’s efforts cannot be easily monitored and it is impossible to relate wages to individual output. Under such circumstances employees have little incentive to put in high levels of effort. More generally, this type of ‘social capital’ means that employees are more committed to (and identify with) the success of the firm and monitoring costs can be reduced.

Lower turnover rates

If employees feel that their employers treat them well and are interested in their well being, they are likely to reciprocate by behaving “reaonably” (i.e., if there is perceived to be a high level of organisational support).

An important outcome for employers is that this can result in lowerturnover rates and lower levels of absenteeism (see the work on perceived organisational support discussed below).

Sharing and spreading of knowledge and innovation

In terms of ‘social capital’, the factors which are important here are the level and quality of interactions in the workplace, including the extent to which workers, co-workers and managers learn from each other and feel they have the right to innovate.

Risk-taking

Risk taking experimentation and entrepreneurial behaviour are encouraged by strong, robust relationships within a firm and between firms. In terms of ‘social capital’ this relates to the extent employees feel valued by their employers and by co-workers and also to the extent that they feel the firm is interested in their welfare.

Improve quality of output

This can be achieved because, as a result of knowledge sharing, improved coordination, teamwork and commitment to the organisation it is likely that a higher and more consistent quality of product will be produced.

From this discussion, we can begin to understand exactly which aspects of ‘social capital’ we should focus upon. In some senses we are still dealing with issues concerning network, reciprocity and trust, however we now have an idea of the mechanisms by which these three factors have an impact on productivity and can search the literature on ‘social capital’ for measurements which relate ‘social capital’ to productivity and design our own where deemed necessary.

How do we measure social capital?

Stone (2001) provides an excellent and detailed survey of the questions used in current attempts to measure ‘social capital’. Stone (2001) has identified only one study that has recognised group and non-group based associations related to the work environments but which are not directly job oriented[2]. However, surveys of ‘social capital’ in the economics literature do not appear to be aware of the relevance of elements of studies concerned with human resource management (HRM) and perceived organisational support (POS) for firm performance. The latter are clearly important and we have therefore adopted a method of measurement which is informed by all these different approaches.

Below we present the questions that various researchers have used in an attempt to ascertain the existence of different types of ‘social capital’ (essentially, trust, networks, and reciprocity including norms of reciprocity). As we have said above, with the exception of Onyx and Bullen (2000) the questionnaires in the published literature are directed at investigating ‘social capital’ at a broader level (the local community being the smallest). We have adapted the questions in the literature in order to focus on ‘social capital’ at the firm level.

In the table below we have organised the types of ‘social capital’ in terms of the above mechanism by which we might expect ‘social capital’ to affect productivity. It is not surprising that the different types of ‘social capital’ appear in all the different mechanisms since not only is ‘social capital’ a multifaceted concept, but individual aspects of ‘social capital’ can be expected to influence more than one aspect of a firm’s organisational efficiency.

Fig. 1 How ‘social capital’ can affect firm performance
Potential Impact on Firm
Broad category of social capital / Low transaction costs / Lower turnover rates / Sharing of knowledge and innovation / Risk-taking / Improve quality of output
Networks / Weak / Weak / Strong / Medium / Strong
Trust / Strong / Medium / Strong / Strong / Weak
Reciprocity[3] / V. Strong / Strong / Weak / Strong / V. Strong

Networks

Commonly used questions (Onyx and Bullen, 2000) are:

  1. Do you feel part of the local geographic community where you work?
  2. Are your workmates also your friends?
  3. Do you feel part of a team at work?

These can be used for the current study without modification. Onyx and Bullen (2000) also attempt to measure individual’s networks though their original questions were not directly related to the workplace. We have modified these somewhat to read as follows:

  1. In the past week, how many phone conversations have you with fellow workers?
  2. How many people did you talk to yesterday at work?

And also elaborated them somewhat by the following questions:

  1. Was that a typical day?

and

  1. If yesterday wasn't a typical day, how many of the people you work with

do you talk to on a typical day?

Network questions from a number of other studies are worth considering even though they are not explicitly work related. Baum et al (1998) asked questions that I have adapted and extended. Baum et al originally ask:

  • Which of the following fits your situation?

I know most of the people living in my neighbourhood

I know many of the people living in my neighbourhood

I know a few people in my neighbourhood, but most are strangers

I do not know people in my neighbourhood

(Baum et al, 1998

Our adapted version of this is:

  1. Which of the following fits your situation?

I know most of the people I work with each day

I know many of the people I work with each day

I know a few people I work with each day, but most are strangers

I know only one or two people I work with each day.

  1. Which of the following fits your situation?

I know most of the people at my place of work

I know many of the people at my place of work

I know a few people at my place of work, but most are strangers

I know only one or two people at my place of work

In addition to these questions, which are suitable for direct incorporation into our instruments, a number of other published questions look at wider aspects of networks. Because these are relatively unlikely to impact on output we have not included them, but they should help inform our more in-depth interviews. Stuart-Weeks and Richardson (1998) attempt to measure the density of networks:

  1. Can you think of any of your current involvement in a group or association at work that came from your involvement in another group (e.g. you met someone there who suggested you become involved in another activity and you went along to give it a try)?
  2. Are there people you know and have contact with at work that you meet in more than one situation?
  3. Can you think of any relationships or links you have made with people at work that have gone beyond the initial reason you got to know them?
  4. Is it possible to think of the links and associations you have with other people at work and judge whether or not the ones that are most important to you are those where you have a range of different connections with them? (p130-131)

Stone (2001) also points out that Black and Hughes (2000) have made a similar attempt to discover the type of networks existent in the community. They posit four types:

  1. Never meet people with the same occupation, skills or knowledge in the local area
  2. Meet weekly or more often with people with the same occupation, skills or knowledge in the local area
  3. Never meet people with the same special skills, abilities or interests in the local area
  4. Meet people weekly or more with the same special skills, abilities or interests in the local area (Ibid, p2-3)

Power relations within a given network have also been explored by Krishna and Shrader (1999):

  1. When there is a decision to be made at work, how does this usually come about?

A leader decides and informs the others in the group

A leader asks group members and then decides.

The group members hold a discussion and decide together

Other; Don’t know; Not applicable

  1. Overall, how effective is the group leadership?

Very effective

Somewhat effective

Not effective at all

Other; Don’t know; Not applicable (Quoted in Stone, 2001, p24)

As noted earlier, very little published work relates directly to firms and workplaces. However, in light of the strong hypothesised relationship between networks and sharing of knowledge and innovation we developed the following questions. These are designed to measure network loyalty and the ease at which an individual can interact with workplace networks.

  1. In the last few weeks, have you volunteered to do anything at work over

and above your normal, day-to-day tasks?

  1. How easy would you say it is to do that at your workplace?

Very easy

Easy

Neither easy nor hard

Hard

Very hard

  1. In the last few weeks, have you made any suggestions for changes or

improvements in how your work is organised?

  1. How easy would you say it is to do that at your workplace?

Very easy

Easy

Neither easy nor hard

Hard

Very hard

  1. Would you say that interactions at work are:

Mostly helpful and or friendly

Often unhelpful and or friendly

Sometimes unhelpful and or friendly

Rarely unhelpful and or friendly

Often unhelpful and or friendly

Reciprocity

Stone (2001) examines the literature concerning ‘norms of reciprocity’ (p30). Again, none of this literature is focused at the firm level and I have selected those measures (questions) of ‘social capital’ which are easily adaptable to the work place:

  1. People at work look out mainly for their own welfare or that of their close friends and are not much concerned with the welfare of others at work. Do you agree or disagree with this statement? (Krishna and Shrader, 1999)
  1. Some say that by helping others, you help yourself in the long run. Do you agree? (Onyx and Bullen, 2000 p114)
  2. How often do you borrow things and exchange favours with your fellow workers? (often to never) (Kreuter et al, 1999, p64)
  1. Have you assisted other workers with the following activities in the past year?

Listened to their problems

Helped them with odd jobs

Lent them…equipment

Lent them money

Other (please specify)

OR, no assistance was needed (Baum et al, 1998)

  1. Have your co-workers assisted you with the following activities in the past year?

(same list as previous question) (ibid)

  1. Thinking of the different associations and groups and activities you are involved in at work, what sort of reasons can you think of that got you involved in the first place? (Stuart-Weeks and Richardson, 1988, 134-136)

Reciprocity and Percieved Organisational Support

According to the literature on perceived organisational support (POS), reciprocity is a function of the extent to which employees perceive that they have the support of their employers; that their employers have their welfare at heart. In other words, the presence of a high level of POS is likely to result in high levels of reciprocity. Thus we can include the following factors: employer fairness; support; commensurate rewards/ entitlements; that employers provide perceived entitlements and job conditions. We feel that the following questions are capable of measuring the presence of organisational support:

  1. Do you feel valued by your co-workers?

A lot

To some extent

A little

Not at all

  1. Do you feel valued by your employer?

A lot

To some extent

A little

Not at all

These question are also a fairly broad catch-all for morale and interconnectedness at work (from Onyx and Bullen, 1997).

In addition, the following relates to factors identified in the literature as contributing to perceived organisational support (POS):

  1. How do you feel about:

Your promotion prospects?

Your relationship with your line manager or supervisor?

Your pay, including any bonuses or overtime?

The training opportunities available?

The commonest measures of POS are based on work by Eisenberger and Huntington (1986). We duplicate only a selection of questions here since although we are addressing the question of ‘social capital’ in general, ultimately we are interested in those factors likely to be effected by basic skills.

  1. To what extent do you agree with the following statements[4]?
  1. The organisation strongly considers my goals and values.
  2. The organisation would ignore any complaint from me. (R)[5]
  3. The organisation is willing to extend itself in order to help me perform my job to the best of my ability.
  4. It would take only a small decrease in my performance for the organisation to want to replace me.(R)
  5. The organisation feels there is little to be gained by employing me for the rest of my career. (R)
  6. The organisation provides little opportunity for me to move up the ranks. (R)
  7. The organisation feels that hiring me was a definite mistake. (R)
  8. The organisation takes pride in my accomplishments at work
  9. The organisation feels that anyone could perform my job as well as I do. (R)
  10. The organisation tries to make my job as interesting as possible.

POS has been linked, but is distinct from, the notion of affective commitment (AC: an employee’s emotional bond to the organisation). Essentially, AC can be also viewed as a type of ‘social capital’ which itself can have an impact on turnover, absenteeism and effort. Rhoades et al suggest (2001) that POS would be likely to inspire workers to increase their AC. Rhoades et al (2001) measure AC in the following way: