Partner Article

Social Capital: as good as money in the bank

Sir Michael Snyder, senior partner at Kingston Smith LLP, looks at how businesses can harnass social capital through online networks.

In the recent Kingston Smith report ‘Success in challenging times: generating social capital’ we looked at how small and medium businesses (SMEs) can best use networks and connections to boost their business.

Social capital is created through both offline activities such as face-to-face events and online activities including social media use.

Offline and online networking activities are not of course mutually exclusive alternatives for SMEs.

Creating and maintaining social capital is central to SMEs’ business development. Yet our report shows that many feel they do not know how to go about it; SMEs typically invest less time on building these networks than larger organisations.

One way in which SMEs can seek to expand their social capital, alongside their use of face-to-face networks, is through the use of social media. The report suggests that while sites such as LinkedIn are widely used to showcase the SME business, direct links between LinkedIn and higher sales revenues are hard to determine. Facebook is used, but not as extensively as LinkedIn, as it is used more in a personal than a business capacity. Twitter can be effective - but there is the danger that tweeting replaces genuine business activity. YouTube is a potentially powerful medium, given that it is relatively cheap to produce and upload videos.

Whatever social media is used, it has to be fit for purpose and appropriate to the business model. Social media is not a substitute for face-to-face networking and events. The challenge is how to integrate them successfully.

As a first essential, SMEs should have a clear strategy towards social capital included in their overall business plan. Our report recommended that the plan should integrate the use of different online activities, for example have a blog on the business website to help with search engine optimisation. The plan should set out how much time and resource can be devoted to developing the use of online social media, and create a balance between live events and online activities.

SMEs should have a policy for, and monitor, social capital based activities. This includes keeping a watching brief on what people (especially former employees) are saying online about the business brand. SMEs should provide staff with operational guidelines for offline and online networking, and monitor the time staff spend on online and offline activities. To ensure they are getting a proper return on their investment, SMEs should track the business impact of their involvement with social media. They should deploy social capital to obtain intelligence on potential clients – and on the competition.

Our report is clear that SMEs should take the development of social capital seriously. But in an increasingly connected world where virtual relationships are valued more highly than ever, it is essential SMEs should devise a co-ordinated approach which combines traditional face-to-face networking with social media. Devising a strategy that incorporates both online and offline activities is central to SMEs’ business development, particularly if they are to compete with their larger counterparts.

This was posted in Bdaily's Members' News section by Kingston Smith LLP .