Investing social capital

By Barbara Spector

After Facebook’s blockbuster IPO filing, the business press overflowed with articles about the value of social networks. Lamentably, not enough attention is being paid to the value of social capital.

Wikipedia defines social capital as a sociological concept that “refers to the value of social relations and the role of cooperation and confidence to get collective or economic results.” In other words, your organization’s financial performance is affected (a) by the way that people in the organization treat others and (b) by the organization’s involvement in the community.

Just Born Inc., the family-owned maker of Peeps and Mike & Ike candy, posts on its website ( a 20-point list entitled “Our Philosophy,” emphasizing people rather than profits. For example, “We believe vision, compassion, courage, and integrity are the cornerstones upon which we build each day and each endeavor.” “We believe great things happen when everyday courtesy, kindness, and humor are woven into all our personal and professional interactions.” “We believe how we achieve is as important as what we achieve.”

This edition profiles two family business leaders who invested social capital and changed their corporate cultures to emphasize interpersonal relationships. Charlie Luck, CEO of Luck Companies, instituted a program called Values-Based Leadership after noticing that his management team was not functioning well. Mark Peters, who became CEO of Butterball Farms Inc. after his father’s death, inherited a company with an annual turnover rate of more than 200% because employees were treated poorly. Peters quickly made dramatic moves to demonstrate his commitment to employees.

In a 2009 article in the academic journal Family Business Review (22[3]:193-5. 2009), researchers Ritch L. Sorenson and Leonard Bierman wrote that family firms have an advantage that other companies lack: family social capital, which they defined as “resources within the family that can be made available to the business.” They noted, “In family businesses family beliefs form the basis for values, norms, and expectations that guide interactions among stakeholders, including employees and customers.”

Your family’s values, relationships, reputation and community participation can be an asset. To leverage your social capital investment, Sorenson and Bierman recommend forming a family council, holding family meetings and documenting your family values. As part of your plan to pass your financial capital to the next generation, make sure you develop a way to transition your social capital, as well.







Copyright 2012 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permssion from the publisher. For reprint information, contact

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May/June 2012


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