Written by Josh Jacobson

Here’s the headline, folks: private sector companies and nonprofits have never been more disrupted, in roughly the same ways, by a shift in societal norms. Both are experiencing new stakeholder expectations that will challenge profitability, sustainability and impact for years to come. And it comes down to how social capital is built on both sides of public/private divide.

Oh boy, not that phrase again…

The term “social capital” in Charlotte has a checkered recent past. The need to increase social capital was a chief finding of the Charlotte-Mecklenburg Opportunity Task Force, the group that worked to address the city’s low ranking in a 2013 study on economic mobility by researchers at Harvard and UC-Berkeley. Since we reference it so often, we’ll assume you know all about it. If not, here’s a brief primer.

As we’ve noted before, we don’t much like how the definition of social capital was interpreted in the nonprofit-sphere – the idea that building one-way relationships of opportunity and resources through social networks are the key to driving economic mobility. Some short-handed the concept of social capital as people of affluence opening up their networks to disinvested people through education, mentorship and “a helping hand.”

In truth, social capital is a two-way street where well-meaning donors and volunteers are learning that “it takes two to tango.” It is constructed through “bridging, bonding and linking” that recognizes the provider and the consumer of resources must build a collaborative framework for that exchange that recognizes what each brings to the table. Here’s an academic paper on the topic if you want to explore it further. These ideas have formed the basis of our firm’s values and guiding principles.

We’ve written exhaustively on this in the past. It’s sort of our thing at Next Stage. So what’s changed?

Enter the private sector.

Oh, we think a lot has changed. A ton, actually.

Riding a Wave of Disruption

Oxford defines social capital as “the process and conditions among people and organizations that lead to their accomplishing a goal of mutual social benefit, usually characterized by interrelated constructs of trust, cooperation, civic engagement and reciprocity, reinforced by networking.”

We love this definition because it centers the concept on mutuality, which is what is guiding our firm in big ways these days. Mutual benefit is an essential component of relationship-forming and a critical ingredient to solving… well, everything. To paraphrase something I read recently, “if it doesn’t work for me, then it doesn’t work for us.”

This definition of social capital also suggests building blocks of trust, cooperation, engagement and reciprocity that we are seeing mirrored in all the ways we are engaging these days – building blocks that have been greatly impacted by three macro trends. If you’ve read any of our 2021 Social Good Report, we bet you can guess what they are:

COVID-19 – Probably not a big surprise here, but the pandemic has disrupted the status quo in innumerable ways. How we live, work and engage with each other has changed so significantly, it is no wonder how we form and maintain relationships has evolved. This is true for private sector companies and nonprofit organizations alike.

The Asset of Identity – The fight for racial and social justice sparked in 2020 has catalyzed a movement that defines one’s identity as a unique and critical asset. “Lived experience” has renewed value in society and institutions of business, social impact and philanthropy are wrestling with how this awakening is challenging built infrastructure and the rules of supposed “best practice.”

Generational Change – We’ve been talking about it for the better part of two decades – the disruption of the digital-age Millennial generation has evolved into a two-generation wave as the oldest Gen-Zers are aging into new roles as employees, investors, consumers, donors and volunteers. These generations are rewriting the rules as they mature into leadership roles and the result is a significant reimagining of standard operating procedure.

It’s a lot. We believe these trends cresting together have manifested a perfect storm of sorts, creating a wave of change that institutions can either successfully surf into a new paradigm or else be leveled like in a tsunami.

Embracing Mutuality as Survival

Why do we love mutuality so much? Because it is so fiercely human.

Mutual benefit is the building block of both democracy and capitalism. It suggests that all sides benefit from an exchange as based on perceived value of meeting needs, wants and desires.

For a long time, the exchange rate of goods and services was well-defined for companies and nonprofits alike.  A business enterprise would produce a good or service, price it to account for the cost of production and profitability, and market it to consumers who value the good or service on par with its offer price. Those companies that survived offered the best value on this exchange. Profits from that exchange allowed the company to grow its human resources, and for the most successful, further stakeholder investment would be driven based on expectations of future performance.

Nonprofits are really not much different, though the constituencies are varied. Nonprofits are public institutions managed on behalf of all citizens. But unlike government that is funded by tax revenue, nonprofits must compete in a marketplace of earned and contributed revenue. That marketplace is complicated, with the impact of the nonprofit leveraged by its network of relationships to secure investment. Like companies, future performance is a key to securing resources.

So what is different these days? The emergence of a collective social consciousness, louder and more defining than ever before. It has led to a big shift from “what” to “how,” with a focus on the ways identity assets inform outcomes.

The trends outlined above have changed the consumer and workforce landscape considerably. Customers, clients, donors, volunteers and employees alike want to align with values-centric companies and nonprofits. Choices are being made not only on the quality and cost of the product or service, but also based on how it is made, who made it, how it fits into a larger system of goods and services, and the unintended downside impacts of its creation.

The private sector and nonprofits have new considerations as it relates to mutuality and “doing it the way we’ve always done it” simply isn’t working anymore. Rather than fight shifts in consumer norms, smart institutions are embracing them as trends upon which to build new infrastructures, not unlike advancements in technology.

It’s the new way of doing business.

Redefining Social Capital

So that brings us back to social capital.

If we agree that the world is changing – nay, has changed – and mutuality has shifted to a more socially-conscious form of value exchange, then it stands to reason that the way relationships between institutions and constituents are formed is changing as well.

Against this backdrop, Next Stage offers a new definition of social capital, one that extends well beyond the aims of economic mobility to suggest a new framework of mutual social benefit. Social capital is the individual and institutional embrace of mutualism, in all of the complicated and often messy ways it manifests. To increase social capital is to center mutual benefit as a defining characteristic for all involved, helping to ensure an outcome that “works for all of us.”

With this definition in mind, we’d suggest the following as critical tools:

Community Voice – It is hard to create a mutually beneficial construct if the voice of key constituents is absent. Institutions are finding that “designing with” yields much better outcomes than “designing for,” and that means deeply exploring the perspectives of a wide variety of constituencies. That also means leaning in to the squeakiest wheels and sourcing feedback from even the most reluctant.

Bottom-Up Cultures – The larger the institution, the more likely it is that power is held in a top-down infrastructure. Shifts to social norms are perhaps most confounding for these institutions as the democratization of public will challenges leaders who are used to more one-sided benefit. Community voice is only as powerful a tool as the bottom-up culture that gives it a seat at the table.

A Focus on Trust  – The concept of trust is everywhere right now. Stanford Social Innovation has a number of whitepapers on the topic, including this one from 2019 that greatly inspired Next Stage’s work. This past summer, we talked on our blog about the important role trust plays in bridging community. The Foundation For The Carolinas recently had Shaady Salehi from the Trust-Based Philanthropy Project in town to facilitate a roundtable about “advancing equity, shifting power and building relationships” toward greater trust-based philanthropy. If your company or nonprofit hasn’t had a conversation about trust lately, we recommend jumping on that.

Informed Decision-Making – Next Stage believes that a focus on mutual benefit always creates better, more sustainable outcomes, but it doesn’t imply that everybody gets exactly what they want. It does suggest that the negotiated outcomes have factored in the buy-in of everyone involved. We are surrounded by difficult situations where the act of leadership is defined by making an informed decision that moves the company, the nonprofit or the community forward. It may not always be easy but considering all the perspectives first will undoubtedly yield better decision-making.

A Foundation of Equity  – To jump-start a focus on mutuality, we must start by recognizing that some in our community have been historically shut out of the conversation about mutualism. We must examine the root causes of outcome disparities within systems before we can fully realize mutual benefit frameworks. We need to build back stronger if we want to demonstrate a commitment to a brighter future.

Over the next few weeks, we’ll be unpacking how new approches to social capital are shaping the direction of area companies, nonprofits and philanthropic instituions leading to bold leadership and decision-making. We’ll feature case studies of “mutualism in practice.”

Interested in exploring how this updated definition of social capital impacts your business or nonprofit? Reach out and let us know. These ideas are guiding everything we’re talking about these days and we look forward to exploring it further with leaders in the communities we call home.