Social Capital and the Power of Brokerage

Diverse NetworkGo to school, work hard, continue skill development, make sure you balance work/life, eat right, exercise, and make sure you make room for spiritual enlightenment. Do these things and you will achieve all your goals…right? If you do these things well, you are maximizing your “human capital” utility. Gary Becker, who passed away in 2014, was a Nobel Prize winning professor of economics and sociology at the University of Chicago. His work on “human capital” was foundational in business and education. His book, Human Capital, laid the groundwork for many decades of research on this topic. In a 2017 article regarding Becker and human capital in The Economist, they state:

“Simply put, human capital refers to the abilities and qualities of people that make them productive. Knowledge is the most important of these, but other factors, from a sense of punctuality to the state of someone’s health, also matter. Investment in human capital thus mainly refers to education but it also includes other things—the inculcation of values by parents, say, or a healthy diet. Just as investing in physical capital—whether building a new factory or upgrading computers—can pay off for a company, so investments in human capital also pay off for people. The earnings of well-educated individuals are generally higher than those of the wider population.”

Society and organizations focus on human capital development—as they should. As a parent, I am trying to teach my children good behavioral habits and healthy eating habits, while stressing the value of education and skills development. Organizations often have programs to improve an individual’s human capital. Human capital is important and should remain a focus area in business and society. However, I would propose that even if you do a great job on the human capital development front, it may not be enough to achieve your goals. One of my favorite professors from my M.B.A. program at the Booth School of Business, University of Chicago, was Ron Burt. Professor Burt is one of the experts in the research field of “social capital.” In Burt’s book, Brokerage & Closure: An Introduction to Social Capital, he says this about human capital and social capital, “Social capital is the contextual complement to human capital in explaining advantage. Social capital explains how people do better because they are somehow better connected with other people. Certain people are connected to certain others, trusting certain others, obligated to support certain others, dependent on exchange with certain others. One’s position in the structures of these exchanges can be an asset in its own right. That asset is social capital. People and groups who do well are somehow better connected.” 

Burt’s research is comprehensive and his writings can be dense, so let me try to summarize my view on a few of his findings. Within the context of social capital, Burt talks a lot about two types of networks: brokerage and closure. Closure networks tend to be walled off. Picture a small engineering development group of 10 folks that work together every day on a very defined task. The group’s interaction with others in the organization is limited and individuals in the group have limited exposure to other professionals outside the organization . Closure networks can be very effective when trying to “efficiently utilize resources.” Brokerage networks are better at driving “new services, new processes and new business.” Brokers form a “vision of what to do and who to involve from exposure to diverse external information.” On the back cover of Burt’s book, it reads “Brokerage is the activity of people who live at the intersection of social worlds, who have a vision advantage of seeing and developing good ideas, an advantage which can be seen in their compensation, recognition, and the responsibility they’re entrusted with in comparison to their peers.” Brokerage is different than just having a large network of contacts. I think the consulting firm expressworks, explains it pretty well on their website. Here’s a summary:

"People rely on their connections, and the connections of their connections, to get jobs, find romantic partners, and discover new things about the world. Perhaps now more than ever the old saying applies: It’s not what you know, it’s who you know. In short, your social network — the one made up of real people, not Facebook posts — is a powerful source of opportunity. This raises an obvious question: What kind of social network positions you for success?

Bella Froedge working on a project during I <3 STEM DAY.Most people would probably say “a big one.” And it is certainly true that maintaining a large social network has its advantages. But according to academic research pioneered by Ron Burt, a professor at the University of Chicago’s Booth School of Business, what is even more important than the size of your network is the extent to which the people you know are themselves disconnected. Burt calls people who serve as a bridge between otherwise disconnected contacts, brokers. Over the last 25 years, he and other researchers have accumulated a substantial amount of evidence documenting the benefits of being a broker in the workplace. Their research shows that brokers generate more novel ideas; get promoted faster; earn higher compensation; complete more deals; and are more influential overall. In short, brokers do better.

Why do brokers benefit?

Brokers benefit because they have access to a greater diversity of information. Knowledge within groups tends to be redundant — people in the accounting department of an organization, for example, tend to know the same things, as do people in the sales department. Having contacts who don’t know one another, however, gives brokers access to the information that each different group possesses. Imagine that people in the accounting department begin a project that provides a great lead for a person in the sales department to capitalize on. If I, as a broker, know someone in accounting and someone in sales, I am in a position to use that information to benefit both my contacts and my organization overall. Note that in this scenario, the overall number of contacts is irrelevant: a person with two contacts is in a much better position than a person with 12 contacts, as long as they are the right two contacts.”

MacKenzie Froedge at I <3 STEM Day.So, why are these concepts important in the context of Women in STEM? STEM roles can often lend themselves toward closed networks if one doesn’t make a concerted effort to develop his/her brokerage networks. Analyst roles, engineering development roles, computer programming roles, and other STEM roles may not naturally create broad interaction within the rest of the organization or outside the organization. Thus, individuals within these roles must develop their brokerage networks in order to maximize their social capital utility. Don’t get me wrong; I am not saying one should steer away from these types of roles. Quite the contrary, these roles are critical.What I am suggesting is that to get promoted more frequently, to maximize compensation, and to get recognized more often, don’t let the 5-10 people on your team be the only folks you interact with. Having people in your network with diverse views/experience in the arts, social sciences, marketing, and other STEM topics that are outside your area of focus will give you a broader and differentiated view of the world which will make you more successful in your current and future roles. It will enable you to make important connections between others that can lead to new business, new ideas, new innovation.

I believe one of the best ways to build social capital is to make your network as diverse as possible. You never know where that next powerful brokerage opportunity will be and the more diversity you have in your network, the more likely you are to be able to make it at the right time to create value. Women in STEM is a fantastic organization that can help you better understand your organization, broaden your network and improve your broker skills. To reach maximum broker potential, think broadly about the types of individuals you connect with that can expand your point of view. To connect with some of these folks you may need sponsorship from others in your network. Invest as much time and energy in developing social capital as you have invested in developing your human capital and I believe it will have a meaningful impact on your life and career.