The effect of social capital on employee's productivity

Amir Salimi1, Mahin Khajeh2, Tohid Eskandarzadeh1

1-Young Researchers and Elite Club, Ilkhchi branch, Islamic Azad University, Ilkhchi , Iran.

2 -Department of Management, Ilkhchi branch, Islamic Azad University, Ilkhchi , Iran.

*corresponding author: Amir Salimi, Young Researchers and Elite Club, Ilkhchi branch, Islamic Azad University, Ilkhchi , Iran.

Abstract

This research has been done with the aim of investigating effective factors on

strategy implementing according to Scott Model in East Azarbaijan Water and

Wastewater Company. Statistic population has included 225 of East Azarbaijan

Water and Wastewater Company experts whom 170 of them have been chosen as

sample size through Morgan Table. Sampling has been stratified. Data gathering

instrument has been researcher-made questionnaire, its content & formal validity

has been confirmed through masters’ point-views & its reliability has been

confirmed through Cronbach Alpha so that Cronbach Alpha has been more than 0/7

for whole research variables. To analyze data Kolmogorov–Smirnov, correlation &

multiple regression tests & SPSS software have been used. Results of

Kolmogorov–Smirnov test has indicated that data has had normal distribution ;

correlation test has indicated that social capital & its dimensions have positive

relationship with staff productivity so that , relational dimension has the most

effect & after that cognitive & structural dimension have the most effect on

productivity of East Azarbaijan Water and Wastewater Company staff,

respectively .

Keywords: social capital, Staff productivity, East Azarbaijan Water and Wastewater

Company

Introduction

In today’s competitive world that productivity has increased in all fields,

organizations can survive which use their resources well & have the best

productivity. One of the most organizational resources is human resource.

Unsucced organizations lack enough efficiency for improving human resource

productivity. Nowadays, it is the best time for organizations to distinguish

themselves through their intangible assists. Managers may spend months or weeks

to provide organizations’ strategy in order to preserve competitive advantages.

What they want to know from way of strategy providing;

- First: What should they do for their organization to be the pioneer? - Second: How they can improve their staff actions & performance?(Mamali

Tafti & Taj Al-Din , 2008).

Because, social capital has created proper field for achieving to life opportunities

& objectives, thus it is one the most important resources for organizational &

social success. In current era, managers for development need more to social

capital than human & physical capital. Nowadays, organizations often employ

managers who believe in social capital & have it too. Numbers of staff with high

social capital are less & organization demand for hiring them is more; senior

managers will find few individuals with high social capital. Thus, individuals with

high social capital are rare resources, because individual with more social capital

can solve more problems. (Tymon &Stump , 2003).

Economic various theories have created revolution in organizational operations

during past decade. This revolution has affected traditional forms of capital as;

buildings & equipment & has presented new capitals. These intangible capitals

have more roles in organization growth & development. Capital term encompasses

more variables day by day. Some of them include human capital, customer capital,

intelligence capital & health capital.

Researches about education & development as investment on human capital have

been done through economic researchers at late fifties and early sixties. Although,

primitive definitions of human capital theory measure worker knowledge

according to formal school education , but correlation between education levels

with productivity & economic growth has indicated that education along with job

experiences results finally in productivity improvement.(Nafukho and

Brooksm,2006).

Recently, human capital theory has been derived from sociology as a potential

force & effective factor on organizational performance. Human capital may be

considered as available sources of social networks are used by people & as

investment by people in useful intrapersonal relationships of markets. Coleman

(1990) believe that in social capital, social relations are relations with predictable

capacity & can create value. Despite human capital & organization traditional

assets, social capital is merely result of meaningful social relations people

investment gradually on it. (Sabatini , 2005).

One of the effects of social capital is increasing productivity of organization

human resources. In business organizations, social capital is a main source for

productivity. For doing affairs, workers & experts must use others advices &

supports more than firm hierarchal structure. However, hierarchy is others most

powerful tool, but two features make their function ineffective:

First: Regardless of how powerful are bosses & how much is the organization

hierarchical, subordinates may affect final return through delay in doing orders &

confront a bit with decisions through opportunistic behavior.

Second: As, nature of jobs is completed over the time, team work will be

necessary. Mere trust to command & control structures or standard operational

procedures doesn’t ensure success. .(Greve and Benassi, 2003)

Social capital is one of the remarkable concepts in social science which its origin

dates back to second half of twenty century. Social capital term has been presented

for the first time at Haney’s article from western Virginia before 1916.

Dimensions of social capital from Nahapiet and Ghoshal point view;

They have presented organizations with higher levels of social capital are possibly

more successful than those organizations with lower levels of social capital.

Nahapiet and Ghoshal have considered three below dimensions for social capital;

• Structural dimension of social capital: This dimension considers general

pattern & existing relations in the organization. It means that this dimension

encompasses relationship individuals create in the organization.

I.e. who accesses to you & how you access to him/her? Structural dimension of

social capital include below cases;

1. Existing links in the network 2. Network Formation & combination

Organizational appropriateness.

2. Rational dimension of social capital: This dimension encompasses nature of

the relations in the organization. In the other word, structural dimension

concentrates on that whether staff having relations with each other in the

organization or not while rational dimension concentrates on nature & quality of

this relation. For example, whether these relations are clarifying through trust,

intimacy, love & so on or not? Also, if colleagues like each other & are friends?

Do they trust each other? If they see each other equal? This dimension includes

trust, norms, duties, expectations & identity.

3. Cognitive dimension of social capital: This dimension includes amount of

shared views & perceptions by staff in a social network. Also, investigates the

nature of intrapersonal relations in an organization as a relationship &

encompasses; common languages & codes & common narrations.

Fukuyama (1995) did extensive researches about trust role in the organizations &

has resulted that trust & common ideas in heart is creating & preserving

organizations which are directed successfully. Furthermore, Humphery & Schmitz

(1998) found that in Germany, Japan & Italy; trust among economic institutions is

as source of competitive advantage. Charles Handy (1995) referred to trust role in

succeed firms. Vice versa, low trust, industrial elasticity & human resource weak

relations may be considered as results of negative social capital. However, Sturgess

(2000), believe that social capital needs more researches & its effect on

organizational performance must be clarified. So, organizations invest in human

resource development cannot ignore important role of social capital. Educated &

trained staff need to an environment which give them motivation og growth &

development, such environment will only result from investment on social capital.

(Nafukho and Brooksm,2006).

Social capital is set of actual or virtual sources which are created in an individual

or among a group through a continuous network of more or less institutionalized

relations of mutual acquaintance and recognition. (Bourdieu, 1986). Thus, social

capital has two components. First, this is a source which is related to membership

in group &social networks. In fact, level of social capital an individual has, is

related to size of social relation network which he /she can create effectively.

Second, it refers to quality which is resulted from relation accumulation among

players. (Off course, it is more than discussion on a group general quality). In late

80s, Coleman has presented a new look to Bourdieu's theory of social capital.

According to Coleman, social capital is created through its function & it isn’t a

single existence. But it is resulted from various & different existences which have

two common elements. Finally in early 90s, social capital has become main subject

of social science. Putnam, Leonardo & Nancy (1993) did a famous research on

local government in Italy. Their result indicated that performance of social &

political institutions has been greatly affected by citizens’ participation in social

affairs & what that is called social capital. (Aspin , 2004). Presented views on social

capital is remarkably different from those former presented views. But all of them

have agreement on ability of social structure definite aspects which are used for

generating positive outputs of group members, i.e. those who gain a competitive

advantage from following their aims.

As have been said in definition of social capital, social capital may have economic,

social & political advantages; this is because of its mutual relation with efficiency.

It seems that there is more agreements on mechanisms which through them social

capital can has positive effect on economic performance. The most important

mechanisms are as follow;

• Lower costs of transactions

• Lower rate of staff displacements

• sharing knowledge & innovation

• Risk taking

• Products quality improvement.

Lower costs of transactions: This subject is related to the classic problem that we

cannot easily control staff efforts & activities as well to relate staff efficiency to

their wages impossible. In such situation, staffs have fewer motives to use their

maximum abilities. Therefore, firms have to use sources to control staff or tolerate

more loss for non-use of these controls. In this regard, social capital can decrease

reminded costs through increasing trust & creating more commitment.

Lower rate of staff displacements: If staff feel that their employer behave with

them well, they will possibly behave like that by rational behavior (for example, if

this be considered as higher level of social support). So, the most important result

of this issue for staff is decrement in displacements & job absenteeism.

Sharing knowledge & innovation: This issue may be encouraged through

creating trust & common relations & objectives. In social capital term, it is the

most important factor for level & quality of work environment to what extent that

staff, colleagues & managers learn from each other & feel that they are innovative

as well as they are member of a team. Effect of such issue on organization is

hidden in efficiency term. New theologies are growing fast, useful activities are

perceived & accepted soon & innovation is developed. Experimental researches

have indicated that informal interactions spread out among staff, improve

information dissemination & enforce knowledge treasures generation which helps

to asset creation for production process. These kinds of treasures are relationally &

are only existence while they are shared.

Risk taking: risk taking experience & entrepreneurship behavior is encouraged

through strong relations in the organization or among different organizations. In

social capital term, this is related to a range in which staffs feel that they are

valuable for their employers & colleagues & their welfare is important for the

organization.

Products quality improvement: Results of knowledge sharing, team work &

organizational commitment improvement will possibly be products higher quality

which social capital encompasses them. Also, when staffs feel that they have

organization support, output level may be increased through staff better

performance & negative role of organizational stress in performance.

According to this issue, we understand that we should concentrate on what aspects

of social capital. We deal with issues such as networks, coordination & trust.

However we know mechanisms by which these three factors influence

productivity. (Aspin, 2004 ).

In another research, Coleman has identified two main branches though which

social capital affects human resource productivity; first that, social capital results

knowledge & information sharing among staff & makes possible achieving definite

objectives through which it won’t be achievable.( Coleman , 1990).

It can be stated that each human resource may be considered as part of informal

structure who his/her sources improve capability of solving his/her problem. Also,

this structure can be expanded throughout whole organization such as; professional

networks, friends & former colleagues. Social capital is becoming important in

projects remarkably, where participants are experts who should use their expertise

for doing complex duties & responsibilities. To participate in multidisciplinary

project teams, each expert needs to know how others can help to achievement of

common objectives & how can use each other expertise & progress the project?

While working on projects, individuals use each other social capital to complete

intragroup knowledge. (Greve & Salaf, 2003). Second that, it is possible that social

interactions affect staff motivation & efforts. In famous research of March &

Simon ( 1985 ) on organizations presented that even if managers behave

democratically , organization hierarchy be so inflexible , but duties be done well,

staff will be possible to affect performance through different ways such as ; delay

in implementing orders & more general , doing opportunistic behaviors . Most of

researches indicate that if human interactions are more comfortable & base on trust

among human resources, staff have more tend to do their best & not doing duties

by individuals will be decrease through controlling them .As Bowles & Gintis has

stated; controlling & punishment through equal team members, credit institutions,

partners, local public conditions & situations & city locations is often a proper

instrument to decrease related problems to individual motivation when their

actions isn’t exposed to forced agreements because of others’ suitable

performance . (Greve & Benassi, 2003).

The aim of this research is determining effect of social capital on staff productivity

which its importance has encouraged researcher to do this research. So, research

hypotheses are as follow;

Main hypothesis

Social capital has effect on productivity of East Azarbaijan Water and Wastewater

Company staffs.

Subsidiary hypotheses

• Structural dimension of social capital has effect on productivity of East

Azarbaijan Water and Wastewater Company staffs.

• Relational dimension of social capital has effect on productivity of East

Azarbaijan Water and Wastewater Company staffs.

• Cognitive dimension of social capital has effect on productivity of East

Azarbaijan Water and Wastewater Company staffs.

METHODOLOGY

This research is applicable in term of aim & is correlation in term of research. Data

collection method has been field & information collection instrument has been

researcher-made questionnaire which has been provided from two standard

questionnaires; social capital questionnaire according to Nahapiet and Ghoshal

model & productivity questionnaire. Statistic population has included 225 of East

Azarbaijan Water and Wastewater Company experts whom 170 of them have been

chosen as sample size through Morgan Table. Sampling has been stratified.

Questionnaire content & formal validity has been confirmed through masters’

point-views & its reliability has been confirmed through Cronbach Alpha so that

Cronbach Alpha has been more than 0/7 for whole research variables. Therefore,

data has more reliability. To analyze correlation & multiple regression tests &

SPSS software have been used.

RESULTS

Table1.

Z K-SsigVariable

1/1430/147Structural dimension of social capital

1/1800/123Relational dimension of social capital

0/9920/273Cognitive dimension of social capital

0/7670/599Social capital

1/0140/256Staff productivity

Table2.

variable

Structural dimension of social capital

Relational dimension of social capital

Cognitive dimension of social capital

Social capital

Staff productivity

sig 0 0 0 0

Correlation 0/700 0/847 0/297 0/638

As table 2. Indicates, significance level of all data is more than 0/05 & is equal to 0, so hypothesis which indicates correlation relation between variables with staff productivity has been confirmed. Therefore, in 0/01 error level we can say that there is positive relationship between structural, relational, cognitive & social

capital variables with staff productivity .

RR(squre)rDeviationDurbin-Watson

0/6380/8890/8890/703602/058

Table 3 indicates correlation coefficients between independent variables (dimensions of social capital) & dependent variable (staff productivity) in simple linear regression model.

As it is observed in table, in simple linear regression analysis, there is a correlation coefficient equal to 0/994 between social capital & staff productivity & independent variables are able to explain 0/630% of dependent variable changes. According to that Durbin-Watson coefficient has been in 1/5 to 2/5 interval & has been equal to 2/058; so, error independence assumption has been accepted & there is the possibility of using regression model.

Table 4 indicates variance analysis for simple linear regression to determine staff productivity. As it is observed at table (4-18), significance level is less than 0/05 .

So, variance analysis indicates validity of regression analysis .

model Sum of squares F Mean Square F sig

regression 991/54 3 330/18 609/4 000/0

660/0 166 004/0

total 652/55 169

Table 5 indicates standard & not standard regression coefficient for investigating effects of social capital dimensions on staff productivity.

Model

Standardized coefficients βT sig

B

Constant quantity

Structural dimension of social capital

Relational dimension of social capital

Cognitive dimension of social capital

According to table 6 social capitals with Beta coefficient of 0/314 has the ability of predicting staff productivity. Therefore, with accepting research main hypotheses, we can say that structural, relational & cognitive dimensions with coefficient of 0/032 , 0/472 & 0/411 have had effect on productivity of Azerbaijan Water and Wastewater Company staff, respectively. Its regression model is as follow;

Y=0/314+0/032 x1+0/472 x2+0/411 x3

Conclusion

There is relationship between social capital & organizational performance. Because social capital refers to links& intrapersonal relations among members of a network as valuable source which will results in achieving goals through creating norms & mutual trust. Through using results of this research, it has been clarified that there is positive relationship between staff performance & their social capital. It means that how more is staff social capital, they will have better performance. In this research correlation coefficient between structural dimension & staff productivity is 0/7 which indicates that there is relationship between them. Also, correlation coefficient between relational dimension & staff productivity is 0/748. We assume that increasing relationship among staff result in increasing trust & identity feeling, doing duties & expectations & accepting norms. These will result in performance increment, too. There is correlation coefficient of 0/792 between cognitive dimension & staff productivity. This will result in knowledge & idea sharing through staff as a result of having trust & group coordination & cooperation. This will result in productivity improvement, too.

According to findings & results, below suggestions has presented for the organizations;

• Managers try that their staff participate in group activities so that they will know themselves as part of working group.

• Managers enforce informal norms in the organization, because individuals make relationship & trust to each other easily & rapidly in informal organizations.

• Through increment in trust radius i.e. increasing range of mutual coordination & trust among group members, trust increase throughout organization.

• Origination can help to newly employed staff through increasing staff personal skills & holding educational courses to make them familiar with organization missions & their colleagues. The courses should be such that increase staff skills. This course not only enforce staff to do their duties , but also increase their coherence .

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