The Hidden Capital of Social Networks

A general truism is that people tend to do business with their friends or even the friends of their friends.  At First Oklahoma Bank in Tulsa, Oklahoma, we are trying to use this to our advantage.

The prospect of Basel III being implemented is getting banking institutions, including ours, focused on increasing equity capital to meet the potential increase in capital requirements. However, there is another “capital” component that is good to think about mobilizing: The social capital among bank investors.

Social capital is essentially the ability of a diverse group of individuals working together to get things done by using their memberships in diverse social networks or other social structures.  At this point, it is essential that banking institutions see the value of social capital as an economic tool to get things done.  Consider the value of the following things getting done via social capital:  

1. Access to information about what is happening in the community or who is doing what deals
2. The exertion of influence on potential customers, new employees or new investors
3. Social connections or introductions to people with money and/or deals 
4. Endorsements that reinforce the identity, recognition and reputation of your bank
5. Associating the trust that we have in a friend with an organization in which they are invested.

While most of us regularly seek to nurture and increase the social capital of the bank represented in the bank’s employees, we should also be thinking about how to do this with our investors.  Reflect upon the wide array of memberships in extended families, university alumni associations, professional associations, religious organizations, and civic or social organizations that exist within your investor group.  Imagine the impact their collective social capital might have on the performance of your bank.

One method our bank uses to engage and mobilize our investors’ social capital is sending a quarterly report to each investor called Talking Points.  It’s a practice adopted from the political world that is intended to get our investors on the same page and spreading the good news about their bank.  We include in our Talking Points information for our investors to share with their social networks about how well their bank is doing and why they should move their business to the bank.  Regular elements of Talking Points include charts describing the bank’s growth, comparisons of the bank’s services to competitors, descriptions of any special promotions the bank is offering and a section describing what you can do to help make your bank more successful.  Because of the diversity of social networks among our investors, the Talking Points message reaches groups that our employees alone could never have done.  We believe this has been an important factor in our bank’s $216 million in asset growth in our first three years and two months as a de novo bank.

By engaging the investors of the bank and connecting to their social capital, you build a diverse reservoir of informed and motivated sales people that can be drawn on to both market the bank and potentially to raise additional equity capital in the future.  We believe this is an important reason why we have been able to raise $32 million in equity capital from our investors over the last 42 months in three separate stock offerings.

As you think about how to address your equity capital needs and other performance items in your bank, think of the social capital that exists in your investor group and how it can be utilized as a valuable source of strength. Figuring out how to use the social networks of your investors may be as important as getting their equity capital invested in the bank.  

An important business goal should be figuring out how to gain and engage more friends.  

If you would like a copy of our Talking Points, please let me know at [email protected].  If you have any great ideas on how this works in your investor group, please let me know.  We can all benefit by learning from others.