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How To Invest in Social Capital

Authored by:Laurence Prusak

Don Cohen

Presented by:Asit Agarwal

Kanti Prakash BrahmaRabindra Kumar Jena

Suchismita Gupta

Outline

What is Social Capital

Enemies of Social Capital

How to Invest in Social Capital

Demerits of too much Social Capital

Conclusion

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What is Social Capital

Business runs better when people within an organization know and trust one another

Trust is a very important factor to move faster and be productive

Social Capital: the relationships that make organizations work effectively

Social Capital Under Assault

Rising Volatility and Overreliance Virtuality

-Building relationships in turbulent times is tough

Reasons

Lack of Knowledge on how to invest on it-There is a difference between theory and practical implementation

Enemies of Social Capital: Volatility and Virtuality

Capital Offences

Companies thrive when they have dense social networks, high levels of trust and norms of cooperation but management theory and practices undercut them

Investment in Social Capital

Making Connection

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What is Connection?

How Connection is Facilitated

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Workplace that spills over in a positive sense to non-work areas of employees life by availability of fringe benefits. (ex- SAS, food coupon of M&M)

By promoting from within (ex- UPS)

Giving people time and space to bond in person(telecommuting, virtual teams, face-to-face interaction)

Fostering Knowledge Sharing

How Connection is Facilitated

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Providing Ice-breakers by open and attractive environment (ex- Grand Rapids)

Fostering Durable Networks (ex-UPS)

Investment in community-building activitiesBut investment should not be heavy-handed

Enabling Trust

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No one can manufacture trust or mandate it into existence

Trust building can backfire if management is too heavy-handed

Conditions and connection people experience day after day is more important than trust building exercises

Enabling Trust

Give Employees No Reasons to Distrust Transparency Rule of the Law

Show Trust Yourself Trust is self-reinforcing Trust employee’s judgment(Nordstom’s two rule: 1. Use you judgement, 2. There is no second rule)

Send Signals that Trust is Valued

Trust Responds to Rewards

“Free Agent” Nation

Each Worker can be a company of one, porting his expertise, on a project-by-project basis, to wherever in the world it is needed

Claims: Free agency is becoming model of work and employment

Claims are counter to how people understand shared task and come together to work

Silicon Valley: Ability to work “Independently” is dependent on their being socially tied to a physical community through durable networks

Fostering Cooperation

Adversity or opportunity-impulse is to pull together

Ex-Malden Mills Give people a common sense of purpose

Ex-Johnson & Johnson Adverse situations-

Noble goals & inspirational leadership can draw people together

Give their work meaning beyond the need to earn a living Financial stake in the outcome-”all in this together” feel

Ex-UPS

Fostering Cooperation

Sharing ownership Reward teamwork & signal its importance Bonuses-more importance to group & corporate

performance and less on individual importance

Ex-IBM Establish some rules

increase the efficiency of the recruiters’ efforts force the consultants to get to know one another in ways

they wouldn’t in self-reliant searches“Hire for it”Ex-South West Airlines

The problem of plenty-too much social capital ?

Social capital is not a Business strategyMarketing planA substitute for either Not always even a good thingCompanies-damaged by high social capitalBreeds “groupthink”-a tendency not to question

shared beliefsSupport ideas that are narrow or wrongPrevent people from challenging one another with

tough questions

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The problem of plenty-too much social capital ?

Discourage “Creative abrasion”-a source of innovation

Ex-Digital Equipment , Polaroid In general effects of social capital are positive Engagement, collaboration,loyalty,persistence &

dedication are important benefits

Ex- UPS, HP, Russell Reynolds, SAS

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Authenticity in Management

“The key for an actor is sincerity because if you can fake that you can fake everything”-Samuel Goldwyn

Invest in social capital only to the extent that you believe in it

Lasting social capital cannot be built merely by going through the motions of team building

Trust is built over time It represents organic growth of trust, understanding,&

loyalty-takes time to develop

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Conclusion

The social capital that used to be given in organizations is now rare and endangered

We can build social capital to capitalize on the volatile, virtual possibilities of today’s business environment

Building social capital can’t be “legislated” or “managed” It occurs through natural development that orients rather

than orders, that provides nourishment rather than blueprints

“Everything in this firm works because of social capital”

-Hobson Brown, President & CEO, Russell Reynolds

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