View Point
February 23, 2007
Social capital in organisation

Our focus today is on social capital in business and organizations, the trust-based connections between people and networks, and the communities through which they engage in cooperative action. Social capital is not new, but most analysis has tended to focus on individuals or nations, cultures or regions rather than companies and organizations. The feel of an organization once you enter the compound tells you whether it has high or low social capital. Anyone who has visited an organization knows how quickly the experience of wandering around creates an impression of the place. The way people greet each other in the hall way, the look of offices, comments overheard in the cafeteria or elicited by questions, tells you whether the organization has high or low social capital. Social Capital is so much a part of people’s working life that it tends to be invisible. As the old proverb notes, the fish does not see the water it swims in. The value of connections between people at work, the value for instance of getting reliable help from a colleague when you need it, or knowing that your contributions to a team success will be recognized and rewarded, are all components of social capital. {{more}}A case in point is a story of the on-line Eureka system used by Xerox copier repair technicians to share tips on solving difficult problems. These technicians actually rejected an offer of financial rewards for contributing tips, because the intrinsic reward of reputation and gratitude among peers was so much more important.

We have long past the time when one individual can know virtually every thing worth knowing. We are even past the time when a single individual can know virtually everything important about any global organization, or everything he needs to know to do his work well. So belonging to the network that can coordinate and enhance our limited knowledge has become essential to the sciences as well as to the corporate world. The individual genius, though not extinct, is rarer than ever. Even individuals whose accomplishments have been recognized by Nobel Prize Awards were supported by a combination of institutions, colleagues and assistants. Analysts call this the age of interdependence. They refer to the importance of people’s NQ or network quotient, their capacity to form connections with one another which some argue are more important than IQ, the measure of individual intelligence. In many endeavours collaboration involving numerous persons in multiple locations has become necessary. This point is emphasized even more clearly by the example of a paper on DNA sequence that lists 133 authors from 85 institutions. The increasing complexity of tasks makes connection and cooperation – social capital – more and more inevitable.

An anecdote about United States President Franklyn Roosevelt’s personal physician suggests that the doctor’s exclusive attention to one patient may in fact have been detrimental in some ways. Because the doctor worked alone, cut off from the experiences of seeing other patients and working with colleagues, he may have failed to learn things that might have extended the President’s life. This despite the doctor’s unquestionable ability and conscientious effort to keep up with the medical literature.

Just as knowledge has always resided in organizations but it was not until the information age put a premium on ideas that intellectual capital was recognized as a critical resource; so forces like technology, globalization and the rise of free agents and virtual workplaces are bringing another form of hidden capital to the fore. Social capital embraces a company’s stock of human connections such as trust, personal networks and a sense of community. It is not being advanced as the key to organizational success, indeed some firms succeed despite the negative effects of low social capital are overwhelmingly positive.

There has been a growing trend towards virtual work which can be described as work done over distance, with critical connections made by e-mail, intranets, video-conferencing, cell phones and other new communications technology. Most of it is work that was traditionally done in the immediate vicinity of other workers located in the same office or laboratory. Virtuality also has to do with new thinking about organizations themselves e.g. like the virtual corporation as a cluster or network of usually dispersed individuals who come together around a particular project or task and disband when they have completed it. Film makers and free lance musicians are typical examples.

The social expectations of almost all new technology have tended to be over ambitious, but it is only after a settling-in period that the practicality of what could be accomplished becomes clear. It was believed at the time that the invention of the telephone would eliminate war. If Kings, Presidents, Prime Ministers could speak directly to one another, free of the distorting intermediations of diplomats, permanent peace would be inevitable. Despite the high hopes in some quarters, no invention has yet eliminated misunderstanding, war, prejudice or the need for human contact. Nevertheless, what in the past could be taken for granted and sometimes even minimized can no longer be ignored or left to chance. This is true in part because organizations in a highly changing competitive global economy need to make the most of their assets, of which social capital is key.

Studies of the internet and social capital conclude that the observance of norms and trust – essential components of social capital – are the greatest barriers to using the internet as a tool for building social capital. The openness of the web is one of its strengths, but the fact that anyone can use it makes it difficult to agree to norms of behaviour or to enforce them, hence the on-going struggle of what to do with pornography on the web. The ease with which almost anyone can construct a professional looking website makes it hard to judge whether you are dealing with a reputable institution that can back up its promises, a fly-by-night operation or a single con-man. People can obviously be fooled in person too, but it is harder to do. Many organizations find that people must meet in person to begin to cohere into a group and then have periodic meetings to reconnect and recalibrate their shared understanding and commitment. In these cases electronic communications and face to face meetings support each other.

Increasingly one hopes that organizations will respect and nourish the human relationships that underlie so much of their current and future success but social capital because it represents the organic growth of trust, understanding and loyalty takes time to develop. A former Harvard University President noted that from his experience on-line universities cannot equal or replace the experience of being at a university. Thus, the fact that trust is harder to keep alive through electronic or non face to face connections is an indication of the challenges that virtual work poses to social capital.