Jim Taggart

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Build Your Organization’s Social Capital by Keeping Good Company

Build Your Organization’s Social Capital by Keeping Good Company

Society at large has been hijacked.

We’re consumed with the newest gadgets, whether it’s the thinnest most dazzling smart phone or tablet; the automobile that can find its way to a parking space by itself while you scurry in with your date to watch a concert; a flatscreen TV less than an inch thick through which you think you’re looking out a window; a vacuum cleaner that independently cleans your house. The list goes on.

However, we’re collectively forgetting one thing: it took the creation of national wealth to get us to that point on the consumption ladder. For Western economies it took many decades of hard work by our parents and grandparents. Today, consumers in emerging economies want the same wealth and same gadgets. And they’re working their butts off to get to there. Global competition is taking on new meaning as a result of these new entrants.

A country’s greatest competitive asset is its human capital and how it develops it. That’s economist speak, from yours truly, for educating and training a country’s citizens. It’s a never-ending process, beginning at birth and continuing to the senior years. The notion that people “check-out” of the labour force when they “retire” is bullshit. Pure and simple. One of the huge mistakes made by countries like Canada and the United States is the tradition of ignoring the knowledge and know-how possessed by those who’ve “checked-out.”

Similarly, but at the opposite end of the age spectrum, are young children, of whom far too many live in abject poverty, whether in North America or in Australia, Europe or Great Britain. Canadians, in particular, should hang their heads in shame for ignoring this lingering problem, especially relating to its indigenous peoples: Inuit, First Nations and Metis.

Very few “experts,” whether economists, leadership gurus, business analysts or geo-political observers, talk or write about one critically important aspect of building an organization’s–and a nation’s–competitive strength. And that is Social Capital.

Fortunately, there are a few bright lights who understand the role that social capital plays at the micro and macro levels. I dusted off one of my management books recently to re-read and to reflect upon how social capital can enhance an organization’s effectiveness.

Meet Don Cohen and Laurence Prusak, authors of In Good Company: How Social Capital Makes Organizations Work. Cohen’s a writer, consultant and research associate with Babson College. Prusak teaches at Columbia University and earlier on founded the Institute for Knowledge Management. He’s also the author of the excellent book, Working Knowledge: How Organizations Manage What They Know.


A lot has occurred in the social media space since this book was published in 2001. However, despite the massive growth and global penetration by such social players as Facebook, Twitter and LinkedIn, they’re still just tools, digital mechanisms with which to connect people close to home and in distant countries, sharing ideas, information and, increasingly, events such as social uprisings in totalitarian countries.

So what is social capital, an expression that first appeared in 1916?

Definitions abound, some quite elaborate. According to the World Bank, it defines social capital as: “…the norms and social relationships embedded in social structures that enable people to coordinate action to achieve desired goals.”

Harvard political scientist and author Robert Putnam expresses it as : “…the features of social organizations such as networks norms, and social trust that facilitate coordination and cooperation for mutual benefit. ”

Here’s my own more minimalist definition: “Social capital is the relationships formed by people to accomplish a shared purpose through commitment and passion.” Hmmm. Not too shabby.

Regardless of which definition resonates with you, social capital is extremely important to how a society functions and, in turn, how it creates wealth to improve people’s standard of living. It’s about connecting across socio-economic levels, age, gender and race to share knowledge, talent, and both similar and opposing beliefs. It fosters creativity and innovation, vital ingredients to the creation of a country’s wealth.

Within the walls of an organization, social capital has an important role to play. Call it the glue that helps cement relationships, in turn spawning the generation of new ideas. However, what we’ve seen over the past decade is the dismantling of the employment contract as the outsourcing and offshoring of jobs has accelerated. In addition the growth in virtual work, with workers distributed around the world, presents a challenge for creating social capital. Cohen and Prusak comment on “virtual social capital” and the role that technology can play to support it.


However, the relentless pressure to distribute work, employ contract workers and reduce wages through bidding processes is contributing to the increase in detachment in attitude and loyalty. Gen Y, in particular, has been whacked as a consequence of the death of the employment contract and the fall-out from the Great Recession of 2008-09. Part-time or contract work is increasingly the norm, not to mention under-employment, for a generation that will one day advance to senior management positions.

In 2001 Cohen and Prusak made the comment on how cynicism is bred in organizations through management’s contemptuous lip service to employees through the use of such terms as “associates.” Hypocrisy, they note, has no place in an organization.

Nothing could be further from the truth when it comes to engaging people and treating them with respect and valuing what they bring to the organization. Indeed, just think for a moment on the much overused and abused expression “employee engagement.” The creation of social capital and true employee engagement are tightly inter-woven. And at the core is one word: TRUST.

Cohen and Prusak call trust the “essential lubricant” to all social interactions, supporting collaboration in organizations. Without trust, and I would add mutual respect, one risks the emergence of a “what’s in it for me” attitude, producing bureaucratic games-playing.

So how do you get there?

Senior leadership must invest the necessary time to build and sustain trust within an organization, starting with creating a respectful workplace. One tangible outcome of this is the open sharing of information through collaborative work relationships. This leads to collective creativity and innovation, supporting improved productivity, and finally stronger competitiveness. Or in the case of the public sector, more cost-effective service to the public.

In a circa 2013 economy characterized by escalating global competition, driven by new entrants; the growth of virtual work spurred on by technology–read this as your job can outsourced to anywhere on this planet; and a race to the bottom of the wage barrel, developing and nurturing an organization’s social capital is a very smart strategy.

The concepts in In Good Company are more relevant today—2020— than they were 19 years ago. If used intelligently, social media may contribute importantly to enhancing the use of social capital in organizations, public and private, and in communities.

Take some time to reflect on the ideas and concepts in this post. Then ask yourself this question:

Am I keeping good company?

Space and time for people to gather and make connections with one another are the seedbed and sunlight of social capital. By providing them, leaders can foster conditions that help social capital thrive.
– Don Cohen and Laurence (In Good Company)

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