How to invest in social capital

• Published in: Harvard business review 2001-06, Vol.79 (6), p.86-93
• Main Authors: Prusak, L, Cohen, D
• Format: Magazinearticle
• Language: English
• Subjects: Business enterprises; Business organization and administration; Commerce - manpower; Commerce - organization & administration; Cooperation; Cooperative Behavior; Corporate management; Efficiency, Organizational; Employee morale; Employee motivation; Health administration; Interprofessional Relations; Investments; Management; Organization, Theory of; Organizational behavior; Organizational Culture; Personnel Management - methods; Professional relationships; Psychology, Industrial; Social capital; United States; Work environment; Workplace - psychology
• ISSN: 0017-8012

Business runs better when people within a company have close ties and trust one another. But the relationships that make organizations work effectively are under assault for several reasons. Building such "social capital" is difficult in volatile times. Disruptive technologies spawn new markets daily, and organizations respond with constantly changing structures. The problem is worsened by the virtuality of many of today's workplaces, with employees working off-site or on their own. What's more, few managers know how to invest in such social capital. The authors describe how managers can help their organizations thrive by making effective investments in social capital. For instance, companies that value social capital demonstrate a commitment to retention as a way of limiting workplace volatility. The authors cite SAS's extensive efforts to signal to employees that it sees them as human beings, not just workers. Managers can build trust by showing trust themselves, as well as by rewarding trust and sending clear signals to employees. They can foster cooperation by giving employees a common sense of purpose through good strategic communication and inspirational leadership. Johnson & Johnson's well-known credo, which says the company's first responsibility is to the people who use its products, has helped the company in time of adversity, as in 1982 when cyanide in Tylenol capsules killed seven people. Other methods of fostering cooperation include rewarding the behavior with cash and establishing rules that get people into the habit of cooperating. Social capital, once a given in organizations, is now rare and endangered. By investing in it, companies will be better positioned to seize the opportunities in today's volatile, virtual business environment.