How To Invest in Social

Capital
by: Laurence Prusak & Don Cohen

Presented by:
Aman Pachisia
Saurav Pattanaik

Outline
What is Social Capital
Enemies of Social Capital
How to Invest in Social Capital
Demerits of too much Social Capital
Conclusion

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

make organizations work effectively

that

Social Capital Under

Assault
Reasons
Rising Volatility
and
Overreliance Virtuality
-Building relationships in
turbulent times is tough

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

management theory and practices undercut them

but

 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
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 Providing Ice-breakers by open and attractive

environment (ex- Grand Rapids)
Fostering Durable Networks (ex-UPS)
Investment in community-building activities
But investment should not be heavy-handed

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 No one can manufacture

mandate it into existence

trust

Trust
building
can
backfire
management is too heavy-handed

or

if

Conditions and connection people

experience day after day is more
important than trust building exercises
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 Give Employees No Reasons to Distrust

Transparency
Rule of the Law
Show Trust Yourself
Trust is self-reinforcing
Trust employees judgment
(Nordstoms two rule: 1. Use you judgement, 2. There is no
second rule)

Send Signals that Trust is Valued

Trust Responds to Rewards

 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 wouldnt 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 strategy
Marketing plan
A substitute for either
Not always even a good thing
Companies-damaged by high social capital
Breeds groupthink-a tendency not to question

shared beliefs
Support ideas that are narrow or wrong
Prevent 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 everythingSamuel 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 todays business environment
Building social capital cant 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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