Wanted: ‘Social Capital’ Director to direct organizational growth

“In Good Company”
Don Cohen & Laurence Prusak
Harvard Business School Press, 2001


When two people chat by the water cooler on company premises, is that a productive use of company time? When a group shares lunch and exchanges gossip at the cafeteria, is that an activity that achieves company goals?

When an executive resists laying off people even if his factory is burned down, is that needlessly sentimental or plain good business sense?

Our answers could be predictable: A chat by the water cooler is relaxing all right but by no means “productive.” Gossip only feeds the rumor mill – and thus hinders, not promotes, company objectives. And that executive is so sentimental he is not needed in a no-nonsense factory.

But, surprise! The book, “In Good Company,” says a relaxing time by the cooler is an investment in “social capital.” And a casual swap of stories over lunch deepens a relationship, builds trust and strengthens the ties that bind employees.

And that executive is a real-life one: He is CEO Aaron Feuersten of Malden Mills whose factory was destroyed by fire in December 1995. Facilities and equipment that produced the company’s popular polar fleece cold-weather fabrics went up in smoke. And suddenly, 3,000 workers had no work to do.

But Mr. Feuersten decided to keep them and to pay their salaries while the company began building a new factory. Was he ridiculed? No. Media hailed him as a heroic and humane business leader, earning him an invitation to the White House.

The authors of “In Good Company” say:

“That the public and business world would consider Feuersten’s action so extraordinary and apparently ‘unbusinesslike’ suggests that many people do not yet understand the value of social capital in organizations.

“It takes nothing away from the humaneness of Feuersten’s behavior to say that his decision made good business sense… By being loyal to his people, he ensured their even greater commitment to doing good work for the company.”

What is social capital? The book quotes a Harvard political scientist, Robert Putnam: “Social capital refers to features of social organizations such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit.”

Long gone were the days when labor was a mere cog in a money-making enterprise. Henry Ford, credited for the popularization of the assembly line, belonged to that age when we had a mechanistic view of organizations. His lament, however, hinted at the need to revise such mechanistic mindset, when he said: “Why is it that when I buy a pair of hands, I always get a human being as well?”

This book is all about humans inside and outside the organization, how they relate to, support, trust and work with one another. It traces the origin of the idea of social capital from 1916 to the 21st century when the primacy of people and societies have been underscored – proving once again John Naisbitt’s famous declaration that “in the midst of hi-tech, humanity asserts itself with hi-touch.”

What is the contribution of this book? The book gives us a new lens by which we can truly comprehend what we had earlier attempted to explain about the primacy of people in organizations. With several studies on organizations and economies that succeeded – and failed – the authors have the same conclusion: Leaders and executives who invested in social capital fared much better.

The book also provides an in-depth discussion on the emergence of networks as compared to communities. It would benefit the readers to apply their own experiences to this discussion – and see greater potential for nurturing such networks for present and future use.

The emergence of social capital as a force for corporate growth follows a positive trend toward emphasizing the value of people. First, we successfully elevated human resources management as a fitting tribute to “corporate heroes” – who else? And then, we advocated the evolution of a “corporate culture” – placing people within the context social relationships.

And then, in this century, the term “social capital” comes in to take the place of – but includes – human resources and corporate culture to effectively deliver one central message: Every organization must invest in social capital – as it invests in land, equipment and technology.

Words have their way of illuminating truths that were hitherto hidden in corners or overshadowed by earlier concepts. “Social capital” – by the phrase alone – prompts our minds to reassess such intangibles as trust, community, connection, conversation and loyalty. On trust, Peter Drucker has this to say: “Organizations are no longer built on force but on trust.”
And, as this book has shown, it truly makes good business sense to nurture such social capital elements to make work meaningful – and thus to release tremendous human energies. Herein lies the harmony between humanity and business.