Food for thought: The value of social capital

Knowledge-based businesses have become accustomed to the idea that much of the productive capacity and value of their business lies not in physical assets but in the less tangible, such as 'intellectual capital'. But are they overlooking a different kind of capital, the 'social capital' of networks, shared norms and mutual trust, that individuals can draw on to help solve problems?

The idea of 'social capital' was first floated by Professor Robert Putnam in an article called 'Bowling Alone' (published in the Journal of Democracy in 1995). Putnam found that while more Americans were going bowling than ever before, fewer and fewer of them were taking part in bowling leagues.

Putnam went on to show that on any number of measures, ranging from involvement in parent-teacher associations to simply inviting friends round to dinner, the social capital of America was declining as inexorably as material wealth was increasing. Putnam's insight was to show that the decline of social capital was not only a matter for regret but the loss of a genuinely productive resource.

While Putnam's thesis is no less than a call for the reinvention of civic life in America, it is clear that the loss of social capital can fatally undermine any organisation whose productive capacity is based on the ability of its people to work together and share knowledge: "It's a truism among consultants that the rate of learning in an organisation must be greater than the rate of change," says Elevation Learning's Calvert Markham.

"At Elevation Learning however, we are more interested in what makes learning effective within an organisation. The factors of trust, norms and networks that make up social capital also make a vital contribution to learning, yet these are the very things that change can destroy."

Investing in and maintaining social capital therefore becomes just as important a factor in achieving successful change as delivering learning. Social capital is not the same as social responsibility; it is a productive resource in its own right, and one which organisations ignore at their peril.

A good example of the destruction of social capital would be the effect of transferring functions such as laundry and cleaning from hospitals to private contractors. Although the staff are the same people doing the same jobs, they are no longer part of the hospital network and its associated norms of public service. They are therefore perhaps less motivated to "go the extra mile" for a profit-making organisation and its shareholders.

This sort of loss can fatally undermine all the assumptions about cost and performance on which a privatisation was based. "While work/life balance has become a topic of increasing importance for individuals, social capital is an analogous feature of organisations which is getting less attention", says Markham .

Already companies in America are trying to create "communities" that go beyond mere professional needs, and already running into all sorts of awkward questions as to what does and does not constitute an appropriate "affinity group" within the workplace. Should, for example, people of a particular religious affiliation be encouraged to network in the workplace. The increasingly fragmented and geographically distributed nature of work, (which is particularly marked in large consultancies) is another obstacle to building social capital. "It's very easy to see how to destroy social capital but less clear how to rebuild it," says Markham .

"Ultimately this may be something that will require more than technological innovation or, dare I say it, consultancy intervention to achieve. It is fair to say though, that while organisations fail to value social capital, they will neither protect it nor benefit from its potential."

Mick James