How to Invest in Social Capital

You know your company runs better when employees have close ties and mutual trust: Deals accelerate, teams work productively and creatively, and people learn quickly.

Strong relationships constitute your firm’s social capital. But they’re under attack, thanks to workplace volatility (relentless emergence of new products and markets, constant strategic change, and endless mergers and acquisitions) and virtuality (telecommuting, flextime, and virtual teamwork).

To fight back, nurture professional and personal connections among workers, and cultivate trust. These investments take time to pay off—but the gains go straight to your company’s bottom line.

The Idea in Practice

Don’t try to legislate social-capital building. Instead, nurture it daily with these mutually reinforcing interventions:

Make Connections

Commit to retention. Relationships form and trust flourishes only when people know each other. Treat employees like people, not just workers. Example:

Software firm SAS strengthens relationships through its recreation facility, health-care center, on-site child-care centers, and Wednesday snack time (featuring 300 pounds of M& Ms). Though SAS’s salaries aren’t extravagant, its turnover rate is below 4%—remarkable in its industry.

Promote from within. You’ll bolster connections and build enduring communities of trust and knowledge sharing. For example, most UPS senior managers have risen through the ranks and accumulated long experience working together.

Give people time and space to bond in person.One consumer-products company discourages working from home until people have been with the firm one year. It takes that long to absorb the culture and bond with colleagues. Far-flung teams also need opportunities to convene face-to-face on a regular basis.

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Facilitate personal conversations. Provide cafés, chat rooms, kitchens, and other spaces where employees can discover mutual interests beyond work.

Foster durable networks. UPS drivers regularly meet for lunch in parks or cafés—to socialize, exchange missorted packages, and share information. One supervisor meets his team at a park if he wants to talk with them together.

Enable Trust

Give employees no reason to distrust. Establish clear rules—then live by them. At executive-search firm Russell Reynolds Associates, people know if they don’t “grow,” they “go.” Trust is high.

Show trust yourself. The best way to display trust? Trust employees. Upscale retailer Nordstrom has two customer-service rules: 1) Use your own good judgment at all times, and 2) There are no other rules!

Promote trustworthy people. You’ll prove that good guys finish first and your company values trust.

Foster Cooperation

Give people a common sense of purpose—through strategic communication and inspirational leadership. Example:

Johnson & Johnson’s first priority is its customers. This clear purpose unites employees in J&J’s scattered businesses—as revealed by the company’s swift, coordinated response to the Tylenol poisonings in 1982.

Reward cooperation with cash. IBM bases bonuses on group and corporate performance much more than individual performance.

Establish rules for cooperation. At Russell Reynolds, new recruiters must make five internal phone calls to get candidate suggestions before calling outside. They learn the ropes and get to know their colleagues.

Hire for social capital. Southwest Airlines hires for positive attitude, sense of humor, and joy in team results.