Wednesday, August 20, 2008

Human Capital, Meet Social Capital

Peter Cappelli's compelling article "Talent Management for the Twenty-First Century", from The March issue of the Harvard Business Review, has some insightful things to say about the problem of managing a firm's human resources in an age of perpetual change and ongoing uncertainty. Cappelli's core claim - that firms need to make better projections about their talent needs, and then need to construct a strategy to fill those needs by developing talent internally, while also reaching out into the marketplace through targeted recruiting - isn't rocket science. The useful contribution that Cappelli makes, though, is refocusing our gaze. He argues that human resource managers have been too reluctant to look beyond ideas about staffing and talent management that have been passed down hand to hand for decades. He proposes looking elsewhere for inspiration. He noticed the big changes in supply chain management over the past decade, and found lessons for talent management.

Keeping talent "on the bench" - Cappelli's characterization of in-house talent development strategies that turn out executives in anticipation of needs that may never emerge - is positioned alongside the now out-dated strategy of filling warehouses with raw materials in anticipation of the needs of one's assemble-line. There's a simple reason manufacturers have turned away from this model - if consumer demands change, or production innovations require a different combination of raw materials, the investment in materials sitting in the warehouse becomes a costly mistake. Better to acquire materials at precisely the moment they are needed, and in the quantities needed. Likewise, Cappelli argues, firms should acquire the talent they need when they need it. Because recruiting and training takes time, it still makes sense to develop talent internally, after making careful estimates about one's needs. It is better to underestimate your needs, and then turn to the marketplace to recruit the additional talent needed. The costly mistake is having talent you aren't using, just as, in the manufacturing realm, the costly mistake is having raw materials you aren't using (or excess inventory you aren't selling).

But the thing only hinted at in the Cappelli piece is the importance of
social capital in the workplace. If the organization is becoming a place where people are brought in when needed, and utilized with prompt efficiency, then the existing staff need to be prepared to extend a hand of welcome, and get down to the work of cooperative effort. In short, the workplace needs to be structured as a place where co-workers trust one another, expect fairness and reciprocity, and collaborate effortlessly. Further, firms of this type, where it is taken for granted that work is cooperative and colleagues can be trusted, are more likely to hold on to their employees, so costly investments in training won't be lost to competitors.

The leading scholar in the study of social capital is Robert Putnam, who unpacked his main argument in his most celebrated book, Bowling Alone. For Putnam, trust and reciprocity are the most vital forms of social capital. When we believe we can trust others, we are willing to make contributions toward common objectives, without feeling like we will be taken advantage of or treated unfairly. Trust, then, can be thought of as a social lubricant, it reduces friction and helps things move forward.

For Putnam, trust is tied up with the idea of generalized reciprocity, that is, the belief that any favor I do for you now will, in time, be repaid by you (or someone else), even (or perhaps preferably) if the favor is repaid in some other form. The idea is not “I scratch your back and you’ll scratch mine.” Instead, it’s better to view generalized reciprocity as “I’ll scratch your back now and someday, I am confident, you (or someone else) will scratch my back or pat me on the back when I need encouragement or ‘back me up’ when I need someone to support my claim for a change in my division’s allocation of resources.” For Putnam, this type of trust is manufactured through encounters and, best of all, repeated and patterned encounters. In his larger argument, Putnam relies on Tocqueville’s argument that American democracy was more robust because of our habit of forming associations and joining organizations. When we encounter one another in intimate settings—within the walls of our lodges or sitting down for bridge—and find ourselves being treated fairly, we formulate certain expectations about the trustworthiness of others. And we transfer these expectations into our relations with others, even if we don’t know them as well as we know our lodge brothers or bridge partners.
In the workplace, this leads to a simple prescription - it is important to fashion opportunities for employees to come together, in a variety of settings for a variety of purposes, both within their expected responsibilities to the firm, and outside of these roles. If employees come to believe they can pretty much trust anyone they encounter within the walls of the firm, they will extend this expectation to new hires, enhancing opportunities for current employees to immediately invite new recruits into the flow of day-to-day effort within the firm, and share intuitive and learned-from-experience knowledge about clients and processes.

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