THE VALUE BETWEEN US - The Economist · 2019. 11. 1. · 3 The value between us The role o social onds in usiness success The Economist ntelligence nit imited 019 understand how people

THE VALUE BETWEEN USThe role of social bonds in business success

1The value between us

The role of social bonds in business success

© The Economist Intelligence Unit Limited 2019

“Why is it when I ask for a pair of hands, a brain comes attached?” complained Henry Ford, titan of 20th century management. For Ford, people were there to help the machines operate smoothly, not be creative or ask questions.

Today, the opposite is true. The basic tools of production have been supplanted by intangible capital: ideas, code, information flow. Corporate power rests more on brainpower and know-how than machines and raw materials. As companies depend more on employees’ knowledge and skills, they must also understand how these assets interact. How do people come together to share ideas and solve problems? This often happens in an unplanned way, driven not by reporting lines and team structures but relationships and social bonds that stimulate collaboration.

How people come together, without instruction, has long interested anthropologists, sociologists and management academics, as part of the field of “social capital”. But companies themselves are now realising the power of this spontaneous order—and the friendships, connections and reciprocity that enable it.

To understand how companies think about, prioritise and support social bonds and networks, The Economist Intelligence Unit, commissioned by Workplace by Facebook, surveyed over 200 directors and C-suite executives from the Americas, Europe and Asia. The results show deep appreciation

among executives of the importance of the “social” in driving success. Key findings include:

• Nearly all organisations encourage stronger social ties between employees—65% report having a formal strategy in place for doing so.

• Knowledge-intensive firms have a greater appreciation of social capital. The more a firm is composed of knowledge workers, the higher the perceived value of “social capital”.

• Firms composed of teams structured towards ad-hoc mobilisation—those established on a cross-disciplinary, project-by-project basis—are more likely to report stronger revenue growth and perceive themselves as innovators.

Mostly knowledge

workers

Even mix of knowledge and non-knowledge

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Figure 1: Nearly two-thirds of respondents report that their organisation has a formal strategy to encourage strong social ties between employees. The more a firm is composed mostly of knowledge workers, the more this is likely to be the case.

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Executive summary

2The value between usThe role of social bonds in business success


• Socialising workflows, such as by pairing staff on a single task, improves quality and ensures that multiple people understand decisions and ways of working. Other companies nurture a sense of belonging and community through events, awards and work anniversary milestones.

• Companies scoring themselves highly in qualities associated with strong social capital—such as closeness to peers and superiors, openness, collaboration, company-wide flow of information and trust—are more likely to see themselves as innovators and report greater current and projected revenue growth.

Figure 2: Most survey respondents recognise strong company culture as a driver of revenue, productivityand growth. Latin American respondents are most likely to believe this to be the case.

HardlySomewhatTo a great extentEntirely

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understand how people use their network to solve problems, and I saw that people usually go local, to the person on the desk next to them. If you do that, you are getting similar knowledge to what you know. Higher-performing managers went beyond, to another subsidiary. They still had a common understanding about the issues, but they went away from what they knew. Think of it like concentric circles; they went to the next circle”.

The network is the asset

Companies have a formal dimension— the “org chart” and on-paper workflows, the explicit roles and responsibilities of employees. But they are also social ecosystems, with connections forming over—and despite—the daily grind. This could manifest as seeking help from someone you know but do not work with directly. It could mean convening a meeting with people across different units to deal with a problem not covered by existing protocols.

“Reaching out” is easier and more likely when people develop relationships beyond reporting lines and immediate teams. A friendship can become a working interaction; a working interaction can deepen into a friendship. This creates a powerful asset in its own right, known as social capital: typically defined as features of social organisation, such as trust, norms and networks, which can improve an organisation’s efficiency by facilitating co-ordinated actions.1

“You can think of social capital as relationship networks, plus generalised reciprocity,” says Wayne Baker, professor of management at the Michigan Ross School of Business. Generalised reciprocity refers to giving—of time or energy—without calculation of immediate value or repayment. This spirit is crucial, because relationship networks require effort not formally required to fulfil narrow job duties.

Andrew Parker, professor of business at the University of Exeter, has studied social networks in multinational companies for over two decades, and his research reveals the critical role of outreach. “I wanted to

1 Putnam, R. (1993). The prosperous community: social capital and public life. American Prospect, 13, 35-42.

Higher-performing managers go beyond the person on the desk next to them—they go away from what they know.

Andrew Parker, professor of business at the University of Exeter

62% believe it’s very likely that employees would

proactively engage with someone outside their core line of commandin solving a problem.



Our survey shows that executives generally feel confident that their company’s culture is open and welcoming enough that staff feel empowered to take such measures: 62% feel it “very likely” that employees would proactively engage someone outside their core line of command to solve a problem, and a further 33% believe it “somewhat” likely. Survey respondents at firms with higher social capital were more likely to report this behaviour.2

Such an environment, by encouraging people to ask questions, could hugely benefit expensive and time-consuming processes like onboarding new staff. Getting know-how to flow quickly to where it’s needed, and when, helps this happen. Our survey shows that firms with higher self-reported social capital are more likely to be quicker on-boarders, with 35% saying this takes less than two weeks (see chart).

2 Following a two-step cluster analysis, survey respondents were segmented into four groups, according to how strong they perceived levels of trust, openness, collaboration and other qualities to be at their organisation.

Figure 3: New hires tend to assimilate more quickly at firms with higher reported social capital

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Source: The Economist Intelligence Unit

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More than one yearA yearSix monthsThree monthsA monthLess than two weeksReported time it takes for new hires to assimilate to the organisation’s working culture




Although companies have a role to play in the formation of social bonds, they must appreciate pre-existing communal dynamics. Staff surveys are one approach—they could ask who employees go to for help, or whether they feel comfortable asking for support. A more technical approach is network analysis, which examines communication flows to see how information moves through the company. This can include the frequency of interactions between individuals, and how quickly individuals respond to communications.

Nine of ten organisations in our survey measure, map and analyse employee interactions, and most (59%) do so with an explicit focus on the emergent value such interactions create, rather than solely on individual effectiveness. This indicates an appreciation that social capital is an asset in its own right.

Nearly half the respondents surveyed (47%) report that their organisation conducts formal network analysis. Mr Parker says network analysis has moved from a fringe interest to a mainstream one. “People are seeing the increasingly networked world around them, and it is getting into the heads of leaders that networks matter. Now, companies can do

Mostly knowledge workers Even mix of knowledge and non-knowledge workers

Mostly non-knowledge workers

Figure 4: Firms are putting an explicit focus on social capital. Over 90% of organisations measure, map and analyse employee interactions; a majority (59%) do so with an explicit focus on the emergent value such interactions create, rather than to improve individual e�ectiveness, communications or workflows. The higher the density of knowledge workers in a company, the more likely it is that they have this focus.

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Can you nurture social capital?

47% say that their organisation conducts

formal network analysis to better understand employee interactions.



3 https://www.tandfonline.com/doi/abs/10.1080/14767333.2019.1562693?journalCode=calr20

social network analysis in-house. They have the data and the methodological knowledge.”

Having mapped networks and social dynamics, what can managers do to nurture them? Research suggests that, firstly, firms should hire people who treat colleagues respectfully. This forges a culture of trust and provides “psychological safety”, giving people the confidence to ask for help.3 “Social capital is not just the flow of knowledge and information. It involves the transfer of emotions and energy, and it is the combination that animates social capital in a network,” says Mr Baker.

This can be further supported by nurturing employees’ confidence and sense of belonging. Recognising them through awards, especially linked to their contribution to the wider company rather than, say, an individual sales target, can help. A clear majority of survey respondents (84%) say staff are encouraged

Figure 5: Nearly half (47%) of respondents report that their organisation conducts formal network analysis to study employee interactions. Two-thirds of North American respondents claim to do so. The preferred method among respondents in Asia Pacific (favoured by 71%) is tracking of internal digital communications.

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and rewarded for “corporate citizenship” entirely or to a great extent. The higher the firm’s social capital, the more likely this is the case.

Firms must also fight reluctance to seek help. “People fear being perceived as incompetent, weak or lazy,” says Mr Baker, “but the opposite is true. If you make an intelligent request, people will perceive you to be more competent”.

Social capital is not just the flow of knowledge and information. It involves the transfer of emotions and energy.

Wayne Baker, professor of management at the Michigan Ross School of Business




One tactic is to implement structures that normalise the process of asking—and giving—such as a “reciprocity ring”. This is a group exercise in which individuals request help on specific issues, and other participants commit to tap their knowledge, wisdom or networks. It can be a one-time exercise or a regular, structured process. Another example is a “daily stand-up” in which employees say what they are working on and where they need help. “A manager who institutes these is creating conditions by which people will create and use social capital. Over time, as they see it work, people will ask for bigger things,” says Mr Baker.

Social ties can also be built into workflow. Michigan-based Menlo Innovations employs a tactic called “pair programming”, in which two people sit at the same computer doing the work of one person. They also switch teams and tasks regularly. This might seem inefficient, but it solves a huge problem in the tech industry: code whose logic is inscrutable to anyone but the person who wrote it. For Menlo, pair programming ensures the code’s rationale is not locked in a single person’s head, and switching regularly means that opaque code is caught quickly.4 Challenging the “individualistic” ideology, the firm talks of “stewardship” as distinct from “ownership”. Ericsson is among those to have adopted the approach.

Maintaining trust and reciprocity is particularly important in an era of increasingly distributed, remote and outsourced work—a constantly changing workforce can undermine relationships. Most survey participants agree—38% strongly and a further 35% ‘somewhat’—that flexible and remote working

makes it harder to maintain strong connections between employees. Relationship and communication quality also deteriorate the more abstract the medium, from in-person, to video, to audio, to text (emails, according to one study, foster conflict almost by design).5 Mr Baker encourages the use of rich media, like video conference calls: “It’s important you see the person you are talking to.”

Easy does it

These interventions have a common theme: they enable bonds but do not force them. Connections form naturally and spontaneously, and experts warn against pressing too hard. Mr Parker recalls how some managers avidly adopted the concept of “communities of practice”,6 which emerged in the 1990s, and referred to how like-minded people get together in self-forming groups to solve problems, and share (and develop) knowledge. “In some cases, they tried to support these communities too strongly, giving budgets and performance targets. The people that had been doing it were turned off because they were being overly managed. If you do too much, you are taking away the desire of individuals to manage themselves.”

Survey respondents agree with this sentiment. The higher the social capital of a firm, the more likely it is to agree that “strong bonds can’t be forced, they can only be encouraged”.

Executives also need to watch for social dynamics that have negative impacts. Cliques can form—“old boys clubs”, in which promotions and resources are given to those linked by university, gender, class, race or other markers, channelling privilege and undermining meritocracy. “Social networks

4 https://www.forbes.com/sites/stevedenning/2016/08/02/the-joy-of-work-menlo-innovations/#7db856a95cf85 https://sloanreview.mit.edu/article/behavior-does-email-escalate-conflict/6 https://warwick.ac.uk/fac/soc/wbs/conf/olkc/archive/oklc5/papers/e-4_cox.pdf



have a structure, with a core and a periphery,” observes Mr Parker. “Those in the core are more likely to get resources or promotions. You hear about things sooner.”

Managers must also balance the wisdom of self-assembly with the need for occasional order. “Flat hierarchies” were once talked up for liberating people to self-organise, but they can also create conflict and inefficiency.

Most survey respondents agree—42% strongly—that strong leadership should sometimes be prioritised over openness and collaboration.

A careful but deliberate approach, which encourages social bonds and instils healthy reciprocity, will act as the invisible hand, guiding know-how to where it is needed and helping companies to prosper in the era of ideas.




While every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in this report. The findings and views expressed in the report do not necessarily reflect the views of the sponsor.


How social bonds power business success


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THE VALUE BETWEEN US - The Economist · 2019. 11. 1. · 3 The value between us The role o social onds in usiness success The Economist ntelligence nit imited 019 understand how people