Passport to the 21st Century
John Seely Brown, Steve Denning, 
Katalina Groh, Larry Prusak: 
Some of the world's leading thinkers
explore the role of storytelling in the world

 I Introduction to storytelling I John Seely Brown on science I Steve Denning on change I Katalina Groh on video
Larry Prusak on organization I Discussion I | Contact us | Bibliography on storytelling

Storytelling: Organizational Perspective: Larry Prusak
Social capital and trust

    The last thing I wanted to talk about in terms of enablers, things that really work well, is the social capital issue. Iíve just finished a book on social capital, a subject I learned about, by the way, by doing a lot of work at the World Bank. Social capital can be defined as investments made Ė investments, thatís why itís capital Ė to facilitate cooperative activities in organizations that have a measurable rate of return. 
    So itís not just mom and apple pie. Thereís nothing wrong with mom or apple pie. But itís investments made when there is an expectation to increase social capital. Now thatís easy to say. But what they hell are they? 
   This is what the World Bank and many other sociologists and political economists are working at. There are about seven or eight books published this year on this, and itís sort of a   what goes along with infrastructure 

   When the Bank and companies just invest in infrastructure, what do they get? Well, they get infrastructure. But if they invest in changing behaviors, in ways of learning, in understanding new ways of working together that can enhance cooperation, you get a lot more.  The infrastructure works out. Thatís why I am so deadly, I sometimes speak in hyperbolic terms to make a point, but thatís why I dislike so much the emphasis on IT in knowledge management, because it drove out, and it still does, it drives out thinking about what really counts, which is people knowing things, sharing what they know, and working with what they know, because people tend to think in the U.S. Ė itís less so in Europe and Asia Ėthat infrastructure equals results. It does if you are putting in an ATM machine. It doesnít in most other things. 


    So social capital: what are some of the drivers of it when I say itís an important issue. Trust. Nothing happens if you donít trust people. Trust is the greatest lubricant for corporate efficiency. Itís even better than information. Why should anyone do anything with anyone else, if they donít trust them? And if you donít trust people, what do you do in the absence of trust? In organizations, forget about countries, thatís another talk. With an organization, what do you do when you donít trust people? You bargain, you negotiate, and you monitor.  Constant monitoring, constant negotiation, constant bargaining. That takes a lot of time and money. And itís not innovative or useful activities. Itís boring. Itís demeaning. And basically, itís worthless. 
    I have thirty-two people who report to me. We all travel a lot. I have to approve their expenses. So itís a lot of money, right? People run up in a year a hundred thousand dollars. I donít do it, folks. I am very candid. I donít review it. I just approve the whole damn thing. If someone wants to ruin their career if they think they can get a free airline ticket, do it. Go ahead. 
   The time I save by not monitoring that, I can write a book, I can read a report, I can come to a conference like this, and give a talk like this, to people, or I could learn something. I could meet with people. I could think of a thousand things Iíd rather do. I could even take a nap. Whatever I do will be better than doing that. And if people want to game the system, if they think itís worth my lasting animosity to get a free ticket somewhere, go ahead. But they donít. I donít hire people like that. Because I hire people I trust. Thatís on a tiny scale. 
   But when you start multiplying this across a large organization, I donít know what percent it amounts to, but itís huge. I was meeting with IBMís Chief Financial Officer. He bemoans the faxt that we used to have 27,000 CPAs working for IBM. Can you imagine: 27,000?  Theyíd monitor everything. And he was crying, that those were the great days. You know, if he said that we had lost 27,000 programmers, or engineers, that would be a tragedy. And thatís nothing against accountants. You need them when you need them, But trust is really important. Trust  for families and for countries and for companies. 
   Now of course, the big question is what do you do about trust? Now hereís when you get into questions of leadership, of trustworthiness, of transparency, of working in a way that inspires trust. I donít have time to go through all of this, but there are things one can do. Look in your own lives. This artificial distinction between work and life which I find, just drives me crazy, when people say, ďOh yes, at home, I do this, or in my community, but when I get to work, Iím a different person. Durkheim said that itís the great source of anomie and suicide. And I think itís right. I think it drives people crazy. Think about what you do with trust in your life and bring it to work. It just makes life a lot easier. It really does. And you can be more efficient. Itís a big social capital issue.
    Another big social capital issue is the strength and durability of networks and ties. And this is of course eroded by volatility and telecommuting and virtuality. People trust each other when they know each other. Trust is a big function of reciprocal relationships over time. Although you can trust a person on meeting them, the kind of quick trust, the army stuff, that exists, and a lot of people who deal with emergency situations, but generally, you trust a person over time. There are some repeated transactions, and they act in a way that is trustworthy. They do what they say they are going to do. They donít do what they say that they are not going to do. If you have constant churning of the workforce, for example, the Big Five consulting firms, are up to 40% turnover, you have pure transaction organizations. There is no trust because there are no durable networks, except at the very top. Thatís true in a lot of organizations, organizations that like stirring the pot, that like constant turnover. You donít get durability in networks and you lose social capital. 
    Social capital is strongly dependent on rich durable networks which develop trust, which develop knowledge sharing, develop a sense of reciprocity so that it becomes generalized. Generalized reciprocity. What I mean by that is someone who asked you a question that is going to cost you something in time and effort, but youíre going to answer it, not because you owe that specific person a favor, but because the culture is one of generalized reciprocity. It gets embedded in the norms. That again is worth its weight in platinum. Look at firms that are low generalized reciprocity, versus high. You really see a difference. You can feel it when you walk around the place. And these are things that you can act on, you can work with, by trying to keep these networks in place.
    Now again, thereís a dark side to this. You donít want cliques. You donít want groups that exclude others. Weíve seen plenty of that in America. Someone said when I wrote this book on social capital, well, the Klu Klux Klan has very high social capital. You surely donít approve of that? Well, thereís some truth to that. You can get cliquishness, you can get an exclusion, you can get all sorts of paranoid fantasies, in groups that donít have input from the outside. Thereís a dark side to anything. 
   On the other hand, itís really worth doing. Itís really worth doing. 
   Strive for it. 
   Rich dense networks with trust and space and time. And a sense of identity. I mean it isnít quite as true for you people, though it sure is true in the outside world. You retain people. I have to give this big talk to the consulting firms in December and they think, because they come from business schools, they think itís all about money. 
   Not true, folks. Thereís a ton of research showing that Maslow was right. Past a certain point, itís not money. People get really pissed off when they see inequalities, and when theyíre not treated well. But past a certain point, people donít work for money. The point is not that high. 
    They donít work necessarily for money. What do they work for? Recognition. Identity. Feelings about your coworkers really count. And thatís whatís ignored in the workplace so often, including in my own firm, in any large firm. We have forty firms as members of the Institute for Knowledge Management, and all of them are facing these issues. 
    But some really address it. The SAS Institute. UPS. I could name some that are really careful about this. This really matters to us. So weíre not going to move people around too much. Weíre not going to go overboard on virtuality, which can be crazy idea. People sometimes say that IBM stands for, ďIím By Myself.Ē And of course, big companies have to eat their own cooking: they give people a laptop and think thatís the answer to their problems. There are a lot of firms that act like this. It goes against everything weíve learnt in social science for the last three hundred years, that people need a sense of identity, a sense of ďgroupnessĒ, a sense of working with other people. Weíre made that way. Weíre hard-wired that way.

Books and videos on storytelling 
*** In Good Company : How Social Capital Makes Organizations Work
by Don Cohen, Laurence Prusak (February 2001) Harvard Business School Press
*** The Social Life of Information, by John Seely Brown, Paul Duguid
(February 2000) Harvard Business School Press
*** The Springboard : How Storytelling Ignites Action in Knowledge-Era Organizations
by Stephen Denning (October 2000) Butterworth-Heinemann 
*** The Art of Possibility, a video with Ben and Ros Zander : Groh Publications (February 2001)
Copyright © 2001 Larry Prusak 
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