Tuesday, 18 August 2009

Which Counts More for Performance: Human or Social Capital?

We've been doing quite a bit of work recently (one of my PhD students, Stacey Bushfield and I) on the drivers of innovation in public sector organizations. These drivers are often described in tripartite terms - human capital (broadly individual competences), social capital (bridging and bonding capital, and trust) and organizational capital (the non-human capital left in the organization when people walk out of the door at night). And this is the basis of the model we are testing in the NHS in Scotland, which, like many industries, invests enormous sums of money on talent management.

So, it is with interest I read about the recent investments in football stars in the English Premier League and the attempts by one of Barclays subsidiaries to pay almost obscene amounts of money to recruit staff from US competitors. It seems that some organizations and industries' strategic recipes are based heavily on human capital and hiring in stars. And, where they go, others seem to follow.

However, this strategy for banks and football teams and the unreflective imitation by others seems to fly in the face of good research as Jeff Pfeffer has recently reminded us in citing a series of articles by Boris Groysberg from Harvard on the problems of hiring stars. He did so in his book with Robert Sutton on Dangerous Nonsense, but here's a recent summary of his arguments if you haven't read it. Worth reading and reflecting on because they demonstrate the importance of social capital and its interaction with human capital, which most most of us know about but some forget in committing the fundamental attributional error - attributing too much cause to individuals and not enough to the context. So why don't firms and football teams get it?

I recently watched my local football team in the Scottish Premier League draw with and beat two English Premier league clubs (actually one was recently demoted, which tells you something). My club cost less than £500,000 to assemble in total, which was less than the cost of the cheapest player on the demoted side and about a hundreth of the cost of assembling both Premier League sides. Cheap shot or a cheap lesson here for talent management?


Jon Ingham said...

Hi Graeme,

In my consulting career, I've increasingly been convinced that the point of performance in most organisations isn't the individual but the team.

This being so, I'm firmly convinced that social capital is more important than human capital. In most organisations, it's also much less well managed (if at all).

It's one reason why I've recently been extending my focus from human capital (http://strategic-hcm.blogspot.com/) to social capital (http://blog.social-advantage.com/).

I hope you might like to read this new blog too.

Graeme's HR Blog said...

I'll certainly have a look, Jon. The argument is really one of complemetarity. There's a good article in the international journal of management reviews this month, which I may blog about