Talent 2.0 - Shifting from Human Capital to Social Capital

Michael Arena, VP Talent & Development, Amazon Web Services (AWS), Ex-Chief Talent Officer, General Motors [NYSE:JPM]

For the past decade or more, organizations have dedicated tremendous efforts in optimizing human capital strategies to win the war on talent—building out comprehensive talent management systems, designing the best possible leadership development programs and refining performance management. More recently, focus has shifted towards building out robust people analytics capabilities and organization network analysis (ONA). According to the 2017 Deloitte Global Human Capital Trends survey, 48 percent of companies are experimenting with ONA tools. Making what use to be invisible connections, visible. These shifts, along with the external demand to be more agile will act as a catalyst in creating more innovative talent approaches.

A recent study conducted by Korn Ferry highlights organizational agility as a top strategic priority for organizations that made the Fortune list of the World’s Most Admired Companies. According to the research, 95 percent of these companies say organizational agility is a “critical” or “very important” focus area. These organizations recognize the need to swiftly respond to changing customer needs and technological shifts. The problem is, most organizations are not very proficient at enabling agility. In another study, McKinsey conducted a comprehensive review of companies to determine which organizations were agile. They found that only 12 percent of these organizations were agile. Most of these organizations focus on human capital strategies such as hiring smart people, teaching creative practices and rewarding innovative behaviors to drive agility. However, it turns out that agility requires a shift towards social capital.

Human capital can be thought of as what someone knows, while social capital is about how well someone is positioned to leverage what he or she knows. Social capital is the advantage that is created based on the way an individual is connected to others. The key to enabling agility is to tap into the power of social capital to open up connections for people, ideas, information, and resources to come together and interact. In particular, there are four types of connections: discovery, development, diffusion, and disruption that enable agility.

More recently, focus has shifted towards building out robust people analytics capabilities and organization network analysis

Discovery Connections represent the bridge relationships across groups. They help organizations to overcome insularity. These bridge connections provide access to more ideas, insights, and information. Sociologist Ron Burt’s research suggests that people who bridge groups are best positioned to have insightful ideas. In one study of nearly 700 managers, he was able to determine that the value of any given idea corresponded to the degree in which a manager had bridge connections. That is, the more managers discovered from other groups, the more valuable their ideas were.

Discovery connections are the lifeblood of agility. They provide the fertile intersections for innovative possibilities to be discovered. However, for these ideas to be useful, they must be applied.

Development Connections enable cohesive teams to facilitate the idea sharing and refinement process so they can be applied. Cohesive teams are represented by many redundant connections within a given team, which often result in deeply trusting relationships. This level of trust enables individuals to more openly share, debate and refine ideas. Harvard researcher Lee Fleming analyzed data from more than 35,000 inventors and found that while bridge connections generate valuable ideas, they actually hamper application. That is, for ideas to be useful, they need to be openly shared, experimented with and refined. Fleming found this happens best in small, cohesive teams with high levels of trust.

The cohesive nature of these teams enables members to more openly challenge one another while still operating with speed. These development connections quickly bring ideas to life so they can be applied. However, well-developed ideas are of little value if they are stuffed away inside some pocket of a much broader organization.

Diffusion Connections facilitate the linking-up process to move ideas beyond local development pockets by scaling them across the organization. Fact is, ideas that are developed deep within cohesive teams are 43 percent more likely to be rejected by the broader organization. We know this as the “not created here” phenomenon. This is where network energy becomes essential.

A few years ago, network experts Rob Cross and Wayne Baker conducted a comprehensive study of seven large organizational networks. What they discovered was amazing: energy has a significant impact on organizational progress. They determined that energy inside the network has four times the lift in facilitating progress and idea diffusion. That is, positive energy encourages others to engage in diffusion of an idea. However, even diffused ideas need to break through the brick walls of well-fortified organizational structures and systems.

Disruption Connections help to break down the roadblocks that exist within organizations that stifle bold innovations. These connections disrupt the existing structures to enable new solutions and innovations to be formally endorsed. Disruption connections help to combat against the current status quo by seeding the network to break through the brick walls of formality. They help to build formal sponsorship for change.

In today’s dynamic world, existing talent frameworks must shift—from a predominantly human capital centric approach, to one that emphasizes social capital. Talent 2.0 will focus on the social connections necessary to actively facilitate the movement of ideas into and across the organization. The result will be greater organizational agility.