The Nordic region enjoys a high level of social capital. For
companies it means a high level of trust between management and
workers. This can give Nordic countries an enormous competitive edge as
long as business leaders learn how to explore the potential of this
particular resource and resist the temptation to focus solely on
economic capital because of the crisis.
That’s the message from three Danish researchers in the new book
‘Leadership and Social Capital’, which focuses on business leaders’
responsibilities and opportunities to develop social capital. Through a
range of case studies, authors Peter Hasle, Eva Thoft and Kristian
Gylling Olesen show how leaders in both private and public enterprises
can promote their business’ social capital.
“Social capital is an enormous and unique resource which is found to
a certain degree in all Nordic companies. Our message is that leaders
face new and considerable demands to realise this resource,” says Eva
Thoft, a consultant at engineering and management consultants Grontmij
Carl Bro. One of her jobs is helping companies’ develop their social
capital.
No soft leadership
Social capital means human relations built on fairness, trust and
the ability to cooperate. Leadership with focus on protecting and
developing social capital can result in improved efficiency and the
optimisation of worker resources, knowledge and competence. This
benefits both workers and businesses – and consequently the Nordic
countries’ ability to compete, the authors argue.
Businesses which enjoy high levels of trust, fairness and
cooperation also perform better on the international stage. Trust saves
a company both money and effort compared to mistrust, control and
conflicts. It can concentrate its efforts on creating results instead.
Studies show that fair processes in the workplace are crucial to a good
working environment and reduced stress.
“It looks like a high level of social capital reduces stress. The
stress factor is reduced when workers can solve their tasks in time,
understand them and feel their achievements are being appreciated,”
says Eva Thoft
Yet showing leadership which stimulates trust and fairness is easier
said than done, and it must not be confused with democracy or soft
leadership.
“Leaders must show trust, but not blind trust. Leaders must support
and govern. Leaders can in fact undermine workers’ trust in them by
failing to be firm when someone is going off in the wrong direction. To
lead social capital is not the same as democratic leadership and it can
be very tough. You must be able to fire workers who fail to cooperate,”
says Eva Thoft.
When a leader balances between power and trust, fairness becomes
very important. Yet the worker’s need for fairness must not be confused
with a demand for equality. It must be made very clear why one worker
earns advantages while others do not.
“Most workers can deal with being treated unequally, but management
must make it clear why and how this happens. It should not happen
because the worker who’s been promoted is a good friend of managers.
They must protect social capital by acting according to known
principles and follow through what they have promised. This creates
trust,” she says.
A resource for times of crisis
During times of crisis, like the one we are going through right now,
it can become very tempting for a business to focus solely on economic
capital to the detriment of social capital, the authors warn. They
argue social capital is a valuable resource also during times of
crisis. One example used in the book is Swedish hospitals which at the
end of the 1990s were about to merge, cut and reduce their workforce.
This, according to a Swedish investigation, led to an increase in sick
leave and a general lowering of well-being among workers. Yet two
hospitals did not fall into this pattern – because they had created and
maintained a high level of social capital. They managed to maintain a
high level of trust and professional pride and had support from
management in times when tough priorities had to be made.
In order to protect and use social capital in times of crisis you
need transparency, a high degree of worker participation in the
decision making process and necessary action. In a crisis most
companies resort to so-called change management. The authors warn
leaders should think carefully before going down that path.
Change management relies on creating a ‘burning platform’ – a
feeling of crisis which justifies radical change. The idea is tempting
but detrimental to social capital because management comes up with a
preconceived idea of what will come out of the crisis – without the
involvement of workers’ representatives.
Important social value
The authors also consider well maintained social capital to be a
benefit to the Nordic welfare societies. They recommend the nurturing
of trust – both in society as a whole and within companies – even
though this means running the risk of disappointing those who put their
trust in their leaders. It is better to risk disappointment than to
introduce a regime of control which only indicates to citizens and
workers that there is no trust in their willingness to do their best,
and no trust in them not cheating.
Some might call this naive, but the authors argue this kind of trust
is what makes Nordic societies tick today. The authors fear the Nordic
countries are about to throw the baby out with the bath water – that
they feel under so much pressure to finance the welfare system in an
increasingly competitive international market with increased
individualisation that they begin to copy other societies which focus
solely on economic motivation and meaningless control.
So far the Nordic region has been successful in developing its own
model built on trust and on the special opportunities presented through
the Nordic culture. “We are convinced we must continue this strategy,”
says the book’s authors.
