There should be little doubt that human capital is a firm’s greatest asset. However, this isn’t enough. Organizations must also ensure that individuals are relationally positioned for success. In other words, bringing in the best people is only part of the solution. Firms must also bring out the best in people, and that requires us to more intentionally leverage social capital.
A strong economy and growing need for advanced technological skills is leaving employers with unfilled roles. Resulting in a global talent shortage that is at a 12-year high. This problem is projected to only get worse. According to a recent study by the year 2030 there will be a global talent shortage of more than 85 million people, roughly equivalent to the population of Germany. If left unmanaged, that equates to about $8.5 trillion in unrealized annual revenues. As a whole, the United States would suffer the largest economic hit, with about $1.7 trillion in unrealized revenue, which would equate to roughly 6% of the entire U.S. economy[1].
In the face of such possibilities, organizations will need to more deliberately focus on unleashing the latent potential of the talent that they already employ. For example, I once overheard a conversation where an HR professional was advocating that a top engineer was worth 10 times that of an average engineer, according to an external study. Sadly, his colleague responded “not here”. Asserting that it didn’t matter how great the engineer was if they weren’t positioned to leverage what they knew. In the midst of a global talent shortage, a top engineer will become a scarce resource. Therefore, it will become more important than ever to position such individuals for greater success. That, is a social capital challenge!
Human capital can be thought of as the knowledge, skills, and abilities possessed by an individual. In contrast, social capital is how well positioned an individual is to leverage these skills and abilities. By definition, social capital is the competitive advantage that is created based on the way an individual is connected to others. Advancements in organizational network analysis (ONA) have enabled organizations to take our day-to-day interactions, that were once invisible, and make them visible so that they can be more intentionally leveraged. By evaluating these connections, we can deliberately position individuals to more fully leverage what they know to enable organizations to operate more strategically.
In particular there are four types of connections, or social arrangements, that are critical to operating more strategically. At times, organizations need to focus on the discovery of new ideas and solutions. Then they need to quickly move into development teams to bring these ideas to life by creating minimum viable solutions and products. These solutions consequently need to be diffused across the broader network to gain greater organizational impact. Finally, disruption connections need to be enabled to unseat current solutions and disrupt the current status quo[2]. To better illustrate this, consider the network diagram below. The three small pockets on the right side (green, blue and orange clusters) were designed to be small, agile development teams that could quickly bring ideas to life, by creating minimum viable solutions and products. While the core of the network (grey nodes) was designed to drive execution. However, the bridge connections (yellow nodes between the clusters and core) are essential to discovery by providing access to new ideas, insights and learning from the other groups. These bridge connections also help with the diffusion of new solutions. Combined, these connections enable an organization to operate more strategically by continually generating new solutions and products for future growth, while also driving the execution around current solutions.
Courtesy: Michael Arena
By thinking of organizations as a set of social arrangements, large companies are able to ensure both flawless execution on the current business and rapid development of new products and solutions. By placing small bets on the edges, they are able to operate with speed and agility, while leveraging bridge connections to enable discovery and diffusion. To do this, organizations need to shift their thinking from human capital solutions to social capital. They also need to more fully leverage the social capital strengths of individuals. They need to unleash their innovators by partitioning them off into small agile teams of development activities, they need to capitalize on the execution abilities of employees by actively positioning them into the core of the business and they need to find the people that can bridge these two groups to enhance discovery and diffusion.
While human capital is more critical than ever, understanding an individual’s social capital strengths can help unleash latent potential in the face of a global talent shortage. The result is, a “great engineer” could be worth a lot more. Or, organizations will be able to generate greater value from a scarce resource, its talent!
Sources
[1] The $8.5 Trillion Talent Shortage, Korn Ferry Institute, https://www.kornferry.com/institute/talent-crunch-future-of-work
[2] Arena, M., Adaptive Space: How GM and Other Companies are Positively Disrupting, (2018), New York, McGraw Hill.
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