Social Capital and Value Creation in Business

Management Thought

Dr. Hargo Utomo, MBA., M.Com
Director of Master of Management Program
Gadjah Mada University

By: Agustinus Gius Gala

Social Capital and Value Creation in BusinessLately, matters pertaining to social capital have earned quite a lot public attention. This attention is no more than an indication of a new awareness of human behavior in relation to the self and the environment.
Essentially, in doing a job, a human being as a social creature with a soul and feelings cannot be entirely replaced by instruments. That's why a business routine devoid of an accompanying soul as its foundation is tantamount to a machine operating mechanically and does not feel the need to recognize the unfavorable effects it may produce.

Following this line of thought, human existence in business life should no longer be viewed as a static resource but as a productive and dynamic resource in controlling organizational behavior.
So the challenge we face is to restore the role of the human being as a social agent and at the same time a stimulator for every change that requires collective action so that a set business performance target can be reached. The initial proposition put forward is that social behavior in business basically can be shaped in accordance with a commonly agreed commitment.
This argument is quite different from an opportunistic view, which always views the elements of a social relationship in business unilaterally. An elaboration of the elements forming social capital will, in its turn, be believed to be able to unravel the complexity of the matter being revealed.
However, the biggest constraint that lies in the effort to optimize the role of social capital in this context is limitation in the codification that is available and can be used to link the parties interested in the control of human behavior.

Can social capital be codified?

Whether we realize it or not, the business community, particularly in Indonesia, has long adopted and appreciated symbolic language in communication and interaction with its community. Nevertheless, symbolic language often cannot be easily understood so that it will very likely lead to a difference in interpretation. If this happens, someone usually will again refer to a written statement that has been made as a commitment. Belief in what has been put in writing usually serves as a basis for decision making. Unfortunately, however, the habit of the community to put down everything that has become its concern is relatively limited in comparison with its use of the audio or verbal media in interaction with its social environment.
This tendency shows that the settlement of a business problem is often quite effective with the adoption of informal measures that do not require a standard procedure.

The implication arising from this limitation in the symbolic codification is the formation of a gap in determining measurable domains and forms of contribution of social capital in business. Indeed, the complexity in measurement may occur because not every element forming social capital can be codified, particularly for performance evaluation purposes. The elements that are within an individual, such as trust, love and charisma, are relatively difficult to transfer to another party without the presence of the individual in question. That's why, in a condition in which a corporation requires a concrete act to be made collectively for a major change, the role of motivators is important to awaken the spirit and at the same time inspire goodwill for this change. Motivators can come from outside the company and generally they are more effective in an empowering movement rather than the motivators from within the company itself.
This may be the case because generally, in terms of its character, the business community in Indonesia, can be easily annoyed if a particular issue is exposed by someone from outside its cultural community.

Theoretically, there will be a need to use external motivators to awaken an awareness of social capital if there is an indication of a lack of confidence or even distrust in a particular business on the part of the public. Business cases related with environmental pollution that have been exposed in the mass media are a simple illustration of this matter.
In fact, on the other hand, certainly a business requires concrete efforts to build a relationship with the broader community. It is a natural phenomenon to see a community hope that the presence of a particular business in their vicinity will help settle local problems and introduce changes for the better and not the other way around. The problem now is whether it is true that a movement to generate social capital must wait until external efforts are available. Is it possible for a multidimensional awareness to be shaped from inside a company itself?
The multidimensional approach as an alternative solution.

A number of published popular scientific studies have from the very beginning given a positive signal about the need on the part of business players to expand their multidimensional view to see the contribution that the reinforcement of social capital will give to the achievement of organizational performance. More specifically, the pattern of studies and discussions made in relation to social capital is geared toward two dimensions, namely: (1) the relational dimension, which prioritizes the significance of efforts to establish interpersonal relations in business and (2) the structural dimension, which emphasizes the significance of understanding the depth or closeness of interpersonal relations in a business (McFadyen and Cannella, Jr., Academy of Management Journal, Vol. 47, 2004).

It is true that monetary values have until recently underlined nearly all activities at the bottom line but businessmen have begun to realize that financial performance alone is not enough to guarantee the survival of a business. Financial engineering is believed to be a necessary condition but not sufficient to make a business capable of survival and maintaining its sustainability in the long run. Moreover, a new awareness arising as a consequence of the empowerment of social capital indicates the need to take into account the measurement of business performance that accommodates the instincts and responsiveness of a human being as a social creature.
Business leaders should be morally responsible to start this. A constructive step to take is to accommodate the need of a natural and proportional return on human investment. The cost and benefit analysis that has until now been used may always be modified to evaluate the contribution of social capital in business.

It may not be time to reassess any indication that spending in a business in relation to human empowerment should be treated as a burden because it indirectly gives a clearly measured return. In fact, a further study of this matter, will show that placing human beings at the center of gravity in a management process assumes a highly strategic significance for the long-term interests of a business.

As an illustration, an improvement in the soft skills among top managers in matters that have hitherto been considered insignificant, for example in terms of dress and communication, will greatly improve self-confidence, particularly in negotiations and approval of business contracts.
In short, efforts to build and develop a business with a value for the community is a long process. An approach that prioritizes individual capabilities should now be geared toward institutionalized efforts that no longer lend prominence to the ego of an individual or a group of individuals.
Empathy and togetherness should be a cohesive element for the rebuilding of a social awareness of a business. Therefore, what is now required is not a focus on how many social relations a business establishes but the quality of a relationship that forms and guides constructive organizational behavior.

~From MMUGM~