Written by John Carbrey.
Ten years ago, one of my newly hired software developers asked me why I hated her. When I asked her why she felt that way, she told me, “Whenever you walk by my desk, you are frowning and look so angry.” Her strong feelings surprised me because internally, I knew she was doing a great job. But externally, my furrowed brow and preoccupied demeanor communicated the opposite. Instead of dismissing her response on the grounds that my expression had nothing to do with her personally and that she was misunderstanding me, I decided to slow down and be more careful when we interacted. I began to understand the value of a relationship that involved more than just her productivity as a member of our team.
How often do we push past the people and other resources both visible and invisible on which our companies rely in our pursuit of efficiency or profit? Companies that have a too-narrow focus on financial capital miss out on measurable benefits from investments into the skills and experiences of their people, the social climate within their firm, and sustainable relationships with the environment.
This article focuses on three types of capital other than financial — human, social, and natural — that are vital to a company’s success but often are undervalued for their contribution to a company’s bottom line. Although not always as easy to measure as their financial counterpart, natural, social, and human capital assessments and observations can spotlight pain points in a company’s ecosystem. These sometimes unspoken or unidentified pain points, like unsustainable exploitation of natural resources, lack of trust between stakeholders, and poor working conditions, can hold back a company’s ultimate financial success.
Three “untapped resources” that fuel a business’s performance
Human capital is the collection of skills and experiences of an employee. While it’s obvious that a company’s employees are human beings, not every company commits to their flourishing as individuals. Companies who value their human capital create environments that contribute to an individual’s well being through development opportunities, thoughtful management, corporate identity — and sometimes through just slowing down enough with people so they know we care.
Factors that represent investments into human capital include:
- Opportunities for growth and development
- The level of empowerment and autonomy felt by employees
- Individual connection to a sense of personal purpose
- Status & recognition given to individuals
Here are a few examples of this in action:
A founder I know writes a glowing email anytime a new employee is promoted to everyone in the company. He confers status on the employee at the start of their new position.
At FutureSight we provide in-house executive coaching to many people on our extended team. Their peers at similar managerial levels in other companies without executive coaches are jealous! These coaches help our employees verbally process key decisions, emotions, and reactions. The result is improved emotional awareness, self-reflection, and emotional health.
Investments in people result in more engagement and productivity, more creativity and flexibility. While a person’s assets are non-monetary, they still have economic value. Whereas social capital is difficult to measure, a company can track the relationship between its investment into human capital and improvements in profits, revealing the mutual benefits of such investments.
For example, Crewscope, a venture we co-founded, discovered that when construction firms valued field workers at a level similar to their office workers and offered clear goal setting and performance pay, the overall performance of the company increased. In interviews with field workers, we discovered that these workers often felt disempowered and as second-class citizens in the hierarchy of the firms they worked in. At the same time, though, they were the most scarce resource as construction firm owners struggled to retain field talent and regularly had to turn away projects due to staffing shortages. Crewscope introduced a new goal-setting and performance incentive model for field workers. The results of construction firms sharing performance-based incentives down to the field worker level have been significant: better productivity, improved attendance, and better project safety.
Closely related to human capital but more focused on a company’s culture is social capital. Social capital refers to the qualities of the social context within a company and the level of trust and perception of inclusion among its members. Social capital starts with existing shared values but has the potential to create new shared values as mutual respect grows.
Investments in social capital produce:
- The living of shared values
- Behaviors and traditions that reinforce core values
- Increases in trust and accountability among team members
- Psychological safety and inclusion
- A sense of shared purpose and meaning
- Constructive conflict
- Increased levels of leadership capacity
Social capital at work:
Here’s how we recently built social capital in FutureSight: Over a period of twelve months we offered nearly forty peer-led, personal growth sessions focused for our team. Each session covered a different area of personal development, giving opportunities for different team members to explore important shared values. We discussed meaning and purpose, emotional awareness, and key shared values like skin-in-the-game and servant leadership. The result of those sessions was heightened trust for our teams, increased commitment to each other and our mission, and increased clarity on personal and shared values.
It was a unique investment: it required hours to plan each conversation and included a significant time commitment by participants who read relevant books and articles prior to the gathering. This investment in personal discovery for our teams had a noticeable impact on our culture.
What if we ignore social capital?
Many times a company that is sold does not perform as well post-acquisition. In a recent roundtable discussion with a group of friends who’d sold their companies, we noticed a pattern: the acquiring company did not value culture in the same way the founder had. Each founder had deliberately invested financial capital to build social capital and the failure of the new owners to value this invisible but powerful asset felt uniformly disheartening, especially because the founders intuitively understood the link between social capital and business performance. The social capital investments were integral to these companies thriving.
The third example of non-financial capital is natural capital. Natural capital refers to the natural resources used in a production process, both renewable and nonrenewable. They can include plants, air, water, minerals, and animals. Even though natural capital is non-human, it still deserves a mutually beneficial relationship with humans. Recycling and reproducing products back into circulation serves as an example of how a company and its resources can have a mutually beneficial relationship.
A company practicing principles of mutual economics understands that it’s not just possible, it’s vital that they profit from solving the problems of people and the planet and not profit from creating problems for the planet.
In order to protect and preserve the limited supply of the planet’s natural resources, a company should inventory and quantify its incoming resources and develop measurements regarding their efficient use and subsequent depletion.
For example, Coca-Cola has an initiative aimed at water conservation, security, and regeneration in their operations. They continue to study, measure, and lead their industry through emphasis on replenishing water in water-stressed areas around their bottling operations, protecting watersheds and promoting access to safe drinking water in vulnerable communities. Aware of the changing climate, Coca-Cola is responding with quantifiable and contextualized goals to address global water concerns.
Conclusion
While natural resources are observable and measurable, social and human capital are less so. However, they are not imaginary. We can create and experience tangible benefits from investing in these forms of capital that are non-financial. Businesses, like humans, exist in multi dimensions. Building out those dimensions through mutuality expands the good that can and must be done in the world, by humans, in and through business.
For further reading, you can access the entire book, Putting Purpose Into Practice: The Economics of Mutuality for free.
To read the next article in this series, click here.