People Are Your Most Valuable Capital, Especially In A Pandemic
A brilliant young friend of mine, Matthew Agarwala, recently wrote an illuminating post about how the pandemic should be teaching us how people are the source of our success, not a cost to be trimmed when times get lean. He’s an environmental economist at the Bennett Institute for Public Policy at University of Cambridge. He joined the institute in order to spearhead an effort to accurately measure how prosperity depends on social capital and the ecosystem. He points out that our pandemic, and its disastrous effect on the economy, can tempt organizational leaders to panic and lay off or furlough their employees in an effort to conserve enough capital to endure through the pandemic.
It’s a hard-nosed tactic that’s an obvious way to preserve short-term profit. It will. Yet, long-term, it’s a bit like strip mining. You get some good precious metals up front, but eventually you make the land uninhabitable and barren. Very simply, a company that lays off its workers, and calls it cost-cutting, will risk squandering years of investment in training and team building. It will be burning muscle and brain tissue, not fat. It goes without saying that there comes a time that a business must furlough employees. Yet the mindset should be that the last employee goes only before you turn out the lights.
In other words, it appears simple to let go employees from the start. But it will be destroying social capital: the connective fiber of trust and loyalty and motivation that can thrive in groups: companies, colleges, administrations, nations, any organization. Think of it in the same category as good will. All of these teams of creative souls can take years to coordinate themselves, attain a level of finely-tuned synergy and reach optimum productivity. Then you send a third or even all of them home with no way to pay their bills for an indefinite period of time? How exactly do you expect them, or their co-workers who are still hanging onto their jobs, to bring their best, most creative selves back to work? You have betrayed them.
You don’t need a pandemic to inspire this kind of folly. It’s been going on for decades, under the guise of shareholder primacy. It has given companies a cover for just this kind of thinking and lack of leadership. It excuses the most cynical disregard for the reality of human life—that we’re all in this together, not divided into an elite corps of wealthy shareholders and corporate royalty pitted against the rest of the humanity. A company is exactly how Agarwala describes society itself: a complex network of creative minds and hearts in which the whole is far more effective and productive than any of its parts, including, and maybe especially, the C-suite.
As he says in his piece: “While the value of all capital is subject to expectations about the future, one commodity that is always valuable – in good times and bad – is social capital. Encompassing trust, relationships, and the ability to overcome collective action problems, this is the kind of wealth we all need now. Assets are supposed to be . . . bedrock. They are the basis of future welfare.”
Even as employers have laid off millions, our society as a whole has showed the real meaning of social capital—the good will and compassion that has prompted most people to voluntarily maintain social distancing and wear masks. And the willingness to be put aside as an inessential worker. As he points out, “Our response to the coronavirus reveals one of the most important, durable assets underpinning modern life: social capital. It is that collective spirit that carried Britain through the blitz, it manifests itself in volunteer armies and the charitable sector.”
Ultimately, Agarwala’s point is that social capital—what the OECD defines as “networks together with shared norms, values and understandings that facilitate cooperation within or among groups”—is understandably hard to measure. And measurement is what’s desperately needed right now, to give companies a way to track their own integrity. He says “the UK Office for National Statistics is ahead of the game. They collect and analyze data on multiple aspects of social capital. What troubles him, is how the pandemic has turbo-charged the ongoing erosion in social capital, if defined as good will and trust among large groups: “Trust in national government across the UK fell by 11 percentage points in the year to autumn 2019. Our sense of belonging to our neighborhoods declined from 2014/15 – 2017/18; and membership of political, voluntary, professional, or recreational organizations fell 5 percentage points between 2011/12 – 2017/18.”
He says Reuters Institute found that trust in the UK government as a source of information on Covid-19 fell from 67% in April to 48% in May.
What employers could do, as their own emergency response, is to stay the course and suffer through the economic setback, keeping workers paid as best they can, so that they can resume business at full capacity when the economy revives. And companies should tout their investment in social capital as proudly as they do their more conventional capital investments. If they do, the trust and motivation they will build would have an incalculable effect. “First, our public discourse and economic analyses need to take social capital more seriously. Second, we need to find a way to build trust and trustworthiness – in governments, communities, and their ability to support each other. Finally, we must re-think what constitutes capital investment. Much of social capital revolves around trust, dignity, and respect. Many key workers used to be referred to as “unskilled” or “low-wage” labour. Yet when push comes to shove – as it literally did in the quest for flour and toilet paper – they are the heroes, carrying their country through the crisis. Perhaps it is time to re-imagine . . . minimum wage increases as social capital investments, rather than economic costs.”
That’s only the first step in a much larger task. We need to look clearly for once at the organization-wide, creative commitment of every worker as the source of our success. And to build that social capital requires just as much commitment and dedication—to the lives of those workers—as we require from them when they come in to work every day. If you don’t stand by them when things get lean, they won’t stand up for your company when and if they do come back to work—deeper in debt, demotivated and resentful of a company devoted to success that rewards only those who own a share of the firm and not those who make that success possible. The Covid-19 crisis reveals convincingly that a change in our culture must happen now.