A problem shared

of the biggest problems for global corporations in multi-locations is getting
employees to work together effectvely. Zurich Financial Services’ CEO Rolf
Hueppi and director of communications Dr Patricia Seemann believe they have the
answer. Mike Johnson reports

with using the same old methods to circulate ideas and information around the
68,000-plus employees of Zurich Financial Services (ZFS), chairman and CEO Rolf
Hueppi and director of communications Dr Patricia Seemann felt there had to be
a another way of "getting people to want to collaborate". Using
research initiated by social scientists and the World Bank, Hueppi and Seemann
realised that the phrase "social capital" reflected what they were
trying to achieve.

Hueppi, "As an organisation, we were undergoing major structural change.
We realised that all the conventional ways of managing our increasingly complex
business weren’t working. Our challenge was, ‘How do we get people, often
people who have never met and never will, to want to collaborate – to share
ideas and opinions?’ In the new economy, conventional solutions are too slow,
too cumbersome, too costly and too fragile to order or control these types and
degrees of collaboration."

and Seemann’s view is that it isn’t enough to "wire up" your business
(for example, give every employee access to Lotus Notes or a dedicated on-line
system) and say you have conquered the challenge of intellectual capital.
Indeed, in recent years many firms have tried it, with very mixed results.
"You can have all the technology in the world," points out Seemann,
"but that doesn’t mean that anything is going to happen; technology is
simply an enabler, it won’t produce anything unless people want to
collaborate." She adds, "What we realised was that in order to create
intellectual capital in ZFS, we needed to accept that there were three elements
in play:

Human capital: individual knowledge, skills, experience and talent

Structural capital: physical assets (such as processes and technologies) that
facilitate a firm’s knowledge and competencies

Social capital: the features of an organisation that facilitate co-ordinated
action to achieve desired goals."

Hueppi, "One way of explaining social capital is that while human capital
resides in the people, social capital resides in the relationships among them."

and Seemann are convinced that managing for social capital holds the key to
long-term success in the new economy. "So far, in the business world,
social capital has not been very visible," they say. "However, rapid,
constant change – which characterises the new economy – means that the ability
of any corporation to get everyone moving willingly in the same direction,
exchanging thoughts and ideas, and creating new knowledge, is becoming a new,
albeit intangible, imperative." And it is one that Hueppi and Seemann
believe many corporations must tackle soon – especially those wanting to get
ideas and knowledge around often far-flung subsidiaries.

say that to be successful in the future, firms must embrace being:

Intently focused on – and responsive to – the customer

Multi-local – decentralised under centralised conditions

Web-like in their ability to distribute knowledge and take decisions

Able to easily and rapidly change roles, responsibilities and reporting lines

Eager and passionate to innovate; agile, nimble and very, very flexible.

all, to do those things," argue Hueppi and Seemann, "companies must
be able to respond locally, while integrating their operational activities and
fully aligning the entire organisation with the overall strategic intent of the
business. This apparent paradox means that a firm moves from managing an
infrastructure of rules and fixed systems to managing a Web-like infrastructure
of knowledge and collaboration."

and Seemann discovered social capital while in the throes of their own
organisational change. "We needed to quickly find a gravitational force
that would allow us to move like a school of fish (instantly and without being
told what to do), with no central command or validated data." They add:
"Our belief is that to make this happen, we must manage for social capital
in the right places and use it at the right times to achieve a high degree of
coherence and purposeful direction."

strong belief that others need to take notice of the challenges of social
capital has prompted them to publish the concept in a management briefing for
the Financial Times, Social Capital: securing competitive advantage in the new

believe that there is an urgent need for companies to find the way to
collaborate at scale, at a distance and in a rapidly changing context; all of
which impacts on more and more firms as they go global," they say.
"The question is how do we begin to manage our corporate social systems
for that? The answer is to manage deliberately for social capital."

they may not have identified it already themselves, Heuppi and Seemann explain
that other firms exhibit clear signs of having strong social capital. Finnish
mobile phone company Nokia is a perfect example of a company that has been able
to get all three parts (human, structural and social) working together in a
consistent fashion. They have been able to create a heady blend of all three elements
which brings a true sense of belonging and ownership to the firm.

firms like Hewlett-Packard, Cisco Systems and Southwest Airlines have achieved
similar synergies. Daimler-Chrysler and its Mercedes-Benz subsidiary showed an
admirable example of social capital at work as they appeared to seamlessly
recover from the Mercedes A-Class so-called "elk-test" debacle. A
Swedish magazine testing the new Mercedes managed to roll it over while doing a
manoeuvre designed to avoid elks while driving at high speed. Everyone said the
car was doomed to failure, but the ability of the organisation to know
intimately the "who, how, where, why and when" of their business made
problem fixing faster and less costly.

is a management tradition at Royal Dutch Shell that executives are constantly
being mixed together (often on intensive overseas assignments). They rotate
people so much that they are able to call on the advice of a large number of
fellow employees. This gives the firm a head start on the social capital needed
to get complex projects up and running. Another major automaker, Volkswagen,
puts young, high-potential employees through a gruelling programme, which
culminates in multicultural teams working on real-life business issues. A key
part of the process is to build long-term, global relationships. Most
importantly, it provides employees with a shared way of thinking about problems
and opportunities.

new-look Coca-Cola – once an icon of global centralisation – has seen the light
and is giving its country managers around the globe the freedom to develop
locally focused marketing campaigns, which build on national cultural issues.
This shows that by developing shared context and understanding the core values
of the business, you can let your local managers have their head.

is the point," says Seemann, "when critics say that you are really
talking about corporate culture or building teams." She goes on, "But
to say that is to miss what managing for social capital is all about."

helps us understand how small groups work together, but cannot easily be
extrapolated to very large numbers of people working for the same firm in many
different places around the world. Culture is also an insufficient instrument
to view an organisation, primarily because it is very difficult to visualise,
analyse and make actionable the findings. Says Seemann, "What we need to
discover is how the ‘bits’ in between the people happen. Our view, is that the
concept of social capital offers a way to look at a firm and all its internal
and external relationships in such a way that it becomes actionable."

Hueppi, "The key to making this work – to managing for it – is to find out
where and when people are getting together to figure something out and then put
in the right support to aid and abet that process."

that the openness, complexity and speed of the new economy means we must find
new ways to manage, Hueppi and Seemann explain: "Business leaders need to
believe that social capital is the only true, sustainable resource for
competitive advantage – the only true constant. If a manager still believes
that the centre and top know best and people need to be told what to do, you
will not be successful."

go on to say, "Where there is social capital, knowledge will flow with
less resistance. It will go where it is welcomed and where it can fit into the
context of the task at hand, where people make sense of it and work at
understanding what it means. In other words, where that knowledge can be, and is,
put to use. Where there is no social capital, knowledge will not flow. It will
be blocked and rejected."

Hueppi and Seemann warn that this is no easy-to-use panacea; it needs care and
ongoing commitment to get it right, something they admit they are still
fine-tuning themselves. Their view, though, is that managing for social capital
offers organisations a lifeline for the future, without which managing the
complex systems of today may well become virtually impossible.

many other companies take up the challenge remains to be seen. Equally, how
they adapt the concept to meet their own specific needs will bear careful
scrutiny in the years to come.


The Zurich Financial Services Group is a global leader in the financial
services industry, providing its customers with solutions in the area of
financial protection and asset accumulation.

The group concentrates its activities in four core businesses: non-life and
life insurance, reinsurance and asset management.

Headquartered in Zurich, Switzerland, the group’s worldwide presence builds on
strong positions in its three key markets – the US, UK and Switzerland.

It has offices in over 60 countries, reaching in excess of 35 million customers
and employing more than 68,000 people.

Based on consolidated figures for 1999, the Group achieved gross premiums of
US$48bn. On 31 December 1999, the Group had US$442bn of assets under
management, of which US$264bn represent funds managed for third-party
institutional and retail customers.


Capital is a Financial Times Executive Briefing, published by Pearson Education
at £95. It can be purchased at www.briefingzone.com or by calling +44 (0) 1279
623 333. We have two copies of the report to give away to the first two people
to send their business card to:

HR Social Capital Offer
Direct Marketing Department
Financial Times Executive Briefings
128 Long Acre
London WC2A9EN, UK

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