Close this search box.

Has economic rationalism destroyed social capital in our workplaces?

Many modern businesses are very good at maximising profit by finding efficiencies and reducing costs. I’ve heard the phrase “do more with less” too many times to count and it normally means employees will be burdened with more responsibilities without further reward. This can result in increased profits but it can also destroy social capital with long term deleterious effects.

What does the pursuit of profit mean for social capital in our workplaces?

In one of my early employment experiences I was working in a small group when management announced that one of the team would be leaving and not replaced. The amount of work had not reduced, but to meet budget cuts the position could not be funded. The rest of the small team had to absorb new responsibilities, work harder, faster and longer, but not receive any compensation for our extra effort.

I saw this happen again and again within the organisation. Employee morale suffered and I noticed a high rate of staff turnover and I also considered quitting myself. The pursuit of profit had effectively destroyed the organisations social capital.

The pursuit of profit had effectively destroyed the organisations social capital.

It was much more than just employee moral that suffered, the organisations culture had become very negative. People didn’t trust management and would avoid taking responsibility for any problems in case it was used as an excuse or reason to fire them. The organisation had effectively stopped learning from mistakes and solving problems.

Many employees also started to rebel. Some people would cut corners or take liberties where they thought it wouldn’t be noticed. This culture developed quickly and became so strong that employees would feel comfortable talking to each other about what they had done. Some people even stole company property to “compensate themselves for their extra work” and made little attempt to hide it from colleagues.

This example is an extreme case with obvious consequences. Management got it wrong and I think we can all see how they should have done things differently.

What are the effects of cost cutting?

I’m not saying that we should not pursue profit, but often management will take actions that they think will increase profit however they can have the opposite effect.

Some measures may be positive, such as reducing travel expenses by using teleconferencing technologies that may actually encourage more interaction, but others, such as reducing entertainment expenses, may reduce interaction and the opportunity to develop social capital. This loss is very difficult to quantify but social capital is important to productivity, efficiency, innovation, creativity and resilience. I think it’s logical that we wouldn’t want to do anything to jeopardise it.

Social capital is important to productivity, efficiency, innovation, creativity and resilience

Another strategy I see often is very narrowly prescribed roles where the actions of employees are very tightly regulated and controlled in the pursuit of efficiency and therefore profit. This can include strict adherence to schedules such as strict 10 minute tea breaks, prescribe toilet breaks, and inflexible arrival and finishing times. It also include overly explicitly defined daily tasks that reduce the opportunity for innovation and creativity, and importantly may reduce the empowerment of staff with the the flow on effects for organisational culture and social capital.

This can lead employees to feel link just another cog in the wheel, undervalued or even exploited.

Almost 20 years ago I was presented with an employment contract that included the words “you will be required to work unpaid overtime as required”.

I didn’t take the job for this and several other clauses that made it clear to me that the employer was too focused on profit at the expense of employee wellbeing and organisational culture.

If you’re cutting opportunities for social interaction you’re probably damaging your organisational culture.

Unfortunately this is all too familiar to many people in the modern age. Most employees will be prepared to go above and beyond when required, and make sacrifices for the good of the organisation if needed, but they don’t want to see it written into a contract as a condition of employment. They want to feel valued and that they are all “in it together”.

Economic rationalism can severely damage social capital. It’s hard to feel belonging when overtime is cut, expenses are cut, positions go unfilled, pay increases are suspended, equipment isn’t replaced, perks are cut, social interactions including parties and celebrations are cut, and so on.

For almost all businesses their employees are their greatest asset, and managers need to remember that and realise the role of cost cutting on organisational social capital and culture.

About the Author

More Articles

Tristan Claridge

The difference between social capital and cultural capital

Export Reference Download PDF Print The concepts of social capital and cultural capital are similar and overlap in some significant ways depending on the meaning attributed to each concept. Cultural capital has at least two different meanings, and social capital

Read More »
Tristan Claridge

Social capital measurement

Attempts to measure social capital are flawed by problems with separating form, source and consequences – a common problem with the conceptualisation of social capital. Unfortunately, few researchers understand this complexity and readily confuse the three, resulting in measurement indices

Read More »
Receive the latest news

Subscribe To Our Newsletter

Get occasional updates about social capital related events and publications.