Does team spirit make economic sense?

Centre for Educational Research and Innovation (CERI)
Teamwork is as vital for successful companies as it is for successful football teams. But little attempt has been made to measure its contribution to the economy, or the cost of its absence. Perhaps it is time to pay more attention to this invisible asset.
What makes for a successful football team – star players bought at huge cost perhaps, a tough and cunning manager, or an inspiring captain? All these are important, but success will also depend, critically, on less tangible factors such as team spirit and fluent communication between the players. Only then will a player know when and how to pass the ball, as well as shoot for the goal. A good firm also needs effective management, the right tools and equipment, and well-trained staff. But, like the football team, its success will also depend on mutual trust among the staff and shared objectives. More widely, in addition to a good product the firm depends for its success on the tacit understandings which bind the company to its customers and contractual partners – the trust that the firm will honour its delivery commitments, or that quality will be maintained.Reliance on teamwork is so universal that it may pass unrecognised. Traditional economic theory allocates a place in production to physical capital, the quantity of labour, and increasingly also to the quality of labour – human capital. Yet “social capital” – made up of the networks and norms that underpin most types of economic and indeed social activity – is apparently ignored.Attention to social capital can suggest new policy solutions. For example, economists worry about markets failing when one of the parties to a transaction is better informed than the other. If someone tries to sell me a used car, how do I know if its curious rumble is a long-standing quirk, or an ominous and recent symptom? Traditional policy answers such as regulatory mechanisms (like trading standards) and investment in information (hiring a mechanic to look the car over) are costly. Social capital theory implies another simpler approach. In an atmosphere of trust, I can ask the vendor about the rumble, and rely on the answer. The honest vendor gains too, in that he or she has less need to discount prices to offset the buyer’s uncertainty over quality. This may explain the common observation that used car sales frequently take place in workplaces, where trust, backed by potential informal sanctions, represents social capital. Generalising, higher levels of social capital should increase market efficiency and lead to higher output.In recent years a stream of research has sought to define and measure the myriad ways in which established norms and social networks support and underpin social and economic activity. On the economic side, for example, the level of trust in Italian regions has been shown to be linked to the effective use of credit while local social networks have been shown to play an important role in helping people to find jobs in many European countries.Another strand of research connects social capital with non-economic outcomes, including better health, education, government and child welfare, and lower crime. A major US study argues that the physical health of someone who belongs to no social group and then joins one will improve so much that his risk of dying will be cut in half, while research in Sweden suggests that social connectedness reduces the risk of Alzheimer’s disease. This apparently magical panacea for social ills has even been shown to be connected to happiness itself.Despite enthusiasm for the concept of social capital in both academic, and increasingly in political, circles, the idea remains fraught with difficulty. The term is used to cover many different things, with some extending it to include institutions such as the legal system, although most would limit its application to informal norms and social networks. And despite tantalising indications, no one has yet been able to prove that social capital increases economic output. This could be because it has been difficult to agree on how social capital should be measured, but it might also be because economic dynamism sometimes requires, alongside team-work, the kind of tough competition and radical innovation which threaten established networks and norms. There is little research, and little consensus, on how one might go about promoting social capital, particularly in “good” forms, like helpful neighbours, rather than “bad” forms, like organised crime. As the research field matures, some of the fog should lift, and it will become easier to see where the greatest policy returns can be realised from investment in research on social capital and its measurement. So what makes for a successful society? Good people certainly, knowledge and resources, effective government, law and institutions. But also the teamwork – the social capital – that makes society more than the sum of its parts.References• The Well-being of Nations: The Role of Human and Social Capital, OECD 2001.©OECD Observer, No 226/227, Summer 2001

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