“Complexity Leadership Theory: Shifting from Human Capital to Social Capital”

Originally posted in our November 2021 Top of Mind Newsletter.

When we examine current Human Resource practices, we see a keen focus on competency-based, human capital initiatives. While human capital is worth developing, new research suggests we may want to emphasize another set of skills. Social capital, it seems, can have as much to do with innovation and growth in an organization as the skills of individuals. As this paper defines it, social capital is “the competitive advantage that is created based on the way an individual is connected to others.”

In particular, the authors of this piece emphasize group cohesion and brokerage as particularly relevant to HR development practices. By focusing on “facilitating the movement of ideas across a system through bridging and brokering,” they believe we can create more adaptive and innovative organizations. This movement of ideas can breed innovation in existing systems by positing a new theory, complexity leadership theory (CLT). This theory suggests that the everyday interactions of cohesive groups foster adaptability. Then the actions of these groups begin to link up to produce “powerful emergent phenomena.”

The issue is, “in many organizations, these linkages are hard to make because organizational bureaucracy and silos can create obstacles to interconnectivity,” say the authors. However, when an organization has well-established bureaucratic and entrepreneurial systems, they often do not link these vital groups together.

The paper discusses how the most effective organizations bridge this gap through something they call adaptive space. That is a space for interaction and (positive) tension between the organization’s operational and entrepreneurial systems to occur. By allowing these clusters of workers to interact, problem-solve, and connect, more impactful innovation occurs.

How are we fostering innovation in our organizations? How are we leveraging the organic innovation and unleashing hidden potential in our teams?

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