The Key to Social Media Success Within Organizations - MIT Sloan

The Key to Social Media Success Within Organizations - MIT Sloan

FA L L 2 0 1 2 V O L . 5 4 N O. 1 Quy Huy and Andrew Shipilov The Key to Social Media Success Within Organizations Please note that gray areas ref...

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FA L L 2 0 1 2

V O L . 5 4 N O. 1

Quy Huy and Andrew Shipilov

The Key to Social Media Success Within Organizations

Please note that gray areas reflect artwork that has been intentionally removed. The substantive content of the article appears as originally published.

REPRINT NUMBER 54112

SOCIAL BUSINESS

The Key to Social Media SuccessWithin Organizations

THE LEADING QUESTION

What determines whether an internal social media initiative brings business benefits? One essential — but often overlooked — factor is how employees feel about the organization. BY QUY HUY AND ANDREW SHIPILOV

MANY ORGANIZATIONS HAVE started using social media (a.k.a. Enterprise 2.0) tools internally to interact with their employees. A number of companies, including Best Buy and Dell, have succeeded in using social media internally to meet important objectives, such as reducing their costs, increasing revenues or stimulating innovation. However, many companies have either stayed away from using social media tools internally or failed to see beneficial results from their use within their organization. In a 2010 survey we conducted of 1,060 global executives, only about 50% said that their companies had adopted social media initiatives within their organizations; of those, about 60% reported that social media had positive effects on their company’s internal communications. Thus, only about 30% of executives whom we surveyed work for companies that have both adopted internal use of social media and seen positive effects on the company’s internal communications as a result. In our qualitative investigation of 34 companies’ social media experience, we found a similar dichotomy. Why do so many companies either avoid using social media internally or fail to make it work very well within their organizations? Our finding is that to be

What determines whether social media use within a company brings business benefits? FINDINGS To be successful, internal social media initiatives must focus on developing emotional capital. Use social media to build positive feelings of authenticity, pride, attachment and fun among employees. Identify authentic and trusted leaders within the company and help them develop social media skills.

Tupperware Nordic invested less than $50,000 in social media initiatives but reaped impressive financial results.

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successful, internal social media initiatives must focus first and foremost on the development of emotional capital, which we define as the aggregate feelings of goodwill toward a company and the way it operates. (See “What Is Emotional Capital?”) A company’s emotional capital with its employees can be built by the actions of executives; it represents the emotion-based assets that the organization has developed over time with its employees. We developed a theory about the relationship between emotional capital and internal social media use by using comparative case studies and tested our theory by a survey. (See “About the Research.”) Our findings suggest that executives who use social media to build emotional capital within their employees’ communities reap real benefits in terms of improved information flows, collaboration, lower turnover and higher employee motivation. Unfortunately, many organizations fail to grasp the crucial role of social media in building emotional capital and instead try extracting benefits from the internal use of social media before emotional capital is built. Social media can help emotionally attuned executives see where their company needs nurturing. It reduces the power distance and helps executives build and maintain human bonds with a large group of employees more efficiently. It allows em-

WHAT IS EMOTIONAL CAPITAL? A number of scholars and executives have used the term “emotional capital” in various contexts — but not always with the same definitions.i In this article, we define emotional capital as the aggregate feelings of goodwill toward a company and the way it operates. Within a company, emotional capital can be built by the actions of executives. It represents the emotion-based assets that the organization has developed over time with its employees. We see emotional capital as a specific dimension of social capital, a well-known concept defined as the goodwill available to individuals and groups.ii Like social capital, emotional capital is a form of capital because it constitutes an asset into which other resources can be invested, with the expectation of future (although uncertain) benefits. By investing their efforts in building feelings of goodwill based on positive emotions, individuals or groups hope to gain more resources such as information and support from others. Our earlier research on organizational networks and emotions has suggested that four key pillars of emotional capital are the feelings of authenticity, pride, attachment and fun.iii Authenticity in the organization is felt when employees perceive that what their company and its leaders say and what they do are aligned. Pride at work is felt when employees perceive that the company values and publicly recognizes their achievements. Attachment at work is felt when employees perceive that they belong to a community with shared values and interests inside the company, while fun is the feeling of playfulness that employees experience when experimenting with new things at work. 74 MIT SLOAN MANAGEMENT REVIEW FALL 2012

ployees to identify themselves more readily with an organization and can provide them with varied nonfinancial rewards. Employees join communities to experience authenticity, pride, attachment and fun, and social media tools can help executives build these pillars of emotional capital more effectively. On the flip side, internal social media use can also relentlessly expose the shortcomings of a company culture and sometimes even magnify them. This may be why many executives, instinctively thinking that social media may highlight the absence of emotional capital in their organizations, avoid adopting it internally: They don’t want to hear what their employees have to say.

Same Tools, Different Results The reason social media tools work well within one company and are ineffective in another can be seen both from our survey results and by looking at the experience of two different companies — a technology company and the northern European branch of Tupperware. (See “What Our Survey Found,” p. 76.) Tekcompany1 is a technology company that decided to invest in social media for internal usage a few years ago. After seeing the success that some other companies were having with social media within their organizations, Tekcompany’s techsavvy executives decided they needed their own social media platform. Executives mobilized experts to develop internal applications that mirrored the functionality of Facebook and Twitter and built a platform that allowed for the creation of internal wiki pages. The company hired many open-source technology developers to build new collaboration tools. Executives communicated with employees through email and blogs, encouraging them to use new applications in the spirit of collaborative community building. Finally, Tekcompany made participation in internal social media communities a part of employees’ performance review. In the end, however, the company had little to show for all that effort. When interviewed, Tekcompany executives had difficulty identifying examples of tangible benefits their company obtained from social media. Contrary to initial expectations, social media adoption improved neither the ease of internal information sharing nor SLOANREVIEW.MIT.EDU

employee morale. Even operational efficiency was unaffected. Tupperware, by contrast, invested less than $50,000 in social media initiatives for Tupperware Nordic, based in Copenhagen, Denmark, but obtained much more impressive results. Between 2008 and 2011, the turnover rate of Tupperware Nordic’s predominately part-time sales consultants — one of the most important cost drivers and indicators of morale in a direct sales industry — fell by 15%. An interactive motivational webcast, “The Tupperware Radio Show” described in detail below, generated 500,000 (about $700,000) of new sales over a three-day weekend in January 2010 with only 6,000 ($9,000) investment in telecommunications bandwidth. Furthermore, both the ease with which best practices diffused throughout the company and the company’s revenues increased. Tekcompany followed an implementation approach that reflected a traditional information technology mindset. When asked about the most important factors that accounted for success of social media communities, Tekcompany executives told us only about technological aspects (such as the ease of use and availability of social media tools), without any hint that they had also considered emotions. In a stark contrast to Tekcompany, Stein Ove Fenne, former managing director at Tupperware Nordic (and now president of Tupperware U.S. and Canada), had an intuitive understanding of the importance of creating positive feelings through social media tools. Through his actions, which just happened to be consistent with the four pillars of emotional capital — authenticity, pride, attachment and fun — Fenne generated far more positive results than Tekcompany, whose approach cut away at each of those pillars. Authenticity The authenticity of an organization

(or of the leaders of a social media community) is probably the most critical pillar of emotional capital. When authenticity is perceived to be high, the other three emotional pillars can be developed on this solid foundation. By contrast, if an organization in general or an executive leader of the social media community in particular is perceived as fake, would-be-followers become mistrustful and view the attempts to create SLOANREVIEW.MIT.EDU

ABOUT THE RESEARCH We developed a theory about the relationship between emotional capital and social media usage by using comparative case studies and tested this theory by a survey method. To identify cases, we began by reviewing what was written in books, journal articles and the popular press about companies that used social media. We also tapped into our personal networks of executives to understand how social media was used in different companies. Reviewing the published company cases and discussions with executives gave us insight into what has been done in 34 organizations. From these companies, we selected five that promised to provide us with contrasting case studies (Tupperware, Tekcompany, Tekcompany 2 and Tekcompany 3, Placement Firm; the last four are pseudonyms for different companies) where we conducted personal interviews and requested nonpublicly available documentation. We did 10 interviews at Tekcompany and 12 interviews at Tupperware and produced a case study on Tupperware combining interview data with archival research. In the case studies, we established causality by asking multiple respondents about the history of social media deployment in their organizations, the evolving nature of emotional capital as a result of social media deployment and the outcomes. The limitation with case studies is the lack of generalizability, however. This is why we surveyed 1,060 executives from different companies. This survey was conducted online in October to November 2010. We followed up with selected respondents in January to February 2011. We asked a range of questions, including whether executives’ companies adopted social media technologies, which specific technologies they adopted, the impact of social media usage on various aspects of the emotional climate inside companies and the impact of social media on vertical and horizontal communication inside companies, as well as questions about the companies and the respondents. Of the 1,060 respondents, 544 said that their companies had adopted social media. The results of this study should be widely generalizable and are not likely to be biased by the focus on specific industry, geographical region or company size. Respondents came from a variety of industries: 16.3% worked in business and consumer services, 14.2% in financial services, 13.4% worked in the technology sector, 9.3% worked in consumer goods, 6.9% worked in telecommunications and 5% in the automotive sector. The remaining respondents worked in other industries. The respondents’ companies operated all over the world, with 79% operating in Europe, 53% in Asia-Pacific, 51.6% in North America, 39.2% in the Middle East and Africa and 35.7% in South American and Central America. Of our respondents, 39.1% worked for companies with revenues under $100 million, 17.8% worked for companies with revenues between $100 million and $1 billion, while 33.2% worked for companies with revenues of over $1 billion. (Some respondents did not answer this question.) More than half the respondents were senior executives: 19.4% were owners/partners, 17.4% held the title of CEO/president or managing director; 16.5% held the title of senior vice president, vice president or director.

other emotional benefits as manipulative. Social media can help build authenticity when messages and actions of an organization’s leaders in the “virtual” world are, first and foremost, aligned with their messages and actions in the “physical” world. When this alignment is absent, authenticity is quickly destroyed. For example, employees greeted with cynicism the Tekcompany senior executives’ blog posts and podcasts about the importance of community spirit, because the same FALL 2012 MIT SLOAN MANAGEMENT REVIEW 75

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executives had previously engaged in a massive restructuring that involved layoffs. Neither did the employees believe executives’ statements about how social media usage would flatten their organization and improve cross-unit communications. Employees perceived the lack of leaders’ authenticity as they noted that, despite these statements, Tekcompany had been very slow in changing its heavy command-and-control structure. By contrast, Fenne’s messages delivered through social media were consistent with his other actions. He inherited a system with a very high power distance between the headquarters in Copenhagen, Denmark and the rest of the organization. Distributors — in other words, individuals operating distribution warehouses — and sales consultants were almost never invited to headquarters. Moreover, despite the fact that distributors played a critical role in Tupperware’s value chain and made significant personal investments in operating the warehouses, they felt underappreciated by headquarters.

To correct this imbalance, Fenne established personal relationships with many consultants and distributors by visiting all major centers of activity. He started to invite distributors to Tupperware’s headquarters on a regular basis and literally rolled out a long red carpet in front of them. Many of his colleagues were shocked by this treatment in the low-key and egalitarian Scandinavian business culture. Yet, precisely because this symbolic gesture was so unusual in that local business context, distributors noticed it, greatly appreciated it and discussed it extensively in their physical and virtual conversations. To reinforce the feeling of direct connection between consultants and headquarters and to maintain personal ties established through his trips, Fenne repeatedly communicated through podcasts, emails and blogs that the company valued the consultants’ and distributors’ contributions. Because these messages were confirmed by his behavior in the physical world (such as personal

WHAT OUR SURVEY FOUND The role of social media in building emotional capital became apparent to us after we conducted a worldwide survey in which we asked 1,060 executives about their experiences with social media. We captured social media’s impact on authenticity in the respondents’ companies by asking whether adoption of social media helped employees perceive that their organizations communicated and acted honestly and transparently. We measured social media’s impact on pride by asking whether social media initiatives helped employees perceive that their companies recognized and valued individual abilities and contributions. We captured social media’s impact on attachment by asking whether it helped employees experience meaningful purpose and passion about their work. Finally, we measured social media’s impact on fun by asking whether these initiatives made employees enjoy experimenting with new ways of working and made them feel safe in doing so. We constructed our measure of emotional capital (EC) as the mean of the executives’ responses to questions about the consequences of social media usage for various aspects of their companies’ emotional climate. We coded responses “Decreased a lot” as -2, “Decreased” as -1, “Did not change” as 0, “Increased” as 1 and “Increased a lot” as 2. Companies with EC equal to or below the sam76 MIT SLOAN MANAGEMENT REVIEW FALL 2012

ple mean were considered as companies in which social media did not increase emotional capital, while companies with EC above the sample mean were considered as companies where social media increased emotional capital. Executives whose social media initiatives had increased emotional capital for their company reported that social media made it easier to communicate both across hierarchical levels (vertical communication) and functional units (horizontal communication). However, companies where social media had not increased emotional capital found that social media had little impact on the ease of communication in the company and in some cases even aggravated existing problems. The ease of vertical communication was assessed by asking the respondents how their companies’ use of social media changed the flow of information between different hierarchical levels, while the ease of horizontal communication was measured by asking how the companies’ use of social media had changed communication between business units. Different social media tools, such as podcasts, wikis or social networking, were perceived to have different effects. If used reflexively, podcasts and wikis improved the ease of communication only marginally, and in some circumstances, social networking tools

actually diminished emotional capital. More specifically, when an organization deployed social media initiatives that did not increase its emotional capital, the inclusion of podcasting in these initiatives had only a small positive effect on the ease of communication. If an organization’s social media initiatives increased its emotional capital, podcasting made its internal communication easier. Implementation of wikis had a similar impact. If an organization rolled out social media initiatives that did not increase its emotional capital, then the inclusion of wikis in these initiatives had only a very modest positive effect on the ease of communication. However, if an organization’s social media initiatives increased its emotional capital, then its internal communication became about three times easier as a result of wikis’ usage. Our survey suggested that the usage of social networking tools, such as internal Facebook-type applications, could harm vertical and horizontal communication if used unreflectively. When an organization introduced social networking that did not increase emotional capital, ease of communication inside the company actually declined. Internal communication improved only when organizations introduced social media tools that increased emotional capital. SLOANREVIEW.MIT.EDU

When it became known that the employees were not communicating with the executives but with their assistants, cynicism about social media initiatives set in among employees and became difficult to reverse. visits and red-carpet receptions), consultants perceived Fenne to be an authentic leader and were willing to join social media communities that he created. Second, executives can develop authenticity by being honest in how they use social media. Many Tekcompany executives let their assistants work on their blog posts. Assistants were also in charge of reading employees’ responses as well as deciding the appropriate action steps. While executives considered this delegation to be efficient and probably acceptable for traditional communication, in this case it hurt the social media initiative’s authenticity. When it became known that the employees were not communicating with the executives but with their assistants, cynicism about social media initiatives set in among employees and became difficult to reverse. Fenne, on the other hand, personally read all communication sent to him by the consultants. To reduce the amount of time spent responding, he learned how to answer with “one-liners.” For example, when a consultant commented on Facebook about her successes, Fenne responded with “WOW, WE ARE SO PROUD OF YOU” and added the person’s name. These messages took little time to type, but made the consultants feel appreciated for their achievements. Moreover, the usage of their first names made the response feel personal and authentic, showing that Fenne truly cared. This is a far cry from the power distance between the consultants and the headquarters under his predecessors. When Fenne didn’t have time to respond to comments or messages generated as a result of his posts, he wrote on his Facebook page, “I cannot respond to all of you at this time, but please know that I read all of your e-mails and I am incredibly proud of your achievements.” Because his prior actions showed his authenticity, consultants believed that he indeed did read all of their messages. Ultimately, SLOANREVIEW.MIT.EDU

when the executive is honest about his or her availability to communicate through social media and does that communication himself or herself, employees will accept the fact that they cannot receive personalized responses all the time. Third, executives can project authenticity by displaying a single and consistent identity for both personal and professional communication. When executives maintain separate personal and private profiles, members of their social media communities at work develop doubts about the executives’ “true selves,” have lower trust and relate to executives less easily.2 Fenne, for example, has a single account on Facebook that is accessible to his family as well as to the consultants and distributors. According to Fenne himself, “social media is the extension of who I am. What I say and do has to be the real thing. On Facebook, which is the main platform for communicating with consultants, I am Stein Ove, the private person, I am not Tupperware. I have my family there; I also have my private inspirations, thoughts and pictures. This builds authenticity and helps consultants feel that the person they see on Facebook is real.” Pride Pride is a feeling experienced when one’s com-

petence and achievements are recognized and appreciated, and this helps motivate people to continue achieving in the future. Financial compensation and promotions are clearly important, but peer praise and appreciation are also powerful motivators. Ironically, offering financial or promotion benefits for employee engagement in social media initiatives can backfire. When Tekcompany executives made employees’ contributions to internal wikis for knowledge sharing a part of their performance appraisals, many employees interpreted this as a coercive measure and posted entries of questionable quality, just to satisfy the directive. By contrast, Tupperware culture emphasizes exFALL 2012 MIT SLOAN MANAGEMENT REVIEW 77

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plicitly appreciating people for their efforts. One of the team leaders we interviewed told us, “A lot of consultants are not usually the persons getting the most acknowledgements for what they do in their main job. So just acknowledging when they’ve done something good is very important.” To recognize top performers with gifts and prizes, Tupperware organizes “moments of pride” during annual celebrations called Jubilees. These are costly events that involve transporting a large group of salespeople to a remote physical location (usually an attractive resort) and providing pleasant accommodations as well as entertainment, culminating in the award ceremonies. Fenne recognized that social media could provide Tupperware with a relatively inexpensive platform for generating nonmonetary rewards for a larger number of sales consultants. To produce these “moments of pride” more frequently, he started using social media to create “Tupperware radio shows.” Running such a show involved organizing webcasts from his office, where he and his staff played the role of talk show hosts. Consultants’ teams from Norway, Denmark, Estonia, Finland, Latvia, Lithuania, Sweden and Norway connected and observed what was going on in headquarters through WebTV and posted their live comments on a Facebook-type “wall” seen by all participants. During the show, Fenne called on every sales team, publicly asked them to report their results and thanked them for their achievements. All of the other teams cheered their colleagues’ performance by writing on the wall (for example, “Go Sweden” or “Go Girls”), allowing the achievers to experience public pride. The cost of running these shows mainly amounted to charges for telecommunications bandwidth, but the business returns were spectacular: In the days following the shows, revenue increased. While Tupperware web radio shows provided psychic rewards to top performers, they

also generated subtle peer pressure on underachievers. The latter observed how the other individuals met their performance goals and seemed to increase their efforts to achieve their own goals. The “one-liner” responses to the consultants’ posts on Facebook represented another way to make employees feel proud about their work. Fenne also developed an even less time-consuming strategy to make consultants feel proud about their accomplishments: clicking the “Like” button next to the specific consultant’s Facebook posts that he wanted to single out. “Liking” and “commenting” are two inexpensive symbolic responses to which he allocated a maximum of 15 minutes per day, yet they provided substantial returns in terms of sales consultants’ increased motivation to excel in their work. Attachment Employees’ attachment to the company is generated when employees feel that they belong to a community with shared values and interests. Some of these values are directly related to work, while others go beyond direct work-related interactions. Contrary to common belief in the pre-social media world, social media users often do not consider time spent on non-work-related discussions within social communities as wasted from a professional standpoint. When employees identify common non-work-related interests among each other and forge informal bonds, they will eventually start discussing work-related matters even outside of formal work hours, thickening the information exchange throughout the organization as well as increasing traffic in the company’s social media communities. Tekcompany’s social media tools created a platform in which individuals interested in technology could collaborate. For example, its social networking application allowed employees to identify other people who could write in the same programming

Fenne developed an even less time-consuming strategy to make consultants feel proud about their accomplishments: clicking the “Like” button next to the specific consultant’s Facebook posts. 78 MIT SLOAN MANAGEMENT REVIEW FALL 2012

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languages. Tekcompany stayed away from Facebook in order to avoid unauthorized information leakage, yet it did not develop the kind of Facebook-type features that would have allowed employees to share information about their personal values and interests that were not directly work-related (such as traveling, child development or music). This reduced employees’ ability to identify peers with shared personal interests and hampered the role that social media could have played in the development of their attachment to the social community inside Tekcompany. Tupperware, on the other hand, explicitly uses social media to solidify the feeling of shared values and interests, regardless of whether these are workrelated. Tupperware defines its mission not as selling plastic kitchenware but “changing lives … one at a time.” Among other things, this means providing individuals with opportunities for personal development. To help sales consultants in their personal development, Fenne recorded short (3-5 minute) podcasts containing advice on how to lead effective sales forces or how to achieve success in one’s private life. These podcasts were sent as thank you gifts to top performers and conveyed that senior leadership cared about consultants’ personal development. Upon receipt of these podcasts, top performers often added their own comments about specific steps they took to garner praise from headquarters (such as unusual ways to organize parties, recruit consultants or other best practices) and then shared Fenne’s podcasts among each other. This transformed vertical messages from headquarters into a flurry of self-motivating and best-practice-sharing lateral exchanges among consultants themselves. These exchanges transcended national borders and increased the consultants’ feelings of attachment to Tupperware as a global community that helps them in personal development. Moreover, Fenne created a Tupperware Nordic page on Facebook to which consultants could link their personal pages that showcased their interests and personal values. For example, some consultants indicated that they enjoyed cooking, others enjoyed music, and still others enjoyed reading or writing blogs on social issues. When consultants visited the company’s Facebook page (or Fenne’s SLOANREVIEW.MIT.EDU

personal page), they could identify other consultants who shared the same nonwork interests and connect with them directly. Tupperware’s in-person meetings, such as Jubilees, then allowed these individuals to meet in person. As a result, Tupperware’s physical and virtual locations became a meeting place for people to identify like-minded individuals, making them feel more attached to the company as a whole.

When Tupperware consultants discovered particularly effective ways of demonstrating products, they produced best-practice videos and shared them.

Fun Fun is the fourth pillar of emotional capital.

It’s particularly important in an organization that wants to encourage innovation, as our research suggests that it tends to lead to feelings of interest and safety among employees. However, Tekcompany’s executives did not pay attention to this pillar of emotional capital in designing its social networking platform. Not one Tekcompany executive we interviewed told us that they wanted employees to use the company’s internal social networking platform to have fun. By contrast, Tupperware actively encourages its consultants to have fun. When consultants discover particularly effective ways of product demonstration, they produce best-practice videos. Sometimes these videos gently make fun of people; for example, one showed a competition among Danish men FALL 2012 MIT SLOAN MANAGEMENT REVIEW 79

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Fenne was not afraid of making fun of himself, despite his senior position. In some of the photos and videos shared by consultants in social media communities, he appeared dressed up either as a pink rabbit or as a waiter. who (somewhat clumsily) competed in cooking using Tupperware products. They are shared through social networking websites. Tupperware Nordic also created multiple amateur movies under the umbrella “Tupper Films.” Some of them contain highlights of Jubilees and parties, while others contained useful tips for product demonstration. This increased the speed with which innovations spread across various countries and regions. Funny elements in these videos attract viewers’ attention and show that humorous deviance from “normal” and “corporate” ways of getting things done is not only tolerated but encouraged. Moreover, Fenne was not afraid of making fun of himself, despite his senior position. In some of the photos and videos shared by consultants in social media communities, he appeared dressed up either as a pink rabbit or as a waiter catering at the reception held for the consultants. This reduced the power distance and improved the quality of vertical communication. It also made him more approachable and indicated that he was willing to take risks and experiment.

Build Community First Perhaps the biggest takeaway of our research is that internal social media success isn’t really about the software. Nor is it about the crowd. Although selforganization is a touted attraction of social media, our research suggests that the most successful employee communities tend to be actively managed by executives such as Fenne. Companies that lack such active community builders may be tempted to compensate by making extensive investments in technological platforms to create communities. Yet such actions create cold communities without heart and spirit. These communities may underutilize technological infrastructure, generate employee cynicism and reduce what little emotional capital was originally present.3 We suggest that companies should use the fol80 MIT SLOAN MANAGEMENT REVIEW FALL 2012

lowing roadmap when deploying social media internally: 1. Identify leaders who are authentic and who employees trust. 2. Help those people develop social media skills. 3. Ask them to build social media communities that emphasize authenticity, pride, attachment and fun. In short, build emotional capital. 4. Deploy social media tools sequentially. Start with wikis and podcasts, and roll out social networking only after enough emotional capital has been built. (Our survey found that ease of communication inside a company actually declined when an organization introduced social networking that did not increase emotional capital. Internal communication improved only when organizations introduced social media networking that increased emotional capital. See “What Our Survey Found,” p. 76.) 5. Expect instrumental benefits (such as improved information exchange, motivation, morale, reduced turnover) only after emotional capital has been developed in these communities. Obviously, actions that are appreciated as authentic and that help others experience pride, attachment or fun can be highly contextual and culturally dependent. Executives from different cultures should use locally appropriate means to develop these four pillars of emotional capital. Quy Huy is an associate professor of strategy at INSEAD, Singapore. Andrew Shipilov is an associate professor of strategy at INSEAD in Fontainebleau, France. Comment on this article at http://sloanreview.mit.edu/x/54112, or contact the authors at [email protected]

ACKNOWLEDGMENTS The authors wish to acknowledge the support of Annet Aris, Fares Boulos, David Champion, Soumitra Dutta and Peter Zemsky at different stages of this project. We are also grateful to the companies and individuals who participated in our survey and interviews. SLOANREVIEW.MIT.EDU

REFERENCES 1. We disguised this company’s identity to preserve confidentiality. 2. S. Harter, “Authenticity,” in “Handbook of Positive Psychology,” vol. 27, ed. C.R. Snyder and S.J. Lopez (New York: Oxford University Press, 2002), 382-394; C. Morgan and J.R. Averill, “True Feelings, the Self and Authenticity: A Psychosocial Perspective,” in “Social Perspectives on Emotion,” vol. 1, ed. D.D. Franks and V. Gecas (Greenwich, Connecticut: JAI Press, 1992), 95-124; and M. Salmela, “What Is Emotional Authenticity?,” Journal for the Theory of Social Behaviour 35, no. 3 (2005): 209-230. 3. Q.N. Huy, “How Middle Managers’ Group-Focus Emotions and Social Identities Influence Strategy Implementation,” Strategic Management Journal 32, no. 13 (2011): 1387-1410; and Q.N. Huy, “Emotional Balancing of Organizational Continuity and Radical Change: The Contribution of Middle Managers,” Administrative Science Quarterly 47 (March 2002): 31-69. i. See, for example, L. Gratton and S. Ghoshal, “Managing Personal Human Capital: New Ethos for the ‘Volunteer’ Employee,” European Management Journal 21, no. 1 (February 2003): 1-10; D. Reay, “A Useful Extension of Bourdieu’s Conceptual Framework? Emotional Capital as a Way of Understanding Mothers’ Involvement in Their Children’s Education?,” Sociological Review 48, no. 4 (November 2000): 568-585; K. Thomson, “Emotional Capital: Maximising the Intangible Assets at the Heart of Brand and Business Success” (Oxford, UK: Capstone Publishing, 1998); and B. Gendron, “Why Emotional Capital Matters in Education and in Labour? Toward an Optimal Exploitation of Human Capital and Knowledge Management,” Cahiers de la Maison des Sciences Economiques r04113, Université Panthéon-Sorbonne, Paris, France, 2004, http://econpapers.repec.org. ii. Social capital has been the subject of a well-established line of research in the sociology and management literature at least since James Coleman’s 1988 article on this topic. It is defined as the goodwill available to individuals and collectives. Its source lies in the social relations in the possession of some actors (such as senior executives in an organization). Social capital is traditionally thought of as having three dimensions: (1) structural (for example, network ties and configurations), (2) cognitive (for example, shared language and narratives), and (3) relational (for example, trust, norms, obligations and expectations). We see the goodwill towards individuals and collectives, whose source lies in experiencing positive emotions, as a fourth dimension of social capital. See J.S. Coleman, “Social Capital in the Creation of Human Capital,” in “Organizations and Institutions: Sociological and Economic Approaches to the Analysis of Social Structure,” supplement, American Journal of Sociology 94 (1988): S95-S120; and J. Nahapiet and S. Ghoshal, “Social Capital, Intellectual Capital and the Organizational Advantage,” Academy of Management Review 23, no. 2 (April 1998): 242-266. iii. Our prior research on emotional capability examines SLOANREVIEW.MIT.EDU

what we consider the four elements of emotional capital. According to Huy (1999), emotional capability is an organization’s abilities “to acknowledge, recognize, monitor, discriminate and attend to its members’ emotions and it is manifested in the organization’s ... routines related to feelings.” The key element of emotional capability is emotion-eliciting actions that mobilize resources for the achievement of organizational goals. A number of emotional management actions facilitate processes of organizational change and renewal, including the feeling of authenticity (trust), the feeling of fun (playfulness) and the feeling of attachment (belonging). Huy (2008) extended this model by evoking the feeling of pride as a means to increase employees’ receptivity to organizational change. The emotional capability view is largely consistent with and enhanced by growing research in positive psychology. See Q.N. Huy, “Emotional Capability, Emotional Intelligence and Radical Change,” Academy of Management Review 24, no. 2 (1999): 325-345; Q.N. Huy, “Cognitive and Emotional Foundations of Strategy Making: An Emotion-Based View of Strategic Renewal,” in “Strategy Process,” Advances in Strategic Management, vol. 222 (Greenwich, Connecticut: JAI Press, 2005), 3-37; Q.N. Huy, “How Contrasting Emotions Can Enhance Strategic Agility,” chap. 34 in “Research Companion to Emotion in Organizations,” ed. N.M. Ashkanasy and C.L. Cooper (Cheltenham, U.K.: Edward Elgar, 2008); B. Fredrickson, “The Role of Positive Emotions in Positive Psychology: The Broaden-and-Build Theory of Positive Emotions,” American Psychologist 56, no. 3 (March 2001): 218-226; and F. Luthans, J.B. Avey and J.L. Patera, “Positive Psychological Capital,” Academy of Management Learning & Education 7, no. 2 (June 2008): 209-221. Empirical research on emotional capability, using varying methods such as qualitative case studies as well as measurement of various emotional dynamics in largescale quantitative studies, has shown both the impact and generalizability of authenticity, pride, attachment and fun beyond the context of radical organizational change. Emotional capability can thus be conceived of as the actions by an organization’s leaders that evoke specific emotions — authenticity, pride, attachment and fun — that, in turn, comprise emotional capital. See J.E. Dutton, M.C. Worline, P.J. Frost and J. Lilius, “Explaining Compassion Organizing,” Administrative Science Quarterly 51, no. 1 (2006): 59-96; Q.N. Huy, “Emotional Balancing”; J. Lilius, M. Worline, J. Dutton, J. Kanov and S. Maitlis, “Understanding Compassion Capability,” Human Relations 64, no. 7 (2011): 873-899; A.E. Akgün, H. Keskin and J. Byrne, “The Moderating Role of Environmental Dynamisn Between Firm Capability and Performance,” Journal of Organizational Change Management 21, no. 2 (2008): 230-252; and A.E. Akgün, H. Keskin and J. Byrne, “Organizational Emotional Capability, Product and Process Innovation and Firm Performance: An Empirical Analysis,” Journal of Engineering and Technology Management 26, no. 3 (September 2009): 103-130. Reprint 54112. Copyright © Massachusetts Institute of Technology, 2012. All rights reserved. FALL 2012 MIT SLOAN MANAGEMENT REVIEW 81

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