The Swedish defender, who is a free agent at the end of the season, has yet to sign a new contract at The Hawthorns.
"The chairman needs to lock him in a room and hopefully get something sorted out," Foster said.
"If you take everything into account I'd much rather be playing with him and Gareth McAuley than the majority of defensive pairings.
"It's people like Jonas we need to be keeping. He is such an important part of our team."
Olsson has gone on to make over 140 appearances for the Baggies following his move from NEC Nijmegen in 2008.