 Strategic Management: Strategic Managment Gregory G. Dess,
University of Texas at Dallas
G.T. Lumpkin,
University of Illinois--Chicago
Recognizing a Firm’s Intellectual Assets: Moving Beyond a Firm’s Tangible Resources
Chapter Overview| Firms throughout the industrial world are recognizing that the knowledge worker is the key to success in the marketplace. However, we also recognize that human capital, although vital, is still only a necessary but not sufficient condition for creating value. We began the first section of the chapter by addressing the importance of human capital and how it can be attracted, developed, and retained. Then we discussed the role of social capital and technology in leveraging human capital for competitive success. We pointed out that intellectual capital—the difference between a firm’s market value and its book value—has increased significantly over the past few decades. This is particularly true for firms in knowledge-intensive industries, especially where there are relatively few tangible assets such as software development.
The second section of the chapter addressed the attraction, development, and retention of human capital. We viewed these three activities as a "three-legged stool"—that is, it is difficult for firms to be successful if they ignore or are unsuccessful in any one of these activities. Among the issues we discussed in attracting human capital were "hiring for attitude, training for skill" and the value of using social networks to attract human capital. In particular, it is important to attract employees who can collaborate with others given the importance of collective efforts such as teams and task forces. With regard to developing human capital, we discussed the need to encourage widespread involvement throughout the organization, monitor progress and track the development of human capital, and evaluate human capital. Among the issues that are widely practiced in evaluating human capital is the 360-degree evaluation system. Employees are evaluated by their superiors, peers, direct reports, and even internal and external customers. Finally, some mechanisms for retaining human capital are employees’ identification with the organization’s mission and values, providing challenging work and a stimulating environment, the importance of financial and nonfinancial rewards and incentives, and providing flexibility and amenities. A key issue here is that a firm should not overemphasize financial rewards. After all, if individuals join an organization for money, they also are likely to leave for money. With money as the primary motivator, there is little chance that employees will develop firm-specific ties to keep them with the organization.
The third section of the chapter discussed the importance of social capital in leveraging human capital. Social capital refers to the network of relationships that individuals have throughout the organization as well as with customers and suppliers. Such ties can be critical in obtaining both information and resources. With regard to recruiting, for example, we saw how some firms are able to hire en bloc groups of individuals who are part of social networks. Social relationships can also be very important in the effective functioning of groups. Finally, we discussed some of the potential downsides of social capital. These include the expenses that firms may bear when promoting social and working relationships among individuals as well as the potential for "groupthink," wherein individuals are reluctant to express divergent (or opposing) views on an issue because of social pressures to conform.
The fourth section addressed the role of technology in leveraging human capital. We discussed relatively simple means of using technology such as e-mail and networks where individuals can collaborate by way of personal computers. We also addressed more sophisticated uses of technology such as sophisticated management systems. Here knowledge can be codified and reused at very low cost, as we saw in the examples of firms in the consulting, health care, and high-technology industries. Also, given that there will still be some turnover—voluntary or involuntary—even in the most desirable places to work, technology can be a valuable means of retaining knowledge when individuals terminate their employment with a firm.
The final section addressed how the leveraging of human capital is critical in strategy formulation at all levels. This includes the business, corporate, international, and Internet levels. |
|
2002 A McGraw-Hill Online Learning Centre