4322 WEEK 5, LECTURE IV, Human Capital and Resource Management

Those that deliver forms of innovation that support or grow market share are labeled

“human capital,” and those that support them are called “human resources.”

Aggregate HTC (human, technical, conceptual) Skills –

the sum of all

job assignments – are the critical factors (people, processes, place-

design-structure) for Value Chains that comprise modern

organizations.

Human Capital and Resource Management (HCRM) –

recognizing,

attracting, developing and retaining “social capital (HTCs)” of

“people” associated with the modern organization.

Social networks allow for

leveraging of individual and partial or

complete aggregates of HTCs, or social capital.

o Social networks define the field or universe for knowledge

management within any modern organization and its area of

operations.

Humans leverage Technology, not technology leveraging humans.

People build the technologies to build the products, and

administrative processes are how we support and deliver our

technological processes that comprise the Value Chain for our

product or organization. People accomplish via social networks.

Outcomes (C)

New market share

More inelastic demand and prices

Attract and retain best available stakeholders

Inputs (A)

People (culture)

Admin Processes

Tech Processes

Place (structure)

Outputs (B)

New product (business)

New production method (business)

New means for supply (business)

New market (business, corporate)

New enterprise format (corporate)

A company’s value is not derived solely from

its physical assets. Rather, it is based on

knowledge, know how, and intellectual

assets, all embedded in people.

In the knowledge economy, wealth is

increasingly created by

effective management

of knowledge workers instead of by the

control of physical and financial assets.

Intellectual capital is a measure of the value

of

a firm’s intangible assets. It is the difference

between a firm’s market value and book value.

It includes these assets:

• Reputation.

• Employee loyalty and commitment.

• Customer relationships.

• Company values.

• Brand names.

• Experience and skills of employees.

Human capital includes

the individual capabilities,

knowledge, skills, and experience of the company’s

employees and managers.

Social capital includes

the network of relationships that

individuals have throughout the organization.

Knowledge management is critical to organizational

success. Knowledge includes:

1. Explicit knowledge. Codified, documented, easily reproduced,

and widely distributed.

2. Tacit knowledge. In the minds of employees, based on their

experiences and backgrounds.

Human Capital: Three Interdependent Activities

Attracting Human Capital

Hire for attitude, train for skill with an emphasis on:

1. General knowledge and experience (technical skills)

2. Inductive thinking skills (conceptual skills)

3. Social skills, values, beliefs, attitudes (human skills)

Recognize the geographical preferences of talent

Use algorithms for selection

Training and development must take place at all

levels of the organization.

1. Requires the active involvement of leaders at all

levels.

2. Includes mentoring and sponsoring lower-level

employees.

3. Emphasizes the need to monitor progress and track

development so knowledge can be shared.

Retaining Human Capital

Retention mechanisms must prevent the transfer of

valuable and sensitive information outside the

organization.

Help employees identify and associate with an

organization’s mission and values.

Provide a challenging work and a stimulating environment.

Offer financial and nonfinancial rewards and incentives.

• Money is not always the most important reason why people

take or leave jobs, but it does get the attention of most

people.

Social capital and networks:

• The friendships and working relationships

among talented individuals.

• It helps to tie knowledge workers to a given

firm.

• Interaction, sharing, and collaboration will

help develop firm specificities, with a higher

probability of retaining key knowledge

workers.

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Social network analysis involves

the pattern of

interactions among individuals and helps to diagnose

effective and ineffective patterns.

A. Who links to whom within the network or cluster?

B. Who communicates to whom and how effective is this

communication?

Social ties can link individuals so they can

[1] convey needed resources,

[2] exchange information and support, and

[3] develop trusting relationships to improve the groups’

effectiveness.

Social Network Analysis

Two types of Relationships

Closure Relationships

Bridging Relationships

Closure Relationships

The degree to which all

members of the social

network have

relationships with other

group members.

Bridging Relationships

Relationships in a social

network that connect

otherwise disconnected

people.

Example: Social Network Analysis

Effective social networks provide advantages for

the firm AND for an individual’s career

advancement.

 Access to private information communicated in the

context of personal relationships.

 Access to diverse skill sets: Trading information or skills

with people whose experiences differ from your own.

 Access to power and Development of influence.

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Social Capital: Potential Downside

1. Groupthink.

2. Dysfunctional human resource practices.

3. Expensive socialization processes

(orientation, training).

4. Distortion or selective use of information to

favor preferred courses of action.

Sharing knowledge and information throughout

the organization (formal communications).

1. Conserves resources.

2. Develops products and services.

3. Creates new opportunities.

Technology can leverage human capital and

knowledge

[1] Within the organization, [2] With

customers and [3] With suppliers.

The Value Chain.

Codifying Knowledge for Competitive Advantage

Tacit knowledge

• Embedded in personal

experience.

• Shared only with the

consent and participation

of the individual.

• Has the organization

effectively used technology

to codify knowledge for

competitive advantage?

Codifying Knowledge for Competitive Advantage

Explicit (codified)

knowledge

• Can be documented.

• Can be widely distributed.

• Can be replicated.

• Can be reused many times

at very low (marginal, per

unit) cost.

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Intellectual property rights are more difficult to define

and protect than property rights for physical assets.

1. Intellectual property can be stolen.

2. If intellectual property rights are not reliably

protected by the state, there will be no incentive

to develop new products and services.

3. Intellectual property has significant development

costs and low marginal costs in production.

4. Effective protection is necessary before any

investor will provide financing.

Summary: Creating Value with Intellectual Assets

Human capital: Does the organization effectively attract,

develop, and retain talent?

Social capital: Does the organization exhibit professional and

personal relationships among employees?

Technology: Does the organization effectively use

technology to transfer best practices across the organization,

codify knowledge, and develop dynamic capabilities for

competitive advantage?

“Therefore, the more technological the world becomes, the more essential

will be the demand for individual freedom and the self-awareness of the

individual human being as a counterpoise to technology” (Speer, 1970).

Reflecting on Career Implications

Chapter 4 discusses the importance of intellectual assets and

students should consider the following variables or elelments

when choosing a Fortune 500 type firm for their employer. See

Human capital

• How your organization to effectively attract, develop, and retain talent.

• Diversity values of your organization.

Social capital

• Does your organization have a strong social capital?

• Are you actively building a strong social capital?

Technology

• Does your organization provide and effectively use technology?