visit umt online at page 1 of 36 chapter 4, mgt 195 version 131509 © 2008 mcgraw-hill © 2009 umt...

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of 36Chapter 4, MGT 195

Version 131509

© 2008 McGraw-Hill © 2009 UMT

Business Policy and StrategyBusiness Policy and Strategy

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Version 131509


Chapter 4Chapter 4 Recognizing a Firm’s Intellectual Recognizing a Firm’s Intellectual Assets: Moving beyond a Firm’s Assets: Moving beyond a Firm’s

Tangible ResourcesTangible Resources

Dess, G.G, Lumpkin, G.T., & Eisner, A.B., Strategic Management: Creating

Competitive Advantages (4th ed.) © 2008 McGraw-Hill. ISBN 978-0-07-338121-3


Visit UMT online at www.umtweb.eduVersion 131509


Copyright WarningCopyright Warning

This presentation is the intellectual property of the textbook publisher McGraw-Hill 2008. Students are hereby advised that they may not copy or distribute this work to any third party




Learning ObjectivesLearning Objectives

After reading this chapter, you should have a good understanding of:

Why the management of knowledge professionals and knowledge itself are so critical in today’s organizations.The importance of recognizing the interdependence of attracting, developing and retaining human capital.The key role of social capital in leveraging human capital within and across the firm.The importance of social networks in knowledge management and in promoting career success.Why teams are critical in combining and leveraging knowledge in organizations and how they can be made more effective.




Learning ObjectivesLearning Objectives

After reading this chapter, you should have a good understanding of:

The vital role of technology in leveraging knowledge and human capital.

How technology can help to retain knowledge even when employees cannot be retained by the organization.

The challenge of protecting intellectual property and the importance of a firm’s dynamic capabilities.

How leveraging human capital is critical to strategy formulation at the business, corporate, international, and Internet levels.




Ratio of Market Value to Book Ratio of Market Value to Book Value Value

for Selected Companiesfor Selected Companies

Exhibit 4.1 Ratio of Market Value to Book Value for Selected Companies




The Central Role of Knowledge The Central Role of Knowledge in Today’s Economyin Today’s Economy

Creation of wealth in a knowledge economyEffective management of knowledge workers

Intellectual capital

Assets such as

Reputation

Employee loyalty and commitment

Customer relationships

Company values

Brand names

Experience and skills of employees




The Central Role of Knowledge The Central Role of Knowledge in Today’s Economyin Today’s Economy

How do companies create value in the knowledge-intensive economy?

Human capital (individual capabilities, knowledge, skills, and experience of the company’s employees and managers)

Social capital (the network of relationships that individuals have throughout the organization)

Knowledge

Explicit knowledge

Tacit knowledge

Intellectual capital = Market value of the firm – Book value of the firm




Human Capital: The Foundation Human Capital: The Foundation of Intellectual Capitalof Intellectual Capital

Exhibit 4.2 Human Capital: Three Interdependent Activities




QuestionQuestion

Do you agree with this statement, “hire for attitude, train for skill”? Explain.




Attracting Human CapitalAttracting Human Capital

Hire for attitude, train for skill

Emphasis onGeneral knowledge and experience

Social skills

Values

Beliefs

Attitudes




Attracting Human CapitalAttracting Human Capital

Sound recruiting approachesScanning pools of available candidates

Challenge becomes having the right job candidates, not the greatest number of them

NetworkingCurrent employees may be best source of new ones

Incentives for referrals




ExampleExample

The top 5 MBA Employers in 2007, according to Fortune Magazine

1. Google2. McKinsey & Company3. Goldman & Sachs4. Bain & Company5. Boston Consulting Group

Source: www.fortune.com




Developing Human CapitalDeveloping Human Capital

Train and develop at all levelsTraining is not the sole responsibility of the human resource department

Encouraging widespread involvement

Transferring knowledge

Monitor progress and track development

Evaluate human capitalEmployees must share knowledge and work together, collectively, to reach organizational goals

Firms often use 360-degree evaluation and feedback systems

Managers’ success cannot compromise the organization’s core values




360-Degree Leadership 360-Degree Leadership AssessmentAssessment

Per

form

ance

Cri

teri

a o

f “V

isio

n”

Has developed and communicated a clear, simple, customer-focused vision/direction for the organization.

Forward-thinking, stretches horizons, challenges imaginations.

Inspires and energizes others to commit to Vision. Captures minds. Leads by example.

As appropriate, updates Vision to reflect constant and accelerating change affecting the business

Ten Characteristics of LeadershipVisionCustomer/Quality FocusIntegrityAccountability/CommitmentCommunication/Influence

Shared Ownership/Boundary-lessTeam Builder/EmpowermentKnowledge/Expertise/IntellectInitiative/SpeedGlobal Mind-Set

Adapted from Exhibit 4.4 An Excerpt from General Electric’s 360-Degree Leadership Assessment ChartSource: Adapted from R. Slater, Get Better or Get Beaten (Burr Ridge, IL: Irwin Professional Publishing, 1994), pp. 152-155.




Retaining Human CapitalRetaining Human Capital

Provide mechanisms that prevent the transfer of valuable and sensitive information outside the organization

Identify with organization’s mission and values

Strong alliance to organization (strategic intents)

Challenging work and stimulating environment




Retaining Human CapitalRetaining Human Capital

Financial and Nonfinancial Rewards and IncentivesRewards are a vital organizational control mechanism

However, money may not be the most important reason why people take or leave jobs

Exodus of employees can erode a firm’s competitive advantage




Enhancing Human Capital:Enhancing Human Capital:How Diversity Benefits the How Diversity Benefits the

OrganizationOrganization

1. Cost argument

2. Resource acquisition argument

3. Marketing argument

4. Creativity argument

5. Problem-solving argument

6. System flexibility argument




The Vital Role of Social CapitalThe Vital Role of Social Capital

Attraction, development and retention of talent is a necessary but not sufficient condition for creating competitive advantage

Knowledge workers often are more loyal to their colleagues and profession than to their employer




How Social Capital Helps How Social Capital Helps Attract and Retain TalentAttract and Retain Talent

Hiring via personal (social) networksSome job candidates may bring other talent with them

Emigration of talent from an organization to form start-up ventures

Can provide mechanism for obtaining resources and information from outside the organization




Microsoft Employees Who Have Microsoft Employees Who Have Left the Company for Other Left the Company for Other

BusinessesBusinesses

Exhibit 4.6 Microsoft Employees Who Have Left the Company for Other BusinessesSource: Reprinted by permission of the Wall Street Journal, Copyright ©2000 Dow Jones & Company, Inc. All Rights Reserved Worldwide. License number 397221136576.




Knowledge of Social Networks Knowledge of Social Networks

Implications that an understanding of social networks has on one’s career

Closure

Bridging relationships

From an individual’s perspective, social networks deliver three unique advantages

Private information

Access to diverse skill sets

Power




The Potential Downside of Social The Potential Downside of Social CapitalCapital

Groupthink

Cost of financial resources

Managerial commitment




ExampleExample

Debunking myths about groupthink in the Old truths for the new economy from Business Week

Teams don't have to constantly work together to be effective.

Teams should not attempt to avoid conflict.

Team members are encouraged to work independently to achieve team goals.

Conflict is essential to prevent groupthink.

Source: Business Week, Old Truths for the New Economy, November 17, 2000




Using Technology to Leverage Using Technology to Leverage Human Capital and KnowledgeHuman Capital and Knowledge

Sharing knowledge and informationConserves resources

Develops products and services

Creates new opportunities

Technology can leverage human capital and knowledge

Within the organization

With customers

With suppliers





Using networks to share information and develop products and services

E-mail

Electronic or Virtual teams

Enhance speed and effectiveness with which products are developed

Can be applied to new business ventures





Codifying knowledge for competitive advantageTacit knowledge

Personal experience

Shared only with the consent and participation of the individual

Explicit (codified) knowledge

Can be documented

Can be widely distributed

Can be easily replicated

Can be reused many times at low cost




QuestionQuestion

Which of the following is NOT an advantage of e-teams?A) Facilitate communication.

B) They have the potential to acquire a broader range of

human capital.

C) They can be effective in generating social capital.

D) They are less flexible in responding to unanticipated

work challenges.




Creating Value Through Human Creating Value Through Human Capital, Social Capital, and Capital, Social Capital, and

TechnologyTechnology

Human Capital

Recruiting “Top-Notch” Human CapitalRecruiting “Top-Notch” Human Capital

•Does the organization assess attitude and “general make-up” instead of focusing primarily on skills and background in selecting employees at all levels?•How important is creativity and problem solving ability? Are they properly considered in hiring decisions?•Do people throughout the organization engage in effective networking activities to obtain a broad pool of worthy potential employees? Is the organization creative in such endeavors?

Adapted from Exhibit 4.8 Issues to Consider in Creating Value through Human Capital, Social Capital, and TechnologySource: Adapted from G. G. Dess and J. C. Picken, Beyond Productivity (New York: AMACON, 1999), pp. 63-64.






Human Capital

Enhancing Human Capital through Employee DevelopmentEnhancing Human Capital through Employee Development

•Does the development and training process inculcate an “organizationwide” perspective?•Is there widespread involvement—including top executives—in the preparation and delivery of training and development programs?•Is the development of human capital effectively tracked and monitored?•Are there effective programs for succession at all levels of the organization—especially the top-most levels?•Does the firm effectively evaluate its human capital? Is a 360-degree evaluation used? Why? Why not?•Are mechanisms in place to assure that a manager’s success does not come at the cost of compromising the organization’s core values?







Human Capital

Retaining the Best EmployeesRetaining the Best Employees

•Are there appropriate financial rewards to motivate employees at all levels?•Do people throughout the organization strongly identify with the organization’s mission?•Are employees provided a stimulating and challenging work environment that fosters professional growth?•Are valued amenities provided (e.g., flextime, child-care facilities, telecommuting) that are appropriate given the organization’s mission, strategy, and how work is accomplished?•Is the organization continually devising strategies and mechanisms to retain top performers?







Social Capital

•Are there positive personal and professional relationships among employees?•Is the organization benefiting (or being penalized) by hiring (or by voluntary turnover) en masse?•Does an environment of caring and encouragement rather than competition enhance team performance?•Do the social networks within the organization have the appropriate level of closure and bridging relationships?•Does the organization minimize the adverse effects of excessive social capital—such as excessive costs and “groupthink”?







Technology

•Does the organization effectively use technology to transfer best practices across the organization?•Does the organization use technology to leverage both human capital and knowledge both within the boundaries of the organization as well as among its suppliers and customers?•Has the organization used technologies such as e-mail and networks to develop products and services?•Has the organization effectively used technology to codify knowledge for competitive advantage?•Does the organization try to retain some of the knowledge of employees when they decide to leave the firm?




The Central Role of Leveraging The Central Role of Leveraging Human Capital in Strategy Human Capital in Strategy

FormulationFormulation

Leveraging human capital and business-level strategy (Chapter 5)

Sustainable over time

Integrate primary and support activities in the firm’s value chain

Leveraging human capital and corporate-level strategy (Chapter 6)

Manage businesses to create synergy

Create more value by working together across business units






Leveraging human capital and international-level strategy (Chapter 7)

Achieve economies of scale

Adapt to local market needs

Facilitate the flow of information and knowledge between business units in different countries






Leveraging human capital and entrepreneurial strategies (Chapter 8)

Create value through technology

Lower costs

Enhance customer service

Improve performance

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