MODULE IN

Strategic Management

4
EHM

SAMCIS

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 Applications Questions and Exercises
“You want your people to run 1. Reflecting on Career Implications
the business as if it were their
 Human Capital: Do you develop your talent? How do you enhance your human
own.” capital? Do you take advantage of opportunities (i.e. HR programs, available
-William Fulmer- STRAMA seminars/training, scholarships, etc) out there to enhance your human capital?
 Social Capital:
Part 1 - Do you build and develop your social capital? Are you actively working to build a
strong social network? How might you better leverage social capital toward pursuing your
career opportunities? To advance your career, strive to build a broad network that gives
COURSE LEARNING OUTCOMES you access to diverse information.
At the end of the module, you should
be able to: Part 2 - Discuss with a co-student or students the topic of developing relationships outside
1. Explain why the management of your sphere of influence. Ask how many of your classmates you know, and what value do
knowledge professionals and you place on your school ties. Friendships with classmates can be an enduring professional
knowledge itself are so critical in asset over the course of their careers.
today’s organizations
2. Describe the importance of Networks of friendships and working relationships may have long-lasting benefits. Important
recognizing the interdependence of relationships may be those that link between groups. It is important to develop relationships
within the organization, but it may be more important to develop interpersonal ties with
attracting, developing, and retaining
those outside it. Such relationships may give you access to information about the general
human capital
and industry environments, as well as employment opportunities.
3. Analyze the key role of social capital
in leveraging human capital within  Technology: Do you effectively use technology (e.g., groupware, knowledge
and across the firm management systems) to help you leverage your talents and expand your
4. Analyze the importance of social knowledge base?
networks in knowledge management
and in promoting career success You are probably very familiar with social networking websites. You may also more likely be
5. Apply the vital role of technology in a member of a professional networking websites. While these websites enable you to
leveraging knowledge and human illustrate the role of technology, the key is to go one step further and be aware of the
STRATEGIC MANAGEMENT capital differences between simple social networking systems and more sophisticated knowledge
6. Realize why “electronic” or “virtual” management systems.
are critical in combining and
2. Pfizer, a leading health care firm with $59 billion in revenues, is often rated as one of
leveraging knowledge in organization
Fortune’s “Most Admired Firms.” It is also considered an excellent place to work and
and how they can be made more
has generated high return to shareholders. Clearly, Pfizer values its human capital.
effective Using the Internet and/or library resources, identify some of the actions/strategies
7. Realize the challenge of protecting Pfizer has taken to attract, develop, and retain human capital. What are their
intellectual property and the implications?
importance of a firm’s dynamic
capabilities
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 for example, we saw how some firms are able to hire groups of individuals en masse who

“Pretend that every single person you

are part of social networks. Social relationships can also be very important in the effective
functioning of groups. We address social network theory and point out the relative
advantages of two key concepts—closure and brokering relationships. Finally, we
discussed some of the potential downsides of social capital. These include the expenses meet has a sign around his or her neck
that says, “Make me feel important.”
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.
-Mary Kay Ash-
The fourth section addressed the role of technology in leveraging human capital.
We discussed relatively simple means of using technology such as email 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 Module 4. Recognizing a Firm’s Intellectual Assets:
knowledge can be codified and reused at very low cost, as we provided in the examples Moving beyond a Firm’s Tangible Resources
of firms in the consulting, health care, and high technology industries. We discuss how
electronic teams can be effectively used.
Discussion Outline
The fifth section addresses key differences between the protection of physical
One of the key trends today is the emergence of the importance of the knowledge
property and intellectual property. The development of dynamic capabilities is clearly one
worker in today’s economy. It is critical for managers to not only recognize the importance
of the best ways to ensure that a firm can protect its intellectual property.
of top talent but also the need to leverage human capital in order to innovate and, in the
end, to develop products and services that create value.

This module is divided into four sections.

1. The first section focuses on the increasing role of knowledge as the primary
means of wealth generation in today’s economy. After all, in the New
Economy a firm’s value is based much more on knowledge—know-how, and
intellectual assets—than on the traditional factors of production (i.e., labor
and capital).

2. The second section addresses the key resource itself—human capital—the

foundation for the creation of intellectual capital. We explore ways in which
the organization can attract, develop, and retain human capital, as well as
the importance of recognizing the interdependence of these three activities.
We also address how the effectiveness of human capital can be increased
by redefining jobs and the value of a diverse work force.

3. Third, we discuss the critical role of social capital, that is, the network of
relationships among individuals. We address both social capital within
organizations as well as across organizations. We also discuss social
networks— and their implications for knowledge management and career
success.

4. The final section focuses on the role of technology in leveraging human

capital. This can range from such basic technologies as email to more
complex forms such as sophisticated knowledge management systems. We
also discuss how technology can play a key role in electronic teams (or e-

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 teams) and enhance the retention of knowledge in an organization. And, we B. Dynamic Capabilities
address the importance of protecting an organization’s intellectual assets.
Here, the roles of intellectual property and dynamic capabilities become Developing dynamic capabilities is the only avenue providing firms with the ability to
salient. reconfigure their knowledge and activities to achieve a sustainable competitive
advantage. Dynamic capabilities include the ability to challenge the conventional
I. The Central Role of Knowledge in Today’s Economy wisdom within a firm’s industry and market, learning and innovating, adapting to a
changing world, and adopting new ways to serve the evolving needs of the market.
We begin by providing some figures on how wealth is increasingly dependent on
knowledge-based assets in today’s economy. The examples of Microsoft’s and Apple’s VI. Summary
knowledge assets are given.
Firms throughout the industrial world are recognizing that the knowledge worker is
To provide some additional “quantitative support” for our arguments, we investigate the key to success in the marketplace. However, we also recognize that human capital,
the tremendous “gaps” between market value and book value—a difference that is although vital, is still only a necessary but not sufficient condition for creating value. We
considered by many to be an indicator of a firm’s “intellectual capital.” TABLE 1 shows the began the first section of the module by addressing the importance of human capital and
ratio of market-to-book value for a selected set of companies. 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
TABLE 1. Ratio of Market Value to Book Value for Selected Companies out that intellectual capital—the difference between a firm’s market share and its book
Company Annual Sales Market Book Value Ratio of Market value—has increased significantly over the past few decades. This is particularly true for
($ B) Value $ B $B to Book Value firms in knowledge-intensive industries, especially where there are relatively few tangible
Microsoft 85.3 486.8 72.0 6.8 assets such as software development.
Apple 215.6 627.0 128.3 4.9
Alphabet (parent of 75.0 564.9 120.3 4.7 The second section of the module addressed the attraction, development, and
Google) retention of human capital. We viewed these three activities as a “three-legged stool.”
Oracle 37.0 160.8 47.3 3.4 That is, it is difficult for firms to be successful if they ignore or are unsuccessful in any one of
Intel 55.4 174.0 61.1 2.8 these activities. Among the issues we discussed in attracting human capital were “hiring for
Nucor 16.4 19.3 7.4 2.6 attitude, training for skill” and the value of using social networks to attract human capital.
General Motors 152.4 57.2 39.9 1.4 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
 Discussion Question 1: What are the implications of TABLE 1 for today’s human capital, we discussed the need to encourage widespread involvement throughout
organizations? 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
We then define some of the basic concepts in this module: capital is the 360-degree evaluation system. Employees are evaluated by their superiors,
peers, direct reports, and even internal and external customers.
• Human capital is the “individual capabilities, knowledge, skills, and
experience of the company’s employees and managers.” Finally, some mechanisms for retaining human capital are employees’ identification
with the organization’s mission and values, providing challenging work and a stimulating
• Social capital can be defined as “the network of relationships that individuals environment, the importance of financial and nonfinancial rewards and incentives, and
have throughout the organization.” 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
• Knowledge comes in two different forms: explicit (easily documented, stored, to leave for money. With money as the primary motivator, there is little chance that
etc.) and tacit (in the minds of employees and shared only with their employees will develop firm-specific ties to keep them with the organization. We also
consent). address the value of a diverse workforce and two different types of diversity—inherent and
acquired.
It is important to point out that the creation of new knowledge involves the
continual interaction of explicit and tacit knowledge. We also emphasize the critical role of The third section of the module discussed the importance of social capital in
socially complex processes (leadership, trust, culture) in leveraging human capital. 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,
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 The SUPPLEMENT/EXTRA EXAMPLE below helps to reinforce the importance of top
The SUPPLEMENT/EXTRA EXAMPLE below provides some guidelines on making talent in today’s organizations and the need to retain that talent. It raises the concept of
knowledge management systems effective. Prior to discussing the supplement, you may “core competents,” an insightful contrast to the more commonly-known term, core
pose the following question: competence.

 Discussion Question 26: What are some guidelines on making knowledge  Extra Example: Winning in the Knowledge Economy—The Importance of Core
management systems effective? (It will be interesting to see what issues are brought Competents
up and how they compare and contrast with the supplement.)
Talented executives will always be in demand and will be able to attract substantial salary
 Extra Example: Making Knowledge Management Systems Effective and remuneration packages. In effect, corporate power will be concentrated in the hands
of the few. “What is critical in the firm of the future is not so much the core competencies
Persuading people to empty their brains into a knowledge management system isn’t as the core competents,” predicts Jonas Ridderstrale, a professor at the Stockholm School
easy. Fortune magazine asked some experts how to make it effective. Here are some of of Economics. “These walking monopolies will stay as long as the company can offer them
their perspectives: something that they want. When that is no longer the case, they will leave.”

1. Create heroes: Build a system that rewards those who share knowledge. Ridderstrale points to a growing array of supporting evidence. Bill Gates has reflected that
2. Follow through: Hire someone to manage and update the system. if 20 of Microsoft’s key people were to leave, the company would risk bankruptcy. In a
3. Don’t let it be in vain: Make sure employees get something out of it. study by the Corporate Leadership Council, a computer firm recognized 100 “core
4. Bring in the boss: Involve upper management to emphasize the system’s importance. competents” out of 16,000 employees; a software company had 10 out of 11,000; and a
5. Make it a no-brainer: Design a tool that is easy to use. transportation group deemed 20 of its 33,000 employees as really critical.
6. Focus on culture: Foster an environment where sharing information is in vogue.
Source: Crainer, S. & Dearlove, D. 1999. Death of executive talent. Management Review,
July–August: 22.
Source: Koudsi, S. 2001. Actually, it is like brain surgery. Fortune, March 20: 234.
 Discussion Question 2: What are the career planning implications for you (that is,
V. Protecting the Intellectual Assets of the Organization: Intellectual Property and how do you as a student see yourself becoming core competent)?
Dynamic Capabilities
The following SUPPLEMENT/ EXTRA EXAMPLE provides more insight into why human
The management of intellectual property involves capital is becoming more valuable in today’s knowledge economy.
• patents,
• contracts with confidentiality and noncompete clauses,
 Extra Example: The Growing Importance of Knowledge Workers in Today’s Economy
• copyrights, and,
• development of trademarks.
Intangible assets, primarily derived from human capital, have soared from 17 percent of
the S+P’s market value in 1975 to 84 percent in 2015, according to the advisory firm Ocean
A. Intellectual Property Rights
Tomo. Even a manufacturer like Stryker gets 70 percent of its value from intangibles (it
makes replacement knees, hips, and other joints loaded with intellectual capital).
The protection of intellectual rights raises unique issues, compared to physical
property rights. Much of the production of intellectual property is characterized by
As technology takes over more of the fact-based, rules-based, left-brain skills of knowledge
significant development costs and very low marginal costs. Indeed, it may take a
workers, employees who excel at human relationships are emerging as the new “it” men
substantial investment to develop a software program. However, once developed, its
and women. More and more major employers are recognizing they need workers who are
reproduction and distribution costs may be almost zero—especially if the Internet is used.
good at team building, collaboration, and cultural sensitivity, according to global
Effective protection of intellectual property is necessary before any investor will finance
forecasting firm Oxford Economics. Other research shows the most effective teams are not
such an undertaking.
those whose members boast the highest IQs, but rather those whose members are most
sensitive to the thoughts and feelings of others.
We discuss recent patent battles that Apple has been fighting against smartphone
makers running Android, Google’s mobile operating system.
Source: Colvin, G. 2015. Personal bests. Fortune, March 15: 106–110.

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 II. Human Capital: The Foundation of Intellectual Capital We also address how technology can play a key role in helping a firm develop a
knowledge-sharing network.
Organizations must recruit talented people—employees at all levels with the proper
set of skills and capabilities coupled with the right values. In this section, we address the B. Electronic Teams: Using Technology to Enhance Collaboration
hiring/selection, development, and retention processes. FIGURE 1 illustrates these
processes. We suggest the imagery of the three-legged stool. Technology has also enabled professionals to work as part of virtual teams to
enhance the speed and effectiveness with which products and services are developed.
For example, it helps to accelerate the design and testing of new software modules that
use the Windows-based framework as a central architecture.
Attracting
Human We discuss the two main ways in which electronic teams are different from
Capital traditional teams (geographical separation of team members; communication by
electronic communication channels such as faxes, email, etc.).
Two major advantages of electronic teams parallel the first two sections of this
module. First, it enables the firm to access a broader range of human capital (i.e., skills
necessary for complex assignments). Second, it’s effective in generating “social capital”
Developi the quality of relationships and the networks that leaders and members form.
Retaining
ng
Human
Human
Capital The two key challenges of making e-teams effective include: members must identify
Capital
with who among them can provide knowledge and resources; and leaders must be able
to know how to combine individual contributions.
FIGURE 1. Human Capital: Three Interdependent Activities
C. Codifying Knowledge for Competitive Advantage
 Discussion Question 3 Why do many firms devote more efforts to attracting human
capital than they do to developing or retaining talent? There are two different types of knowledge: tacit (embedded in personal
experience) and codified (knowledge that can be documented, widely distributed, and
STRATEGY SPOTLIGHT discusses the importance of a firm’s “green” or environmental easily replicated). A challenge of knowledge-intensive organizations is to capture and
sustainability strategy in attracting young talent. Ask: codify the knowledge and experience that, in effect, resides in the heads of their
employees.
 Discussion Question 4: How important is a firm’s “green strategy” in your job search?
We provide the example of Accenture (formerly Andersen Consulting), which has
The SUPPLEMENT/EXTRA EXAMPLE below presents the overall characteristics of the successfully codified the knowledge of its consultants by storing it in electronic depositories.
labor markets in the United States, Japan, and France. The author argues that today’s Thus, the knowledge can be employed in many jobs by a large number of consultants
college graduates would not remain unemployed for long because of the relative since there are strong similarities across assignments.
structural dynamism of American capitalism, that is, its extraordinary labor flexibility.
For such a system to work, training becomes very important. Using the knowledge
 Extra Example: Labor Flexibility in the U.S., Japan, and France management depository, newly hired Accenture consultants work through many scenarios
designed to improve business processes.
The World Bank Group ranks the United States as “first” in the world in “employing workers”
(that is, labor flexibility). What puts the U.S. on the top of the list? American companies  Discussion Question 25: Are there knowledge management systems with which you
have a lot of freedom to hire and fire, payroll taxes are relatively low by international are familiar? Are they effective? Why? Why not?
standards, and people are free to move to new jobs when the economy is better.
We then discuss the knowledge management system used by Access Health, a call-
In contrast, Japan ranks 40th. Lifetime tenure at many companies remains the norm, and it in medical center. Although it was very expensive to develop, the company’s paying
is difficult to get a job except immediately after leaving school. In France, which ranks customers—insurance companies and provider groups—save money because many
155th, many labor contracts severely limit hours and flexibility, high payroll taxes fund callers would have made expensive trips to the emergency room or the doctor’s office
workers’ benefits, and social policy makes layoffs very difficult. A strong economy needs had they not been diagnosed over the telephone.
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 resources and managerial commitment. Such expenses should be evaluated in terms of entrepreneurs to start companies and absorb new workers entering the labor market, and
anticipated benefits. such risk-takers do not appear in a vacuum: Such entrepreneurial activity flourishes
typically only in countries with business climates that are conducive to entrepreneurial
Fourth, individuals may use their contacts solely for personal gain. efforts.

IV. Using Technology to Leverage Human Capital and Knowledge Source: Vanderkam, L. 2010. Why recession won’t mean lost generation Dallas Morning
News. February 28: 5
Here, we discuss how technology can be used to leverage human capital and
knowledge in organizations, as well as beyond their boundaries to include customers and  Discussion Question 5: Do you agree with the idea that “higher labor flexibility eases
suppliers. We will address both simple and more complex applications of technology. We unemployment”?
also discuss the challenge of protecting a firm’s intellectual property and the importance
Discussion Question 6: From the perspective of this article, would employees or
of a firm’s dynamic capabilities.
employers in the U.S. be happy that it is first in the rankings? Why?
A. Using Networks to Share Information
A. Attracting Human Capital
Clearly, email is a very effective means of communicating a wide range of
information. It is quick, easy, and almost costless. It can, of course, become a problem if it is We begin by questioning the traditional “lock and key” approach to employee
used inappropriately, but it has its benefits. selection and emphasize the importance of employee mindsets, attitudes, and social skills.
(It is useful to reemphasize that in today’s knowledge economy, the leveraging of human
The following SUPPLEMENT/EXTRA EXAMPLE addresses some of the other challenges capital is critical—thus, such “soft skills” become more important.)
and limitations associated with the use of email.
The SUPPLEMENT/EXTRA EXAMPLE below describes how a company’s capacity to
 Extra Example: E-mail—Challenges and Limitations attract the best and brightest is enhanced by its reputation as a place that provides great
opportunities for growth and development. The “alumni” from such firms are highly sought
Some well-known problems associated with the use of e-mail include the distraction of after by other firms looking to fill senior executive positions and typically attract a premium
spam and stuffed in-boxes as well as the potential for legal liability. However, an additional price in the managerial labor market.
concern is misinterpreted messages, as well as the degree to which e-mail becomes a
substitute for the nuanced conversations that are critical in the workplace. Business has  Extra Example: Attracting Human Capital through Establishing a Reputation
undervalued the social dimension of communication,” says Daniel Goleman (of Emotional for Growth and Development
Intelligence “fame”), whose book, Social Intelligence, examines the science behind
interpersonal connections. Some companies have a strong reputation as breeding grounds for top notch managerial
talent. In addition to hiring very competent people, these firms nurture and develop them
Research suggest that the perils of e-mail are greater than many assume. Justin Kruger, of through leadership training and careful mentoring. A number of General Electric (GE)
New York University’s Stern School of Business, has found that as few as 50 percent of users “alumni” currently occupy CEO positions in other companies. Other leading firms such as
grasp the tone or intent of an e-mail. Further, most people vastly overestimate their ability PepsiCo and Procter & Gamble also have traditionally enjoyed similar reputations. In
to relay and comprehend messages accurately. Smiley faces and exclamation points add recent years, companies such as Cisco, Campbell Soup, and Google have also
another layer of confusion. Misinterpretation is highest, studies have found, when the e-mail established a reputation for their talented pool of managers.
comes from a boss.
The concentration of high-power talent, however, is not confined to North American firms.
Source: Brady, D. 2006., *!?@ the e-mail. Can we talk? BusinessWeek, December 4: 109. In a globalized economy, the search for talent is becoming truly global. For example, the
Indian software firm Infosys Technologies has been “discovered” as a company with a
Clearly, email can be a double-edged sword. It has its productivity-enhancing deep reservoir of managerial talent. This innovative firm runs a 334-acre training institute,
properties but also has its downs. Email can end up consuming organizational resources, even bigger than GE’s internationally known Crotonville (N.Y) education center. The
leading to miscommunications, and erode productivity. Sloppy use of email can also company allows its managers to spend a year at nongovernmental organizations to
provide embarrassment and damage to a career. broaden their leadership skills. N.R. Narayana Murthy, the company’s founder chairman
calls himself the company’s “chief mentor.” It comes as no surprise that headhunting firms

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 now see Infosys as prime hunting ground. As many as half a dozen Infosys executives are Bridging relationships, in contrast to closure, stresses the importance of ties
now in contention for CEO positions in other companies. connecting heterogeneous people. People who bridge relationships tend to receive
timely, diverse information because of their access to a wide range of heterogeneous
Source: McGregor, J. 2009. CEO breeding grounds: Looking beyond GE and P&G for information flows.
talent. Bloomberg Businessweek. April 11: 38.
Developing Social Capital: Overcoming Barriers to Collaboration. Collaboration, of
 Discussion Question 7: Mentoring and developing managers certainly make a course, doesn’t “just happen.” Effective collaboration involves overcoming four barriers:
company a very attractive employer. But do you think this could become a double- • The not-invented-here barrier
edged sword if a firm becomes the target for “poaching” by other firms? • The hoarding barrier
1. “Hire for Attitude, Train for Skill” • The search barrier
• The transfer barrier
This is a phrase that has become more predominant in today’s business
environment. This section addresses the means by which each of these barriers can be overcome.
These are the unification lever, the people lever, and the network lever.
The SUPPLEMENT/EXTRA EXAMPLE below should be very useful to students—it should  Discussion Question 24: In your experience in working in groups, which of these
“personalize” some of the discussion on the development and evaluation of human barriers did you find most often? What do you think was the cause? Was your group
capital. It summarizes the four qualities that Larry Bossidy (former CEO of Allied Signal) looks able to overcome it/them? If so, how were the problems resolved? Could the input
for when evaluating job candidates. You might consider asking yourself: in this section have helped your group? Why? Why not?
Implications for Career Success We close our discussion of social network analysis
 Discussion Question 8: Can these qualities be developed or are they typically
inherent in an individual (i.e., a nature/nurture argument)? If so, how can they be with a summary of the implications for career success. These are
developed and nurtured? • Private Information.
• Access to Diverse Skill Sets.
 Extra Example: Key Leadership Qualities for Future Leaders: Larry Bossidy • Power.
Below are the four key qualities that Larry Bossidy considers when evaluating job We also address three kinds of “network traps”: the wrong structure, the wrong
candidates: relationships, and the wrong behavior.
THE ABILITY TO EXECUTE: Ideas, analytical capacity, and education are important parts of a C. The Potential Downside of Social Capital
leader’s makeup. However, just as important is being able to implement those ideas. There
are people who are fulfilled by expressing big thoughts, but you will be better served by To provide balance to the discussion, it is useful to address some of the downsides of
hiring people with boundless energy who can execute the thoughts. social capital. There are primarily two issues:
A CAREER RUNWAY: Good leaders have plenty of runway left in their careers. I like to hire First, when people identify strongly with a group they sometimes support ideas that
someone for this job and also the next job, never for the person’s final position. People with are suboptimal or simply wrong. If there are strong social pressures (such as “groupthink”),
perspective on their jobs give me an indication that they have not only the interest but also people may be hesitant to challenge each other with tough questioning. This prevents
the ability to go further. them from engaging in “creative abrasion”—a termed coined by Harvard’s Dorothy
Leonard-Barton—a key means to innovative activity.
A TEAM ORIENTATION: If someone is able to work through and with other people, he’s got
better potential then if he is essentially an individual contributor. Second, if there are deep-rooted mindsets, dysfunctional human resource practices
may develop. For example, the hiring of like-minded people may heighten inertia and
MULTIPLE EXPERIENCES: I’ve learned to consider carefully the dynamics of a candidate’s erode innovation.
past work experiences. People who come from quasi-monopolistic areas often have great
difficulty moving into more competitive environments. You have to understand the Third, the socialization process whereby individuals are socialized in the norms and
environment from which you’re hiring; some kinds of companies are better than others at values of an organization can be potentially expensive—both in terms of financial
developing leaders. To make sure our future leaders have the right experience, I look for
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 “combine and leverage resources” or “create unique bundles”—not just the output from candidates who have operated real Profit & Loss units in two or three different industries or
one’s individual efforts. companies. That’s how great leaders are grown.

Social network analysis depicts the pattern of interactions among individuals and Source: Bossidy, L. 2001. The job of the CEO. Harvard Business Review, 79 (3): 47–49.
helps to diagnose effective and ineffective patterns. Group members’ ties within and
outside the group affects the extent to which members connect to individuals who 2. Sound Recruiting Approaches and Networking
• convey needed resources,
• have the opportunity to exchange information and support, We address the recruiting challenges of Google (advise to watch the movie
• have the motivation to treat each other in positive ways, and, ‘Internship’). Clearly, firms go to great lengths to hire the “best and brightest” in their
• have time to develop trusting relationships that might improve the groups’ industry.
effectiveness.
Many companies have found out that their most effective recruiting efforts start
FIGURE 2 is a simplified network analysis that should provide students’ with a grasp of closest to home—referrals from their own employees. Some companies in the USA provide
key concepts. It depicts informal relationships among individuals that involve bonuses to employees who refer individuals who are eventually hired.
communication flows, personal support, and advice networks. The FIGURE 2 serves to
illustrate two salient social network concepts: closure and bridging relationships (in addition  Discussion Question 9: What are the advantages of such incentive programs to
to “isolates”—those individuals who are not connected to anyone). There is a key tradeoff provide referrals? Are they done at companies with which you are familiar? Should
between closure and bridging relationships. With closure there is more trust and they be implemented?
cohesiveness—which can enhance implementation of ideas. And, with bridging
relationships, there is greater variety of perspectives but less cohesiveness may impair 3. Attracting Millennials
implementation efforts. Research has found that individuals who bridge structural holes are
consistently more successful than individuals who are central to a specific network. Thus, itt Some companies take pains to attract “Generation Y” or “Echo Boom” employees.
it is very worthwhile to spend time developing networks of diverse groups and individuals. These include people born after 1982. Many Y-Generation readers will be pleased to know
This, of course, involves more efforts and initiative—and perhaps discomfort!—than being of the “attention” and “adulation” their getting from the recruiters.
central to a single network because in the latter case people tend to have similar
experiences and viewpoints. An alternate perspective as described in the SUPPLEMENT/EXTRA EXAMPLE below
seems interesting—in a 2007 article from Fortune magazine—presents a far less flattering
perspective of this age group.

 Extra Example: Generation Y—A Less Flattering Perspective . . .

Upon graduation, it turns out that a lot of Generation Yers hadn’t learned much about
struggle or sacrifice. As the first of them began to graduate from college in the late 1990s,
the average educational debt soared to $19,000 for new graduates, and many Yers went
to the only place they know they’d be safe: home. Lots haven’t left. A survey of college
graduates from 2000 to 2006 by Experience Inc. found that 58 percent of those polled had
moved home after school and that 32 percent stayed more than a year. Even among
those who’ve managed to stay away, Pew found that 73 percent of 18- to 25-year-olds
have received financial assistance from their parents in the past year, and 64 percent
FIGURE 2. Simplified Social Network Analysis have even gotten help with errands.

Closure involves a situation in which members have relationship ties to other Source: Hira, N.A. 2007. You raised them, now manage them. Fortune. May 28: 38–46.
members in a given network. Through closure, members develop a high level of trust and
solidarity. However, groups that become too closed can become insular and cut  Discussion Question 10: Do you think that Yers might have expectations that are
themselves off from the rest of the organization. unrealistic? If so, what has led to such expectations?

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 Discussion Question 11: What should potential employers do? (e.g., provide more We then address six areas in which a diverse workforce can improve an
“realistic” job previews?) organization’s effectiveness. These are:
The following SUPPLEMENT/EXTRA EXAMPLE helps us understand how Google attracts 1. Cost Argument
talent and human capital through financial and non-financial incentives. Google not only 2. Resource Acquisition Argument
offers benefits and rewards to its employees, but the unique “Google culture” is also a 3. Marketing Argument
huge attraction to potential employees, by transforming a traditional workspace into a fun, 4. Creativity Argument
feel-like-home, and flexible place to work. 5. Problem-Solving Argument
6. System Flexibility Argument
 Extra Example: What Makes Google so Great to Work For?  Discussion Question 23: Are you aware of organizations that have exemplary (or
ineffective) diversity programs? If so, what makes them successful (or unsuccessful)?
Google Inc., the research giant of our time, ranks first of the Best Companies to Work For by
Fortune Magazine in 2011 and has been in the top three ever since. So what makes Usually, there are two kinds of diversity, inherent (traits one was born with such as
Google such a great place to work? gender and ethnicity) and acquired (traits gained by experience such as understanding
cultural differences). Research has shown “two-dimensional” diversity unlocks innovation
Great workplace atmosphere and the unique “Google Culture” seem to set Google apart by creating an environment where “outside the box” ideas are heard and minorities form a
from over 440 companies competing for spots on this year’s ranking of the nation’s best critical mass.
employers. Google staff, or Googlers, are everything to the company as it commits to
encourage innovation. Googlers do not merely work but have a great time at work. III. The Vital Role of Social Capital
Extraordinary perks offered by Google to its employees help build a great workplace. The
headquarters, in Mountain View, CA, includes on site medical and dental facilities, oil Successful firms are well aware that the attraction, development, and retention of
change and bike repair, foosball, pool tables, volleyball courts, assorted video games, talent are necessary but not sufficient conditions for creating competitive advantages. In
pianos, ping pong tables, and gyms that offer yoga and dance classes, free washers and the knowledge economy, it is not the stock of resources that is important, but rather the
dryers, and free breakfast, lunch, and dinner on a daily basis at 11 gourmet restaurants. extent to which it is combined and leveraged. Thus, the development of “social capital”—
Googlers have access to training programs and receive tuition reimbursement while they friendships and working relationships among talented individuals, helps to tie knowledge
take a leave of absence to pursue higher education. As Google states in its own website, workers to a given firm.
“though Google has grown a lot since it opened in 1998, we still maintain a small company
feel.” This “small” company continues to not only roll out new and innovative products, but Another way to view these perspectives is drawn from the resource-based view of
also attract the best talent. the firm. Here, competitive advantages that are harder for competitors to duplicate are
those that are based on “unique bundles” of resources—which occurs when individuals are
Source: Anonymous. 2011. Best companies to work for 2011. www.finance.yahoo.com. actively collaborating and sharing knowledge.
January 20: np.
A. How Social Capital Helps to Attract and Retain Talent
 Discussion Question 12: Are you aware of other companies using non-financial
incentives to attract young talent in the industry? The importance of social ties among talented professionals is creating an important
challenge (and opportunity) for organizations today. The phrase: “Pied Piper Effect” has
Discussion Question 13: Are the costs paid by Google to keep its employees happy been coined to depict the phenomena in which teams or networks of people are leaving
too high? What does the company get in return? How much are happy employees’ one company for another. Thus, a trend is evolving to recruit job candidates at the crux of
worth? social networks in organizations, particularly if they are seen as having the potential to
bring with them a raft of colleagues.
Discussion Question 14: If this strategy works well for Google, why don’t more
companies implement it? B. Social Networks: Implications for Knowledge Management and Career Success
We included this section because we feel that it has very important implications for
business school graduates’ career success. Much of their education focuses on developing
“human capital,” i.e., their skills and competences. However, consistent with the resource-
based view of the firm, success in the business world depends on how well one can
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 employee, etc.) may come into play in explaining potential performance B. Developing Human Capital
differences?
Organizations must do more than merely hire top-level talent and expect the skills
The following SUPPLEMENT/EXTRA EXAMPLE provides some interesting figures on how and capabilities of those employees to remain current throughout their employment.
often Millennials (those roughly 18 to 34 years old) change jobs—and how some firms are Rather, training and development must take place.
adjusting to this trend.
The following SUPPLEMENT/EXTRA EXAMPLE provides some guidelines/suggestions for
 Extra Example: Millennials: Fast Job Changes: What Should Firms Do? enhancing one’s career success. Although these points are directed at women managers,
they should also apply to men. In addition, these issues may spur some lively discussion
Millennials, those roughly 18 to 34 years old, make up the largest share of the U.S. (such as how much risk one should take, work/life balance, and so on).
workforce, about 34 percent. This outnumbers Generational Xers and baby boomers, who
account for 32 percent and 31 percent, respectively, according to the Bureau of Labor  Extra Example: Three Suggestions for Enhanced Career Success
Statistics.
The following suggestions are drawn from Warren Ferrell, author of Why Men Earn More: The
Last year, the median job tenure for workers aged 20 to 25 was shorter than 16 months. For Startling Truth Behind the Pay Gap—and What Women Can Do About It (AMACOM,
those aged 25 to 34, it was three years—still far short of the 5.5-year median tenure for all January 2005).
workers aged 25 and older.
1. Sign up for a job with bottom-line responsibility.
Companies like International Business Machines Corp, Coca-Cola Co., and Visa Inc. Have
recently relaxed office dress codes and convened councils of millennial employees to Kathy Vrabeck, president of Activision Publishing, the video-game producer behind
weigh in on everything from marketing campaigns to workplace polices. Auditing firm Ernst Shrek 2 and the Tony Hawk series, believes that this is the advice she could give
& Young Global Ltd. and Dutch health-care and consumer-products company Philips NV anyone seeing to earn more money. She had an early glimpse of how this works
have begun programs designed to send employees overseas for stints of a few months, while at Eli Lilly, when she noticed that R&D was the driving function in
giving them global exposure and developing leadership skills. pharmaceuticals. At Activision, she’s responsible for game development—the
function on which the company’s success largely depends. According to Vrabeck,
Toby Murdock, CEO of Kapost, a Boulder, Colorado marketing-software firm, said he has “In any company, it’s the operating jobs, not the staff jobs, that generate revenue.
adopted a different approach: “Let’s be honest about that instead of trying to deny it.” He A company’s always willing to pay more for people who are willing to take on the
wants young workers to consider his company a career accelerator, rather than a parking responsibility of a line job and the risk it entails.
lot. That attitude has given Kapost a reputation as a career launchpad, Mr. Murdock said,
and helps the firm attract a stream of ambitious young candidates 2. Find a field that entails financial or emotional risk taking

Source: Gellman, L. 2015. Millennials: Keep them or let them go. Wall Street Journal. May 6: Most venture capitalists can expect to earn between $100,000 and $300,000 a year,
B1, B7. according to Salary.com. (Many, of course, earn far more!) Of course, if they bet
the farm on an online pet-food supplier, they also risk losing everything. Currency
D. Enhancing Human Capital: Redefining Jobs and Managing Diversity traders, real-estate speculators, and many sales executives all gamble that they can
use their drive and smarts to make a good living. If they’re right, they can clean up.
First, we discuss how some progressive firms are redefining the jobs of their experts If not, they have only themselves to blame. The market pays a premium for such
and transferring some of their tasks to lower-skilled people inside or outside their chutzpah.
companies—as well as outsourcing work that requires less scarce skills and is not as
strategically important. 3. Work more hours, more weeks, and more years

Second, we address diversity in today’s workforce today. This has become more Many may declare: “Enough! Americans already work more hours per year than the
vital due to demographic trends and the accelerating globalization of business. We rest of the planet!” So true. But if you are willing to be the alpha dog of wage slaves
address some of the emerging demographic trends that have created a more diverse in your industry, you can expect to be rewarded handsomely. The U.S. Bureau of
society. Labor Statistics (BLS) reports that the average person working 45 hours per week
earns 44 percent more than someone who works only 40 hours. Why? The willingness
to work more often leads to jobs that pay more per hour. At the upper reaches of a

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 corporation, this can be significant. Top CEOs generally command pay in the 7-digit
range—but they have also typically paid their dues with 15-hour days, six days a
week, for an average of 20 years. The road to higher pay is a toll road with no EZ-
Pass for the fast lane!
Source: Tischler, L. 2005. Bridging the (gender wage) gap. Fast Company, January: 85–87.
1. Encouraging Widespread Involvement
The development of human capital requires the active involvement of leaders at all
levels. We discuss the broad-based involvement at General Electric.
2. Mentoring
We believe that this is a very important topic to address. (To clarify the difference
between mentoring and sponsoring—they are not, of course, synonymous. In effect, a
mentor will talk with you and provide career guidance, but a sponsor will talk about you—
and “use up chips” for their protégé. We also provide insights form Intel’s approach to
mentoring.
The following SUPPLEMENT/EXTRA EXAMPLE provides some advice (perhaps, “tough
love!”) for Millennials on the subject of mentors.
 Extra Example: Millennials and Mentoring—A Caution
Millennial attitudes toward mentorship have left potential mentors feeling deeply jilted, says
Bentley University’s Adams. “One issue I’ve had with some of my mentees—all of whom are
Gen Y—is that understanding that interacting with a professional from another generation
requires them to change their behavior,” says Catherine Carlozzi, a speech and business
writer in Cedar Grove, N.J. “I had to teach one mentee that it is not acceptable to call in
the late evening with a routine question. I’ve had to explain to others that texting on your
smartphone in a situation that involves your seniors suggests you think you have more
important things to do,” she says. She’s adapted by using Facebook messaging, texting,
and Skype. “Sometimes it can be days and days before a mentee will answer an e-mail.
That annoys me.”
Source: Khidekel, M. 2013. The misery of mentoring millennials. Bloomberg Businessweek.
March 18–24: 67–69.
 Discussion Question 15: Do you agree with the above observation and suggestion?
Is it reasonably “representative” of millennial behavior? Why? Why not?
3. Monitoring Progress and Tracking Development
Whether a firm uses on-site formal training, off-site training (e.g., universities) or on-
the-job training, tracking individual progress—and sharing this knowledge with both the
employee and key managers—becomes essential.
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On the other hand, options are given to employees, not purchased. When the stock price
goes down, the options are repriced or, now that repricing has become less acceptable to
institutional investors, companies issue more options at the lower price, as Microsoft and
Amazon.com have done. The potential dilution to earnings is enormous, even if
accounting conventions do not yet fully capture the hit.
Additionally, as technology and venture capitalist William Gurley has observed, options
encourage a gambling mentality. Go for broke. If there’s a win, fine. If there’s disaster,
move on and try again. That is not the mentality of real ownership.
Source: Pfeffer, J. 2001. What’s wrong with management practices in the Silicon Valley? A
lot. MIT Sloan Management Review, 42 (3): 102.
Firms make efforts to increase retention through the offering of amenities and
flexibilities.
The SUPPLEMENT/EXTRA EXAMPLE below addresses why telecommuting remains
quite rare in both Japan and South Korea. This might be interesting to students because it
addresses how the usefulness and appropriateness of a business practice may vary across
countries.
 Extra Example: Telecommuting: Rare in Japan and South Korea
Japan and South Korea have some of the world’s most advanced broadband access.
However, few workers are able to take advantage of the technology by logging on from
home.
Why? Corporate culture in much of Asia remains deeply conservative and a high value is
placed on face time in the office. Despite superb Internet connections, many companies
discourage telecommuting and working remotely. Further, the Confucianism philosophy,
that plays a big role in parts of Asia, prizes group effort and consensus building over
individual initiative. Team members are more likely to stick around the office to get tasks
done instead of going it alone from home or during the commute.
Consider the start differences between packed commuter trains in Tokyo and Seoul and
those in the U.S. While American workers often aim to maximize their productivity by
tapping out emails on BlackBerrys or working on their laptops, Koreans and Japanese are
more likely to be using the latest digital devices to play videogames or send messages to
friends. The different approaches also crop up in the countries’ technology marketing: U.S.
cellular companies emphasize how their services can boost productivity, while Asian
companies stress the “fun factor.”
Source: Anonymous. 2007. Why telecommuting remains rare in Japan, South Korea. Wall
Street Journal. March 17–18: A5.
 Discussion Question 22: What are some of the implications for firm performance?
Would it vary by industry? What other “contingent factors” (e.g. type of work, age of
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 1. Identifying with an Organization’s Mission and Values

People who identify with and are more committed to the core mission and values of The following SUPPLEMENT/EXTRA EXAMPLE addresses how Procter & Gamble has
the organization are less likely to stray or bolt to the competition. We provide a perspective used a technology-based management system to monitor and track its talent.
by Apple’s Steve Jobs on values and commitment.
 Extra Example: How P&G Uses Technology to Monitor and Track Its Talent
We also mention the importance of the emerging trends to a “relationship first” set
of values—in contrast to a “task first” value—in the workplace. At P&G, people and positions are tracked via its technology-based talent management
system. It accommodates all the firm’s 135,000 employees. However, it is primarily used to
 Discussion Question 20: What are other examples of firms that have successfully track 13,500 middle- and upper-management employees. The system captures information
strengthened an employee’s identification with their firm’s mission and values? about:

2. Challenging Work and a Stimulating Environment * succession planning at the country, business category, and regional levels;
* career histories and capabilities, as well as education and community affiliations;
The motivation to work on something because it is interesting, exciting, or personally * top talent and their development needs; and,
challenging underlies the importance of intrinsic motivation. We provide a quotation from * achieving diversity objectives.
Arthur Schwawlow, the 1981 Nobel Prize winner in physics, on the intrinsic value of
challenging work which states, “The labor of love aspect is very important. The most It also makes in-house talent visible to business leaders, who no longer have to scour the
successful scientists often are not the most talented. But they are the ones impelled by company to find candidates by themselves. To keep the system relevant, P&G has
curiosity. They’ve got to know what the answer is.” instituted a global talent review. This is a process by which every country, every function,
and every business is assessed for its capacity to find, develop, deploy, engage, and retain
In addition, some leading-edge firms have kept highly mobile employees motivated skilled people, in light of specific performance objectives. For example, if the company has
and challenged by lowering the barriers to an employee’s mobility within a company. For stated diversity in hiring objectives, the review is used to audit diversity in hiring and
example, Shell Oil Company has recently created an “open sourcing model” for talent. promotions. Determinations made in these reviews are captured in a global automated
Monsanto has a similar program. talent development system and can be assessed by decision makers through their HR
managers.
3. Financial and Non-Financial Rewards and Incentives
Source: Ready, D.A. & Conger, J.A. 2007. Make your company a talent factory. Harvard
Clearly, financial rewards are a vital organizational control mechanism (as we will Business Review, 85 (6): 68–77.
also discuss later in Module 12). After all, top talent is a highly mobile asset, and such
individuals are likely to always be able to attract competing offers—even in relatively tight  Discussion Question 16: What are some of the benefits of P&G’s system for
labor markets. attracting, developing, and retaining talent?

The following SUPPLEMENT addresses an insightful perspective on the downsides of 4. Evaluating Human Capital
stock options as a retention vehicle for top talent. Before discussing, you may wish to ask:
The primary issue that this section addresses is the 360-degree evaluation system.
 Discussion Question 21: What are the advantages and disadvantages of using stock Such an evaluation approach is becoming more critical given the importance of
options to retain talent? collaboration and interdependence in today’s knowledge intensive organizations.
Traditional “top down” evaluation systems evaluate performance from a single perspective
 Extra Example: Some of the “Downsides” of Stock Options as a Retention Device and typically do not address the “softer” issues such as social skills, values, beliefs, and
attitudes.
Employee ownership is a great thing—it helps employees to think like owners. But options
are not the same as ownership. In real employee stock ownership, employees purchase TABLE 2 provides an excerpt from General Electric’s 360-degree evaluation system.
shares and thus have, to use the colloquial phrase, “skin in the game.” They are We also mention the perspective of Merck’s former chairman, Ray Gilmartin, on the
committed. importance for managers to both achieve results and demonstrate Merck’s core values.

TABLE 2. An Excerpt from General Electric’s 360- Degree Leadership Assessment Chart

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 Vision 3. Creating focus groups to identify effectiveness criteria measures.
• Has developed and communicated a clear, simple, customer-focused 4. Evaluating using a pre-post control group design.
vision/direction for the organization 5. Being careful what you measure and how it’s used.
• Forward thinking, stretches horizons, challenges imaginations 6. Train raters.
• Inspires, energizes others to commit to vision, captures minds, leads by example
• As appropriate, updates Vision to collect constant and accelerating change Source: Waldman, D. A., Atwater, L. E., & Antonioni, D. 1998. Has 360-degree feedback
affecting the business gone amok? Academy of Management Executive. 12(2): 86-94.
Customer/ Quality Focus
Integrity Despite its many advantages, the 360-degree feedback system has some limitations
Accountability/ Commitment as discussed in the above SUPPLEMENT. Think of situations where the application of this tool
Communication/ Influence could lead to dysfunctional consequences and explain why.
Shared Ownership/ Boundaryless
Team Builder/Empowerment C. Retaining Human Capital
Knowledge/ Expertise/ Intellect
Intuitive/ Speed We use the rather colorful imagery of “frogs in a wheelbarrow” to drive home the
Global Mind-set point that top talent may bolt at any time. Managers have the option of either forcing top
talent to stay with the organization via non-compete clauses, golden handcuffs, etc., or
The SUPPLEMENT/EXTRA EXAMPLE below addresses a few of the pitfalls, as well as providing the type of environment wherein top talent will desire to stay. (We recognize, of
suggestions for making 360-degree evaluation systems work. course, that employment contracts have their place—but should not be the primary
means of the retention of talent.)
Prior to reading the supplement below, ponder on the following questions first:
The boundary between work life and home life is rapidly disappearing for many
 Discussion Question 17: What are some of the pitfalls of 360-degree evaluation individuals. The following SUPPLEMENT/EXTRA EXAMPLE provides some interesting insights
systems? from research by sociologist Dalton Conley.
 Discussion Question 18: What steps should be taken to improve the chance of their  Extra Example: The Blurring Boundaries Between Work and Home
success when implemented?
One of the most interesting transformations taking place in the work place today is the
 Extra Example: Pitfalls and Suggestions for Making 360 Degree Systems Work rapid blurring of the boundaries between home and office. The following numbers, based
on a survey of large companies that employ more than 500 employees, tell an interesting
Some of the pitfalls of 360-degree evaluation systems are: story.
1. If a manager’s 360 ratings depend on creating a positive or even relaxed climate,  40 percent of large companies allow part-time telecommuting.
these factors may actually detract from work directly geared toward bottom line  16 percent of large companies offer child care centers, some even
results. subsidized by the company.
2. Organizations may embrace 360 feedback to convey an impression of openness and  3 percent of large companies allow employees to bring their pets to work.
participation to clients or recruits when, in fact, this is not part of the organization’s
culture. Source: Eaves, E. 2009. The Elsewhere man. Forbes. February 16: 22–24.
3. Imitating without clearly understanding what other firms have accomplished, or the
likely outcomes for one’s own firm, may be a questionable strategy.  Discussion Question 19: Do these numbers surprise you? Why do you think
4. Even when 360-degree feedback ratings are used strictly for developmental purposes, companies permit such flexibility, even in an environment where unemployment is
individuals will tend to modify behaviors in ways to receive more positive ratings. high?
Some recommendations on making 360 systems work include
1. Making consultants/internal champions accountable for results and customization.
2. Engaging in a pilot test initiative.
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