1. Recognizing a Firm’s Intellectual Assets: Moving beyond a Firm’s Tangible Resources
Chapter Four
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
After reading this chapter, you should have a good understanding of:
LO1 Why the management of knowledge professionals and knowledge itself are so critical in today’s organizations.
LO2 The importance of recognizing the interdependence of attracting, developing and retaining human capital.
LO3 The key role of social capital in leveraging human capital within and across the firm.
LO4 The importance of social networks in knowledge management and in promoting career success.
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3. Learning Objectives (cont.)
LO5 The vital role of technology in leveraging knowledge and human capital.
LO6 Why “electronic” or “virtual” teams are critical in combining and leveraging knowledge in organizations and how they can be made more effective.
LO7 The challenge of protecting intellectual property and the importance of a firm’s dynamic capabilities.
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4. The Central Role of Knowledge in Today’s Economy
Knowledge economy
wealth is increasingly created by effective management of knowledge workers instead of by the efficient control of physical and financial assets.
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5. The Central Role of Knowledge in Today’s Economy
Intellectual capital
the difference between a firm’s market value and book value
a measure of the value of a firm’s intangible assets
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6. The Central Role of Knowledge in Today’s Economy
Intellectual capital (cont.)
reputation, employee loyalty and commitment, customer relationships, company values, brand names, and the experience and skills of employees
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7. Ratio of Market Value to Book Value for Selected Companies
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8. The Central Role of Knowledge in Today’s 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
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9. The Central Role of Knowledge in Today’s Economy (cont.)
Explicit knowledge
Tacit knowledge
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10. Knowledge Explicit knowledge Tacit knowledge
knowledge that is codified, documented, easily reproduced, and widely distributed.
Tacit knowledge
knowledge that is in the minds of employees and is based on their experiences and backgrounds.
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11. QUESTION
Recently, a knowledge worker's loyalty to his or her employing firm has __________ compared to his or her loyalty to his profession and colleagues.  A. Increased B. Decreased C. Remained the same D. No correlation when
B - decreased
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12. Human Capital: The Foundation of Intellectual Capital
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13. Attracting Human Capital
Hire for attitude, train for skill
Emphasis on
General knowledge and experience
Social skills
Values
Beliefs
Attitudes
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14. Attracting Human Capital
Sound recruiting approaches
Scanning pools of available candidates
Challenge becomes having the right job candidates, not the greatest number of them
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15. Attracting Human Capital
Networking
Current employees may be best source of new ones
Incentives for referrals
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16. Example The top 5 MBA Employers in 2007, according to Fortune Magazine
Google
McKinsey & Company
Goldman & Sachs
Bain & Company
Boston Consulting Group
Source:
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17. Developing Human Capital
Train and develop at all levels
Encouraging widespread involvement
Transferring knowledge
Monitor progress and track development
Evaluate human capital
Train and develop at all levels
Training is not the sole responsibility of the human resource department
Encouraging widespread involvement
Transferring knowledge
Monitor progress and track development
Evaluate human capital
Employees 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
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18. Best Practices to Recruit and Retain Young Talent
Don’t fudge the sales pitch
Let them have a life
No time clocks, please
Give them responsibility
Feedback and more feedback
Giving back matters
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19. How to Get Hired It helps to know someone
Play up volunteer work on your resume
Unleash your inner storyteller
No lone rangers need apply
Be open to learning new things
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20. Retaining Human Capital
Identify with organization’s mission and values
People who identify with and are more committed to the core mission and values of the organization are less likely to stray or bolt to the competition.
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21. Retaining Human Capital
Challenging work and a stimulating environment
opportunities that lower barriers to an employee’s mobility within a company
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22. Retaining Human Capital
Financial and Non-financial Rewards and Incentives
Rewards 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
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23. How Diversity Benefits the Organization
Cost
Resource acquisition
Marketing
Creativity
Problem-solving
System flexibility
• Cost Argument. As organizations become more diverse, firms effective in managing
diversity will have a cost advantage over those that are not.
• Resource Acquisition Argument. Firms with excellent reputations as prospective
employers for women and ethnic minorities will have an advantage in the competition
for top talent. As labor pools shrink and change in composition, such advantages will
become even more important.
• Marketing Argument. For multinational firms, the insight and cultural sensitivity
that members with roots in other countries bring to marketing efforts will be very
useful. A similar rationale applies to subpopulations within domestic operations.
• Creativity Argument. Less emphasis on conformity to norms of the past and a diversity
of perspectives will improve the level of creativity.
• Problem-Solving Argument. Heterogeniety in
decision-making and problem-solving groups
typically produces better decisions because
of a wider range of perspectives as well as
more thorough analysis. Jim Schiro, CEO of
PriceWaterhouseCoopers, explains, “When
you make a genuine commitment to diversity,
you bring a greater diversity of ideas,
approaches, and experiences and abilities that
can be applied to client problems. After all,
six people with different perspectives have a
better shot at solving complex problems than
sixty people who all think alike.” 60
• Organizational Flexibility Argument . With
effective programs to enhance workplace
diversity, systems become less determinant,
less standardized, and therefore more fluid.
Such fluidity should lead to greater flexibility
to react to environmental changes. Reactions
should be faster and less costly.
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24. The 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
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25. How Social Capital Helps Attract and Retain Talent
Hiring via personal (social) networks
Some 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
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26. Social Networks: Implications
Social network analysis
depicts the pattern of interactions among individuals and helps to diagnose effective and ineffective patterns
helps identify groups or clusters of individuals that comprise the network, individuals who link the clusters, and other network members.
helps diagnose communication patterns and communication effectiveness
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27. A Simplified Social Network
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28. Knowledge of Social Networks
Closure
the degree to which all members of a social network have relationships with other group members.
Bridging relationships
relationships in a social network that connect otherwise disconnected people.
Structural holes
structural holes
social gaps between groups in a social network where there are few relationships
bridging the groups.
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29. Knowledge of Social Networks
Social networks deliver three unique advantages:
Private information
Access to diverse skill sets
Power
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30. The Potential Downside of Social Capital
Groupthink
a tendency not to question shared beliefs
Tendency to develop dysfunctional human resource practices.
Can be expensive in terms of financial resources and managerial commitment
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31. Using Technology to Leverage Human Capital and Knowledge
Sharing knowledge and information
Conserves resources
Develops products and services
Creates new opportunities
Technology can leverage human capital and knowledge
Within the organization
With customers
With suppliers
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32. Electronic Teams: Using Technology to Enhance Collaboration
team of individuals that completes tasks primarily through communication.
Challenges However, there are challenges associated with making e-teams effective.
Successful action by both traditional teams and e-teams requires that:
• Members identify who among them can provide the most appropriate knowledge and
resources, and,
• E-team leaders and key members know how to combine individual contributions in
the most effective manner for a coordinated and appropriate response.
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33. Electronic Teams: Using Technology to Enhance Collaboration
Advantages of electronic teams
have the potential to acquire a broader range of “human capital”
can be very effective in generating “social capital”
Challenges However, there are challenges associated with making e-teams effective.
Successful action by both traditional teams and e-teams requires that:
• Members identify who among them can provide the most appropriate knowledge and
resources, and,
• E-team leaders and key members know how to combine individual contributions in
the most effective manner for a coordinated and appropriate response.
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34. Electronic Teams: Using Technology to Enhance Collaboration
Challenges of electronic teams
teams suffer processes loss because of low cohesion, low trust among members, a lack of appropriate norms or standard operating procedures, or a lack of shared understanding among team members about their tasks.
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35. Electronic Teams: Using Technology to Enhance Collaboration
Challenges of electronic teams (cont.)
members are more geographically dispersed, and become more susceptible to the risk factors that can create process loss
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36. Codifying Knowledge for Competitive Advantage
Tacit 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
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37. QUESTION
The use of information technology has increased in recent years in many organizations. This has helped to:  A. Communicate information efficiently B. Make more effective use of time in every situation C. Restrict social network growth D. Create smaller social networks
Answer: A - communicate information efficiently
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38. Protecting the Intellectual Assets of the Organization
Intellectual property rights are more difficult to define and protect than property rights for physical assets
If intellectual property rights are not reliably protected by the state, there will be no incentive to develop new products and services.
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39. Protecting the Intellectual Assets of the Organization
Dynamic capabilities
a firm’s capacity to build and protect a competitive advantage, which rests on knowledge, assets, competencies, complementary assets, and technologies.
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40. Protecting the Intellectual Assets of the Organization
Dynamic capabilities include the ability to sense and seize new opportunities, generate new knowledge, and reconfigure existing assets and capabilities.
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