1. Chapter Four Recognizing a Firm’s Intellectual Assets: Moving Beyond a Firm’s Tangible Resources

2. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin After studying this chapter, you should have a good understanding of: Why the management of knowledge professionals and knowledge itself is 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 Why teams are critical in combining and leveraging knowledge in organizations and how they can be made more effective 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 How leveraging human capital is critical to strategy formulation at the business-, corporate-, international-, and Internet levels Learning Objectives TRANSPARENCY-33

3. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin Ratio of Market Value to Book Value for Selected Companies.83 3.6 3.0 14.4Goodyear Tire & Rubber Co. 1.520.6 30.5184.6 General Motors Corp. 1.5 2.2 3.3 4.6Nucor (Steel) 5.4 32.5177.033.7Intel 7.9 41.4327.4 25.3Microsoft 12.4 6.5 80.710.9Oracle 15.4.9 13.9.4Ebay Ratio of Market To Book Value Book Value ($billions) Market Value ($billions) Annual Sales ($billions) Company Exhibit 4.1 Note: The data on market valuations are as of November 5, 2001. All other financial data is based on the most recently available balance sheets and income statements. TRANSPARENCY-34

4. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin Human Capital: Three Interdependent Activities Attracting Human Capital Developing Human Capital Retaining Human Capital Exhibit 4.2 TRANSPARENCY-35

5. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin An Excerpt From GE’s 360-Degree Leadership Assessment Chart 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. Vision Customer/Quality Focus Integrity Accountability/Commitment Communication/Influence Shared Ownership/Boundary-less Team Builder/Empowerment Knowledge/Expertise/Intellect Initiative/Speed Global Mind-Set Source: Adapted from Slater, R. 1994. Get Better or Get Beaten. Burr Ridge, IL: Irwin Professional Publishing; 152-155. Exhibit 4.3 Note: This evaluation system consists of ten “characteristics” – Vision, Customer/Quality Focus, Integrity, and so on. For each of these characteristics there are four “performance criteria.” For illustrative purposes, the four performance criteria for “Vision” are included. TRANSPARENCY-36

6. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin Employee Benefits at Leading-Edge Firms Synovus Financial (Columbus, Georgia): Individual bricks will carry the names of more than 3,000 employees at Synovus’ newest $100 million facility. MBNA (Wilmington, Del.) This credit card issuer is proud of its beautiful; facilities with on-site day care, dry cleaning, shoe repair, and beauticians. When an employee’s child is born or if they adopt, MBNA contributes $2,500 toward his/her education. SAS Institute (Cary, N.C.): SAS offers a 35 hour week, child care for $250 a month, a free on-site medical clinic, and twelve holidays a year, plus a paid week off between Christmas and New Year’s. Janus (Denver, Colo.) The tile of the video this mutual fund manager gives to all new employees: This Ain’t NO Wall Street Joint. Things that set it apart: free Starbucks Coffee, an ultra-relaxed dress code (jeans and sneakers are okay), generous time-off provisions, and beautiful facilities with glorious view of the Rockies. Freddie Mac: (Mortgage giant – McLean, Virginia). Employees can visit the company’s web-based Concierge Club to book travel, get gift ideas, or make entertainment purchases. Sources: Branch, S. 1999. The 100 best companies to work for in America, Fortune, January 11:118-114; Bennett, S. 2000. Working Woman: September, 46. Exhibit 4.4 TRANSPARENCY-37

7. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin Microsoft Employees Who Have Left the Company for Other Businesses COMPANYWHAT IT DOESDEFECTORS FROM MICROSOFT Crossgain Builds software around XML computer language 23 of 60 employees ViAir Makes software for wireless providers Company declines to specify CheckSpace Builds online payment service for small businesses Company says ‘a good chunk’ of its 30 employees digiMine Sells data mining serviceAbout 15% of 62 employees, plus three founders Avogadro Builds wireless notification software Eight of 25 employees Tellme Networks Offers info like stock quotes and scores over the phone About 40 of 250 employees, another 40 from the former Netscape Source: Buckman, R. 2000. Tech defectors from Microsoft resettle together. Wall Street Journal, October 16: B6. Exhibit 4.5 TRANSPARENCY-38

8. CHAPTER 4 McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved. STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin Issues to Consider in Human Capital, Social Capital, and Technology in Creating Value HUMAN CAPITAL Recruiting “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? Enhancing Human Capital Through Employee Development Does the development and training process inculcate an “organization-wide” 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? Retaining 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 organizations’ 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 mass? Does an environment of caring and encouragement rather than competition enhance team performance? 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 email 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? Exhibit 4.6 TRANSPARENCY-39 Source: Adapted from G. G. Dess and I. C Picken, Beyond Productivity (New York: AMACON, 1999). pp. 63-64.