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

Recognizing a Firm’sIntellectual Assets:

Moving beyond a Firm’s TangibleResources

Chapter Four

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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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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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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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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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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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Ratio of Market Value to Book Value for Selected Companies

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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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The Central Role of Knowledge in Today’s Economy (cont.)

• Knowledge Explicit knowledge Tacit knowledge

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Knowledge

• Explicit 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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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. IncreasedB. DecreasedC. Remained the sameD. No correlation when

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Human Capital: The Foundation of Intellectual Capital

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Attracting Human Capital

• Hire for attitude, train for skill

• Emphasis on General knowledge and experience Social skills Values Beliefs Attitudes

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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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Attracting Human Capital

• Networking Current employees may

be best source of new ones

Incentives for referrals

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Example

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

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Developing Human Capital

• Train and develop at all levels

• Encouraging widespread involvement

• Transferring knowledge

• Monitor progress and track development

• Evaluate human capital

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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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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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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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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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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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How Diversity Benefits the Organization

• Cost

• Resource acquisition

• Marketing

• Creativity

• Problem-solving

• System flexibility

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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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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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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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A Simplified Social Network

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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

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Knowledge of Social Networks

Social networks deliver three unique advantages:

• Private information

• Access to diverse skill sets

• Power

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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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Using Technology to Leverage Human Capital and Knowledge

• Sharing knowledge and information Conserves resources Develops products and services Creates new opportunities

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Electronic Teams: Using Technology to Enhance Collaboration

• Electronic teams team of individuals that completes tasks

primarily through e-mail communication.

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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”

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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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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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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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QUESTION

The use of information technology has increased in recent years in many organizations. This has helped to: A. Communicate information efficientlyB. Make more effective use of time in every situationC. Restrict social network growthD. Create smaller social networks

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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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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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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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