SM

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
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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
14.4
Goodyear
Tire &
Rubber Co.
1.5
20.6
30.5
184.6
General
Motors
Corp.
1.5
2.2
3.3
4.6
Nucor (Steel)
5.4
32.5
177.0
33.7
Intel
7.9
41.4
327.4
25.3
Microsoft
12.4
6.5
80.7
10.9
Oracle
15.4
.9
13.9
.4
Ebay
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.
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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
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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
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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
COMPANY WHAT IT DOES DEFECTORS 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 service About 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
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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
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Source: Adapted
from G. G. Dess
and I. C Picken,
Beyond
Productivity (New
York: AMACON,
1999). pp. 63-64.