B. Developing Human Capital
Organizations must do more than merely hire top-level talent and expect the skills and
We provide the example of Solectron and Motorola.
The following SUPPLEMENT provides some guidelines/suggestions for enhancing one’s
career success. Although these points are directed at women managers, they should also apply to
Extra Example: Three Suggestions for Enhanced Career Success
The following suggestions are drawn from Warren Ferrell, author of Why Men Earn More: The Startling Truth
Behind the Pay Gap—and What Women Can Do About It (AMACOM, January 2005).
1. Sign up for a job with bottom-line responsibility.
Kathy Vrabeck, president of Activision Publishing, the video-game producer behind Shrek 2 and the Tony
Hawk series, believes that this is the advice she could give anyone seeing to earn more money. She had an
early glimpse of how this works while at Eli Lilly, when she noticed that R&D was the driving function in
pharmaceuticals. At Activision, she’s responsible for game development—the function on which the
company’s success largely depends. According to Vrabeck, “In any company, it’s the operating jobs, not the
staff jobs, that generate revenue. A company’s always willing to pay more for people who are willing to
take on the responsibility of a line job and the risk it entails.
2. Find a field that entails financial or emotional risk taking
Most venture capitalists can expect to earn between $100,000 and $300,000 a year, 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 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. If
not, they have only themselves to blame. The market pays a premium for such chutzpah.
3. Work more hours, more weeks, and more years
Many may declare: “Enough! Americans already work more hours per year than the rest of the planet!” So
true. But if you are willing to be the alpha dog of wage slaves in your industry, you can expect to be
rewarded handsomely. The U.S. Bureau of 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 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
The following SUPPLEMENT provides some advice (perhaps, “tough love!”) for
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 20: 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-
We provide the example GlaxoSmithKline.
It may be particularly interesting to mention GlaxoSmithKline’s “two-plus-two-plus-two”
(two business units, two functional units, and two countries) formula for developing people for
top management positions. Ask:
Discussion Question 21: Should the 2+2+2 approach be used for other large
multinational firms? Why? Why not?
The following SUPPLEMENT addresses how Procter & Gamble has used a technology-
Extra Example: How P&G Uses Technology to Monitor and Track Its Talent
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 track 13,500 middle- and upper-management
employees. The system captures information about:
* succession planning at the country, business category, and regional levels;
* career histories and capabilities, as well as education and community affiliations;
* top talent and their development needs; and,
* achieving diversity objectives.
It also makes in-house talent visible to business leaders, who no longer have to scour the company to find candidates
by themselves. To keep the system relevant, P&G has 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 skilled people, in light of specific performance objectives. For example, if the company has stated diversity in
hiring objectives, the review is used to audit diversity in hiring and promotions. Determinations made in these
reviews are captured in a global automated talent development system and can be assessed by decision makers
through their HR managers.
Source: Ready, D.A. & Conger, J.A. 2007. Make your company a talent factory. Harvard Business Review, 85 (6):
68–77.
Discussion Question 23: What are some of the benefits of P&G’s system for attracting,
developing, and retaining talent?
4. Evaluating Human Capital
The primary issue that this section addresses is the 360-degree evaluation system. Such
an evaluation approach is becoming more critical given the importance of collaboration and
EXHIBIT 4.3 provides an excerpt from General Electric’s 360-degree evaluation system.
The SUPPLEMENT below addresses a few of the pitfalls, as well as suggestions for
Prior to discussing the supplement, it may be interesting to ask:
Discussion Question 22: What are some of the pitfalls of 360-degree evaluation systems?
Discussion Question 23: What steps should be taken to improve the chance of their
success when implemented?
Extra Example: Pitfalls and Suggestions for Making 360 Degree Systems Work
Some of the pitfalls of 360 degree evaluation systems are:
1. If a manager’s 360 ratings depend on creating a positive or even relaxed climate, these factors may
actually detract from work directly geared toward bottom line results.
2. Organizations may embrace 360 feedback to convey an impression of openness and participation
to clients or recruits when, in fact, this is not part of the organization’s culture.
3. Imitating without clearly understanding what other firms have accomplished, or the likely
outcomes for one’s own firm, may be a questionable strategy.
4. Even when 360 degree feedback ratings are used strictly for developmental purposes, individuals
will tend to modify behaviors in ways to receive more positive ratings.
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.
3. Creating focus groups to identify effectiveness criteria measures.
4. Evaluating using a pre-post control group design.
5. Being careful what you measure and how it’s used.
6. Train raters.
Source: Waldman, D. A., Atwater, L. E., & Antonioni, D. 1998. Has 360 degree feedback gone amok? Academy of
Management Executive. 12(2): 86-94.
Teaching Tip: Despite its many advantages, the 360-degree feedback system has some
limitations as discussed in the above SUPPLEMENT. Ask the students to think of
STRATEGY SPOTLIGHT 4.2 addresses a “cautionary note” on evaluation systems:
C. Retaining Human Capital
We use the rather colorful imagery of “frogs in a wheelbarrow” to drive home the point
that top talent may bolt at any time. Managers have the option of either forcing top talent to stay
The boundary between work life and home life is rapidly disappearing for many
individuals. The following SUPPLEMENT provides some interesting insights from research by
sociologist Dalton Conley.
Extra Example: The Blurring Boundaries Between Work and Home
One of the most interesting transformations taking place in the work place today is the 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 story.
40 percent of large companies allow part-time telecommuting.
16 percent of large companies offer child care centers, some even subsidized by the company.
3 percent of large companies allow employees to bring their pets to work.
Source: Eaves, E. 2009. The Elsewhere man. Forbes. February 16: 22–24.
Discussion Question 24: Do these numbers surprise you? Why do you think companies
permit such flexibility, even in an environment where unemployment is high?
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
We also mention the importance of the emerging trends to a “relationship first” set of
Discussion Question 25: What are other examples of firms that have successfully
strengthened an employee’s identification with their firm’s mission and values?
2. Challenging Work and a Stimulating Environment
The motivation to work on something because it is interesting, exciting, or personally
In addition, some leading-edge firms have kept highly mobile employees motivated and
challenged by lowering the barriers to an employee’s mobility within a company. For example,
3. Financial and Non-Financial Rewards and Incentives
Clearly, financial rewards are a vital organizational control mechanism (as we will also
The following SUPPLEMENT addresses an insightful perspective on the downsides of
stock options as a retention vehicle for top talent. Before discussing, you may wish to ask:
Discussion Question 26: What are the advantages and disadvantages of using stock
options to retain talent?
Extra Example: Some of the “Downsides” of Stock Options as a Retention Device
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 shares and thus have, to use the colloquial
phrase, “skin in the game.” They are committed.
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.
We close this section with examples of what firms are doing to increase retention through
The SUPPLEMENT below addresses why telecommuting remains quite rare in both
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 27: 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
employee, etc.) may come into play in explaining potential performance differences?
EXHIBIT 4.5 gives three examples of companies (Yum Brands, Intuit, United
The following SUPPLEMENT provides some interesting figures on how often
Millennials (those roughly 18 to 34 years old) change jobs—and how some firms are adjusting to
Extra Example: Millennials: Fast Job Changes: What Should Firms Do?
Millennials, those roughly 18 to 34 years old, make up the largest share of the U.S. 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 Statistics.
Last year, the median job tenure for workers aged 20 to 25 was shorter than 16 months. For those aged 25 to 34, it
was three years—still far short of the 5.5-year median tenure for all workers aged 25 and older.
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 weigh in on everything from marketing campaigns to
workplace polices. Auditing firm Ernst & Young Global Ltd. and Dutch health-care and consumer-products
company Philips NV have begun programs designed to send employees overseas for stints of a few months, giving
them global exposure and developing leadership skills.
Toby Murdock, CEO of Kapost, a Boulder, Colorado marketing-software firm, said he has adopted a different
approach: “Let’s be honest about that instead of trying to deny it.” He wants young workers to consider his company
a career accelerator, rather than a parking 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
Source: Gellman, L. 2015. Millennials: Keep them or let them go. Wall Street Journal. May 6: B1, B7.
D. Enhancing Human Capital: Redefining Jobs and Managing Diversity
First, we discuss how some progressive firms are redefining the jobs of their experts and
transferring some of their tasks to lower-skilled people inside or outside their companies—as
Second, we address diversity in today’s workforce today. This has become more vital due
We then address six areas in which a diverse workforce can improve an organization’s
effectiveness. These are:
1. Cost Argument
2. Resource Acquisition Argument
3. Marketing Argument
Ask:
Discussion Question 28: Are you aware of organizations that have exemplary (or
ineffective) diversity programs? If so, what makes them successful (or unsuccessful)?
STRATEGY SPOTLIGHT 4.3 discusses two kinds of diversity, inherent (traits one was
born with such as gender and ethnicity) and acquired (traits gained by experience such as
III. The Vital Role of Social Capital
Successful firms are well aware that the attraction, development, and retention of talent
are necessary but not sufficient conditions for creating competitive advantages. In the knowledge
We provide the hypothetical example of two Nobel Prize-winning scientists. The point, of
Another way to view these perspectives is drawn from the resource-based view of the
firm. Here, competitive advantages that are harder for competitors to duplicate are those that are
A. How Social Capital Helps to Attract and Retain Talent
The importance of social ties among talented professionals is creating an important
challenge (and opportunity) for organizations today. The phrase: “Pied Piper Effect” has been
We provide the example of an electronic commerce company called Third Millennium
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
Social network analysis depicts the pattern of interactions among individuals and 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
convey needed resources,
have the opportunity to exchange information and support,
EXHIBIT 4.4 is a simplified network analysis that should provide students’ with a grasp
of key concepts. It depicts informal relationships among individuals that involve communication
Closure involves a situation in which members have relationship ties to other members in
a given network. Through closure, members develop a high level of trust and solidarity.
Bridging relationships, in contrast to closure, stresses the importance of ties connecting
We briefly review the study that Ron Burt conducted at Raytheon, a $24 billion U. S.
The SUPPLEMENT below provides more information on the results of Burt’s study at
Raytheon from the perspective of career success.
Extra Example: Burt’s Raytheon Study—Evidence of Career Success
For executives educated in the network structure of social capital—performance improved. The effects turned out to
be substantial—relative to a control group of untrained, but otherwise comparable peers.
Graduates from the Business Leadership Program (BLP) were 36 percent to 42 percent more likely to receive top
performance evaluations, 43 percent to 72 percent more likely to be promoted, and 42 percent to 74 percent more
likely to be retained by the Raytheon. It is important to point out that performance did not improve equally for all
graduates. Executives who were quiet spectators in the program cannot be distinguished from the careers of people
in the control group—that is, people who did not attend the program. Clearly, there are significant career benefits
from actively participating in the BLP Program.
Source: Miller, R. A. (abridgement). 2006. Teaching executives to see social capital: An ROI study of a four-year
executive education custom program at Chicago GSB. International Executive Development Programmes.
Discussion Question 29: Why do you think that the BLP Program graduates had higher
subsequent career success? (You would want to stress the importance of social
networks/social capital and suggest that students spend time on developing diverse
Developing Social Capital: Overcoming Barriers to Collaboration Collaboration, of
course, doesn’t “just happen.” Effective collaboration involves overcoming four barriers:
The not-invented-here barrier
The hoarding barrier
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.
Discussion Question 30: In your experience in working in groups, which of these
barriers did you find most often? What do you think was the cause? Was your group able
to overcome it/them? If so, how were the problems resolved? Could the input in this
section have helped your group? Why? Why not?
Implications for Career Success We close our discussion of social network analysis
with a summary of the implications for career success. These are
Private Information.
STRATEGY SPOTLIGHT 4.4 discussed why two famous artists—Picasso and Van Gogh
had such different levels of professional success. The key difference: social capital.
Teaching Tip: At this point it might be useful to drive home the practical importance of
social network analysis to your students. We address the key tradeoffs between closure
and bridging relationships. With closure there is more trust and cohesiveness—which can
enhance implementation of ideas. And, with bridging relationships, there is greater
INSIGHTS FROM RESEARCH (page 130) discusses some very interesting—and
We also address three kinds of “network traps”: the wrong structure, the wrong