Human Resource Management in the Knowledge Economy: New Challenges, New Roles, New Capabilities - Softcover

Lengnick-Hall, Mark L.; Lengnick-Hall, Cynthia A.

Softcover

ISBN 10: 1576751597 ISBN 13: 9781576751596

Publisher: Berrett-Koehler Publishers, 2002

Synopsis

Synthesizes current thinking on knowledge management and intellectual capital and identifies how human resource management can make a value-added contribution
As more organizations recognize the importance of intellectual capital and knowledge management to competitive success, you would expect human resources (HR) to move to the forefront of organizational leadership. Yet, to the contrary, HR continues to be criticized for its operational and bureaucratic focus and its inability to keep up with changes in the environment.
Human Resource Management in the Knowledge Economy examines how human resource management must change if it is to remain a vital part of the organization. The Lengnick-Halls show how HR departments can move beyond a simple operational focus on attracting, selecting, developing, retaining, and using employees to a more strategic focus on managing human capital and managing knowledge.
The book identifies the most important features of the knowledge economy and details four new roles HR must adopt in order to help organizations succeed in this new environment: human capital steward, knowledge facilitator, relationship builder, and rapid deployment specialist. Each of these roles is defined and described in detail using examples from leading-edge businesses. Human Resource Management in the Knowledge Economy describes how human resource management has evolved and continues to evolve to meet the increasing demands of organizations for sources of competitive advantage.

About this title

About the Author

Mark L. Lengnick-Hall, Ph.D., is a Professor of Management in the College of Business at the University of Texas at San Antonio. He has human resource management experience in both private industry and state government. Dr. Lengnick-Hall has also consulted with and provided training for numerous organizations.
His articles have been published in journals such as the Academy of Management Review, Human Resource Management Review, Human Resource Management, Personnel Psychology, Personnel, Journal of Organizational Behavior, Organization Development Journal, HR Magazine, Training and Development, Employee Responsibilities and Rights Journal, Health Progress, Public Personnel Management, and the Journal of Management Education. He has co-authored two books: Compensation Decision Making: A Computer-Based Approach, published by Dryden in 1994, and Interactive Human Re- source Management and Strategic Planning, published by Quorum in 1990. Dr. Lengnick-Hall has also contributed chapters to other books.
Cynthia A. Lengnick-Hall, Ph.D., is a Professor of Management in the College of Business at the University of Texas at San Antonio. She has consulting and management experience in both private industry and higher education administration. Dr. Lengnick-Hall has consulted with and provided executive education for a number of organizations.

Excerpt. © Reprinted by permission. All rights reserved.

A New Imperative for Human Resource Management
“The secret of business is to know something that nobody else knows.”
—Aristotle Onassis
“In a time of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists.”
—Eric Hoffer
Pick up almost any business book or magazine and one is sure to see claims that a firm’s people are its most important resource. Unfortunately for most organizations, the ability to capitalize on this resource is limited by human resource management (HRM) programs, practices, and policies that have a simple operational focus on attracting, selecting, developing, retaining, and utilizing employees to accomplish specified tasks and jobs. Unless HRM is able to reinvent itself to embrace the challenges of the knowledge economy, it will become a constraining factor that undermines a firm’s competitiveness rather than a crucial source of competitive advantage.
The competitive demands of today’s marketplace require a reorientation of strategic human resource management emphasis that concentrates on building human capital and managing knowledge rather than focusing on primarily matching particular job skills to selected strategies. For example, similar to the ways that firms engage in mass customization of their products, they need to develop corresponding means to accomplish mass customization of the ways in which they manage individual differences within the workforce. Likewise, as firms develop business-to-business partnerships with suppliers and customers, human resource managers must find ways to develop partial employee relationships with those beyond the firm’s borders.
It appears that the HRM function in many organizations has become myopic and has directed its attention to efforts to do familiar things better and more efficiently rather than redefining both its role and its contribution to the twenty-first-century organization. The demands of a global, information-based, technology-rich, and quickly changing competitive field require human resource managers to ensure that people truly matter.
Human resource management faces a new imperative in the twenty-first century. It must
· Build strategic capability
· Expand its boundaries
· Manage new roles
It is no longer enough for HRM to maintain a narrow operational focus, view its activities as confined to the boundaries of its own organization, or limit itself only to traditional human resource (HR) responsibilities. To continue as it has in the past will relegate HRM to increasing irrelevance (and likely outsourcing) in the corporation of the future. Although many familiar HRM activities are necessary, they are increasingly distant from a firm’s direct value-creating processes. By taking a new perspective on how HRM can create strategic capability and provide value for customers, HR can increase its importance in the twenty-first-century organization.
Build Strategic Capability
Organizations in the emerging knowledge economy will need to build strategic capability: the capacity to create value based on the intangible assets of the firm. [Note: This entire section draws largely on the work of Hubert Saint-Onge (see http://www.knowinc.com/saint-onge/library/strategic.htm). The tangible assets of the firm are well understood: They are readily visible and rigorously quantified; they form an integral part of the balance sheet; they can be easily duplicated; and they depreciate with use. Examples of tangible assets include manufacturing plants, equipment, buildings, and other elements of physical infrastructure. In contrast, intangible assets of the firm are less well understood. Intangible assets are invisible, difficult to quantify, not tracked through accounting, must be developed in a path-dependent way over time—they cannot be instantaneously obtained, bought, or imitated—and they appreciate with purposeful use. Examples of intangible assets include technological know-how, customer loyalty, branding, and business processes. Tangible assets are necessary but not sufficient for gaining a competitive advantage in the knowledge economy, because most tangible assets can be imitated or obtained through the market. It is the intangible assets that will make the difference in which firms succeed and which fail.
How can you identify whether a firm has strategic capability? Look for these characteristics: a high level of business competency; a superior ability to detect, understand, and direct what’s going on in the marketplace (where preferences are shifting rapidly); the ability to transfer skills quickly and accurately across the organization; the ability to scale-up production to meet explosive demand and quickly expand market reach; and the ability to generate new opportunities for the organization before the marketplace has discovered they are required. Strategic capability is a readiness for the present and an ability to adapt in the future.
Strategic capability is obtained through relationships in which the creation, exchange, and harvesting of knowledge build the individual and organizational capabilities required to provide superior value for customers. Strategic capability consists of three components directly related to HR (http://intellectualcapital.org/evolution/main.html, 6/2/01): human capital, structural capital, and relationship capital. Human capital is the know-how, skills, and capabilities of individuals in an organization. Human capital reflects the competencies people bring to their work. Some examples of human capital include technical skills, innovativeness, and leadership competencies. Structural capital is the organizational architecture and managerial processes that enable human capital to create market value. Some examples of structural capital include modular and/or cellular structures, information systems, organizational culture, and decision-making processes. Relationship capital is the interpersonal connections across members of the firm and relationships with suppliers, customers, and other firms that provide the basis for cooperation and collaborative action. Some examples of relationship capital include trust, consumer loyalty, co-production activities, and licensing agreements (see Table 1.1). The interaction of these three components—human capital, structural capital, and relationship capital—creates value. Human resource management can increase its contribution to a firm’s competitiveness by playing a central role in the creation and maintenance of all three components of strategic capability. This can be done through programs, practices, policies, and setting an example in terms of the way the HR unit develops its people, designs itself, and establishes relationships across the organization and beyond its doors.
Expand Boundaries
When most people think about HRM, they think about hiring, firing, promoting, training, and so forth (the traditional operational focus), and they think about it within the context of a single organization. That is, HRM is thought of as an internal business function. Rarely would anyone think of one company using its HRM programs, practices, and policies on, for example, its suppliers or distributors. Even fewer people would consider the possibility of using a firm’s HRM programs, practices, and policies on its customers. Yet, all of these possibilities are a reality in some firms today and will become an imperative for many firms in the growing knowledge economy. Furthermore, by expanding its boundaries beyond the firm to suppliers, distributors, and customers, HRM can have a more significant impact, that is, HRM can make it possible to provide superior value for customers by providing a more rare, important, hard-to-replace-or-imitate, and powerfully leveraged strategic resource. At the most basic level, expanding the boundaries means that HRM professionals use their expertise to help their organization influence the behavior of customers, employees of supplier firms, and individuals in firms that complement or regulate a firm’s activities.
Table 1.1 Components of Strategic Capability
Value Chain
To understand this expanded role for HRM outside its own organization, it is necessary to appreciate the concept of value chains. A value chain is a conceptual model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. Value chain analysis looks at every step a business goes through, from raw materials to the eventual end-user. The goal is to deliver maximum value for the least possible total cost as quickly as possible.
Simplified Value Chain Illustration

Networks of suppliers, producers, and distributors can be quite diverse, and the effectiveness of the entire value chain is dependent on coordination and efficiency among them. The quality of relationships between business partners will determine the extent to which value is added for the customers they serve. Thus, weak links in the supply chain, production processes, or distribution chain can dilute the organizational effectiveness of some or all of the participating organizations. If, for example, those who staff an outsourced technical support hotline for a new product have inadequate expertise or surly dispositions, even technologically superior products are likely to suffer declines in market position as this reputation becomes common knowledge.
Traditionally, HRM has focused its attention only on its organizational piece of the value chain. That is, HRM in supplier organizations was distinct and largely unrelated to HRM in the organization that produced the goods or services, and the HRM practiced in distributor or vendor organizations was unrelated to the other two players, as well. By pulling back and viewing the entire value chain from a higher vantage point, the possibilities for HRM to make a more significant impact on organizational and value chain effectiveness throughout the entire value creation process become apparent. By sharing expertise and knowledge and diffusing effective HRM practices throughout the value chain, all of the value chain members can be raised to a higher level of efficiency and effectiveness, and thus the entire value chain as a system can create its own competitive advantage. For example, Shell Services International (SSI), a division of the Royal Dutch/Shell group of companies, provides services to internal operating divisions and external customers around the world. Relationships are governed by service level agreements in which customers contract for specific levels of service that correspond to their unique cost and/or value tradeoffs. Employees on both sides of the agreement need to understand how to make informed decisions, provide effective feedback, and improve performance to make the most of the transaction. Human resource expertise in performance appraisal, negotiation processes, and decision-making tools could be beneficial for SSI and its customers.
In the past, a business culture of not sharing information, knowledge, or expertise with other organizations prevented companies from reaping the benefits of this broader perspective on the boundaries of HRM. “We pay our HR people to do our HR; You get your own” describes this narrowly focused mind-set. As Fred Adair, former president of change management consultancy Smythe-Dorward-Lambert, says, “It has proven very difficult for companies in adjacent links of the supply chain to share data and trust that others will play fair. While it’s often clear that sharing and collaboration can have large benefits, people suspect the other guy is getting more. Those who are successful in joining forces, however, can develop incredible momentum, because the good news about increased efficiency travels quickly up and down the chain” (Fahrenwald, Wise, & Glynn, 2001).
It is no longer desirable or even feasible to maintain a narrow perspective on organizational boundaries or to treat businesses with which you have relationships with automatic mistrust. Borders between suppliers, competitors, and customers have, in fact, become blurred. For example, Motorola executives found that in one of their alliances with Intel, they were a supplier; in another setting, they were rivals; and in still another relationship, they were a customer (Ulrich, 1997). Another example also illustrates this point. In a process calledcollaborative design, product development teams from several departments at different companies, using the Internet, can view the same blueprint simultaneously and make changes on the blueprint that are visible to all. This saves the time and cost of faxing or mailing drawings with each new change to each company. In this way, the Internet has created permeable organizational boundaries (Totty, 2001). These permeable organizational boundaries have direct and indirect implications for HRM. When employees from different companies are working on the same product over the Internet, how do you manage them and which firm’s HR policies shape the relationship? How do you assess the relative value of the intellectual contributions from diverse firms? How do you facilitate their ability to coordinate efforts that will benefit all of the organizations involved? How do you maintain the security of each firm’s trade secrets?
Customer Human Resource Management
A customer orientation in HRM has typically emphasized its internal customers, that is, the employees who enable the firm to create value for the external customer and thus enhance organizational performance and profitability. However, HR practices can enhance competitive advantage and organizational performance by enabling the external customer—the individual or institution that purchases a firm’s goods or services—to contribute directly to organizational activities and outcomes (Lengnick-Hall & Lengnick-Hall, 1999). This goal can be achieved in several ways: (1) using HRM to guide customer behavior for the benefit of both the customer and the organization; (2) using HRM to facilitate the inclusion of customers in the creation and distribution of products and services; (3) using customers as organizational auditors, providing feedback on what practices to start, stop, or continue; and (4) using customers as quasi HR managers who directly participate in the management of employees.
First, HRM can guide customer behavior for the benefit of both the customer and the organization. For example, if a skating rink provides clear rules for safe and considerate behavior (analogous to performance expectations or job descriptions for customers), its customers are more likely to behave in courteous ways and create an enjoyable atmosphere for other customers. As another example, when fast food restaurants provide clear expectations for customers to throw away their own trash and make it easy for customers to comply, the dining experience is better for all customers. By providing effective training and work process information for customers, the customers themse...

Edition details

• Publisher: Berrett-Koehler Publishers
• Publication date: 2002
• ISBN 10: 1576751597
• ISBN 13: 9781576751596
• Binding: Paperback
• Language: English
• Number of pages: 224