Class 1: What is Human Capital?

Question 1

What is Human Capital?

Answer 1

“[T]he knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being”
Organization of Economic Co-operation & Development (OECD)
OCED Insights (2007). Human Capital: How what you know shapes your life.

A person’s knowledge, skills, health and values…Investments in HC include education, training, medical care, child care…
Paraphrased from Human Capital: a Theoretical and Empirical Analysis with Special Reference to Education
Gary Becker (1993). Nobel Prize in Economics Winner

“The economic value of a worker’s experience and skills”
Investopedia

Question 2

Study of Human Capital Management

Answer 2

Drawing on knowledge from strategy, organizational behaviour, and human resources management, HCM is about planning, attracting, motivating, developing, engaging, and retaining an organization’s best talent in a fair and cost-effective manner

Question 3

What is Human Capital?

Answer 3

knowledge, skills, abilities, characteristics, education, certifications, training, experience(s), judgment, wisdom, creativity, health & well-being, networks, potential

Question 4

Resource-Based View of Firm

Answer 4

Effective management of resources and capabilities will lead to competitive advantage, resulting in superior performance and value creation
Resources -> Capabilities -> Competitive advantage

Question 5

Impact of Talent on Productivity

Answer 5

The relationship between quality of talent and business performance is dramatic. Graph: Low complexity: 50, Medium: 85, High: 125, Very high: 800

Question 6

Impact of Star Performers- Aguinis & O’Boyle Propositions:

Answer 6

Power law: Performance best represented by power law distribution (not normal)
Pareto’s law (ish): top 10% of workers create 30% of value; top 25% create 50%
Proximity to core competence: Effect of star performance depends on proximity to strategic core competence
Competitive advantage will come from best (not average) HC in the firm
This study focused on knowledge-workers and their results (not behaviours)

Question 7

What is Talent?

Answer 7

A capacity for achievement or success.

-Object or Subject
-Inclusive or Exclusive
-Innate or Acquired
-Performance or Potential
-Inputs or Outcomes
-Transferrable or Context-Dependent

Question 8

Approaches to Talent

Answer 8

Diagram

Question 9

Is Talent Really That Important?

Answer 9

What about hard work and development?
Deliberate practice as differentiator (Colvin)
“Hard work beats talent when talent doesn’t work hard” (Tim Hotke, High School Basketball Coach and popularized by Kevin Durant, NBA player)

Pfeffer & Sutton argue the “best talent” concept is contestable:
Individual ability varies (within self)
Realization of talent depends on motivation, experience, practice, effort and self-efficacy
Great systems often matter more

Question 10

Is a top performer always a top performer?
-Groysberg, Lee, Nanda (2013)

Answer 10

“The performance of an outstanding worker is not owned by the worker alone; it is a property of the work/firm combination, and encompasses firm-specific human capital embedded in colleague relationships and firm capabilities”