A Closer Look at Human Capital as a Competitive Advantage (Human Resource Management)

Topic: Talent Management, Turnover
Publication: Academy of Management Review (JUL 2012)
Article: Rethinking Sustained Competitive Advantage from Human Capital
Authors: Benjamin A. Campbell, Russell Coff, & David Kryscynski
Reviewed By: Susan Rosengarten

All organizations want the secret to retaining top talent; I challenge you to find me one that doesn’t! Turnover and new-hire training is costly and organizations are always looking to curtail their expenses and get the best bang for their buck. Finding job candidates with the right mix of knowledge, skills, and abilities can be tough, but getting the right people to stay once you’ve found them can be even tougher.

Conventional wisdom suggests that a firm’s human capital can be a source of great competitive advantage, but only if the variables of employees’ jobs restrict them from seeking employment elsewhere. Employees with general human capital, or knowledge and skills that can be applied in other settings, have greater market value than employees with firm-specific human capital, which does not transfer to other settings quite as well.

However, Campbell, Coff, and Kryscynski (2012) suggest that there’s more to the story than meets the eye and this approach to human capital mobility may be overly simplistic. They say that factors of supply and demand play a crucial role as well. Under the right conditions, employees with firm-specific human capital may be far more mobile and tradable than you might think. Conversely, supply and demand factors can restrict employees with general human capital as well.

Specific supply factors outlined in this article include the hassle of having to search for a new job and whether or not an employee can accurately appraise what his skills are worth and would command on the market. On the other hand, demand factors focus on how valuable an employee’s skills are deemed to be by potential employers.

So for all of you managers out there, use this information to your advantage! Compensation designs, employee selections, and job designs can be strategically created and leveraged to create supply and demand constraints and, ultimately, to produce a competitive advantage for your firm.

Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking Sustained Competitive Advantage From Human Capital. Academy of Management Review, 37(3), 376-395.

human resource management, organizational industrial psychology, organizational management

 

 

source for picture: http://www.freedigitalphotos.net/images/Business_People_g201-Smiling_Young_Executive_p75603.html