12 December 2005

The Human Capital Formation

Click on diagram to enlarge.


Tom Stewart in his book “The Wealth of Knowledge” (2001) demonstrates how the building and leveraging of organizational knowledge assets can be at the heart of value generation. In chapter 14 (pages 311-313) he refers to Nick Bontis excellent work ( ) on human capital formation (see Nick's comment to this post). Based on this, I have devised a diagram illustrating the virtuous knowledge-driven processes that an organization should emphasize and consciously leverage upon.

The 3 goals are to:

  • Reduce Human Capital depletion.
  • Increasing Income per Employee.
  • Company performance in line with Strategic goals.

This virtuous process is to be maintained through a creative tension between the Company performance and both a Knowledge-Driven Organizational Culture and Knowledge-driven Organizational Capabilities.

This diagram might seem a bit too theoretical at first but it is in fact a pragmatic model. The process starts at the top of the diagram with common-sense and practical principles such as a strong charismatic leadership, recognition of individual and team performance, proactive career development or knowledge-driven recruitment process. An important fact to note here is that the implementation of these principles usually does not require very time-consuming and costly projects/initiatives. They tend to “pay for themselves” in the early stages, providing that they are recognized as strategic and benefiting from top-management support.

Peter-Anthony Glick
Leveraging Organizational Knowledge

Read Nick Bontis' comment on this post.


At 10:40 PM, Anonymous Anonymous said...

I wanted to add that although I originally tested this causal model in the financial services sector, my more recent research studies show that these relationships are quite robust. I have been able to re-validate the results in a variety of other research settings such as technology, health care, government and the retail sectors.

Cheers, Nick

Dr. Nick Bontis


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