Deck 4: Recognizing a Firms Intellectual Assets: Moving Beyond a Firms Tangible Resources

Question 1

Firms such as Apple and Microsoft will tend to have a higher ratio of market value to book value than industrial companies such as Nucor Steel.

Answer 1

True
Explanation: As shown in Exhibit 4.1, firms such as Apple and Microsoft have very high market value to book value ratios because of their high investment in knowledge resources and technological expertise. In contrast, firms in more traditional industry sectors, such as Nucor, have relatively low market to book ratios.

Question 2

The difference between the market value and book value of a firm is its social capital.

Answer 2

False
Explanation: Social capital is the network of relationships that individuals have throughout the organization.

Question 3

Creation of new knowledge involves the continual interaction of explicit and tacit knowledge.

Answer 3

True
Explanation: New knowledge is constantly created through the continual interaction of explicit knowledge (knowledge that is codified, documented, easily reproduced, and widely distributed, such as engineering drawings, software code, and patents) and tacit knowledge (knowledge that is in the minds of employees and is based on their experiences and backgrounds).

Question 4

One of the most important elements in a good employee is his or her attitude. Firms should follow the adage: hire for attitude, train for skill.

Question 5

In firms where knowledge and the management of knowledge workers are relatively important contributors to developing products, and services and physical resources are less critical, the ratio of market-to-book value tends to be much lower.

Question 6

Firms in more traditional industry sectors such as Nucor and General Motors have relatively low market-to-book ratios. This reflects their greater investment in knowledge resources and lower investment in physical resources.

Question 7

The importance of human capital has decreased in recent years. For this reason, many firms have placed greater attention on attracting talent, but not on developing or retaining it.

Question 8

The 360-degree evaluation and feedback system addresses many of the limitations of traditional approaches to evaluating human capital.

Question 9

In most effective evaluation and reward systems employees only receive evaluation and feedback from their immediate supervisor.

Question 10

Technical skills are a necessary and sufficient condition for hiring an employee.

Question 11

The Millennial generation expects employers to provide incentives to attract and retain them. A company that does this will have a competitive advantage.

Question 12

The gap between company market value and book value is far greater for knowledge-intensive corporations than for firms with strategies based primarily on intangible assets.

Question 13

Knowledge workers are more loyal to their companies than traditional workers.

Question 14

A firm like Intel has a market-to-book value ratio that falls between Apple-Microsoft and Nucor-General Motors. This is because its low level of investment in knowledge resources is matched by a correspondingly huge investment in plant and equipment.

Question 15

In the current economy, reliance on the three traditional financial statements (income statement, balance sheet, and statement of cash flow) has increased.
A. Howell, an expert on the changing role of finance and accounting, suggests that the big three financial statements are about as useful as an 80-year-old Los Angeles road map.

Question 16

Companies have found that referrals from their own employees are generally an effective approach to recruiting top talent.

Question 17

Explicit knowledge is in the mind of employees and is based upon their experiences and backgrounds.

Question 18

The more reliance a firm has on intellectual capital, the closer its book value will be to its market value.

Question 19

Social capital does not extend beyond the organizational boundaries to include relationships between the firm and its suppliers, customers, and alliance partners.

Question 20

Millennials value hard work and will rarely use vacation time.

Question 21

Unique bundles of resources can contribute to employee competitive advantages.

Question 22

Hiring via personal networks is a trend in which job recruiters look for candidates at the crux of social relationships in organizations because they have the potential to bring valuable colleagues with them.

Question 23

The most effective method of improving retention of top talent at a firm is to intensify its hiring efforts.

Question 24

Social capital helps organizations leverage human capital within and across the firm.

Question 25

Knowledge-based resources tend to be more explicit in nature.

Question 26

Workforces that reflect demographic changes will become more homogeneous over the next few decades with regard to gender, race, ethnicity, and nationality.

Question 27

Social capital is found in the knowledge, skills, and abilities of individual employees.

Question 28

If employees are working effectively in teams and sharing their knowledge and learning from each other, not only will they be less likely to add value to the firm, but they also will be more likely to leave the organization, because of the loyalties and social ties that they develop over time.

Question 29

When Michael Reene left Andersen Consulting, eventually he joined Third Millennium as CEO with a small salary and 20 percent ownership position. He brought others with him, who brought others with them. This was possible because of the Pied Piper effect.

Question 30

Human capital mobility caused by social relationships occurs when talent emigrates from an organization to form start-up ventures.

Question 31

Developing social capital is risky for an organization because social capital is specific to individuals and remains with the employee, if he or she leaves the organization.

Question 32

The 360-degree evaluation systems are not useful due to the need to integrate large amounts of feedback.

Question 33

Social network analysis can be used to help identify groups or clusters of individuals that comprise the network, individuals who link the clusters, and other network members.

Question 34

The development of intellectual capital (that is, the friendships and working relationships among talented individuals) gains importance, because it helps tie knowledge workers to a given firm.

Question 35

Hiring organizations can be amorphous, distant and threatening entities and therefore detractors for knowledge workers.

Question 36

A hiring agent offers a scientist approximately the same salary, facilities, equipment, and shared laboratory with 10 highly skilled and enthusiastic scientists. Part of the job is to collaborate with these peers and jointly develop promising drug compounds. This structure will create greater firm loyalty than one in which the hiring agent offers only monetary compensation.

Question 37

Developing and protecting social capital requires independence, in which individuals must spend most of their time working individually.

Question 38

The text suggests that talented professionals are typically most concerned about financial rewards. Money is the top reason why such employees take and leave jobs.

Question 39

An internal work opportunity market for employees is one means of increasing employee retention.

Question 40

Start-up ventures often are formed by mobile human capital talent.

Question 41

In bridging relationships in social networks, one member is central to the communication flows in a group.

Question 42

Email can cause embarrassment, as explained by Marshall Goldsmith, executive coach.

Question 43

The use of email can be distracting to employees. Some firms limit the time that employees spend using email.

Question 44

Deliberate actions to reduce email output consist of forwarding all messages, but limiting the number of recipients.

Question 45

Connectors are people to have a unique ability to link people, ideas and resources and are rarely useful for business because they maintain only personal connections that are not transferable.

Question 46

In social network analysis, a person who has no linkages to others in the network is labeled a conformist.

Question 47

Closure, in contrast to bridging relationships, stresses the importance of ties connecting heterogeneous people.

Question 48

Top executives should use email for monthly blasts to employees to discuss company health and other specific issues.

Question 49

Technology can also enable much more sophisticated forms of communication in addition to knowledge sharing.

Question 50

John wanted to set up a nurse-led preoperative assessment service intended to free up time for the doctors who previously led the assessments, reduce cancelled operations (and costs), and improve patient care. Carol, a well-respected nurse, had less seniority than John, but many colleagues relied on her advice about navigating hospital politics. She knew many of the people whose support John needed and she eventually converted them to the change. This is an example of a connector.

Question 51

One potential downside of building social capital in an organization is groupthink. This means everyone in the group thinks on his or her own and comes up with new ideas.

Question 52

Sharing knowledge and information throughout the organization is important for conserving resources, developing products and services, and thwarting new opportunity creation.

Question 53

Effective collaboration requires overcoming four barriers: the not-invented-here barrier, the hoarding barrier, the search barrier, and the place-setter barrier.

Question 54

Phone calls can be better than emails for providing real-time feedback on whether a message is being understood.

Question 55

Facial expressions and body language make in-person meetings a rich method of communication, but not significantly better than email in most cases.

Question 56

Social networks such as Facebook do not facilitate increased interactions between members in a social network via Internet-based communications.

Question 57

From the individual perspective, social networks deliver three unique advantages: private information, access to diverse skill sets, and power.

Question 58

Technology can be used successfully to leverage human capital and knowledge within organizations as well as with customers and suppliers beyond their boundaries.

Question 59

The role of technology in the recruitment of human capital has lowered individual reliance on the use of social networks.

Question 60

Burt studied several hundred managers in the Raytheon supply chain group and asked them to write down ideas to improve the company supply chain management. Then he asked two Raytheon executives to rate the ideas. The conclusion: The best suggestions consistently came from managers who discussed ideas outside their regular work group. This is an example of a structural hole.

Question 61

Technology can be used to leverage human capital and knowledge within organizations as well as with customers and suppliers beyond their boundaries.

Question 62

The potential for process losses tends to be less prevalent in e-teams than in traditional teams because the geographic dispersion of members increases the complexity of establishing effective interaction and exchanges.

Question 63

One should only rely on communication platforms and never on email for communicating information.

Question 64

E-teams do not have the potential to acquire a broader range of human capital or the skills and capacities that are necessary to complete complex assignments.

Question 65

Cisco launched Integrated Workforce Experience (IWE) in 2010. It is a social business platform designed to facilitate internal and external collaboration and decentralize decision making. It functions much like a Facebook wall in that a real-time news feed provides updates on employee status and activities as well as information about relevant communities, business projects, and customer and partner interactions. This is a reason to totally eliminate email.

Question 66

At Accenture, the knowledge of its consultants has been codified and stored in electronic repositories and, therefore, cannot be employed in many jobs by their huge number of consultants.

Question 67

Process losses prevent teams from reaching high levels of performance because of inefficient interaction dynamics among team members.

Question 68

Intellectual property rights are the tangible property owned by a firm.

Question 69

Most of the interactions among members of e-teams occur through electronic communication channels such as fax machines and groupware tools such as email, bulletin boards, chat, and videoconferencing.

Question 70

Since electronic teams (e-teams) seldom meet face-to-face, it is not important for them to be concerned with how to combine individual contributions effectively.

Question 71

Explicit knowledge is generally known to everyone in the firm and is not a critical concern of management.

Question 72

Generally, teams suffer process loss because of low cohesion, low trust among members, a lack of appropriate norms or standard operating procedures, or a lack of shared understanding among team members about their tasks.

Question 73

Once a knowledge asset (e.g., a software code) is developed and paid for, it can be used many times at very low cost as long as it does not have to be substantially modified each time.

Question 74

The use of communication platforms such as the Cisco Integrated Workforce Experience (IWE) permits companies to push out information where it is needed.

Question 75

Given the narrower boundaries associated with e-teams, members and leaders generally have limited access to a wider range of social contacts than would be typically available in more traditional face-to-face teams.

Question 76

According to the text, effective e-teams identify group members with a proper balance of technical and interpersonal skills.

Question 77

The management of intellectual property (IP) involves, besides patents, contracts with confidentiality and non-compete clauses, copyrights, and the development of trademarks.

Question 78

One of the challenges of knowledge-intensive organizations is to capture and codify the knowledge and experience that, in effect, resides in the heads of its employees. This is known as explicit knowledge.

Question 79

When an organization tries to improve cycle times in a manufacturing process, it finds far more value in problem solving shaped by the diverse experiences, perspectives, and learning of a tightly knit team (shared through knowledge flows) than in a training manual (knowledge stocks) alone.

Question 80

Intellectual property rights are easier to define and protect than property rights for physical assets (e.g., plant and equipment).