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Why do you think intellectual capital is so often undervalued or taken for granted? As a general manager, what would you do to increase your organization`s intellectual capital?

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Reasons Why Intellectual Capital is Often Undervalued or Taken for Granted


Despite the fact that almost all organizations today declare that people are their most important assets, these words do not always translate into actions. Why do you think intellectual capital is so often undervalued or taken for granted? As a general manager, what would you do to increase your organization`s intellectual capital?

Example from a class mate

Intellectual capital consists of expertise, knowledge. It represents a firm’s organizational learning ability that we cannot put a price tag to and according to Prokopeak, M. (2013) intellectual capital is the knowledge asset in an organization. Human capital is the sum total of all the human knowledge and skill in an organization that the organization use to expand their goals and broaden their vision. A company may require people with all knowledge and skill in the areas of engineering, software designing, accounting, managing, risk assessments, legal department, public relations just to name a few. In today’s challenging economy organization need human capital to achieve their goals. As a manager to a healthcare organization my strategy to increase organization’s intellectual capital would include: (1) ensure that continued flow of learning is occurring at all level. Registered nurses, clerical staff and nursing assistant, (2) generate knowledge sharing events such as lunch and learn where employees with talents and skill would share disease, procedure, policy, compliance, quality related information with other staffs, (3) recognize and reward for sharing ideas and knowledge, (4) encourage to generate new ideas that has potential to increase quality, customer satisfaction, patient safety, increase productivity, collaboration, (4) promote a culture that embraces new learning and advancing knowledge, (4) hiring the right people with skills and expertise who values compassion and care. 

Prokopeak , M. (2008). Leveraging intellectual capital for organizational gain. Chief Learning Officer, 

7(3), 38-43

Grimsley, S. (n.d.). What is human capital? Importance to an organization. 



Strategic Human Resources Management


The American economy has experienced many revolutions in its relatively brief history. First came the industrial revolution, which changed the nation from one comprised mostly of artisans and craftsmen to one of factories, automation, mass production, and urbanization. More recently was the technology revolution, which introduced new ways to store, manage, and share massive amounts of information, especially via the Internet. This was followed quickly by what many refer to as the knowledge revolution, where the very nature of work has changed dramatically. Initially, this trend was a shift from manufacturing to services. However, in the last two decades, there has been a significant shift towards knowledge-based work, where what people "know" rather than what they "do" has become increasingly relevant and valuable. This change is seen clearly in the rise of consultancy-based work and jobs. For example, companies such as IBM or UPS now focus more on providing their clients with solutions-based services, ones that may or may not include their own products. Today, IBM actually earns more of its income from this type of business than it does from selling its own product lines. The same trend is evident with the large accounting firms who have developed a consultancy business in addition to their traditional accounting and audit services.

The Importance of Intellectual Capital

The shift towards a knowledge economy during the past 20 years has resulted in a change in the way we think about the value of a firm. Traditional assets such as property, equipment, and even technology began to take a back seat to the knowledge people carried around in their heads. The term intellectual capital became popular in business nomenclature. Business leaders began to talk up the value of their intellectual assets, and even Wall Street began to include these intangibles in factoring how well a firm was expected to perform.

According to Dave Ulrich (2004), intellectual capital is a firm`s only "appreciable asset" (pp. 15-16). As the need for intellectual capital increases, companies must find ways to ensure that it develops and grows. Known as the "Talent Management" process in many companies today, it involves the attraction, development, and retention of a firm`s intellectual capital, and has become an important responsibility of the Human Resources (HR) function. Ulrich (2004) outlines five tools that firms can use to increase their intellectual capital competence:

1. Buy. The firm goes outside to hire new talent.

2. Build. The firm invests in employee learning and training.

3. Borrow. The firm hires consultants and forms partnerships with suppliers, customers, and vendors to share knowledge, create new knowledge, and bring in new ways to work.

4. Bounce. The firm removes those employees who fail to change, learn, and adapt.

5. Bind. The firm finds ways to keep those workers it finds most valuable (p. 16).

Human Resources as Strategic Business Partner

Because intellectual capital and talent management have become critical for success today, the function of HR has begun to transform itself in an attempt to meet new demands and challenges; however, the function has also come under attack. When employees are asked what role their HR department plays within their organizations, they often respond with a list of tactical responsibilities, such as looking after the payroll, managing employee benefits, and interviewing for entry-level positions. HR often is viewed in a "policing role" to ensure company policy and procedures are followed. Because of this perception, the question is often asked: Does HR really add value in this new era, where human capital is so important and is seemingly everyone`s responsibility? In fact, some companies have gone so far as to outsource their HR function.

The Four Roles of Human Resources

The HR community has gotten the message, and is moving towards playing a more strategic role within organizations. Dave Ulrich, one of the leading thinkers in this field, has outlined a new agenda for HR that is radically different from the traditional role. The article "A New Mandate for Human Resources" (1998) outlines Ulrich`s groundbreaking thinking on this topic. Fundamentally, HR has to play an important role at the very "top of the house," and has to be invited to the table when top executives are planning the strategy for their firms. Only in this way can HR really contribute to the bottom line. In fact, HR should be as critical to strategy formulation and execution as any other function: finance, marketing, information technology, or operations.

Corporate leaders should view HR as a business partner to line management, rather than a staff function removed from the day-to-day realities of the business. Not surprisingly, this new business partner role requires a completely different skill set for HR managers. Ulrich (1998) identifies three other important roles for today`s HR practitioners: First, they need to be the agents driving change within organizations, helping to shape change and improve the company`s capacity to change. Employees and outsiders see this very clearly with merger and acquisition activities, where HR has a critical role to play in the integration of the two organizational cultures. Secondly, HR needs to be the champion for employees, to ensure that they are able to contribute and deliver results. The third, HR today is to be an expert in how work is organized and executed. Just as an operations manager is responsible for the efficiencies of processes and workflow, so must HR tend to the efficiencies and effectiveness of "people work."

Human Resources Building Organizational Capability

Because people do not work in a vacuum, the overall capabilities of the organization must be considered. Even the most capable people will fail if put into a dysfunctional or toxic work environment. HR has an important role to play in ensuring that talent has every chance to deliver superior results. Dave Ulrich and Norm Smallwood (2004) present an intriguing model to frame individual and organizational capabilities in terms of both technical and social competence. The organization must deliver in all of these areas if it is to achieve a sustainable competitive advantage. The authors provide a practical tool for conducting an "organizational audit" that will highlight important capabilities for a given organization and where possible gaps might exist.

The Softer Side of Sears

Retailer giant Sears, Roebuck and Company invested considerable resources and time in developing its "employee-customer-profit model," which is a rigorous tool that measures the correlation between employee satisfaction and customer satisfaction, and in turn, customer satisfaction and shareholder satisfaction (as measured in increased profits). This study provides a concrete example of how critical employees are to the overall performance of a business organization and underscores why human capital matters. The study is important because it puts in place a measurement system for human capital, which is difficult to do and is a major factor in why human capital is often undervalued.


In today`s knowledge economy, intellectual capital is more critical than it has ever been. HR has a pivotal role to play in attracting, developing, and retaining talent. As such, HR must work as effective business partners with line management and the executive team to ensure that individual and organizational capabilities are built and grown for competitive advantage. The transition in role may not be easy for traditional HR employees, some of whom do not have the skills to take on this new and very different mandate. Subsequently, one of the key issues will be to attract the right people to the HR function itself. Business knowledge and the capacity to deal with continuous change will be baseline entrance requirements for today`s HR practitioners.


Rucci, A. J., Kirn, S. P., and Quinn, R. T. (1998, January/February). The employee-customer-profit chain at Sears. Harvard Business Review, 76(1), (p. 82). Retrieved October 25, 2005, from EBSCOHost database. AN: 16951.

Ulrich, D. (1998, Winter). Human resource management and industrial relations. Sloan Management Review, 39(2), (pp. 15−26).

Ulrich, D. (1998, January/February). A new mandate for human resources. Harvard Business Review,76(1), (p. 124).Retrieved October 25, 2005, from EBSCOHost database. AN: 16992.

Ulrich, D. (1999, January/February). Should we do away with HR? Harvard Business Review.

Ulrich, D., and Smallwood, N. (2004, June). Capitalizing on capabilities. Harvard Business Review, 82(6), (pp 119-127). Retrieved October 25, 2005, from EBSCOHost database. AN: 13208578.


Module 4 DQ1 Name: Institution: Reasons why intellectual capital is often undervalued or taken for granted Intellectual capital is vital for an organization to succeed in the current knowledge economy. Intellectual capital provides the relevant knowledge and skills required in developing a strong business brand needed to compete on the global


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