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This paper seeks to review the article titled “Fairness: Managing in the knowledge economy” written by W. Chan Kim and Renee Mauborgne. This write up defines the meaning of human capital and it also examines who posses it in an organization. Further, it examines the difference in managing physical or financial capital and human capital. It also explores the role of trust, responsibility, commitment and involvement in intellectual capital management. In addition, it looks at the similarities between distributive/procedural justice and single/ double loop learning. Finally, it explores on the value of commitment of all employees to the business and knowledge goals.
The article defines intellectual capital as knowledge that employees posses which is vital in the management of an organization. It also explores that intellectual capital is an asset that is intangible since one cannot see it and it is hardly realized. Its significance in any organization can only be realized if all employees are consulted before making any decision that will affect the organization. Thus, it is an imperative asset to the organization. Intellectual capital is possessed by all employees working in any organization; whether they are on high or low ranking levels. The article also states that, when an individual feels that his or her views are considered in the decision making process, the individual will be motivated to work hard and thus improve efficiency.
There is a distinction between managing physical or financial capital and human capital. This is because of the diversity that exists between financial capital and human capital. Financial capital does not have feelings therefore, managers can manipulate it without any effect. On the other hand human capital has feelings hence it needs to be handled with care. This is because when it is mishandled, the end results will easily manifest themselves inform of reduced production and lack of trust. This could be deduced from various examples illustrated in the article. For instance, though the judge ruled in favor of the woman, the woman felt irritated because she was never given enough time to express herself against the police. Similarly, employees of Chester Company felt betrayed though the decision was meant to benefit them. As a result, the employees lost their morale for work and their performance depreciated at an alarming rate. This was in contrast with the way they used to work.
The two examples illustrate the difference that exists when handling human capital and financial capital. In addition, fair process influences attitudes and behaviors critical to high performance. Moreover, it builds trust and unlocks ideas of human capital which are beneficial to the organization. The converse is true for financial capital since it lacks ideas and trust. In contrast with human capital, financial capital can be manipulated in any way without greater repercussions.
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Trust, responsibility, commitment and involvement play a significant role in intellectual capital management. If employees feel trusted and they are involved in the decision making process, they are likely to be more responsible and productive. This was illustrated in the article when Chester plant employees were handled fairly by involving them in the decision making process and explaining to them why things were done in a particular way and the expected results. The employees felt that their opinions mattered and as a result, they developed trust and they also committed themselves toward helping the plant achieve its goals and objectives. Consequently, their behavior was altered since they were willing to cooperate voluntarily thus increasing performance.
As discussed in the article, there are similarities between distributive justice and single loop learning. Distributive justice occurs when employees get compensated after performing a particular task. This makes them satisfied with the outcome. On their part, they reciprocate by fulfilling their obligation to the organization. On the other hand, single/ double loop learning comes into existence when all employees are made to understand how the final decision was arrived at. According to the way employees are handled in both distributive justice and single/double lop learning, employee’s confidence and trust in the organization increases. This is because they are involved in the decision making process and they are compensated for what they do. As a result, their interest in the company increases hence they become committed in helping the organization to achieve its goals and objectives.
The other similarity that exists between single/double loop learning and distributive/procedural justice is that knowledge is shared freely by all individuals in the organization. As a result, the probability of making informed decisions is very high. This is because each individual is unique and they possess knowledge and information that can benefit the organization.
Commitment of all employees to the business and knowledge goals is imperative to the success of the organization. For instance, when employees are committed, they will not wait untill a problem manifests itself. They will communicate freely as soon as it starts developing. This will reduce the organization’s costs of operation. According to the lesson learnt by Elco’s managers, commitment is paramount since it makes employees go an extra mile or work beyond what is expected of them. Because of working beyond their expectation, the general level of production increases beyond the set targets. Finally, commitment leads to active cooperation of employees hence the efficiency of the organization increases leading to increased production.
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Intellectual capital is significant in the management of any organization. It can be realized through consulting all employees in order to make them feel as part of the decision making process. Further, a conducive working environment needs to be established where employees are made to understand why a particular decision was made. This in return increases their commitment, trust, involvement and responsibility to the organization. This also contributes to increased production.