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and external fit. Internal fit means that management practices are consistent with
each other and pulling in the same direction. Thus, in the personalization strat-
egy, the kinds of people that are recruited needs to be consistent with the way
those people are rewarded. External fit has to do with ensuring that outcomes
of HRM practices fit with the strategic needs of the firm. Thus, with the per-
sonalization strategy we can see that the kinds of knowledge produced by the
consultants in companies like Bain & Co fit well with those companies’ business
strategies and their approach to solving client problems.

Human capital approach
The best-fit approach may be more tailored to individual organizations but it
is also limited in some respects. This approach is essentially managerial in its
focus. That is, it is concerned with getting management practices aligned with
each other at one point in time. By doing this, the right kinds of knowledge will
theoretically flow amongst employees, and from employees to clients. What it
does not do, however, is address the long-term factors which influence the devel-
opment of the stocks of knowledge within an organization. These stocks can be
accumulated in a number of different ways. They can come from organizational
learning, for instance, where organizations develop highly efficient routines for
dealing with problems. They may also be developed through good relationships
with suppliers and customers, which extend the firm’s knowledge base. Crucially,
because such stocks are difficult to acquire and copy, they are seen as vital sources
of the organizational capabilities through which firms compete (Barney, 1991).
Conventional systems of accounting – balance sheets, profit and loss accounts –
have difficulty in dealing with the intrinsic value of these stocks of knowledge.
They are not a tangible asset of the firm, and cannot be as easily quantified as, say,
the value of capital equipment. Nonetheless, for organizations within the growing
knowledge economy, these intangible assets are often the most important assets
they possess. Their increasing importance has been reflected in the growing inter-
est in what has been called the ‘intellectual capital’ of the organization. Such capi-
tal is normally seen as being made up of three principal forms of intangible asset:

• Human Capital – the ability of individuals to contribute to organizational
performance based on their personal competencies, and mindsets.
• Customer Capital – the strength of the customer relationship as reflected in
superior customer-perceived value, and the increasing customization of busi-
ness solutions.
• Organizational Capital – the capabilities of the organization which are accu-
mulated from its knowledge base, business processes, shared culture, values
and norms.

In this perspective, the expertise applied by knowledge workers represents the
human capital component of the organization’s intellectual capital. Viewing

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