HR strategy: optimizing risks, optimizing rewards

Abstract

Purpose

The purpose of this paper is to suggest that in the arena of human capital, risk-mitigation may overshadow risk-optimized decisions, and show how a more balanced approach can be achieved by understanding and applying frameworks from behavioral decision theory, as well as framing human capital risk using tools and frameworks that have a long history in other management arenas, such as finance.

Design/methodology/approach

Review risk-optimization frameworks in human resource and general management, distill key connections, suggest ways to enhance risk optimization for human capital, and offer suggestions for future research and practice.

Findings

For human capital, risk-mitigation may overshadow risk-optimization, a balanced approach can be achieved by applying behavioral decision theory and by using frameworks from other management arenas, such as finance.

Practical implications

Organizations must acknowledge and skillfully manage the connections between human capital and competitive strategy in this emerging arena of human capital risk, or they will miss key strategic opportunities.

Originality/value

Attention to human capital risk has largely emphasized minimizing or controlling unwanted outcomes, but the paper proposes that risk-optimization requires balanced attention to risk-taking as well.

Citation

Cascio, W. and Boudreau, J. (2014), "HR strategy: optimizing risks, optimizing rewards", Journal of Organizational Effectiveness: People and Performance, Vol. 1 No. 1, pp. 77-97. https://doi.org/10.1108/JOEPP-01-2014-0005