Want to build or buy human capital?

Vantage point: Insights from cutting-edge research

Recruit on campus or hire from competitors? In other words, build human capital or buy it? According to Professor Amit Chauradia, an expert in the strategy area at the Indian School of Business, most companies choose from the two options when it comes to hiring employees. While both building and buying strategies can generate value (over different time frames), it is more crucial to understand “how” building versus buying generates greater economic and financial benefits for the firm.

Chauradia’s research highlights four classic human resource problems that companies must effectively address to increase their returns from the HR strategy. First, firms face challenges in accurately assessing an employee’s quality attributes prior to hiring. Second, they find it difficult to motivate employees to invest time and effort in company-development efforts when employees are keen to enhance their own development and skills that aren’t company-specific. Third, determining the fine balance between the employees’ goals and the company’s goals is more challenging that one can imagine. Fourth, how can companies get the incentives right to motivate employees to work diligently?

Chauradia points out that the key to solving these problems lies in a company’s ability to leverage reputation, promotion chances, and hiring of external leadership. Using data of over 200 firms from a human capital-intensive industry, he demonstrates that companies with a strong reputation and good promotion chances for employees can benefit the most with a building strategy, while those that hire external leaders from rival companies will benefit the most with buying strategies. A company that uses a building strategy will invest significantly in training, mentorship and job rotation. The difficulty lies in hiring the “right” type of novices who have the desirable skill sets. Chauradia suggests a company’s reputation and promotion chances will attract and help in retaining the most talented rookies.

Virtual reality ads deliver memorable brand experiences

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Virtual reality (VR) advertising is highly memorable with 70 per cent aided recall across all ad formats, according to a new VR in-game advertising study. The study, which was released by digital video brand advertising YuMe in partnership with others, compared consumer responses to three forms of VR advertising — a pre-roll video ad, brand logos present in-game and 3D branded objects inserted into interactive game play. The highest levels of brand recall occurred with the pre-roll video ad, which achieved 90 per cent aided recall on the day the study was conducted.

As brands continue to identify the most impactful video advertising formats, the report also offers insights about which ad format elicits the strongest emotional response, identified through Isobar's proprietary VR analytics and measurement platform. Isobar found that pre-roll video within a VR experience is associated with a stronger emotional response (both higher emotional arousal and more positive emotional valence). Stronger emotional response levels make advertising more memorable, as is often evidenced by correlating with higher recall.

“We believe our study indicates that VR advertising is highly memorable in any format. It’s encouraging to see that a video ad, the most familiar and high-performing digital format, also delivers the highest rate of ad recall in the VR world,” said Mireya Arteaga, research lead, YuMe. “We believe immersive advertising is on the rise. Its ability to deliver a compelling branded-content message that is interactive, engaging and offers consumers the ability to own their ad experience is very attractive to today’s advertisers.”

“We see strong emotional engagement in both the overall experience and during exposure to each of the ad units, as measured through multiple biometric channels, including brain waves, facial muscle contractions, skin conductance, and heart rate changes,” said Jeremy Pincus, vice-president at Isobar.