Management by Algorithm: The Case of Human Capital
Knudsen, Lien & Wuebker (in review) Management by Algorithm: The Case of Human Capital
What will happen to the strategic management of human capital if AI reach a level where it can allocate employees to teams and tasks better than human managers?
This paper explores machine allocation of human resources to teams and tasks within organizations, and its implications for the management of human capital. We consider a thought experiment where all firms have access to the same basic machine learning technology, and show that the ability of firms to create advantages from human capital differs due to variation in the size of a firm’s internal labor market, employee data disclosure, and characteristics of a firm’s task structure and the dynamism of its competitive environment. Our analysis leads to novel and counter-intuitive predictions about the potential role of machines in the management of human capital with potentially wide-reaching implications for research, practice and policy. More broadly, we contribute to active conversations about the future impact of machine intelligence on firm strategy and human capital management.