Is a concept developed by management writers, David Lepak and Scott Snell, for ‘studying alternative employment relationships used by firms in allocating work’. Essentially, they propose four types of employment relationship, based on the degree to which workforce skills are of high or low value, and firm-specific or generally available. Where skills are firm-specific, contribute to core business activity, and are of high value, there will be an emphasis on long-term employment and developing skills and trust relations between managers and workers. Where skills are of high value but widely available, in contrast, there will be a more contractual relationship with fully-skilled workers hired from the external labour market and rewarded at their market rate. Employment in this case may be for a limited period, such as the time needed to complete a particular work project. Where skills are of low value and widely available, there is likely to be resort to outsourcing and subcontracting; labour in this case will be treated very much as a disposable commodity. Finally, where skills are firm-specific but non-core employers are likely to develop ‘human capital alliances’, perhaps based on a long-term, trustful relationship with a specialist external sub-contractor. Lepak and Snell's typology represents a fuller exploration of the make-or-buy decision in human resource management. Its key feature is the recognition that firms will develop different forms of employment relationship with particular segments of the workforce, depending on the nature of the work they perform and the skills (human capital) they bring to their employment.
Subjects: Human Resource Management.