In the Resource-Based View

Some time ago in this space I brought up the concept known in Management theory as the Resource-Based View of the Firm, or RBV. It’s a staple of strategic-level Management classes which suggests that it is the resources a firm controls – and how well they are utilized by the management team – that determines how successful a given business is going to be. I could tell you that the concept derives from the work of Edith Penrose in 1959 but is more commonly associated with Wernerfeldt in 1984 and Jay Barney’s definitive work in 1991, but if you actually cared about any of that you’d probably be studying it already. A more useful discussion would be how this concept can be of use to your business now. Fortunately, a possible example turned up in yesterday’s post about hiring decisions based on physical appearance…

In the Resource-Based View, any given resource must have four basic characteristics in order give you a sustainable competitive advantage: value, rarity, inimitability and being difficult to substitute for or work around. Needless to say, perhaps, there is considerable disagreement over what “sustainable” means in terms of time frame, as well as how each of these characteristics should be defined, but in general the structure holds up surprisingly well. If a give resource isn’t valuable it probably can’t help you; if it isn’t rare, everyone else will probably have one just like it; if it is easy to imitate you can count on the competition doing just that, and if it is easy to find something else you can substitute for it you can probably assume that people will consider a cheaper or more readily available substitute. What a lot of people seem to forget is that this model can be applied to more than just physical assets…

It would be facile, I think, to deny that in many fields of endeavor there is a definite advantage to being visually attractive. The research is fairly conclusive that people will tend to respond to someone they think of as good-looking in a number of useful ways, many of which are not conscious or even obvious. Most occupations will require the use of various skills in addition, and those that do not involve personal contact will provide minimal opportunities to capitalize on appearance, but in general I believe it is safe to say that an attractive appearance has value. It is also, by definition rare, at least in the sense used in yesterday’s story (e.g. the top 10% of applicants on the basis of appearance only). Whether or not it can be imitated is highly debatable; an individual person’s appearance might be unique, but within any given population you would expect to find multiple attractive people. Substitutability is also highly debatable; there are some advantages that can be achieved another way, but nothing that exactly replaces a good-looking workforce…

In theory, if a given resource can be imitated or a substitute for it can be found, it will only be a matter of time before some competitor does that and your competitive advantage is lost – hence a temporary, rather than sustainable advantage can be gained. With reference to yesterday’s story, the more complex issue here is whether the temporary advantage you might be able to gain by using this service to recruit a more visually attractive workforce is sufficient to offset the disadvantages you will incur by passing up better-qualified but less attractive workers, decreased morale when your employees realize they’ve been hired for their looks, not because you have confidence in their abilities, and the fact that your competition will almost certainly hire the more competent but slightly less attractive workers…

That’s a decision you will have to make, of course, based on your experience, judgment, and knowledge of your industry. And this still does not address the ethics of the situation…