HR strategy: optimizing risks, optimizing rewards

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.