Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 68

Research Assignment, Strategy Obtain from your library a copy of following article: Laurie Bassie and Daniel McMurrer, “Maximizing Your Return on People,” Harvard Business Review (March 2007), pp. 115?123. The authors of this article state (p. 123): “Globalization has left only one true path to profitability for firms operating in high-wage, developed nations: to base their competitive strategy on exceptional human capital management (HCM) . . . managing human capital by instinct and intuition becomes not only inadequate, but reckless. The most competitive companies will be those that manage their employees like the assets they are.”

Required After reading the above-referenced article, answer the following questions:

1. What is the general issue addressed by the authors of this article? That is, what managerial problem are they discussing?

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2. The authors develop a framework that, they assert, can be useful for increasing the long-term value of investments in human capital. What are the two major factors in the authors’ framework? How can the framework be used by managers as part of a comprehensive management accounting and control system?

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3. The authors provide three examples of how their evaluation/assessment framework was used in practice to assess the quality of an organization’s HCM. For each example, indicate how organizational performance was defined, and how the evaluation framework proposed by the authors was used to improve that performance. (That is, what principal results were achieved?)

Step 1 of 3

1.??As the authors note on page 123 of their article, "Globalization has left only one true path to profitability for firms operating in high-wage, developed nations: to base their competitive strategy on exceptional human capital management (HCM)." In the past, these same firms may have been able to secure sustainable competitive advantage by managing their financial or physical capital. Performance-measurement systems for managing such assets are well-developed and key to traditional management accounting and control systems. The management of human capital, however, is not as well developed. Thus, the authors of this article propose methods for measuring the contribution (returns) on investments in human capital, so that these investments can be better managed. Superior management of these investments is critical for achieving sustainable competitive advantage by many firms today. The challenge, of course, is how to adapt management accounting and control systems to guide and monitor such investments.