The authors of a recent article have shown how the concept of return on investment can be applied to the management of human resources. The authors note: “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.” Investments in HCM include programs such as leadership development, job design, and knowledge sharing. 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. The methods consider the drivers of organizational performance in five categories: (a) leadership practices, (b) employee engagement, (c) knowledge accessibility, (d) workforce optimization, and (e) organizational learning capacity.

Required

1. How would you adapt management accounting systems such as those described in this chapter to guide and monitor investments in human capital?

2. The article was written in 2011, prior to Brexit and the trend toward economic nationalism that started in 2016. How do you imagine the authors would adapt (if at all) their comment on globalization quoted above given the events of 2016?

3. Which type of competitive strategy, cost leadership or differentiation, would most likely benefit from the focus on human capital management, and why?