That is do we have enough lecturers a strategy map

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Unformatted text preview: Costs incurred over the entire contracted period such as evaluation costs. Order Level – Costs that are incurred on a specific order such as invoicing and inspection. Unit Level – Costs that are incurred on a specific type of unit such as rework or replacement. Evaluation of Calculating Total Cost of Ownership TCO allows us to see the costs of a certain supplier, rather than just looking at the price of their product. This allows us to choose the best performing supplier and appropriately allocate business as necessary. However, there are other criteria that TCO cannot account for such as good employees, great research and development programs and service. Supplier Performance Index The Supplier Performance Index (SPI) makes comparing between suppliers easier with a since value taking into account both costs and benefits. It is calculated as follows: SPI = Total Supplier Activity Costs / Total Purchase Price The lower this value is, the better. Management Accounting 2 – Semester 2 2010 25 Managing Employee Value and Intellectual Capital Managing Employee Value and Intellectual Capital Background Most managers would say that employees are their “most valuable asset” even though we know that, by definition, employees are not assets. We can attempt to account for human resources through intellectual capital. Intellectual Capital Sveiby defines Intellectual Capital through an intangible asset monitor framework. This framework is comprised of three parts: • • • External Structure This includes brand names, images and relationship between the entity and stakeholders. Internal Structure This includes support staff, patents, innovations, computer systems and administration. Employee Competence This is the competence of professional staff. This differs according to the context of the situation. An accountant can be part of the internal structure but an accountant would be part of employee competence if the firm were an auditing firm, since this is its main operation. Indicators in these areas are: • • • Growth and Renewal Examples for each of the three areas in order: Profitability per customer, Investment in systems, and number of years in service. Efficiency Examples for each of the three areas in order: Customer satisfaction rate, value added per support staff, and proportion of professional staff. Stability Examples for each of the three areas in order: Proportion of big customers, rookie ratio, and seniority. These three indicators should be evaluated in each of the three structures listed previously. It is important for entities to manage and report intellectual capital because it helps firms internally with decision ­making and also as a basis to compensate staff. It is also important externally in that shareholders and creditors can assess the “true value” of a firm, not just the accounting value. We see that the market value of firms is consistently higher than the book value of the firm, which leads us to believe that intellectual capital is worth a lot. Corporate Balanced Scorecard Likewise, the corporate balanced scorecard can be used, usually in the learning and growth perspective to report on human capital management. Management Accounting 2 – Semester 2 2010 26 Managing Employee Value and Intellectual Capital Human Capital Readiness Human Capital Readiness assesses the availability of employee skills to perform a certain strategy. Thus, it enables entities to identify human capital deficiencies and remedy them. First, the entity should identify the critical jobs, which have the greatest impact on the firm’s strategy. Say for a university, these would be lecturers. Then, the entity needs to build a competency profile of those positions, which details the knowledge, skills and values that employees in that job require. For a lecturer, these would be knowledge of what they are to teach etc. With these two known, the entity must then proceed to assess human capital readiness by evaluating the identified jobs and competencies required against those which is has presently. That is, do we have enough lecturers? A strategy map can be used here to graphically show the process. A Human Capital Development Program should then be used to focus recruitment, training and planning around strategic jobs. This allows more efficient spending and f...
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