Comparing and Contrasting Three Business Evaluation Methods


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There are a number a ways to define organizational value; however, whatever the definition, the ultimate outcome is to generate shareholders value. One method to determine organizational value is to synchronize human and complementary capital. As such, corporations have identified the essence of complementary capital is a process in which enterprises change their organizational structure, culture, social relationships, and develop latent value of resources to enhance core competitive capacity and realize its performance targets (Zhang & Jin, 2006). Human capital has property rights character, social character, exclusive character, and is dependent on expectations of the organization (Zhang, 2000). So, there are many factors affecting human capital investment returns; such as, organizational structures, regulations, canons, regimes, mechanisms, culture, administrative philosophy, management programs, and information systems. If one kind of capital can produce value-added, it is capitalized to some extent (Fan, 2001). Organizational structure should conform to a strategy and influence the objectives of the enterprises. An enterprise can quickly meet the demand of markets by adjusting its structure, processes and operations accordingly to gain a competitive advantage (Zhang & Jin, 2006).

Action-Profit Linkage Model (APL); begins with a corporate strategy and moves to four main components: company actions, delivered products/services, customer actions and economic impacts. Managers can evaluate the profitability of any action their company takes by examining the links between the action, intervening variables, and the resulting changes to revenues – minus the costs of their planned actions (Epstein & Westbrook, 2001). Service-Profit Chain (SPC); asserts that employee satisfaction is related to customer satisfaction; driving profitability. However, the SPC construct omits drivers other than those of employee satisfaction. SPC only assumes the link between customer satisfaction and company profitability. There is no analysis or confirmation quality (Epstein & Westbrook). Return On Quality (ROQ); suggests that leaders can trace improved company profitability to its drivers through a chain of variables; which is also a special case of the APL model. ROQ model only addresses improvements in product quality (Epstein & Westbrook).

To effectively gauge either model, leaders are required to establish performance measures and glide paths that foster success. With the appropriate range and set of performance metrics, thoroughly communicated across the organization, companies afford themselves: an employee population that understands and appreciates the company’s strategic and tactical direction; the work is performed with a higher level of employee satisfaction, based on well thought out processes and system applications; and employees are eager to work toward producing quality (right first time) products and services.


Epstein, M. J. and Westbrook, R. A. (2001). Linking action to profits in strategic decision making. MIT Slone Management Review. pp. 39-49.
Zhang, H. and Jin, R. (2006). Value-added of human capital through complementary capital. Journal of American Academy of Business; 9(1), 191-196.

Dr. Johnny D. Magwood
Northeast Utilities Service Company
V.P. Customer Experience & Chief Customer Officer; Northeast Utilities Service Company. J. D. Power Smart Grid Advisory Council; Chairman- Housing Authority Baltimore City; Next Generation Utilities Advisory Board; Utility Knowledge Customer Service Council; CS Advisory Council; Magistrate Judge Seletion Committee. Marketing Executive Council; Mechanical Engineer - The Johns Hopkins University; MBA - Loyola University of Maryland; DBA - University of Phoenix; Doctoral dissertation; Mergers and Acquisition: The Role of Corporate Executives' Relationships with Stakeholders


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