A real options model for workforce cross-training.: An article from: Engineering Economist

This digital document is an article from Engineering Economist, published by Thomson Gale on June 22, 2005. The length of the article is 7087 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the author: In this article, we propose using a real options framework to model and financially value a cross-training policy. The cross-training policy involves a dynamic investment on workforce flexibility. We model it as an approximation of an American call option using binomial lattices. Value stems from the merit of dynamic cross-training compared with the deterministic case using traditional discounted cash flow techniques. This work is discussed in the context of a volatile production system characterized by product dynamics, labor dynamics, task heterogeneity and workforce heterogeneity. Results suggest that cross-training based on the real options approach is dependent on the production capability and the level of workforce heterogeneity. Thus, valuing workforce flexibility using real options has strategic utility beyond that of the net present value approach.

Citation Details
Title: A real options model for workforce cross-training.
Author: David A. Nembhard
Publication:Engineering Economist (Magazine/Journal)
Date: June 22, 2005
Publisher: Thomson Gale
Volume: 50 Issue: 2 Page: 95(22)

Distributed by Thomson Gale