Gone are the days of silos…what is needed today is an effective interface between different disciplines. A very good example is the emergence of Human Resource Accounting.
Human Resource Accounting (HRA) as an approach was originally defined as the process of identifying, measuring and communicating information about human resources in order to facilitate effective management within an organization. It is an extension of the accounting principles of matching costs and revenues and of organizing data to communicate relevant information in financial terms.
Until recently, the "value" of an organization as measured within traditional balance sheets, e.g. buildings, production plant, etc., was viewed as a sufficient reflection of the organization's assets. However, with the growing emergence of the knowledge economy, this traditional valuation has been called into question due to the recognition that human capital is an increasingly important part of an organization's total value.
To do this, an understanding has to be created for:
Human Resource Accounting (HRA) as an approach was originally defined as the process of identifying, measuring and communicating information about human resources in order to facilitate effective management within an organization. It is an extension of the accounting principles of matching costs and revenues and of organizing data to communicate relevant information in financial terms.
Until recently, the "value" of an organization as measured within traditional balance sheets, e.g. buildings, production plant, etc., was viewed as a sufficient reflection of the organization's assets. However, with the growing emergence of the knowledge economy, this traditional valuation has been called into question due to the recognition that human capital is an increasingly important part of an organization's total value.
To do this, an understanding has to be created for:
- Assessing the value of human capital in addition to an organization's tangible assets and
- Improving (and quantifying) the development of human capital in organizations
Under human resource accounting, a value is placed on people based on such factors as experience, education, psychological traits, training, commitment, and, most importantly, future earning power (benefit) to the company.
The idea has been well received by human-resource-oriented organizations, such as those engaged in accounting, law, and consulting. Practical application is limited, however, primarily because of difficulty and the lack of uniform, consistent methods of quantifying the values of human resources.
The idea has been well received by human-resource-oriented organizations, such as those engaged in accounting, law, and consulting. Practical application is limited, however, primarily because of difficulty and the lack of uniform, consistent methods of quantifying the values of human resources.
Dr. Meenakshi Khemka
(Globsyn Business School)
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