Question

What type of performance measurement could managerial accountants use to determine the value and productivity of human resources?

Answer 1

WAYS TO MEASURE HUMAN CAPITAL OR VALUE OF HUMAN RESOURCES

Human capital is considered a resource; an asset similar to land, equipment, bonds, and stocks.

However, it is INTANGIBLE IN NATURE, just like intellectual property or patents are. Intangible assets are no less valuable than tangible ones, it’s just that their value cannot be discerned easily.

One method to value is human capital’s return on investment (ROI).

Steps Involved

Formula = TOTAL ORGANIZATION PROFITS / INVESTMENTS ON HUMAN CAPITAL

Where Total Organizational Profits is profit after covering all of its expen

And Investment on Human Capital refers to money that your organization has put in to develop its human capital; i.e. recruitment and selection, training and development, compensation, etc

If your ROI is sufficient, and if it is comparable to that of other companies in the same industry.

ROIs differ from one company to the next depending on their size, strategy, and industry, but bench-marking is always considered good practice!

Some More human capital measurement techniques:

(a). Skills Inventory- It deals with the skills, capabilities, qualifications, trainings, and certifications of your employees. The skills inventory may also include your employees’ preferences, career goals, and other developmental information.

(b) Personality- Focus on their “other attributes” along with skills, etc.The most important and considered is personality.

An individual’s attitudes, and innate traits defines the employee. Many recent studies have shown that over half the organizations today believe that HR is more influential than it was five years ago. Executives are now recognizing HR’s ability to making strategic contributions to the organization’s overall objective.