Human Resource Accounting- Tool for measuring Human resource value

Essay by tirath5uUniversity, Master'sC+, May 2008

download word file, 21 pages 3.0




After going through this unit, the reader should be able to:

l understand and define the concept of Human Resource Accounting, its objectives

and its role in Human Resource Management;

l understand the measurements of Human Resource Costs; and

l understand the measurements of Human Resource Value.


18.1 Introduction

18.2 What is HRA?

18.3 Why HRA?

18.4 Historical Development of HRA

18.5 Information Management for HRA

18.6 Measurement in HRA: Two Approaches

18.7 The Cost Approach

18.8 The Economic Value Approach: Monetary Value Based Approaches

18.9 The Non-Monetary Value Based Approaches

18.10 Measurements of Group Value

18.11 Summary

18.12 Self-Assessment Questions

18.13 Further Readings


The past few decades have witnessed a global transition from manufacturing to

service based economies. The fundamental difference between the two lies in the very

nature of their assets. In the former, the physical assets like plant, machinery, material

etc. are of utmost importance. In contrast, in the latter, knowledge and attitudes of the

employees assume greater significance. For instance, in the case of an IT firm, the

value of its physical assets is negligible when compared with the value of the

knowledge and skills of its personnel. Similarly, in hospitals, academic institutions,

consulting firms etc., the total worth of the organisation depends mainly on the skills

of its employees and the services they render. Hence, the success of these

organizations is contingent on the quality of their Human Resource- its knowledge,

skills, competence, motivation and understanding of the organisational culture. In

knowledge -driven economies therefore, it is imperative that the humans be recognised

as an integral part of the total worth of an organisation. However, in order to estimate

and project the worth of the human capital, it is necessary that some method of

quantifying the...