Should Employees Be Characterised as Human Assets?

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Position Paper

“Should employees be characterized as human assets?”

Arthur Lok Jack GSB
Student Name: Mahalia Jackson
Student ID No.: 98708970
HRNM 6310: HR Management Information Systems
2012/2013 Trimester II

Feb. 2013

(Dilbert by Scott Adams 1995)
Introduction
“Our employees are our greatest asset”, is one of the statements that are commonly made by CEOs in organizations almost on a daily basis. Of course this is a true statement, as it is only through people, employees, can the strategic plans of organizations be successfully accomplished. However, do people count as “assets” in the true sense of the word? According to investopedia.com an asset is “...a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.” (Investopedia.com n.d.) However, people are not assets like tangible fixed assets such as equipment, which is what is alluded to in the foregoing definition, people cannot be owned and do not depreciate; if they are assets, people are intangible assets. Investopedia.com defines an intangible asset as “…an asset that is not physical in nature. Corporate intellectual property (items such as patents, trademarks, copyrights, and business methodologies), goodwill and brand recognition…while intangible assets don't have the obvious physical value of a factory or equipment, they can prove very valuable for a firm and can be critical to its long-term success or failure.” (Investopedia.com n.d.)

It is the view of this position paper that employees can be characterized as “human assets”, intangible assets, in which organizations invest on a regular basis with the intention of building long term economic value. Training and development, compensation, employee benefits such as savings and pension plans, employee assistance programs, health plans, are just a few of the investments that organizations make in their human intangible assets which drive their financial success; in spite of these investments being treated as expenses on income statements.

While it is true that organizations do not “own” or “control” their employees as it does its physical assets, the knowledge, skills, abilities and talents which employees bring to bear on the organization while in its employ, does in fact redound to the benefit of the organization as on an aggregate level is responsible for the economic success of the organization and its competitive advantage in the market in which it operates. Salaries, employer contributions to pension, savings and group health plans and other employee benefits which organizations invest in on behalf of their employees are in fact payment for the use of these knowledge, skills, abilities and talents. Also, human resource policies and procedures which outline and guide expected and approved employee behaviors while in the employ of the organization, can be viewed as controlling mechanisms used by organizations to ensure that its ‘human assets’ conform to its rules and regulations. Failure to conform, results in consequences as spelt out in organizations’ disciplinary policies and procedures.

The term “human assets” is considered derogatory to some, as it gives the impression that employees are the “property” of an organization. However, the term merely ascribes worth and value to employees and allows organizations to strategically invest in these “assets” in order to exact optimum benefits out of them. As identified in Strategic Management of Human Resources by Jeffrey A. Mello the following exhibit outlines some of the value employees bring to an organization:-

(Mello 2011, 2006)

In recognizing the sources of value that employees bring to bear on the organization, as outlined above, organizations can determine how best it can invest in its employees, the rate of return and long-term benefit it can derive from its investments. As always, there is risk involve in making such an...
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