Human Resource Accounting

Topics: Human resource management, Human resources, Measurement Pages: 7 (2010 words) Published: February 27, 2010
“Research Proposal”

Topic :

Human Resource Accounting
as a Measurement Tool: Asian Perspective

Submitted By:

M. Rizwan Arshad.
Department of Management Sciences
The Islamia University of Bahawalpur.

PhD Research Proposal of
Mr Rizwan Arshad

Human Resource Accounting as a Measurement Tool: An Asian Perspective

Attempts to account the Human Resource are not new it was Rensis Likert (1963), who initiated research into HR accounting in the 60’s. He stressed the importance of long term planning of Human Resource qualitative variables that results in greater benefits in the long run. The resource theory considered that the competitive position of an organization depends on its specific asset, which is the HR. This explains why some firms are more productive and successful than others under almost similar conditions and similar industry. It is the HR that makes all the difference. Following a less fruitful research period (Grojer and Johanson, 1998: 495) one could have expected interest in the area to wane but on the contrary, it has experienced something of a revival. When anyone wants to know the history of HR accounting, most reviewers such as Grojer and Johanson (1998) agreed that during the first half of the 1970s it was one of the most researched subject within accounting, consuming a vast amount of academic Endeavour.

Human Resource is not just the number of pairs of hands engaged in any organization. HR is above the simple number game. HR may be though of as the total knowledge, skills, creative abilities, talents and aptitudes of an organization’s work force. It is the sum total of inherent abilities, acquired knowledge and skills of the employees.

Why HR accounting is considered as important and who is the focus of this research? HR accounting is a term that has both a narrow and more generic focus in the literature with respect to the understanding of the value of people in the contemporary workplace and the contribution of the HR function. Defined narrowly “It is the process of identifying and measuring data about HR and communicating this information to interested parties”(American Accounting Association, 1973, as cited in Flamholtz, 1999: xii). This definition suggests that HR accounting is a tool that can be used for reporting people as organizational resources in both financial and managerial accounting terms (Flamholtz, 1999) The objective is to quantify the economic value of people (Sackman et al, 1989:235). According to Sveiby (1997) attempts to convert people or competencies into financial figures, although theoretically interesting, have not proved entirely useful to managers.

The use of both financial and non-financial approaches is now a more common theme when discussion focuses on the nature of HR accounting. The reason for this is that HR accounting should be thought of as a set of techniques that provide a more balanced perspective, encouraging as much concern about the long-term drivers of financial success as about current performance and value. Consequently, the literature has adopted a wider brief when describing its nature.

Some writers (Lester, 1996; Sheedy-Gohil, 1996; Skittle, 1995) claim that the level of knowledge-based assets of an organisation gives a clearer indication of the potential for future profitability than do traditional historical accounting measures. Therefore, the rate of change in knowledge-based and other intangible assets must be included in any meaningful measure of profits. However, a review by Scarbrough and Elias (2002) suggests that, as an asset, human capital is precarious in terms of its potential mobility and difficult in terms of its measurement.

So narrowly defining HR accounting has distinct limitations because the measurement of HR in whatever guise then becomes reliant on a purely financial metric that invariably involves debate about asset models and cost-benefit analysis. Here, we adopt this...

References: Armstrong, P. (1989). Limits and possibilities for HRM in an age of management accounting’ in New perspectives on Human Resource Management. J. Storey (ed). London: Routledge.
Flamholtz, E.G. and Main, E.D. (1999). `Current issues, recent advancements and future
directions in human resource accounting’
Lester, T. (1996). `Measuring human capital’. Human Resources, 24, 54 .
Mayo, A
Mirvis, P.H. and Macy, B.A. (1976). `Human resource accounting: a measurement
Pfeffer, J. (1997). `Pitfalls on the road to measurement: the dangerous liaison of human
resources with the ideas of accounting and finance’
Prabhakara Rao D, "Human Resources Accounting" Inter-India. Publications New Delhi. 1986
Sveiby, K.E
Turner, G. (1996). `Human resource accounting wisdom?’ Journal of Human
Resource Costing and Accounting, 1, 63-73.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Human Resources Essay
  • Essay on Human Resources strategic
  • Human Resources Purpose and Role Essay
  • Human Resource Planning Assignment Research Paper
  • Human Resources Manager Essay
  • Human Resources Management– Case Study Essay
  • Human Resource Management Paper
  • Essay about human resources

Become a StudyMode Member

Sign Up - It's Free