Modern Performance appraisal methods 3
Human resource Accounting.
Even though we have all been subjected to performance reviews in every business in which we have ever worked, there is still the question of whether or not all of the effort that is put into evaluations actually yields accurate or useful results. In this series of blogs, I have evaluated contemporary methods of performance evaluation in order to shed light onto the obstacles and opportunities that are presented by each approach. This Article is dedicated to explore the modern performance appraisal method Human resource Accounting.
Employee economic value and cost-based measures are measured by human resource accounting. It focuses on human capital investment, which includes employee skill development and knowledge expenses. The value of an organization is determined by the output generated by human resources. Human resource accounting assists stakeholders in making key investment decisions that are based on future earnings rather than current expenses.
Human Resources accounting is used to measure the performance of all employees in a business, and when this information was made available to stakeholders in the form of a report, it aided them in making key investment choices. (Rahaman et al., 2013) Human resource administration (HRA) is a method for reporting people as organizational resources in both financial and management accounting terms. A person's worth as a resource is determined by their job and management styles. People are a useful resource to a company if they provide quantifiable services. (Sarkar, 2018)
Benefits of Human Resource Accounting
1. Cost of developing human resources: HRA that is effective will provide the cost of developing human resources in the firm. This will allow management to calculate the cost of employee turnover. (Pandurangarao et al., 2013)
2. Proper investment: It is possible to determine whether the company has made adequate financial investments in human resources. If the investment is excessive, measures should be taken to keep it under control. (Pandurangarao et al., 2013)
3. Planning and executing personal policies: It will aid management in the formulation and implementation of personal policies. The management also uses its assistance in making choices on human resource transfers, promotions, training, retirement, and retrenchment. (Pandurangarao et al., 2013)
4. Improving employee efficiency: It aids in increasing staff productivity. Employees learn about the costs expended on them and the return provided by them in the form of production, etc., which motivates them to raise their value. (Pandurangarao et al., 2013)
5. Calculate Return on Investment (ROI): Only when the investment in human resources is included can the return on investment be estimated accurately. Because there is an investment in people, the ROI may be favorable. (Pandurangarao et al., 2013)
Disadvantages of Human Resource Accounting
References
Pandurangarao, D., Basha, D.S.C. and Rajasekhar, D.E.V.A.R.A.P.A.L.L.I., 2013. A study on human resource accounting methods and practices in India. International journal of social science & interdisciplinary Research, 2(4), pp.95-102.
Rahaman, M. & Hossain, Adhir & Akter, Tanzia. (2013). Problem with human resource accounting and possible solution. Research Journal of Finance and Accounting. 4. 1-10.
Sarkar, Shakhawat. (2018). Human Resource Accounting Disclosure Practices in Bangladesh. 2. 100-113.
I love how you approach this topic with such positivity and optimism. It's refreshing and inspiring.
ReplyDeleteHi Hisshanthi
DeleteThanks you for sharing your interest on my work.
A very interesting and informative article Asitha! Thanks for your valuable time and effort invested in formulating the same. Agreed! "Human resource accounting" literally refers to the accounting of people as organizational resources. It refers to determining the worth and cost of people to organizations (Flamholtz, 1972). It is indeed evident that, Human resource accounting is beneficial for an organization to maintain sustainability.
ReplyDeleteHi Angelo
DeleteThanks for appreciating my effort and further simplifying the Human resource Accounting concept.
You've provided a comprehensive and insightful overview of the concept of Human Resource Accounting. Your breakdown of the benefits and drawbacks showcases a clear understanding of its implications for organizations. Your inclusion of relevant citations enhances the credibility of your insights. This well-structured analysis highlights the importance of considering both the investment and value aspects of human resources in making informed decisions. Great job in presenting a balanced perspective on this topic!
ReplyDeleteHi Prasadini
DeleteYour positive critique of my article is highly appreciated. Thanks for further elaborating the fine points of HRA.
Great article.
ReplyDeleteHi Hisshanthi
DeleteThanks for your kind words.
Agreed, Turner (2019) states that human Resource Accounting is a valuable approach that recognizes the significance of employees as assets to an organization. It offers insights into the investment and returns associated with human capital, aiding organizations in making strategic decisions and maximizing employee contributions. Flamholtz (2019) states that while HRA has its limitations, it remains a tool that bridges the gap between recognizing employees as valuable resources and quantifying their impact on organizational success. As the role of human capital in business continues to evolve, the adoption and refinement of HRA can provide a more comprehensive understanding of an organization's true value.
ReplyDeleteHi Divviga
DeleteThanks for further adding valuable insights to HRA. Highly appreciate your support as always.
Effective article to read.. According to Raiyan,(2023) human resource accounting (HRA) is a technique that assigns a monetary value to an organization’s human resources and tracks the costs associated with managing them. HRA can provide valuable information to support decision-making about human resource management practices, such as recruitment, training, compensation, and performance evaluation. By analyzing this information, organizations can identify areas where they can improve the efficiency and effectiveness of their human resource management practices and better allocate resources to achieve their organizational goals.
ReplyDeleteHi Sachini
DeleteThanks for sharing such eloquent analysis of HRA. Appreciate your support.
Human Resource Accounting (HRA) offers distinct benefits to both employees and employers. For employees, HRA provides a clearer understanding of their career progression, skill development, and training investments. It quantifies their contributions and potential value to the organisation, enhancing job satisfaction and motivation. HRA also encourages personalised career development plans, improving employee engagement and retention. Further, as you highlight, there are advantages and disadvantages too. However, overall, HRA benefits both employees and employers by fostering transparency, efficiency, and strategic alignment in managing human capital.
ReplyDeleteHi Nuwan
DeleteThank you for taking the time to read and engage with the article. Highly respect your effort to support my work.
Human Resource Accounting (HRA) is a method of quantifying and reporting the value of human resources in financial terms. It involves measuring and reporting the economic value of employees' skills, knowledge, experience, and capabilities as assets on a company's balance sheet. The concept of HRA recognizes that employees' contributions and abilities can significantly impact an organization's performance and value. Pros and Cons are well described in the article
ReplyDeleteHi Shehani
DeleteThank you for the interest and share your observation and research.
I agree with your assessment of the article. It is a good introduction to HRA and provides a good overview of the concept and its benefits and disadvantages. However, it would be improved by providing more specific examples and discussing the ethical implications of HRA.
ReplyDeleteHere are some specific examples of how HRA has been used by organizations to improve their performance.
A company used HRA to identify its most valuable employees. The company then invested more in training and development for these employees, which led to increased productivity and profits.
A hospital used HRA to determine the cost of employee turnover. The hospital found that it was costing them a lot of money to replace employees who left. They implemented a number of retention strategies, which led to a decrease in turnover and a savings of money.
Hi Meera
Deletethanks for sharing the example of determining the cost of employee turnover using HRA. It was really insightful.
Your explanation of Human Resource Accounting (HRA) gives a thorough understanding of its objectives and ramifications. Its relevance in the current organizational landscape is clearly demonstrated by the emphasis on cost-based measurements and quantifying employee economic value while emphasizing human capital expenditure, skill development, and knowledge expenses.
ReplyDeleteYour explanation of how HRA enables stakeholders to make investment decisions based on projected earnings rather than merely current costs highlights the strategic importance of this tool. A crucial element that emphasizes the HRA's dual role in evaluation is the acknowledgment of the HRA as a means of reporting people as organizational resources in both financial and management accounting contexts.
The advantages you've listed, including assessing the cost of human resource development, making wise investment decisions, forming personnel policies, increasing staff productivity, and calculating return on investment.
Hi Prakash
DeleteThanks for marking the strategic importance of this tool for the shareholders.
The article introduces HRA as a method focusing on human capital investment, including skills and knowledge expenses, to determine an organization's value. This concept aligns with earlier research by Flamholtz (1971), who coined the term "Human Resource Accounting." Flamholtz's work highlighted the importance of treating employees as assets and recognized that human capital contributes significantly to an organization's success.
ReplyDeleteIt is very sensitive in HRM
Hi Janagan
DeleteThanks for sharing the history context of HRA. Appreciate your effort to further enhance my work.
I agree with the blog post that human resource accounting is a valuable tool for organizations. It can help organizations measure the value of their human capital, make better investment decisions, and improve employee productivity.
ReplyDeleteThe blog post does a good job of outlining the benefits of human resource accounting. I would add that it can also help organizations to:
Attract and retain top talent: By demonstrating their commitment to investing in their employees, organizations can make themselves more attractive to potential employees.
Improve employee morale: When employees feel that their organization is investing in them, they are more likely to be motivated and engaged in their work.
Innovate: By investing in their employees' skills and knowledge, organizations can create a more innovative workforce.
Hi Nadika
DeleteThanks for further elaborating my article with your further findings.
Your article on Human Resource Accounting as a performance appraisal method is thought-provoking. The way you've detailed the benefits and disadvantages provides a balanced view. It's intriguing to see how this method helps stakeholders make key investment decisions. Do you think Human Resource Accounting could become a standard practice in the future?
ReplyDeleteHi Ashinka
DeleteThanks for raising this, According to (Aggarwal & Thakur, 2013) These are the challenges of implementing HRA;
There are no clear and specific guidelines for determining the expense and value of an organization's human resources.
The method measures only the expense to the organization and disregards any measurement of the employee's value to the organization.
Life expectancy of human resources is uncertain, so valuing them based on uncertainty seems impractical.
These reasons are what holding back HRA becoming a standard practice in organizations.
This comment has been removed by the author.
ReplyDeleteHi Gayani
ReplyDeleteAppreciate your comments and input on highlighting the challenges of HRA.
Hi Nalaka
ReplyDeleteAbsolutely HRA gives stakeholders valuable information for making investment decisions.
Absolutely love this blog post! The insights you've shared about modern performance appraisal methods and their connection to Human Resource Accounting are truly enlightening. It's incredible to see how organizations are evolving their approaches to better assess and recognize their employees' contributions. Your clear explanations make these complex concepts feel approachable. Keep up the fantastic work of shedding light on important HR topics!
ReplyDelete
DeleteHi Malik
I truly appreciate your insightful remarks. Thanks for the encouraging words.
Hi Asitha,
ReplyDeleteVery useful article.
In this case, you've referenced various sources related to performance appraisal, human resource accounting, and disclosure practices in Bangladesh. This not only supports your claims but also provides readers with the opportunity to delve deeper into the topics you've discussed. Well-cited sources like these enhance the overall quality of your work and make it more informative for your audience.