Human Resource Accounting for Training &

Transcript:Human Resource Accounting for Training &:
Human Resource Accounting for Training & Development Shital Jhunjhunwala Institute of Public Enterprise Dr. Shital Jhunjhunwala 2 The Importance of Human Capital 3 “most important assets of my company walk out of the door every night”. Bill Gates, Microsoft Dr. Shital Jhunjhunwala 5 The unquestionable Importance of HR ……. Myth “ROI from human capital cannot be measured! I am just going to treat it as a short term cost, not a long term investment” True there is an objective need to build a credible case for the objective measurement of human capital But there is a stronger case to build human capital as an asset and expenditures relating to improved human capital as a long term investment Why HRA HRA communicates the worth of human resources to the organization and to the public Depicting the true value of the organization ESTABLISHING INVESTOR CONFIDENCE how efficient their personnel is to deliver returns on investments The case for HR Valuation Monitor effective utilization Deciding about transfers, promotion, training and retrenchment Evaluating the expenditure incurred for imparting further education and training in employees in terms of the benefits derived by the firm. It is important to be aware of the fact that HRA is not only about putting figures on human capital; It is also about supporting human resource development / management. It is about treating employees as assets and knowing whether the asset is appreciated, depleted or conserved; It is about acquiring and retaining (good) employees Value of Training Companies that scored in the top 20% of a McKinsey ‘Talent Management Index’ on average had a 22% higher return to stake holders than peers in their industry Echols, Michael E., ROI on Human Capital Investment (Arlington, Texas: Tapestry Press, 2005). pp. 29-30. Value of Training In a study by Accenture that measured the overall business impact of investment in learning found those companies who did had a higher performance and produced higher results: – Sales per employee = 27% greater – Revenue growth = 40% greater – Income growth = 50% greater Echols, Michael E., ROI on Human Capital Investment (Arlington, Texas: Tapestry Press, 2005). pp. 29-30. Value of Training American Society of Training & Development (ASTD) found that the average 5 year returns in stock market value related to the level of a company training investment: Top 50 firms produced 86% returns Bottom 50 firms produced 19% returns Echols, Michael E.,