Human Resource Accounting

query object Topic gentleity imaging chronicle as a step Tool Asian Perspective Submitted By M. Rizwan Arshad. Lecturer Department of worry 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 neb the Human Resource argon non new it was Rensis Likert (1963), who initiated enquiry into HR account statement in the 60s. He stressed the importance of coarse term intend of Human Resource qualitative variables that results in greater benefits in the long run.The imagination theory considered that the competitive position of an geological formation depends on its specific asset, which is the HR. This explains why some firms are more productive and supremacyful than others at a lower place almost similar conditions and similar intentness. It is the HR that makes all the difference. Following a less fruitful research period (Grojer and Johanson, 1998 495) un ity could run through anticipate interest in the area to wane but on the contrary, it has experienced something of a revival.When eachone wants to k today the history of HR explanation, most inspectioners such as Grojer and Johanson (1998) agreed that during the first half of the 1970s it was one of the most researched slip within invoice, 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 whitethorn be though of as the total knowledge, skills, creative abilities, talents and aptitudes of an organizations work force. It is the sum total of inherent abilities, acquired knowledge and skills of the employees.Why HR explanation is considered as important and who is the focus of this research? HR accounting system is a term that has both a narrow and more generic wine focus in the literature with respect to the understanding of the respect of citizenry in t he 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 learning 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 lot as organizational resources in both fiscal and managerial accounting name (Flamholtz, 1999) The objective is to quantify the economic value of people (Sackman et al, 1989235). accord 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 spirit 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, further as much c oncern 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 reading 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 neat is precarious in terms of its potential mobility and difficult in terms of its measuring rod. So narrowly be HR accounting has distinct limitations because the measurement of HR in whatsoever guise then becomes reliant on a purely financial metric that invariably involves bowl over about asset models and cost-benefit analysis.Here, we adopt this b roader notion, include both a stray of financial and non-financial measurements associated with Human Resource Management. quantity PITFALLS AND THE ACCOUNTING IDEOLOGY Measuring human resources has been viewed as proceeding quite a slowly because its advocates al way of lifes seem to be in the minority (Turner, 1996). disdain this, research has, over the past decade, been substantially measurement-oriented (Johanson and Larsen, 2000).Numerous studies report advances in measurement approaches, case studies of developing practice and the growing prolong for techniques such as the balanced score-card (eg Boudreau, 1998 Fitz-enz, 2000 Flamholtz, 1999 Flamholtz and Main, 1999). These achievements may have been somewhat overshadowed by research that has, quite necessarily, been preoccupied with debating a range of measurement concerns including the old arguments that testament continue to be debated long into the future.The first of these arguments concerns the capitalization of H R and the debate surrounding whether human resources qualify or can appropriately be labeled as assets notwithstanding the competing view that in that respect may be little substantial difference between intangible and tangible assets with no reason to treat one antithetically from the other (Boudreau, 1998 Johanson and Larsen, 2000 Mirvis and Macy, 1976 Turner, 1996).There has in like manner been the need to discuss what Human Resource measurement system should be designed to achieve, bearing in mind that measurement is not apathetic and the choice of metrics conveys values, priorities and a strategic framework (Boudreau, 1998 24). The dangerous contact lens between human resources and accounting and the pitfalls of measurement requires a delicate rapprochement act juggling the multiplicity of oft unlinked measures with the need to provide instruction that is oing to be effective in guiding and managing behavior (Pfeffer, 1997). Similarly there has also been a need to debate whether the accounting paradigm has been re-conceptualized (Mayo, 2000) to account for the new economic transformation (Flamholtz and Main, 1999 11). This involves accounting requirements that move beyond the sure region of custodial and financial accountability into the realms of fiscal, social and environmental accountability. (Turner, 1996 71).This involves a shift in thinking from human asset to human worthy (Roslender, 1997) emphasizing a more holistic approach which embraces a broader range of social scientists thinking (Roslender and Dyson, 1992 312) and allows for exploration in the realms of soft accounting numbers (Roslender, 1997 22). Complying with orthodox management accounting conventions runs the risk, argues Armstrong (1989, 1995), of not only challenging the role but having to justify all HR activity in cost-effectiveness terms, thereby handing to others outside the function the decision as to what initiatives be given priority.This scheme cedes too much to th e dominant accounting culture and may also, in the end, achieve little security for the personnel function (Armstrong, 1989 160). What is needed, suggests Armstrong (1989 160), is for HR practitioners to get the accounting approach to the point where they can clearly identify its shortcomings, thereby putting themselves in a position to focus on the inadequacies of accounting projections as an exclusive basis for managerial decision-making, especially where HR are concerned.By exploiting such shortcomings, HR practitioners can, suggests Armstrong (1989), further their cause by whirl alternative strategies that dialect that traditional accounting valuations are only one of a number of ways of establishing the value of HR. It is the politics of measurement and its in all probability impact on the HR function that dwarfs all others argues Pfeffer (1997).Shrewd HR leaders are already readiness their people in a range of measurement strategies in order to prepare them to do competit iveness on more favorable terms with the number of people in the firm. All of these debates, including the ethics of even attempting to measure the worth of HR have one goal in mind to develop a direction of valuing that captures the very(prenominal) nature of the worth of people and reports it in a way that not only allows for the increment of the people themselves but the added value (worth) that they throw to the organisation.Consequently, understanding why HR accounting is important, to whom it is important and its links with organizational and HR strategies volition provide a context for benchmarking the level of support for measuring HR and how far that support has been integrated into the thinking of different managerial groups and organizational strategies. This is what we set out to achieve. Methodology & Data accretion The assay lead be drawn from the organizations in Pakistan from the top industries functional in local economy.Questionnaires will sent to a random sample of 20 members from each organization. For the purpose of gathering data survey-questionnaire approach will be used. The research will carried out in three phases. anatomy 1 involved item generation, for that section of the questionnaire concerned with the importance and measurement of HR. A focus group of 50 people from different organizations will ask to discuss a number of questions. The content analysis of this knowledge is use in developing the important measure of the questionnaire.In the bit phase the draft questionnaire will sent to a group of 20 HR managers organized through a network of one of the higher-ranking managers who was part of the original focus group. Each participant will asked to go through the questionnaire and write any comments relating to any particular question or questions in the right-hand margin available in the copy of the questionnaire. The emphasis in this phase will, as explained to participants, to find out whether they thought any of th e questions are ambiguous or whether parts of the questionnaire could be improved.All the comments authorized related to the background information of the questions and a number of modifications will do to this section. In third phase the questionnaire will distributed to the sample groups described above. Research Questions Why it is important to evaluate HR? Why organizations are not measuring HR? How HR can be measured? How often are measures taken and reviewed? Who develops and collects HR information? Whether human resources qualify or can appropriately be labeled as assets? Does the level of Knowledge-based assets of an organization give a clearer indication of the potential for future profitability than do traditional accounting measures? Does it is possible to develop a means of valuing that captures the very nature of the worth of people? Does it can be used for the development of the peoples in the organization? Does HR accounting add value (worth) that HR contributes to the organization? Potential Outcomes If the firm can effectively calculate the value of HR and add their value to firms assets, it will extend the book value of the firms shares. An index can be prepared for different industries and firms can compare their HR value to the industry standard and with the other firms present in the same industry. The budget for the planning and education can be justified. Firms can evaluate the results of Training and Development by comparing the value of HR before and after training and development session. REFERENCES Armstrong, P. (1989). Limits and possibilities for HRM in an age of management accounting in newfound perspectives on Human Resource Management. J. Storey (ed). London Routledge. Dasgupta. N. Human Resources Accounting Sultan Chand & Sons bare-ass Delhi 1980.Flamholtz, E. G. and Main, E. D. (1999). Current issues, recent advancements and future directions in human resource accounting. Journal of Human Resource Costing and Accountin g, 4 1, 11-20. Johanson, U. (1999). Why the concept of human resource costing and accounting does not work. Personnel Review, 28 1/2, 91-107. Lester, T. (1996). Measuring human capital. Human Resources, 24, 54 . Mayo, A. (2000). The Human Value of the Enterprise, London Nicholas Brealey Publishing. Mirvis, P. H. and Macy, B. A. (1976). Human resource accounting a measurement perspective.Academy of Management Review, 1, 74-83. Pfeffer, J. (1997). Pitfalls on the road to measurement the dangerous liaison of human resources with the ideas of accounting and finance. Human Resource Management, 36 3, 357-365. Prabhakara Rao D, Human Resources Accounting Inter-India. Publications New Delhi. 1986 Sveiby, K. E. (1997). The New Organizational Wealth Managing and Measuring Knowledge-based Assets, San Francisco Berrett-Koehler Publishers Inc. Turner, G. (1996). Human resource accounting apprehension? Journal of Human Resource Costing and Accounting, 1, 63-73.