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1746 Hraaa
1746 Hraaa
SYLLABUS
UNIT I-INTRODUCTION HR as assets -Definition of Human Resource Accounting - Introduction to Human Resource Accounting - Human Resource Accounting concepts, methods and applications Human Resources Accounting Vs other Accounting. Unit II HUMAN RESOURCE COSTS Managing Human Resources Cost Investment in employees Replacement Costs-Determination of Human Resource Value-Monetary and non-monetary measurement methods-Return on Investment Approach. UNIT III-HUMAN RESOURCE ACCOUNTING SYSTEM Developing Human Resource Accounting Systems Implementation of Human Resource Accounting Integrated of Accounting with other Accounting Systems Recent Advancements and future directions in Human Resource Accounting. UNIT IV-HUMAN RESOURCE AUDIT Role of Human Resource audit in business environment HR Audit objectives Concepts Components Need Benefits - - Importance Methodology Instruments HRD score card Effectiveness of as an instrument Issues in HR audit Focus HRD audit. UNIT V-HUMAN RESOURCE AUDIT REPORT HRD audit report Concepts Purpose Role of HR managers and auditors Report Design Preparation of Report Use of Human Resource audit report for Business
UNIT I - INTRODUCTION
UNIT STRUCTURE
1.1 Introduction 1.2 Learning Objectives 1.3 Human Capital as a Foundational Asset 1.4 HR as Assets 1.5 Definition of HRA 1.6 What is HRA? 1.7 Why HRA? 1. 8 Historical Development of HRA 1.9 Significance of Human Resources Accounting: 1.10 Concept of Human Resource Accounting: 1.11 Objectives of HRA 1.12 Information Management for HRA 1.13 Methods of Measuring HRA 1.14 HRA - The Benefits and Hurdles 1.15 Problems with the Current Practice of Human Resource Accounting Vs other accounting 1.17 Summary 1.18 Self-Assessment Questions
INTRODUCTON
The total growth of the organization depends mainly on the skills of its employees and the services they render. Hence, the success of any organization is contingent on the quality of their Human Resource- its knowledge, skills, motivation and understanding of the organizational culture. Therefore, it is imperative that the humans be recognized as an integral part of the total worth of an organization.
In order to estimate and project the worth of the human capital, it is necessary that some method of quantifying the worth of the knowledge, motivation, skills, and contribution of the human element Human resource accounting (HRA) denotes just this process of quantification/measurement of the Human Resource. Human Resource Accounting (HRA) is basically an information system that tells management what changes are occurring over time to the human resources of the business.
LEARNING OBJECTIVES
Importance of understanding the Human Resources Accounting and Auditing Define the concept of Human Resource as Asset Methods and applications of Human Resource Accounting Comparison of Human Resource Accounting and other Traditional Accounting
HR AS AN ASSET
Once organisations realise the actual benefit and take it as a growth process, it will only help them in increasing their shareholders value. When a company is able to assess an individuals worth, it helps in increasing its own worth. Basically HRA can be tracked through two methods - Cost-based Analysis and Valuebased Analysis.
According to Likert (1971), HRA serves the following purposes in an organisation. It furnishes cost/value information for making management decisions about acquiring, allocating, developing, and maintaining human resources in order to attain cost-effectiveness; It allows management personnel to monitor effectively the use of human resources; It provides a sound and effective basis of human asset control, that is, whether the asset is appreciated, depleted or conserved; It helps in the development of management principles by classifying the financial consequences of various practices.
According to Likert (1971), HRA serves the following purposes in an organisation: It furnishes cost/value information for making management decisions about acquiring, allocating, developing, and maintaining human resources in order to attain cost-effectiveness; It allows management personnel to monitor effectively the use of human resources; It provides a sound and effective basis of human asset control, that is, whether the asset is appreciated, depleted or conserved; It helps in the development of management principles by classifying the financial consequences of various practices
OBJECTIVES OF HRA
The objective of HRA is to inform general public how far enterprises are successful in fulfilling the human contributions also come to light through HRA. To facilitates effective and efficient management of human resources. To furnish cost value information for making management decision about acquiring, allocating, developing and maintaining human resources in order to obtain cost effective organizational objectives. To provide information of changes in the structure of manpower to the management.
To provide qualitative information on human resources. To provide more relevant and timely information to the interested parties. To provide a sound and effective basis of asset control. To knows whether the human resources are properly utilized and allocated. To allow management personnel to monitor effectively the use of human resources. To evaluate the return on investment on human capital.
SUMMARY
When the human resources were quantified, it gave the investors and other clients true insights into the organization and its future potential. Proper valuation of human resources helped organizations to eliminate the negative effects of redundant labor. Whatever the tool or approach to HRA, much of the potential for developing human resource accounting capability and gaining its advantage depends upon the availability of and accessibility to the required data.
UNIT II
UNIT STRUCTURE
2.1 Introduction 2.2 Learning Objectives 2.3 Measurement in HRA: Two Approaches 2.3.1 The Cost Approach 2.3.2 The Economic Value Approach: Monetary Value Based Approaches 2.4 Investment in Employees 2.4.1 Human Resource Development Management Based on Corporate Culture 2.4.2 Issues in Promoting Human Resource Development Management 2.4.2.2 Verification of Cost Effectiveness in Human Resource Development 2.4.2.1 Defining Human Resources Ideal for Implementing Strategies and the Corporate Vision 2.4.2.3 Providing Sufficient Development Opportunities to HighPerformance Employees 2.4.2.4 Designing Career Paths by Combining OffJT and OJT 2.4.2.5 Cases of Human Resource Development Management That Focus on Individual Staff Members 2.4.2.6 Strategic Allocations of Selected and Developed Human Resources
2.5 The Non-Monetary Value Based Approaches 2.6 Measurements of Group Value 2.6.1 The Likert and Bowers Model: 2.6.2 Brummet, Flamholtz, and Pyles economic value model 2.6.3 Hermansons unpurchased goodwill model 2.6.4 Human organizational dimensions method 2.6.5 Methods for valuation of expense centre groups 2.7 Return on Investment Approach 2.7.1 Directions in Building Human Resource Development Systems That Focus on HR ROI Development Costs as Investment in Human Resources 2.7.2 Developing HR ROI into Target-Oriented Human Resources Management 2.7.3 Creating a Human Resource Management System Oriented Towards Long- Term Targets 2.7.4 Providing Sufficient Development Opportunities to High-Performance Employees 2.8 Summary 2.9 Self-Assessment Questions
LEARNING OBJECTIVES
This Unit is intended to provide an intensive knowledge on: Approaches to Measure HRA Investment in employees to consider Human Resource as Asset Methods and approaches to measure the non-monetary value Measuring the group value Return on Investment Approach
MEASUREMENT IN HRA
The two main approaches usually employed for the measurement are: 1. The Cost Approach which involves methods based on the costs incurred by the company, with regard to an employee. 2. The Economic Value Approach which includes methods based on the economic value of the human resources and their contribution to the companys gains. This approach looks at human resources as assets and tries to identify the stream of benefits flowing from the asset.
INVESTMENT IN EMPLOYEES
To establish an effective standard for managing and assessing human resource development is required. To improve the functional level of an organization over the long term, it is necessary to envision the employee career path based on the thrust of the companys management, and to create a training and development system that combines OJT (on-the-job training) with Off JT (off-the-job training).
ORGANISATIONAL CLIMATE
GROUP PROCESS
SATISFACTION
The other models are: Brummet, Flamholtz, and Pyles economic value model Hermansons unpurchased goodwill model Human organizational dimensions methods Methods for valuation of expense centre groups
The concept of HR ROI is expressed with the above equation. The denominator of the HR ROI is essentially the total amount of compensation for a targeted individual employee. This total compensation includes salary, a benefits package and investment in human resource development. The fixed HR ROI rule aims at encouraging more highperformance employees to improve their skills and knowledge through a training and self enhancement program.
SUMMARY
Human Resource factor is very crucial, important and sensitive factor of production. Even though human resources are the most important element of the business process, their value is not shown among the assets in a traditional statement of financial position. Human resources are truly the most valuable resources a firm can possess.
Unit III
HUMAN RESOURCE ACCOUNTING SYSTEM
UNIT STRUCTURE
3.1 Introduction 3.2 Learning Objectives 3.3. Developing Human Resource Accounting Systems 3.3.1 Development of HRA systems in Indian Organizations: 3.3.2 Developing the Human Resource Accounting Valuation Models of HRA: 3.4 Implementation of Human Resource Accounting 3.4.1 A overview of the previous HRA system 3.4.2 The Foundation of Human Capital Advantage 3.5 Integrated of Accounting with other Accounting Systems 3.5.1 Capital redefined 3.5.2 Bundle of competencies 3.6 Recent Advancements and future directions in Human Resource Accounting. 3.6.1 Why do employees leave an organization? 3.6.2 The importance of intangible assets 3.6.3 A new role for HR? 3.6.4 Human Capital as a Foundational Asset 3.6.5 Human capital influences in Human Resource Accounting 3.6.7 Underlying meaning of HR value 3.6.8 Implications for Measuring Human Capital Advantage 3.7 Summary 3.8 Self-Assessment Questions
Introduction
It is true that worldwide, knowledge has become the key determinant for economic and business success, but Indian companies focus on Return on Investment (ROI), with very few concrete steps being taken to track Return on Knowledge. Human capital also provides expert services such as consulting, financial planning and assurance services, which are valuable, and very much in demand.
Learning Objectives
This Unit is intended to provide an intensive knowledge on: Developing Human Resource Accounting Systems Implementation of Human Resource Accounting Integrated of Accounting with other Accounting Systems Recent Advancements and future directions in Human Resource Accounting.
The existing Valuation models are *Lev & Schwartz Model (1971): *Flamholtz Model (1971): *Jaggi and Laus Models (1974) Morse Model (1973) *The Ogans Models (1976 Chakraborty Model ( 1976)
To measure human value as a part of goodwill, HRA was introduced into the accounting literature in the 1960s (Flamholtz, 1985), although support for the idea of accounting for human resource values can be found much earlier (Johanson & Nilson, 1990; Sackmann et.al., 1989).
Three purposes can be distinguished in the HRCA (1) An ambition to improve the management of human resources from an organisational perspective by increasing the transparency of human resource costs, investments and outcomes in the management accounting rituals, such as profit and loss accounts, balance sheets and investment calculations; (2) Attempts to improve the bases for investors companyvaluation. (3)Aspirations from human resource specialists, company doctors or unions to use monetary arguments when suggesting investments in human resources.
Three categories of learning intervention measures should be captured: 1. Inputsmeasures of the intensity of learning resources available to employees, including formal and informal learning opportunities. 2. Outcomesintermediate measures of the effectiveness of learning (such as Kirkpatrick levels 2 or 3 for formal learning interventions or other comparable forms of employee assessment of effectiveness for informal learning opportunities). 3. Organizational Learning Capacityan overall assessment of an organizations commitment to and capacity for learning
Summary
The implementation of non-financial performance measures and control systems in high-technology manufacturing plants. To compete successfully measurements of the following intangible key success factors were developed: customer satisfaction, manufacturing excellence, market leadership, quality, reliability, responsiveness, and technological leadership The new non-financial measurement system was found to affect the success of the strategy of the firm. In addition, the measures were actionable at the plant level, which provided the possibility for almost instant corrections.
Unit IV
HUMAN RESOURCE AUDIT
UNIT STRUCTURE 4.1 Introduction 4.2 Learning Objectives 4.3 Role of HR Audit in Business Environment 4.3.1 Definition: 4.3.2 What is HR audit? 4.3.3The audit process 4.3.4 The critical areas 4.3.5 Preparation for an audit 4.3.6 Nature of Human Resource Audit 4.3.7 Examples of improved HR measures using the Audit Process: 4.4 Objectives of HR Audit 4.5 Concepts of HR Audit 4.6 Components of HR Audit 4.6.1 Approaches to HR Audit: 4.7 Need of HR Audit 4.7.1 Purpose(s) of an Audit 4.8 Benefits of HR Audit 4.8.1 Scope of Audit: 4.8.2 Benefits of HR Audit: 4.8.2 Auditing HR Practices 4.8.3 Auditing HR Professionals 4.8.4 Auditing HR Function or Department
4.9 Methodology and Instruments of HR Audit 4.9.1 Methodlogies 4.9.2 Auditing the Human Resources Function 4.10 HRD score card 4.10.1What Constitutes Balance Score Card? 4.10.2 How is BSC Used? 4.10.3.1To What Extent is Quantitative Information on Intangibles Disclosed in External Reports? 4.11 Effectiveness of as an instrument 4.11.1 The Frequency of HR Audit 4.11.2 The Audit Process 4.12 Issues in HR Audit 4.12.1 Issues related to Research Techniques in HRA 4.12.2 Human Resource Management -Audit Program Guide 4.13 Focus of HRD Audit 4.13.1 Conducting HR Audit 4.13.2 Auditing Your HR Department 4.14 Summary 4.15 Self-Assessment Questions
Introduction
"HRD audit is a comprehensive evaluation of the existing human resource development strategies, structure, systems, styles and skills in accordance with both short-term and long-term business plans of the organization. In HRD Audit the skills, styles, systems, strategies, structure is studied and analyzed using a variety of methodologies like interviews, questionnaires, available records, workshops etc. This evaluation helps the organization have a clear understanding of the lacunae and better align the HR processes with Business goals."
Learning Objectives
This Unit is intended to provide an intensive knowledge on: Role of HR Audit in Business Environment Objectives of HR Audit Concepts of HR Audit Components of HR Audit Need of HR Audit Benefits of HR Audit Methodology and Instruments of HR Audit HRD score card Effectiveness of as an instrument Issues in HR audit Focus of HRD audit
HR AUDIT
Typically the basic reason why organisations prefer to conduct an HR audit is to get a clear judgment about the overall status of the organisation and also to find out whether certain systems put in place are yielding any results. HR audit also helps companies to figure out any gaps or lapses and the reason for the same. An HR audit can be used by an organisation for multiple purposes. Some of the more common reasons are: To identify and address HR-related problems. To seek out HR-related opportunities. To conduct due diligence for mergers and acquisitions. To support initial public offerings.
Approaches to HR Audit
There are five approaches for the purpose of evaluation of HR in any organization: Comparative approach Outside authority Statistical Compliance approach and Management By Objectives(MBO)
PURPOSE OF AN AUDIT
The audit can serve any of the following purposes: __To clarify desired practices of HR work and roles within the organization (HR Department, Line Managers). __To establish a baseline for future improvement. __To evaluate current effectiveness. __To standardize practices across multiple sites within a division or company. __To assess current knowledge and skills required of HR practitioners. __To improve performance levels to key customers within the organization.
Benefits of HR Audit
It provides the various benefits to the organization. These are: It helps to find out the proper contribution of the HR department towards the organization. Development of the professional image of the HR department of the organization. Reduce the HR cost. Motivation of the HR personnel. Find out the problems and solve them smoothly. Provides timely legal requirement. Sound Performance Appraisal Systems. Systematic job analysis. Smooth adoption of the changing mindset.
After questioning contemporary management accounting in several articles during the 1980s, Kaplan & Norton (1992) introduced the BSC concept. The scorecard should incorporate the complex set of cause-andeffect relationships among outcome measures and the performance drivers that describe the trajectory of the strategy of those outcomes. The measurement system should make the relationships (hypotheses) among objectives (and measures) in the various perspectives explicit so that they can be managed and validated. Intellectual capital = Human Capital + Organisational Capital + Customer Capital Human capital concerns the knowledge that individuals possess and generate upon demand; organisational capital is that knowledge that has been captured/institutionalised within the structure, processes, and culture of an organisation;
BSC Used
The aim of this section is to see how BSC is actually utilized. Olve et al. (1998) hold that only a few companies have advanced beyond applying it on a limited basis. Because reporting on the BSC is not easily distinguished from other forms of external reporting on intangibles, the section will start with an analysis of the extant literature on reporting of intangibles.
Summary
The auditors always prepare and submit an audit report to authority of the organization, which may be clean or qualified. The clean report indicates the appreciative of the department's function, but the latter one represents the gaps in performance and therefore contains remarks and remedial measures. HR Audit is very much helpful to face the challenges and to increase the potentiality of the HR personnel in the organization. The HR Audit can be a powerful lever of change in your department and organization. In one sense it is simple, in that each step can be completed fairly quickly and with ease. Also, the degree of detail and definition of performance is within the control of the audit developer.
UNIT STRUCTURE
5.4 Role of HR managers and auditors in Report Designing and preparation of report. 5.4.1 Audit of The Functional Role OF HR 5.4.2 Human Resource Development Systems and Procedures (HRD) 5.4.3 Role of Human Resource Management (HRM) System 5.4.4 HR Info Systems 5.4.5 Audit of the Service Role OF HR 5.4.6 Audit of the Financial Management Role Of HR (financial ratios) 5.4.7 Planning and staffing 5.4.8 Recruitment efficiency 5.4.9 Recruitment effectiveness 5.4.10. Audit methodology, instruments, and deliverables 5.4.11 Audit of The Service Role Of HR 5.4.12 Audit of The Compliance Role Of HR 5.4.13 Audit of The Strategic Role Of HR 5.4.14 Audit of The Financial Management Role Of HR
5.5 Role of HRD audit report in business improvements 5.5.1 Procedures in HR Audit usability 5.5.2 Strength Based HRD Audit as an OD Intervention 5.5.2.1HRD Score cards 5.5.2.2HRD Audit is Comprehensive 5.5.2.3HRD Audit is Business driven 5.5.3HRD Audit as an OD intervention 5.5.4 Experiences from Some Organizations 5.5.5 Results of a Research Study 5.5.6 Hrd Audit Implementation: Multinational Company Abroad 5.5.7Validation of Audit Findings5.6 Case Studies 5.6.1-HRA in Practice at Infosys 5.6.2 HRD Audit as a Tool for Reengineering Linking People and strategy 5.6.3 HRD AUDIT IN HEALTH SECTORS INNOVATIONS 5.7 Summary 5.8 Self-Assessment Questions
Introduction
The audit programme comes to an end with the preparation of the audit report. The report may be clean or qualified. The report is qualified when the HR performance contains gaps. Where gaps are observed, remedial measures are suggested. The report is clean where the performance is fairly satisfactory. Estimating your future workforce requirements is an inexact science. But a number of different techniques exist to help you do this, as well as to calculate the state of the labour market in the short to medium-term and assess any problems or implications that result.
Learning Objectives
This Unit is intended to provide an intensive knowledge on: Procedures involved in preparing the HR audit Report Concepts and purpose of HR audit reports Role of HR managers and auditors in preparing the HR reports Application of HR audit report in business applications
HR INFO SYSTEMS
Scope: Audit whether these areas support the achievement of results in the area of HRD and HRM; audit whether HR maintains performance indicators that help management keep track of HR costs and benefits.
Compensation And Benefits: assuring compensation and benefits fairness and consistency. Employee Assistance: providing personal problem solving and counseling to individual employees. Union/Labor Relations: assuring healthy union I organisation relationships. HR Research And information Systems: assuring an HR information base is in place that provides timeous management information; assuring HR functional performance indicators are in place.
Audit Reports in all the four organizations studied served as a mirror and pointed out the strengths and areas of improvement. Since this also included top management as well, none of the reports were opened up to all the employees. Out of the four organizations studied, in three organizations, these are confidential reports made available to top management and HR chief. Implementation of the HRD Audit inputs were done selectively and mostly by the HRD department without much involvement of line managers. However, in one organization, line managers implemented the audit inputs. Visible changes of HRD Audits were observed in all spheres of activities with specific changes seen in HRD systems, people competency development and culture development activities.
The most important factors influencing HRD Audit intervention and utilization of HRD Audit inputs are:
CEO/Top management commitment to HRD HRD chiefs commitment to HRD Management style of the Organization Organizational characteristics HRD department profile Competency levels of the HRD personnel
Summary
HRD audit report is not intended to be originally an OD tool. By virtue of its diagnostic and participative methodology it seems to work as a change management tool. The interview methodology, its comprehensiveness, the audit methodology insisting on starting and ending with top management involvement all have high potential for initiating change processes. It could be further refined as an OD tool. It involves all the HRD staff and a large number of Managers in the audit process and makes them conscious of the areas needing improvements.