ROBINSONS HUMAN ASSET MULTIPLIER METHOD

&
WATSONS RETURN ON EFFORT EMPLOYED METHOD

Presented by Group 6
What is human resource accounting?
According to AAA

HRA is the process of identifying and measuring Data about human

resources

And communicating this information to interested parties.

It also involves measuring the economic value of people to the organization’.

Different types of models-
 Robinsons human asset multiplier method
 Watson’s return on effort employed method
 Hekimian and Jones competitive bidding model
 Lev and Schwartz’s present value of future earnings model
 Brummet, Flamholtz, and Pyle’s economic value model
 Flamholtz’s Stocastic rewards valuation model:
 Myers and Flower’s five dimensional models
 Brummet and Taylor’s human resource value index model
WATSONS RETURN ON EFFORT METHOD
1. This method is developed by David Watson. Under this method, the efforts
used in various functions such as buying, manufacturing and selling are
measured.

2. Factors that determine the quantity and quality of efforts dispensed are
used to measure the contribution made by an employee to perform various
functions.

3. These factors include level of grade of work done, effectiveness in

performing the job, the experience and efficiency of an individual while the
job etc.
WATSONS RETURN ON EFFORT METHOD
4. Total effort of each individual is determined by multiplying these factors
together. The aggregate score of all the individuals thus obtained represent the
total efforts employed in the organization.

5.This method facilitates the allocation of human resources among the different
functions of an organization such as buying, manufacturing and selling as per
the ratio of profit to efforts.
 ROBINSONS HUMAN ASSET MULTIPLIER
METHOD
 W.J.Giles and D.F. Robinson introduced this in 1972 which was sponsored by the
Institute of Cost and Management Accountants

 Valuation of human resources is carried out like other business assets on a going
on concern basis

 The assumption was that the goodwill(in terms of supernormal earnings) of an

organization is related to its human resources.
ROBINSONS HUMAN ASSET MULTIPLIER
METHOD
• The value of HR in an organization is a reflection of the price earning
ratio of the organization( compared to industry average)

• Human asset multipliers(HAM) are used to reflect the value of

individuals and groups
Criticism

1. The synergy component of value. (1+1>2). The aggregate value of individuals

or groups need not necessarily be equal to organizational HR value.

2. The determination of values of multipliers(HAM) are too complex and are

over reliant on an individuals wages.
Example
For instance, let us assume that a firm has four types of grades, i.e. A, B, C
and D and the total remuneration of these grades is Rs 5 lacs, Rs 7 lacs, Rs
10 lacs and Rs 30 lacs respectively. Further, if we assume that the relevant
factors are 4, 3, 2 and 1. The value of human asset shall be Rs 20 lacs for
grade A ;Rs 21 lacs for grade B, Rs 20 lacs for grade C and Rs 30 lacs for
grade D. The total value of the human asset shall be Rs 91 lacs.
THANK YOU