Functions of Human Resources and Accounting
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Notes on Principles and Practices of Management
Functions of Human Resources and Accounting
Types of Human Resources and Accounting models:
1. Historical costs models:
Historical costs models come in two variations. The first variation is designed to gather and record the costs of acquiring, allocating and developing the human personnel within an organization. The ending price is then amortized over time. This method is very similar to the traditional accounting methods used in gathering information and installation of equipment.
The second variation is called the replacement value model, which is an update to the historical model to reflect current value. This model makes an attempt to answer the question, "How much would it cost to start from scratch and replace all human personnel within an organization?" According to Likert and Pyle, it would cost two to ten times the annual payroll of an organization.
2. Present Value Models:
This type of model discounts future employee contributions to the firm earnings at a known rate to arrive at a present value of "The Human Element" of the organization. These steps are involved:
a. To estimate future income of the firm.
b. To determine the percentage of the future income that represents employee contributions.
c. To provide a discount rate - this usually is the cost of capital.
d. To calculate the current value of employee contributions minus cost of acquiring, developing, maintaining and utilizing human reources.
e. To record, report and utilize the gathered data and ensure it is comprehensible to the senior management and external parties.
Levand Schwartz reported a direct relation between net value of human services and personnel income.
3. Human Organization Models:
This model, proposed by Rensis Likert, studies the human component of an organization, which are, the attitudes, perceptions, motivations, interpersonal relationships, and interactions of personnel within an organization. This model assesses the total value of an organization's synergism, where the total output of the system is greater than the sum of its individual parts.
Rensis Likert also claimed that by measuring and analyzing the "casual" and "intervening" variables, an organization can predict its performance by two years into the future. Likert also said that monetary value can be correlated to human organization over time. Likert used the survey feedback method to come up with his conclusions.
Benefits of Human Resource Accounting to Organizations:
1. The manager can better express and correlate human resources to company performance.
2. Corporate variables like manpower changes, company growth, etc., can be measured.
3. The capital budgeting system is more complete and accurate, and quality of return on investment figures is improved.
4. Managers in Human Resources and Accounting models work better.
5. Managers efficiently utilize the scarce human recourses in the company.
6. Top managers can better evaluate the custodianship of human resources by managers.
7. Firms can use Human Resources and Accounting models to evaluate their performance in human resource management.
8. Human Resources and Accounting models consider people by highlighting their value to the organization.
Additional Readings:
1. Functions of a Business Manager
2. Henry Fayol and Modern Management Theory
3. Modern Management Thoughts and McKinsey's 7-S framework
4. Industrial Planning
5. Management and Setting of Objectives
6. Principals of Organization
7. Matrix Organizations
8. Functions of the Human Resources and Accounting within an Organization
9. Differentiation between Motivation and Satisfaction
10. Barriers to Good Communication
11. Requirements of Effective Controls
12. Formal and Informal Organizations
13. Bonded Rationality
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