The Human Value of the Enterprise: Valuing People as Assets – Monitoring, Measuring, Managing

Citation

Hodgson, J. (2003), "The Human Value of the Enterprise: Valuing People as Assets – Monitoring, Measuring, Managing", Leadership & Organization Development Journal, Vol. 24 No. 2, pp. 111-111. https://doi.org/10.1108/lodj.2003.24.2.111.3

A frequently heard statement in management is “our people are our most important asset”. Many CEOs, and even the capital markets, would attest to the value of human capital for corporate performance. Yet for the people working within organisations, such claims about valuing people as assets are empty against perceptions of their company being driven by efficiency and minimising costs. The problem, according to this book’s author, is that we live in an accountancy world which looks back to the last century for its definitions of assets, liabilities and capital. People do not fit these strict financial definitions and as a result their worth and contribution have been difficult to quantify.

The aim of this book is to present a model which managers can use for measuring the value that employees add to their companies. In so doing, the book sets out to answer three questions:

1. 1

   Why is it essential to have a system of measurement of human assets?

2. 2

   How should we go about measurement?

3. 3

   How can this make us manage more effectively and create ultimate value?

The case for human capital accounting is convincing. Today’s markets look for value beyond traditional physical and financial assets towards talent, knowledge, creativity and other “intangible assets”. Only human capital accounting can provide shareholders with a means to judge the future success of the business.

Despite the fact that many companies have added their voices regarding the value of human capital, the measurement of people as assets has been minimal at best. Building on the work of Kaplan and Norton’s “balanced score‐card”, the author presents a framework, called the Human Capital Monitor, for adding human capital to a company’s balance‐sheet. The framework allows for calculations in three areas: the intrinsic value of people as individuals (based on a number of measures including capacity and potential), the factors in the work environment which encourage and/or constrain their performance (measures of commitment and motivation) and their contribution to both financial and non‐financial added value. Whilst the formulae used are limited by the subjective judgements required, they nevertheless provide a basis for a fairly rigorous human capital audit.

Overall this book makes a useful contribution towards a methodology that allows employees to be considered as assets rather than costs. It offers managers and HR practitioners a number of measures: human capital, practical examples and lists of points for action. The author is to be commended for tackling a complicated subject with enthusiasm and energy.