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HRAHRA
IntroductionResources for any organization-4 Ms-Animate
Resource—Human Resource.Accounting of Human Asset which is
responsible for the performance of other AssetsHistorical score card—Gandhi, Martin Luther
King, Kennedy, Abraham Lincoln, Narayana Moorthy Premji, J R D Tata, Dhirubhai Ambani, Medha Patkar
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HRAHRADefinition
According to American Accounting Society Committee on Human Resource Accounting
“Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties”. Features are
--Valuation of human resources
--Recording the valuation in the books of A/C
--Disclosure of information in Financial statements
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HRA-ImportanceHRA-Importance
It helps in employment and utilization of HR
It hepls in Transfers,Promotion, Retrenchment etc
It helps in identifying Training needsIt helps in Planning of ResourcesIt helps in identifying expenses incurred on
HRIt helps to find out reason for Employee
T/O
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HRAHRA
Helps to identify reasons for low return on HR
It helps to identify inner strength of HR so that Appropriate usage may be done under adverse conditions
It identifies gaps in HR which could impact long term investment in the organization
It helps in suitable career planning
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HRAHRA Objectives---Ref Importance of HRA
Limitations of HRA--No clear cut procedure or guidelines for finding cost and
value of HR--The period of existence of HR is uncertain--Fear of dehumanizing--No empirical evidence to support that HRA as a Tool
facilitates better mgt of HR--HR can not be owned/retained and utilized like physical
assets. can not be amortized--Opposition from unions--Tax laws do not recognize--Much research is required for effective application
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HRA-Role of HR ProfessionalsHRA-Role of HR Professionals
The HR strategic advisorThe HR system designer and developerThe organization change agentThe organization design consultantThe learning program designerThe instructorThe career counselorThe performance consultantThe researcher
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HR-challenges to organizations & HR-challenges to organizations & HR executives HR executives
Changing workforce demographics
Competing in a global economy
Eliminating the skills gap
Meeting the needs of learning individual
Facilitating organizational learning
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Investment in HRInvestment in HR
What is an investment?
--Expenditure on new plant and machinery, Interest cost, expected rate of return etc
Human resource is an asset and hence expenses incurred on HR is an investment. The expenses incurred on HR can be of Capital cost and Revenue expenses
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HRAHRA
Capital Cost
Acquisition Cost
1. Recruitment cost
2. Selection cost
3. Placement cost
4. Campus interview cost
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HRAHRA
Training and Development cost
1. Formal Training cost/Induction/Orientation cost
2. On the Job Training cost
3. Special Training cost
4. Development programmes
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HRAHRA
Revenue expenses Welfare expenses
1. Medical expenses
2. Canteen expenses
3. Specific and General allowances
4. Children welfare expenses
5. Housing/Travel/Recreational facilities
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HRAHRA Other expenses Refs to employee safety, ex-gratia amountsTrade incentives etc
1. Health of workers2. Cleanliness3. Disposal of wastes4. Ventilation5. Temp control6. Over crowding7. Lighting 8. Drinking water9. Latrines, urinals, spittoons
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HRA-Other cost ContdHRA-Other cost Contd
Safety cost
1. Fencing of machinery
2. Work on machinery in motion
3. Employing children
4. Casing of new machines
5. Lift facilities
6. Pressure plant
7. Protection of eyes
8. Precaution against dangerous fumes
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HRA-Other cost ContdHRA-Other cost Contd
Welfare of Workers
1. Washing facilities
2. Facilities for storing and drying clothes.
3. Facilities for sitting and taking rest
4. First aid appliances
5. Canteen facilities
6. Creches
7. Welfare officers
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HRA-Rate of ReturnHRA-Rate of Return RR can be calculated on the basis of
1. Measurement of Return on Organization building
2. Measurement of Return on Organization Utilization
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HRAHRA
Performance of the OrganizationQuality of Work Force Quality of Work Life-Emergence of QWL-
Purpose of QWL.Definition of QWL It is defined as “The degree to which
members of a work organization are able to satisfy important personal needs through their experiences in the organization”
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HRA-QWLHRA-QWL
Conditions for QWL or The measuring factors of QWL
Adequate and Fair CompensationSafe and Healthy working conditionsOpportunity to use and Develop Human
capacitiesSocial Integration in work forceConstitutionalism in the work organizationWork and Quality of lifeSocial relevance of work
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HRA-QWLHRA-QWLSteps to be taken by HR Manager to
improve QWLFlexibility in work scheduleAutonomous work groupsJob enrichmentOpportunity for GrowthProviding stability of employmentParticipation in decision makingRecognitionCongenial working relationship
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HRA-QWL contdHRA-QWL contd
Grievances redress mechanismOccupational stressOrganizational health program.Adequacy of resourcesSeniority and merit promotionsCommunication
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HRAHRAQuality CirclesA quality circle is defined as a “self governing
group of workers with or without their superiors who voluntarily meet regularly to identify, analyze and solve problems of their work field”
Task ForceGroup of most skilled competent employees
from different functions , appointed by management to solve the problems
Performance-Relationship between QWF and performance
ProductivityActions/Steps needed to enhance productivity
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HRA-Human AssetsHRA-Human Assets
Tangible and Intangible ResourcesHuman Resources-IntangibleTypes of Intangible Assets-Need to know
from the point of view of HRAR&D capabilityBrand visibilityPatentsHuman Assets
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HRA-Human AssetsHRA-Human Assets
Types of Human Assets
According o Sumantra Ghoshal, human assets is classified as-Intellectual,Social and Emotional capitals
Intellectual capital Refers skills, knowledge including specialized knowledge, experience, learning capacity, cognitive complexity etc of an individual &
--Knowledge, expertise, patents, IT based knowledge systems and or specialized process of work of an organization
-- IQ
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HRA-Human AssetsHRA-Human AssetsEmotional capital
Refers to self confidence, ambition, courage, risk taking ability and resilience etc of an individual which has a direct correlation with controlling emotions-anger, sadness, hatred, frustration etc
EQ
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HRA-Human AssetsHRA-Human Assets
Social capital
It refers to the asset derived from the network of relationship both internally and externally
---Internal
---External
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HRA-Human AssetsHRA-Human Assets
Spiritual capital
Refers to Ability of an individual to increase/align Values , Ego , Approach to work etc to that of an Organization
-- SQAll these forms of Human capitals are
interrelated
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Methods of Valuation of HRMethods of Valuation of HR
Various models
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HR PlanningHR Planning
Human resource planning is the process by which an organization ensures that it has the right number and kind of people at the right place at right time, capable of effectively and efficiently completing the tasks that will help the organization to achieve the overall objectives
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HR PlanningHR Planning
Objectives of HRPTo carefully forecast the personnel
requirementsTo cope up with changesTo use existing manpower productivelyTo promote employees in a systematic
manner
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HR PlanningHR Planning
Explain the process of HRPAnalyze and understand the organizational
plansCarry out Demand forecasting-Evaluating
the overall requirement of HREnumerate the Supply forecasting-
Understanding the available HR and possible changes in the present HR in the near future
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HR PlanningHR Planning Explain the process of HRP---cntd Now estimate the NET HR requirements Contingency plan if there is going to a Surplus in
terms of redeployment/retrenchment Contingency plan if there is going to a deficit Plan now for Recruitment ,T&D, and internal
mobility if surplus in future Plan for suitable adjustment of organizational
plan if supply is inadequate
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HR PlanningHR Planning
Benefits of HRPHRP helps in reducing labour costsIt helps to correct imbalancesIt is a good base for employee
developmentIt helps in the optimum utilization of HRHelps in the over all business plansHelps in managerial succession plan.
Helps in sound manpower managementIt is a Tool for alternative manpower action
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HR PlanningHR PlanningSteps in effective HRPIt must fit in with the over all Objectives of
the organizationPlan should enjoy consistent support from
the TOP managementOrganization should develop an up to date
employee skills inventoryConstant scanning of external
environmentDevelopment of HRISHave a separate HRP division ????
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Human CapitalHuman Capital
Human Capital’s Contribution Vs Contribution from Physical assets
Elements of Human Capital-Knowledge, education, vocational qualification, work related experience, psychometric assessments, changeability, Innovativeness etc
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Human CapitalHuman Capital
Measures to evaluate Human CapitalReputation of the organizationYears of experience in professionRookie ratio (percentage of employees with less
than 2years of experience)Employee satisfactionEmployee participationProportion of employees making innovative
suggestionValue added per employeeValue added per salary rupee
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Human Capital InvestmentHuman Capital InvestmentWhat should be done by an organization to have an
effective Human capital Investment
Acquisition of human capital
Development of Human capital-Training, MDPS, Coaching, Understudy assignments, Job rotation, Committee assignment, Career development
Motivation—What should be done to motivate employees??
Maintenance---How to retain Talent??
Research---Carry out wage surveys, Job analysis, Validation of performance appraisal
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Effective Human Capital Investment
Effective human capital investments
Maintenance
AcquisitionDevelopment
ResearchMotivation
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HRA-TrainingHRA-Training
What is meant by TrainingIt is a learning experience that seeks a
relatively permanent change in an individual that will improve his or her ability to perform on the job
How to determine the Training needsOrganization development Process-
Explain it with a GridTraining methods
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HRA-TrainingHRA-Training
How will organizations determine the Training needs
What are the Organizational Goals?What Tasks must be completed?What behaviors are necessary for each
job incumbent to complete his/her tasks?What deficiencies do incumbents have in
the skills, knowledge, attitude etc required to perform the necessary behavior?
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HRA-TrainingHRA-TrainingExplain by a Block diagram the
identification of Training needs for Organization Development
Present job Next job The futureThe future job
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HRA-TrainingHRA-TrainingName the various Training methods and Explain1. On the Job Training2. Apprenticeship program3. Job Instruction Training4. Off the Job Training --Class room Lectures --Conferences --Films --Simulation exercises --Experiential exercises --Computer modeling --Vestibule Training --Programmed Instruction
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HRA-TrainingHRA-TrainingExplain in detail job instruction TrainingPrepare the trainees ---Break down the job, Prepare an
instruction plan, put the learner on the comfort mode
Presenting essential information ---Tell , Show, Demonstrate, and ExplainHave the trainees try out their learning ---Have the learner talk thro the job, have
the trainee instruct the supervisor , allow the learner do the job
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HRA-TrainingHRA-Training
Contd:Follow up application
--Check progress very frequently, Tell the learner as to whom he should approach in case of need, gradually taper off progress checks
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HRA-TrainingHRA-Training
Evaluation of the Training given to employees
What is the need for evaluation?When to evaluate?On what basisWhat action need to be taken after the
evaluation of the TrainingThe design for the evaluation—Criteria
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HRA-TrainingHRA-Training
Estimation of the cost of Organizing a TrainingCost associated with LaborTraining materialConference/Training hallsTraveling expensesConveyance expensesTrainer’s professional chargesOther Overheads
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Expenditure Vs ProductivityExpenditure Vs Productivity
Expenditure ---Planned outflow of funds for the Growth and Development of an Organization
Productivity ---It indicates the relationship between the results and the means employed. P = O/I
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Human Capital & Productivity
Productivity
Tech development
Job performance
Ability
Motivation
Job condition
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HRA-Objectives
HRA Objectives
Better HRTraining
Effective manpowerutilization
Greater Accountability
Of HR
Quality decisionabout people
Shorter time forPlanning and
budgeting
Increased managerial Awareness of
HR value
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Unit-III
Recap
--What is meant by HR
--Historical cost of HR-Acquisition, Development , Welfare cost and Other costs
--Importance of HR asset in relation to other assets
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Return on investment in HRRate of Return on HR on Organization
building----Measurement of the costs of Recruitment and Training needed
Rate of Return on Organizational Utilization----Measurement benefits/objectives fulfilled obtained by utilizing the HR should be found
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Return on investment in HR = Return on organization building +
Return on Organizational utilizationDeveloping HR costs Check list 1. Remuneration 2.Recruitment 3.Training costs 4.Relocation costs 5.Separation costs 6. Support costs 7. Personnel Overhead costs
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BehaviorWhat is meant by Behavior?—DiscussOrganizational Behavior VS HR Turnover
---Individual Behavior---Discuss
---Group Behavior ---Discuss
---Group Behavior and Educated personnel
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Human Resources
Loss of HR other than by Redundancy. Redundancy refers to employees who no longer needed
Wastage of HR
1. Labor Turnover
2. Idle time
3. Absenteeism
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Wastage of Human Resources
Labor Turnover—Why happensDiscuss steps being taken by
organizations to reduce labor T/OIdle Time—Discuss
It happens on account of Tea breaks, Maintenance shut down, Break downs, Poor Sales etc
How to control Idle Time--Steps
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Wastage of Human Resources
Absenteeism No of man days lost thro absence
from job
AR = --------------------------------------- X100
Average No of employees x no of work days
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Wastage of Human Resources
Effective steps to control AbsenteeismCommitment from management to reduce
absenteeismTrust employees for sickness claim and
yet have controlAttendance policy should be documentedDevelop belongingnessAttendance rules should be implemented
in a transparent manner
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Organizational ClimateExplain what is meant by Organizational Climate?Definition of Organizational climateAccording to Keith Davis, it is defined as “the human
environment within which an organization’s employees do their work”
Factors affecting the Organizational climate1.Organizational structure2.Operational autonomy3.Commensurate Rewards to recognize performance4.The degree to which risk can be taken5.Warmth and general fellowship6.Tolerance to encourage debate, differing views .
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Organizational Climate
What are the factors that would determine Organizational climate according to Schneider and Bastlett?
Managerial support Managerial structure Concern for new employees Inter agency/dept conflict General environment Degree of interdependence of departments
Explain the significance of Organizational Climate
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Organizational Behavior
• What are the models of Organizational behavior?
Autocratic model
Custodial model
Supportive model
Collegial model
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Organizational Behavior
• Explain the various models of BehaviorAutocratic modelDeep rooted in historyManagers only tool is AuthorityIt is evolved on the basis of McGregor’s
theory on human beingsPerformance is ensured thro fear, threats,
punishment etcUseful where employees are motivated
thro Physiological needs
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Organizational Behavior
Custodial modelDepends on economic resourcesNeeds are met in stages or levels one after the
other to get resultsEmployees remain and work but not really
motivated It believes in keeping people happy by offering
benefitsNo ownership and hence working for the money
being paid If benefits are withdrawn, they will fight
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Supportive modelDemocratic attitudes are more in the
behavior of the employerUnlike the other two models ,the employer
creates a supportive roleThere will be mutual trustThe Employee will tend to participate in
the management and hence they voluntarily opt for higher performance targets
Deterioration in climate and hence the performance would be rare
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Collegial model It is an extension of supportive modelManagement believes a participation and
freedom in the operationThe management and the workers are brought
under one roof and there is complete trust and mutual respect
The employees give superlative performance since there is complete trus
Employees interest are safe in the hands of the employer
There is a degree of fulfillment and self actualization
No extra effort needed to keep the morale and motivation
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Changes in HR variables
A successful HRP has to take in to account the variables in business models
There are two variables
1. Casual Variable
2. Intervening variablesCasual variables
Business policies. Govt regulation, Plans, Leadership approach, skills and behavior would have a great impact on HRP
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Intervening variables
These variable reflect the internal health of an organization. They include
Attitude
Morale
Motivation
Interpersonal relationship
Decision making
Communication etc
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Employee Turnover
What are the reasons for Employee T/O and HR Wastage?
Pay related IssuesThe nature of the JobsPerformanceTrainingCareer DevelopmentCommitmentLack of understanding/Group cohesionConflict with managers/supervisorsPoor/Short sighted recruitment/selectionLack of transparency in promotion policies
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Cost Reduction
Need for cost reductionAreas of cost reductionReduction of cost should be a continuous
affair No compromise on Quality, usage and
serviceabilityIt is a must to face competition and remain
profitable
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Responsibility AccountingResponsibility accounting is a system of control
where responsibility is assigned for the control of costs. The persons are made responsible for the control of costs
Definition
Responsibility accounting is a system under which managers are given decision making authority and responsibility for each activity occurring within a specific area of the company
Under this system managers are made responsible for the activities of segments. These segments may be called as departments/divisions
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• According to Charles T. Horngreen “Responsibility accounting is a system of accounting that recognizes various responsibility centers throughout the organization and reflects the plans and actions of each of these centers by assigning particular revenues and costs to the one having the pertinent responsibility. It is also called profitability accounting/Activity accounting”
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The Inferences from the definition
1.It stresses on communication of information in general and accounting information in particular to various decision centers.
2.Lays greater emphasis on human factor
3. It is a system that collects and reports both planned and actual accounting data in terms of sub units which are recognized as responsibility centers
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What are the steps involved in Responsibility accounting?
1.Organization is divided in to various responsibility centers and each center is put under a responsibility manager
2. The budgets for each center is set in consultation with RM. He knows what is expected of him-Goals should be set and responsibility and authority for each center should be well defined
3.Managers can exercise significant control on items being monitored
4.Goals should be attainable with a stretch5.The actual performance is conveyed periodically to the
managers. Variations if any is conveyed to top management as well
6.The performance reports should also indicate the action to be taken by the management for correction
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Responsibility CentersA Responsibility center is like an engine-ExplainIt is classified in to four categories for better
control. They are
--Expense center
--Revenue center
--Profit center
--Investment center
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Responsibility accountingAdvantages It introduces a sound system of controlEach individual in the organization is given some
specific responsibility and they would be held accountable on that.
Everybody knows their responsibility and it can be shifted to someone else if not handled properly
It is an effective tool for cost control It facilitates management to set realistic plans It facilitates decentralization in decision making
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It helps to measure the performance of individuals in an objective manner
It facilitates a sense of cost control among all.
It provides a platform for delegation in terms of authority and responsibility
Since detailed information /datas are collected it provides a platform for future plans
Timely actions can be initiated for effective control
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Responsibility centers Vs Cost centers
Transfer Prices
Cost control through Responsibility accounting
Controllable Vs Non controllable costs—for different levels
Responsibility Reporting-The need
Frequency of reporting, persons to whom the reports are to be sent, Details to be compiled and standardization of Formats
Total cost Concept-Right from the childhood of a person till he retires from an organization
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Recording and Disclosures in Financial statements
Dilemma faced by accountants in reporting Human assets
Left to individual firms as of now till a proper verifiable and tested procedures and methods have been put in place
Prof.Dasgupta’s method—Human assets to be classified in to two parts
—Value of individuals---Value of Firms Investment---On the Assets side after the Fixed assets---On the Liability side after the Capital
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Prof Dasgupta’s Model
LIABILITIES
Capital ----- 100000
Human Capital--- 80000
Total 180000
ASSETS
Fixed Assets --- 50000
Human Assets Individual’s -80000 Firm’s investm-24000
Current Assets - 26000
180000
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UNIT 5---HR AUDIT
RecapWhat is a Resource?
What is HRP?What is HRISBasic information about employeesStages in HR Acquisition and
DevelopmentWhat is meant by HR Audit in General?
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HR AUDIT
Meaning of HR Audit
HRD Audit is a systematic survey and analysis of different HRD functions with a summarized statement of findings and recommendations for correction of deficiencies. It examines and evaluates Policies, Procedures and Practices to determine the effectiveness of HRD function in an Organization. It also ensures sound cost effective HRD policies are implemented
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HR AUDIT
What are the objectives of HR Audit?? To review the whole organizational system of
HR practices like recruitment, selection, T&D, performance management, Grievances mechanism, promotional policies etc
To find the deviation to be reported with corrective measures
To analyse the Objectives set for each activities and the achievement
To evaluate the various personnel policies To evaluate the quality of personnel
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HR AUDITScope of HR AuditThe scope is far and wideIt covers from HR ObjectivesHR planning Recruitment, selectionT&DPerformance managementIR Leadership styles and the consequences
etc
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HR AUDITRole of HR Auditor
To get the facts for all HR functions
To Compare with the objectives set and prepare deviation reports
To Study the effectiveness of the present system
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HR AUDITRecords used for HR AuditTime study records with Time standardMedical and accidental ReportsGrievances ReportsTurnover ReportsRecruitment ReportsPerformance management ReportsEmployee Motivational scheme ReportsPay roll ReportsBehavioural survey reports
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HR AUDITWho will do HR Audit?-Internal
staff/External specialistsWhen to conduct the HR AuditHow will it be done?-Attitudinal
survey/Internal dataHow the analysis is done to draw
meaningful conclusions/observations before preparing the report?
Key points to be stressedHR Research—Two forms :-Facts &
Interpretations--Collection of facts/concepts--Interpretation/prediction on the basis of
facts/concepts
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HR AUDITEssential steps in HR Auditing processOrientation of the staff for HR AuditPlanning for the AuditScanning the info/details available in
internal recordsDevelop questionnaire for survey and
conduct itWhere needed plan and do interviews with
the personnelSynthesis the data/Information to draw
meaningful conclusions
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HR AUDITHRA---Indian scenario--Gupta’s report--NTPC, ONGC,SAIL—Public sector--Private sector Labour ministers conference of 1995 at
Delhi on HR policies in non aligned countries
HRA in Australia, Newzealand, SingaporeHRA in Indonesia, Philippines, Thailand
and Malaysia
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HRA-VALUATIONS
HR ValuationModels
Monetary
Non monetary
Composite
Statistical
Cost based
Value based
Historicall cost
Replacement cost
Standard cost
Opportunity cost
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