Tag: Diversity and Inclusion

Intangible assets are those assets in a company’s balance sheet that have monetary or business value hidden in them but are not present in the physical form. Intangible assets help companies by performing operations in a unique manner thereby giving them a competitive edge. For example, intellectual property like patents, trademarks and copyrights are types of intangible assets. All businesses can gain access to intangibles by creating intangibles or acquiring intangibles from other businesses.

The intangible value of a business can also be hidden in the brand value of a corporation. Different businesses exhibit different Unique Selling Points that can be considered part of the intangible value of a business.

Important

There can be different reasons to value intangibles; some of them are listed below:

• Determining the Asset Value: Since an intangible asset is a non-physical asset, the value at which it has to be disclosed should be determined as accurately as possible.
• Regulatory Purposes: Determining the correct value of the intangible asset for taxation purposes, transfer pricing, taxation for mergers and acquisitions etc.
• Improving Accuracy and Reliability of Financial Communication: Informing stakeholders (Management, Employees, Shareholders, Regulators, etc) appropriately and reliably is of paramount importance in today’s day and age.
• Improving and Diversifying Access to Finance: Recognizing the worth and inherent value of intangible assets would greatly improve the chances of any company to successfully apply for financing.
• Impairment Testing: Impairment testing involves comparing an asset’s carrying amount in the balance sheet with its recoverable amount.
• Gaining competitive edge: An increase in intangibles investment may trigger an increase in total factor productivity, and therefore long-term economic growth.

Marketing-related intangible assets

• Trade marks (eg. McDonald’s logo with gold M symbol, Nike logo)
• Internet domain names (eg. www.google.com, www.yahoo.com)
• Non-competition agreements

Contract-based intangible assets

• Licensing, royalty agreements (eg. Lending a license for use)
• Leasing agreements (eg. Leasing agreement to use an asset)
• Broadcasting rights (eg. Hotstar’s right to broadcast IPL)

Technology based intangible assets

• Patented and unpatented technologies
• Software (eg. Microsoft Office)
• Databases
• Secret formulas, processes (eg. Confidential code of a product)

Methods:

1) Relief from Royalty Method (RRM)

In this method, value is assigned to the intangible asset based on approximate royalty rates that would be saved by owning the asset. Because the asset is owned by the Company, it doesn’t have to pay for the use of the asset. The RRM incorporates elements of both the market (royalty rates for comparable assets) and income (estimates of revenue, growth, tax rates) approaches.

2) With and Without Method (WWM)

The intangible asset’s value is determined by calculating the difference between a discounted cash flow model for the enterprise with the asset and a discounted cash flow model without the asset.

It should be noted that identification of incremental income and incremental risk to business cost of capital excluding the capital is of paramount importance here.

3) Multi-Period Excess Earnings Method (MPEEM)

The cash flows related to a particular intangible asset are discounted to calculate the present value. It is applied when the cash flows associated to a particular intangible asset can be properly determined. Software and customer relationships are examples of assets that can be valued using MPEEM.

4) Real Option Pricing

This method is used to value intangible assets that are not presently generating cash flows but are expected to do so in the future. Undeveloped patent options are one example of an intangible asset that may be valued using this method.

Types

1. Human Capital

Human capital is the umbrella term for the skills, education, experience, and value of an organization’s workforce. It’s the know-how and expertise of individuals within a company, which can bring the company value. An organization’s human capital also shows how effectively management uses resources to help employees achieve their potential.

2. Relational Capital

Relational capital consists of all the valuable relationships that an organization maintains with customers, suppliers, partners, clients, and other external entities. It also encompasses brand names, reputation, and trademarks that a company owns.

3. Structural Capital

Structural capital is the organization, process, and innovation capital that supports an organization’s human and relational capital. It includes culture, processes, databases, intellectual property (IP), non-physical infrastructure, hierarchy, and more. It refers to the knowledge and value that belongs to an organization’s structure and processes.

Change management is defined as the methods and manners in which a company describes and implements change within both its internal and external processes. This includes preparing and supporting employees, establishing the necessary steps for change, and monitoring pre- and post-change activities to ensure successful implementation.

Significant organizational change can be challenging. It often requires many levels of cooperation and may involve different independent entities within an organization. Developing a structured approach to change is critical to help ensure a beneficial transition while mitigating disruption.

Changes usually fail for human reasons: the promoters of the change did not attend to the healthy, real and predictable reactions of normal people to disturbance of their routines. Effective communication is one of the most important success factors for effective change management. All involved individuals must understand the progress through the various stages and see results as the change cascades.

Change Management Need

Change management is a complex process and requires serious attention as well as involvement from the management and people from all levels, in order to achieve a meaningful or a progressive transformation across various levels. For being ahead in the competitive race and gaining a winning edge, organizations have been focusing on expansion of business worldwide, achieving excellence in processes and operations, implementing innovations in technology and identifying/developing the right talent. The fast changes which have taken place and the way in which this has affected the strategies, people, policies and processes in an organization, it has become all the more imperative that organizations clearly establish a well-defined change management framework for realizing the strategic objectives. Change is inevitable and it can only be managed, failing which the organizations may cease to exist.

In the era of globalization, organizations function across the cultural boundaries with large investments in human capital as well as physical resources, give utmost importance to technological change and innovative practices for a leadership advantage. Business alliances like mergers, acquisitions, diversifications, takeovers and various other collaborative ventures have become the most preferred strategic best practices for the organizations to survive the fierce forces of competition, through transfer of people, technology, processes and leadership. For successfully handling this transition and converting the threats of change into opportunities, organizations must be flexible and open for Change Management.

By improving the readiness for change, organizations can strengthen their adaptability mechanisms and build their internal competencies for facing future uncertainties or many such multiple change auguring situations. An organization’s readiness for change management influences organizational strategies and policy related decisions, as it involves a comprehensive, well planned approach and implementation of systemic interventions which would have an overall influence on the system, processes, people as well as the organizational structure as a whole.

Innovations in technology and research advancements, have created opportunities for working virtually across any part of the globe; changes in the organizational structure and hierarchy; changes in the human resource policies and regulations, has resulted in organizational reengineering and change in the style of working of employees.

For meeting the growing demands of ever changing business operations, more dynamic and flexible organizations have endorsed new methods of working like flexi work hours, work from home, freelancing opportunities, virtual method of working, business operation outsourcing and project driven operations, etc. which provide ample opportunities to the workmen to work as per their convenience and flexibility.

Organizations change for responding to the fluctuations or volatility in the business environment. Any change in order to have successful outcomes must involve comprehensive planning, focused approach and involvement of the key stakeholders in the entire process.

For any organization, people play a very vital role in driving business excellence as they are the most valuable assets. Hence, a change in the method of handling a job role, implementation of facilitating interventions and training people about the new practices or techniques, can result in impressive results in terms of the return on investment (ROI). How organizations manage change or respond to the business transitions largely depend upon the adaptability of people or readiness of the people in understanding the changes in the process and method of handling a job. Change management process may directly affect the human resource strategies of an organization depending upon the goals or strategies of an organization.

A well-defined change management process can help in mitigating risks related with the people side. If this aspect is ignored, it might result in increase in the overall costs, decline in productivity as well as employee motivation and increase in the absenteeism level and employee attrition. Hence, it improves the overall preparedness of the management and the decision-making authorities in understanding the need for managing change, the key processes involved in it and in understanding the operational technicalities connected with it.

Planned change if effectively implemented can be beneficial in terms of controlling costs, minimizing risks, reducing the stress and anxiety by controlling uncertainties. It helps in setting up new milestones, establishing objectives, defining priorities and identifying the limitations for driving excellence in new initiatives.

Effective Change management process help organizations in understanding the changing customer needs, meeting their demands and expectations much better since the requirements are well defined. If implemented with proper planning, change management does not affect the day to day functioning of an organization, rather it functions concurrently. Instead it creates a scope for establishing best practices, defining the operational framework and regulations for the people, processes and system. It engages people in the entire process and motivates them to work towards realization of a common goal or objective and deliver excellence in performance through collaborative efforts and involvement in the process as a whole. Research in this direction proves the fact that organizations which have an established change management process are more likely to excel in meeting the business goals or achieve excellence in their project outcomes.

Effective change management is the key to realization of operational effectiveness, plays a key role in creating an optimism in the organizational environment as it has holistic outcomes and enables achievement of outcomes by defining superior benchmarks and working towards it for realization of the set benchmarks.

Organizational change affect the leadership thinking style and may optimize the benefits by establishing the systems and processes in place, establishing an integrated framework for achieving the developmental goals with the complete involvement of people in the end to end stages of change management cycle.

Capital refers to already produced durable goods which further contribute to the production of goods and services. In simpler words, capital refers to any produced good/service which enables an individual/organization to deliver high quality output. Capital acts as a catalyst to increase productivity in organizations.

Human Capital management refers to managing an organization’s employees for them to contribute significantly in the overall productivity of organization. In a layman’s language managing workforce of an organization refers to human capital management.

Human Capital Management is defined as the process of acquiring, training, managing, retaining employees for them to contribute effectively in the processes of the organization.

In simpler words, upgrading the existing skills of an employee and extracting the best out of him/her refers to human capital management.

Do not treat your employees as mere labours. Senior management must ensure timely growth and development of every individual concerned for him/her to contribute efficiently when required.

The key objective of every organization should be to train its employees so that they become efficient resources later on. In human capital management, organizations treat their employees as important resources that play an instrumental role in productivity of the organization.

The development and management of individuals in line with their key responsibility areas not only make them an indispensable resource in the future but also ensure their hundred percent contribution towards the organization.

Human capital management drivers fall into five major categories:

1. Leadership Practices

• Communication: Employees must be treated well for them to develop a feeling of attachment and loyalty towards the organization. Managers must understand that their role is not just to sit in closed cabins and impose ideas on others. They ought to communicate well with their subordinates. Employees must have an easy access to the senior management. Communication from management to employees also known as Top down communication is essential for the employees to be aware of their goals and objectives and for them to know what is expected out of them.
• Inclusiveness: Management ought to sit with employees on a common platform to invite suggestions and feedbacks from them.
• Supervision: Senior executives and management must reduce the various levels of hierarchy between them and employees’. Management must interact and motivate the employees from time to time for them to give their level best.
• Leadership: Senior executives should support, lead and influence the workforce so that they contribute effectively towards the organization.

2. Employee Engagement

• Key Responsibility Areas: Key responsibility areas of an individual should be designed in line with his education, skills, expertise, experience and also area of interest. This way, work never becomes a burden for him.
• Commitment: Outstanding efforts of employees must be acknowledged for them to feel motivated and work harder even next time. Employees performing well ought to be suitably rewarded and appreciated in front of others.
• Time: Time management ensures that no employee is overburdened. Responsibilities must be equally shared among employees.
• Evaluation: Employee engagement must be evaluated from time to time by the top management.

3. Knowledge Accessibility

• Information Availability: Employees must have an easy access to all relevant information required to perform their duties. Organizations must organize various training programs (In house Trainings or Out sourced trainings) to constantly upgrade the existing skills of employees and acquaint them with new learnings.
• Team Work: Employees must be motivated to work in teams rather than working alone.
• Information Sharing: Encourage employees to share information with each other.

4. Workforce Optimization

• Work processes: Senior management must define work processes of employees well for maximum productivity.
• Working Conditions: An organization needs to provide excellent working conditions to the employees to expect the best out of them.
• Accountability: Individuals must be held accountable for their work. Get a commitment from employees and nothing like it, if everything is in writing.
• Hiring: Individuals responsible for talent acquisition must ensure that they hire the right candidate for the right role. Design a strong induction program for all the newly joined employees.
• Performance Management: Employee’s performance needs to be strongly monitored and managed.

5. Learning Capacity

• Innovation: New ideas should be welcome. Employees must be encouraged to come out with new and innovative ideas which might benefit the organization.
• Training: Trainings must be practical/relevant and designed to sharpen the skills of employees. Do not design training programs just for the sake of it. They must benefit the employees.
• Career Development: Employees must be aware of their growth plan in the organization.
• Learnings: New learnings should be valued by all in the organization.

Human Capital Management is essential for hiring, managing, training and retaining talented and high performing employees.

Human Capital management plays an important role in the recruitment process. It ensures that human resource professionals hire individuals who really deserve to be in the organization. Recruiting the right talent is of utmost importance. An individual who is not fit for a particular role will not be able to contribute much in the long run.

Talent acquisition is one of the most crucial responsibilities of human resource professionals, often neglected in most organizations. Do not hire someone just because you need to fill a vacant position or your superiors have asked you to do so. Analyze the background of an individual thoroughly. Try to find out why someone really wants to join your organization? Remember money should not be the only criterion why someone wants to change and join a new organization. An individual who has been assigned the role of acquiring new talents should not forget to check an applicant’s past experience, interests, professional qualification and reasons for changing previous job. If you really like someone, try to do some reference check as well. Do discuss with the applicant before calling up his previous organization or boss, else it might land him/her in trouble.

Human Capital management plays an important role in orienting a new employee to the system. Boring and meaningless induction programs lead to confusions and an employee eventually loses interest in the organization. Do not load someone with unnecessary information, the very first day he steps into the organization. Believe me, he will run away. Make him feel comfortable. Ask him/her not to bring lunch from home. Order lunch from outside and ask all his team members to have lunch together. Such small initiatives go a long way in breaking ice among team members.

It is essential for employees to upgrade their knowledge with time to cope up with the changing situations. Human Capital Management helps in training the employees and making them indispensable resource for the organization. Motivate employees to take up special courses or online programs which would help them in their job. Employees who do not brush up on their skills from time to time find it difficult to survive in the long run. Inculcate the habit of reading. Internet is also one of the good options to keep oneself abreast with the latest developments.

Human Capital management plays an important role in increasing the efficiency of employees. Individuals are in a position to contribute more towards the system, eventually increasing the overall productivity of the organization.

To conclude, human capital management is important for:

• Hiring the right talent
• Orienting him/her to the organization
• Making a new employee feel comfortable
• Training employees in order to constantly upgrade their skills
• Retaining employees
• Making employees self-sufficient and prepare them for adverse conditions.

Benefits

Human capital management helps in extracting the best out of employees. It also plays an instrumental role in increasing the efficiency of employees, making them an indispensable resource for the organization.

Human Capital Management enables the human resource professionals to hire the right candidate for the right role. Talent Acquisition is one of the most crucial functions of an individual representing human resource vertical.

Remember one wrong employee can lead to problems, confusions within the system. Superiors and management do not have to spend much of their time and energy in training someone who already is aware of his roles and responsibilities. Human Capital Management is beneficial in recruiting the right talent for the organization. Hire employees who really deserve to be in the system. The process of Human Capital management involves hiring the right candidate; orienting him to the system and making him comfortable for him to deliver his/her level best. It is generally observed that boring induction programs are a mere waste of time and energy. Human resource professionals should not design induction programs just because protocol demands the same. Induction programs should be interactive sessions where the trainer should acquaint the new employee with the policies of the organization. Human resource professionals should act as a bridge between senior management and employees.

Human Capital management enables free flow of information between superiors and subordinates. Employees have an easy access to the senior management and hence there is no room for confusion or misunderstandings. Half of the problems evaporate when colleagues discuss matters amongst themselves.

Trainings and skill development activities are essential for upgrading the existing knowledge of employees. Training program increases the efficiency of employees and eventually increases the overall productivity of organization. It is essential for every employee to keep himself/herself abreast with the latest developments in his/her field. Human Capital management makes an employee self-sufficient. It enables employees to adapt to changing situations easily. A well-trained employee can bring better productivity than someone who is not trained.

The performances of employees must be evaluated from time to time. Superiors ought to keep a track on subordinate’s work. Proper feedback is essential. Human Capital management helps in monitoring employee’s performance. Special online reporting systems help senior management to have a direct access on the work of their juniors. Employees are aware as to what is expected out of them.

Human Capital Management highlights the importance of soft skills and personality development for employees. An employee who can speak well is always considered as a trouble shooter by his fellow workers. Do not hire someone who has poor communication skills. Someone with average communication skills can still be considered.

Human Capital management helps the employees to improve in areas where they feel they are lacking. It not only benefits the employees but also the entire organization.