Tag: employee engagement

A policy is somewhat a permanent feature of an organization. It being a standing plan, provides guidelines to managerial decisions. Therefore, policies should be developed on a sound basis. If this is not done, managers have to make decisions again and again. However, what features constitute a sound policy cannot be prescribed universally because situations vary so greatly and an organization may differ in respect of policy formulation and implementation from others.

A sound policy must Have

(i) specify more precisely how the decision will come what is to be done, who is to do it, how it is to be done, and when it is to be finished

(ii) establish a follow-up mechanism to make sure that the decision intended will take place

(iii) lead to new strengths which can be used for decisions in future.

Characteristics of Sound HR Policy

1. Relationship to Organizational Objectives:

A policy is formulated in the context of organizational objectives. It tries to contribute towards the achievement of these objectives. Therefore, in formulation of a policy, those functions or activities which do not contribute to the achievement of objectives should be eliminated.

For example, if a policy of filling higher positions from within produces hindrance in attracting talents at higher level but the organization needs them, the policy can be changed because in the absence of suitable manpower, the organization may not be able to achieve its objectives.

2. Planned Formulation:

A policy must be the result of careful and planned formulation process rather than the result of opportunistic decisions made on the spur of the moment. Since policies are relatively permanent features of the organization, ad hocism should be avoided because it is likely to create more confusion.

It is true that it is not possible to solve every problem in the organization on the basis of policies because new situations may arise, however, for matters of recurring nature, there should be well-established policies.

3. Fair Amount of Clarity:

As far as possible, policy should be clear and must not leave any scope for ambiguity. If there is a problem of misinterpretation, the organization should provide the method for overcoming the ambiguity. Further, policy provides some discretion for managerial decisions but it should minimize the number of cases where decisions are based on personal judgement. If this happens frequently, there should be close scrutiny of the policy and suitable amendments should be made.

4. Consistency:

The policy should provide consistency in the operation of organizational functions. Often the organization formulates policies in various functional areas and each function is related to other functions of the organization. If the policy in one area is inconsistent with another area, there may be conflict resulting in inefficiency.

This happens very frequently in functions having close relations such as production and marketing or finance and other functions. Therefore, the formulation of policies should be taken in an integrated way so that policies in each area contribute to other areas also.

5. Balanced:

A sound policy maintains balance between stability and flexibility. On the one hand, a policy is a long-term proposition and it must provide stability so that members are well aware about what they are required to do in certain matters. On the other hand, the policy should not be so inflexible that it cannot be changed when the need arises.

In a changed situation, the old policy becomes obsolete. Therefore, there should be a periodic review of policies and suitable changes should be incorporated from time to time. The changes may be in the form of addition, deletion, or substitution of the existing policy.

6. Written:

A policy may be in the form of a statement or it may be interpreted by the behaviour of the people at the top level. However, clearly-specified policy works better than the one which has to be interpreted by the organization’s members. When the policy is in writing, it becomes more specific and clearer. It creates an atmosphere in which individuals can take actions with confidence knowing fully the impact of a particular action.

A written policy is easier to communicate through the organizational manuals. However, written policy has certain disadvantages in the form of being inflexible, too much emphasis on written words and their interpretation, and leakage of confidential policy. However, if the policy has been formulated carefully, many of the dangers will be overcome. Of course, confidential policies cannot be made part of organizational manuals.

7. Communication:

It is not just sufficient to formulate policies. Unless these are communicated properly to the persons concerned, no meaningful purpose will be served. Therefore, a system should be developed to communicate the policies to those who are to make decisions in the light of those policies.

While written policies can be communicated easily, problems exist for communicating unwritten ones. In such cases, there should be more interaction between policy framers and policy implementers.

HR Policies

1. Recruitment and selection policy: To procure suitably educated and efficient personnel by offering those tempting wages, good working conditions, safety and security, and better future prospects.
2. Training and development policy: To make available all possible facilities for the training and development of employees to enable them to do their job efficiently and to prepare them­selves for future promotions; to take effective steps including training and development pro­grammes to equip the employees in the latest techniques of production, management and so on; to get the performance appraisal done; and to provide adequate opportunities and facilities for the development of employees.
3. Job evaluation, wage and incentive policies: To determine reasonably good wage rates and dearness allowance, and to work out incentive plans for workers after undertaking job evalu­ation and other necessary steps and also keeping in view the prevalent wage rates for similar jobs in other industries.
4. Labour welfare policy: To improve industrial relations by evolving a suitable machinery for the settlement of disputes; to encourage mutual negotiations; to prepare and execute labour welfare programmes; and to arrange all possible facilities for the health, education and other welfare programmes.
5. Retrenchment: All progressive companies keep good exit policies, so that feedback can be obtained and improvement can be brought about.

High-commitment management emphasizes personal responsibility, independence, and empowerment of employees across all levels instead of focusing on one higher power; it always intended to keep commitment at high level “calling all the shots”.

A high commitment system is unusual in its job design and cultural structure. These practices emphasize getting the tasks complete, but do it in a way that their employees enjoy doing it. According to Harvard Business School Professor Michael Beer, “leaders develop an organizational design, business processes, goals and measures, and capabilities that are aligned with a focused, winning strategy.” This kind of environment allows employees to approach tasks at ease, wearing jeans instead of suits and staying home to watch their children get on the bus for school before coming to work. Technology also plays a role in this system. Recently, technology has slaughtered barriers of communication, which makes this high-commitment model fit that much better. That father waiting for the bus can still answer phone calls and check emails for work, so is he working or is he spending time with his daughter? He can be doing both. As long as the job gets done, this system is casual on how it gets done, relieving employees of constant stress.

A flat organizational structure is one of the biggest success factors. Individuals are responsible for their own decision-making and these decisions, their skill, and their performance is how they get paid. Instead of putting too much weight on the individual, “people are likely to see the locus of the control coming from ‘within’ through the adoption of self-created demands and pressures as opposed to external and making them feel subordinate.” While these companies allow each employee to be a manager in their own way and try not to distinguish its structure by higher levels of employment, it doesn’t mean that they lack these higher powers entirely. It’s that under this system people aren’t relying on the general managers, CEOs, or other employees to do their work for them. This personal discipline is what drives the employees to help the company be successful. and eliminates the chance at a thought like, “Why would I want to help my company become better if I know I’m just going to get yelled at?”

Another focus of high commitment practices is their employee relationships. They only hire people who are flexible, determined, and are willing to handle challenges. Because this system relies on individual performance, there is a big emphasis on hiring the right people for the job. The detailed recruitment process can consist of many interviews with different members of the company, an induction course, and in some cases, team-building exercises. Once found, the right employees help create a strong bond and high trust throughout the entire company.

High commitment workplaces are successful through their importance on an individual’s responsibility in order to help the team prosper. By creating a culture that motivates individuals to want to succeed while sustaining high commitment, “these firms stand out by having achieved long periods of excellence.”

These models of best practice can take many forms; while some have advocated a universal set of HR practices that would enhance the performance of all organisations to which they were applied (Pfeffer, 1994, 1998), others have focused on high-commitment models (Walton, 1985; Guest 2001) and high-involvement practices (Wood, 1999) which reflect an underlying assumption that a strong commitment to the organisational goals and values will provide competitive advantage.

Others have focused on ‘high-performance work systems/ practices (Berg, 1999; Applebaum et al., 2000). This work has been accompanied by a growing body of research exploring the relationship between these ‘sets of HR practices’ and organisational performance (Pfeffer, 1994; Huselid, 1995; Huselid and Becker, 1996; Patterson et al., 1997; Guest, 2001). Although there is a wealth of literature advocating the best-practice approach, with supporting empirical evidence, it is still difficult to reach generalised conclusions from these studies.

This is mainly as a result of conflicting views about what constitutes an ideal set of HR best practices, whether or not they should be horizontally integrated into ‘bundles’ that fit the organisational context and the contribution that these sets of HR practices can make to organizational performance.

• Universalism and high commitment

One of the models most commonly cited is Pfeffer’s (1994) 16 HR practices for ‘competitive advantage through people’ which he revised to seven practices for ‘building profits by putting people first’ in 1998. These have been adapted for the UK audience by Marchington and Wilkinson (2002).

Pfeffer (1994) explains how changes in the external environment have reduced the impact of traditional sources of competitive advantage, and increased the significance of new sources of competitive advantage, namely human resources that enable an organization to adapt and innovate. Pfeffer’s relevance in a European context has been questioned owing to his lack of commitment to independent worker representation and joint regulation (Boxall and Purcell, 2003), hence Marchington and Wilkinson’s adaptation, highlighted in Table.

HR practices for ‘competitive advantage through people’

With the universalist approach or ‘ideal set of practices’ (Guest, 1997), the concern is with how close organisations can get to the ideal set of practices, the hypothesis being that the closer an organisation gets, the better the organization will perform, in terms of higher productivity, service levels and profitability. The role of Human Resources, therefore, becomes one of identifying and gaining senior management commitment to a set of HR best practices, and ensuring that they are implemented and that reward is distributed accordingly.

The first difficulty with the best-practice approach is the variation in what constitutes best practice. Agreement on the underlying principles of the best-practice approach is reflected in Youndt et al.’s (1996: 839) summary below: Lists of best practices, however, vary intensely in their constitution and in their relationship to organisational performance. A sample of these variations is provided in Table. This results in confusion about which particular HR practices constitute high commitment, and a lack of empirical evidence and ‘theoretical rigour’ (Guest 1987: 267) to support their universal application. Capelli and Crocker-Hefter (1996: 7) note:

• Integrated bundles of HRM: horizontal integration

A key theme that emerges in relation to best-practice HRM is that individual practices cannot be implemented effectively in isolation (Storey, 1992) but rather combining them into integrated and complementary bundles is crucial (MacDuffie, 1995). Thus the notion of achieving horizontal integration within and between HR practices gains significance in the best-practice debate.

HR practices for ‘competitive advantage through people’

The need for horizontal integration in the application of SHRM principles is one element that is found in the configurational school of thought, the resource-based view approach and in certain best-practice models. It emphasises the coordination and congruence between HR practices, through ‘a pattern of planned action’ (Wright and McMahan, 1999). In the configurational school, cohesion is thought likely to create synergistic benefits, which in turn enable the organisation’s strategic goals to be met.

Roche (1999: 669), in his study on Irish organisations, noted that ‘organisations with a relatively high degree of integration of human resource strategy into business strategy are much more likely to adopt commitment-oriented bundles of HRM practices’. Where some of the best-practice models differ is in those that advocate the ‘universal’ application of SHRM, notably Pfeffer (1994, 1998). Pfeffer’s argument is that best practice may be used in any organisation, irrespective of product life cycle, market situation or workforce characteristics, and improved performance will ensue.

This approach ignores potentially significant differences between organisations, industries, sectors and countries however. The work of Delery and Doty (1996) has highlighted the complex relationship between the management of human resources and organisational performance, and their research supports the contingency approach (Schuler and Jackson, 1987) in indicating that there are some key HR practices, specifically internal career opportunities, results-oriented appraisals and participation/ voice, that must be aligned with the business strategy or, in other words, be context-specific.

The ‘bundles’ approach, however, is additive, and accepts that as long as there is a core of integrated high-commitment practices, other practices can be added or ignored, and still produce enhanced performance. Guest et al.’s analysis of the WERS data (2000a: 15), however, found that the ‘only combination of practices that made any sense was a straightforward count of all the practices’. As with many high-commitment-based models, there is an underlying assumption of unitarism, which ignores the inherent pluralist values and tensions present in many organisations. Coupled with further criticisms of context avoidance and assumed rationality between implementation and performance, the best-practice advocates, particularly the universalists, are not without their critics.

Self-directed work teams

In a study of illumination in the workplace of Hawthorne and the Western Electric Company, a sociologist from Harvard Business School, Elton Mayo, concluded that when the organization established experimental work groups, “the individuals became a team and the team gave itself wholeheartedly and spontaneously to cooperation.” Through a natural system of collaboration, the teams are not only responsible for the work but also the management of their group. Mayo’s research uncovered that teams under their own direction established a capacity for self-motivated learning and change. This concept of designing the work system with the full participation of the people proved to be a breakthrough for organizations during the 1990s. During that time, employees closest to the product and customer began to have increasing decision making capacities and capabilities.

Interview programs

The Hawthorne Experiments sought to determine a correlation between light levels and productivity. Researchers had divided the employees into teams of six and interviewed the individuals to determine the effect of the lighting. Mayo discovered that the interview program set up by the study inherently gave the employees a sense of higher purpose.[9] Exposure of employee thoughts and concerns to managers appeared to be a fundamental aspect of the relation between managers and employees. Evidently, by having the ability to speak to their managers, the employees at Western Electric exhibited a dramatic improvement in their attitudes towards work. Essential to a highly committed work force, the interview program formally developed and sustained cooperation with management.

Problem-solving teams

The Hawthorne experiment further highlighted that teams working without coercion from above or limitation from below could astonish even their own expectations of themselves. Sociologist Fritz Roethlisberger argued that this informal organization left the team responsible for addressing the myriad of problems that continuously arose. Roethlisberger noted by studying the chemistry of informal groups that human interactions and collaboration have the potential to set when teams have to face problems on their own. Together the individuals of the team strive to improve the processes of the team by adapting to different demands and learning from each other.

Cross training

Cross training began to be heavily examined through the scope of modern Japanese management in the automobile industry in the 1970s. Sociologists examined the way in which the Japanese automobile firms cross-trained its employees through a company wide orientation and training program. As Japanese firms trained their employees in a multitude of aspects in the production process, sociologists discovered that the training brought the employees together and formed a connection in which all the employees were dedicated to the company’s mission. These established connections appeared to solicit cooperation among the work force. The Japanese auto plants revealed that flexibility within the production teams allowed employees to work on their own tasks while keeping others efficient.

A resourcing strategy and a recruitment policy helps you understand future staffing needs and work out how to ensure those needs are met. The policy should be consistent and transparent, reflect the organisation’s mission and values, and comply with employment law regulations.

The resourcing strategy broadly states the goals that the organisation aims to achieve through recruitment. This could be by external recruitment or developing existing employees; working with the whole organisation to understand its current and future needs; and ways of addressing resourcing (both by filling vacancies and also through the wider needs and expectations of candidates).

The policy should clearly set out the recruitment process; demonstrate consistency across the organisation’s sectors; extend information about the organisation’s recruitment strategy; and integrate with strategic and operational objectives. Finally, check that your resourcing policy chimes with your employer brand, and that your organisation is fulfilling those ambitions and values.

Components of a resourcing strategy include knowing the talents and skills you need to meet your business requirements; where and how to fill gaps; and how to fulfil your future talent needs:

• Workforce planning: The number and type of employees required
• Employee value proposition: The ‘give’ and the ‘get’
• Resourcing plans: Where to find your people; learning and development offer
• Retention: Being ‘an employer of choice’
• Flexibility: Addressing hard-to-fill roles; offering different hours and work locations
• Talent management and succession planning: What future talent does the business require and where will these managers come from?

Successful resourcing strategy include:

• Ensure you have a ‘resourcing champion’ overseeing your strategy, whatever the size of your organisation
• Refine the employer brand and employee value proposition (evp) to determine how you stand out against the competition
• Build talent internally by adjusting existing roles, providing training, flexible working, or creating career paths to build loyalty and enhance your employer brand
• Develop an internal pool of candidates by using internal referral schemes and contacting previous applicants
• Consider establishing relationships with graduates, past employees and other contacts to provide a talent pool
• Keep a schedule of hiring practices and expenditure to monitor the most successful and cost-effective channels and inform future strategy
• When selecting a recruitment agency, look for one key expert in your industry that offers a genuine partnership, based on longer-term resourcing needs.

If there is more than one person in your organisation who can hire new recruits, make sure any changes to hiring processes are communicated effectively. It is important to have a clear understanding of the current marketplace and what your business may need in terms of talent for the short and long term. The same goes for your organisation’s targets, projects and relevant timescales, and how these link to future vacancies.

Process

1. Have a Workforce Plan

Imagine if you never had a vacancy again. This may seem far-fetched but you can get pretty close by having a thorough Workforce Plan which considers the type of workforce you need for the future, the volume of people you need and where they are based, what skills they’ll have and where you can get them from. If you build in a proactive approach to recruitment where you plan for the future and know what roles you needed and when, you would be able to build pro-active talent pools and reduce the need for in the moment, requisition-led recruitment, which would in turn limit the number of vacancies you have.

A key part of the Workforce Plan is to have a detailed view of Succession. You can also use the succession process to scenario plan (who’s likely to leave), future-proof your business, plan development, keep an eye on talented individuals and identify internal and external replacements succession doesn’t just have to be internal, you can keep external talent warm too. In my view part one of a resourcing strategy is to minimise vacancies. Workforce Planning is the best way to do this.

2. Know and communicate what you’re about.

I’m not a fan of HR jargon but in the trade, this would be referred to as a strong Employer Value Proposition. In essence this means being really clear on what you stand for as an employer and what the prospective employee will get in return for working from you, for example fast career progression, high pay, long hours or strong values, flexibility, a great environment. It is important that this is reflected in all your recruitment literature and job adverts. A strong and accurate proposition will help you attract the right people to your business.

3. Be clear on the type of person you’re looking for.

In order to attract the right people, you’ve first got to be clear on the type of person you’re looking for. This means knowing the skills, qualifications, experience you need to be a success in the role and combine this with the values the person needs to work effectively in your business.

4. Advertise your roles in the right place.

It seems pretty simple when you think about it. I’ve done a lot of work with some great marketing people recently who have helped me to identify the right channels and right places to advertise based on where the people I’m trying to attract look for jobs. For example, if I’m trying to attract people out of the city then I’ll advertise on the London tube, if I’m trying to attract rural people, I’ll look at Farmer’s Weekly, if it’s HR people then the CIPD etc.

If you’re using a recruitment partner/agent, then it’s critical that you pick the right one. One that shares your values and can represent your role and brand as well as you can. The partner you choose says a lot about you to your prospective future employee. It’s about more than just price.

5. Stay in touch with second place.

It is about making sure you keep in touch with the good quality, unsuccessful applicants for roles in your business. This is a great way to keep a warm pool of high-quality people interested in your business who want to work for you. They might not have been successful this time but they could be great for future positions. Staying in touch could also help you build an external talent pool so you’re not always starting your recruitment search from a standing start.

6. Have robust selection methods.

Build a selection process and method for assessing candidates that reflects and effectively tests the skills applicants will need to be a success in the role. Don’t just rely on an interview which can be subjective build a recruitment assessment process that tests on the job aptitude through practical assessments, numerical, verbal and psychometric assessments and use referencing from previous roles. If you’re relying on interviews then use competency-based interviewing to draw out real examples of when they’ve had success before.

Resourcing Types

Internal Recruiting: internal recruiting involves filling vacancies with existing employees from within an organization.

Retained Recruiting: When organization hire a recruiting firm, there are several ways to do so; retained recruiting is a common one. When an organization retains a recruiting firm to fill a vacancy, they pay an upfront fee to fill the position. The firm is responsible for finding candidates until the position is filled. The organization also agrees to work exclusively with the firm. Companies cannot, in other words, hire multiple recruiting firms to fill the same position.

Contingency Recruiting: like retained recruiting, contingency recruiting requires an outside firm. Unlike retained recruiting, there is no upfront fee with contingency. Instead, the recruitment company receives payment only when the clients they represent are hired by an organization.

Staffing Recruiting: staffing recruiters work for staffing agencies. Staffing recruiting matches qualified applicants with qualified job openings. Moreover, staffing agencies typically focus on short-term or temporary employment positions.

Outplacement Recruiting: outplacement is typically an employer-sponsored benefit which helps former employees transition into new jobs. Outplacement recruiting is designed to provide displaced employees with the resources to find new positions or careers.

Reverse Recruiting: refers to the process whereby an employee is encouraged to seek employment with a different organization that offers a better fit for their skill set.

Human Resource Accounting (HRA) is a specialized area of accounting that involves measuring, recording, and analyzing the value of an organization’s human capital. It recognizes employees as valuable assets rather than just costs, aiming to quantify their contribution to the organization in monetary terms. This concept emphasizes the importance of skilled and experienced employees in driving organizational success and sustainable growth.

HRA focuses on assessing the cost of recruiting, training, and developing employees alongside evaluating their economic value and performance. Costs such as salaries, benefits, and training investments are categorized, and methods like historical cost, replacement cost, and present value of future earnings are used to estimate their value.

The primary goal of HRA is to provide information for better decision-making by management, such as resource allocation, talent management, and workforce planning. It also aids in evaluating the return on investment in human capital and improving transparency in financial reporting.

HRA benefits organizations by helping them understand the long-term impact of employee contributions, fostering effective talent management strategies, and aligning workforce investments with organizational goals. By recognizing human resources as strategic assets, HRA highlights their critical role in achieving competitive advantage.

Features of Human Resource Accounting:

• Recognition of Human Capital as Assets

HRA acknowledges employees as intangible assets critical to the success of an organization. It shifts the perspective from viewing human resources as merely expenses to considering them as valuable investments.

• Measurement of Costs and Value

HRA involves calculating the costs associated with human resources, such as recruitment, training, development, and retention. It also evaluates the economic value employees bring to the organization through their productivity and contributions.

• Use of Quantitative and Qualitative Metrics

HRA employs both quantitative metrics (e.g., cost of training programs, employee turnover rates) and qualitative assessments (e.g., employee skills, leadership potential) to provide a comprehensive valuation of human resources.

• Focus on Decision-Making

HRA aids management in making informed decisions related to workforce planning, training investments, promotions, and succession planning. It provides insights into how human capital investments impact organizational performance.

• Enhanced Financial Reporting

By including human capital in financial statements, HRA offers a more transparent view of an organization’s intangible assets. This improves the quality of financial reporting and enhances stakeholder trust.

• Alignment with Organizational Goals

HRA aligns the measurement and management of human resources with organizational objectives. It highlights the importance of workforce management in achieving strategic goals and sustaining competitive advantage.

Objectives of Human Resource Accounting:

1. Recognizing Human Resources as Assets

HRA aims to shift the traditional perspective of employees as expenses to recognizing them as valuable organizational assets. This objective highlights the long-term contribution of human capital to organizational success and positions employees alongside other tangible assets on the balance sheet.

2. Measuring the Cost of Human Resources

One of the core objectives of HRA is to quantify the cost associated with human resources, including recruitment, selection, training, development, and retention. By identifying these costs, organizations can evaluate their investment in human capital and plan for its efficient utilization.

3. Determining the Economic Value of Employees

HRA seeks to calculate the monetary value employees contribute to the organization. It evaluates the impact of human resources on productivity, innovation, and profitability, providing a clear picture of their return on investment (ROI).

4. Facilitating Effective Decision-Making

HRA provides management with accurate data about human capital, which aids in making informed decisions. This includes areas such as workforce planning, compensation strategies, talent development programs, and succession planning, ensuring that human resource investments align with organizational goals.

5. Enhancing Transparency in Financial Reporting

HRA integrates human capital valuation into financial statements, making them more comprehensive and transparent. By doing so, it enables stakeholders to understand the intangible value human resources bring to the organization, fostering greater trust and accountability.

6. Supporting Human Resource Development

Another key objective of HRA is to promote the continuous growth and development of employees. By identifying skill gaps and measuring the effectiveness of training programs, HRA helps organizations design initiatives that enhance employee performance and satisfaction.

Methods of Human Resource Accounting:

Human Resource Accounting (HRA) employs various methods to quantify the value of human resources. These methods can be broadly categorized into cost-based methods and value-based methods, each offering unique perspectives on human capital valuation.

1. Historical Cost Method

This method involves recording the actual costs incurred in hiring, training, and developing employees. These costs are treated as investments and are amortized over the expected service life of the employees.

• Advantages: Simple to implement and focuses on actual expenses.
• Disadvantages: Ignores future potential and does not consider the impact of inflation.

2. Replacement Cost Method

This method estimates the cost of replacing an employee with a similar skill set and experience. It includes expenses for recruitment, training, and onboarding of new hires.

• Advantages: Reflects the current value of human resources.
• Disadvantages: Can be subjective and challenging to estimate accurately.

3. Present Value of Future Earnings Method

This approach calculates the present value of an employee’s expected future earnings during their tenure. The formula discounts future earnings to the current period.

• Advantages: Focuses on potential contributions.
• Disadvantages: Highly dependent on assumptions about future performance and tenure.

4. Opportunity Cost Method

This method values human resources based on the opportunity cost of not employing them in their most productive capacity. It considers the income that would be forgone if employees left the organization.

• Advantages: Highlights the economic impact of skilled employees.
• Disadvantages: Limited applicability as it assumes perfect mobility of employees.

5. Economic Value Method

This method evaluates the economic value of employees by estimating their contribution to the organization’s overall profitability. It combines cost and performance metrics.

• Advantages: Provides a comprehensive valuation of employee contributions.
• Disadvantages: Requires complex data and analysis.

6. Adjusted Present Value Method

This method adjusts the present value of future earnings by incorporating factors such as employee turnover, training effectiveness, and market conditions.

• Advantages: Offers a nuanced valuation.
• Disadvantages: Complex and resource-intensive.

7. Human Resource Value Index Method

This method assigns an index value to employees based on factors such as skills, experience, performance, and potential. The index reflects their relative value to the organization.

• Advantages: Emphasizes qualitative aspects of human resources.
• Disadvantages: Subjective and prone to biases.