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

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

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

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

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

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

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

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

HRAHRA

Capital Cost

Acquisition Cost

1. Recruitment cost

2. Selection cost

3. Placement cost

4. Campus interview cost

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

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

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

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

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

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

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”

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

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

HRA-QWL contdHRA-QWL contd

Grievances redress mechanismOccupational stressOrganizational health program.Adequacy of resourcesSeniority and merit promotionsCommunication

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

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

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

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

HRA-Human AssetsHRA-Human Assets

Social capital

It refers to the asset derived from the network of relationship both internally and externally

---Internal

---External

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

Methods of Valuation of HRMethods of Valuation of HR

Various models

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

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

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

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

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

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 ????

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

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

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

Effective Human Capital Investment

Effective human capital investments

Maintenance

AcquisitionDevelopment

ResearchMotivation

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

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?

HRA-TrainingHRA-TrainingExplain by a Block diagram the

identification of Training needs for Organization Development

Present job Next job The futureThe future job

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

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

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

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

HRA-TrainingHRA-Training

Estimation of the cost of Organizing a TrainingCost associated with LaborTraining materialConference/Training hallsTraveling expensesConveyance expensesTrainer’s professional chargesOther Overheads

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

Human Capital & Productivity

Productivity

Tech development

Job performance

Ability

Motivation

Job condition

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

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

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

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

BehaviorWhat is meant by Behavior?—DiscussOrganizational Behavior VS HR Turnover

---Individual Behavior---Discuss

---Group Behavior ---Discuss

---Group Behavior and Educated personnel

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

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

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

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

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 .

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

Organizational Behavior

• What are the models of Organizational behavior?

Autocratic model

Custodial model

Supportive model

Collegial model

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

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

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

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

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

Intervening variables

These variable reflect the internal health of an organization. They include

Attitude

Morale

Motivation

Interpersonal relationship

Decision making

Communication etc

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

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

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

• 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”

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

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

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

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

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

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

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

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

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?

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

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

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

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

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

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

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

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

HRA-VALUATIONS

HR ValuationModels

Monetary

Non monetary

Composite

Statistical

Cost based

Value based

Historicall cost

Replacement cost

Standard cost

Opportunity cost