IGNOU MTM 2 2017 - Why do we need monetary measures of Human Resource Value? Explain vari

Question

Why do we need monetary measures of Human Resource Value? Explain various models of valuation.

24 Jan 2018

Answer :

Word Count : 743

monetary measures are based on cost or economic value of human resources. Under these methods human resources of an organisation are translated into a common denominator, i.e., money on which organisational decisions are taken.

Following are the important monetary methods used for measuring human values in an organisation:

1. Historical Cost Method:

This method is developed by Rensis Likert. Under this method, all actual costs incurred on recruitment, training, familiarisation, etc., are capitalized. Then, the capitalized cost is amortised, or say, written off over the period an employee serves in the organisation.

In case the employee leaves the organisation before his expected service period, the remaining amount is written off completely in that particular year of his/ her leaving the organisation. The advantage of this method is that the value of human asset can be shown on conventional Balance Sheet and Profit and Loss Account. However, its drawback, if at all, is that human resource is equated resulting in undervaluation.

2. Replacement Cost Method:

As the title itself indicates, under this method, replacement cost refers to the cost of replacing an existing employee. In other words, replacing cost is the cost that would cost to replace the existing human resources with

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