In the service sector, the performance of any enterprise depends mainly upon the quality of its human capital, as they are the main product delivering assets. Just like an industrial unit’s tangible fixed assets like Plant & Machinery, any deterioration in the quality of the human capital assets of a service provider will clearly reflect on the enterprise’s performance. So, in the current competitive scenario, it is pertinent to communicate to investors how efficient their personnel is to deliver returns on investments. Even in other sectors with heavy capital investments, the investors need to be assured that the personnel is capable enough to be trusted with the former’s investments.
A human resource valuation will assure customers quality and consistency. An HR valuation is a means of guarantee available to customers and outsiders that the enterprise is through its personnel efficient to honour commitments.
An HR valuation study assists management to project the future outgo of personnel costs like training and development costs, salary and benefits, compensation costs, retirement benefits etcetera.
An HR valuation report help immensely in monitoring efficiency of personnel and in designing the HR strategy. The company can analyse if its investment in human capital has paid off. Such a valuation tabulates a database on personnel details, which serves as a basis of MIS reports on returns on personnel cost, return on human capital.
An HR valuation report helps the management to make a conscious move to capture its costs related to HR department by developing a human resource accounting system, which compliments the HR valuation exercise. The system can provide a cost clarity in all relevant areas related to the human resources of the company.