Estimating Human Capital - Grounded Theory Approach - Research Paper Example

FOBE720 Theoretical and Empirical Approaches in Business and Economics Marketing and Management Semester Written Assignment 2 ESTIMATING HUMAN CAPITAL: A GROUNDED THEORY APPROACH Contents Introduction 3 Literature Review 4 Epistemology and Ontology of Human Capital 4 Methods of Estimating Human Capital 5 Grounded Theory Approach 7 Benefits of Grounded Theory Approach 7 Methodology 8 Findings 8 Standards in Measuring Human Capital 9 Strategy for Measuring Human Capital 9 Comparison of Human Capital Measures 9 Challenges in Defining Parameters for Human Capital Measurement 10 Finance and Human Capital 10 Human Capital as an Asset 11 Conflict between Academia and Practice in defining Human Capital 11 Data Analysis 11 Problem Definition 12 Inherent Difficulties 12 Context Specific 13 Factors Influencing 13 Financial Focus 13 Human Capital and Structural Capital 13 Case Study: Human Capital in a Medium Sized Firm 13 Reflections 14 Conclusion 16 Bibliography 18 Appendix 1 20 Introduction The purpose of this paper is to utilize the grounded theory approach to evaluate the appropriateness of the approaches used to measure human capital and the challenges of doing this. Hence, the research will review the grounded theory approach and analyze how it is applied. A literature review to be conducted will critically review the concept of human capital and its inherent features and approaches in being used as a method of checking a firm’s human resource base. The research will also utilize the Grounded Theory Approach as a means of evaluating the appropriateness of the human capital approach and methodology for evaluating human resource base. This will be done through the conduct of an interview on a participant who is a highly experienced and skilled professional who has also practiced in human resource management. The interview will be semi-structured and classified in a way and manner in which it will be evaluated and analyzed to provide logical conclusions. Human capital is conceptual in nature, hence it cannot be quantified like other items like fixed assets or stocks, however, they can be measured through various estimation techniques (Mincer, 2011). However, concepts like depreciation and other conceptual measures have proven to be problematic since there is no defined approach and method that scientifically deduce their worth. This has not yet been done for human capital measurement. Hence, the motivation for this study is to examine the grounded theory approach and analyze how it operates as a means of measuring human capital and its challenges and weakness. The aim of this paper is to identify human capital as a method of analyzing human resource capabilities and the shortcomings of these methods, with an emphasis on the grounded theory approach. In order to attain this end, the following objectives will be explored: 1. A critical analysis of the justification of human capital as a method of measuring human capital; 2. An evaluation of the human capital measurement system through the grounded theory approach 3. An enquiry into the strengths and weaknesses of the approaches of measuring human capital. This paper will involve a literature review that will examine the different approaches that can be used to examine and review human capital measurement. This will be followed by a fieldwork that will analyze the grounded theory approach. Literature Review This section of the research will examine the methodology that was employed to study the phenomenon in the research. This section will however examine some aspects of approaches utilized in examining the fieldwork and its related processes. In order to do this, there will be a brief literature review on the methods of analyzing and reviewing human capital in organizations. This will set the framework for the critique of the findings and the discussions that will be carried out after the findings are gathered. Epistemology and Ontology of Human Capital Ontology is a branch of metaphysics in which the existence and nature of existence of a given concept is reviewed whilst epistemology is about how the concept is known to scholars (Norhoff, 2012). Human resource management replaced the old system of employment relations and personnel management in which labor was seen as nothing more than a factor of production and organizations had to deal with them to attain the highest level of returns. Human capital is seen as a variation of human resource management carried out through measurement of the worth of labor, skills and talent (Armstrong, 2012). Human capital is a belief that human resource is an asset and not just cost and hence, this gives an organization the impetus to take care of their human resource and optimize its impact on the firm (Van Leeuwen, 2013). This is an attempt to value the worth of human resources in a firm and this enables a firm to examine how to strategize and define the best approach to utilizing human resources in order to attain the highest returns on investment (Echols, 2010). Methods of Estimating Human Capital The intellectual capital theory seeks to quantify the worth of human capital and human resources in a firm and how the firm has invested in it and how the firm has benefited from the human capital (Ramirez & Gordillo, 2014). Hence, most firms utilize the approach of trying to grant metrics and values to different qualifications and competencies in order to estimate and evaluate the worth of the human capital in a given organization or firm (Ramirez & Gordillo, 2014). Hence, the pre-entry qualifications are evaluated and each year, the competencies and improvements of the staff members is evaluated and the existing pool of human capital is updated incrementally. However, there is a major variation in estimating and defining intellectual capital this is because the worth of every qualification or competency varies from one geographical area to another and from one industry to another (Montemari & Nielsen, 2013). This implies that the approach of estimating human capital is based on analyzing and reviewing an intangible asset and hence, this variation technique that is steeped in intellectual analysis and intellectual capital is somewhat difficult and complicated and is prone to being evaluated wrongly and negatively (Giuliani & Marasca, 2011). The general adage states that “if it cannot be measured, it cannot be managed” and this implies that most organizations might want to overlook human capital and concentrate on other methods of running human resource management. However, in most firms, the human resource management units find various approaches and various methods to examine, evaluate and quantify their human capital (Dumay & Rooney, “Measuring for managing?” An IC practice case study. , 2011). This shows that the idea of human capital is important and vital for examining and evaluating the human resource management inputs that are made. This will aid in decision making and in the normal sense, since every unit of an organization has the obligation to provide accounting and feedbacks on their results as a stewardship requirement, the human resource management unit of organizations will have to come up with a way of scientifically measuring human capital and its dynamics in organizations. Dumay (2009) identify that all firms come up with an approach that suits them. And this leads to the creation of a general framework and a general approach that is utilized in the industry by most firms to evaluate and examine human capital (Dumay J. C., 2009). Various firms have gone through different stages and phases of innovation in identifying the right approach and the right method that can be employed in measuring human capital (Dumay, Rooney, & Marini, An intellectual capital-based differentiation theory of innovation practice. , 2013). These innovative methods and approaches are akin to a firefighting approach and this brings about results that are varied over the years. This includes integrating relevant variables from time to time in order to reflect the needs of the organization and its relevant stakeholders and environmental demands that affect human resource and its related variables (Vuori, San, & Kira, 2012). This culminates in the change of human capital measurement approaches that based on the changes in the organization’s goals and strategy (Bang, 2012). Grounded Theory Approach The Grounded Theory Approach to the evaluating phenomenon is an approach that is used to generalize the components of concepts (Storberg-Walker, 2007). This can therefore be done by evaluating human capital by defining a framework and a process through which the components of the human resource needs are defined and from there, they are valued in those components and the human resource needs that are achieved and those needed to be developed are identified. Grounded Theory is mainly about gathering data and analyzing the data in order to deduce the actual worth of a phenomenon (Bowen, 2003). This approach can be utilized to contextualize the human capital levels and to provide an approach to integrate qualitative information that is necessary to define human capital levels (Gabbott & Hogg, 2010). The central feature of the grounded theory approach is that it is a general method that involves comparative analysis between theory and data (Swanson & Holton, 2012). Hence it is prone to various elements and approaches to undertaking qualitative research. Benefits of Grounded Theory Approach The grounded theory approach is somewhat a qualitative method and an approach that has various benefits and advantages. First of all, it can be used to evaluate things that cannot be evaluated done rigidly in a scientific manner. Therefore, there is the need for some kind of subjective and less objective methods to be employed and utilized in measuring the worth of a phenomenon. This implies that the grounded theory approach allows a system to be formed that is holistic and covers all the different components of the concept or idea The grounded theory approach is somewhat realistic. This is because it brings together all relevant and important factors and matters that are important. This helps to provide a system of measuring the needs and expectations of a given phenomenon in order to deduce what actually exists. The use of realistic matters means that it can be utilized to measure what really and actually happens. Methodology In order to conduct this study, the grounded theory approach is used to find a more critical view of the practice in measuring human capital, the researcher conducted a fieldwork in order to investigate the phenomenon closer. This culminated in the gathering of information from a recognized expert in the field of accounting and human resource management. The information gathering involved a semi-structured interview with an expert who gave various submissions on the matter. The respondent is a professor who has been awarded for his numerous works involving the measurement of human capital in organizations. A semi-structured interview is a form of data gathering in which the interviewer has a number of themes under which he poses questions to the respondent (Schensul, 2012; Recker, 2011). Online structured interviews that have specific questions which might have some possible answers, a structured interview is a form of a conversation where there are broad frameworks and parameters within which the interviewer asks questions (Bailey, 2008). Findings The semi-structured interview between the researcher and the respondent are transcribed and presented below. The diagram showing the build-up of the questions is presented in Appendix 1 below. The main parameters that were taken into account in the semi structured interview conducted are as follows: Measuring Human Capital Standards in Measuring Human Capital Parameters for Measuring Human Capital Challenges in Defining Parameters Financial Focus in Measuring Human Capital Modifications in Evaluating Human Capital As an Asset Conflict between Academic Theory and Practical Measurement of Human Capital Standards in Measuring Human Capital Intellectual capital is a non-financial indicator. Hence there is no clear-cut and standardized system of measuring it. However, human capital creates value that is social in nature and hence, cannot be easily quantified. This means the standards vary from organization to organization. The interviewee identifies that in most cases, the best way of defining standards for measuring human capital is to take the inputs of stakeholders, that is, persons who affect and are affected by the organization. Therefore, value is defined and interpreted by how it affects and influences the needs of stakeholders. Hence, the yardstick for measuring human capital is based on the requirements and expectations that are topmost in the firm’s strategy. Strategy for Measuring Human Capital The strategy of measuring human capital is steeped in the needs of the organization and once this is deduced, a strategy can be formulated and defined for the organization. Therefore, two organizations might have the same parameters for measuring human capital because they might have different ends. However, the strategy is defined according to the principles of best practice and the organizations work to attain the best results. Comparison of Human Capital Measures There is a notion of accountization and this means accountants hold the notion of human capital as an intangible asset. Hence, there is room for the use of some standardized approaches and methods to define this asset. Since intangible assets are recognized in financial statements, there is a possibility of unifying standards of measuring human capital. However, these approaches and methods have not been recognized by accounting bodies. Therefore, human capital theory is something that operates like management accounting which involves compiling information for decision-making. Challenges in Defining Parameters for Human Capital Measurement First of all the attempts of measuring human capital is challenged by the fact that most accounting concepts are not applicable to measuring human capital. For instance, the historical cost convention does not apply to the measuring of human capital. Secondly, the non-business units of organizations are best treated differently and separately from the accounting sector. Hence, the human capital unit is separate and different from accounting measurement. Thirdly, comparison is a challenge and difficulty when it comes to human capital measurement. Within an organization, one cannot compare the measures form department to department. In relation to time and inter-organizational comparisons, there is a challenge because there are no standardized measurements and standards that can be used and utilized in dealing with the comparison of the parameters. Finance and Human Capital The respondent of the interview indicated that there is a major difference between finance and human capital. And as a tradition, 70% to 80% of a business’ assets and activities are not stated in financial statements. Cashflow and financial matters are somewhat different and unique, hence they are not the same as human capital. Human capital can only be presented in the qualitative form. Human Capital as an Asset From the submissions of the interviewee, it is apparent that human capital is seen as some kind of an asset, however, like goodwill and other intangible assets that are not recognized on the face of financial statements, human capital is not to be disclosed in financial statements and is left as qualitative pointers presented in narrative forms. Human capital is also presented as an asset that is placed in the production process and the production system. This indicates that it is a measure that is used to evaluate the worth of human resources and how this contributes to the productivity of the firm or organization. Human capital is distinguished from structural assets on the grounds that they are a form of asset related to labor, but structural assets are those assets that remain with the firm after people leave the firm. Human capital’s worth changes and this is due to the circumstances that change amongst workers in a firm. Conflict between Academia and Practice in defining Human Capital The interviewee indicated that there are divergences between theory and actual practice in relation to human capital and its definition. This is because in theory, the ideals circumstances are defined. However, in relation to practice, the persons in charge are to do things that provide the best results. Hence, the principles of best-practice presented by academicians or theorists might be overlooked by the professionals on the field because the realities on the ground might be very different and distinct from the assumptions made before defining the theories in academic circles. Data Analysis The data analysis is done by logically evaluating and analyzing the processes necessary for the build-up of a case for the human capital method. The data analysis is done by first conducting an open coding which is presented in Appendix 1 below. This formed the parameters and framework within which the analysis and reviews were done. The respondent identified that measuring human capital is such a broad situation that it cannot be defined so easily. There are no standards and the industry is one that is evolving due to the fact that the reference point in these situations keeps expanding. Hence, there are no clear definitions of human capital. Main Category Sub-Category Features Measurement Inherent Difficulties Not easy to quantify Context Specific Varies significantly and does not aid comparison Factors Influencing Depend on expert definitions Financial Focus Puts in place motivations for subjectivity Relationships: Human Capital and Structural Capital Difficult to create and maintain consistently Figure 1: Open Coding Main Category and Sub Category Problem Definition The main end that human capital seeks to attain is to define what the worth of human resources in a firm is. The barriers in this situation pose a challenge and difficulty to the individual involved and this makes it difficult for the estimation to be done in a realistic, consistent and objective manner that can aid comparability and analysis in decision-making. Inherent Difficulties These difficulties include the prima facie challenge of quantifying the values of human capital. This is highly difficult and complicated because it is not straightforward and gives room for a high degree of judgment and subjectivity. Context Specific The context within which the scope of the measurement of human capital will be defined is likely to be difficult and complicated. This is because the situations and the realities of the organization and its circumstances will dictate the actual context and process. This will involve the creation of a system and process within which the different aspects of a firm’s human resource base can be defined and identified. Factors Influencing This will involve the competency of the person designing the process and the exercise. This includes the relevant issues and this must be properly and duly identified because there is the need for a critical and thorough identification of important matters and this must be done objectively although in reality there might be some subjective considerations that will not be universally acknowledged. Financial Focus Trying to define human capital in financial terms is linked to the difficulty of measuring or quantifying it and trying to justify its worth. These valuation models might be problematic and it will be difficult to define the financial worth in order to define a firm’s worth as a whole. Human Capital and Structural Capital Defining a firm’s human capital as an asset is quite difficult because it does not conform to aspects of the financial statements and this might be difficult to be carried out Case Study: Human Capital in a Medium Sized Firm The fundamental problem definition for measuring human capital will involve the attempt to identify the worth of human resources and how they contribute to the organization as a whole. On the other hand, one might want to define this in the context of creating a system of identifying the relative worth of human resources. These two approaches (worth of HR to the firm V market value of HR) come with major challenges and issues that will create various forms of difficulties. How do we value it? That is a problem and that is a major issue. There are also inherent difficulties about how to define the valuation for all departments and units of the organization. Assuming there are branches of the company around the nation, will the worth be fluctuated according to the geographical locations of all branches? That is an issue that needs to be examined and addressed. The HR manager doing the human capital measurement will have to factor in all relevant matters and situations that can affect the definition of human capital. This will involve the use of expert competencies and abilities. However, the one doing the measurement is constrained by the powerful segments of the organization because the board of directors and chief executive officer will have the right to define the best methods and approaches and this means objectivity might be stifled in the analysis of human capital due to the political interests of powerful stakeholders. This is worse in an organization where there is one dominant person who overrides the top-tier structure of the organization. Reflections From the study, the researcher provided some important information that was rich in depth relating to theory and practice. This culminated in providing insights into how human capital and the grounded theory approach vary in practice and in academic circles as well. Reflexivity has to do with how the data and findings of a research is crystallized into knowledge that informs the practice of the researcher (Woolgar, 2008). It refers to the ways a researcher internalizes the new knowledge derived from the study or the research. Methodological reflexivity seeks to aims to improve existing practice and hence, builds upon existing knowledge in order to challenge existing knowledge and draw conclusions (Johnson & Duberley, 2000). Epistemological reflexivity refers to a situation where the researcher reflects on existing knowledge that enables him to balance the new knowledge acquired in the research and what was held to be true in practice (King & Horrocks, 2010). The interview was mainly a straightforward situation. The questions were presented to the interviewee and answers were given from his professional background and rich experience. Hence, the interview came in as one that answered fundamental questions relating to human capital and how it is carried out in real life. This gave the interviewer a perspective that is somewhat different from the one that most students get in the academic environment. The depth of the responses indicated that the findings and the insights given by the interviewee reflected years of experience that described important ideas and concepts relating to human capital and its measurement. The findings show that human capital is something that is somewhat essential and necessary for firms to operate and optimize human resources. This therefore indicates that human capital is something that is necessary but the metrics are from a broad framework and a broad base and researchers will have to integrate different considerations in order to define the framework within which firms will carry out their evaluation of human capital. Human capital measurements are viewed as assets from a social science perspective because that is the best way to present it as an aspect and a part of a firm. However, the research indicates that this is merely theoretical and helps firms to come up with reasonable methods of evaluating and recognizing human resources. The main ethical considerations involve confidentiality and applicability of the theories. In relation to confidentiality, it is apparent that the interviewee shared some practical experiences that occurred in his many years that applied theories to practice. This however, had to be stated and transcribed in a general sense, rather than in a specific sense as there could be numerous privacy breaches that could come with issues for the interviewer. The research process included recording the findings and transcribing it. The transcription of the interview gave room for more critical analysis and evaluations that helped to provide information and insights into the concepts and ideas. The ultimate end was that the findings were compiled and explained in relation to the specific research questions formulated before this paper was put together and compiled in its current state. The research analysis process was one that included various approaches and methods that summarized the core findings and the core views that were put together in the research and the study. This showed the practical challenges and pointers of concern in applying and implementing various elements and aspects of human capital. This built upon the theoretical discussions and findings that were compiled in the process of gathering information relating to the literature review which was presented above. The interpretation was therefore based on the core and fundamental findings and processes stated and derived in the literature review which was based on authoritative sources and information. These findings were later put together and interpreted on the basis of the core components of the literature review and its main frameworks and parameters which gave impetus to the entire research design and research process. Conclusion The study identifies that the human capital is a concept that attempts to deduce the worth of human resource in an organization. This includes the estimation of the worth of the human resource base in an organization. Hence, the human capital approach is employed by firms to create a logical framework of identifying what the human resource of their firm is worth and how it contributes to the development and growth of the firm. This can be used to help to identify the human resource needs and expectations and also modify the firm and the organization to attain the best and the highest levels of results in its operations. The fieldwork indicated that human capital is not a tangible aspect of the firm’s assets. This is because human capital is mainly an internal organizational concern and it aids in firm decision making. Due to the fact that it is non-financial and cannot be quantified, there are few standards and rules on how this is done. Rather, human capital is recorded as required. This gives room for a vast range of possible approaches and methods in measuring it. Human capital is something that comes with numerous divergences amongst firms, and it is also varied over time horizons. Academics and practitioners vary in how they define human capital. Bibliography Armstrong, M. (2012). A Handbook of Human Resource Management. London: Kogan Page. Bailey, K. (2008). Methods of Social Research. New York: Simon and Schuster. Bang, H. (2012). What prevents senior executives from commenting upon miscommunication in top management team meetings? . Qualitative Research in Organizations and Management: An International Journal, 7(2) , 189-208. Bowen, G. A. (2003). Grounded theory and sensitizing concepts. . International Journal of Qualitative Methods, 5(3) , 321-338. Dumay, J. C. (2009). Intellectual capital measurement: a critical approach. . Journal of Intellectual Capital, 10(2) , 190-210. Dumay, J., & Rooney, J. (2011). “Measuring for managing?” An IC practice case study. . Journal of Intellectual Capital 12(3) , 344-355. Dumay, J., Rooney, J., & Marini, L. (2013). An intellectual capital-based differentiation theory of innovation practice. . Journal of Intellectual Capital , 608-633. Echols, M. (2010). Returns on Investment on Human Capital Investments. London: iUniverse. Gabbott, M., & Hogg, G. (2010). Service Industries Marketing: A New Approach. London: Routledge. Giuliani, M., & Marasca, S. (2011). Construction and valuation of intellectual capital: a case study. . Journal of Intellectual Capital, 12(3) , 377-391. Mincer, J. (2011). Studies in Human Capital. Surrey: Edward Elgar Publishing. Montemari, M., & Nielsen, C. (2013). The role of causal maps in intellectual capital measurement and management. . Journal of Intellectual Capital, 14(4) , 522-546. Norhoff, G. (2012). Philosophy of the Brain. New York: John Benjamins. Ramirez, Y., & Gordillo, S. (2014). Recognition and measurement of intellectual capital in Spanish universities. Journal of Intellectual Capital , 173-188. Recker, J. (2011). Evaluations of Process Modeling Grammars: Ontology and Qualitative Studies. London: Springer. Schensul, S. L. (2012). Essential Ethnographic Methods: Observations, Interviews and Questionnaires. London: Rowman Altamira. Storberg-Walker, J. (2007). Understanding the Conceptual Developmental Phase of Applied Theory Based Research: The Grounded Theory Approach. Human Resource Development Quarterly 18(1) , 63-90. Swanson, R. A., & Holton, E. (2012). Human Resource Development Research Handbook. London: SAGE. Van Leeuwen, B. (2013). Human Capital and Economic Growth. London: Box Press. Vuori, T., San, E., & Kira, M. (2012). Meaningfulness-making at work. Qualitative Research in Organizations and Management. International Journal, 7(2) , 231-248. Appendix 1 Coding Measurement of intellectual capital is a big topic Existence of standards Classification Non-financial forum Create non-monetary Value Measurement difficulties Measuring is very context specific. Measurement depend on strategy Chief parameters Comparing two different intellectual reports intellectual capital liabilities Historical cost accounting Employee turnover the narrative with the number financial focus divide revenue Management accounting Structural capital Relation capital Boundaries Human Capital Problems and conflicts between academic and practitioner Intellectual capital measurement explanation human factor Strategy Assets Liabilities Expenses financial gap structural capital problems between academic and practitioner in intellectual capital measurement Intangible property This is a big umbrella that cannot be easily answered unless you go deep to its parts. Moreover, you need to consider context and strategy of a company. To measure anything, people need standards and principles. Accounting Standards come from Accounting Standards Board. Intellectual capital is normally classified to Three categories: Human Capital, Structural Capital and Relation Capital. It can called intangible assets. There are no Standards then what is intellectual capital. How can we deal with non-financial report? Intellectual capital is a voluntary report that focuses on text accounting. So, is difficult to see it from financial prospective. Usually, Intellectual capital creates value for any organization. This value is not restricted to dollar but it can be any things such as infrastructures and serves. Because of non-dollar value creation, it is difficult to measure intellectual capital; and if a company measure intellectual capital, it will be difficult for other to do the same.so at the end , it only depend on the context of an organization. When people measure intellectual capital they need to consider the context. How to measure intellectual capital is depending on the organization goals and strategy. If there are different ways to measure intellectual capital. So, what is the best parameter? The main parameter is the company strategy. If the measurement depend on the company strategy then how people can compare differentintellectual capital reports. This is one of the financial gaps. There is no one want to have intangible liabilities. Some intellectual capital creates more expenses and less revenue which will consider by a company as liabilities. Follow the international financial report standards (IFRS) to evaluate the intellectual capital. For example, if the company bought a new systems, it will record is as expense on that financial year according to IFRS. This is a part of human capital. How to measure the human capital is deferent from one organization to another. It is all depend on the context. As accountants, we need to focus on text and dollar. The separate of them leads to unreliable value of a company Which can cause a financial gap. When we are measuring intellectual capital from dollar prospective, What are we focusing at? What the benefit of measuring intellectual capital financially. Can accountants know which intellectual capital cause most of the revenues?. This part cover any aspect related to financial value. One of aspects that generate revenue is intellectual capital. So, can we relate and divide revenue to each parts of intellectual capital. This can helps us to know whichintangible asset worth more than the other. It is management accounting (MA) responsibility to evaluate the intellectual property effectiveness. Management accounting report is an internal report for the manger to make a decision.so; it will not be available for the public. Also, it does not follow any standard because it is not for the public. Therefore, MA can provide financial information about the intellectual capital and its effectiveness. the supportive non-physical infrastructure, processes and databases of the organization that enable human capital to function consisting of such as customer relationships, supplier relationships, trademarks and trade names People like to divide intellectual capital to three categories: human, structural and relation capital. There is an argument regarding this classification and some academics are questioning the benefit from it. Also, it depend on the company strategy. Human capital is inherent in people and cannot be owned by an organization. Therefore, human capital can leave an organization when people leave, and management has failed to provide a setting where others can pick up their know-how There are different interpretation and consideration of intellectual capital between Academic and practical. There are no standards for its measurement. It can be viewed from financial perspective. Different people measure different things when it comes to intellectual capital. It is the human capital. Involves measurement of how staff works correctly. How one achieves the strategy. It defines what one should measure. Some measure the easier things living out the hard ones. Other factors are almost impossible to measure. Measurement of assets is divided in to two. That is measuring intangible assets and measuring tangible assets. Measurement of liabilities involves measurement of nonperforming employees as well as old processes that need replacement. Stake holders find it to be an expense when implementing a new system. Historical cost is important as it is true and shows true and fair view. Employee turnover is measured through number of employees and it is done differently from one organization to another. There is always a financial gap between true value of assets and the amount at which a company is valued. Structural capital is what there is without human capital. Measuring is only one thing. The aim is to achieve the same thing so it is not about managing or not managing. Things that can be owned by a company and transfer to other but do not have physical body. Also, it is important for stakeholders to know about it. It provides the real value of the company. Read More