Human Resource Accounting: Dollars and Sense for Management

Brummet, R.L. , E.G. Flamholtz , and W.C. Pyle , "Human Resource Accounting: A Tool to Increase Managerial Effectiveness," Management Accounting , August, 1969, p. 12.

Woodruff, R.L. , "Human Resource Accounting," Canadian Chartered Accountant, September, 1970, p. 156.

Likert, R. and W.C. Pyle , "Human Resource Accounting: A Human Organizational Measurement Approach ," Financial Analysis Journal, January-February, 1971, p. 175.

Lev, Baruch and A. Schwartz , "On the Use of the Economic Concept of Human Capital in Financial Statements ," Accounting Review, January, 1971, p. 103.

Flamholtz, Eric , "A Model for Human Resource Valuation: A Stochastic Process with Service Rewards," Accounting Review, January, 1971, p. 253.

In 1974, Jaggi and Lau published a more sophisticated version of the Lev-Schwartz and Flamholtz models. Instead of calculating role change probabilities for individuals, they used homogeneous groups of employees with role/state change probabilities derived in a fashion similar to actuarial science methods employed by insurance companies. These probabilities were grouped in a Markovian rank transition matrix (normally derived from historical personnel records). This matrix was based upon the probabilities that certain members of a particular group of employees would be promoted to various ranks, would exit the organization, or would remain in their original rank during any given time period. By placing a monetary value on each rank/ service state and multiplying by the probability of attaining that rank the average value for each individual was obtained. Using Markov chain technique, the transitional probabilities over a specified number of time periods could be applied to calculate the total expected economic value of the employees for that number of future periods. An appropriate discount rate was then used to determine the present value. See Jaggi, Binki and Hon-Shiang Lau , "Toward a Model for Human Resource Valuation," Accounting Review, April, 1974, p. 321.

Likert, Rensis , "Human Resource Accounting: Building and Assessing Productive -Organizations," Personnel, May-June, 1973, p. 10.

Likert and Pyle , op. cit, p. 17.

Woodruff, loc. cit.

Likert, loc. cit.

Mills, Ted , "Human Resources—Why the New Concern?" Harvard Business Review, March-April, 1975.