Valuation of Human Capital: Quantifying the Importance of an Assembled Workforce PDF
Preview Valuation of Human Capital: Quantifying the Importance of an Assembled Workforce
VALUATION OF HUMAN CAPITAL Quantifying the Importance of an Assembled Workforce Kimberly K. Merriman Valuation of Human Capital Kimberly K. Merriman Valuation of Human Capital Quantifying the Importance of an Assembled Workforce Kimberly K. Merriman Manning School of Business University of Massachusetts Lowell Lowell, MA, USA ISBN 978-3-319-58933-6 ISBN 978-3-319-58934-3 (eBook) DOI 10.1007/978-3-319-58934-3 Library of Congress Control Number: 2017944545 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover Illustration: © Stephen Bonk/Fotolia.co.uk Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Dedicated to the scholars, business professionals, colleagues and other smart people whose contributions to the field helped shape this book. C ontents 1 Preface 1 2 Workers as an Asset vs. Cost 7 3 Cost Approach to Value 19 4 A Closer Look at Cost Approach Assumptions 35 5 Income Approach to Value 47 6 Market Approach to Value 59 7 Sustaining Human Capital Value 69 8 Leveraging Human Capital via Organizational Social Capital 77 9 Other Quantitative Views of Human Capital 87 Index 99 vii A A bout the uthor Kimberly K. Merriman is a Management Professor with the Manning School of Business at UMass Lowell, an innovative educator, busi- ness advisor and a widely published and cited authority on compensa- tion, performance management, and human capital. She holds a Ph.D. in Organizational Management and Human Resources and a B.B.A. in Accounting. She can be reached at http://www.kkmerriman.com. ix L f ist of igures Fig. 4.1 Business value components 37 Fig. 9.1 Workforce analytics overview 95 xi L t ist of AbLes Table 3.1 Example replacement cost new—Step 1 27 Table 3.2 Example replacement cost new—Step 2 27 Table 6.1 Example of a workforce sale 65 Table 9.1 Utility analysis example 91 xiii CHAPTER 1 Preface Abstract This chapter provides an overview of the author’s back- ground‚ qualifications and perspective on human capital. It outlines the book’s purpose‚ what readers can expect to gain and a description of each chapter’s content. In short‚ human capital is defined for this book’s purpose as the organization’s assembled‚ trained and experi- enced workforce. In keeping with the author’s experience‚ the mate- rial is grounded in scholarly research and practitioner based knowledge‚ providing readers with a conceptual and applied understanding of approaches to human capital valuation. This chapter also clarifies what the book is not—that it is not an accounting approach‚ per se‚ to the valuation of human capital. Keyword About the author · Book overview · Human capital valuation This book is a foundational guide to the valuation of an organiza- tion’s human capital. Many would agree it is the people that make the organization. This is especially true in a knowledge economy, where an assembled, trained, and experienced workforce is typically considered a company’s greatest asset. Yet few organizations actually evaluate their workforce in these economic terms. To address this void, presented herein is a way to understand the economic value of human capital for the firm and, in the process, a financial view of the assembled workforce © The Author(s) 2017 1 K.K. Merriman, Valuation of Human Capital, DOI 10.1007/978-3-319-58934-3_1
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