The Valuation of Human Capital in an Organization

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Human Capital Valuation in the Organization Introduction With the rise of the knowledge economy, traditional valuation in the enterprise that consisted solely of measurable assets including buildings, equipment and inventory is increasingly being questioned. Human capital is widely recognized as an important component to the enterprise's total statement of its financial position. This brief study discusses whether human capital should be assessed and reported in the financial statement of the organization. I. The Definition of Human Capital Human capital can be defined as "all strategic issues of people, performance and culture in an organization." (All About Human Capital, nd) The conception of human capital is such that can be viewed from three levels: (1) strategic; (2) tactical; and (3) operational. (All About Human Capital, ) The following illustration labeled Figure 1 shows these three levels. Figure 1 Three Levels of Human Capital Source: All About Human Capital (nd) Defining human capital is inclusive of: (1) the strategic framework; and (2) the core strategic activities. ( All About Human Capital, nd) The strategic framework is reported as the "set of principles and guidelines to which all strategic HR activities should adhere." (All About Human Capital, nd) The framework is reported to be comprised of the following: (1) the HR strategy which is required to be aligned completely with the strategy of the company; (2) the Performance Culture; (3) HR is
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