Knowledge-based structure is the key to the success of any organization in this modern world. This article analyzes rationale and verifies the validity of various approaches in estimating intangible assets such as human capital. Besides, various modern valuation models for valuing human resources are described in detail in addition to their applicability in real life scenarios.
There is a growing realization in the minds of people that mere procurement and management of tangible assets is not the end for survival and growth of organizations. Irrespective of their areas of operation, organizations thrive for success because of inherent intangible assets. In today's knowledge-based world it is difficult to imagine about an organization's success unless it attaches desired importance to intangible assets. Even in a manufacturing sector the success of an organization is derived from the brands that has been nurtured and nourished all through out. Sustainable growth of a pharmaceutical company depends on its investment in research and development which subsequently leads to product or process patents. Coming to non-physical asset-based organizations, like service, technology, information sector, human assets constitute their substantial portion of total organizational capital. It is observed that very often market recognizes the importance of intangible assets positively. Intangibles take many forms like patents, trademarks, brands, human resources or human capital.
All these put together are called intellectual capital. As our traditional accounting system does not require audited information on the intellectual capital, our effort in this article has been to measure one of the most important components i.e., human capital which is believed to create a sustainable growth opportunities for the future. Therefore, in this paper the focus has been to capture the importance of human capital in today's knowledge-driven economy which is shortsighted in traditional accounting and the methods of valuing the same. The importance of this exercise could be traced from the words of Narayana Murthy, Chairman, Infosys, "Our respect for our professionals can be summed up from our belief that the market capitalization of Infosys becomes zero after working hours end at 5 p.m., no matter what it was during the day." When you believe in people and invest in them, as Infosys does, your value can only shoot up. |
