Valuation of Human Capital: Quantifying the Importance of an Assembled Workforce

104 Pages·2017·1.882 MB·English

by  Kimberly K. Merriman (auth.)

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
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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