A dynamic monetary model for evaluating employees

Date23 January 2007
Pages124-138
Published date23 January 2007
DOIhttps://doi.org/10.1108/14691930710715097
AuthorFranko Milost
Subject MatterAccounting & finance,HR & organizational behaviour,Information & knowledge management
A dynamic monetary model for
evaluating employees
Franko Milost
Faculty of Management, University of Primorska, Koper, Slovenia
Abstract
Purpose – The paper seeks to develop an original monetary model for evaluating employees of a
company. Employees are an important element of the business process. However, apart from their role
as a means of production, their value is not disclosed on the assets side of the classical balance-sheet.
Employees may be disclosed among the assets only if they are expressed in value terms. Therefore, the
fundamental aim of the paper is to provide an appropriate monetary mode for valuating employees.
Design/methodology/approach – A descriptive approach is sued to identify the basic problems of
existing monetary models for valuating employees. According to these findings a totally different
approach is taken and an original dynamic model is developed to evaluate employees.
Findings – Existing criteria do not offerappropriate solutions for expressingthe value of an employee
in monetary terms.The model presented here efficiently overcomes most of the practicalproblems and
can be used as an appropriate estimator of employees’ value expressed in monetary terms.
Research limitations/implications – The model presented has not been sufficiently verified in
practice. The model could prove to be directly applicable in those enterprises that would like to define
the value of their employees.
Originality/value – The model presented is original and presents one possible approach to the
solution of the problems mentioned above.
Keywords Human capital,Intellectual capital, Intangible assets,Added value, Modelling,
Accounting valuations
Paper type Research paper
1. Introduction
A company is usually founded by individuals striving to achieve their own or broader
goals. Goal achievement related to a company’s operations is called business or the
business process. There are four basic elements required for a business process:
(1) means of production;
(2) raw materials;
(3) services; and
(4) employees.
However, there is a significant difference between employees and the other three
relevant elements. As a rule, human potential is not expressed in terms of monetary
units, which means that its value is not disclosed on the assets side of the classical
balance sheet. The same applies to investments in human potential. These investments
do not add to the value of human potential, but instead are characterised as costs from
the very beginning.
Such treatment of human potential stems from the belief that employees are not
company assets. According to the classical model, an element can be treated as an asset
only when:
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
8,1
124
Journal of Intellectual Capital
Vol. 8 No. 1, 2007
pp. 124-138
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930710715097

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT