Fixing the value of an employee depending upon his productivity, promotability, transferability and retainability is the core of the
Stochastic Reward Valuation model
Human resource accounting offers several models for putting a money value on employees. The model described here is the Stochastic Rewards Valuation model of Eric Flamholtz (1971).
Flamholtz argued that an individual's value to the firm is the present worth of the services he is expected to render while moving through different service states (roles) in the organisation. The movement between states is probabilistic (stochastic), and it depends on his productivity, promotability, transferability and retainability, so the expected value is weighted by these probabilities.
The Present value of future earnings model (Lev and Schwartz, 1971) values employees by discounting their future salaries up to retirement; it does not consider these service-state attributes. The Human asset multiplier model (Giles and Robinson) multiplies total employee cost by a multiplier based on grading of staff, and the certainty equivalent approach adjusts expected net benefits for risk; neither is built on productivity, promotability, transferability and retainability.
Hence, Stochastic Reward Valuation model.
Similar Questions
Assertion (A) : Human Resource Accounting is the measurement of the cost and value of people to the organization.
Reasoning (R) : Human Resource Accounting involves measuring costs incurred by the organizations to recruit, select, hire, train and develop employees and judge their economic value to the organization.
Codes :
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