Human Capital: An Analysis of Flamholtz's Human Resource Accounting Model

Abstract

Human capital, a critical driver of organizational success, encompasses the skills, knowledge, and abilities of employees. Flamholtz’s Human Resource Accounting (HRA) model offers a quantitative framework to measure and manage this intangible asset. This paper explores the model’s steps, including individual value measurement and group-level aggregation, while highlighting its significance in strategic decision-making and financial reporting. Despite its utility, limitations such as subjectivity, data requirements, and ethical concerns have been emphasized. Recommendations of the model include integrating technology, tailoring the model for industry-specific needs, and adopting hybrid approaches. By refining Flamholtz’s model, organizations can enhance workforce value, driving innovation and sustained competitiveness.