Abstract
The purpose of this paper was to examine the effect of human resource accounting on the performance of quoted banks in Nigeria. The study examined the annual reports of 18 quoted commercial banks from 2009-2018 financial years and the research design adopted was the ex-post facto research design. Using regression analysis, the effect of certain human resource accounting attributes such as staff cost, director remuneration, number of staff and firm size was examined. The results confirm that there is a significant relationship between staff cost, staff strength, and firm size and financial performance. Director remuneration had no significant relationship on financial performance. We therefore recommend that a better system of communicating employee benefits to the employees of the organization should be adopted. Furthermore, unfair performance appraisal should be discouraged since it diminishes employees’ motivation.
CHAPTER ONE
INTRODUCTION
1.1  Background of the Study
The growing importance of human resources
accounting is a determinant of economic success at both the macroeconomic and
microeconomic levels which dictates that firms need to adjust to this new
economic reality. Specifically, if human capital is a key determinant for
organizational success, then investment in the training and development of
employees to improve performance is a critical component of this success (Ahmed, 2011). This broad socioeconomic
shift underscores a growing need for measuring and analyzing human capital when
making managerial and financial decisions. Yet important human resource
decisions involving hiring, training, compensating, productivity and other
matters are often made in the absence of specific information about the
different cost and benefit of these particular choices (Flamholtz, 2011).
Human resources accounting is a managerial tool that can be used to gain this
valuable information by measuring the cost of recruiting, hiring, compensating
and training employees. It can be used to evaluate employee training programs,
increase productivity and improve managerial decision making regarding
promotions, transfers, layoffs, replacement, and turnover (Bassey, 2012).
The American Accounting Association’s
Committee on Human Resource Accounting (2013) has defined Human Resource
Accounting as “the process of identifying and measuring data about human
resources and communicating this information to interested partiesâ€ÂÂ. Human
resource accounting, thus, not only involves measurement of all cost investment
associated with the recruitment, placement, training and development of
employees, and also the qualification of the economic value of the people in an
organization (Flamholtz, 2019).
The past few decades have witnessed a global
transition for manufacturing to service based economies. The fundamental
difference between the two lies in the very nature of their assets. In the
former, the physical assets like plants, machinery, materials etc. are of
utmost importance. In contrast, in the latter, knowledge and attitudes of the
employees assume greater significance. For instance, in the case of an I.T
firm, the value of its physical assets is negligible when compared with the
value of the knowledge and skills of the personnel. Similarly, in hospitals,
academic institutions, consulting firms etc. the total worth of the
organization depends mainly on the skills of its employees and the services
they render. (Becker, 2016).
Hence, the success of these organizations is contingent on the quality of their
Human Resource, its knowledge, skills, competence, motivation and understanding
of the organizational culture. In knowledge-driven economies, it is imperative
that the humans be recognized as an integral part of the total worth of the
human capital. It is necessary that some methods of quantifying the worth of
the knowledge, motivation, skills and contribution of the human elements as
well as that of the organization processes like recruitment, selection,
training etc. which are used to build and support these human aspect is
developed. Human resource accounting (HRA) denotes just this process of
quantification/measurement of the Human Resource. (Ahmed, 2011).