Question

2. Why do line managers often fail to realize the value of human assets vis-à-vis other assets?

Answer 1

Senior managers often fail to realize the value of human assets vis-à-vis other assets because:

1. Qualitative vs quantitative: The human asset, unlike other assets is more qualitative than quantitative. Other assets like fixed assets and inventory can be analyzed using numbers. The human asset is analyzed using the output they produce. Due to this reason, they are less valued by managers than other assets which can be seen in the form of output and monetary value.

2. Scarcity issue: Other assets are in abundance and can be bought using money through funding. Human asset approach does not strictly follow this and is difficult to value for their input. For example, two employees with the same qualification and different industry exposure and the same profile will be given different monetary salary.

3. Depreciation issue: There is no depreciation issue in human asset approach. However, in real assets, we charge depreciation of value every year accordingly to the salvage value and estimated useful life.

4. Flexible: The human asset is flexible to work with. He may be put to work for extended long hours but this is not possible with other assets. The strict valuation and input-output model makes humans an expendable asset.