Accounting for human capital: Implications of automation and operational performance

• Author: Alice C. Stewart,Brandis Phillips,Nicole R. McCoy
• Date: 01 October 2019
• Published date: 01 October 2019
• DOI: http://doi.org/10.1002/jcaf.22408

EDITORIAL REVIEW

Accounting for human capital: Implications of automation

and operational performance

Nicole R. McCoy | Brandis Phillips | Alice C. Stewart

College of Business and Economics, North

Carolina A&T State University, Greensboro,

North Carolina

Correspondence

College of Business and Economics, North

Carolina A&T State University, 1601

E. Market Street, Greensboro, North

Carolina 27411.

Email: nrmccoy@ncat.edu

Abstract

As automation evolves, human capital becomes a firm's strategic asset. Using

reso urc e-ba sed theory, we discuss the importance of maintaining human capital with

superior skills as a means to sustain a competitive and how to value human capital as a

strategic asset. As we do not propose a new accounting regulation, we suggest metrics

that may be used to assess the value of strategic human assets.

KEYWORDS

accounting standards, firm employment, innovation, labor management, social

JEL CLASSIFICATION

M48; M51; M5; O33; O35

“The 21st century is the human capital century.

As the engine of economic growth shifts from

physical production to knowledge creation,

good jobs….well-paying jobs…increasingly

comes from the production of new ideas, new

knowledge, and new technologies”.

—(Moretti, 2012)

1|INTRODUCTION

Our current industrial revolution involves the convergence

of technology and labor. In order to sustain a competitive

advantage in the midst of this automation, human capital

becomes increasingly important. It becomes a firm's strate-

gic asset.

1

As technology replaces recurring tasks, it is the atypical

tasks that require social and problem-solving skills that

remain. With cobot and creative processes persisting, labor

will be needed to enable automation, assist customers, and

generate new products and services.

We use resource base management theory to discuss

the importance of maintaining and retaining human

capital and how to value human capital as strategic assets.

Undoubtedly, we are not proposing any new accounting regu-

lations, but we are suggesting that the value of key human

assets will be based on its direct impact on organizational per-

formance. Management needs to foster employee engagement

in order to maint ain their competitive advantag e.

2|RESOURCES-BASED

PERSPECTIVE

The value of human capital has been explored at a variety of

levels: from its impact on national economies to its impor-

tance as a unique asset within firms. Human capital theory

was formalized in the mid-20th century, but its roots in

economic theory run deep. The originator of classical eco-

nomics, Adam Smith, observed the connection between

“superior skill”and higher wages and these “superior

skills”make are certain workers more valuable than other

workers. The essence of human capital theory encapsulates

anything that improves “quality of human effort”(Schultz,

1961) and a key aspect of the “quality of human effort”is

how employees enhance organizational performance.

Received: 31 May 2019 Accepted: 8 July 2019

DOI: 10.1002/jcaf.22408

J Corp Acct Fin. 2019;30:111–115. wileyonlinelibrary.com/journal/jcaf © 2019 Wiley Periodicals, Inc. 111