Accounting for human capital: Implications of automation and operational performance

AuthorAlice C. Stewart,Brandis Phillips,Nicole R. McCoy
Date01 October 2019
Published date01 October 2019
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
College of Business and Economics, North
Carolina A&T State University, 1601
E. Market Street, Greensboro, North
Carolina 27411.
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.
accounting standards, firm employment, innovation, labor management, social
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 jobsincreasingly
comes from the production of new ideas, new
knowledge, and new technologies.
(Moretti, 2012)
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.
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.
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 skilland higher wages and these superior
skillsmake 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 effortis
how employees enhance organizational performance.
Received: 31 May 2019 Accepted: 8 July 2019
DOI: 10.1002/jcaf.22408
J Corp Acct Fin. 2019;30:111115. © 2019 Wiley Periodicals, Inc. 111

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