Human Capital Valuation Methods

After having gone through the basic introduction to the course, it is only naturally to begin building the blocks on this foundation. The next section of the course has to do with organizational aspects and valuation of human capital. To further build on the first assignment wherein I used the National Open University of Nigeria, Lagos,(NOUN) as my example organization because it my my own context and because it will always help me to apply whatever I am learning to my context, I decided to continue using NOUN as my organization of choice.

To be successful in this second part, it became necessary to master at least chapters 1 and 2 of the main textbook that has to do with role of human capital in the organization and the valuation methods. I also went on the web for more articles in this area to supplement my readings in this area. From my readings it becomes clear that the importance of human capital can be seen in 2 areas:
i. the investment in equipment is useless if there is no human skill to drive it
ii. the human capital is a major key to the success of any organization as they determine the organization's social capital.

Valuation of human capital also have 2 approaches:
i. cost of production approach
ii. capitalized earnings approach

In establishing the valuation method for NOUN, I came to crossroads because there is apparent lethargy among academic institutions to measure its human capital. At the end, I worked on the paper from Jones and others to get the key valuation indices for academic institutions and I adapted this to NOUN context since the context of an open university is different from that of a conventional institution and that of Nigeria as a developing country is clearly different from open universities in developed countries.  This work was submitted as an assignment to my instructor and is shared below:

Human Capital Valuation Methodology for NOUN

The grade on this assignment too was very encouraging and the feedback too proved to be a motivation for further learning. I had learnt a lot on human capital management at this point from being a novice to one who would develop indices to measure human capital for his own institution.

I must confess that there was a lot to learn in this section including the importance of human capital and the history of human valuation from biblical terms when valuation was based on age and gender. At this point I began to learn about the various methods of valuation of human capital from the two approaches listed above. The main problem I had here was how to apply the human valuation method to the university environment. This became more acute as literature in this area was very scanty because as stated above, it seems that scholars are not interested in the valuation of the university staff. After several readings and downloading of materials, I got one article written specifically on human valuation in the university. I had to digest this article. It has to be noted that though the article I read recommended the Danish Valuation Model because according to the author, the Danish model is highly applicable to public organizations. After several study of the Danish model, I felt I cannot use it for NOUN, thus I decided to use the Balanced Scorecard. However, what I have read about the Danish model is not lost!