HUMAN RESOURCES ACCOUNTING AND FINANCIAL PERFORMANCE OF BANKS IN NIGERIA (A STUDY OF LISTED BANKS IN NIGERIA)
The authors x-rayed the relationship
between human resource accounting (HRA) to financial performance of banks in
Nigeria. It is believed that a well-developed system of HRA could contribute
significantly to internal decisions by management and external decisions by
investors. The authors adopted the survey research design. An instrument was
designed using the 5-point Likert scales. The instrument (questionnaire) has 17
items. A total of 22 samples were drawn from the target population using the
simple random sampling technique. Out of the 22 questionnaires administered, 21
were returned upon which the analysis was based. This represents 96% response
The Chi- square statistical technique
was used to test the hypothesis at 5% alpha level. It was found that HRA is a
major factor in the financial performance of banks. It is also empirically
verified that HRA value in the balance sheet of organization does help the
organization make more rational decisions. HRA should be made a necessary
element of financial reporting. The authors recommended the necessity of
recognizing human resources asset in the financial statement of financial
position and using current cost to measure it; human resource cost should be
reported in asset accounts rather than as expenses; effort to improve HRA should
focus on the value of quality management, since it is positively related to the
future operating performance of the banking industry.
This study concludes that a
well-developed system of HRA could contribute significantly to internal
decisions by management and external decisions by investors Fajana (2002).
Keywords: Human resource accounting,
financial performance, Investors.
1.1 BACKGROUND OF THE STUDY
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. 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. 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.
Accounting Association’s Committee on Human Resource Accounting (1973) has
defined Human Resource Accounting as “the process of identifying and measuring
data about human resources and communicating this information to interested
parties”. 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.
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. (Flamholtz, 1971). 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.
accounting centers on the valuation of human capital available to organizations
and its recording and subsequent reporting in the financial statement of the
organization. Human capital is the main factor towards achieving the
organizational goals of maximizing the wealth of the owner. The economist
Milton Friedman states, from the broad and general point of view, that total
wealth includes all sources of income consumable services. One of such is the
production capacity of human beings and accordingly, this is one form in which
wealth can be held. (Karl-Erik Sveiby, 2004).
accounting facilitates effective and efficient use of human resources. Human
resources along with financial and material resources, contributes to the
production of goods and services in an organization. Physical and monetary
resources by themselves cannot improve efficiency or contribute to an increased
rate of return on investment. (Anjorin B, 1992). It is through the combined and
concerted effort of people that monetary and material resources are harnessed
to achieve organizations goals. (Likert R, 1971). Human resources in the
business organizations cannot be over-emphasized in this modern world, as human
resources therefore is the most important assets of an organization. Infact,
with additional training and experience gained over a period of time, they tend
to do well on the job. This fact however, is ignored when a firm’s balance
sheet is prepared. All expenses relating to recruitment, training and
development of employees are charged against the revenues of a particular
accounting period. The expenses on human resources are fixed in nature and do
not offer any immediate return.
nature accrues to the firm over a long period i.e. as long as the employee
remains with the firm as a result of human resources accounting. Hence such
costs should be capitalized and amortized over the entire period so that the
Balance sheet gives a true and fair view of the state of affairs of a business.
(Brummet, 1983). Since human resources are capable of enlargement
a period of time, there should be innovative investment in its people and how
the value of people changes over a period of time. Human resources accounting
is one of such methods which endeavour to reduce the cost, measures and improve
the value of people to an organization.
link between human resources policies and organizational performance is the use
of employee surveys combined with benchmarking over the years. When employees
are viewed as assets rather than simply costs, there is a positive impact on an
organizational performance. A mix of financial and non-financial measures
(actual versus budget, cash flow, customer satisfaction, economic value added,
employee satisfaction, employee turnover, safety, sales and shareholders total
return) leads to improved organizational performance.
1.2 STATEMENT OF THE PROBLEM
the fact, that there is a high growth rate in human resources accounting in
every industry, there is scarcity of literature devoted to studying the impact
of human resources accounting in the banking industry particularly in Nigeria.
The literatures used have not been able to address the relationship between
human resources accounting and its importance to in organizational performance.
Banking industry as a heart of economic development in any country with its
major resources as human resources, there is a need to study how the industry
can utilize its human resources to achieve its set goals or objectives.
1.3 OBJECTIVES OF THE STUDY
main objective of the study is to examine and investigate the impact of human
resources accounting on the performance of banks in Nigeria. Other specific
objectives are to:
To determine the relationship between human resources accounting and the
financial performance of banks in Nigeria.
To determine the significant influence of human resources accounting in the
To proffer solutions to the problems affecting the system of human resources
accounting and the financial performance of banks in Nigeria.
To identify problems affecting the system of human resources accounting and
financial performance of banks in Nigeria.
To determine effective system of human resources accounting to the financial
performance of banks in Nigeria.
1.4 RESEARCH QUESTIONS
the course of carrying out this research, the following questions shall be
provided answers for.
Is there any relationship between human resources and
the performance of banking sector?
What is the effective system of human resources
accounting in banking industry?
What are the problems affecting the system of human
resources accounting in banking industry?
What is the relationship between human resources
accounting and economic value of people to the banking industry in Nigeria?
What are the importances of human resources accounting
in the financial performance of banks in Nigeria?
the course of study, the following research hypotheses shall be tested.
Ho: There is no relationship between human resources
the performance of banks.
There is a relationship between human resources accounting and
the performance of banks.
Ho: Human resources accounting is not effective in the
Human resource accounting is effective in the banking industry.
Ho: There is no problem confronting human resources
Hi: There is problem confronting human resource
Ho: There is no relationship between human resource
accounting and economic value of people to the banking industry.
Hi: There is a
relationship between human resource accounting and economic value of people to the banking
resource accounting is not important to the financial
performance of banks in
Human resources accounting is important to the financial
performance of banks in
1.6 SIGNIFICANCE OF THE STUDY
the end of this study, the banking sector will learn how to utilize its human
resources to the maximum advantage. Also, the findings of this study will
enable the captains of banking industry to be sensitive to the need of the
human resources and also to adopt strategy to decide effective leadership in
order to optimally utilize their human resources.
AND LIMITATIONS OF THE STUDY
this study, there is bound to be limitation to be encountered during the course
of this study. These limitations need to be stated to aid the users of the
research findings for effective decision making.
Limited time available to carry out the research which
affects the sample signs used for the research proposal.
The limited funds that affect the coverage of the area
in which the research is carried out.