IMPORTANCE OF HR AS AN INTANGIBLE ASSET IN ORGANIZATIONS: INTRODUCTION

INTRODUCTION

In this global village a company can buy best of the machinery and equipment from international market to have a competitive edge over its rivals. Now if that machinery is not effectively and efficiently utilized it is of no use. It means that more than the machinery and equipment it is the skill and knowhow of using that machinery in the best possible way important for the organization. For example if a company losses all its machinery and equipment but is still left with the expertise of using it will be back in the business relatively quicker than the one which lost the expertise of using it and have all the machinery and equipment with it.

With this we can understand the difference and advantage of intangible or intellectual workforce over physical or tangible assets. One of the examples in favor of the above discussion is of Coca Cola Company, according to its CFO James Chestnut Coke’s $150 Billion market value is derived from its Brand and Management systems after transferring all its tangible assets to its Bottlers.

We can also say that the benefits of the HR as intangible asset may not be always visible but it plays an important role to manage tangible assets. It is also worth worthy to know that some companies which relies heavily on intellectual capital to have a competitive edge over its rivals have invented completely new business models based largely on Intangible assets. Another example as evidence for the above discussion in of Dell and Amazon.com has increased their shareholder value extraordinarily through their management systems who mainly deal in commodities. In the same way many financial analysts are now including intangibles in their valuation models. A recent study of financial analysts reveals that, for average analysts, 35 percent of his or her investment decision is determined by non financial information.

Companies need to manage their intangibles–once defined in The Economist magazine as “anything in a firm that generates value that you can’t drop on your foot”.

Intangible assets include a company’s employees, brand, reputation, relationship to customers, decision-making process and ability to innovate, along with investor confidence in the company’s strategy and its ability to deliver on it.