Human Resources Accounting in Infosys

            
  
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Case Details:

Case Code : HROB031
Case Length : 14 Pages
Period : 1990 - 2002
Pub Date : 2003
Teaching Note :Not Available
Organization : IBM
Industry : Information Technology
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"Real assets will not appreciate much as businesses get commoditized. Innovation and intellectual power are going to be the key to the future."

- Mohandas Pai, Chief Financial Officer, Infosys.

"Employees are the most valuable resources of comparison in the service (software, banking, management consultancy, etc.) sector. Like all other resources of the company, the employees possess value because of providing future services."

- Samrat Gupta, MIS Manager, DSQ Software Ltd.

Valuing Human Resources

In the financial year 1995-96, Infosys Technologies (Infosys) became the first software company to value its human resources in India. The company used the Lev & Schwartz Model (Refer Exhibit I) and valued its human resources assets at Rs 1.86 billion. Infosys had always given utmost importance to the role of employees in contributing to the company's success. Analysts felt that human resources accounting (HRA) was a step further in Infosys' focus on its employees. Narayana Murthy (Murthy), the then chairman and managing director of Infosys, said: "Comparing this figure over the years will tell us whether the value of our human resources is appreciating or not. For a knowledge intensive company like ours, that is vital information."

 Human Resource and Organization Behavior | Case Study in Management, Operations, Strategies, Human Resource and Organization Behavior, Case Studies

The concept of HRA was not new in India. HRA was pioneered by public sector companies like Bharat Heavy Electronics Ltd. (BHEL) and Steel Authority of India Ltd. (SAIL) way back in the 1970s. However, the concept did not gain much popularity and acceptance during that time.

It was only in the mid-1990s, after Infosys started valuing its employees, that the concept gained popularity in India. By 2002, HR accounting had been introduced by leading software companies like Satyam Computers and DSQ Software, as well as leading manufacturing firms like Reliance Industries.

HR managers were quick to respond on the above developments by stating that more and more organizations had now started to realize the importance of skilled workforce. They felt that to be successful in highly competitive markets, companies require to continuously improve the level of performance of their workforce.

HRA enabled companies to understand whether the skill sets of their human capital was appreciating or not. R. Krishnaswamy, an actuarial accountant, said, "The value can be used internally by an organization to make comparisons from unit to unit, from year to year, as well as within its industry."

Human Resources Accounting in Infosys - Next Page>>

1] Based in Bangalore (Karnataka), Infosys is a publicly held, ISO-9001 certified company offering information technology, consulting and software services to Fortune 1000 companies. The software services offered included application development (on a fixed-time and fixed-fee basis), Internet consulting and software maintenance services.

  

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