Are Employees Assets or Expenses?

How does your company report on its human capital? This Harvard Business Review article challenges the traditional approach that I was taught, and that I see practiced by most companies I interact with. Generally speaking, there is a significant gap in the way that companies share this information, if they do at all. “This lack of reporting on human capital discourages effective investment in workers for at least two reasons. First, what is not measured cannot be rewarded. Sen. Mark Warner of Virginia summed up this inadequacy during a recent speech, when he pointed out that government ‘provides a tax deduction to the company that replaces a human with a robot, but offers nothing to the company that trains that worker to remain employable.’”

Hopefully future changes in legislation and regulation will be helpful in accurately reflecting a companies true “assets”. What might the benefits be to companies and all stakeholders of including human capital disclosures into financial reporting? The implications of this paradigm shift are exciting to contemplate. What might this mean for your company? Reach out anytime. I’d love to hear your thoughts and discuss.

About Eric Kalter

Eric Kalter is a Director with Fahrenheit Advisors’ Phoenix location. Eric has extensive accounting and finance experience with multiple fortune 500 companies. A data-driven leader, Eric has worked in all levels of Finance and Accounting as well as leading IT and Human Resource functions. He consistently challenges himself and his clients to reconsider established ways of conducting business in order to balance efficiency and bottom-line focus with a recognition of the value and needs of all stakeholders.