The Development of Human Capital Management

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only and needed participation of organizations to make an applied research study. Costs 
for that were high, benefits were uncertain and not necessarily profitable for the 
sponsoring company. Only a few reports were published. ‘It was at this point that 
Human Resource Accounting seemed to have been an idea that was promising but that 
would not be developed much further’ (Flamholtz et al, 2002, p.951). 
The shift from an industrial based economy to a knowledge based economy leads to an 
increasing emphasis on human capital. As a result of this, international interest in 
Human Capital management came up again, when interactions between theory and 
application were made. 
Realizing an effective Human Capital Management strategy and turning into knowledge 
based company is seen as a compulsory term of success for firms. The intention of 
managing a firm’s human capital is to increase and improve the profits for the company 
(Bose, 2004). This indicates that the organization is able to measure the principal 
investment in human capital. Measuring the company’s benefits of Human Capital 
Accounting is at this time rather complicated. Human Capital Management systems 
must reveal their value. Without this assessable success, interest and cooperation for 
Human Capital Management is not likely to be sustainable. 
In the early 1990s employees were regarded as ‘cogs in the industrial machine’, but 
‘many of the highly skilled knowledge workers of today actually control the machines, 
carrying the power and ability to make decisions to satisfy customer needs’ (Losey, 
1998,p.9). The value of employees grew and the importance to know about that value 
got more significant for the firms. Shyness about treating workforce as assets has been 
reduced in this century, in particular in the past 25years (Odiorne, 1984). Odiorne gave 
two reasons for that; first is that highly paid people such as engineers, accountants, 

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scientists and lawyers seldom feel they are oppressed and are not usually insulted if 
they are regarded as assets. Secondly, when such people are treated as assets, they are to 
discuss the relationship of their value to the return they gain from their skills.
Today, organizations have several tactics when it comes to use and benefit from human 
capital. New methods are frequently developing, but also been queried critically. In 
these days firms have to take note that the work environment ensures the best outcomes 
of their human capital. Organizations have to evaluate the value that is generated by the 
employees to be able to find out how successfully they use their knowledge and skills. 
However it seems that in academic research, Human Capital Management changed a lot 
and in different dimensions but in practice in the firms, it is yet to be understood by its 
users. Recent surveys has showed that many Human Resource Managers have not 
attempted to understand the usefulness or how Human Capital Management can be used 
in their firms successfully (Huselid, Becker and Beatty, 2005).

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