Human Resource
Information System
NOTES
Self-Instructional
Material 171
keeps the morale of his subordinates high so that they can contribute their best in
achieving the organizational objectives. The following advantages are derived from
an HRA system:
1. It throws light on the strengths and weaknesses of the existing workforce in
an organization. This in turn, helps the management in recruitment planning,
whether to hire people or not. It thus provides useful information about the
value of human capital which is essential to managers for taking the right
decisions, e.g., choice between:
Direct recruitment and promotion
Transfer and retention
Retrenchment and retention
2. The management can evaluate the effectiveness of its policies relating to
human resources. For instance, high costs of training may indicate the need
for changes in policy for reducing labour turnover. The management can
also judge as to whether there is an adequate return on investment in human
resources. HRA provides feedback to manager on his own performance.
3. It helps potential investors to judge a company better on the strength of the
human assets utilized therein. If two companies offer the same rate of return
on capital employed, information on human resources can help investors
decide which company to be picked up for investment. The present law
does not require the value of the human asset to be shown in the balance
sheet.
4. It helps the management in taking appropriate decisions regarding the use
of human assets in an organization, that is, whether to hire new recruits or
promote people internally, transfer people to new locations or hire people
locally, incur additional training costs or hire consultants keeping the impact
on the long-run profitability in mind.
5. The return on investment (ROI) can realistically be calculated only when
investment on human resources is also taken into account. The return on
investment may be good because there is an investment on human beings.
On the other hand, a low investment may be the reason of low investment
on human asset. So ROI can give accurate results only when expenditure
on employees is treated as an asset.
6. HRA may help to improve the motivation and morale of employees by
creating a feeling that the organization cares for them. HRA will also help in
improving the efficiency of employees. The employees come to know of
the cost incurred on them and the returns given by them in the form of
output, etc.
7. It can be seen whether the business has made proper investments in human
resources in terms of money or not. If the investment is excessive then
efforts should be made to control it.
