Accounting for the development of human capital in manufacturing organizations: a study of the Pakistani textile sector

Abstract

Purpose – The purpose of this paper is to examine empirically the impact of human capital development in organizations. It is based on some conceptual aspects of human resource accounting and considers how investments in the development of human capital can be measured in order to investigate the financial returns for organizations. Design/methodology/approach – The study is exploratory in nature as this is the first of its kind in the Pakistani manufacturing sector. The technique of convenience sampling was used to collect the data due to time and resource limitations. The sample comprises of 30 leading companies in the Pakistani textile sector. A self-administered postal questionnaire was designed for the research survey. The results focus on the benefits derived by using the capital investment appraisal techniques of human resource accounting including: return on investment, benefit to cost ratio, weighted average cost of capital, and bottom line evaluations. Findings – The results provide evidence of an association between investment in the development of human capital and the benefits, which organizations can reap from such investments. It further finds that the organizations investing in training and development programs provide high employee productivity that ultimately contributes towards high-organizational performance.