HUMAN RESOURCE ACCOUNTING: A CRITICAL THEORETICAL REVIEW OF ORGAN MODEL AND ITS RELEVENCE TO ORGANIZATIONS IN NIGERIA

Abstract

This paper undertakes a critical theoretical review of the Organ Model, one of several valuation models proposed by human resource accounting (HRA) scholars for measuring the economic worth of human capital. Human resource is increasingly regarded as the most valuable asset available to a modern organisation, since capital and physical assets cannot by themselves generate value without the skill, effort and judgement of the people who deploy them. Yet conventional financial accounting continues to treat expenditure on employees as a period cost rather than as an investment in an appreciable, income-generating asset. Several models including those of Flamholtz, Likert, Lev and Schwartz, Morse and Organ have been advanced to correct this omission, but a review of the extant literature shows that both the conceptual and applied dimensions of these models, particularly the Organ Model, remain thinly researched. Developed by Pekin Ogan in 1976, the Organ Model conceives of the organisation as an interconnected organism and values human assets according to their contribution to the different functions of the business. Using a library-based, content-review methodology, this paper examines the model’s theoretical foundations, valuation logic, strengths and weaknesses, and considers the suggestions necessary for refining and extending its usefulness, with particular reference to the Nigerian organisational environment. The review finds that the subjective determination of an employee’s “certainty factor” and net benefit to the organisation remains the model’s central weakness, limiting it to a largely theoretical rather than practical tool. The paper concludes that the Organ Model, in common with other HRA valuation approaches, remains at a developmental stage particularly in developing economies such as Nigeria and that further research, together with a universally acceptable valuation and disclosure standard, is required before human resource can be reliably reported as an accounting asset.