Hermanson’s Unpurchased Goodwill and Adjusted Discounted Future

Wage Model:
According to unpurchased goodwill model, the value of human resources of an organization
may be calculated by capitalizing earnings in excess of normal earnings for the industry or
the group of ompanies of which the firm is a part.
The adjusted discounted future wage model used compensation as a surrogate measure of
a person’s value to the firm. Compensation means the present value of future stream of
wages and salaries to employees of the firm. The discounted future wages stream is
adjusted by an ‘efficiency ratio’ which is the weighted average of the ratio of return on
investment of the given firm to all the firms in the economy for a specified period, Usually
five years.
Jaggi And Lau Model:
This model suggests valuation of human assets on a group basis rather than on individual
basis. Group, in this model, means a homogeneous group of employees who may not be
necessarily working in the same department. It might be difficult to predict an individual’s
future period, stay and chances of promotion, but on a group basis, it is easier to ascertain
the future period of service, chances of promotion and those who are likely to leave the firm
during each of the forthcoming period. It has been assumed in this model that the pattern of
movement is likely to remain constant overtime and the probabilities determined for one
period can be extended to future periods.
Morse Net Benefit Model(1973):
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According to this model, the value of human capital is determined on the basis of the
present value of net benefits derived by the organization from the expected future services
of its employees. It involves the following steps.
Determination of the gross value of future services to be rendered by employees in their
individual capacities as well as perating in groups. Determination of the cost, ie. The total
future payment to be made to the employees. Calculation of ‘net benefit’ to the organization
on account of human resources by subtracting (i) from, (ii). Calculation of the present value
of the net benefits by discounting at predetermined rate of discount.
3. Write a note on Individual and Organizational knowledge conversion
process.
Individual knowledge conversion process:
Individual knowledge conversion takes place between tactic knowledge and explicit
knowledge. According to Nonaka and Takeuchi, knowledge conversion is based on four
modes:
Socialization: Knowledge is converted from tactic to tactic through sharing
and exchanging experiences and technical skils.
Externalization: Tactic knowledge is converted into explicit concept like
analogies, models generalization etc.
Combination: Knowledge is converted from explicit to explicit by
reconfiguration of existing information by infusing modifications, additions,
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deletions, sorting combinations and categorization. This effort results on the

creation of new or improved knowledge.
Internalization: Knowledge is converted from explicit to tactic. This is
related to learning by reading, listening and doing. This stage helps the individual to
conceptualize the knowledge from his own perspective through the interaction of his own
cognition. Thus, the individual internalizes the explicit knowledge and converts it into tactic
knowledge.
Organizational knowledge creation process:
Organizational knowledge creation involves five phases. These five phases
include:
Sharing tactic knowledge:Interaction among individual employees in the
form of meetings, discussions and conflict over ideas, provides for exchange and sharing of
tactic knowledge. Thus, tactic knowledge held by most of the employees becomes the
organizational knowledge.
Creating concepts: The cognitive process of each employee crystallizes the
shared tactic knowledge into models, concepts and words.
Justifying concepts:The new concepts generated by individual need to be
tested in practice and justified for further validity and practical implementation. This stage
justifies whether the new concepts/ideas are worthwhile for the organization and the
society.
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Building an Arch type:The tested concepts are converted into tangible or

concrete (arch type) or prototype operating mechanism.