Uncertainty and Human Capital Decisions: Traditional Valuation Methods and Real Options Logic
Badders, Brett; Clark, Lindsey Cottom; Wright, Patrick M.
As the importance of human capital increases in organizations, so does the need to develop more sophisticated financial valuation models. This paper reviews some of the major traditional financial decision making models used in costing employment mode choices. It then introduces the real options valuation approach for costing such choices. The advantage of the real options model is demonstrated to build flexibility into employment decisions.
CAHRS; ILR; center; human resource; job; worker; advanced; labor market; satisfaction; employee; work; manage; management; health care; flexible benefit; HRM; employ; model; industrial relations; job satisfaction; job performance; productivity; measurement; compensation; pay; voluntary turnover; salary; pay level; benefit; pay raise; job growth; managerial; employment growth; college degree