Commentary
Measuring intellectual capital
Maria Pia Chircop, FHRD CEO
Activities of organisations and of broader economic and social life are today more and more knowledge-driven. Most organisations believe that what separates them from their competitors is the knowledge assets or intellectual capital of their employees.
Thus, the collective knowledge of employees has become a very critical resource to the organisation. "By the year 2010, all the world's codified knowledge will double every 11 hours" (Bontis 2000). Moreover, the OECD (1992, p. 15) states that tangible assets, like raw materials, fixed capital and even managerial knowledge, no longer account for investments made and wealth created by new and prospering companies. This can be evidenced by high-tech companies where their intellectual capital has been the driving force of their success story.
A number of scholars like Sveiby and Edvinsson provided models of how intellectual capital can be monitored, based mostly on the same classification. These scholars have focused on three intangible assets of the organisation, namely human capital, organisational capital and its infrastructure, and the customer and relationship capital.
Three performance indicators have been identified for each capital, which are that of growth/renewal (i.e., development and change), efficiency and stability. These performance indicators are derived from organisational goals.
They are not assessment objectives, but indicate the future direction of each asset. The choice of indicators depends on the company's strategy, which should include a few measurement indicators for each intangible asset.
People are always mentioned as the prime organisational asset. They bring to the organisation a huge intellectual portfolio, including knowledge, information, experiences, skills and attitude. All these elements can be translated into human capital, to which some scholars also include the company's values, culture and philosophy. Human capital, which is an intangible asset, cannot be owned by the company.
The second asset is the organisational capital and its infrastructure, which include investments like those in technology, processes, procedures, patents and trademarks, people support, time devoted to R&D, and anything that remains with the organisation once employees quit their workplace. These tangible assets, which are easier to monitor, can be owned and traded by the company.
The third asset is that of the external customer, including quality index, satisfied customers, present and new market shares, profit and sales, customers' satisfaction and relationship with stakeholders. This is translated into customer capital and relationship capital, the success of which depends primarily on the organisation's reputation.
In many organisations, HR practitioners might already be measuring some of these intangible assets like how employees' attitudes and commitment may be correlated with customer attitudes and commitment. Other practitioners might be measuring customer satisfaction and relationship stakeholders.
Monitoring intellectual capital should be treated as a strategic performance management measure, helping to translate strategy into action, rendering results transparent in all relevant areas and improving organisational performance. Thus managing intangible assets becomes paramount should organisations decide to monitor their intellectual capital.
I am no expert on this topic. The aim of this commentary is to invite HR practitioners who adopt a system to measure their organisation's intellectual capital to share this practice through an interactive presentation during an HR practitioners' meeting, organised at FHRD. Those interested are kindly asked to contact us on 2137-8895.
Source: Bontis Nick (2000) Assessing Knowledge Assets.
|
