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HUMAN LEARNING -
NATURAL DRIFT TO LOOSE COMMUNITIES OF PRACTICE
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Entered 10/04/04 PROFESSOR'S
REVIEW OF MEASURING INTANGIBLES An Australian professor of business, Professor Malcolm Rimmer at Deakin Business School, Melbourne, Australia, reviews two recent major contributions to measuring 'intangible' assets characterised in knowledge management practices. He affirms the place of the Balance Scorecard tool in this and along with knowledge-intensive not-for-profit institutions to use similar tools for transparent accountability. __________________________________________________________ A. Kaplan, R. and Norton, D. (2004) Measuring the Strategic Readiness of Intangible Assets. Harvard Business Review. February. Intangible Assets Management is the new generation wealth-creation driver in business, according to Kaplan and Norton : 'the holy grail of accounting.' The rationale is well-accepted. Competitive advantage comes from valuable but hard-to-copy processes and practices. The more intangible yet valuable, the more leverage. The original tool they developed to measure organisational success was called the Balanced Scorecard, having four dimensions: Financial, Customer, Internal Process, and Learning and Growth. This last, more intangible dimension that the authors focus on, having three elements to it. These are Human Capital, Information Capital, and Organisational Capital. A mapping and measurement system is developed for them.
_____________________________________________________ B. Leitner, K-H., and Warden, C. (2004) Managing and Reporting Knowledge-Based Resources and Processes in Research Organisations: Specifics, Lessons Learned and Perspectives. Management Accounting Research. 15:1 Reporting activities was unnecessary for research organisations funded by governments, universities or public agencies. Now accounting standards are being enforced. But traditional standards have ignored the inputs (intangible resources such as skills) and outputs (knowledge). Thus the authors describe new attempts at measuring "intellectual capital" by European groups such as the Austrian Research Centers(ARC) and the German Aerospace Research Center and Space Agency (DLR). Both agencies share the same IC model. Their are four dimensions, each with their own performance indicators :
The final dimension for Intangible Results has indicators such as number of publications, patent applications, Internet site hits, and so on. Rimmer adds that similar reporting methods are evident in 'many Australian research organisations.' He is impressed with this model 'providing a framework for comprehensive, transparent reports.'. However, he warns that these activity performance measures do not link to specific stakeholder interests like shareholder profit or customer satisfaction. He implies clear performance outcomes lings need to be made to gauge the true worth of knowledge creation and manipulation in these organisations. - DEBRIEF - Are intangible assets the 'oxygen' to an organisational system ? YES. Can we continue to ignore or downplay their importance as seen by a low level of current measurement tools being used ? Not at all. Have organisations made inroads to metrics here ? Definitely. The Balance Scorecard or the IC Model both attempt to put valid performance indicators around intangible areas. I say even a metric system less sophisticated than the ones detailed above is better than none at all. Would you agree ? For instance, the case study reviewed earlier on Samsung Life Insurance agents, showed a simple but powerful set of measures for knowledge creation and manipulation. They tracked each business group's contribution to the Centralised 'Knowledge' Database - how much they took out (hits) and how much they contributed to it (documents). The shortcoming in all this was the quality of contributions, which the researchers were in stage two of rectifying. Nevertheless, SOME of Samsungs 'organisational memory' was being well documented and partly used...instead of a SMALL AMOUNT. Would you agree ? Samsung's Knowledge Management performance could then be delivered in the Annual Profit and Loss Accounting Report for shareholders to read. Yes ? Another powerful KM performance indicator is for each function in the organisation to count the number of Communities of Practice meetings they have to share expertise and workshop timely issues. How many 'incidences' of Transferring Learnings to the Workplace' could be documented ? This is a true measure of Competency Development, that staff and supervisors can be motivated to do and achieve. It is a science but it is not esoteric, elitist rocket-science. There is hope ... yes ? Summary Measuring intangibles is likely to be the 'New World Order' for most industries in the coming decades. It is becoming mandatory already for some industries. But why be a laggard ? Why don't you gain advantage by leading the way in your industry ? It may require sophisticated management tools and then again a few key performance indicators may suffice. Nevertheless, Rimmer and others are extolling the necessity to measure properly your competitive edge activities for any hope of actively improving them. It will take a paradigm shift for many senior managers to buy in to this concept and to persevere. But measuring 'smarts' to build 'smarts' is the way to go. Are you doing it ? Links : www.afrboss.com.au |
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