Intellectual asset measurement systems

Good measurement systems should satisfy two key areas of performance, effectiveness and efficiency. Intellectual resource effectiveness measures fall into two categories. Effectiveness can be measured as the change in intellectual stocks and therefore companies should measure activities that increase those stocks, for example recruitment and training. The second measure of effectiveness is to understand how intellectual resource management affects business performance, for example what returns are being achieved on intellectual assets. In terms of efficiency, intellectual resource measures can include operating performance measures such as lead times, customer satisfaction, employee productivity, or learning measures such as the number of participants in communities of practice and the number of people trained.

A non coordinated effort has been made to create measurement frameworks for intellectual assets. The frameworks that have been created are broadly similar, and have resulted in a number of index measurement frameworks such as Skandia’s Navigator, Brooking’s Technology Broker, Svieby’s Intangible Asset Monitor and Roos’ IC-Index. In the majority of cases the frameworks are basically a hierarchy of measures with each category of intellectual assets being measured by its own set of indices. Indices are a collection of measures specific to the business; they can range from direct counts (i.e. number of staff), ratios (i.e. hits per web page) or concrete financial measures (i.e. amount of revenue generated per person). Ratio measurements are useful to help determine the efficiency and productivity of a company’s intellectual resource. To date no standardised index method has been settled upon, although Kaplan and Norton’s Balanced Scorecard is the most widely accepted and used.

Unfortunately the measure of intellectual stocks is not entirely accurate and when companies try to assign a value to their intellectual assets it heavily relies on a number of assumptions and approximations. It is difficult to create a standardised framework across companies, let alone industries, as although two organisations can be similar in terms of size, industry, markets, and the amount they invest in research and development they will combine, use and exploit their organisational knowledge differently. Therefore if the same stock of knowledge represents different combinations of expertise it is difficult, from a measurement perspective, to create a general framework of measures.