This paper discusses Gray’s statement: "Before we measure something, we must ask whether we understand what it is we are trying to measure", relating it to business performance management and management information system theories. With today’s knowledge of management - which involves the way of organizing humans and the use of computers to manage information systems - the paper highlights the importance of hidden values (intellectual capital) in business success, knowledge and performance management, measurement techniques and challenges as well as how communities of practice are managing to solve real firm’s problems and help it meet its goals.
It was argued by Gray (2015) that all businesses operate with specific sets of activities that result in their deliverables. The most challenging and important discussion topic, is how these business processes are effectively managed and measured against the firm’s objectives, as well as how companies measure the contribution of their intangible assets to business outcomes.
Intellectual capital is the intangible assets of an organization resulting from employees' physical efforts, knowledge assets and other results of human innovation and thoughts. Due to firms that have neglected intellectual capital to focus on finance and operations for many years, Leif E. (1991) describes intellectual capital as a hidden value and explains its importance on the company value. Intellectual capital, as argued by some scholars and authors, including Edvinsson, can take many forms.
Table of Contents
1. Intellectual Capital
1.1. Intellectual capital categories
2. Knowledge Management
2.1. Aspect of Measurement
3. Communities of Practice/Interest
4. Performance Measurement and Challenges
4.1. Wrong Designing
4.2. Lack of leadership commitment
4.3 Ignoring change management in system implementation
4.4. Absence of Integration
Research Objectives and Key Themes
The primary objective of this paper is to critically appraise the statement by Gray et al. (2015) regarding the necessity of understanding what is being measured before initiating any measurement process, particularly within the contexts of business performance management and management information systems.
- The strategic role and categorization of intellectual capital within organizational success.
- The interdisciplinary nature of knowledge management and its contribution to organizational capabilities.
- The critical importance of communities of practice in fostering knowledge sharing and solving real-world business problems.
- Challenges associated with designing and implementing performance measurement systems.
- The need for integrating strategic planning, human resource management, and organizational culture into performance management frameworks.
Excerpt from the Book
1. Intellectual Capital
Bernard H. N. (2017) defines an intellectual capital as the intangible assets of an organization resulting from employees' physical efforts, knowledge assets and other results of human innovation and thoughts. Due to firms that have neglected intellectual capital to focus on finance and operations for many years, Leif E. (1991) describes intellectual capital as a hidden value and explains its importance on the company value. Intellectual capital, as argued by some scholars and authors, including Edvinsson, can take many forms.
1.1. Intellectual capital categories
Bernard (2017) distinguishes the four major components of intellectual capital assets such as the legally recognized assets, the legally salable and protected intangible assets, structural intangible assets and the human capital intangible assets. However, Edvinsson and Malone talks about the three main forms of intellectual capital which are “human capital, structural capital and customer capital”.
According to them, human capital includes knowledge, skills, and abilities of employees. It’s by using the human capital that an organization solves a set of business problems. It is inherent property of people that can’t be owned by an organization without people. Therefore, human capital is a property of an organization that can be lost at any time, once people leave the organization. Human capital entails how an organization uses its people resources in an efficient and effective way as measured by creativity and innovation (David H., 2009).
Chapter Summaries
1. Intellectual Capital: This chapter defines intellectual capital as hidden intangible assets and explores its categorization into human, structural, and customer capital.
2. Knowledge Management: This section discusses knowledge management as an interdisciplinary model essential for organizational innovation and creating sustainable competitive advantage.
3. Communities of Practice/Interest: This chapter highlights the role of informal, self-selected groups in sharing expertise and driving emergent organizational strategies.
4. Performance Measurement and Challenges: This chapter examines the definition of performance management and identifies critical pitfalls such as poor design, lack of leadership, and inadequate integration.
Keywords
Strategic Systems Thinking, Intellectual Capital, Knowledge Management, Aspect of Measurement, Performance Management, Community of Practices, Tacit Knowledge, Explicit Knowledge, Intangible Assets, Organizational Capability, Change Management, Business Process.
Frequently Asked Questions
What is the fundamental focus of this paper?
The paper critically appraises the assertion by Gray et al. (2015) that a deep understanding of the subject matter is a prerequisite for effective measurement within a business context.
What are the central themes discussed in the text?
The central themes include the strategic value of intellectual capital, the role of knowledge management in modern firms, the impact of communities of practice, and the challenges of performance management systems.
What is the primary objective of the work?
The goal is to explore how businesses can effectively manage and measure their intangible assets against firm objectives, specifically addressing the gap between operational processes and management information systems.
Which scientific approach is utilized in this paper?
The paper employs a literature-based theoretical analysis, drawing upon existing academic theories and management frameworks to discuss the alignment of organizational strategies and performance measurement.
What topics are covered in the main body of the text?
The main body covers the definitions and components of intellectual capital, the nexus of knowledge management, the function of communities of practice, and common failure points in performance management implementation.
Which keywords characterize this work?
Key terms include Strategic Systems Thinking, Intellectual Capital, Knowledge Management, Performance Management, and Communities of Practice.
Why is the concept of 'hidden value' significant to the author?
The author emphasizes that 'hidden value' (intellectual capital) has been historically neglected in favor of strictly financial metrics, yet it is essential for long-term organizational success.
What does the author identify as the primary challenge in performance management?
A significant challenge identified is the lack of integration between performance management systems, strategic planning, and the broader organizational culture.
How do communities of practice contribute to organizational goals?
They act as informal networks that facilitate knowledge sharing, solve work-related problems, and help organizations retain talent and develop new business strategies.
- Quote paper
- Dr. Sixbert Sangwa (Author), 2017, Intellectual Capital and Knowledge Management. Performance Measurement and Challenges, Munich, GRIN Verlag, https://www.grin.com/document/1014897
