Developing Intellectual Capital using BSC as the strategy

‘Intellectual Capital’ is probably the most abstract concept that has ever entered the domain of organizational management

Most analysts would agree that this topic has been evolving since its inception and yet has not reached a consensus. However, stating in a fragmented manner, the components of this subject include individual capital, instructional capital, human capital etc.

Though its importance has been recognized, realized and emphasized time and again but the term has not found a significant place for itself on the accounting papers from a number of sectors. Some of the industries where it has managed to gain the deserving attention include Information Technology, Technology Transfer, Research and Development.

Organizations often hesitate in ‘valuing’ this asset owing to the obscure boundaries of it. The blurred demarcation lines are due to the underlying basics of this concept. ‘Intellectual Capital’ is all about sharing information (both Explicit and Tacit) among the peers to bring everyone ‘on the same page’. This is an absolute necessity as people working in a group must be aware of the developments ‘already occurred’ or are ‘in-process’ to contribute to the organizational progress, in their own ways.

Once the difficulty of defining this term is confronted ‘honestly’ and ‘effort-fully’; the power that is unleashed can take the organizational group on its ‘success path’. One can give the ‘Intellectual capital’ the shape of ‘competitive advantage’. For instance, a suitable Intellectual Capital solution can bring down the ‘new product development time frame; ‘increase brand equity’ and ‘better customer relationships’.

Consequently, companies employ various means to enable managers reach the right piece of information, on real time basis. One of the methodologies that makes possible the ‘capturing’, ‘growing’ and ‘sustaining’ of this asset is BSC (Balanced Scorecard). This management strategy helps an organization in building an ‘information network’ to make feasible the conveying of information in no time.BSC has its roots in the finding that ‘improvements on Financial front alone are not enough in reflecting the moves, rather a more complete overview calls for incorporation of other aspects that relate to Customer Perspective, Internal Operations and Innovation and Learning.

The indicators for development of Intellectual capital are- ‘Estimated Value of People’, ‘HR value Return’, ‘Time Period for which Human Capital Measures were planned’ and ‘Employee Performance Review Frequency’. To know the status of relationship Capital, one can rely on indicators such as ‘Brand value ‘, ‘Innovativeness ratio’, ‘Schemes aiming at Flexible Work Timings’ and ‘Average Collaboration Period with Suppliers’. Structural capital can be taken care of depending on KPIs such as ‘Number of Database systems deployed in the organization’, ‘R&D value added’, ‘Number of assisting Measures’ and ‘Appreciation Ratio’. Employee Training and Learning aspect can be measured using parameters like ‘Training Hours per employee’, ‘Contribution to Intellectual capital on per employee basis’, ‘% increase in Training Expenditure’ and ‘Satisfied Employee Index’. Treading the BSC path to develop Intellectual Capital requires formulating indicators to measure and manage progress of the process.