Codifying Knowledge

Knowledge accumulated by an organisation provides a valuable source of intellectual capital. From the time a business begins operating it accrues knowledge, yet organisations do not appear to fully appreciate this is occurring, and are frequently unaware of the real worth of their in-house knowledge. Documentation of processes, policies and procedures, in most instances, is the usual practice because they set the direction for operational activity.

That organisations do own knowledge is a view supported by authors such as Levitt and March (1988) and Spender (1996), and gives credence to the internal asset component identifying intellectual capital. Senge (1990) makes the point that it is through individual learning that knowledge increases, enabling organisational learning to take place, and this in turn will lead to an increase in organisational knowledge. To benefit from knowledge, organisations need to identify where the knowledge is, evaluate it to determine the business goals it will serve, and make it available in a way that is accessible by those who require it (Davenport and Prusak, 1998). However, codifying knowledge is not an easy task and regardless of their willingness to do so, it is just not possible for people to write down all that they know. Tacit knowledge cannot be turned into explicit knowledge therefore it is not possible for people to convey all they know (Polanyi, 1958; Polanyi, 1967; Joia, 2000; Firestone and McElroy, 2003).

Responses from the chief executives to question 96 suggested that managing the codification of knowledge was a concern. In most instances policies and procedures were documented, but there were gaps, for example in the documenting of some processes, and attempts were being made to address this. It was accepted that it was not possible to record all knowledge, but it was necessary at least to capture the essential elements of a task so that when people left, the business units were not bereft of vital knowledge. It was important to codify knowledge whenever possible, and the chief executives recognised there was a need to do so.

Only three chief executives mentioned the existence of technology systems – a document management system, a customer relationship management system, and a system to document projects undertaken by various business units. This latter system appears to be separate from the organisation‟s intranet. As a source of knowledge the intranet was barely mentioned by the chief

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To what extent is knowledge codified in the organisation, and what systems are in place to allow for the flow of knowledge?

executives. The impression received was that not a lot of use was being made of the technology systems, with the inference that they were not generally accepted as a means through which knowledge was captured or shared. On the other hand it may be that in the minds of the employees the systems were not sufficiently user friendly for accessing knowledge.

Codifying knowledge is an essential part of the process of the management of intellectual capital and is a component in the internal capital section of the Model. CHH was established over 100 years ago and has accumulated a vast amount of knowledge of importance for the organisation, and the wider forestry industry. This points to the likelihood of codification having occurred over time. However, while recognising the importance of knowledge codification, the chief executives admitted that this issue was not being addressed properly. Nevertheless, such action as had been taken at CHH did fit with the inclusion of codifying knowledge as a component of the internal capital of the Model.

5.1.7 Metrics

Integral to the functions of management is the need to assess progress towards achieving goals and objectives. When tangibles are involved, measurement raises few difficulties, but attempts to measure intangibles such as intellectual capital have proven to be difficult. Many authors (e.g. Stewart, 1997; Sveiby, 1997; Guthrie et al., 2004) support the importance of measuring, but they concede there are difficulties in developing appropriate measures. Several models have evolved, for example, the Intangible Asset Monitor (Sveiby, 1997), the Skandia Business Navigator (Edvinsson and Malone, 1997), and the Balanced Scorecard (Kaplan and Norton, 1992). In the Intellectual Capital Management Model, metrics is part of managing internal capital.

Responses by the chief executives to question 107 tended to be negative. A few referred to measurements for identifying customer numbers, or measures for intellectual property related to brands. Only three chief executives made reference to the Balanced Scorecard (Kaplan and Norton, 1992), yet Balanced Scorecard objectives for performance, innovation and leadership were explicitly identified in the 2001 Annual Report. The other chief executives did not see any connection between the Balanced Scorecard and measurements that might fit those for intellectual capital.

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The chief executives generally felt that measuring intellectual capital would be very complex. Those views are in line with the dilemma faced by theorists who point to difficulties associated with measuring intellectual capital. Considerable research has been undertaken on the issue of metrics (e.g. Stewart, 1997; Kennedy, 1998; Carrol and Tansey, 2000; Joia, 2000; Guthrie, 2001; Edvinsson et al. 2004), and agreement on appropriate measures is likely to be an ongoing debate for some time. When measures are developed it is important that they have relevance for management, and are sufficiently flexible to meet the changing needs of individual organisations.

As there was no explicit evidence of management of intellectual capital taking place, inevitably measuring intellectual capital was not an activity with which the chief executives were concerned. Although the Model points to metrics being a facet of managing intellectual capital, this is not supported by management practices in the business units.