Identifying your IC by looking at your current initiatives

One way to identify the intellectual capital you have is to create an overview of existing initiatives and objectives with respect to knowledge resources. Everyday, people in your enterprise do things to optimise or make use of knowledge resources. Somebody is sent on a training course, A PC is bought. New people are hired. Dialogues with customers are started, an intranet is set up. All these actions are taken for a reason. By listing those activities you create an overview of the IC that apparently is important to the enterprise. The following table might help:

Example of a Knowledge Narrative: Odense Customs and Tax Region

Odense Customs and Tax Region supplies reliable and systematic tax assessments to businesses. Through tax assessments, the business world experiences that all businesses are treated equally, because unfair competition is avoided. To achieve this, Odense Customs and Tax Region must have access to motivated and skilled employees, have a well developed tax issue database and have a very helpful culture. This should make it possible to share experiences gained and to add relevant competencies.

Intellectual Capital Existing actions and

initiatives Existing objectives and strategies Assessment of effect

Human capital • To ensure the right employee portfolio? • To train and upgrade employees? • To promote employee satisfaction? • Employee mix? • Training and upgrading employees? • Employee satisfaction? • How do initiatives affect employee contribution to creating a better enterprise? Organizational capital

• Processes • rationalize business To document and processes? • To document and rationalize knowledge processes? • Rationalization of business processes? • Rationalization of knowledge processes? • How do initiatives affect the benefit of the business processes? • How do initiatives

affect the benefit of the knowledge processes? • Technology • To ensure the right

production

technology portfolio? • To upgrade existing

production technology? • To ensure the right

knowledge infrastructure? • To upgrade existing

knowledge infrastructure?

• Ensuring the right portfolio of production technologies now and in the future? • Ensuring the right

knowledge infrastructure now and in the future?

• How do initiatives affect the added value of the technology? • How do initiatives

affect the added value of the knowledge infrastructure?

Relational capital

• Customers • customer portfolio? To ensure the right • To upgrade customer relations and customer competencies? • To promote customer satisfaction? • Customer mix? • Customer relations and customer competencies? • Customer satisfaction? • How do the initiatives contribute to creating value to users?

2. German: Wissensbilanz

Description

www.akwissensbilanz.org

Wissensbilanz -Guideline on the preparation of an IC Statement is a German

guideline supported by the German Federal Ministry of Economics and Labour. The Guideline targets SMEs, as well as other forms of organization which have a comparable structure. In particular, it targets all decision-makers in an organization, from the Managing Director via the controller and those responsible for personnel matters, to the quality management commissioner, strategy managers, knowledge managers, as well as the heads of sales and marketing. The model is drafted in six steps with four milestones.

Milestone I is the IC Statement in its simplest form. Three steps are needed to achieve it: The first step is to assess the initial situation relating to: the business environment and strategy, the intellectual capital, and a self-evaluation of intellectual capital. The target group of Milestone I is the management of the organization which can extract measures of improvement based on the results.

Milestone II targets the same group, but goes one step further in supporting the self- evaluation with indicators. In this way, self-evaluation is given further concrete form and supported using facts by means of which changes can also be measured independently of the employee’s self-evaluation. The collection and assessment of indicators is at the same time a preparation for internal or external communication. Milestone III provides a processed document, or a presentation of the organization’s IC. It is adjusted towards a specific (external and/or internal) target group and describes the most important information attractively and in a structured form. Milestone IV works out a full IC statement, which is also suited for monitoring the organization’s development. It integrates correlation analyses and assessments which provide information on how long it will take until measures which have been initiated ultimately lead to business success.

Case study

Case study 6: VR-Bank Südpfalz www.vrbank-suedpfalz.de

Case study background and objectives: The company produced its first IC Statement in 2004. The

first objective was to use the results to improve the internal implementation of the Balanced Scorecard. However, as the internal project group made the first prototype of the report and began to discuss its consequences, it was decided to also publish the results outside the company. The bank decided to communicate the report externally, exactly the way it was presented internally and to include the conclusion that the bank had to improve in the areas of customers, management processes, and competencies. The IC Statement was integrated in the annual report of 2004. In May 2005 the process of making a second IC Statement commenced.

Main motivations to report on IC:



To make the intangibles more tangible;



To measure and control the intangibles;



To show and act as good practice. The Wissensbilanz supports more transparency and an open company culture;



To have a fitness check and to analyse how the merger process affects the different branches and motivation among employees;



To make more efficient use of the customer relations, as well as the relations between employees;



To find out how different parts and decisions of the company have impact on the overall system;



Model used: The bank used the German Wissensbilanz model.

Main activities undertaken to acquire, improve or monitor IC resources:



To make the vision and the strategy more clear to the employees.



To show how different units and activities affect one another in reaching the strategic goals. The report showed in a structured way how the organisation could become a learning organisation.



To better communicate and visualize already decided action points (change management).



To integrate the Wissensbilanz with the balances scorecard.



To use the Wissensbilanz as a check to assess and control operational risks.

Main results achieved: The bank integrated the Wissensbilanz with its Balanced Scorecard. Results

were used to structure a new Customers Relation Centre and to integrate the services of this Centre with the Company Client Department, following the principle of ‘one bank-one face’. The results and insights were also integrated in a task force implementing a new performance based salary system. Other topics currently under discussion are:



How can the Wissensbilanz be integrated in the credit decision process?



Shall we start a competition in the region for customers to make Wissensbilanzen together with the bank and so to acquire new customers with a good organisational fit?



Shall we collaborate with the local government (Landesregierung) to see if the Wissensbilanz could add relevant information to support the Basel II rating?

The results from the first Wissensbilanz are now being completed with the second one. Management appraisal systems are being based on these results and indicators are being used, also for external communication purposes. As in 2004, the bank intends to integrate the Wissensbilanz in its 2005 Annual Report, thereby committing itself to following up the action points decided in the first Wissensbilanz. It is unique to have a bank using the Wissensbilanz not only for internal purposes but also for its core business activities of risk evaluation and credit processes.

Key messages:

This case shows that the reporting of IC can be combined with a Balanced Scorecard to create a very useful tool for banks, both to improve their internal management and external reporting. By implementing it themselves, VR-Bank Südpfalz has discovered the benefits of IC Reporting and is now considering integrating it in the credit rating process.