Professional Documents
Culture Documents
Introduction
Knowledge is recognised as a foundation of sustainable quality and compe-
titive advantage in the current era, when business is both complex and
dynamic (Pacharapha & Ractham, 2012). The ability of organisations to
create value is no longer solely dependent on their nancial and physical
capital, but rather on their capacity to acquire, create and utilise knowledge
(Carmeli & Tishler, 2004). Given that knowledge is the main value driver in
todays businesses, the focus on the management of knowledge as a strategic
resource has given rise to the Knowledge Management (KM) eld, which has
grown exponentially over the last decade (Serenko et al, 2010). However,
reecting the truth of the saying if you cant measure it, you cant manage
it, the measurement of an organisations knowledge resources has emerged
as a key area of interest for both researchers and practitioners in the KM
domain (Skyrme, 2003).
Despite being one of the most challenging activities in KM (Chen et al,
2009), the measurement of knowledge is needed to achieve two organisa-
tional objectives: internal monitoring and external presentation. From an
internal perspective, managers may not know the full extent of the knowl-
edge that exists within their own organisations, as the CEO of Hewlett-Packard
Received: 6 March 2013 once famously said: If only HP knew what HP knows, we would be
Revised: 25 June 2013 three times as protable (Davenport & Prusak, 2000). In such cases, knowl-
Accepted: 27 June 2013 edge measurement is essential to reveal hidden knowledge assets, leading
The MinK framework Mohamed A.F. Ragab and Amr Arisha 179
to more effective KM (Edvinsson & Malone, 1997). Knowl- process of achieving this objective, a succinct critical
edge measurement can also be crucial to the implemen- review of the different existing methods used to measure
tation of KM initiatives, as it allows the effects of KM knowledge in the KM literature is provided below, along
on organisational knowledge to be evaluated, thus justify- with a discussion of the main frameworks used by each
ing the often substantial costs of KM implementation method. The development of MinK is then described and
(Liebowitz & Suen, 2000; Khalifa et al, 2008). From an the models structure is presented. A pilot study aimed at
external viewpoint, the mounting gap between compa- its preliminary validation is then introduced, followed by
nies book and market values has led to the widespread the studys ndings and some recommendations for future
view that a companys true value must include the value research.
of all its intangible assets (Boda & Szlavik, 2007). From this
perspective, a companys value is seen as the aggregation
of its nancial capital and its intellectual capital (Galbraith, Literature review
1969), which refers to its packaged useful knowledge Initially, the authors aimed to review the KM literature on
(Stewart, 1998). In the traditional conceptualisation where individual knowledge measurement. However, given the
organisational knowledge is envisaged as a series of stocks dearth of research addressing knowledge measurement on
and ows, Intellectual Capital (IC) can be seen as referring the individual level, the literature review had to be
to the stock of knowledge an organisation holds at a extended to encompass organisational models to enable
certain time, while KM is concerned with the ows, that the authors to identify the different approaches researchers
is, with acquisition and sharing of such knowledge (Bontis have applied to measure knowledge (Skyrme, 2005). The
et al, 1999; Al-Laham et al, 2011). KM literature on organisational knowledge measurement
The need to measure knowledge so as both to enhance offers an array of measurement models among which three
its management and to enable the true valuation of main groups can be identied: (1) Financial Methods, (2) IC
companies has led researchers to propose a number of Components Methods, and (3) Performance Methods.
knowledge measurement frameworks. However, the
majority of their models have attempted to measure
knowledge at a company level, while very few efforts have Financial methods
been directed towards measuring the knowledge held by In the rst approach, data from a companys nancial
individual employees, although they are the major source results and records is used to compute IC in nancial
of any organisations knowledge (Kannan & Aulbur, 2004). terms. Table 1 lists the most widely cited models and their
In their classic work two decades ago, Nonaka & Takeuchi respective knowledge valuation methodologies.
(1995) stated, Knowledge is created only by individuals.
An organisation cannot create knowledge on its own,
IC components methods
Organisational knowledge creation should be understood
The second approach divides IC into different compo-
as a process that organisationally amplies the knowledge
nents, each of which is then measured individually
created by individuals. Fahey & Prusak (1998) agreed,
(Luthy, 1998). Most such methods tend to apply at least
pointing out that there is no knowledge without someone
the rst two of the following four steps:
knowing it, and they list seeing knowledge in isolation
from the knowers who own it among their list of Gravest Classication: An organisations IC is broken down into
KM Mistakes. Since knowledge identication is a core KM its components, usually Human Capital (HC) the
activity (Heisig, 2009), the success of an organisations KM combined knowledge of its employees and Structural
efforts will largely depend on its ability to identify the Capital (SC), which refers to [knowledge] left when
individual creators and carriers of knowledge before seek- employees have gone home, including that held within
ing to implement other KM activities such as knowledge the companys supportive infrastructure, business pro-
sharing and utilisation. Identifying knowledge holders will cesses, IT systems and customer relations (Bose, 2004). SC
also contribute to reducing knowledge loss, as it would may be further sub-divided into Organisational Capital
allow managers to take measures to ensure that those who and Customer Capital (Edvinsson, 1997).
hold vital knowledge remain within the organisation by Metric Development: Metrics are selected to measure each
offering them appropriate compensation, longer contracts IC component.
and loyalty programmes. But despite its cardinal impor- Aggregation: IC measures are aggregated into one numer-
tance, the measurement of individual knowledge remains ical gure using such methods as averages, weighted
a comparatively unexplored subdomain of knowledge averages, etc., to produce a single number value that
measurement and KM. reects the companys IC.
This study attempts to address this lack by proposing a Financial Valuation: The nancial value of a companys IC
new framework, referred to as MinK, an acronym for may be computed and presented in monetary terms, or a
Measuring Individual Knowledge. The objective of the MinK correlation may be established between the gure that
framework is to provide managers with a comprehensive represents the IC value and some nancial indicator.
tool to allow them to assess individual knowledge, despite Table 2 summarises the IC Components frameworks most
the complexities surrounding the process. As part of the widely cited in the KM literature.
Tobins Q Measures knowledge as the ratio between a companys market value and its book value. A Q higher than 1 is an
(Tobin, 1969) indicator of the ability to create value by utilising knowledge
Economic Value Added (EVA) Applying 164 adjustments to traditional balance sheets to account for intangibles after which EVA is calculated
(Stewart, 1994) by deducting the cost of capital from operating profit (Weaver, 2001)
Human Resource Accounting Uses three types of models:
(HRA) Cost models Value human capital comprising knowledge as the cost of acquiring human assets
(Hermanson, 1964) Market models Equate knowledge with the cost of buying an individuals services from the market
Income models Use the present value of the revenues an employee is expected to generate while working
for a company as a measure of his/her knowledge (Flamholtz et al, 1993)
Value Added Intellectual Calculates how efficiently financial and intellectual capital are utilised to generate value for the company using
Coefficient (VAIC) financial data
(Pulic, 2000)
Skandia Navigator Human Capital Developed 112 metrics that Combines all financial indicators The overall financial
(Edvinsson & Malone, Structural Capital cover five components of IC into a single monetary value C value of IC is equal to
1997) Customer Capital Converts all the remaining metrics I multiplied by C
Organisational Capital into ratios, and then aggregates
Process Capital them into an efficiency indicator I
IC Rating (Jacobsen et al, Human Capital Evaluates 200 parameters Results are presented using a letter No financial valuation
2005) Management through in-depth interviews grading system ranging from AAA
Employees with internal and external to D in one diagram, but no
stakeholders numerical aggregation is
Organisational Capital
Assesses IC components from conducted
Process
the perspectives of:
Intellectual Properties
Effectiveness
Relational Capital Risk
Network Renewal
Brand
Customers
Business Recipe
181
182 The MinK framework Mohamed A.F. Ragab and Amr Arisha
No financial valuation
Table 3 Individual Knowledge Indicators (IKIs)
or income valuation
described in HRA)
Uses cost, market
Financial Valuation
IKI Description
methods (as
Education An individuals formal academic education
(e.g. B.Sc., M.B.A., Ph.D.)
Training Training courses and internships an individual
has attended during their career
Experience The extent of an individuals professional
experience
IT Literacy An individuals ability to use IT tools
Results are visually represented on a
(software and hardware) in business to
have the flexibility to present their
selected indicators in the manner
No numerical aggregation
Communications individuals internal and external business
evaluate their companys
Evaluation of return on
they provide
Quantitative analysis
Documents auditing
Market research
Metric Development
investment
Interviews
2012).
using:
Human-Centred Assets
2012).
Stakeholder Resources
Human Resources
Human Resources
Structural Resources
Infrastructure Assets
Level of education (r) Professional qualifications (r) Professional years (#) General IT Literacy (r)
Grades (%) Training hours (#) Years in industry (#) (windows, office, internet)
Relevance of education to job (r) Training expense ($) Years in function (#) Specific IT literacy (r)
Internships (n) (e.g., finance) (function-specific software)
Years in the company
Meetings attended per week (#) Processes utilised (#) Contacts (#)
Meetings with managers per week (#) Processes supervised (#) Relevance of contacts to
Meetings with subordinates per week (#) Processes reviewed/audited (#) business (r)
Meetings per week with external Process improvement suggestions (#) No. of social media connections (#)
stakeholders (#) Process improvement suggestions Percentage of external contacts (%)
Communications sent per week (#) implemented (#) Percentage of international contacts (%)
( phone/email/memo/report) Business process quality systems Percentage of VIP contacts (%)
Communications received per week (#) involvement (e.g., ISO) (r) New contacts acquired/month (#)
Contribution to information systems (r) Business contacts retention (r)
Performance Creativity/Innovation
Financial Indicators
The next step was to develop metrics to assess each IKI. across nine countries (Table 5 gives their proles). Respon-
Metrics are measurement units, which may be direct dents were selected from diverse backgrounds so as to
counts, monetary values or percentages when used to examine the generalisability of MinK across different dis-
measure quantitative attributes, or numerical scale-based ciplines, company sizes and countries.
ratings when used to quantify qualitative attributes (Lerro Interviews started by providing background information
et al, 2012). Table 4 shows the proposed metrics for each about knowledge measurement and briey explaining
indicator, along with their corresponding units of mea- MinK. The rst few questions examined respondents
surement (where # is a number, % a percentage, $ a awareness of knowledge management and measurement
monetary value and r a rating). in their own organisations and the KM challenges they
were currently facing. Participants were then asked to
complete an evaluation questionnaire to assess the
Preliminary validation study relevance of the proposed indicators and metrics to
Before proceeding to the second phase of this research, it measuring individual knowledge using a ve-point
was necessary to examine the validity of the proposed Likert scale (Likert, 1932) ranging from 1 (highly irrele-
indicators and metrics as measures of individual knowl- vant) to 5 (highly relevant). The questionnaire was
edge. A preliminary validation study was conducted via then discussed and the managers gave further insights
semi-structured interviews of a sample of 15 senior man- related to their answers, as well as their reections and
agers and directors representing small, medium and large opinions on the suitability and potential of the MinK
corporations from nine different industries and located framework.
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Correction
In the online version originally published 19th August 2013 the second authors name was misspelled. This has been
corrected in this nal version.