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David
Lee
Consultant
Speaker
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For
More Information:
David Lee, Principal
HumanNature@Work
P.O. Box 430
Bar Mills, Maine 04004
Tel: 207-929-3344
E-mail: info@HumanNatureAtWork.com |
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AR
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Intellectual
Capital: If You Don’t Appreciate It, You
Will Depreciate It |
| By
David Lee |
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| An
earlier version of this article was reprinted
from Executive Excellence, September, 1998 |
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You can’t pick up a business
magazine or journal these days without seeing
an article or editorial about Intellectual
Capital, the Knowledge Economy, or Knowledge
Management. Thought leaders including Warren
Bennis, Peter Drucker, Peter Senge, and Charles
Handy repeatedly remind us that an organization’s
intellectual assets are its most important
source of competitive advantage in today’s
marketplace.
Yet, as most of us have experienced in our
work life and as customers, many organizations
don’t seem to grasp this fact. Instead
of appreciating this critical asset, in both
the intellectual and fiduciary sense; they
squander it. They don’t ask for employee
input or they ask for input and never use it.
They tell front-line people how to do their
jobs, rather than asking those closest to the
process for their suggestions. They tie potential
innovator’s hands with red tape and politics.
In such an environment, a wealth of knowledge
and wisdom go untapped; leaving the organization
with a frozen asset that cannot be utilized
to compete in the marketplace. Not only do
many organizations leave great reserves of
Intellectual Capital dormant, they literally
depreciate this asset by creating an environment
that leads to dumbed down thinking.
Because of this, before an organization decides
their ability to compete in a Knowledge Economy
requires investing thousands or even millions
of dollars in Knowledge Management technology,
they need to first examine the people side
of the equation. They must ask “Have
we created an environment that encourages intelligent,
innovative thinking, and the willingness to
share such thinking with others?”
Without a satisfactory answer to this question
or a strategy for creating a satisfactory answer,
no amount of state-of-the-art technology will
help an organization compete in today’s
Knowledge Economy. Thus, understanding what
psychological and organizational factors influence
the appreciation and leveraging of intellectual
capital should be the first task of any organization
hoping to compete in the Knowledge Economy.
In this article, we will explore what “smart
companies” do to appreciate and leverage
this most important asset. This is not meant
as an exhaustive list, but as a selection of “highlights.”
Eleven Characteristics of Smart Companies
They Communicate
a Compelling Big Picture -
Employees need to know what the goal is, how
the game is played, and how to contribute.
Without this essential information, employees
lack the contextual background necessary for
useful contributions. Knowing the big picture
intellectually isn’t enough, though.
Employee intelligence is truly unleashed when
the big picture is understood and valued emotionally.
Then and only then will employees care enough
to spend time thinking about how to improve
products, services, and processes. For instance,
at Tom’s of Maine, a manufacturer of
all-natural personal care products, a package
design idea originating from the front line
resulted in a 200% increase in sales for a
particular product. This kind of front line
solution comes only from employees who know
enough and care enough about the company’s
mission to make valuable contributions.
They Provide The
Informational “Grist” for
the “Idea Mill” - In addition to
communicating a compelling Big Picture, smart
companies also provide employees with the nitty
gritty information they need to both innovate
and make improvements. For instance, the billing
department of one company discovered their
turnaround time was twice the industry average
of four days. Armed with this information alone,
they cut their turnaround time by half in thirty
days. After accomplishing impressive this,
they believed they could improve even more.
Within three months, they cut the turnaround
time from 4 days to 4 hours. Simply having
the information about their performance was
enough to unleash their innovative capacity.
They Give Employees
Control Over Their Jobs - Lack of control leads to learned helplessness,
according to decades of research by Dr. Martin
Seligman and his associates. Learned helplessness
results in people not even bothering to seek
solutions because they “know” no
solution exists. This is obviously not a fertile
breeding ground for innovation or intelligent
problem-solving.
Lack of control and the resulting feeling of
helplessness not only prevents people from
attempting to solve problems, it also affects
their ability to think. Research by Dr. Ellen
Langer of Harvard and Dr. James Pennebaker
of Southern Methodist University shows a fundamental
connection between helplessness and intellectual
functioning. When people feel helpless and
powerless, they become “mindless” -
to use Dr. Langer’s term. When operating
out of a mindless state, people make bad choices,
short-sited decisions, and glaring errors.
When confronted with a problem, people in the
mindless mode think as far “inside the
box” as they can go.
The research on the relationship between powerlessness
and mindlessness, shows that powerlessness
can make smart people dumb. This is one of
the major ways organizations depreciate their
intellectual assets. Without control over their
jobs and the ability to exercise judgement;
employees get caught in a downward spiral of
poorer judgement and decision-making skills
leading to a greater sense of helplessness,
which leads to more mindlessness.
Conversely, smart companies know that intellectual
capacity works like physical capacity - you
either use it or lose it. Thus, they give employees
plenty of opportunities to use judgement, make
decisions, and exercise control over their
work life. By doing this, they appreciate and
leverage the “thought power” of
their workforce.
They Provide an Environment
Which Fosters Trust - Intellectual capital appreciates most rapidly
if shared. It also can only be leveraged when
it is shared. Yet, what happens in organizations
with low trust, organizations where employees
get a clear message that they are expendable?
Nobody is about to give up their bargaining
chips - the special knowledge and know-how
that might help them keep their job.
Tom Koulopolous of Delphi Consulting, an authority
in the knowledge management field, puts it
this way: "Forget the over-used adage
of 'knowledge is power.' In many organizations,
knowledge is security. If I work in an organization
where I feel expendable, where I might be the
next to go, you better believe I will hoard
my knowledge. If I give it away, I lose my
value." Thus, in a fear-based environment,
huge stores of critical knowledge lie dormant,
only used occasionally by the sole owner of
that knowledge. And where does this important
knowledge base go when its sole owner leaves
the organization? To the competition. This
is one of the major problems of downsizing
- it often leads to dumbsizing.
They Reward Managers
For Coaching, Not For Having All the Answers - Smart companies understand
that thinking outside the box requires emotional
safety and the freedom to do so. Overtly or
covertly punishing employees for thinking on
their own or rewarding them for running to
the boss for answers dumbs down employees according
to Harvard University’s Dr. Ellen Langer.
Her research revealed that employees were most
likely to generate useful solutions when working
for a boss who had a positive expectation that
employees would find a solution and who didn’t
need to have the right answer all the time.
In short, “Know-It-All” bosses
tended to cultivate “Know Nothing” subordinates.
Thus, when managers feel comfortable not knowing
all the answers and can coach employees to
generate their own solutions, intellectual
capital appreciates. To reinforce such knowledge-generating
behaviors by supervisors, smart companies include
these behaviors in their managers’ performance
goals and compensation structure.
They Make Capturing
and Sharing Knowledge Fun - The Forum Corporation, a global leader in
workplace learning headquartered in Boston,
demonstrates the profitability of this practice.
Since their competitive advantage clearly depends
upon the combined intelligence and knowledge
of its consultants; their success depends upon
their ability to cultivate, capture, and disseminate
knowledge throughout their organization. They've
learned to do this in part through making the
process fun.
For instance, Forum held a “World Cup
Soccer” contest of best practice ideas,
for all of their consultants worldwide which
yielded over 500 quality contributions to the
knowledge base, according to Judith Green,
who heads up Forum's Knowledge Management program.
Forum consultants created teams with names
like El Teamyo (this took place at the height
of El Nino), the Beaudacious Berwynites, and
the Toronto ChillyWillies. These teams then
competed for prizes to see who could capture
most useful best practices and client work.
For instance, Forum recently held a contest
called World Cup Soccer for all of their consultants
which yielded over 500 pieces of useful process
and outcome information, according to Judy
Green, who heads up Forum's knowledge management
program. Forum consultants most useful "what
worked and why" ideas.
In the early stages of their efforts to encourage
idea and best practices sharing, they ran a
Mind Meld Month contest that focused on the
quantity of ideas shared. Recognizing that
the quality of ideas shared is more important
than mere quantity, they followed up with Mind
Meld Month - The Next Generation in which ideas
where rated according to their quality.
Does this pay off? One simple metric gives
a hint of just how valuable this effort has
been. In the past, when potential clients would
ask a new consultant about Forum's expertise
in a particular area, it would often take several
weeks for that consultant to hunt down the
necessary information, assuming it was available
at all. In that time, the business could, and
often would, go elsewhere. Now, consultants
have this information at their fingertips,
often within a matter of hours - at most a
week.
They Reward Knowledge
Sharing And Knowledge Using - The old adage “what gets rewarded
gets repeated” holds true for knowledge
sharing. This is especially critical for organizations
to address if they currently have a low trust,
knowledge hoarding culture. Smart companies
build in explicit rewards for both the quality
and quantity of information sharing, and for
using shared information. Achieving balance
among these three activities is essential.
If only quantity and not quality is measured
and rewarded, potential users of the knowledge
base will need to sift through too much chaff
to find the useful ideas, diminishing the perceived
value of knowledge sharing. If employees are
rewarded only for disseminating information
and not using what others have shared, they
are likely to reinvent the wheel; thus, undermining
one of the primary reasons for knowledge sharing.
One company created a fun way of rewarding
employee use of shared knowledge by instituting
an award called The Thief of the Month. This
award was given to the employee who demonstrated
the best use of someone else’s idea.
They Communicate
and Celebrate The Joy of Knowledge Sharing - Smart companies constantly share
success stories of how other employees shared
knowledge that benefitted others, and were
rewarded for doing so. They also communicate
examples of how employees used knowledge captured
by their colleagues to do a better job or to
make their job easier.
Customer service representatives at Hanna Anderson,
a mail order company of upscale children’s
clothing, see the results of their knowledge
sharing in the following season’s catalog.
They frequently make suggestions to the product
development department based on their interactions
with customers. When these changes are incorporated
into the next version of a product, customer
service reps see how vitally important their
input is to the company’s success. Because
they see their input is valued, they act in
ways that make them far more valuable to their
company than the typical customer service representative
who is perceived as only an order taker, and
not a source of critical market and customer
information.
They Focus On People,
Not On Technology - With
the amazing technological offerings available
today, it's easy to get caught up in the "gee
whiz" aspect of Knowledge Management.
However, simple e-mail, database, or even word
processing documents can be powerful knowledge
sharing vehicles. This was critical in Forum's
success. Notes Judith Green "When we first
implemented our knowledge sharing process,
we focused on behavior and culture first, using
a low tech solution initially.” Rather
than leap to a state-of-the-art software program,
they created searchable Wordperfect documents. “Once
the process and behavior was embedded in the
organization,” states Ms. Green, “we
then moved to a more powerful, sophisticated,
robust solution - an intranet."
Looking back, Ms. Green believes this choice
was a significant factor in employee buy-in
and use of the system. By eliminating a steep
software learning curve for employees to struggle
with, they also eliminated a potential hurdle
to employee buy-in. Once employees felt comfortable
with the process of knowledge sharing and experienced
its benefits, Forum transitioned into the more
sophisticated corporate intranet technology.
They Build In Reflection
and Capture Time -
The ability to reflect upon and codify experience
is central to knowledge creation. Without reflection,
we don’t learn from experience or generate
new models and strategies. Thus, smart companies
realize that expecting staff to rush from project
to project and rewarding this activity is counterproductive
in a Knowledge Economy. At Forum, reflection
and codification time, labeled Capture, is
an explicit step in the business process system
now in place. Instead of employees hoping to
someday have the time to figure out what worked
and why, and then maybe tell others about it;
this is now clearly identified as a key part
of their job.
They Know How to
Create a Positive Emotional Climate - Although this includes the previously
mentioned practices of creating an environment
that fosters trust and makes knowledge sharing
fun; it goes far beyond these two actions.
Smart companies understand intuitively what
psychological research clearly demonstrates
- emotions and intellect are inextricably interwoven.
Emotions focus attention, shape thought, and
influence cognitive functioning.
Emotions focus our attention by influencing
what we think about and notice. Employees who
feel inspired, proud, and valued think about
how to make their organization better and notice
opportunities to do so. Employees who feel
afraid, resentful, and depressed do not. Emotions
shape our thought by coloring our perceptions
and influencing our interpretations. Employees
who feel inspired, proud, and valued interpret
and respond to supervisory feedback, customer
responses, and market changes in a very different
way than employees who feel afraid, resentful,
and depressed. Emotions also very dramatically
affect cognitive functioning.
Employees who feel inspired, proud, and valued
have full use of their intellectual powers.
They are able to think creatively, flexibly,
and analytically. Employees who feel afraid,
resentful, and depressed lose much of their
intellectual capacity. This process, called “downshifting” by
the educator Dr. Leslie Hart; results in rigid,
primitive, unoriginal thinking. The downshifted
employee is using only a fraction of his or
her true intellectual capacity, something no
organization can afford in a Knowledge Economy.
Dr. James Pennebaker’s research on how
feeling powerless and helpless affects intellectual
functioning demonstrates that when people are
in emotional pain and feel powerless to change
their situation, they often engage in what
he calls “low-level thinking.” Their
thinking becomes simplistic and superficial
in an attempt to avoid the painful reality
of their situation. This connection between
negative emotional states and intellectual
functioning is critical for organizations to
understand if they want to appreciate, rather
than depreciate, their Intellectual Capital.
Smart companies understand this relationship
between thought and emotion and the reverse
effect positive emotion has on cognitive functioning.
Research shows that when people feel intellectually
challenged, but emotionally safe, they are
far more creative and innovative. They also
have greater access to their rational, analytical
capabilities, which are lost when one is downshifted
due to emotional pain. Thus, addressing employee
emotions isn’t a “warm, fuzzy” thing
to do if one had the time; but an absolutely
critical component to a serious Intellectual
Asset Appreciation program.
Conclusion
Successfully competing in the Knowledge Economy
requires understanding what factors influence
intellectual functioning and what organizational
practices cultivate intellectual capital. When
we look at both the scientific research on
intellectual functioning and the practices
of Smart Companies, we see some common themes
about how to appreciate and leverage this critical
source of competitive advantage. |
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About the Author: David Lee is an internationally recognized authority on organizational and managerial practices that optimize employee performance. He is the author of Managing Employee Stress and Safety, as well as dozens of articles on employee and organizational performance that have been published in trade journals and books in North America, Asia, Europe, and Australia. For information on his programs and service, click here.
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