Intellectual Capital: If You Don’t
Appreciate It, You Will Depreciate It
By David Lee
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
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
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
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.
An earlier version of this article was
reprinted from Executive Excellence, September, 1998
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by David Lee
About the
Author: David Lee is a consultant, speaker, and executive coach.
The founder of HumanNature@Work, he has worked with
organizations and presented at conferences throughout
For More Information:
David Lee, President
HumanNature@Work
P.O. Box 430
Bar Mills, Maine 04004
Tel: 207-929-3344
E-mail: info@HumanNatureAtWork.com