How do we capture all the activities that have the potential to generate wealth within organizations? Most remain hidden as they lie within out knowledge-based capital. So how can we capture and report on ALL our assets, both the tangible and intangibles? Are we being realistic?. Are we chasing after measurements, sometimes in a purists sense?
What do we loss in not becoming part of a balance sheet and becoming part of the strategic statement.
Knowledge-based capital today is more important to understand in its make up than often the reported financial numbers. One generates the other and investors need to see what goes into an organizations knowledge capital to provide them with continued confidence or not.
Recently the OECD provided an extensive report on “Supporting Investment in Knowledge Capital, Growth and Innovation” This report ‘points’ towards one area I totally believe needs resolving, capturing knowledge and where it resides and how it works. Then we can begin to place increased focus upon improving the capabilities and capacities we all need for innovation to do its necessary work, that of regaining our growth and vitality in many markets. The problem is we often do not know which are the most valuable or critical to focus upon.
Also if we can capture this understanding well, the recognition, once and for all, that people and what they do is vital and often completely undervalued. The recognition of the importance of our intellectual capital we might begin to create more of the environments necessary to nourish it. To allow this ‘creating’ to take place more effectively than today and value it for what it truly provides.
The present impasse in grappling with this knowledge generating side within our business organizations has been a lack of regulatory requirement to disclose that much around any knowledge generating activity for fear of ‘revealing’ the competitive advantages. What is discussed is only what management chose to provide for giving a ‘certain gloss’ to their reporting or unyielding probing by interested parties. The IA community also seems determined not to put on a united, common front so the value with the multiple messages gets lost, ignored or simply don't gain identification with the very people who would want to understand this and adopt it for gaining a greater understanding of all assets contributing to their organization
Certain countries, especially in Northern Europe have been able to make far more headway on getting intellectual capital statements recognized and part of a annual reporting but these are still not easy to align and compare. Knowledge-based capital is far too important not to understand today. Yet we avoid embracing the idea, we prefer to reject this type of asset and capital reporting with cries of “too difficult”
The movement today is towards narrative formats
How can we move forward? The suggestion is narrative reporting. Generally speaking, narrative disclosure can take several forms: companies can publish an Intellectual Capital Statement or include a description of their intangible assets in the Management Discussion and Analysis (MD&A) section or the report on environmental, social and corporate governance (ESG) and sustainability.
What is recognized is that narrative reporting need not be purely qualitative. It can include some form of valuation. There is on-going argument this might be based on KPI’s tailored to an industry but realistically very few report on recognized KPI’s, comparable with others in their industry or field. Also how would you tackle differences in national approaches. Standardising our reporting has never been easy and when you contemplate ‘capturing’ more intangible aspects, it gets significantly harder. Yet we must try.
Let me offer one way, through narrative reporting in a further blog just to throw this open in this community?
Comments