Why managing the intangible matters

By Edward Houghton, Research Adviser - Human Capital and Metrics, CIPD @EHoughtoncipd

Being a manger in any organisation today requires what many refer to as a sixth sense of leadership and management; an ability to recognise and capitalise on the abilities and skills of those whom they manage and seek out and maximise opportunities to their full potential.  This is reflected in recent CIPD research investigating leadership; the top personal quality that line managers of all seniorities pointed to which helped them to be effective was the ability to "allow people to play to their strengths".  When we unpack this we find another ability, that is, to understand the knowledge, skills and experience which form this "strength". To do this effectively a manager must have an appreciation of the intangible assets that form their team's human capital.

What at first may appear subtle soon becomes weightier with more consideration. A source of sustainable competitive advantage¹ and inextricably linked to the performance of the organisation² savvy organisations expend serious amounts of resource nurturing knowledge in their business, and perhaps even more importantly, acting to retain it. This knowledge management process is something organisations of all size should consider, and as Oliveira et al illustrate in their 2012 paper from Knowledge Management Implementation: An Evolutionary Process in Organisation, is a challenge which should be approached by all sophistications of organisation. The reason behind the development of such knowledge management protocols in those examined case studies? To prevent knowledge erosion through the withdrawal of personnel, and in some cases to explicitly protect the knowledge commodity. In other words, to retain the competitive advantage of the business.³

What results from the successful implementation of a knowledge management system is the development of a learning organisation. The learning organisation is the embodiment of the market leader, a company that is able to develop products quickly, respond to the needs of customers effectively, and manage the development and use of intellectual capital, processes and systems. When public and private sector organisations in India were compared for the implementation of knowledge management systems, Chawla and Joshi found that the dexterity of the private sector shone through and consistently produced results demonstrating greater ability to transform to the learning organisation. Interestingly their results also point to the need for improvement in all organisations, public and private, indicating that businesses today are very much still learning about how to become the learning organisation.

What the research is telling us then is that it is more and more important for managers and leaders to consider the way they value, nurture and retain knowledge and skills within their business. If they don't, they may quickly find themselves struggling to compete and ultimately survive in today's knowledge based market.

¹ Hooff BVD, Huysman M. 2009. Managing knowledge sharing: emergent and engineering approaches. Information Management 46(1): 1–8.
² Lee J-H, Kim Y-G. 2001. A stage model of organizational knowledge management: a latent content analysis. Expert Systems with Applications 20(4): 299–311.
³ Oliveira M, Caldeira M and M.J.B Romão. 2012. Knowledge Management Implementation: An Evolutionary Process in Organizations. Knowledge and Process Management 19(1): 17-26.

Thank you for your comments. There may be a short delay in this going live on the blog page as we moderate the comments added to our blogs.