Tuesday, March 29, 2005
Prepping for a conversation with Tom Stewart this morning, I spent a couple of hours going over my notes on Intellectual Capital and The Wealth of Knowledge. Both books are brilliant in describing the shift to the knowledge economy. These should be required reading for all executives. A few of the quotes I loved:Intellectual capital is intellectual material--knowledge, information, intellectual property, experience--that can be put to use to create wealth. It is collective brainpower.
What's new? Simply this: Because knowledge has become the single most important factor of production, managing intellectual assets has become the single most important task of business.
"You cannot manage what you cannot measure" is one of the oldest cliches in management, and it's either false of meaningless. It's false in that companies have always managed things--people, morale, strategy, etc.--that are essentially unmeasured. It's meaningless in the sense that everything in business--including peole, morale, strategy, etc.--eventually shows up in someone's ledger of costs or revenues.
Stan Davis: Business people frequently confuse an organization with a business. Organizaitons are defined from the inside out: They are described bywho reports to whom, by departments and processes and matrices and perks. A business, on the other hand, is defined from the outside in, by markets, suppliers, customers, and competitors.
Now skill is mental, not manual. Knowledge workers are measured not by the tasks they perform but by the results they achieve.
The worker used to be one more interchangeable part. The man worked for the machine. Now the machine works for the man. Organizational intelligence--smart people working in smart ways--has moved from a supporting role to a starring one.
Accountants measure the form rather than the substance, "which is like the viticulturist paying more attention to the bottle than to the wine."
The human resources director may know how much the company spends on formal training, but doesn't know how much learning resulted from it.
BETA | jay 3/29/2005 01:13:00 AM| WRITE JAY |
2 Comments:
Today I received this lengthy comment from Henry Jones, whose email addresss was bogus.
I have to disagree with the article (pasted below) from your blog:
"You cannot manage what you cannot measure" is one of the oldest clichés in management, and it's either false of meaningless. It's false in that companies have always managed things--people, morale, strategy, etc.--that are essentially unmeasured. It's meaningless in the sense that everything in business--including people, morale, strategy, etc.--eventually shows up in someone's ledger of costs or revenues."
While I am certain there is some management issues that are not measured, two of the three examples given above are very poor example. The five basic functions of management are planning, organization, staffing, directing, and controlling. In effect, a manager manages when he or she applies resources to each function successfully and achieves the intended objective. Resources are people and material. If a manager has people who are unproductive and he or she fails to replace them with productive employees or make them become productive, then he or she is not managing effectively, and consequently, will not achieve the intended objective. I will concede that depending on the manager, morale is not managed in most organizations. It is however, a leadership responsibility; but it can also be managed by conducting a climate assessments employee and then applying the resources to improve morale in the areas that scored low.
Further, I vehemently disagree that strategy is not managed. Strategy is most certainly managed through the control and directing functions of management. Controls measure the actual results to the desired results. Managers then make adjustments accordingly. Strategy is a desired approach to achieve a desired objective? And the only way to achieve an objective is to move towards it. The only way a company knows well it is doing is to compare (measure) itself and or its strategy to the other companies in its industry AND the demand of a given market. Companies that fail to manage their strategy fail to succeed in a market or an even worse, it fails to succeed in an industry. One classic example includes the famous Swiss watch company that failed to pursue the quartz watch market, because it made "Swiss" watches. Its failure to manage its strategy resulted in it loosing nearly 80% of its market share. Another example is IBM, first the company didn't strongly pursue the PC market until it had already lost sizable market share then to make it worse, the company let Bill Gates leave the company to patent the rights to MS DOS/Windows. It is ironic that PCs are "IBM" compatible, although the company is not the market leader in the PC industry. My take on management is this, by measuring the aspects of management that fall within one of the functions of management (e.g., the productiveness or effiency of its employees; or the effectiveness of its strategy), that is the only way to substiate a company knows that it is going forward and is the only way to make sure the company is not going backwards. While there aspects of management that is not measured, the important ones that affect the bottom line of cost or revenues are most effectively managed when they are measured.
While managing intellectual property will take a different mindset from a management's perspective, it too however, must be measured. For example, for a company that maintains an intranet library, it would be advantageous for it to measure how often and which documents are accessed. The advantage could be from linking the people who accessed those documents to the documents; thereby giving its employees access to a resource with tacit knowledge as well as a resource with explicit knowledge. In addition, a company could lose this "intellectual property" if it is not aware where the intellucual property resides. Consequently this issue can also be tied to strategy, i.e., a company knowing its core competencies. I guess I need to buy Mr. Stewart's book to gain more insight to his philosophy on these subjects.
My reply:
Henry,
I'm not so sure you and Tom Stewart are in disagreement at all. He doesn't say people, morale, and strategy are not managed. He simply decries the lack of measurement. You say "Controls measure the actual results to the desired results." Not very well. That's the problem. We need better yardsticks for measuring performance, a system that values investing in people.
jay
Bill, what proportion of claims adjusters' learning do you suppose is formal? Wasn't some of the seminal work that uncovered the 80/20 informal/formal ratio done by Institute for Research on Learning with insurance companies?
Your distinction between knowledge makers and knowledge consumers is important, but it doesn't translate directly to the need for formal learning. Or am I missing something?
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