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Intellectual capital

by Simon Longstaff

It appears that the management community has just 'discovered' the idea of ‘intellectual capital’. Along with other major 'discoveries' of this kind, this latest seems to have generated a wave of breathless wonder. As such, it is like the sense of awe felt by people who rename their nose a 'proboscis' and suddenly discover that it is part of their face!

Can it really be the case that it has taken until the closing moments of the current millennium for people to realise the critical importance of knowledge in securing the welfare of corporations and communities? Surely the history of humankind is brimful of examples demonstrating this truism. What we have is an old idea dressed up in seductive but potentially disturbing new clothes. Its current garb is susceptible to at least two fairly obvious interpretations.

The first is that it is a new label that achieves the distinction of sounding economically respectable by disguising the fact that fellow human beings (or at least that part of them ranging from the neck up) are the newly 'discovered' intangible assets underpinning market value. Alternatively, it may be that (disembodied) knowledge is the thing to be prized. Or it may be that a proper interpretation of the term lies somewhere in between. In any case, a number of issues need to be addressed before accepting this latest addition to the manager's lexicon.

For a start, if people are the source of valuable knowledge, then why not say so in simple and direct language? One response might be to dodge the question by asserting that words don't really matter. Well, they do - not least because they represent the conceptual building blocks from which each of us constructs the world in which we live. As such they are of crucial importance when helping to shape our relationships and guide our actions.

As Dame Leonie Kramer once observed:

It matters what descriptions we give people, because they affect how they feel about themselves and those to whom they answer. I am a person, not a ‘human resource’.

Yet, for all this, people in large organisations seem to struggle when using the 'p'[eople] word.

Perhaps it is precisely because of the power of words that 'people' disappear from the language of organisations. There may be some psychological advantage in pretending that some of the less compassionate things we do are only being visited upon 'human resources' or a stock of ‘intellectual capital’.

Resources usually don't speak back. Most capital can be manipulated without causing us to take a deep breath and think, “It might have been me”. So, it may be that de-personalising labels offer a convenient fiction for directors and managers not wanting to look into the human face of tough decisions that they feel compelled to make.

The alternative interpretation, that ‘intellectual capital’ only refers to the actual knowledge that employees produce or hold, gives rise to a similar difficulty. That is, there may be a temptation to devalue the individuals or groups that hold this information as being little more than a kind of receptacle within which the assets are temporarily stored.

Now, it could be argued that a company that adopts this approach is merely refining an old relationship in which employees exchanged their labour for wages. Knowledge, instead of labour, is the new product for exchange. Likewise, organisations might be said to have earned a right to share in knowledge created using the opportunities and facilities provided by employment. There is obviously some merit in these types of response. However, they miss the underlying point.

The invention of a term like ‘intellectual capital’ might be nothing more than a clever marketing ploy. Then again, it may be meeting a deeper need of managers to be free from the discomfort of having to handle ‘soft’ language that falls outside the ‘hard’ framework of balance sheets and the bottom line. The concern is that this apparent need, to place all relationships in a financial framework, will eventually make us blind to a broader range of goods. For example, what happens when an idea like ‘intellectual capital’ breaks loose of the dominant world of corporations and enters other institutions like schools and universities?

The background to the idea of ‘intellectual capital’ suggests that the value of knowledge (or the people who produce it) is to be found only in the market place. Import this type of language into the university and there is a risk that nothing will be studied for its own sake. There is, already, a rising temptation to cull anything that is not 'relevant' (or at least bankable). In these conditions a good idea can be stillborn for want of a price.

Then again, it might be tempting to think that a new regard for ‘intellectual capital’ will improve the standing of those who teach and research. After all, we pay a small fortune to the wunderkind trading in financial markets while quibbling over a salary claim by teachers and researchers wanting to claw back the cost of inflation. Yet these are the people who can make or break a society that depends on ‘intellectual capital’ for its prosperity.

As with universities, so schools must be allowed to be about more than generating useful outcomes and intangible assets. Surely, they are also about the wonder of exploring new horizons; the creative nonsense of childhood play; the challenge of finding out what it means to be a person; and so much more.

A final rejoinder by the intellectual capitalists might be that there is nothing to fear, that their novel idea will be contained within the bounds of the commercial environment. But that response only serves to reinforce the underlying error. There is no discreet commercial sector. Business is not a ghetto surrounded by civil society. People in business are an integral part of our community. As such, the things they do and the things they say help to shape our vision of who we are and what we stand for.

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