Success - it's all in the mind, say Britain's bosses

Citation

(1998), "Success - it's all in the mind, say Britain's bosses", European Business Review, Vol. 98 No. 3. https://doi.org/10.1108/ebr.1998.05498cab.003

Success - it's all in the mind, say Britain's bosses

Success ­ it's all in the mind, say Britain's bosses

What your employees know is a vital source of company success, but finding the right way to capture and manage that knowledge is the real key to competitiveness, say Britain's bosses.

In a new report, Spinning Straw into Gold, by the Institute of Management (IM) and Informix Software, over three-quarters of executives in the UK say that by managing intellectual capital effectively, organisations have a better chance of survival and of gaining competitive advantage. "This is not just another management fad. The knowledge held within an organisation can be a company's most valuable asset, especially in today's global business environment where corporate knowledge can reside in many different business locations", said Roger Young, IM director general.

Executives report that by using the intellectual capital within their organisations they avoid expensive mistakes and develop better customer service (85 per cent), capitalise on unique skills and know-how (83 per cent) and respond more rapidly to business change (82 per cent).

But, while managers recognise the value of intellectual capital, many find it difficult to pinpoint and measure. Only 13 per cent of organisations have a nominated person responsible for knowledge management and over half (51 per cent) of organisations do not measure it in any way.

Business leaders believe the most important sources of intellectual capital are individual employee know-how (69 per cent), technical expertise (53 per cent) and relationships with customers (47 per cent). Senior managers are seen as most important to creating and using knowledge, whereas support staff and external contractors are often undervalued, despite being employed in key areas such as customer care, IT and project management.

The way organisations use IT is pivotal to harnessing knowledge and transforming it into a usable form. One in four managers rate databases as an important source of intellectual capital. This doubles to 50 per cent for those in financial institutions which appear to be more aware of the importance of IT in managing knowledge.

"Although IT plays a critical role in the way that information and knowledge is captured in an organisation, it is not solely a function of the IT department. Those that implement a knowledge management system must be able to blend analytical IT skills with broader management skills. The art is to identify the culture of the organisation, capture the knowledge held within it and apply the technology to transform the knowledge into a usable form to bring competitive advantage," said Alan Kerr, vice-president, UK, Middle East and Africa, Informix Software.

Two-thirds of managers who rate their organisations as above-average users of IS say information is shared freely and encouraged from the bottom up. Only 25 per cent of managers say this is the case in organisations which are below-average users of IS.

An organisation's management style affects specific areas of business performance which are key to managing intellectual capital effectively. Managers who work in participative and empowered environments report greater flexibility (51 per cent), innovation (50 per cent) and team working (45 per cent), following organisational change. One-third of those who work in more traditional command/control-style organisations say performance in these areas has deteriorated.

Executives believe strategies such as restructuring and delayering are eroding corporate memory. They say the main barriers to managing intellectual capital are a failure to capture existing knowledge systematically (78 per cent), a culture of short-termism (66 per cent) and lack of investment in staff training and development (50 per cent). The report recommends board-level commitment combined with input from employees at all levels throughout the organisation, as vital to developing and managing intellectual capital. The findings also indicate that those organisations with open and participative management styles are more likely to encourage the free flow of information leading to better knowledge management.