Keith Goosen, management consultant at EOH Consulting, says that a company’s profit is created from the work it does. Some of that work is on plant and equipment, some is created from raw materials, the rest is knowledge in the heads of your staff and knowledge in repositories, like books, computers, etc.
The value of knowledge is the amount of money we have left over after we have taken out materials, operating expenses, and time wasted on non-productive tasks. Most of the money a company makes is because it knows how to make money. Knowledge earnings at the end of an accounting cycle become knowledge equity.
Theoretically, dividing this value by the total equity of the company should tell you the value of a unit of knowledge. The problem is that there are a number of reasons why it is difficult determine what a unit of knowledge looks like.
* In peoples' heads.
* In the way we do things so documenting work processes will help (the basis behind ISO 9000 certification and TQM benefits).
* In previously made good decisions.
* In relationships.
* Somewhat unique to the brain using the knowledge.
The problem with trying to affix a value to knowledge units is:
* There is no gold standard to help determine value.
* Knowledge can be easily duplicated, but a second piece of the same knowledge has little value.
* Knowledge can be easily duplicated, but a second piece of the same knowledge has little value. (See, I told you).
* Knowledge can lose value rapidly or even convert to a large liability in a short period of time.
* Knowledge is not easily convertible to other currencies (language barriers).
You should try to convert knowledge to a fixed long-term asset (a system) rather than a variable short-term asset (a person). Here are some guidelines to achieve this:
* Develop appropriate and secure places to put and store your information and knowledge.
* Knowledge needs to be written down to convert current asset knowledge to fixed asset knowledge. Coaching systems and practices can help extract tacit knowledge.
* Collaboration systems gather much of the context around documentation, which helps re-create decisions.
* Document as many kinds of knowledge as you can through process mapping or ISO certification. Make your knowledge assets more efficient.
* Reduce operating expenses by applying business process reengineering (BPR) and cutting out time wasting activities.
* Apply workflow technologies where an assembly line mentality will be appropriate.
* Get the assets to where they are needed most through good network design, and accessible infrastructure.
* Realise that your staff is your means of production in an information age.
* Protect and keep them.
* Understand the role of HR and IT. It is interesting that HR (current assets) and IT (fixed assets) seldom seem to work together to solve company problems.