Knowledge in enterprise: the role and performance measurement

• Author: Marie Mikusova
• Position: Technical University Ostrava, Economics Faculty, Dep. of Management, Sokolska tr. 33, Ostrava, Czech Republic
• Pages: 283-291

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1. Introduction

A newly arising competitive environment exerts pressure on the re-evaluation of company reporting character and on making changes in the systems of performance measurement. Performance and its monitoring and maintaining have become not only the instrument of competitiveness but also the precondition of a company existence.

IMA (Institute of Management Accountants) has surveyed opinions of its one thousand and half members on the systems of performance measurement (Denton, 2002).

In the IMA survey from 2001 it is said that 80 % of its respondents announced the implementation of changes in the systems of performance measurement during the last three years. The changes varied from radical (rejecting the current systems) to incremental ones (delivering or eliminating of measurement). 33 % of respondents mentioned a change as the main renovation of the system of measurement. 31 % of those respondents said that their system of measurement was less than adequate or even insufficient for supporting company's goals and initiatives. Only 15 % of them considered the systems of performance measurement as very good or excellent for a communication strategy. The users evaluated the balanced scorecards much better.

Key challenges for performance measurement seem to be intangible assets including also knowledge. In the IMA survey 60 % of the respondents thought the innovation to be part of company's statement about its mission. Yet, more than 50 % of them indicated the system of measurement as insufficient or less than adequate in that area. In total, less than 10 % of the respondents considered the indices of performance for intangible indices including assessment of knowledge as very good or excellent. Also reports from companies dealing with performance evaluation - the Institute of Authorized Accountants in England and Wales (ICAEW) (www.icaew.co.uk), the Centre for Tomorrow's Company (CTC) and the Centre for Performance Measurement (www.tomorrowscompany) show the support to non-financial measurement with the focus on knowledge. Also the research done by PricewaterhouseCoopers called ValueReporting (www.valuereporting.com) came to the same conclusion. There is no doubt that the above-

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mentioned reports would deserve more attention. Because of the contribution's extent, however, only the above-mentioned conclusions have been presented. More detailed information can be found on the indicated web pages.

2. A new entrepreneurial environment increases the role of knowledge in business

A new competitive environment is characterized by the shift in the structure of company's sources. The following picture explains a growing importance of intangible property and changes in sources.

[ VEA LA FIGURA EN EL PDF ADJUNTO ]

Prahalad (1998) aptly describes a newly arising competitive environment. He identifies eight discontinuities accompanying the new economics: environment-friendly behaviour, putting a limit on intermediation, standards, distorted borders among branches, convergence, variations in demand, deregulation and privatisation, globalisation. Those discontinuities will influence companies in a different way but generally all of them will have to include globalisation impacts into their decision-making, they will be forced to form alliances, even though sometimes temporal only, they will have to accept speed as the element accompanying all processes, and they will be forced to re-evaluate their "entrepreneurial" model so that it would comply with the requirements of a new environment. Environment where enterprises leave existing role in society (profit only) to new wider view of corporation's functioning considering triple - bottom - line (Krymlakova, 2007). Primarily, they will have to lay a considerable emphasis on acquiring and the right use of knowledge.

The above-mentioned discontinuities will not be further dealt with because of the extent of the paper.

At managing discontinuities the managers will be confronted with new complex challenges. A company in the new environment has to apply principles of knowledge management to be able to cope with new competences. Managing competences on the new global market is a complex task having at least five various elements (Prahalad, 1998):

1. Obtaining the access to new knowledge and its acquiring

2. Integration of many various fields of knowledge

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3. Cooperation within various cultures overcoming considerable distances

4. Learning of how to quit inappropriate things - to overcome a routine

5. Coordinated applying of competences within the framework of many business entities

   Creation of new competences, their selective using and the protection of the current competences act as a big challenge as far as knowledge management is concerned both from the view of desired intellectual abilities and workforce's knowledge, and from the view of organisation. Minimally they include the following requirements...