A knowledge balance sheet is an instrument for structured identification, representation and development of intellectual capital

Intellectual capital

The value of an enterprise is made of physical assets, various financial assets and, finally, intangible assets, i.e., intellectual capital . The term intellectual capital conventionally refers to the difference in value between tangible assets and market value. ....

. It shows the connections between organizational goals, business processes, intellectual capital and business success. It is able to reveal the mutual influence between the factors of success and the most efficient investment levers, specifies the strategic direction for knowledge management processes and checks the degree to which they have been implemented.

Two views

• View from the outside as a reporting instrument: stakeholders obtain reliable data on the intangible assets and on the future-fitness of the enterprise.
• View from the inside as a management instrument: the measurement and assessment of the intellectual capital can be systematically controlled, developed and reflected upon.

Direct benefit

• uncovering weak spots and potentials for maximizing business success
• transparency
• cost/benefit ratio of knowledge development
• communication with shareholders
• organizational development
• capital acquisition
• cooperation
• customer orientation
• deeper understanding of interrelationships
• synergies with existing mgmt. systems (QM, risk mgmt.)

Indirect benefit

• gathering and definition of intellectual capital allows clearer communication
• employees understand their company better
• process optimization and innovation
• increased attractiveness for employees and cooperation partners

Prerequisites

• Management systems should already be utilized
• Management (openness, willingness to talk/engage dialog, recognition)
• openness for employees
• anxiety-free corporate culture
• documented and communicated business strategy

Criticism

• Lack of generally recognized system
• generally not verified by auditors
• connection between knowledge balance sheet and future revenue opportunities difficult to verify
• may exacerbate the asymmetry of knowledge between management and outside stakeholders
• possible misuse as a marketing instrument