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An integrated framework for intellectual capital measurement and knowledge management

implementation in small and medium-sized enterprises
Vicente Rodrguez Montequn, Francisco Ortega Fernndez, Valeriano Alvarez Cabal and Nieves Roque Gutierrez
Journal of Information Science 2006 32: 525
DOI: 10.1177/0165551506067127

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An integrated framework
for intellectual capital
measurement and knowledge
management implementation
in small and medium-sized
enterprises

Vicente Rodrguez Montequn, Francisco Ortega Fernndez, Valeriano Alvarez

Cabal and Nieves Roque Gutierrez
Project Engineering Area, University of Oviedo, Spain

Received 11 October 2005

Revised 14 February 2006

Abstract.
This paper presents a model for measuring intellectual capital (IC) within small and medium-sized enter-
prises (SMEs) in correlation with the key factors for the successful implementation of knowledge manage-
ment (KM). Most of the existing IC measurement models are intended to cover general aspects. The kernel of
these models could be customized/extended to handle more specific aspects, like KM. The focus of this study
is the integration between an IC measurement model and the key factors for successful implementing of KM.
The paper identifies, analyses and compares IC elements that are relevant for SMEs and how they can be
linked with the IC measurement methods for determining if a company is ready for KM. For this purpose, a
general IC measurement model is taken as reference for the study.

Keywords: intellectual capital; knowledge management; SME; management strategy; intangible

assets

Correspondence to: Vicente Rodrguez Montequn, Escuela de Minas, C/Independencia 13, Oviedo, Spain.
E-mail: montequi@api.uniovi.es

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Intellectual capital measurement

1. Introduction

Making the transition to becoming a firm that manages efficiently all aspects of knowledge is not a
trivial step, even less when talking about small and medium-sized enterprises (SMEs). Knowledge
and knowledge management are vital areas for most organizations nowadays, especially those that
are knowledge intensive. Firms should develop the right circumstances to stimulate the develop-
ment of knowledge. Implementing knowledge management means something more than imple-
menting a set of IT tools: it involves changes in the organizational structure, process and culture.
The first step to changing from a traditional company into a knowledge company is to be aware of
the knowledge of the organization, also known as intellectual capital (IC).
According to the European Committee for Standardization (CEN), intangible assets are those assets
that can have great value for an organization, generating competitive advantage in the future, but
which typically have no physical presence and have traditionally not been recognized from a finan-
cial perspective, except when they are sometimes grouped together as goodwill on balance sheets [1].
IC is considered to be a subset of intangible assets. There are several accepted definitions for IC.
Edvinsson [2] states that The IC of a firm is its possession of knowledge, applied experience, organi-
zational technology, customer relationships and professional skill that provides it with a competitive
edge in the market. Wiig [3] defines IC as assets created through intellectual activities ranging from
acquiring new knowledge (learning) and inventions to creating valuable relationships. IC may be used
interchangeably with intangibles, knowledge or knowledge resources [4]. It seems to be accepted that
knowledge is the most important source of competitive advantage and sustained superior organiza-
tional performance [57].
The interest in managing intangible assets is derived from the development of different methods
of measuring IC. Many authors have identified lots of reasons for measuring IC. In general, measur-
ing IC is considered essential to comparing different companies, to estimating their real value or
even to controlling their improvement year-to-year. But according to Mouritsen [8], measurement of
IC is important but not only for descriptive purposes. Modern IC theories are oriented to internal
development rather than just measuring for comparative purposes.
The existing approaches to the measurement of intellectual capital can be classified according to
a double criterion: on one side, organizational level only vs components identified; and on the other
side, non-monetary valuation vs monetary valuation. In accord with this taxonomy, the aim of this
work is focussed on those models classified as components identified and non-monetary-valuation.
These models assume that measures and management of intangibles usually concentrate on intangi-
ble competences, based on a firms strategy. Indicators are derived from identified key success fac-
tors. The most well-known representatives of this category are identified as: the Intangible Asset
Monitor [9], the Balanced Scorecard [10], the Edvinsson and Malone intellectual capital approach [2],
the IC-Index [11], the Performance Prism [12], MERITUM guidelines [13], the Danish guideline [14]
or the Spanish models Intelect [15] and Intellectus [16]. These models provide a baseline of indica-
tors. They are quite general. Most of them originated under the financial perspective and they deal
mainly with general business objectives. According to Andriessen [17], generic methods have been
proposed as a cure for all diseases. The models are intended to perform as an input to reflexivity
through which things can be changed and mobilized. IC reporting is not only useful for external com-
munication such as valuation for shareholders and raising capital. It is also useful for internal devel-
opment. The methodology given by models like the Balance Scorecard is very useful for the
development of more specific topics, like knowledge management (KM). These methods are useful to
monitor company progress in how KM initiatives have impacted upon organizational performance.
In order to do this, new indicators should be considered and included within the models baseline.
This work is focused on KM implementation within SMEs. Knowledge is seen as one of the main
competitive advantages [5]. Especially the resource-based view [18] and knowledge management
approaches [19] suggest that knowledge is a major factor for attaining superior performance. Knowledge
will tend to play a more significant role whenever change, innovation and growth are sought in a com-
petitive and complex field. KM refers to the developing body of methods, tools, techniques and values
through which organizations can acquire, develop, measure, distribute and provide a return on their

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Intellectual capital measurement

intellectual assets [20]. Organizations are implementing KM systems with the assumption that there
will be an increase in organizational effectiveness, efficiency and competitiveness [21].
There are several approaches for KM performance measurement. Mu-Yen Chen and An-Pin Chen
have presented an interesting example of linking between measuring models, integrating the KM process
with the Balance Score Card in four interrelated main research streams [22]. They have developed an
index (KMPI) based on the BlackScholes model [23]. The authors state that the option pricing model
can act as a measurement guideline for KM activities. Nevertheless, option pricing is not applicable
within SMEs. William J. Martin argues for the importance of metrics to the overall process of KM [24].
Although the KM and IC concepts were developed around large enterprises, mainly related to the
financial sector, nowadays efforts are addressed to transfer those concepts among SMEs. The SMEs can
be different from large companies in their stages of development because, when they are successful,
they are normally associated with a clear focus and strong values like independence, flexibility, entre-
preneurship and innovation. In addition they work in close contact with customers and suppliers,
using a personal form of control and having a long-term view of business relations. They suffer from
informal structures, insufficient resources, erratic decision-making, and poor administrative and
accounting procedures [25]. IC reporting is so important to SMEs because it reveals hidden assets
that can have a major impact on the profitability and even the core existence of the company in the
future [26].

2. Work methodology

This paper is a first attempt at systematically identifying some of the factors for the successful
implementation of knowledge management and linking them with a general IC measurement strat-
egy. In order to do this, first a study of the key success factors for KM implementation is done. This
exploratory study is performed reviewing the existing literature.
The second step is to assume a generic IC measurement model, in order to show an example of
integration. After that, based on those key success factors, new indicators have to be identified. For
each indicator, rules for measuring have to be provided, indicating what is considered a low or high
level. This task is performed according to the review of existing literature and considering the per-
sonal experience of the authors within several implementation projects carried out within SMEs.
As a final result, the existing model is extended considering the critical factors for a successful KM
implementation, and linking it with the IC measurement model. The resulting model is suitable for
indicating what has to be done to build a supporting infrastructure and to instil the right culture and
the right set of behaviours within the organization. Finally, the validity of the resulting model has to be
checked with some companies. All these tasks must be done considering the focus target, the SMEs.

3. Key success factors for KM implementation

The aim of this work is to identify and analyse IC elements that are relevant for SMEs and that have
direct impact on business improvement in order to meet KM requirements, linking them with the
indicators provided by an IC measurement model.
Knowledge structures and cultures differ substantially between organizations [27]. Many authors
have discussed this topic. It is commonly accepted that there are three influencing categories: tech-
nology, process and people. Usually companies pay more attention to the technology focus, forget-
ting process and people. Ruggles [28] points out that the success factors people, process and
technology need to be balanced in a 50/25/25 relation. Kavindra Mathi states in his Masters Thesis
[29] that sometimes a fascination with technology may result in the assumption that employees
must adjust to the IT instead of the other way around. An organization must create a KM strategy
that unifies its intellectual assets with the technology being used. According to Nonakas theories,
companies need to create the circumstances for knowledge creation [30]. Development toward KM
should be brought under controlled forms. Management should be able to indicate what it has done

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Intellectual capital measurement

Table 1
Bixlers critical success factors for KM

1. Vision and leadership: KM strategic plan 5. KM architectures and infrastructure

2. Organizational and communication training 6. KM integration and resourcing

3. Business performance measurements 7. Governance: policies and procedures

4. KM mission interface alignment

Table 2
Skyrme's critical success factors for KM

1. Clear and explicit links to business strategy 5. Systematic knowledge processes

2. Knowledgeable about knowledge 6. A well-developed knowledge infrastructure

3. A compelling vision and architecture 7. Appropriate bottom-line measures

4. Knowledge leadership and champions

to stimulate the right process and organization, to build a supporting infrastructure and to instil the
right culture and the right behaviour within the organization. Culture is perhaps the most important
factor in successfully managing knowledge. It is a key influence on behaviour [31].
Bixler [32] states that there are four pillars to support enterprise-wide KM initiatives: leadership,
organization, technology and learning. Managers develop business and operational strategies to sur-
vive and position for success in todays changing environment, so leadership is needed. Those
strategies determine vision, and must align KM with business tactics to drive the value of KM
throughout the enterprise. For an organization to succeed, the value of knowledge creation and col-
laboration should be intertwined throughout the enterprise. Operational processes must be aligned
with the KM framework and strategy, including all performance metrics and objectives. Technology
enables and provides the entire infrastructure and tools to support KM within the enterprise.
Organization learning must be addressed with approaches such as increasing internal communica-
tions, promoting cross-functional teams and creating a learning community.
Based on the four pillars, Bixler [33] identifies seven critical success factors to be considered in
implementing KM, as set out in Table 1. Bixler [33] also states that customer focus is very important.
Davenport and Probst [34] developed a similar list of success factors for implementing KM: lead-
ership, performance measurement, organizational policy, knowledge sharing and acquisition, infor-
mation systems structure, and benchmarking and training.
Skyrme [35] talks about seven recurrent characteristics in successful knowledge innovation best
practices, as set out in Table 2. Other authors indicate that cultural and technological barriers have
to be overcome successfully, as key factors for ensuring successful KM implementation. The CEN
[31] also performs a similar identification of critical factors for implementing KM. Again, they state
that cultural factors are the most important. Additionally, measuring business performance itself is
a key success factor for KM, so implementing an IC measuring model is also an enabler for KM [36].

4. Description of the reference IC measurement model

Up to now, most companies have developed IC measurement and reporting systems based on gen-
eral structures. The models recognize the presentfuture dimension. They attempt to structure and

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Intellectual capital measurement

INTELLECTUAL = HUMAN + STRUCTURAL + RELATIONAL

CAPITAL CAPITAL CAPITAL CAPITAL

1.1-Peoples competence 2.1-ITC penetration 3.1-Customer base

1.2-Competence improvement
1.3-Staff stability
1.4-Improvement of capacity of
persons and groups
2.2-Product technology 3.2-Customer loyalty
2.3-Process and business philosophy 3.3-Market proximity
2.4-Organization structure 3.4-Sales effectiveness
2.5-Intellectual property 3.5-Suppliers
3.6-Interrelation with other actors

Fig. 1. IC measurement model blocks and clusters.

measure intangible assets in the current moment, but above all, they try to reveal the foreseeable
future of the company, in accordance with the potential of the different elements of its intellectual
capital and the efforts that it is making for their development. But usually companies find problems
in connecting the measurement model with the development of the company. According to
Andriessens review of the most well known IC valuation and measurement methods [17], the exist-
ing methods should be improved by adding a diagnostic phase that will allow users to identify what
the problem in their organization is and to judge whether a specific method can help in solving it.
In this paper, a general purpose IC measurement system is taken as reference. This model is
based on KNOQUA [37], an IC measurement model developed under the framework of the
KM4SME project, an EU project for building a network between the European Union and Asia
within the fields of IC, organizational learning and customer relationship management [38]. The
model was developed combining the most successful elements of existing methods within its cate-
gory, components identified and non-monetary valuation. It was tested on Thai SMEs.
Nevertheless, it has a quite generalized structure, suitable for most SMEs across the world. The
developed model has an arborescence structure with three levels: blocks, clusters and indicators:
(1) Blocks: a group of intangible assets based on its nature. They may be common to any
company.
(2) Clusters: intangible assets considered in each block. They may be customized for each kind
of company.
(3) Indicators: the way of measuring or evaluating the elements. They could present some
changes from one company to another.
It is commonly accepted that IC may be broken down into three subcategories: human, relational
and structural [2, 9, 11]. According to the traditional classification, IC is broken down into three
blocks: human capital, structural capital and relational capital.
Each block has been broken down into several clusters (15 for the whole model, see Figure 1),
where each cluster comprises several indicators (54 indicators for the whole model). The different
metrics are expressed in different units depending on the element: percentage, currency or absolute
values. The set of indicators was designed looking at the existing literature and paying special
attention to the reports from The Observatory of European SMEs [39] and the OECD. Most of the
indicators given by the model in the clusters may be considered as key performance indicators (KPI)
or new ones may be developed from them. Tracking improvements in KPI and outcome/output indi-
cators are valid methods to monitor company progress in how KM initiatives have impacted upon
organizational performance.
Most of the presented items belong to the traditional literature, so only those having special rel-
evance for the work environment are commented on. In fact, the purpose of this study is to start
with a generalized model.

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Intellectual capital measurement

Human capital describes the value of the know-how and competences of an organizations employees.
This block includes information about peoples competences, competence improvement, staff stabil-
ity and the improvement of the capacity of persons and groups. SMEs identify a number of advantages
derived from their involvement in competence development activities, such as enhanced staff reten-
tion and motivation as well as increased competitiveness and productivity. Organizations develop
through the learning and growth of employees. KM performance can be explained in terms of employ-
ees satisfaction [40]. When employees learn, there should be increased customer satisfaction, ability
to meet future needs, and new sales may result. A good atmosphere for employees also leads to higher
satisfaction and lower turnover of staff.
Structural capital describes the knowledge that has been captured and institutionalized within
the structure, process and culture of an organization, a subset of its explicit knowledge. The struc-
tural capital block includes information about information technology, product technology, process,
organization structure and intellectual property. ITC tools improve information and knowledge
management inside the firm, leading to more efficient business processes and better firm perform-
ance. Measures of efficiency of both production and business processes are indicators of financial
performance. According to the European Guide to Good Practices in Knowledge Management [41],
when looking at organizational culture that favours the creation, sharing and application of knowl-
edge, organizations with high awareness of knowledge have few management levels and shared
responsibility. According to OECDs Second Conference of Ministers responsible for SMEs [42],
balanced regulation and use of intellectual property rights (IPRs) are important for small firms.
Particularly important for innovative small firms is satisfactory protection of ICT innovations and
digital content products, and mitigating the cost of obtaining, maintaining and enforcing intellec-
tual property rights.
Relational capital is related to the value that all the external relationships have for a company.
The quality of the relationships and the ability to create new customers are key factors for the suc-
cess of a company. The relations held with other agents such as the suppliers and the different
alliances of the company are also a very important knowledge source. Relational capital includes
indicators for measuring customer information, suppliers and interrelation with other actors. The
relationship a firm has with its customers contributes to its organizational capital [43] and com-
prises an important part of its shareholder value [44]. The value in these relationships therefore
needs to be understood and managed carefully [45]. Measuring customer satisfaction is an indicator
of future sales. Customer value should be measured in terms of customer retention and loyalty, sales
growth, market share and customer risk. Trusted suppliers help the firm in terms of quality, effi-
ciency and cost control. Additionally, many large enterprises develop supplier rating systems to
indicate which suppliers are certified for product delivery. Included within these lists is an impor-
tant competitive advantage, as well as a probe into the firms quality. In a similar way, many large
enterprises take SMEs for subcontracting and participating in projects. This is a valuable source of
knowledge for the SME, even better when collaborating with international companies. Finally, the
interrelation with other actors is one of the most important clusters providing growth of knowledge
for SMEs. It includes valuable information like strategic alliances, external collaborations or net-
work membership.

5. Extending the IC model in correlation with KM

Based on the key success factors for implementing KM, the IC measurement model should be
extended in order to assess what can be considered low competence or high competence for the
implementation of a KM programme. For each cluster, several factors have been identified. These
factors have been named key success factors for KM (KM-KSFs). The model gives a mark for each
of the KSFs, what can be considered low competence or high competence. In order to show the inte-
gration with the IC model, the nomenclature presents the number of the cluster which it is related
to. For each KM-KSF, low and high level is described. The analysis task is performed by means of a
set of questionnaires, some of them addressed for the managers and some for the line staff. Table 3

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Intellectual capital measurement

Table 3
Key success factors for KM implementation

KM-KSF Description Low High

Section 1. Peoples competence (core competences)

1.1.LTL Learning to learn It is difficult for employees to Employees easily adapt to novel tasks
adapt to novel situations. and new situations.
1.1.ITC Information technology The company employees have The company employees have high
and communications low competences in new technologies. competences in ITC (using PCs, internet, etc.).
1.1.DAS Deduction and analytical The analytical and deductive skills of Deduction and analytical skills are
skills the employees of the company are not promoted in the company.
promoted.
1.1.DMS Decision making The employees of the company have The employees of the company have the
a system of very rigid work in which capacity to make their own decisions and
freedom does not exist to make their opinions are considered by
decisions, and do not participate in managers.
the decision making of the managers.
1.1.CLS Communication skills, Communication and language skills In the company, the communication and
language skills are not promoted among the language skills among the employees are
employees. promoted.
1.1.TW Teamwork The employees work individually, People work in collaboration and they
there is little interdependency. share responsibilities. There is shared
team vision and clear goals.
Collaboration is something natural
within the organization.
1.1.CTPS Creative thinking and Creative thinking and problem Creative thinking and problem solving
problem solving skills solving skills are not promoted in the skills are encouraged within the
company; the employees depend on organization.
their managers to develop the work.
1.1.MLST Management and There is little leadership, poor Leadership is encouraged at all levels of
leadership, strategic judgment and low reliability. Because the organization. High credibility is
thinking leadership is poor, credibility is obtained.
not given.
1.1.SMSD Self-management and Employee self-management is not Potential problems are anticipated before
self-development promoted within the organization. the problem occurs and action taken to
avoid or eliminate it. Positive feedback is
provided to employees in this situation.

Section 2. Competence improvement

1.2.FT.CD Formal training and
competence development
are conducted on a regular
basis
1.2.FT.ER Formal training and
competence development
activities are aimed at
economic returns in the
short run
1.2.IT Informal training
The company does not pay enough
attention to the training of its
employees. A training plan is either
not established or is not being
followed.
The training plan of the company is
not efficient since it is not reflected in company offers good results for the
the results of the company.
The employees of the company are
involved in few informal training
activities so they do not acquire the
knowledge that is offered by those
activities.
For the firm, training is important and
there is a plan of training adapted for the
employees.
The training plan developed by the
activity of the company. It is an efficient
training model.
The employees of the company carry out
activities (visits to expos/trade fairs, job
rotation, etc.) promoting the acquisition
of skills for the development of their
professional activity.

(Continued)

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Intellectual capital measurement
Table 3 (Continued)
KM-KSF Description Low
1.2.ATT Attitude Poor understanding of the structure
of competences and incomplete
training and appraisal systems.
Section 3. Stability
1.3.SSM Staff satisfaction and Little consideration is given to
motivation motivation. Motivation is done by
fear so staff limit their actions to low
risk decisions. There is poor
management and/or a bad work
environment, with people wishing to
go to other companies. Often the only
motivation for the employee is the
wage.
Section 4. Improvement of capacity of persons and groups
1.4.CMN Change management Low level or understanding of what
change management means within
the organization.
Section 5. ITC penetration
2.4.ITE Information technology as IT possibilities and knowledge tools
enabler are not considered. They do not exist
within the organization, or exist but
are not being used by the staff.
Section 6. Process and business philosophy
2.3.BPH Business philosophy The company does not take special
care with its business philosophy.
Aspects like mission and vision are
not clearly defined or are not
transmitted in the right way.
2.3.PM Project management Project management processes are
not being followed.
Section 7. Organization structure
2.4.FLEX Flexibility Managers are difficult to replace or
the percentage of employees with
work difficult to substitute is very high.
2.4.ECFI Easy communication and There is a lack of communication in
flow of information the company.
2.4.RCD Roles clearly defined Each employee does not know his/her
role in the company.
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High
The importance of knowledge in
developing competences and its
relationship to skills and attitude are
understood.
Within the organization, motivation is
strongly linked to personal recognition.
There are an appropriate workspace
environment, satisfaction with the work
itself, reward/recognition systems, both
formal and informal, opportunities for
growth, and compensation/benefit
programs. Support is received from
co-workers and other managers.
When managing change within the
organization, a vision statement for
change is created. A strategy for
communicating the vision across the
organization is performed, resistance to
change is overcome and a change
programme is implemented.
Collaboration and knowledge capture
and distribution tools are used
effectively. The systems have
appropriate levels of relevance and
usability to ensure long-term use.
The company really takes care with its
policy-making structure, the construction
of its organizational culture, employees'
identification with the company's
perspective, etc.
Project life cycles are defined, and each
stage is managed following processes for
initiating, planning, executing,
controlling and closing.
Managers and employees are not too
difficult to replace in general.
There is a good level of communication
and flow of information between
employees and managers.
Employees know clearly their roles in
the company. There is a clear
relationship between authority and
responsibility.
532
Intellectual capital measurement

Table 3 (Continued)

KM-KSF Description Low High

2.4.ECS Enterprise controlling The managing style in the An enterprise controlling system is
system company is poor. working properly.

2.4.INF Informal organization Poor use of informal structures. Informal structures are encouraged.
Self-organized groups and communities
are found within the organization.

Section 8. Intellectual Property

2.5.KNO Knowledge as a value The company does not pay attention Knowledge is recognized as an outcome
to knowledge. There is no knowledge for the company and sharing is
sharing. promoted.

shows the full list of KM-KSFs. This is a personal categorization performed by the authors based
on their own experience and looking at the existing theories shown in Section 3.
Section 1 in Table 3 refers to the needed competences. Following Argyriss definition [46], com-
petence can be defined as the synthesis of knowledge (what you learn in education), skills (what
you gather in your job, at your work place, and in social life from your daily experiences) and apti-
tudes (these are, the abilities to use this knowledge and these skills). Htnen et al. [47] have iden-
tified the main competences required by enterprises in the future (Table 4).
The skills required are not only related to fields of a technical nature, but also of an organiza-
tional and social character. The model has adopted the competences shown in Table 4 as core com-
petences to be analysed and promoted. Developing detailed measuring indicators for each shown
competence would be tedious and perhaps too ambitious. The aim within this model is not to per-
form a skills audit. Instead, a more general indicator was developed, based on short questionnaires.
The questionnaires examine behaviour within the organization. The answers are based on
employee perception about how often they perceive the behaviour. A three-point scale is used (fre-
quently, occasionally or never). According to the answers to these questionnaires, the KM-KSFs
related to the Peoples Competence cluster are developed (Table 3, Section 1).

Table 4
Competences required by enterprises (Htnen et al.)

Competence

Learning to learn

Information technology and communications

Deduction and analytical skills

Decision making

Communication skills, language skills

Teamwork

Creative thinking and problem solving skills

Management and leadership, strategic thinking

Self-management and self-development

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Intellectual capital measurement

Section 2 in Table 3 shows the KM-KSFs related to the Competence Improvement cluster.
Information provided by traditional indicators, like training hours per employee or number of
employees getting training, is not enough to assess the details about the way competence improve-
ment is carried out within the company. Competence development activities have a positive effect
on the individual SMEs competitiveness and performance. According to recent studies [48], SMEs
use two different kinds of training: formal and informal. Formal training considers traditional indi-
cators, but it also should consider the effectiveness of the training. This is given by:
Competence development activities are conducted on a regular basis (1.2.FT.CD).
Competence development activities are aimed at economic returns in the short run
(1.2.FT.ER).
The informal training could be achieved by visits to expos/trade fairs, reading the professional lit-
erature, meetings amongst personnel for knowledge exchange, job rotation and recruitment of per-
sonnel with required new competences (1.2.IT). Additionally, some questions are asked about
personal attitude (1.2.ATT) and actual behaviour related to competence improvement.
The KM-KSFs for staff stability (Table 3, Section 3) assess staff satisfaction and motivation.
Implementing a KM programme means a process of change. Leadership and motivation are key points
for successful change in management. Ros Jones [49] points out that those activities that require indi-
viduals to change their behaviour or take time to learn new skills were more problematic when meas-
uring KM benefits at the Financial Services Authority. The leadership style applied to a specific work
situation has a direct impact on bottom-line performance. Leadership is assessed within section 1 in
Table 3, 1.1.MLST (Management and leadership, strategic thinking). To tackle the change, individuals
must be motivated. Motivation should not be only biased towards financial rewards. For assessing
motivation aspects, Herzbergs theories [50] about motivators and hygiene factors are used. By means
of a questionnaire, the motivation of staff is measured regarding to motivators (achievement, recogni-
tion, work itself, responsibility and advancement) and hygiene factors (interpersonal relationships,
salary, work conditions, supervision and company policy and administration).
Implementing a KM programme is closely related to managing change theories. Running a KM
programme involves significant changes in the organization. Moving a company from a traditional
focus to a knowledge-aware focus is substantial and involves a change in the psychological contract
on both the employee and the employer side. It involves learning and using new processes, and
managing new expectations and new types of commitment from staff. So SMEs need to be prepared
for managing the change in an effective way. By means of questionnaires, the readiness of an organ-
ization for change is evaluated. This means if it is able to create a vision for change, create a strat-
egy for communicating the vision across the organization, overcome resistance to change and
implement the change programme. The KM-KSF 1.4.CMN (Table 3, section 4) is related to these
aspects of change management.
Information technology can support the implementation of a KM programme (Table 3, Section 5).
Empirical findings by Sher et al. suggest that management of both endogenous and exogenous
knowledge through IT significantly enhances dynamic capabilities [51]. A low level means that a
company does not consider IT knowledge tools and does not evaluate IT possibilities. A high level
means that a company is using collaboration, knowledge capture and distribution tools. For assess-
ment of this KM-KSF, Gartner Group classification is used. The Gartner Group defines 10 tech-
nologies that collectively make up full-function KM. The functional requirements that enterprises
can select and use to build a KM solution should include: capture and store; search and retrieve;
send critical information to individuals or groups; structure and navigate; share and collaborate;
synthesize; profile and personalize; solve or recommend; integrate with business applications; and
maintain.
Section 6 in Table 3 shows the KM-KSF 2.3.BPH related to the Process and Business Philosophy
cluster. By means of these KM-KSFs some company functions are evaluated. Within a KM imple-
mentation, knowledge strategy has to be aligned with the goals of the organization and the KM ini-
tiative should be officially sanctioned. High level in these KM-KSFs means that the company really

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Intellectual capital measurement

takes care with its policy-making structure, the construction of the companys culture and employee
identification with company perspective. Business philosophy also includes credibility aspects,
since it is a key point influencing change management.
Another important aspect related to KM is the way in which projects are managed within the organ-
ization (2.3.PM). This has a double influence on KM. First, it is important because introducing a KM
programme itself is a project, so it should be properly managed. Second, projects are an important
source of knowledge. Within the firm the project life cycle must be determined. According to the
PMI standards [52], projects are composed of processes. Project processes generally fall into one of
two major categories: project management processes and product-oriented processes. Project man-
agement processes describe, organize, and complete the work of the project. These processes can be
organized into five groups: initiation processes, planning processes, executing processes, control-
ling processes and closing processes. Because these processes are applicable to any kind of project,
this schema should be followed by the firm. Product-oriented processes specify and create the pro-
jects product. They are defined by the project life cycle, so they may be different depending on the
kind of project. A questionnaire is used to assess if the firm has a defined life cycle for its projects,
and if each stage of the project life cycle is managed according to the five groups shown above.
Special focus is given to closing processes, especially those related to lessons learned.
The organization structure should also be assessed (Table 3, Section 7). High levels mean that
managers and employees are not difficult to replace, there is a good level of communication,
employees know clearly their roles in the company, there is a clear relationship between authority
and responsibility and the enterprise controlling system is working properly. Communication
strategies for effective knowledge sharing have been formulated by Yeo Ming Mei et al. [53]
Finally, section 8 in Table 3 shows the KM-KSF related to knowledge. The KM-KSF 2.5.KNO
measures the relevance given by the organization to knowledge creation and sharing. Knowledge
should be considered a key aspect, and sharing of the knowledge should be promoted.
The model calculates the KM-KSF marks for the company based on the answers provided to the
questionnaires. Levels are scaled into low, medium and high level. When evaluating the answers,
some questions can be relevant to several KM-KSFs. For example, a question like Was training
activity promoted and announced adequately?, included within the competence improvement
questionnaire, is correlated with both 1.2.FT.CD (Formal training, competence development are
conducted on a regular basis) and 2.4.ECFI (Easy communication and flow of information). When
analysing the questionnaires, it is important to identify the strongly negatively and positively rated
questions and to compare the answers between managers and staff line. Discrepancies could reveal
internal organizational problems.
Intellectual capital and knowledge management can be integrated [3]. Companies can use the
shown model as a learning framework for knowledge management, performing an inverse analysis
of the KM-KSFs. For example, when a firm gets a low-level mark for some of the key success fac-
tors, a backward analysis could be performed looking for the answers with a negative influence on
the mark. The model could be linked with a knowledge base (KB), so suggestions for improvement
could be shown to the firm based on the KB.
The model was tested with some knowledge intensive firms in Spain. The application of this
process has proved beneficial within the companies involved. However, there are barriers to
progress. The intention to conduct regular assessment can be deflected by time and scarce
resources.

6. Conclusions

This paper shows how an IC measuring model can be connected with the key success factors for
implementing KM within an SME. For this purpose, a generic IC measuring model was used. The
model yields a classification of components identified and non-monetary valuation. The measuring
model presents an intuitive and quite generalized structure. The model is composed of three

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Intellectual capital measurement

levels, with elements condensed in clusters. The model is intended for internal development rather
than comparative purposes.
The work has identified a set of KSFs relevant for SMEs and with a direct impact on business
improvement in order to meet KM requirements. The set of KSFs cover the three main categories:
technology, process and people. The analysis is performed by means of questionnaires. Although
the indicators were presented separately, there are a lot of cross-relations between them. Many of
the presented indicators are related to the theory of change management. Introducing a KM pro-
gramme within a firm involves an important change. So all the topics related to change manage-
ment should be considered. The firm needs to be prepared for managing the change in an effective
way. People need to have suitable competences and a suitable work environment (motivation).
Cultural and organizational factors should also be considered. In fact, culture is one of the most
important factors in successfully managing knowledge. Of course, technological factors also have
to be considered, but they play a secondary role.

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