Models to Measure Intellectual Capital

As intellectual capital is a new concept for many organizations and one that may be difficult to embrace, identifying ways of measuring it are likely to appear daunting. The famous saying: “what you manage you must be able to measure” also applies to intellectual capital. Researchers, consultants, accountants and managers soon discovered, however, that the traditional financial accounting measures, such as return on investments and earnings per share, could not be adequately utilized for intellectual capital, as they were out of step with the skills and competencies companies were trying to measure. (Ulrich, 2001)Numerous suggestions were made to solve this problem. For example, some wanted to adjust the traditional financial measures to make them more relevant, while others suggested adapting operational measures like cycle times and defect rates. Some even suggested a combination of the two approaches. However, researchers soon realized that, because of the nature of intellectual capital, new measures had to be developed to determine the value-creating potential of the workforce.