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A Leading Intellectual Capital Rating Tool

Kaytek Analysis and Queries as regards the same

Benefit From Gray Arrow A Kaytek Management Consulting Perspective

Kaytek's Consulting Director did a brief analysis of a leading European Intellectual Capital Rating and Measurement Tool.

Some of his Queries ( to be considered in the context of limited knowledge with the vendor's tool framework and InTangible Capital Measurements in general ) and responses from the Tool Vendor are reproduced below.

Down Arrow 1.0 - Definition of Intellectual Capital

My understanding from reading your documents is that it is " All factors critical to an organization's future success that are not shown on the traditional balance sheet. "

The term 'Intellectual Capital' perhaps have an excessively narrow scope in the Individual or Organizational Context.

Gray Arrow Vendor Response - Yes, for many it does. That is why we increasingly use terms like Intangibles and Non-financial Assets rather than intellectual capital.

Down Arrow 1.1 - Your definition mentions future success. What about past events (maybe successes or failures) ?

Does the framework capture the impact of Intellectual Capital on the same or vice-versa ?

Gray Arrow Vendor Response - Our niche is to consider the present and potential state and capabilities of an organization to become successful, i.e. increased profitable growth for a profit-driven organization.

We leave the past to others, such as accountants and financial rating institutions.

Down Arrow 1.2 - Intellectual Capital Measurement

It cannot be restricted only to organizations.

As the Net enables more and more single individuals to work as one-man corporations, does your framework recognize the same ?

Gray Arrow Vendor Response - This is absolutely right, but our tool is for large and medium size organizations.

Down Arrow 1.3 - Does your framework give a numeric quantitative figure ?

(e.g. A person may have an IQ of 150. Can we say that an organization has an Intellectual Capital Rating or Measurement of a certain numerical value ? )

Gray Arrow Vendor Response - Yes, but our quantification is similar to Standard & Poors’s S&P ratings grades: AAA AA A BBB, BB etc.

Down Arrow 1.4 - The regulatory reporting systems (e.g. a Published Balance Sheet) capture only the tip of the Iceberg of organizational information.

There are many figures that are not shown at all.

I presume that your framework captures the remaining information.

Is there any inbuilt link in your framework between the regulatory reporting systems of say a country like India and the 200 different Parameters of your framework ?

Gray Arrow Vendor Response - Our Tool focuses on capturing the non-financial parameters that make a company outperform its competitors.

Judging from the 200 and some parameters measured, none of them are successfully captured by any regulatory system that we have seen.

Down Arrow 1.5 - You may be kindly aware of Sarbanese Oxley Act in the US and a similar inspired one in India as an example of newer regulatory controls being imposed on organizations.

Does your framework have an inbuilt mechanism to incorporate newer regulatory reporting elements or other environment changes ?

Gray Arrow Vendor Response - Our Tool is based on parameters converted to questions.

The accounting regulatory systems of the world will, in my opinion, never account for such things, since it is considered subjective.

Our Tool objectifies the subjective features of organizations.

Down Arrow 1.6 - What happens to say Individual or Team Measurements relating to 'Emotional Quotient' (from 'Emotional Intelligence' ) or 'Adversity Quotient' or 'Spirituality Quotient' or other such measures ?

Gray Arrow Vendor Response - Our Tool does not measure individuals and teams separately. It has a holistic approach to organizations and thereby leaves the really detailed levels out of the picture.

The result of a rating might very well lead to a more detailed and in-depth analysis of such things as emotional and spiritual intelligence.

Down Arrow 1.7 - Would these Measurements of Emotional, Adversity, Spiritual Intelligence, etc all come under the category of 'Intellectual Capital' ?

Gray Arrow Vendor Response - Yes, I would say they would, but again, that is not the expertise of our tool.

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Updated on 20th December 2012.
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