In the ongoing debate about where managers should focus their attention, something has been missing: a focus on intellectual capital. Intellectual capital — the commitment and competence of workers — is embedded in how each employee thinks about and does work and in how an organization creates policies and systems to get work done. It has become a critical issue for six reasons:
First, intellectual capital is a firm’s only appreciable asset. Most other assets (building, plant, equipment, machinery, and so on) begin to depreciate the day they are acquired. Intellectual capital must grow if a firm is to prosper. A manager’s job is to make knowledge productive, to turn intellectual capital into customer value.
Second, knowledge work is increasing, not decreasing. James Brian Quinn has observed that the service economy is growing directly in service industries such as retail, investments, information, and food and indirectly in traditional manufacturing industries like autos, durable goods, and equipment.1 As the service economy grows, the importance of intellectual capital increases. Service generally comes from relationships founded on the competence and commitment of individuals.
Third, employees with the most intellectual capital have essentially become volunteers, because the best employees are likely to find work opportunities in a number of firms.2 This does not mean that employees work for free, but that they have choices about where they work and, therefore, essentially volunteer in a particular firm. Volunteers are committed because of their emotional bond to a firm; they are less interested in economic return than in the meaning of their work. Employees with this mind-set can easily leave for another firm.
Fourth, many managers ignore or depreciate intellectual capital. In the aftermath of downsizing, increased global competition, customers’ higher requirements, fewer management layers, increased obligations, and pressures exacted from almost every other modern management practice, employees’ work lives have not always changed for the better. In a recent workshop with sixty high-potential managers from a successful global company, we discussed careers. Of these managers (mostly in their thirties and early forties), 50 percent did not think that they would stay with the company long enough to retire, not because of lack of opportunity but because of the enormous stress and high demands. Within this group, 90 percent personally knew someone who had voluntarily left the company in the past six months because of the increased workload.