How is knowledge measured

The value of knowledge and how to measure it

CONTROLLING | GENIOS WirtschaftsWissen No. 02/2003 from 02/10/2003


The importance of knowledge for companies

The fundamental success factors for a company include the company's own knowledge and successful knowledge management. However, this knowledge is mostly in the minds of your own employees and slumbers there. Management, but also works councils, are the most important intermediaries and catalysts for individual and company-wide knowledge.

Although the term "knowledge management" is on everyone's lips, knowledge is still one of the most underdeveloped production factors in companies. Problems exist in particular in the actual finding, structuring and processing of knowledge, as well as in ensuring the necessary sustainability.

Knowledge as such is a valuable asset, but it is not enough to just have an idea and present it as knowledge. Each of us has ideas every day, some of them are good, others not so good. Only the assessment of an idea - based on our experience and the resulting opinions - can concrete approaches emerge, which, in combination with methodology, become comprehensible, communicable and verifiable for others.

The change in the demands that a company places on employees is also historically visible: In the times of the boom in assembly line work, the so-called human factor was still measured as pure labor in units of measurement such as production volume, time and costs. In today's society, which shows a very strong development in the service sector, factors such as creativity and communication are not only essential requirements for employees at management level.

Knowledge as a core competence

For a company, the identification, acquisition and implementation of knowledge are core competencies. Such a capability enables the acquisition of competitive advantages over the competition and thus the strengthening of the market position. Knowledge as a resource has to be managed efficiently in order to generate a critical success factor. The survivability of companies, especially in today's economic situation, in which many providers are fighting for little demand, is determined by how quickly knowledge is identified and implemented.

Internal company knowledge market

In internal company markets, the knowledge market threatens to fail. The main reason for this is the nature of the goods traded on the knowledge markets; they are knowledge goods. Knowledge goods are characterized by the fact that they are soft, intangible goods. Therefore, there is always uncertainty about the quality of the good and about the usefulness of the knowledge for a potential customer. However, this problem also occurs with traditional material goods. (1)

A company-internal market is not known to the company management like the official one in which the company operates. It is therefore not so easy to influence, as it is more like a black market. (1)

One way of efficiently establishing a knowledge market in a company is what is known as a "filtered market". In a filtered market, a filter in the form of an intermediary is built into both the supply and demand processes. On the one hand, he is responsible for ensuring that a minimum level of quality is ensured when preparing the offer for a knowledge product. In the inquiry process, he contributes to the generation of willingness to pay. It is precisely this regulation in the demand process that is necessary, since the employees' knowledge products are paid for with the company's financial resources. As a result, the intermediary, as an intermediary, has to clarify internally to what extent the knowledge product offered could actually be useful for the company and what price one would be willing to pay for it. (1)

An essential function in an external market is objectified pricing. In contrast, the price plays a rather subordinate role on in-house knowledge markets. The crucial task of the internal market is not to ensure market efficiency, but to match supply and demand. A market where you can earn additional money with your knowledge creates enough incentives to offer your personal knowledge. (1)

By using modern information and communication tools, these knowledge markets can be organized not only intraorganisationally, but also interorganisationally. For this purpose z. B. electronic marketplaces, operated as a shop or as an auction.
The guarantee of legal security for the participants is essential for the stability of a market platform. In the area of ​​trade between organizations, this security is fulfilled by the economic or legal system of society. However, an internal control body must be created for the functionality of internal, filtered markets. This should not intervene in what is happening as long as the applicable rules of the game are not violated; in the event of a violation, however, this authority must act in a moderating manner on the market participants solely through its authority. (1)

Knowledge markets will overcome the boundaries of the organization. External and company-internal markets will grow together wherever internal supply competes with external supply or can also be marketed externally without significant intellectual capital being sold. (1)

Human capital

Thanks to their knowledge of internal processes and the market, combined with creativity and communication, the employees of a company become an enormously important and decisive factor in production and success.

The accepted increasing value of the employees with their knowledge and skills as an essential success factor for a company is also reflected in the requirements for a mathematical representation of this value in the company valuation but also in external accounting. In the Anglo-American as well as in the Scandinavian region, the so-called concept of Human Resource Accounting (HRA) has therefore been taken up again in the discussion and methodologically further developed. (2)

The term human capital, for which synonyms such as human assets, human resources and human assets, as well as related terms such as knowledge capital, intellectual capital and intangibles, or structural capital, are not clearly defined. In general, it is understood to mean all knowledge and skills that are assigned to a specific group of people or a single person and that have an economic value. In economics, the first approaches to human resource accounting can already be seen in the economics of the 17th century. At that time the purpose of such calculations was in particular to record the monetary loss that an economy suffers in its human capital through emigration or wars. (2)

However, it is also important in the course of company takeovers, in which a high proportion of the purchase price is influenced by goodwill, especially in companies in the service industry, which is largely the result of the professional competence, performance, experience and creativity of the employees and thus their knowledge is.

How can I measure the "knowledge capital"?

Problems, especially for controlling, arise in data acquisition and processing as well as the complexity of the procedures, which is why only a few specialists were able to adequately set up such accounting systems.

The starting point for a much stronger focus on the topic of human resource accounting, at least in American companies, was created by the increasing competitive pressure against large Japanese companies, along with the realization that the productivity advantages of Japanese companies were explained by their consistent safeguarding of human capital, to which the ran counter to American "hire and fire" philosophy. The need to show the hidden values ​​of the companies was triggered by the effects of the increasing importance of the service sector and the new economy in the 1990s, as the gap between the market and book values ​​of many companies grew blatantly. (2)

Valuation methods

There are several methods of assessing human vitality. These methods can be classified into processes that provide monetary information on the value of human assets and processes that describe human resources using non-monetary values. While the statements of monetary results can be easily interpreted, the further interpretation of non-monetary results can be fraught with problems, since one has to deal with the scales used.

The monetary procedures in turn are divided into "cost" -based and value-oriented procedures. While the cost-based methods consider variables such as costs, effort, expenses or payments in relation to the area of ​​human capital, the value-based methods are based on the benefits that come from the human capital, i. H. on the assessed performance contributions. (2)

Controlling, accounting and the human resources department are initially faced with the problem of choosing the right method. When making a selection, it is important to precisely define the accounting purpose that is pursued with the assessment of human assets. Is z. B. measure human capital on a regular basis, or should it only be used for a specific purpose such as B. an acquisition or merger can be determined. In addition, it must be defined whether human resource accounting should only be collected for the purposes of internal accounting, or whether the results should also be generated for external accounting.

In any case, the cost-based methods seem more suitable for external purposes. They evaluate the investment in human assets in a similar way to the investment in real and financial assets on the balance sheet and are therefore likely to meet with greater acceptance from external addressees.
In contrast to this, the value-based processes can provide a lot of information relevant to decision-making for management and are therefore more suitable as a component of internal accounting than cost-based processes.

On the other hand, it must be taken into account that the introduction of a cost-based procedure generates significantly less effort and is therefore more suitable for ongoing invoices than the very complex value-based procedures, which are most likely to be justified in terms of the effort involved in carrying out a special event such as a company takeover let. (2)

Acceptance problems

Acceptance problems are to be feared from two directions. The assessment of human resources raises some questions of a moral character, including fears that people should not be treated and computed like machines.

Ultimately, all stakeholders in a company have to be convinced of the human resource accounting in order not to stir up the fear of "transparent employees", but to convince everyone involved of the positive effects.
But especially those who are responsible for generating the data to be processed must also be convinced of the advantages of human resource accounting. The problems in connection with the acquisition and processing of the extensive amounts of data are likely to have been alleviated in the meantime by the further development of information technology.

The main problem is the provision of sufficient data quality, which of course also depends on the selected "accounting method". How can you get those members of the organization who are supposed to provide the data for accounting to actually and truthfully disclose their information? (2)


The introduction of human resource accounting offers a company considerable potential with regard to the delivery of relevant information for the evaluation of operational knowledge / knowledge markets, or also (dis) investment decisions, be it management decisions in the personnel area or acquisition / participation decisions by investors . The difficulties facing these potentials are on the one hand methodological and technical level and on the other hand they are acceptance problems by the organization members.

In the (more distant) future there should also be analyzes with regard to the "relationship skills", which could also provide an important basis for decisions. The determination of human assets has so far been largely limited to operational staff. In today's highly integrated world of work, the close network-like cooperation between companies, companies and freelancers who are involved in the provision of their own services would have to be considered separately. (2)

Case studies

Cost-oriented approaches to human resource accounting (original costs)

An example of a cost-oriented approach is the method of historical acquisition costs (original costs), in which the actual costs incurred at the reference point for human resources form the starting point of the calculation. All relevant costs from the areas of recruitment (e.g. job advertisements), further training activities to productivity reductions during the training phases must be recorded and evaluated by the controlling department. It turns out that not only direct costs but also indirect costs are taken into account.

The sum of all costs over the whole of the employees then indicates the value of the human capital. This approach is essentially based on the view that costs incurred in the personnel area are understood as an investment in an asset.

The controlling thus provides the decision-makers for investment decisions in human capital in addition to the pure evaluation of the human capital also differentiated information about what z. B. the costs for the acquisition of personnel from different hierarchical levels usually costs. In addition, this information provides important assistance in making decisions about the acquisition of companies or the merger with other organizations.

Value-based approaches to human resource accounting (Stochastic Rewards Valuation Model)

Even the cost-based approach of human resource accounting offers a large number of different methods. However, this is exceeded by the even more extensive selection options for the value-based approaches. The starting point for the value-based method is that the "human" assets cannot be mapped solely with the associated costs, but that the expected benefits are particularly decisive for the value of the human assets.

As an example of a value-oriented process, a brief overview of the process of "future performance contributions with hierarchical levels" (Stochastic Rewards Valuation Model) may serve. This model uses a five-step process to evaluate:

1. All employee potentials with regard to possible hierarchical levels to be filled by them in the future are determined.

2. It is determined which performance contributions each employee can potentially make in his activities / services at the individual hierarchical levels for the overall performance of the company.

3. The length of stay of the employees on all of their individually determined future hierarchy levels are estimated.

4. The different career paths as well as the length of time employees stay at different hierarchical levels are assigned probabilities.

5. The individual values ​​are then summed up and form the individual value of an employee for the company.

The problem with this approach is quite clear. In order to be able to carry out a valuation, a great deal of data has to be collected, most of which can only be vaguely forecast. If there are market prices for the respective services that can be used to determine the value, a sufficient forecast quality can be guaranteed for this. However, the prognosis of complete career paths is likely to be fraught with considerable problems. This process has already been used as a prototype, but it seems unlikely that it will become widespread due to the current state of development. (2)

The valuation of technology-oriented companies is also determined to a large extent by the valuation of intangible assets. The management and the employees are particularly knowledge carriers due to the significant technology focus. The operation of a technological platform requires skilled employees who know the system in detail and actively support the innovation process.

On the one hand, employee continuity must be taken into account, together with the supporting concepts such as participation plans for employees, but the corporate culture also plays a major role. Particular attention must be paid to intellectual property rights such as business concepts, patents and licenses, which are at the heart of technology-oriented companies.

Likewise, when selling a company, human resources aspects such as team structure, safeguarding know-how and employee motivation must be taken into account and measured. This also results in findings regarding the future employee structure of a z. B. merged company. (3)

Expert knowledge of executives

The importance of specialist knowledge among executives has increased significantly in recent years. The decisive factor here is the increasing competitive pressure, which requires solid and comprehensive staff management. It is a basic requirement to be able to correctly assess the potential of employees. (4)

Further reading:

(1.) Barth, Klaus / Kiefel, Jens / Wille, Kai, The Organization of Companies in the Information Age, Unleashing the Hidden Powers of Companies with Market-Based Knowledge Exchange, Frankfurter Allgemeine Zeitung, January 6th, 2003, No. 4, p.20
from Frankfurter Allgemeine Zeitung, January 6, 2003, No. 4, p. 20

Further document

F.A.Z. Frankfurter Allgemeine Zeitung / Heading: Operation and Practice at a Glance Department: Economy

The organization of companies in the information age

Article (2287 words)

for € 4.76


(2.) Gebauer, Michael / Wall, Friederike, Human Resource Accounting to support corporate accounting, an overview of the state of development, methodological possibilities and potential pitfalls, Controlling, Issue 12/2002, pp. 685-690
from Frankfurter Allgemeine Zeitung, January 6, 2003, No. 4, p. 20

Further document


Gebauer, Michael / Wall, Friederike, Human Resource Accounting to support corporate accounting, an overview of the state of development, methodological possibilities and potential pitfalls, Controlling, Issue 12/2002, pp. 685-690

Article (2287 words)

for € buy


(3.) Bergamin, Stephan, The sale of technology-oriented companies, special features and procedural concept, Der Schweizer Treuhänder, Issue 12/2002, pp. 1117-1122
from Der Schweizer Treuhänder, Issue 12/2002, pp. 1117-1122

Further document

The Swiss trustee / e-business

Selling technology-oriented companies

Article (2486 words)

for € 2.73


(4.) Balzer-Drohner, Heike, More and more demands are placed on managers - management market 2002: companies make higher demands - social skills and technical knowledge are required, Lebensmittel Zeitung 52 of December 27, 2002 page 023
from Lebensmittel Zeitung 52 of December 27, 2002, page 023

Further document

Lebensmittel Zeitung / Review Jobs & Careers

More and more is demanded of the managers

Article (636 words)

for € 5.71


Author GENIOS WirtschaftsWissen: M.Westphal
Source: GENIOS WirtschaftsWissen No. 02/2003 from 02/10/2003
Document number: c_controlling_20030210

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