Also investors cannot rely on traditional measures such as return on assets which can be predicted on balance sheet ratios. Secondly, companies with significant intellectual assets often face financing problems. Banks traditionally rely on tangible assets, such as inventory, property, and plant and equipment, to assess loans. To better manage and measure intellectual capital, organisations must first understand what it consists of. Click on image to enlarge Human capital refers to the knowledge, know-how, skills and expertise of the employees of an organisation.
Employees create value by applying their skills, exerting their knowledge and initiating new ideas.
But the employees' knowledge and skills can only be used if they are willing to make their contributions. So human capital management is mainly concerned not only with how to maintain knowledge workers, but how to turn their tacit knowledge into the explicit variety. Structural capital represents the organisation's databases, processes, information systems, structures and culture. The aim is to create an environment conducive to knowledge sharing. Systems such as on-line database or processes enable an organisation to catch, store and reuse organisational knowledge.