Dealing with the knowledge economy: intellectual capital versus balanced scorecard

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Abstract:

Purpose ‐ This paper compares balanced scorecard and intellectual capital and finds important differences between their theoretical underpinnings, which suggest that the breath of indicators will work differently in organisations. Design/methodology/approach ‐ Analysing texts about balanced scorecard and intellectual capital, the paper discusses not the obvious similarities ‐ that they are both integrated performance management systems ‐ but four more aspects: strategy, organisation, management, and indicators. Comparing these four dimensions the paper discusses the differences arising from the very different theories of strategy that they presuppose: competitive advantage versus competency strategy. Findings ‐ The paper suggests that the very different notions of strategy that underpin the balanced scorecard and the intellectual capital approach make such comprehensive performance management systems behave in very different ways ‐ the difference between a tightly coupled and a loosely coupled system accounts for this. Research limitations/implications ‐ The main limitation is that the paper is primarily a literature study and therefore it is not certain that in practical situations companies will necessarily adopt the theoretical perspectives mobilised behind balance scorecard and intellectual capital. Practical implications ‐ The usefulness of that paper is that practitioners may understand the breath of implications of a shift in strategic focus and realise the various organisational conditions that can help mobilise the use of indicators in different ways. Originality/value ‐ The paper's analysis shows how the two models assume how indicators work in an organisational systems and concludes that the differences are significant and that therefore there are considerable differences in how a system of indicators may work in the context of balanced scorecard compared with the context of intellectual capital.
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