Journal of Knowledge Management Practice, February 2001


The IC/KM Movement and Human System Well-Being

Professor Herman J Pietersen, Vista University, South Africa


The IC/KM movement is considered in relation to a comprehensive approach to human system well-being, which includes acknowledgement of the socio-cultural and spiritual dimensions of organizational existence. A review of the IC/KM literature shows the use of an ambiguous and oversimplified conceptual framework based on an almost exclusive concern for the material and financial well-being of the corporation. In this effort the contributions of other management and organizational disciplines over many decades are simply bypassed. The main implication is that the movement should follow a less mechanistic (Taylorist) approach and expand its focus in order to become a more viable undertaking in future.

Keywords: IC/KM movement; conceptual inadequacy; human systems; well-being; organizational disciplines; re-focusing.


The aim of this paper is to assess the Intellectual Capital/Knowledge Management (IC/KM) movement with reference to human system well-being. The IC/KM literature is reviewed, followed by a brief indication of how, against the background of main propositions of a theory of organizational well-being, the basic IC/KM framework fits into a more comprehensive and representative approach to organizations.

A Critical Review Of The IC/KM Literature

From a historical perspective, IC/KM can be seen as a venture to more effectively organize and utilize what is now referred to as the 'Intellectual Capital' of a company.

The IC/KM movement, with its early roots in Peter Drucker's concept of the 'knowledge worker' (Drucker, 1966), and in some respects also influenced by the ideas of the 'learning organization' (see Argyris & Schon, 1978, for an early formulation), is essentially an attempt to conceptually re-encompass and 'gear' the organization, now conceived en toto in terms of so-called 'intellectual capital or assets'. In its basic thrust it shows a strong resemblance to the scientific management approach of Taylor, which, from one perspective, seems to indicate that Taylorism is alive and well. Interestingly, a basic premise of Taylor's philosophy of management, which can also be detected in the writings of the KM movement, was:" In the past the man was the first; in the future the system will be first" (Taylor, 1911: 2).

Perusing the extant IC/KM literature from an organizational behavior perspective, one is struck by the very confident but one-sided way in which the concept of the business enterprise is reformulated as a 'knowledge organization' consisting of three types of 'intellectual capital'; in the process almost wholly disregarding a century's worth of management and organizational theory.

Currently there seems to be a renewed urgency in the movement to systematically capture, measure, and exploit that elusive 'grail', the creative human mind (and all of its 'data', 'informational' and 'knowledge outpourings), for the admitted sole purpose of realizing its financial value (profit and increased market value).

It needs mentioning that the majority of active IC/KM proponents seem to be trained in one or more of either the: accounting, engineering or IT professions, and therefore, not surprisingly, more interested in developing exact systems for managing the modern corporation than in, say, pondering the behavioral truths contained in Douglas McGregor's "Human side of Enterprise" (McGregor, 1960).

In what is increasingly recognized to be a Knowledge Economy the so-called 'knowledge organization', of which Microsoft is perhaps the leading example, serves as the organizational paradigm par excellence today. The ongoing quest, especially among IC proponents based in the accounting profession, is nothing less than to make the intangible (human brainpower) tangible; to ideally have it all on tap and accounted for in strict financial terms.

A reading of the literature (much of it appearing in the form of anecdotal and promotional reports), reveals that the IC/KM movement, after about a decade, amounts to little more than a contestable framework of: Human capital; Customer (relational) capital, and what appears to be a catch-all, residual category of Structural (organizational) capital. One of the originators of the movement, Svieby, uses a similar framework of: Human Competence, External Relations and Internal Structures. (Svieby, 1999).

Beyond this oversimplifying framework and some idiosyncratic variations of it, the movement is almost exclusively focused on refining, propagating and standardizing an expanding array of 'IC metrics'. Little thought seems to be given to provide coherent interpretation guidelines or even a proper theoretical rationale for actually making sense of these indicators, rather glibly offered to the business world as the panacea for effectively managing the corporation as a knowledge enterprise.

Internal concerns in the IC/KM movement mostly revolve around: (a) the seemingly troublesome separate emphases of the IC (the 'thinkers', 'conceptual purists') and the KM (so-called 'pragmatists') adherents of the movement; (b) the realization that the movement, if it is to have more widespread influence and impact, need to develop the idea of "networks of communities of practice" or "shared knowledge cultures" (see Chatzkell, 1998 and Wenger, 1998), and (c) how to convince more business leaders and senior managers to come on board the IC/KM initiative.

However, all is not well. At a recent conference it was concluded that: "…the knowledge movement is at a crossroads. Although we live in a Knowledge Economy, strong efforts to promote re-treaded mechanistic or sentimental solutions to the [detriment of the] much more challenging issues of human knowledge creation, its capture and sharing still exist" (Chatzkell, 1999). As one, 'hardcore', IC/KM believer puts it: "To have an effective knowledge management model…we must get beyond two crippling misconceptions…the Sentimental Model which says that a company is its people…and, the Mechanistic Model…which attempts to codify knowledge…The result of being caught in these two models is that the knowledge management leader has become a cross between a systems manager, a librarian and a social worker."(Stewart,1999). Clearly, the IC/KM movement still experiences what psychologists could refer to as an identity crisis of some sort

The movement also seems to be in danger of being 'hijacked' by those with a predominantly commercial interest in the concept. In this regard Jeffers (1997) states that although: "Corporate America soon will spend billions on IC…most corporations remain unclear on the concept of intellectual capital and how to make the most of the internal knowledge they may have. But fear not. Every consultancy worth its J. Lobb lace-ups has bottled the idea into a pricey opportunity. " Ironically, a recent in-depth study of knowledge sharing within the management consulting industry itself, showed that the majority of consultancies are struggling with many of the same issues and challenges as their clients. For instance, the study reports that about 60% of all consulting firms surveyed :"…currently maintain no active best practices database"(Reimus, 1997).

Another critic, John Rutledge, the chairman of a merchant banking firm, is very outspoken in his condemnation of the IC/KM movement : " At best, useless. At worst, 'stakeholder' meddling" (Rutledge, 1997).

On the positive side, there seems to be agreement within the movement on the basic concepts, apparently first promulgated by Hubert Saint-Onge. One member shows a praiseworthy but rather naive insight into the human side of work organizations when he states that "…more important than technology is changing the social norms of the organization, which will then allow for networking and collaboration." (Prusak, 1999). Unfortunately, he does not seem to be really aware of the behavioral complexities involved in attempting to change an organizational culture – nor does there, in this regard, seem to be any knowledge of the contributions and efforts of behavioral scientists and organizational development practitioners (OD) over many decades.

Problematic aspects of the IC/KM scheme are, firstly, the fact that the framework is much too general and its categories not as mutually exclusive or theoretically pure as what might appear at first glance. For instance, a cohesive organizational culture refers to sound interpersonal relations based on strongly shared behavioral norms between members, and can therefore quite validly be viewed in IC/KM terms as the internal relational capital of the firm (not that one wishes to add to the existing conceptual muddled-ness in this area). This means that Relational Capital does not only refer to customers, and is confusing when used in the latter sense only. Yet, nowhere is this distinction made in the IC/KM literature.

Secondly, beyond the odd one or two references to 'leadership', 'organization culture', and 'empowerment', which, when mentioned, are cursorily treated as 'extraneous variables' of secondary importance, little if any awareness, interest or use of research from other management and organizational disciplines are indicated. With the exception of the currently somewhat marginal influence of the concept of the 'learning organization' on IC/KM, one can safely state that the entire field of organizational behavior (OB) and applied behavioral science in general (with its feeder disciplines of social psychology, I/O psychology, sociology etc) is inexplicably glossed over, almost as if it does not exist.

Knowledge Management can, paraphrasing Swanstrom (1999), succinctly be described as the art of identifying, acquiring, nurturing and utilizing/exploiting minds (human creativity) for profit. Seen thus, IC/KM shows its 'kinship' with the concept of the 'learning organization', namely, of creating or building the sort of organization: "…where people continually expand their capabilities to understand complexity, clarify vision, and improve shared mental models or basic assumptions"(Senge, 1990:340). Some writers, such as Chun Wei Choo (1999), in effect equate the 'knowledge organization' with being a 'learning organization'. He states: " The intelligent organization is…a learning organization…skilled at creating, acquiring, organizing and sharing knowledge"

Again, it must be borne in mind by IC/KM advocates, that creating a 'learning organization' is far from being a straightforward endeavor. One should ponder the following words of wisdom by, Edgar Schein, one of the leading scholars and pioneers in the field of Organization Behavior: " …the Learning Organization is a complex beast consisting of many systems whose separate learning and change efforts must be coordinated and integrated. It is time to accept the reality of this complexity and stop oversimplifying systemic learning processes by touting particular remedies like leadership, vision, re-engineering, total quality, customer focus, systems thinking and the like." (Schein, 1999). Grieves points to four challenges to OD raised by the existence of the knowledge-intensive organization, namely, to give adequate consideration to:" (a) the need to ensure an adequate supply of knowledge workers; (b) the need to identify, develop and evaluate knowledge workers and their outputs; (c) the ability to motivate and reward knowledge workers; (d) the ability to structure the organization…to facilitate change transitions to new organizational forms" (Grieves, 2000).

Finally, the IC/KM movement can, perhaps fruitfully, be viewed in relation to three broad and overlapping historical developments in 20th Century business and management thought (see Figure 1). During the first era, roughly covering the first few decades of the Century, a Production Economy was dominant, and the main aim, following Taylor's principles of scientific management, was the efficient manufacturing and production of goods, of which the Ford motor assembly line operation served as prime example. It was the era of 'hiring hands' as cheaply as possible to make 'better mousetraps' as reliably and efficiently as possible.

Figure 1: IC/KM in historical relief




















The second era, starting in the late twenties and early thirties, was given impetus by the quite serendipitous social-psychological research findings regarding the influence of human factors on productivity, by Elton Mayo, and others (Roethlisberger & Dickson, 1949). The focus now shifted to people and their relationships ---a trend which resulted in the Human Relations movement, which later, during the sixties and seventies, expanded to include a concern with keeping the customer satisfied. This led to an increasing importance being placed on 'consumer behavior'. Efficient mass production was not a problem any more; it was making things that people liked (that met their idiosyncratic consumption needs, and, increasingly, needs that were 'created' for them) that now made the difference in business survival and success. Thus entered the Service Economy, and such market slogans as: 'after-sales service'; 'service excellence' and 'customer care'.

We are now well into the third era, of the Knowledge Economy and the 'Learning/Knowledge Organization', whose main historical exemplar is Peter Drucker and his prescient emphasis on the 'knowledge worker'. During the last two decades various management models, concepts and tools, such as IT, TQM, LO and later BPR, were introduced. The latest addition to this stable is the IC/KM movement, the primary (if not exclusive) aim of which is to promote the: acquisition, organizing, managing and exploitation (for profit) of the creative capacity of human minds and all other assets, conceived in Intellectual Capital terms. Organizations are now reformulated as Knowledge Organizations with an emphasis on what can be described as: 'minds as the new business commodity'. Microsoft, with a reported market value of more than ten times its book value, serves as the prime example of the Knowledge Organization today.

IC/KM And Organizational Well-Being

This section briefly considers the 'place' of the IC/KM movement within a broader approach to human system well-being and against the background of a number of basic propositions concerning the systemic well-being of organizations.

Systems are integrated wholes whose specific structure and identity derive from the interactions and interdependence of their constituent or component parts. The generic structure of living systems are represented by varying and dynamic combinations of the basic constituents of being, namely: the Natural or Physical-Biological, the Social or Cultural, and Spiritual (Physis, Nomos and Logos in ancient Greek thought). A systems view of life emphasizes processes, dynamic ongoing relationships rather than isolated elements.

These root or archetypal dimensions are manifested in a large variety of observable phenomena and systems behavior in everyday life. The empirically observable characteristics of living systems typically provide the focus of study for a range of knowledge disciplines.

Human systems are considered to be in a state of well-being or optimal functioning when, firstly, the integrity of all three primary dimensions (separately and collectively) are preserved, none being allowed to either usurp or be substituted for by any of the others, although manageable imbalances inevitably form part of the ongoing life of human systems. Secondly, dynamic balance or well-being as such is achieved when human systems maintain optimum levels of tension between self-assertive and self-transcending forces, avoiding the destructive excesses of both.

Figure 2 gives an indication of how the three primary components of organizational well-being fit together. Secondly, using this approach it is easy to see that the IC framework (in terms of its previously discussed characteristics) represents an example of an excessive focus on the Physical-Material dimension, and on what can be generally be described as an overly mechanistic 'system resource' approach to work organizations.

Figure 2: Root dimensions of system well-being















Like other models adopting the more purely engineering-financial-economic approach, the IC/KM model does very little (see previous section) to substantially address the Social/Cultural and Spiritual dimensions of the organization as a human system.

From this perspective, and using the IC model as guide, perhaps business should consider introducing an expanded new measure of success, namely, the ROIC or Return on Intellectual Capital, consisting of three primary components:

Ø      conventional financial/market indicators (financial capital ?)

Ø      organizational (cultural) cohesion and commitment (loyalty capital ?)

Ø      realization of the firm's basic or ultimate/spiritual reason-for-being (often found in the vision of dynamic and charismatic top leaders – 'spiritual capital'?)

It would of course, by way of example, be irrational to expect an economic organization to acquire the collective mindset or identity of, say, a religious organization, not being a religious institution per se. But, it is a thought well-worth pondering to think of economic organizations at the Logos or Spiritual-level as being concerned with more than just the values of Utilitarianism, or some watered-down version of it (usually associated with the short-term profit-maximization motive). Similarly, incorporation of the more positive values of Humanism appropriate to the Social /Cultural root dimension of the organization, should also be considered. In short, perhaps the main deficiency of the IC/KM movement is that it focuses predominantly on the physical/financial well-being of the modern corporation to the exclusion of its equally important need for human (psycho-social) and spiritual well-being.


In conclusion, the IC/KM concept, although noteworthy for advancing the idea of the 'knowledge organization', seems to be stuck in an oversimplified conception of the organization. It takes a much too narrow, reductionistic approach to business organizations, simply seen as three types of 'intellectual capital', and nothing much else. If it is to remain a viable undertaking it will have to conceptually 're-group' to include the wide range of work done in other organizational sciences. Surely, as complex living human systems, organizations and its members are much more than mere repositories of 'marketable ideas' to which a dollar-tag is attached?


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Note: This paper is based on a commissioned report prepared by the author for Didata Health Services (SA)

To Contact The Author:

Prof. Herman J Pietersen, Head: Department of Industrial Psychology, Vista University, South Africa

Tel: 27 051 5051272, Fax: 27 051 5051270, URL: