Archive for January, 2014

Communicating Risk By Clarifying Risk Appetite

January 27th, 2014. Published under Communicating Risk. No Comments.

Michael D. Moberly     January 27, 2014   ‘A blog where attention span really matters’.

Companies and organizations encounter – engage risk every day, even multiple times per day, certainly no debate on that issue.  But, in my 25+ years of experience on the security – asset protection side of risk, I, like many of my colleagues, recognize business risk is perceived, defined, and addressed through a variety of lens, often dependent on (a.) one’s professional discipline, and (b.) their company specific responsibilities and/or oversight of assets.

One point I wish to make at the outset is this; as an intangible asset strategist and risk specialist, it is consistently necessary for me, when engaging clients, particularly new ones, that when the subject of risks arises, its absolutely critical that I recognize and respect that just because key business unit and management team members are at the same table, seldom do their perceptions and targets of risk necessarily coincide nor is consensus reached easily.

I attribute this circumstance in large part, to another reality, which is, a sizable number of management teams, c-suites, and boards, while they may generally know what intangible assets are, they (a.) variously remain operationally unfamiliar with the intangibles their company produces and utilizes, and (b.) have yet to feel compelled to achieve a higher level of operational familiarity to consistently engage their intangibles more effectively, competitively, and profitably.

Obviously, these realities present some challenges.  One is that it can impair the accuracy of a company’s risk assessment even though, as noted above, intangible assets are quite literally integral to most every aspect of conducting business regardless of industry sector, company size, or maturity.  Nevertheless, I endeavor to remain respectful of the various (business) risks management team members espouse through their diverse ‘lens’.   My initial objective is to respectfully guide management team members, c-suites, and boards, to recognize the ultimate target of their company’s risks – threats are, with increasing  consistency, intangible assets.

That is, for a substantial majority of companies globally, 80+% of their value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability today lie in or directly emerge from intangible assets.  My experiential expression of this economic fact – business reality generally produces the necessary intellectual and business bridge and/or linkage to achieving sufficient consensus to move forward on communicating an enterprise wide risk management initiative.

Admittedly, the notion that for most companies, their risks – threats, i.e., the ultimate, if not primary target are its intangible assets may be new.  Nevertheless, a significant percentage of economic – competitive advantage adversaries globally, are really seeking a company’s intellectual, structural, and relationship capital, i.e., intangible assets.  So, it is these intangibles that management teams are obliged to address and mitigate risks to, which starts by communicating (articulating) those risks, and putting in place practices, policies, and procedures designed to simultaneously sustain control, use, ownership, and monitor (the assets) value, materiality, and risks – threats.  That is, if their firm is to maintain its path of success, profitability, and competitive positioning.

But, insofar as most company’s never ending efforts to manage their risks, a fundamental question remains which warrants thoughtful attention, that is, how much risk, rightfully or wrongfully, do a company’s decision makers find acceptable as they pursue their company’s mission and objectives?  In other words, what is their ‘appetite for risk’?  Again, as an intangible asset strategist and risk specialist correctly gauging a company management teams appetite for risk is a responsibility I do not take lightly.

A complicating factor to answering the question lie in the reality that regulators, various oversight entities, and certainly stakeholders (and, stockholders) are seeking, if not demanding companies develop better descriptions of – and refinements in their risk management processes.

The Committee of Sponsoring Organizations of the Treadway Commission, or COSO, 2012 report titled Enterprise Risk Management — Understanding and Communicating Risk Appetite   suggests, in a related way, that communicating company risk should commence by…

·         understanding how much risk a company is willing to accept.

·         how should a company decide how much risk it is willing to accept?

·         to what extent should the risks which a company accepts, mirror stakeholders’ objectives and attitudes towards risk, and

·         how does a company ensure that its business units are operating within the agreed upon boundaries  which actually represent the company’s appetite for specific kinds of risk?

COSO defines ‘risk appetite’ as the amount of risk a company is willing to accept in pursuit of value. Each company pursues various objectives to add value and should recognize and understand the risk it is willing to undertake to achieve those objectives.

Accordingly, the COSO reports’ authors, suggest answers to the above questions essentially embody and/or frame a company’s risk appetite.  So, readers can assume then, that the foundation or starting point for developing and communicating a clearer understanding of a company’s risk appetite is determining…

·         which (business) objectives to pursue and which objectives should not be pursued, and

·         how to manage those objectives within the boundaries of a company’s agreed upon appetite for risk.

Admittedly, and unfortunately, some company management teams, c-suites, and boards, when asked, characterize ‘risk appetite’ as being an interesting theoretical discussion, probably best suited for a university lecture hall than a company’s conference room and probably more relevant to ‘risk management’ than ‘risk appetite’ and therefore, not easily integrated into a company’s strategic planning or even its day-to-day decision making.The COSO report’s authors though, believe that discussions regarding risk appetite exceed the theoretical.  This means, when effectively articulated, a company’s ‘risk appetite’ essentially provides guideposts and/or boundaries around the amount of risk a company should consider pursuing as part of say, a new (business) project, initiative, R&D, or transaction.  Therefore, presumably, a company which decides upon – accepts an aggressive appetite for (business) risk is more likely to set aggressive goals for itself, whereas a company that is (more) risk-averse, with a lower appetite for business risk, will likely set more conservative (business) goals and objectives.

Carried to the next logical level, readers can assume when a company’s visionaries and/or its decision makers consider or embark upon a particular business strategy, somewhere in that decision making process, preferably in advance of execution, there will be a determination as to whether the agreed upon strategy will actually align with and/or remain within the company’s risk appetite boundaries.  Again, when effectively communicated, a company’s ‘risk appetite’ can serve as a guide to management team members who are actually engaged in – responsible for setting the company’s goals and executing the necessary decisions to increase the probability those goals will be achieved and become sustainable relative to its operations and mission.

In other words, risk management decision making and compliance should not be executed as if  they were separate – distinct from strategic planning and daily decision making.  Rather both should be recognized as important components to a company’s culture, just as making decisions to attain a company’s (business) initiatives, projects, and objectives should be part of a company’s culture.

Again, an initial step, most would agree, to more fully embed risk management in a company, its decision makers and management teams should know and reach consensus on how much risk is acceptable insofar as developing strategies to accomplish both company-wide and individual business unit objectives for a company.

As a company and its management team actually begin to factor their risk appetite into their decision-making processes, they will become better positioned to (objectively) balance business risks with business opportunities.

For example, if a CEO expressed a need or desire to increase her company’s ‘risk appetite’ based on expectations that key aspects of its profitability were declining or would become stagnant, it’s quite likely…

·         if it were a financial services firm, by accepting a lower risk appetite, it may well choose to avoid opportunities that produce higher levels of risk while offering the possibility of higher returns, whereas

·         if it were a manufacturing firm, that accepts a higher appetite for risk may be more inclined to engage an opportunity to procure natural resources from a volatile country where its investment could be lost, literally at the whim of that country’s political leader(s). Obviously, in this instance the rewards may be high, but the risks are high as well.

So, company decision makers are obliged, if not fiduciarily responsible, to consider its risk appetite in unison with its goals and selecting which operational tactics to pursue.

I am very grateful for the work/research produced by Dr. Larry Rittenberg, Ernst & Young Professor of Accounting University of Wisconsin-Madison School of Business, Frank Martens, Director, PricewaterhouseCoopers in the development and writing of this blog post and I encourage readers to read their COSO Report titled ‘Thought Leadership in ERM   |  Enterprise Risk Management — Understanding and Communicating Risk Appetite’. 

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Islamic Law and Intellectual Property

January 24th, 2014. Published under Intellectual Property Rights, Islamic IP. 2 Comments.

Michael D. Moberly    January 24, 2014    ‘A blog where attention span really matters.’

Admittedly, I am not an expert in Islamic law, particularly those aspects which pertain to intellectual property and other intangible assets.  I do however, possess a very genuine desire to learn key practicalities of Islamic (and Sharia) law insofar as it relates to engaging in and/or endeavoring to conduct (business) transactions in which intellectual property and other intangible assets are in play, which I presume they are in Islam as they are in non-Islamic  sectors.

After reading and studying numerous, primarily academic, papers on what I respectfully refer to as an emerging business necessity, much of this post, I defer to an excellent paper authored by Silvia Beltrametti, (The Legality of Intellectual Property Rights Under Islamic Law, The Prague Yearbook of Comparative Law 2009. Mach, T. et al. (Eds). Prague, 2010. pp. 55-94).  While I did find many answers to the practical questions I was seeking, I concluded however, numerous questions remain insofar as the actual application of Islamic law to IP (intangible asset) conventions.

Ms. Beltrametti, a JD from the University of Chicago with an emphasis/specialty in IP, states that intellectual property rights, per se, are not regulated by Islamic law and its jurisprudence. Rather, the question or issue, she posits, is whether the principles of Islamic law can be construed in a manner that actually provides for or supports intellectual property rights  protections in a conventional context.

Beltrametti’s paper further discusses the extent to which Islamic law has an impact on the protection of intellectual property (rights).  She does this initially by presenting Sharia’s main sources; the Qur’an, the Sunna, Ijma and Qiyas.  I should note that the term Sharia, as applied throughout Beltametti’s paper, is synonymous with Islamic law.

Very appropriately, Beltrametti points out, tensions and challenges remain between (a.) the predominantly Western, and (b.) Islamic perspectives regarding intellectual property rights, as well as (c.) the role economics plays within Islamic law and society.  To that,  Ms. Beltrametti offers an  intriguing suggestion in which a Sharia based (legal, intellectual property rights) system, is flexible and adaptable.  Such flexibility, she suggests, can be used to address current economic facts/realities, for example,  80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today reside in or evolve directly from intangible, often IP-based assets.

Another equally informative paper, titled ‘Can TRIPS Live in Harmony with Islamic Law: An Investigation of the Relationship between Intellectual Property and Islamic Law?’ authored by Chad M. Cullen (Baker Botts) provides additional insight and is certainly worthy of one’s time to read and study.

Both authors/researchers, in their respective style…

  • agree that intellectual property (rights), per se, are not particularly new concepts to Islamic rule of law. Some IPR’s are actually strengthened by Islamic rule, while others were never explicitly formulated (as law), instead, they evolved as accepted social norms.
  • point out that since the advent of Islam, the concept of intellectual property (rights) has expanded to include trademarks, patents, and certain forms of copyright by granting limited exclusive rights to works, in exchange for the commercialization of original creations that benefit society, while also allow the owner (presumably the originator) to stop overt – unauthorized use, e.g., presumably acts such as counterfeiting, piracy, infringement, misappropriation, etc.
  • agree that Sharia does not refer to Islamic legal rules only, rather, Sharia encompasses a timeless concept of justice and fairness that may be best understood as constituting a higher rule of law with a divine connection.

After reviewing numerous (other) sources, I concluded, correctly and reasonably I trust, that…

  • there are varying degrees of latitude insofar as interpreting and applying IP and intangible asset matters under Islamic (Sharia) law, but
  • such laws are not being aggressively enforced, at least at the present time.  In other words, infringement and misappropriation, etc., in the Middle East, contributes to substantial losses of revenue for companies and/or individual business persons who rely – are dependent on intellectual property rights.

Obviously, it’s important and necessary to point out that such transgressions pose significant problems globally, not just in countries which practice Islamic law.

Both Cullen and Beltrametti note however, that an Islamic World Trade Organization member state, is obligated to uphold the requirements of TRIPS.  Under Shari’a, this has led many Islamic states to enact intellectual property laws meeting the minimum standards of TRIPS.  Thus, being a signatory to TRIPS essentially verifies (operationalizes) the belief that intellectual property rights are compatible with Shari’a and related Islamic legal concepts and practices.

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members.[2] It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.

The TRIPS agreement introduced intellectual property law into the international trading system for the first time and remains the most comprehensive international agreement on intellectual property to date. In 2001, developing countries, concerned that developed countries were insisting on an overly narrow reading of TRIPS, initiated a round of talks that resulted in the Doha Declaration. The Doha declaration is a WTO statement that clarifies the scope of TRIPS, stating for example that TRIPS can and should be interpreted in light of the goal “to promote access to medicines for all.”

Specifically, TRIPS requires WTO members to provide copyright rights, covering content producers including performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; new plant varieties; trademarks; trade dress; and undisclosed or confidential information. TRIPS also specifies enforcement procedures, remedies, and dispute resolution procedures. Protection and enforcement of all intellectual property rights shall meet the objectives to contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.  (Wikipedia)

In practice, however, intellectual property rights, be they TRIP’s initiated or otherwise, have respectfully, not been particularly well-received in some Islamic states.  That is, a percentage of the Islamic community believe the concept of intellectual property and the associated rights and responsibilities, particularly intellectual property-based innovations associated with advanced technologies, etc., originate predominantly in the West, and not from (their) religious sources.  This perspective. many agree, serves to elevate reluctance for a broader acceptance of intellectual property rights.

That said, numerous Islamic states have stringent intellectual property laws and regulations in place.  However some, not unlike other non-Islam countries, remain ineffective or experience particular challenges related to actual enforcement of intellectual property rights.

Appropriately then, one question to pursue further is whether this is a government influenced choice or mandate, or an enforcement resource issue?  Taking this perspective several steps further, some assume that forcing WTO membership and TRIPS upon Islamic states through threats of import – export restrictions and high tariffs underlie a perception that intellectual property law, with provisions for the enforcement of intellectual property rights, constitutes another facet or form of Western oppression.  This perception has gained varying levels of strength within some sectors of the Islamic community.  In other words, infringement and/or misappropriation of intellectual property (rights) may not characterized so much as a legal wrong per se, rather a means for seeking revenge against the West.

So, how should all of this be interpreted by businesses wishing to engage in transactions in countries practicing Islamic law where in most instances, there is significant intellectual property and other intangible assets integral to a transaction and its outcome.  Admittedly, having not engaged in or consulted with companies engaging in business (transactions) is Islamic countries, I presume, as in any transaction occurring elsewhere, intellectual property and other forms of intangible assets will play a significant role.  Perhaps readers who are engaging in such transactions, they will find various other posts made at this blog to be relevant particularly those that address intangible asset due diligence and risk assessments.

I am very grateful for the work/research produced by Silvia Beltrametti and Chad Cullen in the development and writing of this blog post and I encourage readers to read their respective papers.

Reputation Risk Mitigation Confidentiality Agreements

January 20th, 2014. Published under Intangible asset protection, Reputation risk.. 1 Comment.

Michael D. Moberly     January 20, 2014      ‘A blog where attention span really counts’. 

 There is nothing particularly new in the reality that forward looking – thinking companies, whether they be a university research-based spinoff, an SMM (small, medium multi-national) or a global Fortune 1000,  are experiencing an increasingly aggressive, and even predatorial environment insofar as securing human – intellectual capital to sustain their competitive position, growth strategies, and financial security.

To be sure, prospective candidates can be readily identified from virtual pools of global applicants.  But, a percentage of the candidates with the requisite levels of experience, knowhow, and trusted academic credentials, frequently come already wrapped in various forms of non-competes (NC’s), non-disclosure agreements (NDA’s) and various other forms of confidentiality agreements (CA’s) which have, quite wisely in most instances, become routine fixtures of employee hiring and on-boarding processes.

 Rationale for contractual safeguards is to establish boundaries…

In most instances, the rationale underlying the requisite that employees’ enter into NC’s, NDA’s and/or CA’s, is to establish ‘boundaries’ which employees are legally – contractually obligated to work within, usually for a specified period of time, insofar as safeguarding their employer’s proprietary information and/or trade secrets.

Such contracts themselves create legal obligations to privacy and compel employee signatories to keep specified information secret and secured.  Based on my own experiences and which I believe many colleagues would agree, any boundaries employees may be compelled to agree to, as a requisite to employment insofar as safeguarding proprietary information and/or trade secrets, are, in my judgment (a reasonable guesstimate) perhaps 60% proactive and 40% reactive.

That is, any form of contractual agreement that obligates employees to safeguard knowhow, i.e., theirs and others’ intellectual and structural capital related to work products, company proprietary information and trade secrets will, to be sure, inhibit a percentage of employees, perhaps as high as 60+%, from ever ‘purposefully’ divulging specified information to individuals absent a right to know.  There remain considerable unknowns in my view, about the actual permanency of such inhibiting intentions.

On the other hand, the reactive elements of CA’s are executed primarily to establish legal standing and/or provide a recourse for a victimized company to seek criminal and/or civil charges – damages against employee(s) who elect, for whatever reason, to, at some point during their employment or post-employment period to purposefully disregard the boundaries of a previously executed CA and divulge information to others, i.e., economic – competitive advantage adversaries, etc.

Admittedly, I find no satisfaction in the view that it is, at best, wishful thinking that CA’s, standing alone, absent respectful and legal monitoring, actually possess the preemptory and/or inhibitory features an uninitiated company or its legal counsel may naively presume.

Perceptions that information safeguards slow access to needed information…

Too, there is a perception, real or anecdotally imagined, that CA’s will limit or otherwise adversely affect the speed and collaborative necessities that comes from sharing and disseminating information in a timely and/or at will manner.  Those responsible for information asset (trade secret, intellectual property, proprietary/sensitive information) protection may not find this frequently espoused argument to be a particularly credible or worthy of otherwise addressing.

A relevant, but often overlooked reality relative to that the ‘contributory value’ related to an employee’s existing or future intellectual, structural, and relationship capital are indeed intangible assets, and exist as either stand alone or collaborative combinations.  That being the case, companies would find proactive prudency in, at minimum, revisiting, re-writing if necessary, and then re-executing employee’s CA’s, versus assuming its initial (one time) execution is a sufficient inhibitor for the duration of an employee’s employment.

The suggestion put forth here is, for new hires particularly, i.e., those who have been recruited for possessing specific intellectual and structural capital, presumably to advance a new, or existing (company) initiative or project should be subject to regular review.  The rationale is, seldom does an employees’ intellectual and structural capital remain stationary relative to its contributory value.  Instead, in most instances, such intangible (intellectual) assets will likely elevate and expand, that is their ‘contributory value’ will heighten and, as such, become increasingly attractive commodities to economic – competitive advantage (predatorial) adversaries globally.

In-coming employee’s confidentiality agreements need to be thoroughly unraveled…

That’s due, in part to (a.) the duration, (b.) what’s covered in an employee’s former employers’ CA, and (c.) whether there may be multiple – overlapping features.   Thus, it’s essential to unravel and assess these agreements insofar as their relevance to – immediate impact on the hiring company, and the employee’s ability to make immediate contributions.  In other words, be able to legally navigate such agreements to avoid, among other things, incurring extraordinarily embarrassing and costly reputation risks.

Also, in today’s HR sensitive environment, any cultural, legal, and/or religious contexts embedded in a NC, NDA, and/or CA which could conceivably hamper and/or delay a new hires’ eventual contributory value must be respectfully assessed.

To be sure, there some instances in which new hires have either been purposefully or inadvertently remiss in fully understanding specifics contained in NC’s, NDA’s, and/or CA’s executed with former employers.  On the other hand, some employees pay little or no attention to the language in employment (contractual) agreements or perhaps don’t fully comprehend the legal boundaries which their signed agreement (language) actually stipulates –  imposes on them for the duration of their employment, not to mention periods of time following their employment with a particular employer.

Collectively speaking then, the time and attention devoted to unraveling and assessing prospective hires’ previous employment confidentiality agreements can (a.) help mitigate reputation risks, (b) make for more informed hiring decisions, (c.) reduce the probability that potentially problematic employees will be inadvertently hired, and (d.) create costly and long term reputation risks.

Being on the receiving end of an allegation of violating a non-compete and/or a cease and desist letter can certainly diminish – undermine the contributory value of not only a new hire, but a company’s overall reputation.

Ultimately, the long held adage ‘ignorance is bliss’ in these circumstances is virtually irrelevant in today’s virtual and global recruitment and hiring environment.  So, the onus is on every employer, throughout their respective (new hire) on-boarding processes, to not just inquire, but bring absolute clarity to the boundaries of any and all employment agreements that may still have an effect on an employee’s reputation.

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for a wide range of issues related to intangible assets within the global business community.  My posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Investing In Company Culture Is An Investment In Intangible Assets!

January 10th, 2014. Published under Company culture and reputation., Design thinking., Intangible asset focused company culture.. No Comments.

Michael D. Moberly    January 10, 2014    A blog where attention span really matters!

David Lapin projects the next big wave of growth in business will come from businesses whose leaders and management team members know how to convert this low-cost intangible asset, i.e., company culture, into high bottom-line value!

Investing in building and nurturing a company’s culture is the wisest investment any business leader or management team can make!  Financially, it is a low-cost investment with a high probability of economic – competitive advantage returns.

A company’s culture is somewhat akin to a garden, that is, a culture will develop whether or not business leaders or management teams put forth the time and effort to actually design it.

So, like the garden analogy above, if a company’s culture is ignored or neglected, that is, absent regular management, oversight, and nurturing, it’s very likely it will continue to grow regardless, but probably not as intended or preferred and in ways which are not particularly helpful to the company and its mission.  Adverse examples of this include inhibiting innovation or manifesting as employee under-performance. Company cultures that evolve in this manner are said to be akin to an ‘invisible force’ that can not only undermine company – employee productivity but sap leader’s energy.

Cultivating a positive company culture…

Let there be no question, developing, cultivating, and sustaining a desired company culture requires thought, wisdom, time, and some intellectual curiosity and emotional investment to understand what motivates employees to perform consistently well, even beyond expectations.   I am respectfully confident there is no specific, one-size-fits-all methodology or strategy to achieve this, but there is ample anecdotal evidence and examples that ‘good to great’ leaders do pay attention to it.

As David Lapin pointed out in his research, an authentic (company) culture is something competitors will find challenging if not impossible to imitate.  And yes readers, company culture is an intangible asset which, in most instances, can be commoditized and converted to real value. In fact, David Lapin projects the next big wave of growth in business will come from businesses whose leaders and management team members know how to convert this low-cost intangible asset, i.e., company culture, into high bottom-line value.

The knowledge-based global economy has allowed many leaders and managers to acquire a better understanding and appreciation for ‘home grown’ intangible assets like intellectual, structural, and relationship capital and their potential for conversion as specialized commodities into value, revenue, reputation, and goodwill, etc.

Many would agree with the view that Southwest Airlines (headquartered in Phoenix, Arizona) is a prime example of a leaders’ ability to not only create a very open and transparent company culture, but also turn the intangibles emanating from this culture into commodities with substantial monetary value.

Southwest Airlines has long been a dominant player, particularly upon airline deregulation occurred in the U.S. and now in the ever shrinking (merging) U.S.-based airline industry. For SWA’s their growth was in part due to its operating culture built upon genuine efficiencies, e.g., flying only one model of aircraft, creating a no-frill travel experience, no food service or pre-assigned seating.  Ultimately SWA stripped most of these ‘tangible commodities’ associated with conventional airline travel.  In return, SWA’s customers received something of relatively equal value in return, at least in the eyes of their growing number of customers that is, a good flying experience underwritten by a culture embedded with intangible assets, i.e., joke telling entertainment from flight attendants coupled with a felt sense of care that apparently compensated for any loss of those ‘tangible commodities’, i.e., complimentary food and beverage service for one.

There are three well known secrets that underlie SWA’s travel experience and its overall financial success since its inception, i.e., (1.) the company and its leader, ala Herb Kelleher built a culture that incorporated the properties of fun, entertainment, and felt care became embedded in the company’s core, (2.) the culture had to feel authentic and genuine by passengers, and (3.)  SWA had to be able to convert its now intangible asset based company culture into tangible benefits, including market share growth which, as we know, it did.

Numerous business schools today use SWA and its founder Herb Kelleher as a case study of commoditizing a company culture and its intangible competitive advantages balanced with tangible operational efficiencies.

While SWA was investing in and building its intangible asset based company culture, numerous competitors were cutting financial corners that indeed reduced costs that frequently eroded their own culture. Kelleher and SWA, on the other hand, only cut those (financial) corners which the y presumably believed would have little or no impact on the culture they were building and a passengers’ overall travel experience. In fact, SWA continued to invest more in its culture even during periods when the airline industry, as a whole, was struggling. Kelleher and SWA management teams obviously recognized safe and on-time flights for passengers were, in essence, common commodities that competitors also provided to their passengers.

So, for SWA to be competitive in a deregulated environment, Kelleher and his management team purposefully built a company culture that would offer ‘intangibles’ that competitors couldn’t or wouldn’t.

The intangibles SWA’s culture began offering became well publicized differentiators that were embedded in the company’s values rather than directly in its products, processes, or structures. Products, processes, and structure, it’s said, Kelleher recognized could and would be copied, but intangible assets such as an authentic company culture cannot be readily copied providing it is genuinely embedded in company and employee values.

Any company can build its own culture; one that is unique and innate to its people and strategic objectives. But when a company tries to copy another company’s culture they quickly find it difficult, if not impossible to replicate.  Numerous SWA competitors have tried, over the years, to imitate those SWA, but, most all fell short, generally it’s assumed, because they were unable, for whatever reason, to embed it in company – employee values.

Admittedly, I never had the opportunity or pleasure of making Mr. Kellehers’ acquaintance. I did however regularly fly on SWA in it earliest days, not for its’, at the time, emerging culture, rather because (a.) it was less expensive, and (b.) I didn’t mind its business model of securing gates at first generation airports, which in many instances were actually closer to city centers’.

Professionally speaking, I’m unclear whether SWA’s company culture, which in my recollection became obvious and noticeable, from a passenger perspective, beginning in the mid-1980’s and continuing through much of the 1990’s.  Was this culture a well thought through component of Kelleher’s ‘grand plan’, or was it like most other company cultures which appear and grow by accident or merely good luck?  Frankly, what makes me slightly skeptical is the now common relationship between intangible assets and company culture only slowly acquired traction in business operations following the publication of the Brookings Institute’s report (study) on intangibles in late 1990’s.

There is absolutely no question that Kelleher was the ‘dynamic’ driving SWA’s rapid growth and passenger satisfaction, which in part was due to the company culture that evolved.

This post was inspired by David Lapin’s book ‘Lead by Greatness, Character, Success’ published by Avoda Books, 2012.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Creating A Company Culture: A Necessity, Not A Luxury!

January 9th, 2014. Published under Company culture and reputation., Fiduciary Responsibility. No Comments.

Michael D. Moberly    January 9, 2014    ‘A blog where attention span matters’! 

Imagine a person from another planet turning up at a funeral here on Earth. Without having to be told, he would know that a funeral is not an appropriate place to tell jokes. This, Professor Michael Tushman tells his class at Harvard Business School, is the meaning of culture.

But culture does more than inform employees what attitudes and behaviors are expected of them. Culture reflects a company’s soul and is responsible for generating human energy.

I have written this post with the intent that it respectfully encourages business leaders and management teams to recognize the importance of creating a company culture that converges  intangible assets, particularly its intellectual, structural, and relationship capital.

Every company has a culture…

Whether by accident or by design, it is highly likely every company has a culture, says Dr. Phillip E. Atkinson in his paper titled ‘Creating Culture Change’.

However, in most instances, Atkinson suggests, a company’s culture is frequently a matter of accident or, simply luck.  Unfortunately, in numerous instances, Atkinson found, a company’s culture may not match its strategy, its business plan, or its commercial intentions.  In other words, a company culture may actually be counter to its needs.  Further, Atkinson suggests, and I agree, it is not unusual to observe a company culture that actually drives clients and customers away because its focus is primarily internal to the exclusion of being sufficiently external (customer, client) oriented.

Examine company culture for…

As conveyed countless times throughout this blog, a well designed, configured, and balanced company culture that genuinely reflects each relevant component of a company’s mission can be a very valuable intangible asset that delivers competitive advantages in multiples. It’s prudent then for business leaders and management teams to assume an obligation, if not fiduciary responsibility to periodically examine and assess their company’s culture for (a.) balance, (b.) match, and (c.) resilience.

There is ample evidence, along with just plain business sense, that for numerous companies globally, success, measured as elevated value, expanded sources of revenue, opportunities for growth, profitability, and sustainability, etc., flow from an agreeable and well executed company culture.

Key components of an effective company culture…

The key components of this type of company culture are that it respectfully harnesses, exploits, and utilizes its intangible assets which I describe as ‘contributory value’ assets, i.e., intellectual, structural, and relationship capital.  In most instances, these and other intangibles are accepted, shared, and ultimately embedded in company practices and processes.

A resilient company culture…

A company cultures’ resilience is indeed important, and a facet that should not be taken for granted or otherwise overlooked. A cultures’ resilience translates as how receptive and readily adaptive it is – can be to the increasingly nuanced types of global, multi-partnered, and multi-cultural business transactions that are common in a manner that elevates the probability that the outcomes – results will be favorable and meet or surpass projections.

A well designed and executed company culture, recognized as a culmination of intangible assets, will deliver superior performance, providing, of course, resilience and sustainability have been prominently embedded along with a balanced internal – external orientation that reflects the company’s mission and achieves competitive advantages relative to its respective (industry) sector.

However, company cultures’ require working in ambiguous and perhaps subjective arenas, relative to how (company) beliefs and values eventually surface as accepted processes, practices, group dynamics, and ultimately expected behaviors.

This culture has to change…

Atkinson appropriately asks, how many times has the phrase ‘this culture has to change’ been uttered by business leaders and management teams?  To be sure, in recent years we have heard this phrase often relative to the global banking crisis, the recent exposures about the media, publishing of Edward Snowden’s revelations, the continued poor performance of educational systems, and the list certainly does not end there.

Respecting Atkinson’s near term as well as over-the-horizon research regarding company culture, it’s certainly not challenging to infer a significant percentage of company cultures are not, or they are ineffectively, aligned with a company’s mission, the various transactions it becomes engaged, or its purpose. Surely, at some point, business leaders and management teams will recognize that it does not require publicly embarrassing revelations and/or investigations that produce substantial and long lasting reputation risk to recognize that in a number of instances, remedial (company culture) action is necessary and is the absolute correct thing to do.

Before those of us who are strong company culture advocates jump into this fray, it might be a good idea to bring more clarity about precisely what company culture actually is and how it can be built, shaped, installed, nurtured, monitored, and sustained.

Remember, a company’s culture is an intangible asset…

Admitted, there remains confusion, even among the higher echelons, about company culture and how to recognize it warrants changing to be better, more relevant, and actually fit or merge with the economic fact that today, 80+% of most company’s value, sources, of revenue, and ‘building blocks’ for growth, profitability, and sustainability either lie in or evolve directly from intangible assets, which company culture is a prominent one.

A company’s culture should be or become the driving underlier to company’s forward movement, Atkinson suggests.  More specifically, a company culture consists of its infrastructure and the proverbial glue that connect employees and processes (structural capital) to generate positive outcomes and results while being aligned with the business plan and vision for the future.

So, for 2014 and beyond, it’s important that business leaders and management teams recognize, whether by accident, design, or luck, their company already has a functioning culture in place.  The assessment that must be performed however is whether that culture meshes with the company’s strategy, business plans, and overall commercial intentions. a company.  If not, often with slight modifications, managerial nurturing, and time, the existing culture can be re-oriented to better connect with a company’s needs.


This post was inspired by the excellent work of Phillip A. Atkinson, particularly his 2004 article titled ‘Creating and Shaping a Performance Driven Culture’.

Company Cultures: Their Future Must Accommodate Intangible Assets

January 8th, 2014. Published under Company culture and reputation., Intangible asset focused company culture.. No Comments.

Michael D. Moberly     January 8, 2014    ‘A blog where attention span matters!’

I assume many readers of this blog are like me, that is, we only periodically give the notion of ‘company culture’ much genuine thought.  But, if asked, we could readily utter a sufficient number of adjectives, adverbs, and nouns that, once organized, would paint a fairly detailed operational portrait of our employer that would reveal the intricacies of our employer’s (company) culture.

I respectfully suspect however, individuals who are unfamiliar with my blogs’ overall mission may omit from their (company culture) descriptive’ the fact that company culture is a powerful and generally valuable intangible asset.

So, while we may understand how a company culture should be conveyed, many of us may not realize how important company culture has become in today’s businesses, as a valuable contributor – underlier to sources of revenue, competitive advantages, and overall sustainability.

In their new book titled Rise of the DEO: Leadership by Design, Maria Giudice and Christopher Ireland explain their view of the importance for companies to have a ‘design executive officer’ in the place.  Of the six defining characteristics which Giudice and Ireland believe DEO’s should possess, I believe a particularly relevant one is being a ‘systems thinker’ which they define in the following context which I have taken the liberty of adapting somewhat…

“despite their desire to disrupt and take risks, DEOs understand the interconnectedness of the work environment as a whole, that is, they recognize each part of the organization (probably) overlaps and influences other parts of the organization. They also recognize unseen connections, that surround what’s actually visible within acompany which helps give their disruptions intended, rather than chaotic, impact and makes their risk taking more conscious…”

More specifically, Giudice and Ireland suggest that business leaders who actually understand the transformative power and influence of a company culture (design) and embrace and engage its characteristics will lead in times of change.  Thus, as noted countless times in this blog, the economic fact that 80+% of most company’s globally, their value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability either lie in or evolve directly from intangible (not tangible) assets, constitutes change, and leading that (economic, business) culture change is not merely important, it’s a necessity!

In many respects, Giudice and Ireland’s 2013 book, Rise of the DEO: Leadership by Design, describe, the qualities, many through examples, which they believe ‘a new breed’ of business management team leaders should possess which I do not disagree insofar as have a ‘design’ for purposefully identifying, unraveling, and engaging their intangible assets.  In other words, elevating the operational familiarity of the current, as well as the on-coming generation of company management teams to the sometimes disruptive strategies necessary to fully utilize and exploit their intangible assets.

This post was dually inspired by Marissa Brassfields Ridiculously Efficient’ blog post of December 24, 2013 and the authors Maria Giudice and Christopher Ireland for their very intriguing 2013 book titled, Rise of the DEO: Leadership By Design.

 

  • This blog post, as usual, is researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for a wide range of issues related to intangible assets within the global business community.  My posts are not intended to be quick bites of unsubstantiated commentary.
  • Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Company Culture Due Diligence

January 6th, 2014. Published under Company culture and reputation., Due Diligence and Risk Assessments. 1 Comment.

Michael D. Moberly    January 6, 2014    ‘A blog where attention span matters.

 A company initiating, or even contemplating, a merger or acquisition would be well served today if a company culture analysis was included in their overall due diligence strategy!

The reason, as conveyed here many times, is that increasing percentages, i.e., 80+% of most company’s value and sources of revenue either lie in or directly evolve from intangible assets, which company culture is one.  It’s correct to assume then, that a substantial factor in the rationale if the initiating company’s seeking an M&A evolve around merging or acquiring particular intangible assets which the target firm already has in place and collectively exist in the form of intellectual, structural, and relationship capital.

From an operational perspective, intellectual and structural capital constitutes the knowhow and processes which collectively underlie the revenue, competitive advantages, and efficiencies, etc., being sought.  So, in M&A transactions, acquiring unimpeded use and control of these valuable assets becomes the underlying starting point for achieving the projected (desired) transaction outcomes.

Unfortunately, for the uninitiated, a target company’s culture, as well as other intangible assets, may be overlooked, dismissed, or even deemed irrelevant to a transactions’ projected outcome.  It’s equally unwise to assume, should a proposed transaction, i.e., M&A, strategic alliance, etc., be favorably executed, that the sought after intangibles can be necessarily (individually) separated, extracted, and  exploited apart from a company’s culture. Today, transaction management teams are obliged to understand that are intangible assets quite indivisible from its culture, particularly intellectual, structural, and relationship capital which are generally embedded in various operational processes and integrated throughout an enterprise,.

Transaction management teams again, would be well served to recognize a company’s culture as being an invisible (intangible) temperament and/or attitude that connects and bonds companies, employees, and stakeholders together, says Grant McCracken, one, among several prominent company culture specialists today, specializing in the intersection of commerce and culture, i.e., where company culture sits at the intersection of anthropology and economics.

So, from McCracken and others’ work in this arena, we see perspectives emerging, that company culture is being likened to an ‘internal version of a company’s brand’.  That’s largely attributable to a broader recognition of the reality that company culture generally encompasses a company’s mission, its vision, its values, and its intangible assets.

Clearly McCracken understands how an effective (company) culture can impact a business, e.g., “culture is a company’s last mile” he often emphasizes as he makes a very compelling case that a company’s culture is marketing’s newest version of the proverbial ‘silver bullet’.  Certainly, no disagreement here!

But, before embarking on a company culture analysis, says Monica Mehta a writer for Profit and Profit Online, the target company should be distinguished on several cultural dimensions often conveyed as dimensions between two extremes as Ms. Mehta has portrayed so well here…

So, there should be less resistance to including company culture analysis as an integral component to transaction due diligence.  In my view, each of the dimensions above apply to corporate cultures, and can serve as effective starting points for culture assessment and due diligence. It is important to realize, as Ms. Mehta points out, there may be no, necessarily right or wrong (company) culture at the analysis stage.  The initial key is that due diligence teams are operationally familiar with the characteristics and features of their own company’s culture.
In Ms. Mehta’s example, the following can be observed with respect to Company #1…
  • it is engaged in public manufacturing with a strong western, primarily U.S. oriented, business culture.
  • the nodes confirm the company has an individualized (work ethic) orientation overall wherein employees have the opportunity to work in a meritocracy fashion.
  • is very rules-oriented, i.e., there is a process for most every function or task.
  • due in part to its public nature, the Company #1 has a relatively short-term focus, e.g., new business strategies need to pay off – produce a return on investment within each fiscal year.
  • tends toward a (McGregor) Theory Y perspective, wherein managers assume employees are (self) motivated to perform well providing their efforts are duly and appropriately recognized., i.e., the bonus program, based on over-performing on the goals, can be found on the company’s intranet, next to all other procedural descriptions
  • is relatively internally focused, and plans its business using a traditional – conventional budget scheme.
  • benefits from the best practices of performance management, i.e., a top-down strategy for task implementation, coupled with openly shared feedback with a ranking of the best-scoring people in sales.

On the somewhat opposite extreme, Company #2 would likely not be as successful because Ms. Mehta suggests…

  • it has been a family-owned business for multiple generations with senior management knowing most of the employees, many of whom have worked for the company their entire professional lives.
  • the next generation of ownership is growing up and the company needs to secure their future too.
  • the culture of the company is externally focused which suggests it can only survive in the market by sustaining its extreme customer focus.
  • of the company’s decision-making process, i.e., senior management ask for input only from a few trusted employees, and then the family will make a decision with information eventually being shared with the staff, but usually verbally and in informal meetings.
  • while the company has performance indicators, they are mostly aimed at how the company is performing in the eyes of the customers.
  • rewards are not directly tied to performance during a specific period, rather the family rewards loyalty and provides bonuses when deemed necessary.

In closing, while I am a strong advocate of company culture due diligence, standing alone, culture alignment does not guarantee a successful and profitable transaction, i.e., M&A.

For example, if Company #2 is realizing losses, perhaps some elements of the performance management practices of Company #1 need to be adopted.  Conversely, if Company #1 is experiencing a substantial growth phase, key people (and their respective intellectual, structural, and relationship capital abilities) need to be retained to manage that growth with these individuals becoming part of the company’s inner circle of strategic thinkers and decision makers.

Thus, the insight that a company culture analysis (due diligence) would bring to transaction oversight could ultimately set a strategic path how (culture) performance management should be conceived and implemented. But, transaction management teams should also recognize that (culture) performance management it can work as a measurement mechanism that drives employee behavior.

So, if there are particular aspects of a target company’s culture that appear undesirable or otherwise may impede a transactions projected milestones for success they may warrant change.

Otherwise if there is too much…

  • of a group focus, individual performance indicators may be useful, or
  • of a long-term focus, short-term targets may help, or
  • if relationship (capital) focus turns into nepotism, more uniform reward processes may be needed.

This post was inspired and adapted from work authored by Monica Mehta in a February 2009 piece in Profit and Profit Online.

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for a wide range of issues related to intangible assets within the global business community.  My posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

 

 

 

 

 

Company Culture, Reputation and Financial Performance

January 3rd, 2014. Published under Company culture and reputation.. No Comments.

Michael D. Moberly    January 3, 2014    ‘A blog where attention span matters’!        

This blog post constitutes a respectful summary of what I believe to be very fascinating research conducted by Dr. Sylvia Flatt and Dr. Stanley J. Kowalczyk that conveys enlightening linkages between…

  • company culture.
  • reputation, and a company’s
  • financial performance.

Today, there is, in my view, an absolute necessity for business leaders and management teams to possess – retain a strong sense of personal – professional inquisitiveness in order to stay abreast of trends, and equally important, strategically relevant applied (academic) research.  When the latter is examined through intellectually receptive lens, valuable kernels of contributory value are routinely found which are not merely time bound or ‘buzz word’ trends, rather they often bring operational and nuanced clarity to issues and/or challenges that warrant board, c-suite, and management team attention.

In this regard, allow me to introduce readers of this blog to a comprehensive piece of research related to company culture, reputation, and company’s financial performance which I have taken the liberty of respectfully summarizing and commenting.

As readers know well, ‘company reputation’ is an intangible asset.  However, more company management teams need to devote time assessing various strategies to…

  • leverage their reputation to create (strategic) competitive advantages that will distinguish their company from others which operate in the same sector.
  • converge all intangibles to favorably influence their company’s culture, reputation, and ultimately, it’s overall financial performance and even sustainability.

But first, a broadly agreed upon definition of culture is warranted, i.e., (company) culture consists of…

           a system of shared values (defining what is important) and norms that define appropriate attitudes and behavior (Chatman and Cha, 2003, p. 21). 

Thus, it’s easy to surmise that a strong and well managed (company) culture can actually influence a company’s financial performance because the shared and strongly held norms and values embedded in the company culture, serve to increase behavioral consistency among employees which in turn can, and should lead to…

  • enhanced coordination and control.
  • improved goal alignment, and
  • increased employee effort (Sorenson, 2002, p. 70-72).

Relatively few researchers have empirically tested the relationship between company culture and reputation, as Flatt and Kowalczyk have.  Their research allows them to put forward a very interesting and certainly (business) relevant perspective about how company culture can be an important (intangible) predictor of reputation.  Flatt and Kowalczyk demonstrate this relationship by engaging 104 companies (as part of this research project) in which, among other things, they found that (company) culture…

  • not only enhances financial performance (as indicated by other research), but also is positively related to reputation itself, thus
  • reputation functions somewhat as a mediator between culture and financial performance.

Flatt and Kowalczyk’s paper extends prior research in this arena by…

  • examining the direct and indirect effects of culture and reputation on financial performance, and
  • tests if reputation actually mediates the effect of culture on financial performance.

Please note that financial performance is included as a dependent variable to gauge whether culture and reputation contribute to a firm’s value creation for a competitive advantage(s).

Flatt and Kowalczyk admit however, while there is fairly broad support that financial performance is a predictor of reputation, less is known about what other variables may also be predictors of (a strong, positive, and possibly resilient) reputation (e.g., Sobol and Farrell, 1988; Fombrun and Shanley, 1990; Brown and Perry, 1994; Hammond and Slocum, 1996; Roberts and Dowling, 2002).

Fombrun (1996) states that “a company’s reputation sits on the bedrock of its identity, i.e., the core values that shape it’s…

  • communications,
  • culture, and
  • decisions (p. 268).

A company’s identity, in turn, is closely aligned with its…

  • character,
  • personality, and
  • culture (Fombrun,1996, p. 277).

Therefore, core cultural values, such as…

  • credibility
  • reliability
  • trustworthiness, and
  • responsibility.

                              are at the core of the perceptual representation of a company’ reputation (Fombrun, 1996).

Thus, (company) culture provides the context for how a company’s identity is formed and articulated in relation to its cultural context (Hatch and Schultz, 2000, p. 25).

The continued quest to identify various and key variables that are consist predictors of a company’s reputation is essential, because without this insight, neither academic researchers nor company leadership and management teams will be able to advise companies about strategies to enhance their reputation to achieve competitive advantage and increase their financial performance.

This post was inspired by research conducted by Dr. Sylvia J. Flatt, University of San Francisco College of Professional Studies and Dr. Stanley J. Kowalczyk Department of Management College of Business San Francisco State University in a paper they authored and submitted to the Reputation Institute Conference in 2006.     

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for a wide range of issues related to intangible assets within the global business community.  My posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Performance-Based Company Culture Is A Valuable Intangible Asset!

January 2nd, 2014. Published under Company culture and reputation., Competitive advantages., Intangible Asset Value. No Comments.

Michael D. Moberly   January 2, 2014    ‘A blog where attention span matters’!

What follows is, in my view, an excellent example of a company culture melding into an attractive, valuable, and very powerful competitive advantage.  In 1987, the former and now late Nucor Steel CEO, F. Kenneth Iverson embarked on an admittedly risky proposition (business model) at the time, in which he came to embrace the perspective that most all employees (at Nucor) would likely perform better if they were provided with, at the time, were deemed quite innovative incentives. (Byrnes & Arndt, 2006).

There is little doubt that Iverson himself, was the driving force for developing, what was described at the time, as a uniquely egalitarian (companywide) culture for Nucor.  Being somewhat familiar with Iverson’s initiative as it evolved in the late 1980’s, I sensed the key differentiator for this particular company culture Iverson that was fabricating sprung from its (employee) performance-based features.

That ‘cultural’ change Iverson set in motion was to ‘empower’ Nucor’s employees with probably the most significant tool in any management teams’ tool box at that time, which was to treat them (employees) with respect!  To this component, I suspicion Iverson was not just an admirer of McGregor’s Theory Y, he strongly embraced it, and it probably influenced his views on particular (differentiating) components he sought to embed in Nucor’s company culture.

As such, an integral component prominently embedded in Nucor’s overall (employee) compensation strategy was designed to foster (employee) motivation and productivity on a companywide basis. That is,  salary reconstruction aspects of Nucor’s company culture allowed for sixty-six percent of Nucor employee’s weekly pay to be linked to performance with up to 20% of this total coming from Nucor’s profit sharing program, which took 10% of operating profits and divided them among all employees (excluding senior officers).

Very simply, but respectfully stated, Iverson’s premise was that by rewarding individual and collective employee productivity, rather than the conventional job title or higher-level degree methodologies, Nucor would be positioned to empower its employees to consistently work hard because risks and rewards were being shared and would ultimately come to benefit stakeholders as well.  Thus, individual employee empowerment, as a method for rewarding employee productivity, would ultimately fall to how well employees recognized and utilized their intellectual, structural, and relationship capital, each of which are, of course, intangible assets.

Therefore, the wellbeing of Nucor executives was dependent on the productivity of Nucor’s employees. So, if productivity declines, employee salaries will decline as well, but, the CEO’s salary and benefits will decline also. Thus employees know that the same factors impacting their income also impact c-suite executives, providing for a shared sense of risks and rewards on an enterprise wide basis. (Byrnes & Arndt, 2006)

So, once Nucor’s (Iverson’s) ‘company culture’ is in place, and I take the position it is a very positive step, it will elevate Nucor’s competitiveness.  But, relevant question is, what is the absolute best and most objective method for capturing this contributory value when Nucor is sold?

This post was inspired by Business Roundtable Institute for Corporate Ethics blog post written by Kevin Belt in October, 2009.

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   My blog posts focus on a wide range of issues related to intangible assets and intellectual property.   Respectfully, each post is not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.