Michael D. Moberly   September 13, 2012

In light of the economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability globally reside in – evolve directly from intangible assets, it’s important that management teams, c-suites, and boards recognize, in a fiduciary responsibility context, that sustaining a strong, stable, and loyal base of skilled intellectual capital, i.e., employee know how, is an increasingly relevant and necessary requisite to not just achieving, but sustaining success, profitability.  Of course, an important contributor to those outcomes is safeguarding those all-important ‘knowledge based  (intangible) assets.  Making the latter even more essential lie two important realities, (1.) the reality that most all company’s globally are in the midst, perhaps early stages, of a knowledge-intensive economies, and (2.) most company’s workforce are increasingly diverse, mobile, competitive, and global.

Intellectual capital (IC) represents the value employees provide to a company or client by applying their skills, knowhow, expertise, and the unique understanding of how best to use (exploit) their IC to create efficiencies, commercialization opportunities, and/or generate revenue and competitive advantages, in other words, some manner of competitive advantage.

But too, company management team must recognize that IC is a perishable, vulnerable, usually time-sensitive, and transferrable commodity.  That is, it can ‘readily walk out the door at will’ or be bought, sold, licensed, transferred, loaned, misappropriated, stolen, etc.

Let’s be clear at the outset though, IC is not synonymous with intellectual property, i.e., patents, trademarks, or copyrights.  True, intellectual property is generally composed of intellectual capital.  IC however, standing alone, is not eligible for conventional intellectual property protections unless it would be internally designated as a trade secret. Thus, having pre and in-employment personnel security screening practices in place to ensure IC’s proprietary status is preserved becomes all the more important.

Broadly speaking, achieving and sustaining that level of workforce today is often conditioned less on serendipity and more on having in place an effective recruitment, pre- and in-employment (personnel) security screening, and employee on-boarding processes that function in concert, not as standalones.

Once this level of workforce is achieved, it can translate as valuable intangible assets that can be smartly leveraged and exploited to achieve greater organizational resilience, an embedded institutional culture, and numerous (industry sector) competitive advantages which I’m hard pressed to believe any management team, c-suite, board, or investor would not readily endorse.

There’s no disagreement here that effective employee recruitment and on-boarding programs are contributing factors.  But, the courage and audacity of management teams, c-suites, and boards to recognize, approve, and execute an effective pre-employment (and in-employment) personnel security screening program should not be overlooked based on ill-conceived, uninformed, risk adverse notions.  Similarly, companies that rely exclusively on conventional one-size-fits-all, one time administered ‘paper and pencil’ honesty and integrity tests, while generally better than nothing, are seldom wholly sufficient.

In today’s increasingly global commerce and business transaction environments, pre and in-employment personnel security screening is, to be sure, not redundant to resume, reference, or criminal background checks, nor should it be reserved for only those individuals seeking employment in a classified and/or proprietary arena.

Allow me to draw an analogy to describe how pre and in-employment personnel security screening can produce valuable intangible assets.  Physical security products/systems, i.e., intrusion detection, access control, and surveillance, etc., are common to building-environment design and operation.  When applied correctly, they can deliver-produce, in my judgment, specific sets of intangible assets.  Unfortunately however, seldom do the intangible by-products of tangible (physical) security products get articulated, translated, or leveraged insofar as how they contribute to elevating reputation, adding value to a company, or building-sustaining competitive advantages, etc.

In too few instances, are these intangible ‘feel safe, feel good’ asset attributes articulated as extensions of a company’s fiduciary responsibilities (i.e. Stone v. Ritter) or calculated in return-on-security-investment (ROSI) contexts.  The reason, in large part, is because, intangible asset dimensions and/or by-products of most (physical) security products are frequently not well understood and noticeably absent a persuasive and quantified narrative that describes their contributory value.

In today’s increasingly security conscious global business environment, advocates of pre and in-employment personnel security screening programs should be prepared to offer reasoned, well- articulated, and business oriented counter arguments and rationales to the following, e.g.,

• The usually risk adverse legal counsel, who warn that caution should be exercised about public displays regarding the presence or deterrent effects of security systems or programs because either may unduly elevate user expectations. If a system and/or program are incorrectly applied or ineffective, and risks/threat does materialize, it may elevate propensity for greater liability.
• Intangible assets lack a conventional sense of physicality, they’re often obscure to the untrained eye, are challenging to quantify and/or measure performance in ways that translate as contributory value, i.e., delivering competitive advantages, elevating workforce stability, reducing risks-threats, etc.
• The reality that intangible assets are routinely portrayed through structured (codified) accounting-tax lens and too, they’re not required reporting on financial statements or balance sheets other than collectively as goodwill thus are interpreted as being less useful-relevant.
• The classical belief that public announcements about the presence-use of certain physical security systems or procedures undermine their presumed deterrent capabilities and thus compromise the intended (designed) benefits.

Some of the above perspectives are deeply held precepts, often based on anecdotal or one-off experiences, more than broad-based fact.  Collectively, this often makes them uniquely challenging to refute, absent a good grounding in intangible assets.  Most unfortunately then, the result often is that the intangible (asset) derivatives of physical security products and systems often go un-noticed, un-leveraged, and ultimately dependent on user-consumer imagination to draw their own, albeit subjective ‘feel good, feel safe’ conclusions versus the actual value-added risk mitigation premiums they produce.

The same holds true for pre and in-employment personnel security screening measures and the truly intangible risk mitigation benefits they can produce.

Again, the economic fact that increasingly higher percentages of most company’s value, sources of revenue, sustainability, and foundations for growth and sustainability globally, evolve directly from intangible assets should clearly serve as a strong signal security practitioners would be well served to learn more about intangible assets.  But, not merely the by-products produced from deployment of physical systems and products, but since 65+% of most company’s value and sources of revenue lie in (their) intangible assets, how to safeguard them as well!

For a comprehensive list of intangible assets see https://kpstrat.com/blochure.

(This post was inspired by the excellent work of Dr. Nir Kossovsky in reputation risk, Zwi Kremer, Berndt Rif, and Michael Rosin on personnel pre-employment security screening, and Mary Adams on intellectual capital.)

Comments regarding my blog posts are encouraged and respected.  While visiting my blog I encourage you to browse other topics (posts) which may be relevant to your circumstance.  Either way,  I welcome your inquiry at  314-440-3593 or [email protected]