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A Critical Analysis of the Intellectual Capital Measuring, Managing, and Reporting Practices in the Non-profit Sector: Lessons Learnt from a Case Study

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Abstract

In management literature, intellectual capital (IC) is considered the key driver of the competitive advantage of the third millennium enterprise firm; consequently, measuring, managing and reporting IC has become a critical issue. Frameworks addressed to measure and report IC have proliferated, nevertheless the adoption of these frameworks is not so widespread in practice. The strong call for critically investigating IC practices has been raised by several leading authors in the area. Doing a critical and performative IC research means empirically researching IC organisational practices in specific contexts, in order to increase the understanding of the IC dynamics. By critically analysing the IC practices of ANPAS Piemonte, an Italian non-profit organisation chosen for its long-standing experience in issuing audited IC reports (from 2003 to 2011), the article contributes to the knowledge of how and why IC is measured and reported in a specific, outstanding NPO disclosing IC. Moreover, the case study analysis contributes to shed lights on the levers and barriers that should be faced by other managers intending to implement and effectively use an IC measurement, management and reporting system within organisation.

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Notes

  1. The NP sector recorded +28 % (number of NPOs) and +39.3 % (number of employees). The corresponding number of private firms are +8.4 and +4.5 %; the percentages relative to the public sector are −21.8 and −11.5 % (Istat 2013).

  2. Direct IC measurement methods estimate the monetary value of what a company may consider as individual components of its IC, identified by audit questionnaires. The IC measures can take the form of a dollar value or be aggregated as coefficients (DIC); Market capitalization methods calculate IC as the difference between a company’s market value and its net asset value (MCM); Return on Assets method calculates IC as a ratio between average annual earnings from intangibles (derived by multiplying the difference between the ROA of a company—the ROA of the industry for the company’s average tangible assets) and the company’s average cost of capital or an interest rate (ROA); finally scorecard methods measure IC by identifying its components and expressing them through IC indicators, above all non-monetary, assembled in a company’s scorecard (SC).

  3. General scorecard methods are models aimed to measure organizational performance; therefore, they focus not so much on measuring intangibles per se, but on evaluating company performance highlighting also “invisible factors” linked to non-financial dimensions, such as the Balanced Scorecard. Ad hoc ICMMR models, instead, focus on two issues: develop a IC measurement system which would facilitate its management so as to improve its performance and thus positively influence company performance and disclosing IC information through IC reports to improve communication with the organizational stakeholders (Veltri 2011).

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Acknowledgments

The authors thanks the editor and two anonymous referees for their help that contributed to significantly enhancing the paper. As usual, all remaining errors are the authors’ responsibility. Though the paper is the fruit of joint reflection and collaboration, for academic reasons Sections “Introductory remarks”; “Literature review”; “Research methodology”; “Analyzing the firm-specific factors of ANPAS Piemonte”; “Analyzing the IC reporting practices of ANPAS Piemonte”; “Analyzing how ANPAS Piemonte works with IC”; “Main findings” and “Conclusions” are to be attributed to Stefania Veltri and Sections “Analyzing the Italian non-profit sector” and “Analyzing the IC measurement and management practices of ANPAS Piemonte” to Giovanni Bronzetti.

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  1. Department of Business Administration and Law, University of Calabria, Ponte P. Bucci, 87036, Arcavacata di Rende, Cosenza, Italy

    Stefania Veltri & Giovanni Bronzetti

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  1. Stefania Veltri
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Correspondence to Stefania Veltri.

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Veltri, S., Bronzetti, G. A Critical Analysis of the Intellectual Capital Measuring, Managing, and Reporting Practices in the Non-profit Sector: Lessons Learnt from a Case Study. J Bus Ethics 131, 305–318 (2015). https://doi.org/10.1007/s10551-014-2284-7

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