Home Up


Action Knowledge
in Intellectual Capital Statements:
A Definition, a Design and a Case

Ib Ravn, Ph.D.

This paper summarizes my thinking as I drew up the intellectual capital statement (ICS) for the Danish consulting firm Nellemann Konsulenterne A/S in the winter of 1999-2000. I try to dislodge knowledge management from its IT origins by fashioning a concept of knowledge as rooted in human action. This concept has guided my efforts to create an ICS that emphasizes knowledge sharing activities. It is presented here as a case study, preceded by my thoughts on a general design for an ICS.

Unpublished manuscript


1. Introduction

The field of knowledge management (KM) and the attempts to create intellectual capital statements (ICS) seem to be struggling to escape from their roots in the 1980’s rhetoric of the information society and the 1990’s focus on information technology. This IT backdrop to KM has reinvigorated the classical, but otherwise obsolescent view of knowledge as stable, internal representations of external objects or events (Rorty 1979, Dreyfus and Dreyfus 1988), an idea that is manifestly unsuitable to the dynamic nature of organizational action.

The recent Danish Ministry of Trade and Industry (www.efs.dk/icaccounts) project to develop guidelines for the construction of ICS’s embraces more dynamic notions of knowledge (Larsen, Bukh and Mouritsen 1999). In this view, what is important in an ICS is not so much the knowledge held by the organization as the way knowledge is being used in the organization. Knowledge activities take precedence over knowledge resources.

This paper proposes a definition of action knowledge that squares with these efforts. This concept (inspired by Schon 1983, Argyris 1993, Argyris, Putnam and Smith 1985) provides a suitable epistemological context for more dynamic and people-focused KM efforts and ICS’s.

The notion of action knowledge is then used in a design for an intellectual capital statement that delineates five phases to be covered when drawing up an ICS.

Finally, a case that illustrates the application of this design is offered, the case of Nellemann Konsulenterne A/S’s ICS for 1999. To this medium-sized Danish consulting firm, knowledge resides in the informed and competent actions taken by its consultants and thus calls for a concept of knowledge of the type indicated.


2. A Definition of Action Knowledge

An action view sees knowledge as that which gives direction and meaning to human action. A person has knowledge or knows things if he or she is able to engage in activity in a directed and coherent way, whether this activity is in the mind or is performed by the body or enacted in the social world. Planning a courtship, fixing a carburetor, and chairing a board meeting are all evidence of knowledge.

More specifically, we may define knowledge as forms in consciousness that guide human activity. These forms may be concepts, categories, distinctions, images or the like. This definition restricts knowledge to consciousness, which, according to one’s tastes, may or may not include that which has been conscious or could become conscious (that is, the contents of the subconscious), such as tacit (Polanyi 1958) or embodied knowledge (Varela, Thompson and Rosch 1991, Lakoff and Johnson 1998). Excluded are purely biological forms, instincts, reflexes, cellular control mechanisms, etc., which are also powerful forms guiding human activity but not something we would not ordinarily call knowledge.

In this view, even so-called representational knowledge becomes a form of action knowledge, as any factoid, such as sentential knowledge of the form "That rose is red", by its very having been stated serves to channel the cognitive activity of the person entertaining this idea in his or her mind (cf. Freeman and Skarda 1990, Nunez and Freeman 1999).

This view of knowledge affirms the common, sensible distinction between information as dead, apersonal bits residing in files and computers, and knowledge as being alive and subjectively meaningful. The pitfalls of tying KM too closely to IT become apparent when we see knowledge as dynamic forms in consciousness, not bytes stored on a disc or letters printed on a page. This alternative view suggests that the traditional intellectual context for the KM and ICS movements – rationalistic IT and the well-known management-science attempts to engineer the organization for maximum effectiveness – needs to be tempered by another set of ideas: The interpretive, actor-based, constructivist and narrative positions that emphasize the role of knowledge in the creation and maintenance of a shared social world.

This view has implications for KM, IC and ICS’s:

  1. Knowledge management may be understood as the orchestrated and explicitly normative attempts within an organization to optimize its construction of knowledge and meanings so as the help the organization create the social world its stakeholders desire (cf. Ackoff 1981).
  2. Intellectual capital is the very ephemeral stock of knowledge ongoingly constructed and maintained within the organization that enables it to create value for its stakeholders (not just financial value, of course, but value understood as that which helps meet real social needs and bring out human potentials).
  3. An intellectual capital statement is a report that documents the organization’s efforts to nurture and improve the knowledge-creating, -sharing and -using activities undertaken by the organization in pursuit of its ambitions to create such humanistic value for its stakeholders.


3. A Design for an Intellectual Capital Statement

An ICS that highlights an organization’s action knowledge may be put together in the manner suggested by this model (see the diagram p.3 in the Nellemann 1999 ICS):

  1. Knowledge narrative: Who are we?
  2. Knowledge strategy: What do we want?
  3. Knowledge resources and activities: What do we have and what do we do?
  4. Intellectual capital statement: How do we measure up?
  5. Knowledge management: How do we manage our knowledge?

Step 1. The ICS proceeds from an appreciation of the self-understanding held by the organizational members and management. In a sense, an organization is sustained by the stories told by its members about production, service and success, about work mates, superiors and customers, and so on. These stories encompass the knowledge extant in the organization, the familiarity with work routines, the know-how, the timeworn approaches to problems, etc. These stories may be synthesized and simplified into one story by which the organization understands itself and the contribution it tries to make. This is the knowledge narrative (Larsen, Bukh and Mouritsen 1999). The knowledge specialist charged with the difficult task of writing this narrative may wish to divide it into three or four manageable and well-known bits:

a. The history of the organization (how did it come to be what it is now),
b. Its culture (what does it look like from the inside?) and
c. Its value base and mission (what do the organizational members believe in? What do they ultimately work to accomplish?).

Step 2. The more immediate aims of the organization, or its strategy, will be more or less resonant with this knowledge narrative and may (at least) be construed as issuing from it. In so far as this strategy is relevant to the organization’s action knowledge, the strategy may be termed a knowledge strategy. A knowledge strategy details the knowledge-related activities that needs to be performed in the organization to fulfill its mission – in the way of training and development, learning mechanisms, knowledge-sharing activities, on-the-job training, executive coaching, as well as an overall organizational culture conducive to learning and knowledge sharing.

Step 3 is the implementation of the knowledge strategy in the set of knowledge activities (Larsen, Bukh and Mouritsen 1999) performed on the organization’s knowledge resources. These resources are knowledge and the skills that the organizational members bring to bear on their work, whether acquired outside the organization, as part of their previous education and training, or inside, during previous years. The knowledge activities are the actions that organizational members perform to apply and add to their knowledge. They may be loosely divided into activities that emphasize, respectively,

a. Learning (crudely put, knowledge going into people’s heads)
b. Knowledge sharing (knowledge exchanged between people’s heads) or
c. Knowledge development (knowledge going out of people’s heads).

Step 4 is the ICS proper. This is the attempt to document and tally the knowledge resources and activities. The data may be gathered from the accounting system (such as training and development expenses per employee), other records (such as the number of internal evaluation reports completed), questionnaires (as administered to the employees about their educational backgrounds and time spent working in teams, say), interviews (as conducted by external consultants with customers, for example) or participant observation (of the organizational culture and the extent to which it supports knowledge sharing). An important precursor to the ICS proper is the reflection and collective evaluation performed by the organizational members as they look back on the past year’s activities. Without this qualitative scrutiny and reflective conversation on the part of the people whose activities the ICS records, the construction of the ICS may well turn into an empty ritual immaterial to the aspirations of the organization.

Step 5 feeds back the results of the ICS and the reflective conversations to the knowledge strategy. What the organization wanted to accomplish is held up against the data on its accomplishments. Did the knowledge activities initiated and sustained during the year further the organizational goals - or were they irrelevant or even wasteful? Was anything useful learnt, as evidenced not only by the numbers in the ICS but also by the reflective conversations carried out? The comparisons of aspirations with performance and the subsequent adjustment of the knowledge activities supported in the following year constitutes knowledge management, writ large. Knowledge management as an everyday activity consists in the daily adjustments to knowledge practices, whenever organizational members reflect on and change the way they learn, train, evaluate, share information, etc.

Taken together, the five steps constitute a learning cycle that may be repeated annually, in the large scale, or daily, in the small scale. Devising and revising a knowledge strategy is an annual process in most companies, and the telling of the stories of who we are may well be an adjunct to this process. Knowledge activities are ongoing, whereas the reflection and measurement that make up the ICS may be confined to a single month of the year, that preceding the drafting of the ICS. The adjustments resulting from comparing the knowledge strategy with the ICS will take effect after the ICS has been publicized and discussed in the organization.

Even if the persons putting together the ICS will be at pains to make it a correct account and a fair representation of the organization that year, it goes without saying that the ICS is singularly a product of these very people’s minds and actions and thus reflects their assumptions, concerns and values. As such, the ICS is itself a piece of action knowledge informing the actions of its creators and readers, channeling their mental, physical and social activities in this way rather than that.


4. A Case: Nellemann Konsulenterne A/S

Nellemann Konsulenterne A/S is a Danish Consulting firm of 32 consultants that work mostly for the public sector with physical planning, strategy, organizational development, human resources and negotiation. In mid-1999 it merged (by purchase) with another consulting firm, Amphion, from whence slightly less than half of its employees and gross turnover derives. Amphion was one of the twenty-odd companies involved in the Danish Ministry of Trade and Industry project to develop guidelines for the design of ICS’s. Having made an ICS for Amphion for the year 1998, its creators (including the present author) continued the work under Nellemann Konsulenterne’s auspices and, in the early spring of 2000, wrote the ICS for Nellemann Konsulenterne 1999 to be presented below.

1. Nellemann Konsulenterne’s knowledge narrative briefly tells the story of Nellemann Konsulenterne’s origins in its founders’ concern to contribute to a kind of town and public planning that would consider the citizen as a whole, in contradistinction to the fragmented planning of earlier days. Amphion traces its origins, also stretching back a dozen years, to a concern to help the public sector and labor unions develop their organizational and human resources in ways more effective as well as humanistic. The two business philosophies dovetail nicely and both organizational cultures seem to emphasize the internal rewards of empowering clients and their stakeholders to develop themselves rather than the customary consulting ethos of long hours put in for financial rewards. Such is also framed Nellemann Konsulenterne’s mission: by way of planning, consulting and training to create lasting improvements in society’s physical and social structures, as well as empower the people living within these structures to change and develop them themselves.

2. The knowledge strategy singles out three competencies or types of action knowledge that the company wishes to strengthen:

a. Interdisciplinary planning: Work for local authorities in integrative teams that include unusual areas of expertise - to ensure a synthetic view.
b. Process consultation: Rather than give clients solutions to their problems, help them develop their own.
c. Cookbooks, not grade reports: Evaluations or analyses of major public projects should give directions for future development, not just grades for good behavior.

These overall ambitions are supplemented by more specific business goals in each of company’s the five departments.

3. The knowledge resources and the knowledge activities identified as important for the implementation of the knowledge strategy are presented next. Data collected from accounting records, interviews with management, and questionnaires (one anonymous, one not) returned by all employees document the status some 25 types of knowledge resource and activity.

The resources identified show the Nellemann consultants to have a variety of educational backgrounds, dominated by architecture and the social sciences, a mean age of 42, as many men as women, competencies ranging from public planning, strategy, organizational development and evaluation to negotiation, and an average of 15 years of professional experience primarily from working with local and regional governments, the trade unions and a small number of large private companies.

Knowledge activities of the learning kind are measured by the amount of time spent on evaluating projects carried out for clients, introduction routines for new employees, number of professional journals and books read, and days spent in professional training and development. Knowledge-sharing activities include measures of the extent of teamwork, peer coaching, "scrutinizing" (a colleague evaluates one’s project at its inception and conclusion), in-house seminars, and desk swapping. Activities promoting knowledge development include individual competency development plans, annual employee interviews and an indicator of the amount of routine vs. challenging work as subjectively experienced.

4. The ICS proper is simply a table listing all the knowledge resources and knowledge activities already mentioned and the associated values as measured by regular accounting procedures, interviews with management or employee questionnaires. For example, a questionnaire item asked respondents to estimate the time they spent every month reflecting on and evaluating completed projects. The mean for the 35 employees and managers at Nellemann Konsulenterens came out at 69 minutes each month.

5. The last step, knowledge management, in which the knowledge strategy is held up against the ICS, will take effect in Nellemann Konsulenterne only after the ICS has been presented at an internal strategy seminar in late May 2000 (after which time this section will be updated). KM adjustments contemplated at the current time include increasing the number of interdisciplinary project teams, establishing competency development plans for each consultant, strengthening the internal project evaluation routines and expanding the scrutinizer function.


5. Conclusions

A definition of knowledge was proposed that emphasizes its dynamic quality: action knowledge is constituted by forms in consciousness (such as distinctions, categories, concepts and images) that guide human activity, including mental, bodily and social activities. In this light, knowledge stored by means of IT or other records are less important to knowledge managers than the live interactions of people using and sharing knowledge to improve human action. Knowledge management is not the manipulation of knowledge resources for corporate gain, but the optimization of the forms in consciousness that guide human action.

Thus conceived, knowledge management necessarily involves ethical or moral considerations that help specify what may be meant by "optimizing the forms that guide human activity." Such moral reflections are alluded to in some corporate mission statements, such as Nellemann’s cited above: Create lasting improvements in society’s physical and social structures and empower citizens to change these structures themselves. While certainly incomplete, a normative orientation such as this is required for any attempt to make knowledge management meaningful beyond the intellectually and morally bankrupt idea of exploiting knowledge for corporate profit (as expressed in one common definition of intellectual capital: the knowledge held by a company that can be turned into a profit).

The ICS is an opportunity for the organizational members to develop their sense of direction and to document the efforts made to channel their knowledge activities in the directions desired (Baburoglu and Ravn, 1992). The knowledge narrative in the ICS would then merely be the written-down version of the interpretations and stories that management and employees tell each other and their stakeholders about why they are in business: "This is what we believe in, this is what we work for and this is how we try to do it."



Ackoff, Russell L. (1981); Creating the Corporate Future. New York: Wiley

Argyris, Chris (1993): Knowledge for Action: A Guide to Overcoming Barriers to Organizational Change. San Francisco: Jossey-Bass

Argyris, Chris, Robert Putnam and Diane Mclain Smith (1985): Action Science. San Francisco: Jossey-Bass.

Baburoglu, Oguz, & Ib Ravn, 1992: Normative Action Research. Organisation Studies, 13(1): 19-34.

Dreyfus, Hubert & Stuart Dreyfus(1988): Making a Mind versus Modeling the Brain. Dćdalus, Winter, 117(1): 15-43.

Freeman, Walter J., and Christine A. Skarda (1990): Representations: Who Needs Them? In: J.L. McGaugh, N.M. Weinberger and G. Lynch (eds.). Third Conference, Brain Organization and Memory: Cells, Systems and Circuits (pp. 375-380). New York: Guilford Press.

Lakoff, George, and Mark Johnson (1998): Philosophy in the Flesh : The Embodied Mind and Its Challenge to Western Thought. New York: Basic Books.

Larsen, Heine T., Per Nikolaj D.Bukh and Jan Mouritsen (1999): The Logic of Intellectual Capital Statements. Copenhagen: Danish Ministry of Trade and Industry.

Nellemann Konsulenterne A/S Videnregnskab 1999

Nunez, Rafael, and Walter J. Freeman (eds.) (1999): Reclaiming Cognition: The Primacy of Action, Intention and Emotion. London: Imprint Academic.

Polanyi, Michael (1958): Personal Knowledge: Towards a Post-Critical Philosophy. London: Routledge and Kegan Paul.

Rorty, Richard (1979): Philosophy and the Mirror of Nature. Princeton, NJ: Princeton University Press.

Schon, Donald (1983): The Reflective Practitioner: How Professionals Think in Action. New York: Basic Books.

Varela, Francisco, Evan Thompson and Eleanor Rosch (1991): The Embodied Mind: Cognitive Science and Human Experience. Cambridge, Mass.: MIT Press.