Employee (EM)

The knowledge asset of the corporation, the Employee, is defined as a salary-paid member of the corporation. He may be either hired on a hourly-paid or monthly-paid basis.

Corporation (CO)

The Corporation may be either profit-based or non-profit based. The unit of the Corporation is the officially registered head office for the business activity. Multinational corporations with central accounts of employees and revenues are only counted once. Establishments-based level of registration is not performed. If the head office does not posses the required data, the corporation is asked to obtain these data from the establishment(s) where the employee is working.

Education (ED)

The tertiary education duration of the employee is registered whatever the type of tertiary education. Apprentice-based education, typically skilled labour, are counted for the entire period of their training, including the apprentice-period at the employer’s location. If the tertiary education is taken part-time or scattered over several distant periods, the total period of tertiary education is converted to aggregated full-time period counted in years. 

Employer-based training or coaching either in-house or off-site for the employee regardless of purpose is also counted in the total Tertiary Education period. Part-time training is converted to full time activity as percentage of a full time year. 

Mentor-agreements and trainee positions for the employee is converted to full time activity as percentage of a full time year when the employee is primarily engaged in being mentored or trained, i.e. not primarily performing routine-based full-load work activities comparable with an experienced, employee in a senior position skilled in the art of the business.

Experience (EX)

The Employee’s total period of hire at each employer is calculated to aggregated full-time employment in years. The aggregation is converted for part-time employment and scattered employment over several distant periods at the employer. The Experience type must be as a salary-paid member. The Experience may be with different job content and titles, but are counted with equal status.

Experience (EX)

An extended Employee Knowledge Index is provided to accommodate the employee’s previous working experience in a similar industry by providing this factor multiplied with the 3 other index factors. The employee’s total period of hire at each previous employer is calculated to aggregated full-time employment in years. The aggregation is converted for part-time employment to full-time equivalent period.

Industry Benchmark (IB)

The Industry Benchmark of the accounting year in question is defined by the Employer conducting the registration of his employees’ Balanced Scorecard strategic readiness ratios. The Industry Benchmark will for the present methodology be based on a skill level for each employee assigned to a particular Balanced Scorecard strategic goal.  

One example could be an Employee may lack the efficient competence compared with the state of the art in the industry for a particular programming tool to master his skills for the strategic goal of the corporation to launch a new version of a software application on the market.

Another example could be an Employee or an employee team in the sales department who needs to improve the customer satisfaction rated good to excellent from 70 % to 90 % within a given segment for the coming year 1. If we assume a benchmark of 90 % customer satisfaction rated good to excellent, the Balanced Scorecard Strategic Readiness ratio for year 1 is 0,80. We expect a total duration of 2 years to obtain the strategic aim of 90 % customer satisfaction from our base level of 70 % customer satisfaction.  The total customer improvement increase is expected to be linear, therefore the Balanced Scorecard strategic readiness ratio for year 2 will be 0,90.

Time (T)

The time frame for the Employee Asset Balanced Sheet is annual based on the return of the Employee’s annual accounts. If no annual data is directly available, the existing data is converted or approximated to an annual basis for the parameter in question.

Balanced Scorecard Strategic Readiness (BS)

The Balanced Scorecard methodology (Kaplan and Norton, 2003, 2008) measures the strategic readiness of the employee, team, division, or entire corporation within a given time frame as the current state of the corporate unit for the strategic goal compared with the final goal. The strategic readiness ratio is calculated as the employer-stated performance within each accounting year as the relative distance (percent) to the Industry Benchmark of the strategic goal in the market place of the corporation. For example,  in the present employee asset Balance Sheet the ration 0.90 in year 2006 means that the Employee is lacking 10 % for skill x compared with the current industry benchmark for year 2006 to obtain the Employee’s strategic goal of the corporation. 

In case an Employee is assigned several different Balanced Scorecard goals within one accounting year, the average is calculated of all the Employee’s Balanced Scorecard strategic readiness ratios. 

Equal Employee’s Balanced Scorecard strategic readiness ratios can be assigned to all employees belonging to a team, department, or division regardless of each individual employee’s particular current skill level if the Employer has only stated one common Balanced Scorecard strategic readiness ratio for the particular group or division in question.

The type of the Employee’s skill may be either domain and trade specific or generic skills, for example team-building skills or project-management skills.

The Balanced Scorecard Strategic Readiness ratio Skill-Industry Benchmark for the present research is aimed to be compared externally with a representative sample of companies. The ratio is defined as objective and standardized as possible for all employees within a corporation and intended to be implemented systematically as an ongoing activity. The ratio in its basic form is primarily for external functions, i.e. management research, industry survey, and for investors. For internal functions, the ratio can be developed for more sophisticated application. For example, different work functions of the corporation can be assigned different weights in the Employee equation to reflect differences of strategically critical Employee functions in the corporation. Another example is the Experience variable in the equation. Depending of the level of knowledge and skill intensiveness in the industry, the emphasis may be different on how important the staff retention is for the corporation. A high emphasis on staff retention may assign a high weight on the Experience component of the equation. The reasons for emphasis on staff retention can be high cost to train new employees to become fully efficient in the job, corporate culture, and difficulties finding suitable highly-skilled new employees to substitute the departing employees joining competing corporations. 

The depreciation rate and level of the employee’s skills is build in the Balanced Scorecard Strategic Readiness ratio. In each annual statement of the employee’s strategic readiness the employee’s required skill for the corporation’s strategic goal is assessed for the current degree of depreciation and the need for updating.

There may be significant different levels for depreciation rates depending on the industry development pace and sophistication. Furthermore, the type of skills have different type of depreciation: Generic skills which are not highly depending on fast changing  knowledge and a heavy load of current short term memory may have a low depreciation level. For example, this is the case for basic training in team work, basic negotiation techniques, and project management methods.

Kaplan, R. & Norton , D.P. (2003). Strategy Maps: converting intangible assets into tangible outcomes. Boston, MA: Harvard Business School Publishing.

 Kaplan, R. & Norton , D.P.  (2008). The execution premium: linking strategy to operations for competitive advantage. Boston: MA: Harvard Business School Publishing.