Proceedings of the 3rd European Conference on Intellectual Capital

John Dumay and Jim Rooney
on a more detailed analysis <strong>of</strong> individual IC factors and seek suitable ways to manage and measure
<strong>the</strong>m”. Ano<strong>the</strong>r example is Cleary (2009, p. 37) who argues “… strongly that firms adapt/develop
management accounting systems to furnish <strong>the</strong>mselves with <strong>the</strong> appropriate information required for
<strong>the</strong> management and measurement <strong>of</strong> <strong>the</strong>ir increasingly valuable stock <strong>of</strong> IC”. From <strong>the</strong> frameworks
perspective, Ramírez (2010, p. 261) suggests “fur<strong>the</strong>r [public sector IC] research could attempt to
develop an intellectual capital framework that helps to understand <strong>the</strong> interrelationships between <strong>the</strong>
three IC components”. Secundo et al. (2010) go even fur<strong>the</strong>r and develop <strong>the</strong>ir own dashboard <strong>of</strong>
metrics for higher education and research. However, Dumay (2009a) critiqued <strong>the</strong> need to develop
more IC frameworks, as a plethora <strong>of</strong> IC measurement frameworks already exist (see Sveiby, 2010).
Additionally, Dumay (2009b, 489) “openly questions <strong>the</strong> need to develop fur<strong>the</strong>r IC <strong>the</strong>ory and
advocates a way forward by outlining a critical approach to researching and implementing IC in
practice”.
This critique <strong>of</strong> IC measurement and frameworks has extended beyond <strong>the</strong> annals <strong>of</strong> <strong>the</strong> Journal <strong>of</strong>
Intellectual Capital. In 2009 a special edition <strong>of</strong> Critical Perspectives in Accounting critically examined
measuring IC (see Mouritsen and Roslender, 2009). The papers investigate measuring IC from <strong>the</strong>
perspectives <strong>of</strong> ethics (Mårtensson, 2009; McPhail, 2009), transparency (Gowthorpe, 2009; Nielsen
and Madsen, 2009) and implementing IC measures in practice. Overall <strong>the</strong>re is a concern with
measuring IC and whe<strong>the</strong>r or not it produces <strong>the</strong> desired results (Mouritsen and Roslender, 2009,
802).
Catasús et al. (2007, p. 505) also explored measuring and managing IC and concluded “that <strong>the</strong>
relationship between indicating [measuring] and acting is not significant and that <strong>the</strong> introduction <strong>of</strong>
mobilizing gives a better model fit”. Their argument implies managing effectively requires action
before measuring can have any impact. Thus, measuring is about discerning <strong>the</strong> results <strong>of</strong> one’s
actions ra<strong>the</strong>r than measuring in <strong>the</strong> hope that something positive happens. Unfortunately if this is
done <strong>the</strong> o<strong>the</strong>r way around, by measuring first, significant problems can arise as lamented by Behn
(2003, 599) “…what people measure <strong>of</strong>ten is not precisely what <strong>the</strong>y want done. And people,
responding to <strong>the</strong> explicit or implicit incentives <strong>of</strong> <strong>the</strong> measurement, will do what people are
measuring, not what <strong>the</strong>se people actually want done”. As Kerr (1995) outlines this can be counterproductive
as people tend to be rewarded for achieving <strong>the</strong> numbers ra<strong>the</strong>r than being rewarded for
<strong>the</strong> desired outcomes. Demming (1986, 24) also identified <strong>the</strong> fallacy <strong>of</strong> managing by numbers by
advocating “running a company on visible figures alone” as one <strong>of</strong> <strong>the</strong> seven deadly sins <strong>of</strong> managing.
Additionally, he claims “<strong>the</strong> most important things can’t be measured” as <strong>the</strong>y are ei<strong>the</strong>r not known
until revealed or <strong>the</strong>ir importance is not know beforehand. Thus, <strong>the</strong> unease with numbers as an all
powerful and all knowing phenomenon extends beyond measuring IC.
The concern with measuring IC and its impact is intriguing and prompts <strong>the</strong> question “Does measuring
IC lead to managing IC?” We are motivated to explore this question as a result <strong>of</strong> our research at
Lands. We have been conducting research into IC practices at Lands since 2004 and noted in our
most recent round <strong>of</strong> interviews and analysis <strong>of</strong> IC statements a continued tension between
measuring and managing IC. Lands (2009, 14) states in its latest annual report “As in previous years,
we are challenged to find improved metrics which reflect outcomes at an organisational level as well
as remaining meaningful and appropriate to our operational divisions”. Yet, Lands is considered an
exemplary public sector entity in <strong>the</strong> practice <strong>of</strong> managing its IC, suggesting an ongoing tension in
between measuring and managing IC. Therefore we will explore whe<strong>the</strong>r or not measuring IC is
actually required for managing IC in <strong>the</strong> context <strong>of</strong> Lands.
3. Lands
Lands is an Australian public sector entity employing more than 2000 people. Formerly known as <strong>the</strong>
NSW Department <strong>of</strong> Lands from 2003 to July 2009 it was renamed as a result <strong>of</strong> <strong>the</strong> Government
creating thirteen separate super agency clusters from existing New South Wales (NSW) Departments.
Lands mainly comes under <strong>the</strong> auspice <strong>of</strong> <strong>the</strong> Minister for Planning. Additionally, Lands inherited
several o<strong>the</strong>r bodies dealing with managing and developing land in NSW (NSW Government, 2009).
Over <strong>the</strong> last decade Lands faced public sector reforms resulting in creating Government Business
Enterprise (GBE) structures. These structures focus on delivering pr<strong>of</strong>it to <strong>the</strong> Government ra<strong>the</strong>r than
requiring public funding, being typical <strong>of</strong> recent Australian public sector reforms (English et al., 2005).
By July 2010 Lands had completely converted its operations into GBEs. Thus, Lands relies on an
ability to generate revenue from <strong>the</strong> services provided to its customers to sustain and grow <strong>the</strong>
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