‘Managing intangible assets in a tangible context’

RESEARCH

‘Managing intangible assets in a tangible context’

Supervisor: Prof. Dr. J. Strikwerda By: Charlotte Roos Student Number: 10317333 Amsterdam, August 31 2014

Version: final version

University of Amsterdam Amsterdam Business School

Executive Programme Management Studies

I Reviewed this thesis on September 1, 2014. Grade = 7.

The English in terms of style could at certain point be improved. Research, given the subject is sufficient.

Good is that the student demonstrates awareness of the pitfalls with the research topic on the level of language and politics.

Abstract

The shift towards the importance of intangible assets compared to tangible assets in the economy leads to the necessity of a fundamental change in the institutional foundations for firms. Corporate law and accounting rules, which define the

foundations of western institutions, are based on the principle of physical assets. For various reasons societies are not willing to adapt those institutions to the increasing role of intangible assets. This results in a gap between the institutional context of firms and the capital asset base of firms, which leads to a number of implications for firms while trying to organize for and manage intangible assets to achieve an efficient organization. Firms will need to adapt their management methods to the increasing role of intangible assets within the existing environment, which is based on tangible assets in order to overcome these implications. The question to be asked is whether traditional management methods, directly or indirectly based on tangible assets, are capable to create efficient organizations in case these organizations dominantly are based on intangible assets, respectively whether the conventional tools and concepts of management and organizations are capable to achieve a maximum return on investments in human capital. This thesis will, by explaining the necessity of organizing for and managing intangible assets to achieve an efficient organization, argue that an understanding of the fundamental aspects of intangible assets in a tangible context of the firm including the corresponding implications, is needed to achieve the required level of management and to achieve a maximum return on investments in human capital.

Table of Contents ABSTRACT...2 INTRODUCTION...4 LITERATURE REVIEW...7 RESEARCH METHODS...17 FINDINGS...22 DISCUSSION...37 CONCLUSION...44 ACKNOWLEDGEMENTS...47 REFERENCE LIST...48

Introduction

In the end, the location of the new economy is not in the technology, be it the microchip or the global telecommunications network. It is in the human mind. -- Alan Webber

There is a lot to do about knowledge. Knowledge is getting more and more

acknowledgement as one of the most important firm assets. Knowledge can lead to innovation, can create firm value and (sustainable) competitive advantage.

Knowledge is therefore being attracted, developed and even protected via labor contracts with anti competition clauses, protecting intellectual property rights. Overall, one could conclude that firms start recognizing the important advantages of the use of knowledge as an asset. But knowledge as an asset also brings along some difficulties. Managers intuitively feel and acknowledge the value of knowledge as an asset, some even know how to operationalize the role of knowledge, but unfortunately these managers form the exception. Economists recognize the role of knowledge, but have not yet succeeded in translating the role of this intangible asset into a micro-economical theory of the enterprise. Consultants have brought in solutions, like Nonanka’s knowledge management, but these solutions have failed in practice since the ownership issue was not recognized.

With physical, tangible, assets (machinery, equipment, buildings) it is very clear to whom the assets belongs: the firm. With an intangible asset like knowledge this is not as black and white. As Alan Webber (indirectly) mentions, knowledge resides in the mind of human beings. The firm does not own employees; employees are merely connected via labor contracts. Although one could argue that knowledge is, at least partially, further developed within the firm, a firm cannot claim the knowledge as

their property. When an employee ends his or hers labor contract, certain firm specific knowledge (customer specific knowledge for example) leaves with the employee. Furthermore, Grant emphasizes that if knowledge, as the most important source for creating firm value, is owned by the employees who also apply their knowledge, this means that the theoretical assumptions for the shareholders no longer stand. The ownership issue as addressed by Grant is caused by the institutional foundations of the firm still being based on tangible assets. Intangible assets, like knowledge, can therefore not be capitalized on the balance sheet.

The nature of the firm is changing, but the institutional foundations of the firm are not changing along. This growing gap results in a weakening of the traditional

management systems, still being based on a physical asset base of the firm. New types of management methods need to emerge.

To make knowledge work productive will be the great management task of this century, just as to make manual work productive was the great management task of the last century. -- Peter Drucker, 1969

Focus is shifting from producing, physical labor, muscles and physical strength being the most important assets of a worker to: specialization, codifying knowledge, transfer and share tacit knowledge in order to create new knowledge. This shift in assets has changed the relationship between managers and employees. From demand and control, the manager telling employees what to do and how to do it, to cooperation and a changing balance of power since the employee is the one that owns the valuable asset: knowledge. Firms will need to adapt their management methods to the

increasing role of intangible assets. But managing knowledge within the current firm environment seems a challenging task. In my thesis I will therefore focus on

professional organizations, which have successfully found a way to organize for and manage intangible assets in an institutional context of the firm which is based on physical assets only.

To accomplish an understanding of the deeper meaning and the wider context of the changing institutional foundations of the firm while it’s environment stays stable, and the implications that this sets forth, the next section (literature review) will explore the literature regarding this topic and it’s context. The third section (research methods) describes the research methods used for this thesis. In section four (findings) the results are described and analyzed. Section five (discussion) follows with a discussion and the thesis concludes with section six, the conclusion.

Literature Review

One of the consequences of the rise of modern firms around 1900, as described by Chandler (1977) in his concept of the MBE, was the development of the separation of ownership and control (Berle&Means 1932/1991). To facilitate the then needed investments in capital goods, which were of physical nature mainly, by labor law and corporate law the separation of labor and capital was established implying that the hired worker only sells his or her workforce and is not required to provide any capital, e.g. in the form of tools, into the workplace. This is also supported in the neo-classical economic theory in which labor is not a part of the firm; instead it is a purchased commodity. Employees are not a part of the firm; they are linked to the firm via contracts, similar to contracts being closed with suppliers. The separation of labor and capital also implies that the worker has no rights to the residual claim of the firm, this right belongs to the shareholders only. Neither has the worker voting rights in the general meeting.

Although this theory is originated during the industrial revolution the separation of labor and capital still plays a significant part in the playing field of corporations today. Corporate law and accounting rules, which define the foundations of western institutions, are based on this principle of physical assets. At the end of the nineteenth century corporate law and labor law have been created to facilitate the then new technologies with their need of large investments in tangible assets and in research and development. The firm as an institution in western societies, as created by corporate law therefore is purely based on tangible assets (machinery, equipment, buildings).

But firms have evolved. The capital base of modern firms(OECD) (Nakamura 2001) exists dominantly of intangible assets like human capital (knowledge), information

capital, organizational capital and relationship capital (Arrow 1996). The importance of intangible assets is also acknowledged by Kaplan & Norton via the creation of the balanced scorecard. They emphasize the need to have balanced investments in

intangible assets and tangible assets in view of the increasing economic importance of intangible assets in our economy, which was based on (Porter&Wayland 1992). The shift from the tangible asset base to knowledge, and the recognizing of the importance of knowledge as an asset, is also being discussed in the academic literature. The shift from the Resource based-view (RBV) towards the Knowledge based-view (KBV) shows the evolution of the capital base of firms. The RBV focuses especially on the inside of the firm, it’s resources and capabilities, to explain

differences in firm performance. Organizations are described as heterogeneous entities characterized by their particular and unique resource bases (Barney 1991). Nowadays, and according to the KBV, organizations are seen as heterogeneous entities loaded with knowledge (Hoskisson et al. 1999). The resource base of the organization increasingly consists of knowledge-based assets (Roos et al. 1997; Stewart 1997; Sveiby 2001b; Marr 2004). Knowledge resources are especially important to ensure that competitive advantages are sustainable. Since knowledge is difficult to imitate it is the foundation for sustainable competitive advantage. High strategic flexibility and the ability to react fast to environment changes can be achieved by establishing a superior knowledge base (Grant 1996b; Volberda 1996). According to the knowledge based-view (KBV), knowledge is considered to be one of the most important assets to the creation of sustained competitive advantage

(Umemoto 2002).

Both theory and practice show the importance of knowledge for value creation and for the value of the firm. But the gap between the foundation of institutions being focused

on tangible assets and the capital base of modern firms consisting of intangible assets (Strikwerda 2014) has not yet been discussed in the theory. This gap results in

multiple implications for modern firms, examples are financial implications (capital allocation) and asset ownership implications, which lead to implications for the traditional management methods. The question to be asked is whether traditional management methods and organization concepts are capable to create efficient organizations in case these organizations dominantly are based on intangible assets, respectively whether the conventional tools and concepts of management and organizations are capable to achieve a maximum return on investments in human capital.

The financial implication results in the fact that firms are not able to economize their most important assets. Investments in intangible assets cannot be economized

according to the current accounting rules, and are therefore regularly seen as expenses. This can lead to a resource allocation process, which is focused on

investments in tangible assets and restrained with respect to investments in intangible assets. This issue was foreseen by Porter, and addressed in 1992 in his article Capital disadvantage: America’s failing capital investment system. In this article he describes the problematic role of the shareholder. Innovation and upgrading come from

sustained investment in physical as well as intangible assets, things like employee skills and supplier relationships. But because the institutional environment in which firms operate is still being based on tangible assets, the system rarely treats intangible investments as actual investments. Rather they are negotiated as part of the annual budgeting process, which is primarily driven by a concern for current profitability. Intangible investments may not even be tracked in the financial system, and thus may be sacrificed in the name of profitability (Porter 1992).

To solve the limitations of the budget-driven method for strategy execution,

Kaplan&Norton came up with the Balanced Score Card (BSC). Kaplan & Norton do not discuss the limitation of existing accounting rules, but make use of the new technological possibilities to organize a richer information space compared to an information space based on management accounting information. This richer information space provides for multidimensional, non-financial leading parameters (management information), whilst at the same time produces the information as required by the traditional accounting rules (compliance information) (Strikwerda 2014).

The essence of the BSC is to acknowledge in the capital allocation process, in the process of investment decisions, the role of intangible assets in the value creation and in the value of the firm. The essence of the BSC is to achieve a balance between investments in intangible assets and in tangible assets, and to achieve a balance between short term and long-term objectives (Strikwerda 2014).

In the BSC four dimensions are distinguished: the financial perspective, the customer perspective, the internal process perspective and the learning & growth perspective. The thought is that investments in learning & growth will lead to process capabilities and process performance, which in their turn will lead to performance with the customer, which will result in a financial performance (Strikwerda 2014). This is in conflict with the interests of institutional investors, which are purely financial and are focused on quarterly or annual appreciation of their investment portfolio compared with stock indices. As a result, many companies invest too little, particularly in those intangible assets and capabilities required for competitiveness and economic growth—R&D, employee training and skills development, information systems, organizational development, and supplier relations (Porter 1992).

Not only the capital base but also the role of the firm has changed. According to Nonanka the role of the firm in knowledge creation is ‘the organization supports creative individuals or provides a context for such individuals to create knowledge’ (Nonanka 1994). As discussed earlier, the separation of labor and capital makes that the worker is no part of the firm, but is merely connected via a labor contract, similar to a supplier. Therefore, the worker has no right to the residual claim. Part of the characteristics of a knowledge based firm is that the role of tacit knowledge as carried by the worker, and which is owned by the worker, is acknowledged as being material to the value creation by the firm. This creates a contradistinction. On the one hand, the worker brings in (personal) knowledge, which is material to the value creation of the firm, but at the same time the worker does not obtain a share of the residual claim. Furthermore, the asset ownership implication results in the firm becoming more vulnerable to the ownership of human capital; personal knowledge is owned by the person. The ownership of the firm no longer coincides with the ownership of its assets. One reason why asset ownership matters, is that it allows us to understand bargaining power and hence the derived concept of authority: the manager, who controls assets, can threaten the employee with depriving him of the asset with which he is currently working as a result of which the worker cannot monetize his tacit knowledge (Blok 2013). But the control and ownership of (intangible) assets has shifted to a great extent from the firm to the employees. Existing methods and techniques for management and organization are based on physical assets of which the firm has alienation rights (a right is alienable if its owner has the right to sell a right and capture the proceeds offered in the exchange). In the case of intangible assets, and in specific knowledge, the right of alienation does not belong to the firm,

but this right of alienation forms since Roman times the basis of the control over the firm (Furubotn&Richter 2000).

The discussion regarding the asset ownership issue also plays a role in the field of HRM, especially focused on employment contracts. The average length of

employment contracts has changed. Back in the days, lifetime employment contracts used to be normal, whereas now it is common to switch between jobs and different employers. Firms have departed from the labor relation practices of the past, and have constructed a radically new type of workplace, one that is dedicated to expanding and deploying the human capital of their employees rather than to maintaining hierarchy and control (Stone 2001). The recognition of firms of the value of human capital leads to the implication, disputes over ownership of human capital have increased.

Employees assume that the skills and knowledge they acquire on a particular job "belong" to them in the sense that they take these with them when they depart. Employers, on the other hand, believe that if they have imparted valuable skills or knowledge to their employees, they should "own" that human capital in the sense of being able to ensure that it is utilized on their firm's behalf. While they cannot compel an employee to remain with their firm, employers can, and do, attempt to prevent former employees from using knowledge obtained in their employ on behalf of a competitor. Employers use a variety of legal theories to restrain former employees from using knowledge obtained at their firms. Some of these theories include: misappropriation of trade secrets, breach of a duty of loyalty, industrial espionage, and when applicable breach of nondisclosure agreements and covenants not to compete (Stone 2001). Although these measures can only prevent former employees from using their knowledge on behalf of other firms than the firm where they

leaves the firm. This implicates the underlying question: Who "owns" the employee's human capital (Stone 2001)?

The nature and organization of labor, the way in which labor is given meaning to, and the importance of tacit knowledge has led to the weakening of the construct of (labor) institutions (Strikwerda 2014). Institutions as we know them now no longer seem to be suited to enable firms to respond to changing situations. Therefore we can conclude that the nature of the firm is changing, but the institutional foundations of the firm are keeping its’ status quo. As Kaplan & Norton mentioned: “Ideally, this financial accounting model should have been expanded to incorporate the valuation of a company’s intangible and intellectual assets”.

According to Birkinshaw there are two schools of thought regarding the reinventing of management methods (Birkinshaw, Hamel, & Mol 2008). One school of thought states that management cannot be reinvented. Management is fundamentally about how individuals work together, and the basic laws of social interaction have not changed for centuries, if ever. While the business context evolves, the underlying principles of management (how we set objectives, coordinate effort, monitor performance) are never going to change.

Second school of thought states that we are on the cusp of inventing a new model of

management. Management as we know it was developed for the industrial era, based on physical assets as the capital base of the firm and being the scarce resource; but, today, knowledge is the scarce resource and forms the capital base. Firms gain advantage not by working efficiently, but by stimulating initiative, creativity and knowledge sharing and creation. And, most vitally, the information technology revolution is making it possible for entirely new ways of working to emerge (Birkinshaw 2008).

For various reasons societies are not inclined to address the need to adapt institutions to the increasing role of intangible assets (Arrow 1996). Therefore the adaptation of tools of management to the increasing role of intangible assets needs to be achieved within the context of the existing institutions. This would mean meeting half way of both schools of thought as described by Birkinshaw.

Looking at the traditional management methods, the idea of management is a separate role focused on planning, oversight and monitoring of others work was appropriate for the industrial age. But in an era of autonomous, self-motivated knowledge workers it can be suggested that the traditional management methods are no longer applicable. The old model of management was formed to deal with a very different set of external and internal circumstances than those organizations face today. Because knowledge is an invisible asset that resides largely in the minds of human beings, management can no longer be about close observation and monitoring. The traditional management methods are based on assumptions, which no longer hold. Examples of these assumptions are ‘management was viewed as requiring a higher level of conceptual capabilities and was perceived to be superior to, and more valuable than,

nonmanagerial work’ and ‘it was assumed that managers could do workers job better than the workers themselves: indeed, it was part of the managers responsibility to instruct workers on how to perform their jobs more effectively’ or ‘the managers job was to think, and the workers job to do’ (Davenport 2005). These assumptions will have to change when wanting to organize for and manage intangible assets. A

managerial revolution is necessary (Davenport 2005). Davenport proposes in his book ‘thinking for a living’ a new set of assumptions. Unfortunately he does not take into consideration the existing gap between the capital base of the firm and the

gap by stating that companies need to put the necessary incentives and assurances in place to ensure that people are willing to share their knowledge. Due to the ownership issue constraining workers is no longer a means to achieve the desired result or output. This may be perceived as a power struggle, since in knowledge work the knowledge worker rather than the managers holds the power since they possess the critical knowledge (Davenport 1995). Unfortunately Davenport does not answer the question ‘how to overcome these challenges’ in his book.

Rosabeth Kanter promotes a change-adapt organization and therefore change-adapt leadership in her book Frontiers of Management. Change-adapt organizations produce three intangible assets that help them master change: concepts, competence and connections. These assets draw on human talents such as intellectual skills, imagination, courage, creativity, sociability and trust. Kanter states that people are perhaps a company’s most valuable raw materials, but they do not become assets or sources of organizational capital until deployed effectively. Here lies a task for management. According to Kanter, managers have the fundamental, enduring job of mobilizing and motivating individual human talent in pursuit of collective ends. This encompasses defining and communicating tasks, grouping people and attaching them to their tasks, and ensuring appropriate treatment of people on the job (Kanter 1997). Furthermore, they must create assets that remain with the organization even after particular people leave, by codifying or sharing their knowledge. Although this solution can enable organizations to become an efficient organization in which intangible assets are organized for and managed, unfortunately Kanter is not making explicit how firms can coop with the implications, such as the ownership issue, coming from the discrepancy between the changing nature of the firm and the non-changing institutional context of the firm.

The concept of the BSC, strategy map and the management system as published by Kaplan & Norton seem to be a ‘solution’ how to organize for and to manage

intangible assets, within the existing institutional context (Strikwerda 2014). Another solution seems to be provided by Kanter.

Since there is a power struggle going on in the field of business administration and organization theory as an academic discipline, I will focus my research on those professional organizations that have found a solution in organizing for and managing intangible assets, without interfering in the politically sensitive debate. The research question that is central to this research is therefore:

“How to organize for and to manage intangible assets to achieve an efficient

organization in an institutional context of the firm which is based on physical assets only?”

Research Methods

This research will de conducted by using secondary, content, analysis. Secondary analysis is the re-analysis of data for the purpose of answering the original research question with better statistical techniques, or answering new questions with old data (Glass 1976). In my thesis the latter will be of relevance.

The reason why secondary analysis is preferable is that access to the proper firms and the relevant layer of management is difficult, so not impossible, to obtain from my position. Other institutes, like Harvard Business School (HBS), do have had access and used this opportunity to form a case study on the topic of knowledge

management. Furthermore, it would be difficult to interpret answers and findings from semi structured or open interviews since the theoretical foundation within this specific context is non-existent. Since little is known about this research topic in the particular context in which my research takes place, I believe that a secondary analysis is of value.

Also there is the issue of researchability. In the Netherlands thinking about

organizations, especially about the role of intangible assets is still in a more intuitive phase compared to a phase of codification in systems as in the USA. Interviewing managers in the Netherlands on the role of knowledge in the economic model of their firm, respectively in how this role is codified in the systems and procedures of their organization, will be difficult for reasons of their espoused theory being stronger than their theory-in-use.

A secondary analysis of HBR-cases also is worthwhile because of the role of rhetoric in cases. The issue of the becoming salient role of tacit knowledge in the value

creation and in the capital base of the firm (Arrow 1996; Jensen 1998; Zingales 2000) is a political issue because it touches upon the issue of ownership of the firm,

especially in the USA jurisdiction, and the rights of the shareholder. For this reason Arrow (1996) has stated that for the time being there will be no adaptations of the institution in society, corporate law, labor law, to the role of intangible assets. On the other hand Porter (Porter&Wayland 1992) has acknowledged, like The Conference Board and the OECD, that intangible assets, knowledge, human capital, information capital, organization capital, is of more importance for value creation, the value of the firm and for the competitiveness of the US economy, and economic growth as are tangible assets. Therefore it is understandable that solutions are sought as e.g. in the form of the BSC and the management system of Kaplan & Norton, to address the issue of the role of intangible assets within the context of the existing institutions (Strikwerda 2014). Therefore a reasonable hypothesis is that in a number of specific HBS-cases descriptions are to be found of these new practices, but are worded in a way as not to raise political or ideological unrest, whilst serving the role of intangible assets for the competitiveness of the US economy. For European managers and academics, failing the US economic institutional and political context, this implies that these cases cannot be read nor interpreted ‘as is’ is used to be the way with US management books, but European managers need an additional level of awareness, consciousness in order to interpret these cases and especially their lessons in a European context. In terms of research methods, the traditional methods for researching management practices, methods and concepts assumed congruency between the institutional context of firms as codified in corporate law, labor law, the system of industrial relations, contract law, etc. and the nature of the firm, being based on physical assets. The issue here is that since about 1990 (OECD) this congruence is at least weakening. Raising the question what this weakening may imply for the effectiveness of traditional management models.

The unit of analysis are firms, professional firms in particular, who have created an environment or conditions in which the institutional context and its implications are avoided. I have chosen to focus on professional organizations because of their social importance. The firm as a unit of analysis is chosen since the growing discrepancy between the changing nature of the firm and the non-changing institutional

environment of the firm results in the changing or weakening institutional basis of the instruments for administration, management and organization (Strikwerda 2014). Therefore, the second unit of analysis are the managers and the management methods used within these professional organizations, by trying to organize for and manage knowledge to achieve an efficient organization. I would like to explore to what extend the growing importance of knowledge and knowledge workers within firms,

combined with the troubled institutional foundations, affect existing management methods. How do organizations coop with the implications coming from the discrepancy between the changing nature of the firm and the non-changing institutional environment of the firm?

Intangible assets come in a variety of forms, but my research is especially focused on knowledge. Knowledge, among other intangible assets (information capital,

organization capital, social capital, human capital), according to the accounting rules IAASB 38 does not qualify for being capitalized on the balance sheet of the firm, nor is this intangible asset alienable except in the case of mergers, divestments or

acquisition of firms as a whole (Strikwerda 2014).

It is an exploratory study, exploring new questions/phenomena with old data. Multiple cases will be studied and analyzed. Multiple cases enable comparisons that clarify whether an emergent finding is simply idiosyncratic to a single case or consistently replicated by several cases. Furthermore the theory is better grounded,

more accurate, and more generalizable when it is based on multiple cases (Eisenhardt&Graebner 2007).

The professional organizations Duane Morris and Intermountain Healthcare are selected. A minimum of two HBS-cases per professional organization will be

consulted. The secondary data is obtained via Harvard Business Publishing, websites of the firms, annual reports and external sources like the chamber of commerce or press releases. A mixture of different types and sources of literature will be used since consulting multiple sources will result in greater confidence of findings.

The limitation of this research is that only one method, documentary analysis, is being used. This could weaken the representativeness of the outcomes due to minimal triangulation. Another limitation regarding the comparability of the different cases is the data collection method used. The data collection method used for the different case studies might differ from each other, which could counter the comparability. Furthermore, the case studies might have been written for a specific purpose, a learning objective for example. It is therefore important that various sources are consulted for the collection of data. Especially the cases should be judged on possible bias by the case writers, therefore other (theoretical publications) by the case writers will be studied to understand a possible bias.

A strength is that information about the (knowledge) management methods of noteworthy professional organizations is accessible and used for this research, but being analyzed in a different context. By doing secondary research I am filling the gap between theory, which is lagging behind, and the organizational environment. Due to the fact that this issue has become a political issue, because it touches upon the issue of ownership of the firm and the rights of the shareholder, organization theory as an academic discipline has become entangled in all kinds of social interests instead of

being academically independent (Khurana 2007). Therefore I believe I am taking a first step towards a new theoretical direction.

Findings

After having analyzed the HBS-case studies of two professional organizations, their annual reports, websites and press releases, it seems that it is possible to successfully organize for and manage intangible assets in an institutional context of the firm which is based on physical assets only. Both professional firms created conditions which are not in conflict with the institutional context and are avoiding the additional

implications.

When studying the HBS-cases of Duane Morris it all seems to come down to one central aspect: culture. Duane Morris’s culture originates from the firm’s Quaker roots and is defined by values like collaboration, trust, equality, transparency, simplicity, functionality and consensus (Groysberg&Abrahams 2008). These values, and their consistent and complete codification in the systems and procedures of Duane Morris’ culture, support cross-functional collaboration. Associates are expected to contact and involve partners for a client case. Thereby ensuring that the necessary knowledge is involved and customer value is created. To secure and stimulate collaboration, trust is an important factor. Duane Morris therefore

emphasizes equality of associates, partners and staff. They implemented the ‘no jerks rule’, which forbids employees and partners to behave rudely to others

(Gardner&Lobb 2013). As discussed by Strikwerda in his article Empowerment: Hoe professionele ruimte te combineren met in control zijn there must be a psychological climate in which employees feel safe to take initiative and to make mistakes

(Strikwerda, 2012). The culture of Duane Morris secures this psychological climate. Geisler&Laws (a law firm which successfully merged with Duane Morris due to their compatible cultures) encourages openness among attorneys about their successes and

failures. ‘In most of the other law firms we’d worked in, people hid their mistakes, but we wanted to have an open dialogue with people’ (Gardner&Lobb 2013). Codification is an essential element; values are not simply stated, but consistent and completely codified in all systems and procedures of the organization. The Duane Morris culture is also codified in the HR-policy and recruiting process. Duane Morris looks for specific personality traits in new hires, alongside the requisite professional skills. Searching for a match between values of the individual and the firm.

Considerable time was spent explaining the Duane Morris culture to potential new hires to ensure a good fit. This small-scale recruitment and individual interviewing had its costs in time and money but resulted, according to Duane Morris leadership, in an easier cultural alignment than a merger or acquisition would

(Groysberg&Abrahams 2008). Personal qualities, as well as professional skills, were assessed. Looking at the dimensions of the Big Five (existing of neuroticism,

extraversion, openness to experience agreeableness, and conscientiousness) the dimensions agreeableness and conscientiousness are probably of most importance to the Duane Morris HR-policy and recruitment process since these personality traits connect with the Duane Morris culture. Conscientiousness, which has emerged as the Big Five construct most consistently related to performance across jobs

(Barrick&Mount 1991; Salgado 1997), is manifested in three related

facets-achievement orientation (hardworking and persistent), dependability (responsible and careful), and orderliness (planful and organized). Thus, conscientiousness is related to an individual’s degree of self-control, as well as need for achievement, order, and persistence (Costa, McCrae & Dye 1991). Agreeable persons are cooperative (trusting of others and caring) as well as likeable (good-natured, cheerful, and gentle) (Judge, Higgins, Thoresen & Barrick 1992). This personality trait is consistent with the ‘no

jerks rule’ in which equality and respect are emphasized. But especially the

combination of both personality traits seem to contribute to the Duane Morris culture which include "integrity, reliability, lack of greed, good humor, hard work of high quality, a desire to be the best, willingness to sacrifice personal pursuits for the benefit of clients, involvement in civic affairs for the benefit of the community, tolerance of divergent views, concern for those less fortunate, devotion to our

families, and among the partners and all others in the office a subordination of self for the welfare of the group and its clients which in the world of sports is known as teamwork" (Groysberg&Abrahams 2008).

After being recruited an on boarding and integration program is started. Via these programs the new hire learns about the Duane Morris culture and learns that teamwork and sharing knowledge is a common way of working at Duane Morris. During the on boarding the new hire is assigned to a mentor and “integration team”. The team members help the new hire to identify opportunities by presenting their practice and clients to internal practice groups, internal and external speaking events, and client introductions and cross selling. The integration process is a process for which not only the new hire is responsible, but everyone at the firm (Gardner&Lobb 2013). But also, if it turns out that the values of the individual, which may take some time for the individual to become aware of, do not match those of the firm, the individual will be fired.

Strikwerda discusses in his article how professional firms can cope with the tension between empowerment and being and staying in control by becoming an edge-organization. He uses the definition of the resource-based view of the firm. In this school of thought a company is in control when they successfully obtain (new) means of production (knowledge, people, technology, information) and know how to exploit

those resources that are necessary for the continuity of the company (Strikwerda 2012). To meet this end a firm needs external and internal control. This means market power in relation to competitors, suppliers and customers, and internal control, in short: an efficient organization. But continuity of a company, being in control, in a changing environment (economy, markets, technology, consumer preferences), not only requires an efficient organization, and ability to adapt to operational changes, but also the ability to transform the business model of the company (Strikwerda 2012). The question now is, is Duane Morris in control? Companies fail in adapting their business model to the changing environment mainly due to psychological reasons: dominant logic, belief conservation, the culture being to strong or dominant (group think) (Strikwerda 2012).

Paradoxically, although the Duane Morris consensus-based decision making process was meant to surface all questions and concerns, thus leading to a better decision, this process could lead to groupthink if group members believed that they must agree or face ostracism (Groysberg&Abrahams 2008). The goal of consensus-based decision-making was to allow all points of view to be heard before action was taken, in order to reach an opinion as a whole firm (Gardner&Lobb 2013). But the procedure was not without risks; it could be a slow process. In order to overcome these risks the key values of consensus—active listening, an avoidance of win/lose scenarios, leadership as a reflection of group will—are preserved at Duane Morris. Leaders prepared intensively before important decisions were to be made. Members of the partners’ board were provided with extensive background material on issues at hand. It allowed for a more thorough vetting of the issues involved in a given decision and also created a climate where there were no “winners and losers” as there would be in a voting situation (Groysberg&Abrahams 2008).

Apparently this approach worked. Duane Morris attorneys were quick to note that reaching consensus did not slow firm processes down. “We don’t’ get bogged down with an idealized notion of consensus. We assume consensus, although if people want to speak out, there is the opportunity to do so. We try to move forward absent any issue” (Gardner&Lobb 2013).

Furthermore, the psychological factors that influence the ability of the firm to

successfully adapt their business model to the external environment can be overcome. At the organizational level, it is possible to mitigate the effects of the mentioned mechanisms, or sometimes even avoid them. Companies that give employees the space to inventive respond to changing market demands and also to experiment to achieve goals more efficiently are more likely to survive, by transforming their operations to new products, technologies and markets (Strikwerda 2012). At the operational level, this means that front-line workers should be able to experiment to find a response to new demands coming from the market. Duane Morris seems to meet these criteria by letting collaboration, instead of hierarchy, predominate. Associates and partners are expected to seek the help of other partners or colleagues, instead of hording work and keeping it to their selves, when this is necessary to meet the client needs. Employees can themselves determine which of their alternative initiatives and decisions contributes most to the needs and demands of the customer. Furthermore, collaboration is supported via the bonus system. This system is not based on only high billable hours, but as one Duane Morris employee described it: ‘we get credit for working regardless of whether I’m working on my matter or your matter or someone else’s matter, I’m still working’. The compensation system of Duane Morris is a recognition of fairness over the absolute amount of money paid. It takes multiple factors in consideration, not just raw work hours completed for each

client; it in turn encourages collaboration among attorneys and therewith the sharing of knowledge (Gardner&Lobb 2013). Furthermore, Duane Morris maintained a relatively low spread between the highest- and lowest-paid partners and between the highest-paid equity partners and the average (Groysberg&Abrahams 2008). Thereby emphasizing the value of equality and collaboration within the firm. Leadership at the firm was undercompensated for three reasons. As Sheldon Bonovitz, chair and CEO of the firm in 1998, explained: ‘first of all, I believe that in a law firm the leadership has to be perceived as being undercompensated. If the leadership is perceived as being greedy and overcompensated, it carries through the whole firm, and people then focus on it. Second, the leaders, or whoever sets compensation, have to be perceived as not being political but only trying to fairly allocate compensation among the partners based on their contributions, and thirdly, there has to be a recognition that compensation is an art and not a science’ (Groysberg&Abrahams 2008).

Strikwerda discusses the characteristics of an edge-organization in his article Empowerment: hoe professionele ruimte te combineren met in control zijn. The concept of an edge-organization means that the operational decision-making takes place at the edge of the organization. In order for a professional organization to become an edge-organization, the organization should meet three conditions

(Strikwerda 2012). First, decision rights should be attributed to those employees who are in contact with customers and suppliers. Associates at Duane Morris have the opportunity to reach out to, and involve, partners when they think it is necessary to successfully execute their work. Deciding on who to involve, it not just a

responsibility for the partners. Furthermore, decisions at Duane Morris are based on consensus and are made in consultation and are therefore not dependent of

work together, without limiting hierarchical lines, to provide a customer with a good solution. Duane Morris does not have a (strict) hierarchy. Via the Duane Morris culture conditions are shaped that enable collaboration and the use of each other’s knowledge and expertise. This enables Duane Morris to focus on creating customer value, assisting the client as good as possible, instead of hierarchy and top-down steering on strategy. Third, all types of information should be immediately accessible by all members in the organization, as widely as possible. The idea is that no longer we work with management information, but that members of the organization have direct access to all information. Duane Morris has a financial dashboard, accessible for attorneys on their own computers. The dashboard shows numbers such as accounts receivable by bucket category and work time in progress. It shows hours, time value, unbilled time, fees collected (Gardner&Lobb 2013). Furthermore, they also have the Matter Contribution Analysis (MCA), a quantitative system used to calculate

profitability by client, matter or individual attorney (Gardner&Lobb 2013). Besides, the heads of Duane Morris’s practice groups were provided with summary data and reports on each individual in their group on a monthly basis, allowing them to track performance issues and allocate work appropriately. Because of this in-depth

information about what, who, and where their profits came from, Duane Morris was able to predict future needs based on historical trends rather than just on today’s profits. The firm was able to accurately determine which practice areas were most lucrative and make decisions to drop or grow practices (Groysberg&Abrahams 2008). Furthermore, identifying the person with the appropriate knowledge within Duane Morris is done simply via e-mail. Partners often sent an e-mail to all other partners in the firm, asking for specific knowledge they needed for a client matter

Even though Duane Morris seems to have created an environment in which the institutional environment and the additional implications for firms are avoided through culture, we cannot yet conclude whether it is possible for Duane Morris to survive. Duane Morris has created a culture in which collaboration instead of the pursuit of self-interest is emphasized and rewarded and trust is established, but as Duane Morris grows, could they successfully pursue a merger strategy and maintain the culture? Will it be possible to continue to follow its “consensus” mode of

governance? The law industry in the USA in general has values opposite those guarded by Duane Morris. Shark type, individualistic, low trust and ‘eat what you kill’ are common descriptions used for the USA law industry. Will Duane Morris be able to survive and be successful in an industry with opposite values? Duane Morris is successful but does not belong to the top three law firms. Furthermore, the

remuneration system of Duane Morris is significantly different that the standard or conventional remuneration system used by most (top) law firms. Duane Morris has developed a quantitative system used to calculate profitability by client matter, or individual attorneys. This system became the basis for the quantitative analysis for the compensation. The system does not look at each person’s book of business, what many law firms do, but instead they look at the actual profitability of an attorney. Profitability is determined by comparing two numbers. The first number is the revenue collected on each of the attorney’s matters, subtracted by the actual costs of that attorney (salary plus overhead, divided by the total of hours worked that year). Resulting in an amount per hour. The second number was obtained through an

identical calculation, but instead of hours actual worked the firm uses the target hours of the attorney. This yields an hourly cost number for what the attorney was projected to cost the firm. This allows Duane Morris to see whether the attorney was more or

less profitable that he or she should be. Attorneys hogging work to themselves or claiming new clients, in order to achieve bigger books and obtaining a larger piece of the bonus pie, is not being rewarded. By sharing this information with the attorneys, Duane Morris is able to guide behavior and set focus (Gardner&Lobb 2013). But marketplace trends were heading in the opposite direction from Duane Morris’s standard practices. Industry analysts noted rising initial attorney salaries and a trend toward a larger spread between the highest and lowest paid. Duane Morris typically had a low spread and an aversion to “buying” attorneys (Groysberg&Abrahams 2008). Can it maintain the relatively risk-averse compensation practices in an “overheated” marketplace?

In the case of Intermountain Health Care (IHC), the use of information technology and standard protocols have created an environment in which knowledge is managed and organized for to achieve an efficient organization while not being in conflict with the institutional environment. IHC captures and codifies knowledge via decision support tools, called protocols. The protocols were designed to help medical providers to determine the best medical interventions for each patient. Clinical programs were set up to develop the protocols. These programs provided “tools to help clinicians deliver consistently high-quality clinical care” and defined “appropriate care management systems and initiatives for medical treatment throughout IHC.” Each clinical program was responsible for guiding initiatives, defining new Disease Management Systems, and integrating them into routine care throughout the IHC system. Each Disease Management System included a Care Process Model (CPM) consisting of (1) an evidence-based best practice guideline, (2) workflow tools, to blend the guideline into care delivery as a “shared baseline” (that actively required clinicians to modify the guideline to meet unique individual patient needs), (3) a

clinical management information system that identified and tracked medical cost and service outcomes specific to that particular care process, (4) decision support tools, usually implemented through Intermountain’s electronic medical record system, and (5) education materials for both health professionals and patients (Bohmer 2008). IHC began to use outcome data to hold both employed and affiliated physicians accountable for their clinical performance and to enable IHC to set and achieve clinical improvement goals. They have evolved this work method into standard protocols. These protocols incorporate (patient) data, medical literature and research and ‘just good ideas’. The protocols are constantly updated and kept up to date over time by applying new findings from the medical literature, from similar physician groups in other institutions and by closely tracking and leading discussions based on IHC’s internal outcome and protocol variation data. Changes are made based on feedback from front-line physicians and medical directors as well as updated

antibiotic and clinical care research findings (Bohmer, Edmondson & Feldman 2013). Furthermore, physicians were granted the override capability. But if they chose not to follow the orders automatically generated for a particular patient, they were prompted to explain and document their reasons into the system. This was not to track and discipline “disobedience” but to learn from exceptions. There were two options for not following the protocol: the protocol was wrong and should be modified, or it was correct but the patient had complications so the protocol was not applicable (Bohmer, Edmondson & Feldman 2013). Development Teams would look for statistically significant patterns of variance in process and outcome for opportunities to improve the protocols. Working with the standard protocols has resulted in higher quality of medical treatment and shorter (or less) hospital stays (Bohmer, Edmondson & Feldman 2013).

IHC has aligned the incentive-pay to their focus on improving the quality of their protocols and their medical treatments. A median salary is established for each senior manager. Twenty-five percent of the median salary is withheld, but could be won back by meeting goals. One-third was based on medical-outcomes, one-third on service outcomes and one-third on cost outcomes (Bohmer, Edmondson & Feldman 2013). Through the use of information technology IHC seems to be avoiding the ownership issue. Knowledge, which is incorporated in the standard protocols, comes from data which is collected on the working floor (use of medicine, tests, treatments, etc). By simply doing their jobs, physicians provide direct input and feedback for the optimization of standard protocols. They do not have to actively share their

knowledge unlike most knowledge management systems, where knowledge workers themselves have to manually enter and thereby codify their knowledge.

When comparing the IHC case to the characteristics of an edge-organization, it seems that IHC has managed to meet the conditions to a great extent by using information technology. The first characteristic is that of decision rights. Decision rights should be granted to those employees who are in contact with customers and suppliers. In the case of IHC, the standard protocol is the directive, but it is up to the physician to decide when to deviate from the standard protocol when this protocol is not suitable for a specific case. The decisions made by the physicians should contribute to the goal of IHC and should not adversely affect the integrity. To enable the physicians in making wise decisions IHC has to codify their mission statement in the objective function. The mission statement of IHC is ‘excellence in the provision of healthcare services to communities in the Intermountain region’, which is divided into the performance parameters medical outcomes, patient perceptions, service quality and costs (Intermountain Healthcare 2014). Two of the four performance parameters,

medical outcomes and costs, are measured with the help of information technology and outcome tracking systems, translated into best practices and codified via the protocols. One of the implications is that physicians need to be willing to cooperate and work with the best practices. Especially bringing affiliated physicians on board was an issue. Even though they were not required to adhere strictly to the protocols, some hate the protocols because they see them as a loss of traditional physician autonomy, prestige, power and income (Bohmer, Edmondson & Feldman 2013). Dr. Terry Clemmer (head of the Intensive Care Unit) believed that, in order to improve and innovate, they needed more than the protocol. He felt that a culture of openness (in which the nurse at the bedside was very comfortable questioning the doctor and the protocol) and a culture of process rigor (in which processes were scripted and decision criteria were explicit) were both important. Further, he believed it was essential that the doctors were involved in the design and refinement of clinical processes through rapid cycle trials. “We are not trying to control the doctors,” he said—“we are trying to get the doctors to control the system” (Bohmer 2008). This is the reason why many of the Development Team members were affiliated physicians, who got reimbursed for time spent working on the team.

Second, employees must be free to discuss with colleagues and work together, without limiting hierarchical lines, to provide a customer with a good solution. As described earlier, a culture of openness is necessary to improve and innovate

(Bohmer, Edmondson & Feldman 2013). Although this is not further discussed in the HBS-cases, we do know that nurses are actively involved in developing and working with protocols. An example is the protocol and information system that is developed for the section woman and newborns. Nurses in this section were able to track a patient’s medical history, labor progress, interventions, and delivery and recovery

record, through a unique computer program known as “StorkBytes”. Development Teams programmed alerts and best-practice reminders into StorkBytes so that, for example, when a patient was admitted for induced labor, nurses would check standard indications for delivery. If a patient did not meet the criteria, a red box reading

“Patient does not meet criteria; notify admitting provider” appeared on the screen (Bohmer, Edmondson & Feldman 2013).

Third, all types of information should be distributed throughout the organization, as widely as possible, and should also be immediately accessible to as many employees. At IHC, information technology played a mayor role in developing and implementing the protocols. Some examples of information capturing and distributing are already described, but another example is the Electronic Medical Record (EMR). This information system enables patient monitoring, surgery scheduling and transcription and to which decision support tools were added such as the Antibiotic Assistant. The Antibiotic Assistant applied a protocol to perform a customized assessment of a patient, producing a list of most likely infections and a list of the most appropriate antibiotic to threat them. The Ventilator settings module is another decision support tool, which was implemented in the EMR. This module advised respiratory therapists about optimal ventilator settings (Bohmer, Edmondson & Feldman 2013).

Furthermore, via the standard protocols the lessons learned, best practices and medical literature are shared.

IHC realized very good clinical results. By using the protocols fewer patients needed to be hospitalized, those that were hospitalized had shorter lengths of stay. But even though the average cost per patient decreased, and the protocol reduced costs by 1,2 million dollar, the financial results were disappointing. Using the protocols resulted in reduced reimbursements by 1,7million dollar (Bohmer, Edmondson & Feldman

2013). The question now is, is IHC in control? They do seem to have external control, being market power in relation to competitors, suppliers and customers (Strikwerda 2012). Becker’s Hospital Review recognized six Intermountain hospitals in various categories, including lowest readmission rates for heart attack patients, highest patient satisfaction scores, great heart programs, and great hospitals. This is only one

example of many awards and recognitions which were assigned to IHC. But do they also have the ability to transform their business model? As mentioned earlier,

companies fail in adapting their business model to the changing environment mainly due to psychological reasons: dominant logic, belief conservation, the culture being to strong or dominant (group think) (Strikwerda 2012). In the case of IHC the main challenge is to get the affiliated physicians, approximately 67% of all physicians, on board. A great challenge for IHC in successfully working with protocols was to have the affiliated physicians get used to their loss of autonomy. IHC has tried to establish trust between this group and the new work method by making many of the affiliated physicians part of the Development Teams. Development Teams created protocols, sent them to frontlines for implementation, data collection, and review, and updated them as new information became available.

The key findings are that Duane Morris manages to deploy knowledge to create firm value through culture, whereas IHC has established a knowledge-integrating

environment via protocols which are codified in information technology systems. They have, both in their own way, created an environment and/or conditions in which the institutional context and the additional implications for firms are successfully avoided. Furthermore, the criteria for an edge organization as described by Strikwerda (2014) were largely implemented by both organizations, enabling them to become an efficient organization.

We cannot yet conclude if both organizations are in control. Main challenge for both organizations is to be able to successfully transform their business model. At Duane Morris the main risk lies at groupthink. Although Duane Morris has measures in place to prevent group members to think that they must agree or face ostracism, the

consensus-based decision-making process might possibly still lead to groupthink. The main risk for IHC lies in working with many affiliated physicians. This group has to be willing to accept the change, therefore the affiliated physicians need to be involved in the change process and trust needs to be established. Even though IHC took these measures, the affiliated physicians might still from an obstacle to prevent the

Discussion

The aim of this research was to describe and analyze examples of professional organizations that have found a way to organize for and manage intangible assets to achieve an efficient organization in an institutional context of the firm that is still based on physical assets only. Though it can be mentioned that the aim of the research is fulfilled, various limitations to this research can be identified. In this chapter the findings will be placed in context and the significance of the research will be

discussed. This is done by discussing the credibility, transferability, dependability and confirmability. Furthermore the answer to the research question will be discussed. Credibility – in order to secure the credibility of the results I have used triangulation of data. By consulting multiple sources I tried to build up the credibility.

Triangulation was also used to judge the possible bias of the case writers. HBS-cases might have been written for a specific purpose, a learning objective for example. It is therefore important that various sources are consulted for the collection of data. A possible credibility pitfall is that I have started with the analysis of the HBS-cases, and as a second step analyzed annual reports and information on the Internet. Thereby risking confirmation bias.

Transferability – since secondary research was conducted, the setting in which the research is conducted does not have any effect on the validity of the collected data, but it might have effected the data collecting process and it’s outcome. No interviews or observations were conducted; data was primarily collected via the Internet. Four HBS-cases were purchased via the Harvard Business School, annual reports of both organizations were found online, information from the websites of both organizations was collected and analyzed, and additional information that could be found on the

Internet was collected. Even though the annual reports for both firms were available and additional information could be find online, the findability and availability of information is partly controlled by both firms. Access to particular information could only be granted to members or employees. Besides, search criteria might also have influenced the finding or not finding of relevant data and information. As mentioned in (§ 3), descriptions of new practices are likely to be found in HBS-cases, but worded in a way as not to raise political or ideological unrest. There are two problems with language. First of all, we tend to describe new situations in old, familiar terms, defined by old organization theories. And second there is the political use of

language. This makes it difficult to search the Internet and printed academic literature for relevant information. Search criteria derived from the theory are not likely to bring up useful information, but by only using search criteria derived from the HBS-cases confirmation bias is risked. These factors might have affected the transferability of this research. An example of a study on new forms of organization can be found in the book ‘nieuwerwets organizeren’ (Bruijn, Voort, Hot Link, Joode, & Willems 2014). In this book, for example when it comes to the role of the coach, you see that the researchers do encounter relevant phenomena. But because they operate from a limited organization theory, they cannot identify nor describe what they observe. Dependability – since secondary research was conducted, old data is re-analyzed to answer new questions. The data used for this secondary research comes from four HBS-cases and the annual reports of both organizations. Additional data was found online, mostly via the websites of the organizations. Coding sheets have not been used to analyze the collected data since it can be assumed that descriptions of new

practices were to be found in the HBS-cases, but are worded in a way as not to raise political or ideological unrest, whilst serving the role of intangible assets for the

competitiveness of the US economy (Porter&Wayland 1992). Predefined coding sheets, based on conventional theory, would not help in finding the description of new practices worded in different terminology.

Confirmability – As mentioned before, the wording used to describe new practices are possibly different than the wording used in the literature. In order to recognize the new practices and their descriptions in the collected data, sound knowledge about this research domain and its context is necessary. When the acquired knowledge is not sufficient, this could increase the risk of subjectivity.

Furthermore, there is also the issue of researchability. Response on surveys is very low, often surveys are completed by the wrong persons and companies are

overwhelmed with too many requests to participate in research. Another factor is that all kinds of organizational issues, organizational structures, processes etc. are

increasingly sensitive in terms of competition and in terms of trade secrets.

The research question which was central to this research is: ‘how to organize for and to manage intangible assets to achieve an efficient organization in an institutional context of the firm which is based on physical assets only’. The characteristics of an edge-organization seem to be helpful in dealing with intangible assets in a firm incorporated in a corporation based on corporate law, labor law and a system of corporate governance assuming physical assets only. Strikwerda mentions conditions which an organization has to meet in order to become an edge-organization. Those conditions are:

- Decision rights should be granted to those employees who are in contact with customers and suppliers.

- Employees must be free to discuss with colleagues and work together without limiting hierarchical lines to provide the customer with a good solution.

- All types of information should be distributed throughout the organization, as wide as possible. Information must also be immediately accessible to as many as possible employees (Strikwerda 2012).

From the HBS-cases we learned that there are multiple ways to meet these criteria. IHC for example gives decision rights to the (affiliated) physicians by granting them the right to deviate from the protocols. Thereby ensuring the quality of medical treatment since ‘no protocol fits every patient, and no protocol perfectly fits any patient’ (Bohmer 2008). Duane Morris grants decision rights by telling their partners and associates to involve whoever has the necessary experience and knowledge, thereby ignoring hierarchical lines, to provide the client with a good solution. Whereas traditional partner firms hold on to hierarchical lines and collaboration is strictly a top-down process, with partners choosing among their peers and associates. By breaking these hierarchical lines Duane Morris ensures customer value and meets the first two conditions at once. Both organizations have a clear strategic intent and values, which are codified in objectives and processes, making it possible for employees to determine which alternative or decision contributes most to the objectives of their organization. This results in the organization being in-control as defined in the RBV of the firm, by giving the front-line employees a sensing

(observing changes in the environment of the firm) and sense-making (finding ways to react to these changes) task (Strikwerda 2012). This enables the organization to observe what happens in the environment and to respond timely to the observed changes and to needs and demands of their clients.

Furthermore, in both organizations all types of information are immediately accessible by all members in the organization. As discussed, Duane Morris has a financial dashboard, accessible for attorneys on their own computers and works with

the Matter Contribution Analysis (MCA), a quantitative system used to calculate profitability by client, matter or individual attorney (Gardner&Lobb 2013).

Furthermore, Duane Morris works with the Reports and Analytics Foundation (RAF) solution, which enables Duane Morris to “bring in different fields, metrics, and variables and merge them together to create one report that accounts for all the information previously required in multiple reports” (Groysberg&Abrahams 2008). Client-relations efforts were supported by an integrated client-relationship

management system called InterAction. This software allowed Duane Morris attorneys to see “if a contact is related to, was a former coworker of, went to law school with, etc., someone at Duane Morris.” InterAction was integrated with the firm’s other systems (such as accounting and research software) so that complete reports could be pulled up on any company (Groysberg&Abrahams 2008).

IHC works with the HELP information system, in which appointment books, patient consult notes and charts, and laboratory results can be consulted. The HELP system makes it possible to review patients’ clinical data and to review medical literature. Next to HELP, IHC has the Electronic Medical Care (EMC) system in which the protocols, the Antibiotic Assistant and the Ventilator Settings module are embedded (Bohmer, Edmondson & Feldman 2013).

By making all information accessible to all, employees can there selves determine what information is of importance to them based on their tasks, objectives and inventiveness (Strikwerda 2012).

The HBS-cases show that there are ways to avoid the resource allocation and asset ownership implications as described in § 2. Investments in intangible assets cannot be valued according to the current accounting rules, and are therefore regularly seen as