What is the effect of the intangibles on your company?
The worth of the invisible
More than meets the eye
From an accounting perspective, 'tangible' assets are simple, measurable and (usually) physical assets of an organisation. They are things you could sell: plant and equipment, computers, land, vehicles, inventory etc.
'Intangible' assets however are more difficult to value, they are generally not “sellable” in their own right - you can’t sell goodwill or brand value without selling the company to which they belong.
The global evolution of businesses towards a knowledge-based economy, and the primacy of intellectual property in this shift, heralds the inexorable move to intangible assets as the most valuable items on the company's balance sheet.
The hidden figures
Increasingly, company boards/executives understand the importance of measuring and valuing intangible assets such as culture, talent and human capital which boost overall performance and profitability. Intangible assets now average 52% of an organisation’s market value, and exceed 90% in some__¹__.
To demonstrate the relative value of tangible vs intangible assets, consider the CEO of a large corporate. Numerous studies have looked at the impact of CEO turnover on market capitalisation, and the net “real result” is around 2.5% (which could be up or down depending upon how investors view the situation)². This is remarkable considering the CEO’s salary (for large corporates) represents 0.001% of the market capitalisation, so the intangible component of the CEO’s value is 2,500 times greater than the tangible component.
SHAPE provides extensive data and insights into the intangible assets of an organisation through its 12 Explorers. These range from Corporate Culture and Employee Engagement, to Personal Work Ethic and Management Style, all of which, like the CEO, have a multiplier effect which helps to transform the intangible to tangible. The ability to link “intangible” survey data such as the SHAPE Score and the Team Performance Pyramid, to “tangible” elements such as productivity, absence, claims and employee retention, is the underlying strength of SHAPE that helps drive change within organisations.
With the ability to quantify complex areas such as culture, satisfaction, commitment and mental health, and how they impact on fundamental business performance issues such as absence and productivity, SHAPE helps companies to realise the value of their intangible assets.
¹"Global Intangible Finance Tracker". 2018. Brand Finance.
__²__Clayton, M. et. al. 2005. The Journal of Business, 78(5).
