Assigning a bottom-line value to information.

TITLE: Valuating Information Intangibles: Measuring the Bottom Line Contribution of Librarians and Information Professionals

AUTHOR: Frank H. Portugal, Ph.D.

ISBN: 0-87111-512-3

PUBLISHER: Special Libraries Association

PUBLICATION DATE: 2000

LENGTH: 149 pages

PRICE: $34;95 U.S.; $24.95 SAA Members

SOURCE: www.sla.org

The book title--Valuating Information Intangibles: Measuring the Bottom Line Contribution of Librarians and Information Professionals--presents a tantalizing prospect to the records and information management (R/M) professional who has never had an authoritative answer to the question, "How do we know what this information is really worth?" The synopsis sounds even better--"A determination of the bottom-line value of libraries and information centers has proven difficult because of the intangible nature of the value, and the use of archaic accounting systems that ... focus on tangible assets rather than intangible ones."

Although the book was published by the Special Libraries Association, the records management community should be able to adapt the principles outlined. Librarians and records managers share some issues. Both deal with intangible resources. Both manage information that can have different values depending on how it is used. For both groups, assigning a bottom-line value to information is complicated by the fact that established financial accounting systems are based on tangible assets. Yet, in the Information Age, the need to assign a value assumes greater importance because information is a primary asset. It is important to the R/M professional in justifying the existence of the records management program. It is also important in mergers and acquisitions when a fair value must be established for contract negotiations. It is critical in determining how much insurance should be carried to really protect an organization's valuable papers and information.

The author outlines four possible approaches to establishing a financial value to intangible assets. Each method is described as to its scope, underlying assumptions, benefits, what it does not do, who can use it, and how to do the calculations. The author further states that, due to the complexity of this issue, multiple methods should be used to ensure as comprehensive an evaluation as possible. The book includes sample calculations for each method to enable readers to gain a thorough understanding of each method described.

The first method defined by the author is based on more traditional return-on-investment (ROI) and cost-benefit-analysis methods. This method requires dividing the acquisition cost of information by the revenue achieved through its use and coming up with an ROI. The advantage of this method is that it is simple to calculate and easily understood by executives. However, the disadvantages are considerable--it is not easy to determine what revenue was generated by what information, and the ROI is not really a calculation of intangible value. The other disadvantage is that this method assumes all information is useful.

The second method, "Knowledge Value Added" acknowledges that information has relative values and seeks to identify the extent to which it is embedded in corporate processes. This method requires an analyst to choose a substitute measure (i.e., time needed to learn the processes involved with the product or service, the number of words required to provide adequate instruction, or the length of time it takes to describe the process) as a basis for estimating the value of the knowledge used. This method has two key advantages for the information professional: 1) It acknowledges that the value of information will vary depending on the process in which it is involved; and 2) It seeks to put a value on the contribution of the information to the organization's products and services. As such, these advantages are more proactive than other methods because they are looking at the active stage of the information. However, this method is more cumbersome as it requires an array of individuals to be involved in assessing the processes, the information used in each, and the substitute measures that will be employed.

The third method, "Intranet Team Forums," seeks to determine how information is used and reused throughout an organization. The concept requires monitoring the discussions of product teams during the development stages so that they can determine which pieces of information have been most useful (and frequently reused) during the creative process. The examples listed involved creation of project team chat rooms that would be used for project team discussions. In this way, a librarian could determine which information had been most valuable. This method seems even more cumbersome than the Knowledge Value Added approach. In addition, if the project teams do not already use chat rooms and intranet tools, it could impose a new way of working upon them. Such impositions are not usually well-received.

The final method, "Intellectual Capital Valuation" acknowledges that value is created by both human and structural factors and not financial factors alone. This combines multiple assets into a quantifiable valuation and has the advantage of being customizable to the organization and processes involved. It also requires the specific collection of data to track associated activities and assist in the actual calculations.

The only real conclusion to be drawn for the records management community is that these methods still leave a great deal to be desired for its particular segment of the information management industry. None of the methods translate closely enough to be adopted--the modifications that would be required are extensive.

Far from having found "the Holy Grail" of establishing a financial value for intangible information for the RIM profession, considerable work still needs to be done.

Diane Carlisle, CRM, is Director of ARMA International's Professional Resources Department. She may be contacted at [e-mail].