CPE investment valuation program.

In a professional service business, people are the product and can be the single greatest asset. As in all other businesses, the quality of the product is an important factor in its success. Knowledge or intellectual capital is a valuable commodity that, if used properly, may exceed the value of tangible forms of capital; thus, managing that knowledge is fast becoming a valuable part of professional service businesses. Knowledge management concentrates on building knowledge infrastructures, organizing knowledge cultures, getting a return on investment dollars and providing quantifiable measures of added value.

Experts have predicted that employee knowledge will be the most important factor driving business profitability in the next century. Intangible resources (such as company reputation and employee know-how) are viewed as being increasingly critical to future organizational success.

Quality CPE 

In the knowledge economy today, the quality of thinking is pivotal to the success of self-directed teams' productivity improvement and quality-based initiatives (i.e., the value-added difference in an organization's performance). To achieve such benefits, professional service businesses should not only ensure that their employees meet continuing professional education (CPE) requirements to maintain their professional credentials, but also must manage the investment in CPE to maximize their organizations' brainpower.

If the quality of CPE makes a difference, what can be done to enhance the effective use of the collective intelligence? How can CPE (which is invisible and intangible) be made visible and be leveraged?

In a blinding glimpse of the obvious, some firms recognize that quality CPE is at the root of every worthwhile accomplishment. The problem is how to measure the benefit derived from the investment in CPE and how to develop a system for improving its effective use.

The annual investment in intellectual capital has increased over the past few years, due to a number of factors, many of which may be directly related to a firm's strategic plans. However, that investment (viewed as a necessity in outpacing the field) must be coupled with a commitment to getting a reasonable return on the investment. The adoption of a "CPE Investment Valuation Program" is a way to do just that.

Under the program, primary responsibility for doing what is necessary to achieve individual objectives can be switched from the firm to the individual to achieve the level of knowledge needed. A core of CPE courses should be developed to meet that expected level of knowledge; then, the individuals should be expected to develop their expertise in the desired way and at the desired pace.

It is essential for the firm to convey to its personnel the expectations to be received from CPE. Courses and training (provided and paid for by the firm) are a privilege, not an entitlement. CPE is not merely a cost to be contained and minimized, but an investment, the return on which is to be maximized. To achieve a successful CPE Investment Valuation Program, these guidelines should be followed:

* Learn all that can be learned from the training received.

* Share what is learned with others in the firm.

* Transfer what is learned into value-added ideas for clients.

* Demonstrate that every effort is being made to maximize the return on the CPE investment.

Documentation is needed to measure success. The procedures for valuing the CPE investment on page 384 will aid in this process.

From S. Richard Royster, CPA, Geo. S. Olive & Co. LLC, Evansville, Ind.

Editor's Note: Mr. Pascarella chairs the AICPA Tax Division Tax Practice Management Committee. Mr. Royster is a member of the committee.

If you would like additional information about this article, contact Mr. Royster at [phone].