Measuring the profitability of the intangible

4 minutes

In this fifth article and last article in connection with the International Co-operative Summit, I propose to you to reflect on a common difficulty for cooperatives and lean organisations. How to measure the profitability of the intangible? Indeed, many things are so difficult to measure.

© Dominique Duchesnes

The Italian economist, Riccardo Petrella, recalled at a round table the main danger to the cooperatives. In my opinion, he also watches for lean organizations. This is the monetization of any form of life.

Indeed, in recent years, the tendency is to calculate what is worth every thing, including the intangible. As I explained in my previous article, with the will to grow, increase turnover and market share, organizations must prove the profitability of their project in € or $. The improvement of the working conditions, the satisfaction of the customer must come with a number in order to be taken into account.

Measuring Non-performance

In his article on costs that do not appear in accounting expenses, Florent Fouque tries to give keys to calculate what inefficiency costs. It seems that to convince decision-makers, only financial profitability counts.

And yet… Everyone knows that education has a significant cost to society, but no one calls into question this little amount of contribution to our societies. In fact, in the absence of education, how much will the ignorance cost a country? Thus, painfulness, lack of interest or accountability at work, are leading to illness, disorganization and lower productivity. They are partly measurable. On the other hand, the improvement will bring more efficiency, more retention. The latter will be difficult to quantify. However everyone knows how to measure importance in a qualitative way.

Some companies manage to monetize the intangible. Let’s take Facebook for example. Every friend, network of friends, or even interactions with these friends have a value. Facebook has been able to evaluate and slide into its business model.

Leisure companies sell you a week in the sun, with a refund of rainy days. This is how a Swiss insurer evaluates a rainy day during your holiday at 100 Swiss francs.

If to sell us services or the intangible, companies are able to put a price, why could we not evaluate the value of the intangible associated with our projects of operational excellence, since it is the only way forward?

Examples of intangible measurements

Here are some ideas to help you materialize the costs of the intangible:

Happiness at work: impacts on the workforce
  • Number of days of absence reduced sickness * Average wage of an employee * 1.3 (for time taken to treat absence by other persons)
  • Productivity to 95% instead of 75%
  • Training days saved * Cost of education (retention of employees)
  • Abolished recruitment firm fees (retention and attraction of talents)
Employee mobilization: Impacts on customer service
  • Number of customers who are not going to leave us * average annual amount of purchases
  • Number of clients who will be talking about us to friends * Average annual amount of purchases
  • Amount invested in advertising reduced by 20%
  • Cost of trials avoided by better resolution of customer complaints

It’s up to you to put your own figures according to the reality of your organization and imagine all the hidden costs and gains.

If in an ideal world, the intangible should remain a sanctuary protected from the merchant sector, let us be creative and add all the costs to measure the profitability of operational excellence.

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