ROI for Knowledge Management, Continued…..

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Since i launched this blog a little over a month ago i have recieved a considerable number of responses. While a few of my readers do take the time to leave a comment against a post. There are a large number that send their comments via mail.

I have chosen to put a few of these in my blog as i would hate for my other readers to miss out on this information ( the post was way too large to have it sitting idle in my comments section ) .

Joseph M. Firestone who is the CEO of KMCI sent me one such mail which contains some information regarding the topic of ROI for knowledge management.

“The ROI issue in KM is one that surfaces fairly frequently. I think the issue is part of the larger problem of developing good metrics for knowledge processing and KM activities and direct outcomes, But it’s also closely related to the problem of modeling KM impact on other activities and outcomes in the enterprise that it effects indirectly.

If I recall correctly, there was a recent discussion of KM and ROI in the actkm list serv group which you may have seen earlier. It was a pretty good interchange and covered many of the main issues surrounding the subject. I’ve written a few things either on KM and ROI or closely related to it. One piece is here:

http://kmci. org/media/ KMBenefitEstimat ionrev1.PDF

A second is downloadable from the Cutter Consortium site. Go here first:

http://www.adaptive metricscenter. com/media/ BSCdevelopmentsa ndchallenges. pdf

Then here:

http://www.cutter. com/offers/ adaptivescore. html

and download the adaptive scorecard report using their promotion code.

In addition, I’ve also developed a Software Template using Expert Choice providing a very detailed hierarchical ontology identifying descriptors and metrics relating to knowledge and KM processes and knowledge outcomes. The measurement models themselves can be developed using this ontology, along with the measurement methodology (The Analytic Hierarchy Process) associated with Expert Choice. The template is called the Open Enterprise Template because it provides a framework for measuring progress towards the Open Enterprise (See http://www.dkms. com/papers/ openenterpriseex cerptnumb1final. pdf) for more on the Open Enterprise.

Finally, I’ll point out that the issue of ROI is also not a straightforward one because of the issue of monetary ROI versus ROI in terms of values. We know that the relationship between money and value is a non-linear one so that, in general, a person’s first $1,000 units of currency are worth far more than the same person’s last $1,000 units when that person has become a billionaire (at least relative to the person). The fact that the relationship is non-linear raises the issue of value interpretation of improvements in monetary assests resulting from business activities including KM. The paper I’ve mentioned above discusses the value interpretation question and the Open Enterprise Template combined with the AHP methodology provides a way of handling it. The paper also contends that measurement techniques are needed that will allow comparison of monetary and non-monetary values on the same measurement scale.The adaptive scorecard paper puts the possibility of value interpretation
into both KM and Balanced Scorecard contexts.”

Please feel to comment on any of the other posts as well to enable further discussions on the subject.

ROI for Knowledge Management

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As with every business venture , unless there is a solid case built on the ROI chances are the initiative wouldn’t get the backing of the executive team. It’s a numbers game, and without a clear indication of some benefit, in terms of a dollar figure, it get more and more difficult to justify the costs.

Now the reason i started up this post is to get an idea of how companies , if at all, calculate the ROI on a knowledge management initiative. Based on my experience, figuring out where the knowledge is and getting it to flow is tough enough, adding a number value to it seems next to impossible . Sure , there have been methods where people have attempted to calculate it. But the question of a methodology robust enough to calculate the ROI of a KM intiative doesn’t seem to be here as yet, then again i could be wrong.

So, if any of you have managed to implement an accurate ROI calculation in a KM environment i’d love to hear about it. Do leave a comment , against this post so other people can get involved in this discussion.

Driving Innovation

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In order to drive innovation in your company you need to have an innovative way of tackling the rewards and recognition system, which is the cornerstone of any such initiative.

Considering employees do have needs for achievement and status, definining and creating systems and processes that rewards employees based on their innovation would be an ideal way to tackle something like this. However the issue of how a structured rewards and recognition system encourages employees to change their behaviour must also be studied in depth before one is rolled out.

There are certain things you must look at as an organization if you want to foster an atmosphere of innovation. These basics will give you a foothold with which you could promote innovation in the organization.

The first step would be creating a team that maps out a innovation road map for the company, its framework, goals and expectations.

As discussed earlier, since the rewards and recognition program would form the cornerstone of this initiative. Consistent acknowledgement of those who contribute ideas, knowledge, and time must also be done. It is also very important for the senior management to recognize innovative design teams and champions, while peers should typically nominate and recognize teammates for their contributions to the overall effort.

One of the biggest motivators of innovation for an employee is recognition, so while implementing a rewards program ( monetary or otherwise ), keep in mind that for the long term success of the program you need to make innovation self-rewarding. Being perceived as an expert by peers and the management acts as a huge incentive to employees.

It is also important to provide recognition to volunteers, change agents, and model innovators. Associating names with such changes and improvements automatically increases the employees self-worth and willingness to engage in future endeavours.

“Spread the word” – is a great way to increase visibility across the organization for success stories and the people behind them. The benefits of a medium like this would include greater buy-in for the initiative.

And finally, linking innovation to the core cultural values of the organization should be the last step. Only once this is accomplished can you call the organization a true innovator.

Leadership Expectations…

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For any initiative to succeed and be accepted across an organization it requires some serious leadership buy-in. This is more so in the case of Knowledge Management. There are certain things that leaders can do to promote the sharing of knowledge in the organization.

Tie your initiatives to your vision: Create and publish an integrated mission, vision, and values statement that endorses and sustains learning and transfer. It’s very important to showcase success stories at each executive meeting. Unless there is a clear indication of progress the executive backing for an initiative like this will quickly die out.

There has to be an emphasis on re-enforcing management commitment to identifying new ideas and removing barriers to progress. This has to be built on top of a robust rewards and recognition program, and most importantly, make sure you have the right people working on this.

The management as a rule is always looked up to for direction, and its the same with knowledge management, lead by example and show commitment to learning through action. Tell employee groups that the most important thing is to share and use best practices.

Once this has been accomplished start rolling out these initiatives across the rest of the organization.

Addressing Cultural Issues

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“Go the distance alone” – competitiveness is one of the biggest challenges to a Knowledge sharing culture. Unless you’ve been raised by Marxists, chances are competing with your classmates and colleagues has become a full time job for you. Schools and colleges stress individuality and competition, not collaboration and sharing, and so does the corporate world.

Knowledge Management is based on the foundation of selflessly sharing information. Now as naive as that sounds, it does work. There are certain challenges that need to be overcome however, that goes without saying. The biggest of these, as you probably guessed, is getting employees to part with their knowledge and share it with their peers.

The question i’m always asked when i propose this is ” Why should i share what makes me unique and valuable to the organization?”. A very serious concern that needs to be addressed. Unless the senior management changes their outlook on what makes an employee valuable, the culture of knowledge hoarding will continue to thrive.

So what makes an employee valuable, really valuable, to an organization? Well, if he manages to teach his colleagues to replicate this methods for success. Unlike most other initiatives Knowledge Management isn’t something that can be driven using a carrot and stick approach. Threatening or forcing KM down your employees throats would be the most counter productive move you could ever make. This will virtually guarantee that any future KM endeavors are regarded with scorn and dread.

While rewards are a direct means of getting a KM initiative off the ground, recognition and benefit are the actual factors that sustain KM in the long run.

What can you as managers and leaders do to facilitate a knowledge sharing culture in your organizations? Simple though it sounds, the best way is to recognize knowledge sharing and reward it.

What prompts the need to capture Best Practices?

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There are a number of reasons that spur an organization to institutionalize a best practices capturing mechanism. Here we discuss five of the most prevalent reasons.

Demonstrated Success : There have been many instances where one particular unit of a corporation has started doing much better than the rest. A causal analysis of its processes generally finds certain modifications and improvements that lead to this dramatic rise in performance. In an effort to replicate this process improvement across all other units considerable effort is put into identifying these process changes and trying to replicate them, this is one of the main causes for companies to implement a best practices capturing methodology.

Decentralizing : In order to maintain a light support overhead most companies have started downsizing their corporate support teams that were initially responsible for inventing, discovering and transferring best practices. Now most of the individual business units are expected to handle this load. However with an increasing need is being felt to re-establish these teams that can help with identifying and transferring these best practices across business units, as the cost savings associated with these best practices far outweight the costs of maintaining a corporate support team.

External Forced factors : In a number of instances, clients threaten to move to another vendor if certain improvemets aren’t made to existing processes and systems. This is another instance where corporates are spurred into action and where hidden best practices are unearthed in an effort to meet their clients expectations. Usually with massive cost benefits as a secondary gain.

External Benchmarking indicators : The very idea that other companies are doing things better than we are automatically prompts corporates to take a serious look at their existing processes and best practices. An external benchmarking agent can show companies where they stand in the corporate world, encouraging them to improve their existing system, by implementing a best practices system.

Potential gain : Internal benchmarking allows companies to identify hidden potential, it gives them an idea of what is possible if the necessary efforts are made. Adding a dollar amount to the benchmarking figures also enables them to clearly envision the massive savings, or gains they can make by implementing certain best practices.

These are just some of the reasons why corporates decide to create a Best Practices capture system.

Roadblocks for Best Practices Sharing

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There has been a massive shift in thought over the last decade or so , from when corporations were valued on their physical holdings. However it has since become clear that a corporates worth has more to do with its people than its other physical entities.

Billions of dollars are lost every year over something as simple as communication, and when i speak of communication i’m talking about sharing of information , knowledge amongst co-workers. There have been instances where companies having factories right opposite each other haven’t been able to share knowledge due to culture constraints.

So, the need of the hour was to create a framework that allowed best practices to be shared by everyone in an organization. The biggest challenges with creating a system like this unfortunately is the fact that a large portion of the knowledge being dealt with is tacit in nature.

Some of the major roadblocks to sharing best practices are listed below:

Ever been in a situation where you don’t know who the person sitting across your cubicle is? Well, thats a classic case of an organization working in a silo’d environment. The larger it gets, the more complicated its hierarchy. In some cases it gets so bad that you barely know the rest of the people working in your team. Its a classic case of your left hand not knowing what you’re right hand is doing, and in some cases it gets so bad that your left hand doesnt even know it has a right one. This is the single largest problem of sharing knowledge in an organization.

Sharing of knowledge and information is still considered foolhardy as traditionally your value in the organization is determined by how unique you are, and the expertise you bring with you. Expecting you to suddenly start sharing the very knowledge that makes you a valuable commodity is a tall order. So a serious culture change is required before actually sharing of knowledge takes place.

There has always been a huge reliance on explicit information, “unless i have it documented there isnt anything i can do about it”. This massive reliance on explicit information means a large part , over 80% , of your employees knowledge isnt being tapped. Companies have slowly come to realize this and steps are being taken to ensure that tacit knowledge gets an equal, if not more important place in the information hierarchy.

For a learning and sharing culture to grow it needs to be rewarded from time to time. Only when this is done will the actually transfer of knowledge and best practices take place.

What is a Knowledge Inventory?

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If you’ve ever cooked anything, or attempted to like i have. The first thing you need to do is take a look at the recipe ( the knowledge audit ) . Once you’ve done that you need to make a list of the various ingredient ( the knowledge inventory ) . Unless you do this you might end up with something completely different from what you started out trying to accomplish.

So what is a knowledge inventory? well, as the name suggests its a kind of stock taking to identify and locate knowledge assets around the organization. This includes the explicit and the very difficult to locate tacit knowledge sources.

The best way to make a comprehensive list of knowledge sources is to segregate it by explicit and tacit knowledge.

Some of the questions you might want to ask when identifying explicit knowledge sources are :

• What explicit knowledge already exists? – categories of documents, databases, intranet libraries, links etc.
• Where this knowledge is located? – locations in the organizations and the various systems that house the information.
• Access and Organization – How is the knowledge structured and how easy of difficult is it for people to locate this information, and do they have access to it as well.
• Purpose and relevance – why does the information exist? how relevant is it to the users?
• Usage – who uses them? how often ?

Identifying tacit knowledge sources is an entirely different proposition. Unlike explicit knowledge, tacit knowledge is much more difficult to quantify. Though there are a few questions you could ask to create a rough map of where it exists.

• Who we have – The numbers and categories of people working in the organization.
• Where they are – Identifying where people are located is extremely important when building a tacit knowledge map
• What they do and what they know – job profiles, expertise areas and so on.

The above questions should give you an excellent place to start collating the list of knowledge sources you have in your organization. Once this is done you can move on to the next step of identifying the gaps after comparing this information to the information you’ve garnered from the knowledge audit.

Identifying Knowledge Requirements

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As with any initiative you need a place to start, a solid foundation before you can proceed. This foundation is the first and most important step in a Knowledge Audit, it’s purpose is to gain a clear and precise understanding of what knowledge the organization and its people need to meet their goals and objectives.

You need to have a systematic approach defined when tackling something as complex as a knowledge audit. Break down the information gathering approach to ensure you capture as much detail as possible. This can be done using questionnaire based surveys, interviews, group discussions or a combination of these.

The biggest hurdle when composing questions is that knowledge is seen as a conceptual entity and therefore rather difficult to articulate. To overcome this you need to focus on issues like user goals, objectives, activities and decisions that are made on a day to day basis.

Keep in mind, the questionnaire that you use in interviews and group discussions is just a rough guideline to gain insight to the users day to day activities. The more flexibile you are with the questions the more information you are bound to receive. So don’t hesitate to ask deeper more probing questions when you feel there might be some information you could use.

The end goal of such an audit is for you to be able to get a clear picture of what information and knowledge a person uses in his day to day activities, thereby allowing you to tie it into a framework you create at the end of this excercise. The whole purpose of this exercise is to make the end users job easier. Compromising on the audit at this stage could have serious repercussions later on.

The need for a Knowledge Audit

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The traditional definition of an Audit is to check performance against a standard, as is the case with financial audits. However a knowledge audit works a little differently, its more of a qualitative evaluation. Its essentially an investigation of an organizations knowledge “health”.

For those of you who are confused between a content audit and a knowledge audit : a content audit is focused primarly on the content in the organization. It just identifies what content exists and what doesn’t. Details like what the content is used for isnt really looked into. A knowledge audit on the other hand looks at problems and puts the information in the context of the problem.

The reason a knowledge audit is so vital is because it gives an organization a comprehensive picture of its strengths and weakness, allowing it to focus its efforts in the right direction.

Some of the questions addressed during a knowledge audit are as follows:

• What are the organisation’s knowledge needs?
• What knowledge assets or resources does it have and where are they?
• What gaps exist in its knowledge?
• How does knowledge flow around the organisation?
• What are the blockages that prevent knowledge from flowing across the organization ( people, process , technology ) ?

Once you start asking these questions a clear picture of your organizations knowledge structure will start emerging, and using these results can help you establish processes and systems to tackle certain shortcomings.

 

Some of the key benefits of a knowledge audit are as follows:

• It helps the organisation clearly identify what knowledge is needed to support overall organisational goals and individual and team activities.
• It provides evidence of the extent to which knowledge is being effectively managed and indicates where improvements are required.
• It provides an evidence-based account of the knowledge that exists in an organisation, how that knowledge moves around in, and is used by, that organisation.
• It provides a map of what knowledge exists in the organisation and where it exists, as well as revealing gaps.
• It reveals pockets of untapped knowledge.
• It provides a map of knowledge and communication flows and networks.
• It provides an inventory of knowledge assets, giving a clearer understanding of the contribution of knowledge to organisational performance.
• It provides vital information for the development of effective knowledge management programmes and initiatives that are directly relevant to the organisation’s specific knowledge needs and current situation.

Future posts will tackle issues like , How do you go about a knowledge audit?, creating a knowledge map …..