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knowledge management ROI

Is it possible to measure knowledge management ROI?

During Mesopotamian times king Ashurbanipal constructed a library situated in Nineveh, an important trade route between the Mediterranean Sea and Indian Ocean. It has been acknowledge by many historians as one of the most emblematic constructions of the time but there is more to it.  The library is in fact one the most stunning strategic success in knowledge management history.

  • King Ashurbanipal crafted a structure capable of registering the memory of a nation.
  • In addition to government records, a wide range of materials were found including topics of law, medicine, science, magic and legends.
  • It even included a carefully designed system for retrieval, which meant that it served reference purposes.
  • Ashurbanipal´s genius lay not in his understanding of protecting memory but in the clever strategy applied to process information and the years of innovative management and organisational development that preceded it.

Just as Taylor laid the foundations for management practices, Ashurbanipal fostered a science that had been developed years before by other civilisations and that today is still appreciated in modern organizations. The Mesopotamian library dresses today in the form of knowledge management, extending the strategy to the identification of critical knowledge, lessons learned, improved process management and specialised IT platforms. However, can it yield the necessary (economic) results? Ashurbanipal certainly understood it, but today’s CEO’s need clear KPIs in order to take action.

A few years ago an engineering firm was having trouble as it found that many projects were reinventing the wheel and were losing valuable time due to information misplacement. An in-depth study revealed that:

  • Valuable information was stored in personal file servers and emails.
  • Common mistakes were made as workers could not reach out to subject experts in order to receive feedback.
  • Team members spent time developing templates and processes that had already being registered.
  • Lessons learned and best practices from past projects were not available
  • Norms and manuals were purchased in repeated occasions.

After an extensive knowledge audit, various actions were taken in order to deploy the knowledge management strategy. Following the first couple of months of implementation I interviewed team members and analyzed project performance in order to measure the results and the following table is an example of the benefits obtained by one of the company´s fifteen projects that were chosen to participate in the implementation phase.  (These were only 4 KPIs from a list of 10 metrics that were developed with project managers)

 

Item Hours saved Costs (Avgr hour valued @USD 20 based on project costs) Observations
Implementation of lessons learned 635 12,700 Team members consulted lessons learned and avoided mistakes or reduced the time it took them to carry out specific activities.
Results from discussion forums with community experts 83 1660 Team members consulted peers and community of practice. The hours saved were calculated by identifying the amount of time saved by applying the answers obtained.
Centralize access to norms, information and work templates For this case we took into consideration the avr. Times an information asset was downloaded (and the total number was reduced to 10% as not all information consulted was implemented by team members.) As explained in the observations column, we also considered the fixed average price for the norms. IDC standards were also implemented. 4990 Developing a work template accounts for 1 hour of work (based on the knowledge audit results).

 

Norms have an average price of USD 50. The number of times it was consulted was taken as the metric for evaluation.

Implementing best practices into work procedures. 230 4600 Based on the amount of time it took a project to carry out an activity vs the new time. Best practice sessions were carried out with community experts.

 

From the above table we can see that the project saved USD 23,950. On average, the other fifteen projects accounted for USD 18,750 in savings. In total USD 281, 250 were saved by the company (considering that only 4 KPIs are being used in the example!)

Arriving at this conclusion the CEO made KM a standard practice for projects. From that point onwards a specific KM dashboard was built in order to demonstrate project efficiency as a result of applying KM. I hope the post provides you with more insights regarding the value of KM and the possibility to really measure outcomes. First steps will require identifying the organisations strategic knowledge in order to align the strategy to the desired outcomes.

Don´t miss the upcoming KM trends webinar. In order to register click here. 

© Jose Carlos Tenorio Favero

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