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Performance of Knowledge Management
Dr. Elijah EzenduFIMC, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM,
PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC, CMgr
“Within the last years, nearly all major corporations started Knowledge Management (KM) initiatives, particularly to strengthen the knowledge base within the organization, especially to help employees share, activate and increase their knowledge to finally generate a more innovative, faster acting, competitive organization. Recognizing knowledge as the primary intangible resource to make companies more efficient and effective was the basis for the "knowledge-based economy" and for KM. Increasingly sophisticated customers, new technologies, eager new competitors, and the need for more innovative products forces companies to be able to manage their knowledge assets well. The introduction of a KM initiative is a large investment for many corporations. Therefore performance measurement systems are required to make the benefits and the performance of KM initiatives transparent. Especially in times of scarce budgets the usefulness of KM is in doubt, as the business impact of such initiatives often can be hardly quantified or is only indirectly measurable.” - Florian Resatscha and Ulrich Faisstb
“The ultimate test of any business is whether it leads to measurable improvements in organizational performance.” - Heeseok Lee and Byounggu Choi
Different Perspectives Regarding Knowledge Exchange Outcomes
Source: David A. Bray, Benn R. Konsynski, Improved Organizational Performance by Knowledge Management
From Knowledge Management Enablers to Organizational Performance
Source: Lee and Choi, Knowledge Management Enablers, Processes and Organizational Performance
Culture
•Collaboration•Trust•Learning
Structure
•Centralization•Formalization
People
•T-Shaped Skills
Information Technology
•IT Support
• Socialization• Externalization• Combination• Internalization
• Organizational Performance
• Organizational Creativity
Knowledge CreationProcess
Knowledge ManagementIntermediate Outcome
OrganizationalPerformance
Social Perspective
Technical Perspective
Hadanian, Borhani, Nekahi & Tolunia Perspective on Influencers of Knowledge Management
Transformation to Organizational Performance
Knowledge Management Performance
Market Orientation
Innovation
Contributors to Knowledge Management Maturity
Factors Affecting Effectiveness of Knowledge Management Transformation to
Organizational Performance
Adapted from Rasula, Vuksic & Stemberger, The Impact of Knowledge Management on Organizational Performance
Dekings Four Quadrants of Knowledge Management Measurements
Instrument (Example)
•Balanced Scorecard•Intellectual Capital Audits•Knowledge Portfolio•Tobin’s Q•CIV
Business Impact ofKnowledge Assets
Quality of KnowledgeManagement Initiative
Location and Value ofKnowledge Assets
Business Impact of Knowledge Management
Instrument (Example)
•Questionnaires•Cross Organizational Benchmarking
Instrument (Example)
•Analysis of Knowledge Quality•Technology Broker
Instrument (Example)
•Success Stories•Cost Saving Analysis•Scoring Models
Knowledge
KnowledgeManagement
The generic methods for measuring organizational performance in knowledge management are as follows.•Financial Measures•Intellectual Capital•Tangible and Intangible Benefits•Balanced Scorecard
6P’s of KM Performance by Elijah Ezendu
KM Impacts in Organizational Philosophy, Processes, Practices, People, Products & PartnersMonitoring and Evaluation of KM Impacts must be managed as a Structured Change Programme
Performance Indicator
It’s a tool enabling the effectiveness of an operation or organisation to be measured, and allows an achieved result to be gauged or evaluated in relation to a set of objectives.
Source: OECD
Properties of Performance Indicators
i. Relevant to the purpose, policy and practiceii. Clearly definediii. Reliableiv. Worth measuringv. Measurablevi. Galvanize actionvii. Reflect results of actionviii. Precisely defined as possibleix. Readily available within a reasonable time frame
Advantages of Performance Indicators
i. Means of measuring organizational progress toward set objectives.
ii. Give room for benchmarking and comparing various units, sections, departments and subsidiaries.
Disadvantages of Performance Indicators
i. Act as bad measures if not well defined
ii. Some vital indicators cant be easily measured
iii. Issuance of complexity due to number of indicators
Key Performance Indicators in a Firm
These are quantifiable factors that are clearly connected to drivers of business success in a particular firm.
Criteria for Selecting KPI
i. Strong linkage to objectives
ii. They should be connected to areas of the business that can be controlled
iii. They should be quantifiable
Types of KPI
1. Directional Indicators2. Quantitative Indicators3. Actionable Indicators4. Practical Indicators
Developing Targets based on KPI
A Key Performance Indicator should drive managerial effort towards a mark of achievement, which is a target in accordance with set objective.
KPI…….Reduce waste Target……50% by end of March
Expression of Performance Indicator
• In terms of ratio of actual to standard• In terms of number of occurrence• In terms of a complex mathematical
expression showing extent of occurrence• In terms of percentage of occurrence
North, Probst & Romhardt Performance Measurement Framework for KM Initiatives
Cost indicators)Class II(
Knowledge Base Indicators (Class I)
Business Results
System qualityKnowledge Quality
)Documents(
Knowledge Specific
Service
Costs of Interventions
Interceding Processes
System Usage
User Satisfaction
Knowledge Transfer
Within the Organization
Intermediation andTransfer Indicators
(Class III )
Effect Indicators on Business Results
(Class IV )
Classes of IndicatorsClass of indicators Definition of term
Knowledge base indicators (Class I) Constituents of the organizational knowledge base in qualitative and quantitative terms
Cost indicators (Class II) Processes and inputs for changes in the organizational knowledge base (Costs)
Intermediation and transfer indicators (Class III)
Measure direct usage of the knowledge base and the results of knowledge transfer resulting in intermediate effects on the organization.
Effect indicators on business results (Class IV)
Evaluation of the effects on business results
Examples of System Quality Measures
Performance Issue Indicator Implementation of performance measurement
Quality of navigation structure
How fast can the user find the desired information?
Feedback buttons with ranking possibility on every portal page
Quality of search engine
Does the query result match what the user was searching for?
Average time of query to request, plus feedback buttons
Quality of expert search
Is the required expert found quickly?
Average time of query to request, plus feedback buttons
Examples of Knowledge Quality Measures
Performance Issue Indicator Implementation of performance measurement
Quality of the content
Quality of the provided documents within the repository
Feedback functionality attached to single documents. Higher rated documents are scaled up in the search lists. A repeated usage might also indicate a high-quality document.
Reliability, Up-todateness, Relevance, Accuracy of the content
Are the files and documents always up-to-date and do they fit the user's criteria?
Internal ranking, Feedback buttons, Trust buttons referring to author of document
Quality of experts Could the expert help? Feedback button referring to experts
Examples of Knowledge Specific Service Measures
Performance topic Indicator Implementation of performance measurement
Quality of knowledge distribution
Is the right knowledge at the right time at the right person?
Average time employees spent searching the information
Support of communities and collaboration
Do communities of practice share knowledge more efficiently?
Feedback surveys of participants
Cost Types of KM Initiatives
Cost types Items
Hardware Server, Network, Infrastructure
Software Portal Software, Network: One-time purchases or development costs
Implementation Consulting, customizing, training, and testing costs; communication costs
Support (Maintenance) Annual system administration, support, and maintenance costs
Examples of System Usage Measures
Cost types Items
Hardware Server, Network, Infrastructure
Software Portal Software, Network: One-time purchases or development costs
Implementation Consulting, customizing, training, and testing costs; communication costs
Support (Maintenance) Annual system administration, support, and maintenance costs
Examples of Knowledge Transfer as Intermediate and Transfer IndicatorPerformance topic Indicator
Knowledge
transfer from organization to employees
Period of vocational adjustment: The time to adjust a (new) employee to the given processes within the company decreases, because most of the necessary knowledge is available easier.
Knowledge
transfer from organization to projects
Reuse Rate: indicates the percentage of failed objects. This performance measure can be applied to a number of "re-inventing the wheel" cases: another measure is reuse opportunities ratio – the ratio between actual reuse content compared to opportunities.
Knowledge
transfer from R&D to production
Effectiveness of knowledge transfer from the Research & Development (R&D) department and the production area. A rating-based performance measure shows the closeness of working relationships between R&D and manufacturing using an internal self-assessment based on ratings.
Knowledge
transfer from production to
Response time to customer queries: The response time can be tracked electronically and is closely
correlated to the customer satisfaction.
Response quality of customer queries: Average customer rating (internal and external) of overall technical capability of the firm in providing technical service and new product
customer service innovations to bring value to the customers' future problems. Possible is an average rating by key external
or internal customers using a 1 to 5 interval rating scale to evaluate various dimensions regarding product
technology or process technology
External knowledge spillover
Response time to competitive moves: Time required for corporation to match the newest product of the competitor divided by the time required for competitor to match firm's newest product benefits. This indicates the ability of the corporation to maintain a leadership position or to match technology moves by the competition. The knowledge is generated by external experts, customers, supplier, competitors, and research institutions.
Examples of Indicators on Business Results Based on Balanced Score Card
Performance topic Indicators
Financials Shareholder Value, NPV, Profit, ROI, ROA, ROE, ...
Customer Satisfaction
Number of refunds made, number of merchandising items returned, etc. Explanation: the customer satisfaction may increase because of faster response times and a better understanding of customer needs due to external knowledge links.
Internal Processes Efficiency of internal processes: e.g. percentage of tasks/milestones
achieved within a certain timeframe measures the efficiency of a
group/unit.
Quality of internal processes: the fraction of tasks finished correctly:
Potentials A possible measurement approach could include the KVA methodology. The process oriented view with learning time as basic metrics shows the performance of business units.
Balanced Scorecard Measures in KM
Financial
Objectives Indicators
How should we appear to our stakeholders?
Internal
Objectives Indicators
What must we excel at?
Customer
Objectives Indicators
How should we appear to our customers?
Vision & Strategy
Objectives Indicators
How should the organization look in the
future?
Learning & Growth
Objectives Indicators
To what extent are we able to change, improves
and innovate?
Linkage Between Causes and Strategic Activities
Knowledge Management
Business Process Improvement
Customer Relationship Management
Budget & CostManagementFinancial Results
Business Processes
Learning & Growth
Customer Satisfaction
Source: Balanced Scorecard Institute
Applicable Metrics at Various Stages of KM Maturity
KM M
atur
ity
Time
Pre-Planning PhaseUse scenarios & simulations to explore projected measure results & effects
Start-Up PhaseAnecdotes & qualitative metrics are most valuable to convince people of KM value
Pilot Project PhaseUse definitive metrics to show real value to business objectives
Enterprise Growth PhaseUse mixture of metrics to show value across organization
Cases Adapted from European Journal of Scientific Research
1. Hewlett PackardHP has a decentralized organization with little sharing of information across its units. The business culture supports sharing but few units have been willing to invest in efforts that do not have fast payback for the involved. There has previously been some informal knowledge transfer when employees have changed business units. In order to solve this problem knowledge management was implemented. The following are the performance indicators identified: •Active involvement. •Number of participating employees. •Number of postings/contributions. •Number of downloads. •Number of calls to support function. •Support ratings. •Unique log-ins.
2. KPMGThe purpose of the KM system is to take advantage of the experience within the organization, both in Sweden and globally. The overriding objectives are to maximize value creation and realization for the organization and for their clients, by making universally and instantly available best practices, experiences, insights and connections to the right people. •Adoption curve to see knowledge culture progression. •Generated business. •Individual contributions to the further development of the organization and its employees. •Statistics of awareness. •Number of contacts gained. •Attitude of knowledge sharing. •Efficiency & visibility on the market. •Employee satisfaction. •Re-use of information and/or experience.
International Oil Companies’ Adoption of KMCompany Adoption Of KM Origins Of KM
BP 1996Organizational learning/best practices transfer in upstream
Royal Dutch Shell 1995Organizational learning initiatives by corporate planning (e.g. scenario analysis, cognitive maps)
Chevron 1996Best practices transfers & cost reduction in Chevron’s downstream businesses
ExxonMobil 2003In Exxon: application of IT to E&P. In Mobil, best practice transfer in downstream
ConocoPhillips 1998 IT support for E&PSchlumberger 1997 IT applications to drilling
Halliburton 1998 IT applications to drilling and seismic analysis
Marathon Oil 1999 IT applications to explorationMurphy Oil 2000 IT applications to exploration
BHP-Billiton 2000KM uninitiated by IT dept. - but not adopted company-wide
Paragon Engineering Services Inc.
1999KM practices based upon groupware, intranet, project files, & other IT tools
Source: Robert Grant, The Development of Knowledge Management in Oil and Gas Industry
Motives for the Adoption of KMCompany Motives for Adopting KM
BP AmocoFollowing radical organizational decentralization, KM viewed as mechanism for achieving lateral coordination
Royal Dutch/Shell
In Shell’s highly-decentralized multinational structure, KM was a natural complement to strategic planning and career management as an integrating mechanism. With poor profitability during early 1990s, Shell came under strong pressure to make more effective use of its dispersed talent
ChevronTexacoChevron’s adoption of KM driven by pressured for cost reduction during early 1990s. Resulted in strong interest in transfer of best practices
ExxonMobil
Mobil enthusiastic adoption of KM during the mid-1990s was driven primarily by its desire to improve efficiency in E&P and in refining through improved identification and transfer of best practices
ConocoPhillips
Expansion of exploration, especially in deep-water Gulf of Mexico, created need for data management systems to support huge amounts of data being generated and processed and link them to decision processes
Schlumberger Impetus for KM came from need to link rapidly advancing data management with systems that linked human expertise in globally distributed operations
Halliburton
Marathon OilDesire to improve upstream performance through more effective linking of people to people and people to information
Source: Robert Grant, The Development of Knowledge Management in Oil and Gas Industry
Activity
The management of a multinational company with operations in 40 countries spread across 5 continents embarked on Knowledge Management Initiative focused on overcoming geographical barrier in knowledge sharing by using alternative means of communication. List the performance indicators that can suffice in this programme.………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Dr Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise in Interim Management, Strategy, Competitive Intelligence, Transformation, Restructuring, Turnaround Management, Business Development, Marketing, Project & Cost Management, Leadership, HR, CSR, e-Business & Software Architecture. He had functioned as Founder, Initiative for Sustainable Business Equity; Chairman of Board, Charisma Broadcast Film Academy; Group Chief Operating Officer, Idova Group; CEO, Rubiini (UAE); Special Advisor, RTEAN; Director, MMNA Investments; Chair, Int’l Board of GCC Business Council (UAE); Senior Partner, Shevach Consulting; Chairman (Certification & Training), Coordinator (Board of Fellows), Lead Assessor & Governing Council Member, Institute of Management Consultants, Nigeria; Lead Resource, Centre for Competitive Intelligence Development; Lead Consultant/ Partner, JK Michaels; Turnaround Project Director, Consolidated Business Holdings Limited; Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles), Fortuna, Gambia & Malta; Chief Advisor/ Partner, D & E; Vice Chairman of Board, Refined Shipping; Director of Programmes & Governing Council Member, Institute of Business Development, Nigeria; Member of TDD Committee, International Association of Software Architects, USA; Member of Strategic Planning and Implementation Committee, Chartered Institute of Personnel Management of Nigeria; Country Manager (Nigeria) & Adjunct Faculty (MBA Programme), Regent Business School, South Africa; Adjunct Faculty (MBA Programme), Ladoke Akintola University of Technology; Editor-in-Chief, Cost Management Journal; Council Member, Institute of Internal Auditors of Nigeria; Member, Board of Directors (Several Organizations). He holds Doctoral Degree in Management, Master of Business Administration and Fellow of Professional Institutes in North America, UK & Nigeria. He is Innovator of Corporate Investment Structure Based on Financials and Intangibles, for valuation highlighting intangible contributions of host communities and ecological environment: A model celebrated globally as remedy for unmitigated depreciation of ecological capital and developmental deprivation of host communities. He had served as Examiner to Professional Institutes and Universities. He had been a member of Guild of Soundtrack Producers of Nigeria. He's an author and extensively featured speaker.
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