posted 26 Oct 2007 in Volume 11 Issue 3
Jerry Ash: KM+DM+KPI=ROI
Leave it to the world’s leading data and information company to effectively tie its excellent knowledge management programme to return on investment (ROI).
Just as other KM programmes are being built around business processes and critical success factors, Teradata Corporation’s Knowledge Enablement programme is not just about managing the company’s knowledge, but making knowledge work.
Its most unique feature is a network of Knowledge Practice Owners (KPOs) and the use of Value Engagements (VEs) that produce measurable data to justify the millions being spent on KM.
The Teradata case report (see page 18) is reminiscent of a rich dialogue on measuring the impact of knowledge work that took place in the Association of Knowledgework’s STAR Series Dialogues a while back.
Tom Barfield, capability development and global KM leader for systems integration giant Accenture, was leading a discussion on a different thread when the conversation boiled into KM metrics, a topic that produces as much passion and rhetoric as any other in the knowledge biz.
Hubert Saint-Onge, who doesn’t deny the importance of valuing knowledge, also warns that those who push for measuring the value of knowledge are often those who scorn KM and use the metrics challenge to debunk KM as not measurable – and therefore, not worthy of investment. If you can’t tie KM to the bottom line, it is hard to defend against this tactic when you are competing for coin among a plethora of other corporate programmes.
Saint-Onge, CEO of Konvergeandknow, argues: “Measurement is both a matter of accountability and marketing. Accountability, in that we need to demonstrate a yield for the investment in knowledge strategies. Marketing, in that we need to explain to people what the yield is in order to obtain additional support and resources for the work.”
Drawing a singular line from KM to results is rife with vulnerabilities but, as Leif Edvinsson, professor of Intellectual Capital,
KM isn’t the lone ranger in having difficulty connecting itself to the bottom line. IT, HR and Training and Development (T&D) are in the same boat. Even the CEO has difficulty producing metric evidence that what he or she does has direct effect on ROI. The CEO, for instance, can point to the success of the business during his or her watch (or their board can point to a downturn), but the truth is that market conditions and many other factors probably have a greater effect on outcome than the CEO does.
But regardless of the frustration of measuring, excuses don’t compute and failure to try to provide hard evidence is deadly.
One classic excuse is that measuring is too costly. In some cases, claims have been made that more has been spent on measuring than on the project itself.
Perhaps it isn’t just an excuse. KM measurement does have a price and measurement itself needs to be weighed against its own ROI. KM programmes are usually small and limited in resources. And, therefore, cost of measurement needs to be balanced against the value added, in terms of accountability and marketing.
“Clearly, the wisdom here is knowing how much, how and when to measure,” says Scott Shaffar, KM lead, at defence and aerospace company Northrop Grumman. “The best measure I have experienced is personal testimony from those doing the value-added work. The challenge for those of us leading KM is to capture and share that testimony. If it is backed with hard data, the more power we can hold, specifically with the CFO.”
The CEO isn’t blind to the cost of measurement. Saint-Onge recalls an episode in his own career to make the point.
“One day, when I presented to the CEO, I reported on a budget request for a measurement initiative” he recalls. “The CEO asked why I wanted so badly to spend such an amount on measuring instead of focusing on moving the work ahead. My answer was that I wanted ammunition to counter the critics in the organisation. He then told me it was not necessary to make this kind of investment, that I should proceed with the work at full speed and that he would provide the air cover.” The CEO provided constant support over the next four years and in time Saint-Onge’s colleagues on the senior management team became very supportive as well.
Most KMers would agree that too much emphasis is placed on metrics, as opposed to valuing.
“I think it is an illusion of the metrics-minded,” says Peter Marshall, SVP Platform Strategy & Professional Services at Peracon. “They have a visual image of a dashboard with all the key indicators which a manager will use to navigate the business. But a car’s dashboard is hardly used to navigate the car. It provides some useful metrics which the driver occasionally consults, but the key is the driver who uses all kinds of tools and skills that are not on the dashboard including the window which provides a view of the world outside the car.”
Nevertheless, successful KMers measure. Rony Dayan, formerly KM lead, Israel Aircraft Industry, says that company uses over 70 key performance indicators (KPIs) to establish the true value of its KM initiatives and adds to and revises them regularly.
Teradata’s approach is probably the most sophisticated in the field, because a data and information company like Teradata demands it. For others, the questions of how, what and when to measure are answered on the basis of “what it takes” to assure performance and maintain management support.
Jerry Ash is KM coach, founder of the Association of Knowledgework, www.kwork.org, and special correspondent to Inside Knowledge. He is author of the Ark Group’s Next Generation Knowledge Management series. Additional discussion of KM and ROI can be found in Next Generation Knowledge Management III, chapter 4. To order any of the three volumes, contact Adam Scrimshire at firstname.lastname@example.org. Jerry Ash can be reached at email@example.com.