How Effective are the Metrics?

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knowledgeSeveral debates and discussions in the KM field today revolve around metrics. What can be reliably measured in KM practices? How can they be measured on an ongoing basis? How valid are these measures? Should they even be measured? How should such measures be interpreted? Madanmohan Rao, Editor of KM Chronicles, takes a peek into many such questions.

A well-planned KM initiative calls for extensive organisational support – infrastructure, community roles, learning workshops, external consultants and the like. This serious capital investment must therefore be backed by systematic approaches to performance measurement and return on investment via various quantitative and qualitative metrics.

Organisations have devised a range of KM metrics depending on how the KM practice is aligned with business needs. These could include reduction in operational costs, reusability of knowledge components, faster induction of new employees, better knowledge retention, and reduced infrastructure investments. Metrics for KM could also include surveys on job satisfaction, a sense of personal accomplishment, improved morale, and plans to stay on in the organisation.

Numerous accounting procedures are being applied to assess intellectual property (brand equity valuation), intellectual assets (benchmarking, balanced scorecards) and intellectual capital (market-to-book value, calculated intangible value).

The framework I have developed in my book series classifies KM metrics into five kinds, depending on their focus: activity (or tool/technology usage), business process, knowledge (stocks and flows), employee (cultural attitudes and performance) and business (overall economic impacts).

Scope of KM metrics

 

Sample parameters
Activity/tool metrics Number of emails, usage of online forums, number of database queries, website traffic, duration of portal sessions, number of search queries, number of blogs, number of alerts
Process metrics Faster response times to queries, meeting international certification standards, more real-time interactions with clients, tighter collaboration with suppliers and distributors, more direct channels to customers, more accurate content taxonomies, more secure communications
Knowledge metrics Number of employee ideas submitted, number of knowledge asset queries, number of knowledge assets re-used, best practices created, rate of innovation, active CoPs, knowledge retention, quicker access to knowledge assets, fewer steps to distribute/repackage knowledge (“flow” and “stock” measures)
Employee metrics Degree of bonding with colleagues, improved performance in CoPs, peer validation, feeling of empowerment, growth in trust, satisfaction with reward/recognition, retention in company, decrease in time to competency, more accountability, responsible risk-taking, increased motivation
Business metrics Reduced costs, less travel costs, greater market share, increased customer satisfaction, customer loyalty, profitable partnerships, conversion of knowledge assets into patents/licenses, improved productivity, risk reduction, crisis management

Another way of analysing these metrics is by their nature: quantitative, qualitative or semi-quantitative. KM impacts in government and public sector organisations tend to differ from KM measures and outcomes in private sector companies.

KM success stories

During economic slowdown measuring return on investment in initiatives like KM is becoming a pressing concern at large companies. Organisations today rely on KM for faster speed of operation, less time to build client presentations, lower training costs and greater global consistency in service delivery.

Buckman Labs reportedly spent $7,500 per person, or 3.5 to 4.5 per cent of its revenue, on its knowledge efforts. A key metric is the faster pace of innovation: the global knowledge-sharing effort helped increase the sales of products less than 5 years old, from 14 per cent to 34.6 per cent in less than ten years.

Schlumberger reported a first year savings of $75 million through its KM initiative called InTouch, which improved operational efficiency by connecting technology centres and field workers. As a result, technical query resolution time fell by 95 per cent and engineering modifications update time was reduced by 75 per cent.

Tata Steel reported significant savings in saleable steel costs to the tune of US$700,000 thanks to its KM initiatives, and has even been guiding sister companies of the Tata group to implement KM.

Xerox’s KM portal called Eureka was credited with solving over 350,000 problems annually that otherwise would have been recreated by other customer service engineers (CSEs) wasting both parts and labor as they try to find a solution — parts and labor savings were in excess of $15 million annually, with increased customer satisfaction and faster learning cycles for the CSEs. EMC’s KM practice helped improve worldwide sharing of solutions and shorten learning curves.

As compared to the private sector examples above, it is important to see how KM initiatives in public sector agencies differ in some significant aspects. There is less of a focus on profits, market positioning and global competition. But shared focus areas include collaborative communities, cultural change and harnessing new tools such as social media.

It is important not to choose too many metrics, choosing metrics that are hard to control, metrics that tear people away from business goals, and choosing right answers to the wrong questions. The metrics used must be company-specific and robust; a mix of short-term, medium-term and long-term measures serves well.

Far too often, metrics analyses stop short at only one or a few of these five categories. All categories of measures are needed together to ensure that KM practices and tools are steering the organisation in the right direction and are indeed delivering value.

For instance, mere increase in email traffic (a technology metric) after KM tool deployment need not imply that users are communicating and collaborating more; this may be a reflection of email overload. Many early BPR rollouts improved process efficiency (a process metric), but reduced knowledge exchange opportunities (a knowledge metric). Online communities of practice may increase knowledge contributions (a knowledge metric), but may promote conforming behaviours and create cliques among employees (a people metric). Many organisations have extensive knowledge repositories (a knowledge metric) and high levels of motivation and retention among employees (a people metric), but are unable to convert this to market leadership and profitability (a business metric). True organisational success, therefore, lies in maximising performance along all the five dimensions of KM metrics listed in Table.