Dimitrios V.

Siskos

Why Strassmanns Knowledge Management metric is considered as

an important one?

To: Dr. Thomas Grisham

May 22, 2015

This paper is submitted in partial fulfillment of the requirements for Controlling and Performance
Management (Doctorate of Finance)

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SMC Working Papers

Contents

Contents.................

Abstract..............

Why Strassmanns Knowledge Management metric is considered as an important one?..

References....................... 7

May 22, 2015

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Dimitrios V. Siskos

SMC Working Papers

Why Strassmanns Knowledge Management metric is considered as an important

one?

Siskos V. Dimitrios
Swiss Management Center (SMC) University
May 22, 2015

Abstract
For many decades, scientists, economists and other intelligent professionals have been concerned about
creating, acquiring, and communicating knowledge and improving the re-utilization of knowledge. However,
it is only in the last 1520 years or so that a distinct field called knowledge management (KM) has
emerged (King, 2009). Specifically, Paul Strassmann (1999) and other introduced KM as an important metric
for measuring performance, attracting the interest of executives and managers worldwide. This paper
examines the reasons which make knowledge measurement necessary for any organization.

Keywords: Knowledge Management, Performance Management Metric, Evaluation.

May 22, 2015

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SMC Working Papers

Why Strassmanns Knowledge Management metric is considered as an important one?

The turbulent business environment, with global trends and the stringent competition in the world
market, resulted in many changes that companies should introduce in their current business operations in
order to survive in the market (Jelenic, 2011). In this light, there has been a drive to move away from the
traditional performance management metrics and follow the knowledge economy, in which the intangible
resources are significant enough that add the firms value. Strassmann (1999) and Drucker (1995) made the
introduction of knowledge Management, stressing the growing importance of information and explicit
knowledge as organizational resources.
As such, organizations showed great interest for the new metric in their effort to measure performance
efficiently. As Osei (2013) refers, many organizations have created positions in their setup where people are
appointed as "Chief Knowledge Officers" (CKOs). It has been estimated that the position of Chief
Knowledge Officer (CKO) exists in about one-fifth of the Fortune 500 companies, although not all the
positions carry the title of CKO (Stewart, 1998). Apparently, nowadays that number is much bigger.
According to Bhojaraju (2005), knowledge management enhances existing organizational business processes
and introduces more efficient and effective business processes removing redundant processes.
To effectively apply knowledge management programs within an organization, it is required to identify
and leverage the know-how embedded in work, with a focus on how it will be applied. As Kidwell et al.
(2000, pp. 29) aptly refer, the challenge in knowledge management is to make the right knowledge available
to the right people at the right time. The most popular framework for establishing the knowledge
management metric is to move from tacit1 to explicit2 knowledge, reducing the risk of losing valuable
1

It is sometimes referred to as know-how (Brown & Duguid, 1998) and refers to intuitive, hard to define knowledge
that is largely experience based.
2

This type of knowledge is formalized and codified, and is sometimes referred to as know-what (Brown & Duguid,
1998.

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knowledge if people decide to leave the organization (Fairchild, 2002). Intellectual capital is knowledge that
can be exploited for some money-making or other useful purpose (Rouse, 2007). According to Seemann et al.
(2000), such a model integrates the concept of intellectual capital into three elements: human capital,
structural capital and social capital as seen on figure 1 below:

Figure 1: Key Components of Intellectual Capital

1. Human capital is the knowledge, skills, and experiences possessed by individual employees. The
purpose of managing human capital is to ensure that the business has the right mix of talent at the
right time to implement the firms corporate strategy.
2. Structural capital is basically everything that remains in a firm after its employees go home.
Practically, it measures the structures and systems that exist in the organization.
3. Social capital is reflected in the ability of groups to collaborate and work together and is, basically, a
function of trust. Practically, it reduces transaction costs and produces higher quality knowledge.
Given that organizations are facing many challenges, which are mostly brought on by market pressures
or the nature of the workplace, they seek to find ways to overcome them. They are, also, realizing that to

May 22, 2015

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Dimitrios V. Siskos

SMC Working Papers

remain competitive, they must explicitly manage their intellectual resources and capabilities. To this end,
many organizations have initiated a range of knowledge management projects and programs, primarily by
developing new applications of information technology by utilizing the "social capital" that develops from
people interacting repeatedly over time and by experimenting with new organizational cultures, forms and
reward systems to enhance those social relationships (Zack, 1999). As such, it becomes apparent that the
biggest issue is not in defining some KPIs but in getting people in the organizations to actually start, and
more important, keep using the system so sustainable benefits are gained (Waal, 2007). Clearly, the
Strassmanns Knowledge Management metric does provide useful approaches which, if properly,
consistently and thoughtfully applied, can help address and eliminate some of the deficiencies of the current
ones.

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References
Bhojaraju G. (2005). Knowledge Management: Why do we need it for corporate. Malaysian Journal of
Library & Information Science, 10(2), 37-50
Brown, J.S.& Duguid, P. (1998)Invention, innovation & organization. Submitted to Organization Science,
1-36
De Waal, A. (2007). Strategic performance management: A managerial and behavioural approach.
Basingstoke, Hampshire: Palgrave
Drucker, P. F. (1995). Managing in a time of great change. New York: Truman Talley Books/Dutton. In
Fairchild, A. M. (2002). Knowledge management metrics via a balanced scorecard methodology.
Proceedings of the 35th Hawaii International Conference on System Sciences. Retrieved on 03/03/2013
at: http://www.computer.org/csdl/proceedings/hicss/2002/1435/08/14350243.pdf
Dunn, S., and Morgan, V. (1999). 'A fraught path - education as a basis for developing improved community
relations in Northern Ireland'. Oxford Review of Education, 25, pp.141-153.
Fairchild, A. M. (2002). Knowledge management metrics via a balanced scorecard methodology.
Proceedings of the 35th Hawaii International Conference on System Sciences. Retrieved on 03/04/2014
at: http://www.computer.org/csdl/proceedings/hicss/2002/1435/08/14350243.pdf
Jelenic, D. (2011). The importance of knowledge management in Organizations with emphasis on the
balanced scorecard learning and growth Perspective. Management, Knowledge and Learning
International Conference, 33-43.
Kidwell, J.J., Vander Linder, K.M., and Johnson, S.L. (2000) Applying corporate knowledge management
practices in higher education, Educause, 4, pp.28-33
King, W.R. (2009).Knowledge Management and Organization Learning: Annals of Information System, 4th
edition. Springer Dordrecht Heidelberg London New York, Springer Science Business Media, LLC
2009, pp. 3-11.
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SMC Working Papers

Osei, M. (2013), Is Strassmann's 'Knowledge Management' an Important Metric. Available at SSRN:

http://ssrn.com/abstract=2240860 or http://dx.doi.org/10.2139/ssrn.2240860
Rouse, M. (2007). Enhancing effective inclusive practice: Knowing, doing and believing. Kairaranga.
Wellington: New Zealand Ministry of Education.
Seeman, P, De Long, D., Stuckey, S. & Edward G. (2000), Building Intangible Assets: A Strategic
Framework for Investigating in Intellectual Capital. Morey, D, Maybury M, & Thuraisingham, B, eds.
(2000). Knowledge Management: Classic and Contemporary Works, The MIT Press
Stewart, T.A. (1998), "Is This Job Really Necessary," FORTUNE, 154-155.
Strassman P. (1999). Measuring and managing knowledge capital. Report on knowledge, technology and
performance. Retrieved on 03/04/2014 at: http://www.strassman.com/pubs/measuring-knowledge/
Zack, M. H., (1999) Developing a Knowledge Strategy. California Management Review, 41 (3), 125-145

May 22, 2015

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Dimitrios V. Siskos