EFFECTIVE MEASUREMENT OF KNOWLEDGE

MANAGEMENT INITIATIVES
An APQC Overview
Many organizations still struggle to measure the gains that knowledge management (KM) promises to
offer. Executives are right to ask, "What investment are we making in KM? Is it enough? Too much?
What are we getting for our money?" The intangible nature of knowledge itself causes some KM
practitioners to assume that the effects of KM will also be intangible. However, APQC has not found
that to be the case.
According to our research, firms can and do effectively measure the impact of KM. In fact, those that
invest the most and measure most rigorously are achieving a financial return on investment (ROI) of
approximately two dollars for every dollar spent per participating employeea healthy ROI by any
standard. These returns are added to valuable intangibles such as an increased sense of belonging among
employees, faster socialization of issues and change, cross-fertilization of ideas, and so on.
Below are five tips for creating and sustaining successful KM measurement programs.

TIP NO. 1
Start with a measurement paradigm that links knowledge management efforts to business
needs.
Far too many KM measurement attempts focus exclusively on activity measures such as the number of
communities, the number of documents downloaded, or the number of people who participate. While
these are critical indicators of the health and adoption of knowledge-sharing practices, they are not an
end in themselves.
APQC suggests a different approach: A KM measurement system should incorporate business outcomes
as the focal point for the strategy and a way to measure its effectiveness. Once an organization defines
the business objectives for KM, knowledge flow processessuch as communitiesneed to be
established and their activity levels tracked. The goal is to tie trends in activity measures to business
outcomes. Clear business outcomes provide the ROI to justify investment in targeted KM approaches as
well as the infrastructure, people, and technology that any successful initiative requires.

TIP NO. 2
Select measures that are appropriate to your organization's particular KM approach,
objectives, and stage of development.
In the early stages of deployment, any KM strategy needs measures that assess alignment with business
strategy, acceptance, and behavior change, as well as a method to predict desired business outcomes
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and begin tracking them. However, the way in which an organization measures the particular costs and
impacts of its KM program depends on the KM approach(es) adopted.
For example, a KM initiative focused on improving sales force effectiveness would track the reuse of
effective proposals (activity) and sales (outcome), but such measures would probably be irrelevant to a
KM initiative centered on building new knowledge in an engineering discipline. Likewise, an enterprise
whose goal is to implement communities of practice would measure success differently than would an
organization that wants to install a content management system.

TIP NO. 3
Understand the relationships between inputs, process changes, and desired outcomes.
The APQC value path model shows the relationships among inputs (investments), processes (KMrelated activities and behaviors), and outcomes (organizational objectives). Depending on the particular
KM activities being performed, examples of inputs might include time, salaries, and IT costs. Process
changes might include cycle time, participation, and contribution to a body of knowledge. Examples of
outcomes important to the organization might include employee and customer retention, reduced costs
per transaction, or increased revenue.

TIP NO. 4
Create a measurement system that actually works.
Many organizations have lists of measures, but lack the necessary processes and accountability for
collecting, organizing, reporting, and using the measures to improve their KM programs and drive
funding and investment. In addition, a measurement system that captures intangible benefits such as
social cohesion, job satisfaction, and time-to-competency will provide a more comprehensive view of
KM efforts success.

TIP NO. 5
In addition to metrics, provide compelling examples of success.
At every stage of KM deployment, organizations need examples of concrete accomplishments that can
help justify past and future investments and provide management with a vision of what is possible.
Collect success stories that illustrate the value path from inputs to outcomes.

THE BOTTOM LINE

KM measurement is like a beautiful automobile. Although measurement has inherent esthetic and social
value, its utilization value comes when it propels one from point A to point Bfrom ignorance to
understanding or informed action. A measurement system that links KM activities to business impact
provides a rationale for investment beyond the intangibles that KM brings to an organization.

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For more information on KM measurement, see the following APQC collections: Measuring Knowledge
Management Initiatives and Key Measures for Knowledge Management.

ABOUT APQC
APQC helps organizations work smarter, faster, and with greater confidence. It is the worlds foremost
authority in benchmarking, best practices, process and performance improvement, and knowledge
management. APQCs unique structure as a member-based nonprofit makes it a differentiator in the
marketplace. APQC partners with more than 500 member organizations worldwide in all industries.
With more than 40 years of experience, APQC remains the worlds leader in transforming
organizations. Visit us at www.apqc.org, and learn how you can make best practices your practices.

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