Вы находитесь на странице: 1из 12

Introduction

Knowledge
The twenty-first century is characterized by the
management metrics growth of importance of knowledge in
organizations and its impact on all aspects within
Ranjit Bose an organization. Interest in knowledge
management (KM) has grown along with the
advances in computers, networks, and data
management systems. Sharing and collaboration
among the thousands of people scattered around
the globe depends on the technology of connection
and the organized storage of content, and many
knowledge projects have focused on building
The author systems to connect people and capture knowledge.
Effectively implementing a sound KM strategy
Ranjit Bose is Professor of MIS, Anderson School of
and becoming a knowledge-based company is seen
Management, University of New Mexico, Albuquerque,
New Mexico, USA. as a mandatory condition of success for
organizations as they enter the era of the
Keywords knowledge economy (Davenport and Beck, 2002;
Groves, 2002; Levett and Guenor, 2000). The
Knowledge management, Performance measurement (quality)
purpose of managing and leveraging a companys
Abstract knowledge is to maximize the returns to the
organization. This means being able to measure
Over several years, there have been intensive discussions about
both the principal investment and the yield from
the importance of knowledge management (KM) within the
business community. Effectively implementing a sound KM
that investment at regular intervals. Yet, measuring
strategy and becoming a knowledge-based company is seen as a the business benefits of KM is currently quite
mandatory condition of success for organizations as they enter difficult. Measurement is the least developed
the era of the knowledge economy. However, standardized aspect of KM and best practice transfer efforts
metrics are needed to quantify knowledge and to fully convince because of the inherent difficulty to measure
management and stakeholders as to the value of KM initiatives. something that cannot be seen, such as knowledge.
Development of KM metrics has begun in recent years and these KM systems must demonstrate their value.
metrics are being applied by some organizations, but more Without measurable success, enthusiasm and
research is needed to better define these measures and to make
support for KM is unlikely to continue.
them universal. The purpose of this research is to survey and
report the current measures of knowledge assets or intellectual
Specifically, without measurable success,
capital, as well as the methods that are popularly being followed managers will not be able to tell how the
by organizations to measure the performance of KM strategies. organizational KM system works, where its
The research findings should: assist organizations in identifying bottlenecks are, and how the system could be
the measures that are appropriate and suitable for them, for improved. Managers, therefore, need to be able to
improving the quality of metrics they use for measuring KM measure the impact of KM efforts on their
effectiveness; and assist researchers in identifying future organizations performance (McInerney, 2002).
research needs toward the standardization of KM measurement Standardized metrics are needed to quantify
metrics.
knowledge and to fully convince management and
stakeholders as to the value of KM initiatives.
Electronic access
Development of KM metrics has begun in recent
The Emerald Research Register for this journal is years and these metrics are being applied by some
available at
organizations, but more research is needed to
www.emeraldinsight.com/researchregister
better define these measures and to make them
The current issue and full text archive of this journal is universal (Wagner, 2002). The purpose of this
available at research is to survey and report the current
www.emeraldinsight.com/0263-5577.htm measures of knowledge assets or intellectual
capital (IC), as well as the methods that are
popularly being followed by organizations to
measure the performance of KM strategies. The
research findings should: assist organizations in
identifying the measures that are appropriate and
Industrial Management & Data Systems
Volume 104 Number 6 2004 pp. 457-468 suitable for them, for improving the quality of
q Emerald Group Publishing Limited ISSN 0263-5577 metrics they use for measuring KM effectiveness;
DOI 10.1108/02635570410543771 and assist researchers in identifying future research
457
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

needs toward the standardization of KM research laboratories to the business


measurement metrics. organizations.
(2) Capture knowledge. The knowledge that is
created needs to be stored in its raw form in a
database. Most organizations use many
KM background different types of knowledge repositories to
capture the knowledge (Wang, 2002).
In its most basic form, knowledge can be thought (3) Refine knowledge. New knowledge must be
as information that is contextual, relevant and placed in context so that it is actionable. This
actionable (Soliman and Youssef, 2003; is where human insights or tacit knowledge is
Wainwright, 2001). The other perspective on it captured and refined along with explicit
states knowledge as information in action. KM is know1edge (Herschel et al., 2001).
fundamentally the management of the corporate (4) Store knowledge. Codification of tacit and
knowledge and intelligent assets that can improve a explicit knowledge helps in making the
range of organizational performance knowledge understandable and which can be
characteristics and add value by enabling an used later on.
enterprise to act more intelligently (Murray, (5) Manage knowledge. Like a library, knowledge
2002). It is the formalization of organizational must be kept current. It must be reviewed to
memory and learning into an available resource verify that it is relevant and accurate. So, most
through a knowledge repository. KM encompasses Fortune companies have well defined
both types of knowledge the tacit and explicit departments that actually take care of keeping
knowledge. KM strives to cut across organizational the knowledge current.
boundaries, enhance communication and (6) Disseminate knowledge. Knowledge must be
collaboration and transform local knowledge into made available in a useful format to anyone in
organizational knowledge (Duffy, 2000; Lee and the organization who needs it anywhere and
Hong, 2002). anytime. The new technologies like
KM needs the right methods, technologies, and groupware, Internet/intranet and other DSS
tools for a successful implementation (Duffy, technologies help in the dissemination of
2001; Gupta et al., 2000; Marwick, 2001). A knowledge.
knowledge management system (KMS) facilitates
KM by ensuring knowledge flow from the There are generally three broad objectives of KM
person(s) who know(s) to the person(s) who in organizations: leveraging the organizations
need(s) to know throughout the organization, knowledge; creating new knowledge or promoting
while knowledge evolves and grows during the innovation; and increasing collaboration and
process. A variety of tools and technologies make hence enhancing the skill level of employees. The
up a KMS (Bontis et al., 1999). The Internet, most common KM program involves development
Intranets, data warehousing, decision support of a knowledge repository, and forming and
tools and groupware are some of the many nurturing of the communities of practice. These
technologies that make up the KMS. two, jointly, address all of the above three
The literature extols the importance of objectives of KM. The several benefits of KM as a
measurement of knowledge at all stages of its strategy are: it reduces the loss of IC from
development. However, to understand more about employees who leave; it reduces the cost of
the metrics development it is important to development of a new product/service; it increases
understand the process and framework that the productivity of workers by making knowledge
currently allow organizations to manage accessible to all employees; and, therefore, it
knowledge. increases employee satisfaction.
Figure 1 identifies a number of KM processes
that center around the goal of continuous
KM processes organizational learning (McInerney, 2002). These
The following steps are followed to represent the processes tend to get identified with the employees
cyclical model of KM processes: and therefore mechanisms for their measurement
(1) Create knowledge. The knowledge comes can get formulated.
primarily from the experiences and skills of the
employees. Knowledge is created as people Knowledge enablers
determine new ways of doing things or In most organizations, KM process can be broadly
develop know-how. Sometimes if the categorized into: knowledge creation; knowledge
knowledge is not residing in the organization, validation; knowledge presentation; knowledge
external knowledge is brought in, for example, distribution; and knowledge application activities.
technology transfers that take place from the Enabling such a balancing act requires changes in
458
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

Figure 1 Knowledge management processes they are managing the companys knowledge so
that it maximizes returns to the organization. The
knowledge embedded in business processes,
corporate culture, best practices, core
competencies, skills, or strategic visions are critical
parts of the total stocks of knowledge in an
organization. Without measurable success,
managers will unlikely be able to tell what works
and what does not and therefore make an informed
judgment regarding what to continue doing, and
what to adjust.

Knowledge asset measurement


In an alarming rate, many organizations have
embarked on programs of KM in the last few years.
The following statistics validate the statement:
. A total of 80 percent of Fortune 500 companies
have KM staff.
.
From 1997-2000, the Ford Motor Company
saved $914 million, mainly due to effective
KM programs; Chevron has saved $650
million since 1991, while Texas Instruments
has saved $1 billion since it launched KM
organizational culture, technologies, and programs in the mid-1990s.
techniques. .
Of CEOs polled at the 2001 World Economic
The research literature suggests that there are Forum in Davos, Switzerland, 95 percent said
four enablers for knowledge across organizations. that KM was critical to organizational success.
These four enablers culture, technology, .
Of Canadian business leaders polled by
infrastructure, and measurement contribute to IpsosReid in 2001, 91 percent believed that
the overall development of organizational learning, KM practices have a direct impact on
that companies can use to generate value organizational effectiveness, and one-third of
proposition and deliver better products to the Canadian organizations that have not
market. Each is essential and is insufficient without undertaken a KM initiative expect to do so in
the others. They all work together to yield the next 12 months (Bontis, 2002).
sustainable success. .
With increasing alliances across many
Of these four enablers, culture is perhaps the industry segment, studies show that, using a
most potent and most difficult to alter. Culture, is knowledge-based approach to alliances is
the combination of shared history, expectations, effective (Parise and Sasson, 2002).
unwritten rules and social mores that affects all
employees behavior. Technology is one of the The impact of KM on an organizations
important contributors of KM, as the pervasive performance is strongly tied to the ability of an
use of groupware and Internet/intranet/extranet organization to identify where KM will be of most
technologies has had a profound effect on peoples value that contributes to its market strength. The
ability to share knowledge and practices effectively. best and most logical approach to measuring the
Infrastructure includes the transfer impact of KM on an organizations performance is
mechanisms, such as technology, work processes to tie-in measurement of KM with the
and people networks, to ensure that best practices organizations overall performance measurement
flow throughout an enterprise. It also includes the systems. This can be done either at an
organizational structure and roles supporting the organizational level, or for individual projects and
processes. Infrastructure includes the strategists at processes. Even though it is intuitively clear that
the top, a role that could be played by the executive knowledge is one of the key generators of value in
team or assigned to specific positions such as chief any business organization, when one tries to put a
information officer (CIO) or chief knowledge number for this value, it is difficult.
officer (CKO). Measurement of knowledge is still Increasingly companies are embracing
in the nascent stage. As with almost every initiative performance measures that depart from traditional
in the business world, managers need to know that accounting based measures such as earnings per
459
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

share and return on investment, to new value- The balanced scorecard


based measures such as economic-value-added An increasingly popular approach in the USA to
and market-value-added. Likewise, the current measuring an organizations performance, and one
measures of KM are characterized by integrated that is being widely adopted in KM, is the
use of financial and non-financial measures. These balanced scorecard (BSC). The advantage of this
integrated measurement systems examine approach in KM terms is that it directly links
performance from multiple angles (Ahmed et al., learning to process performance, which in turn is
1999). linked with overall organizational performance.
IC is supplementary to financial information; it Developed by Kaplan and Norton (1996), the
is a non-financial capital, which is a debt item, and BSC focuses on linking an organizations strategy
not an asset item. The value of IC is determined by and objectives to measures from four key
the extent to which intangible assets can be turned perspectives: financial (How can we add value to
into financial returns. The IC index, therefore, has our shareholders?, e.g. profitability and cash
been developed to help managers visualize growth flow); customers (What do our customers value
or decline in capital and also the trade-offs. As from us? Are we meeting their needs and
such it is a measure of IC performance. expectations?, e.g. customer satisfaction and
Figure 2 organizes and presents some of the market share); internal processes (What do we
currently used measures for knowledge assets or need to do well in order to succeed? What are the
IC. Note that in Figure 2, there are human-
critical processes that have the greatest impact on
oriented metrics that are also used in process
our customers and our financial objectives?, e.g.
measures. Some of these metrics fall into the KM
tender success rate and safety incidents); and
field, as they attempt to quantify and measure
learning and growth (Orientation to future
human capital and knowledge assets. The
success, how can we continue to add value?, e.g.
currently used metrics for measuring knowledge
unit costs and new products launched).
assets or IC have been developed based on:
The BSC methodology, therefore, is an analysis
Intellectual Capital Management Groups study in
technique designed to translate an organizations
1998 (Ahmed et al., 1999); Canadian
mission statement and overall business strategy
Management Accountants report on measuring
into specific, quantifiable goals and to monitor the
knowledge assets (CMA, 1999); Roos et al.s
organizations performance in terms of achieving
(1998) study and published report; and Universal
Intellectual Capital Report (Von Krough et al., these goals. In contrast to traditional accounting
1999). measures, the BSC shifts the focus from purely
The metrics presented in Figure 2 are very financial measures to include three key measures of
helpful and desirable for the purpose of identifying intangible success factors. These roughly equate to
and developing future measures. It must be noted, the three components of intellectual capital
however, that specific KM metrics will be tied to namely human capital (knowledge and skills of
specific organizational contexts. Domain details, people), structural capital (knowledge inherent in
affecting KM metrics, will differ across organizations processes and systems), and
organizations. Furthermore, in the area of customer capital (customer relationships).
performance metrics, value interpretations that The process of creation of a BSC is as follows:
enter composite performance metrics will differ (1) Identify a vision. Where is the organization
across individual organizations. In spite of the going?
diversity of specific KM metrics across (2) By identifying strategies, learn about how to
organizations, it should be possible to define get there.
general types of metrics: for example, performance (3) Define critical success factors and
metrics that are structurally similar across perspectives, which means asking what needs
organizations. to be done to do well in each of the four
perspectives mentioned above.
(4) Thereafter ask how do we measure that
everything is going the expected way?
KM metrics methods (5) Evaluate the scorecard. How do we ensure
that we are measuring the right things?
The implementation of KM is a strategic process (6) Based on this work, create action plans and
and needs careful target setting and review. This plan reporting and operation of the scorecard.
section describes the three popular methods used (7) Determine how to follow up and manage the
by organizations for measuring the performance of scorecard? Which persons should have reports
KM strategies. and what should the reports look like?
460
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

Figure 2 Currently used measures for knowledge (intellectual capital)

461
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

Figure 2

462
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

Figure 2

Economic value added (EVA) capital charges where capital charges are
In the 1990s, another value-based performance calculated as the weighted average cost of capital
measure, called EVA has gained immense multiplied by the total capital invested (Dillon and
popularity. It is the relatively newest method of Owers, 1997). In practice, EVA is increased if the
evaluating corporate performance, developed and weighted average cost of capital is less than the
trademarked by the Stern Stewart & Company, the return on net assets, and vice versa.
New York consulting firm. It focuses on The EVA methodology is well established and
maximizing the wealth of shareholders (i.e. the increasingly, large firms are adopting it as the base
shareholder value), it calculates a companys true for business planning and performance
economic profit, and it helps managers to create monitoring. There is growing evidence in research
value for shareholders (Ray, 2001). EVA is the literature that EVA, not earnings, determines the
after-tax cash flow generated by a business minus value of a firm. The chairman of AT&T stated that
the cost of the capital it has deployed to generate the firm had found an almost perfect correlation,
that cash flow, thus representing real profit versus over the five-year-study period, between its market
paper profit. value and EVA. Effective use of capital is the key to
EVA is defined as the difference between net value; that message applies to business processes,
sales and the sum of operating expenses, taxes and too. EVA is ideally suited to publicly traded
463
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

companies, not private companies, because it deals business unit managers. Indicators and
with the cost of equity for shareholders, as opposed information on the companys past performance
to debt capital. is the thrust of the financial focus area; on current
An EVA-based system helps managers to make performance is the thrust of the human, customer,
better investment decisions, such as investment in and the process focus areas; and on future
KM systems, identify opportunities for performance is the thrust of the renewal and
improvement and consider short-term as well as development focus area. Skandia started with a
long-term benefits for the company. Furthermore, long list of measures before discovering which were
studies suggest that EVA is an effective measure of most useful. They now use a shorter list, which
the quality of managerial decisions as well as a provide the necessary information.
reliable indicator of a companys value growth in The IC index, developed by Skandia and
the future. EVA is always expressed as a dollar depicted in Figure 3, helps managers visualize
amount. In summary, constant positive EVA growth or decline in capital, and the trade-offs. It is
values over time will increase company value, while
based on an intellectual capital tree, which is
negative EVA implies value depreciation. EVA
also known as the Skandia value scheme, of
does not make it easy to quantify IT benefits but
hierarchical categories. The intellectual capital,
creates clarity so that all the pluses and minuses of
according to this scheme, is composed of two IC
these IT decisions can be considered in ways that
elements: human capital and structural capital.
companies that do not use EVA find difficult to do.
The EVA methodology for performance Human capital is the accumulated value of
measure in a company is carried out in five broads investments in employee training, competence and
steps: step 1: review the companys financial data; future. It might also be described as the employees
step 2: identify the companys capital; step 3: competence, relationship ability and values.
determine the companys capital cost rate; step 4: Structural capital is the value of what is left when
calculate the companys net operating profit after the employees the human capital have gone
tax; step 5: calculate the economic value added by home. Examples include databases, customer lists,
subtracting capital charge from net operating manuals, trademarks and organizational
profit after tax. If the EVA is positive, the company structures.
created value for its owners. If the RVA is negative, A brief description of each IC element (see
owners wealth was reduced. Figure 3), of the Skandia value scheme is provided
below:
.
Human capital. This includes all the individual
Skandia Navigator capabilities, talents, knowledge and
Skandia AFS is a Swedish financial services experience of the companys employees and
company and is well noted for pioneering the managers competence, capabilities,
measurement of its knowledge. Skandia AFS relationships and values of employees.
extensively experimented with many IC tools and .
Structural capital. This consists of the IC that
methods, and eventually developed their own IC remains in the firm when employees retire,
tool, the Skandia Navigator and its associated
such as the supporting infrastructure system.
value creation model (Von Krough et al., 1999).
It encompasses the organizational capability,
The Navigator is a tool for evaluating the soft
including the physical systems used to
assets of an organization, as well as a management
transmit and leverage IC data and
reporting system that helps managers visualize and
knowledge bases.
develop measures that reflect intangible assets, and .
Customer capital. This is value of enterprises
guide them into the future (Malone, 1997). Each
business unit is required to create indicators or IC relationships with customers customer base,
indices that are critical to its future developments. customer relationships and customer
The top management is therefore provided with a potential.
focus for managing development for the future by
.
Organizational capital. This is systematized
asking them to concentrate on each of these indices and packaged competence, plus systems for
individually, as well as collectively. leveraging the companys innovative strength
The Navigator measures IC through the and value-creating organizational capability
analysis of up to 164 metric measures (91 embedded knowledge assets in the process
intellectually based and 73 traditional finance- and innovation areas.
based metrics) that cover five focus areas (which .
Innovation capital. This is the renewal strength
are also known as perspectives): financial; of a company, expressed as intellectual
customer: process; renewal and development; and property, that is, protected commercial rights,
human. Measures to be used for each of these and other intangible assets and values, such as
focus areas are locally defined by the respective knowledge recipes and business secrets.
464
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

Figure 3 Skandia Navigator IC value scheme and measurement tool

. Process capital. This is combined value of rather, they are meant to help initiate the process
value-creating and non value-creating of identifying and defining firm specific KM
processes, such as practices, systems, and metrics.
procedures.
.
Intellectual property. This is patents,
trademarks, copyrights, designs and other Financial focus
specifications. These indicators would capture the financial
. Other intangible assets. This is culture. outcomes of activities in dollar values, but are not
seen as an end in themselves, but as markers of the
Several large companies, including Dow
companys progress over time. These might
Chemicals initiatives in valuing its R&D and
include investment in IT, revenues from new
patent process, have relied extensively on the
customers/total revenue, profits resulting from
Skandias multi-dimensional conceptualization of
new business operations, expenditure on research
organizational value, as described above. In sum,
and development, revenue per employee, and costs
Skandias IC Index, based on its value scheme,
per employee. They might also incorporate an
contains both financial and non-financial building
understanding of the companys financial past, as a
blocks that combine to estimate the companys
means of identifying those activities, which have
market value. This conceptualization achieved a
been most profitable over the long term.
balance for Skandia in trying to represent both
financial and non-financial reporting, uncovering
and visualizing its IC, tying its strategic vision to Customer focus
the companys core competencies reflecting These indicators would capture how well the
knowledge-sharing technology and knowledge organization fills the needs of its customers via
assets beyond intellectual property, and reflecting services and products. The indicators would form
better market value. a set of metrics that define the companys customer
base, and would help to understand the position of
Application of Skandia Navigator the company in the marketplace. These might
Skandia Navigators IC Index helps measure the include the type of customers for each of the
changes (positive or negative) in a firms overall companys products in terms of their duration as
market value based on both financial and customers, the level of satisfaction and
intellectual capitals. Any company that wishes to dissatisfaction (as indicated by, for example,
develop a capacity for IC measures must construct product returns), the support given by the
a set of key indicators that is relevant to their own company to its customers, and methods of
activities. The following provides a guide to help reaching customers; ratio of sales contacts to sales
organizations identify some of their key indicators closed; and ratio of customers gained to customers
based on the five focus areas of the Skandia lost. Indicators that use more aggregate data, such
Navigator. It should be noted that the indicators as overall market share and market coverage, can
listed below are by no means exhaustive, but also provide a broader context.
465
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

Process focus capital expenditures. Thus, human capital is equal


These indicators would capture the firms to training expenditures multiplied by the ratio
infrastructure in terms of how it does what it does. between the actual performance increase and the
Technology is a key element in this component. performance increase related to a desired ROI.
The indicators would deal with successful The bigger is the ratio between the two
application of technology, and would capture the performances, the bigger will be the amount of
actual processes of creating services and products capitalized training expenditures. The maximum
the customers desire. Relevant metrics in this case value of human capital cannot be bigger than the
might be the number of contracts processed value of training expenditures.
without error, the time required for particular
operations, the number of accounts or transactions
per employees, processing capacity of IT, and
changes flowing from technology acquisitions. Next steps

Renewal focus Management agenda


These indicators aim at reassuring a companys The challenge for organizations today is how to
long-term renewal, therefore, would gauge the match and align performance measures with
capacity of the company to respond to future business strategy, structures and corporate culture,
trends and events. The indicators would assess the the type and number of measures to use, the
companys position in the marketplace in terms of balance between the merits and costs of
changes in the customer base, changes in introducing these measures, and how to deploy the
consumer demands, expenditure on research and measures so that the results are used and acted
development to meet anticipated changes, upon.
expenditure on the development of new markets, None of the three value-based KM metric
and the age and value of the intellectual assets methods discussed in this article produces a list of
(such as patents) that the company holds. intangible assets with monetary values assigned to
Additionally, the indicators would also assess each, the total of which accounts for the difference
the readiness of the company to respond to between market capitalization and tangible asset
change. These might include the age profile of the value. However, over the series of reports, they do
company workforce, the training provided to produce some indication of a companys ability to
employees in connection with anticipated changes, turn intellectual capital into financial capital and
the number and profitability of new products, the an indication of what the companys managers
time taken for new products to develop from the consider important to achieve. They also produce
research stage to market readiness, and trends in a set of performance measures that influence
application for patents. behavior inside the organization. Because what
gets measured, gets managed and therefore,
Human focus management attention is not exclusively focused
These indicators are the most dynamic and on operational/financial results to the detriment of
difficult of the Skandia Navigators five focus areas innovation, customer relationships, employee
and in many respect the most important. morale and process development among others.
Measuring the human capital of a company is a Most leading-edge organizations can clearly
task made even more complex by larger social describe process improvement outcomes in
shifts, such as the move towards part-time work, projects that employ KM approaches and
telecommuting, and outsourcing. The human applications-outcomes like business growth (from
focus area assumes that diversity and innovation measuring the production and success rates of
are linked. Thus, some of the indicators include proposals and increased customer satisfaction)
the number of women managers, the proportion of and improvements in process cycle time and
minority employees, the number of managers with product quality. Whether or not companies can
non-business degrees, number of managers with assign actual dollar amounts to the results of their
advanced degrees, annual turnover of staff, the knowledge-based initiatives, they can identify, at
reasons underlying staff opting for part-time work, least anecdotally, the initiatives effects.
and the number of different languages and cultures The Skandia approach assigns no dollar value to
represented within the workforce. its IC, but uses proxy measures of IC to track
The human capital is evaluated according to: trends in the assumed value added. Every
the costs sustained in human resource company would need to possess a unique
development; and proportionally to the ratio: understanding of which intangible assets are truly
performance increase during the budget period valuable for the organization to choose, know
divided by desired performance increase that which assumptions are most valid, and identify
would allow the company to capitalize human appropriate metrics. It should also be noted that
466
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

given the requirement to create unique standards use to implement and evaluate an effective KM
for each companys metrics, generic standards for strategy in the marketplace.
measuring IC among companies or across
industries would be slow in coming. Research agenda
Managers should, therefore, develop a method The three currently popular KM metrics methods
or process for creating an IC index, which is the were presented here for constructing IC
critical factor for successful application of IC measurement system for knowledge-intensive
measures in their companies. The following steps organizations. A challenge with IC research thus
are suggested for this purpose: far has been that it has been primarily of the
(1) define the business concept the vision and anecdotal variety. Most researchers have
strategy of the organization; conducted case-based reviews of organizations
(2) identify the critical success factors; that have initiated KM. Other researchers have
(3) choose the key performance indicators; documented the metrics without advancing or
(4) apply weightings to the indicators; testing them, see Figure 2 for example. A way to
(5) consolidate the metrics, hierarchical level by overcome this challenge is for researchers to
hierarchical level pursue more empirical research. The three KM
(6) generate the IC index; and metrics methods discussed are both theoretically
(7) use it to focus management action on the key and empirically based, however, they have not
factors. been empirically tested. In order to increase their
managerial value thorough empirical testing
Once a company has a clear idea about its vision
should be conducted.
and strategy, it should use its long-term goals to
IC measurement is an emerging field within
identify: its value-creating path (i.e. those IC
KM, thus many research on IC primarily focused
categories that really drive company value
on definitions and classification. Interestingly,
creation); and the indicators that can act as many IC models have similar constructs and
performance measurements for each critical measures that are merely labeled differently. For
success factors. Like most other measures of example, the learning and growth perspective in
tangible assets, an IC-index does depend on value balanced scorecard method is also called the
judgments, in the choice of weights, indicators, renewal and development focus in the Skandia
and even the assumption that IC is present and Navigator method. However, as this field develops,
important in company operations. Although this it is important to build on each researchers work
charge of subjectivity can also be made of certain so that a common set of definitions can be used to
traditional accounting methods and assumptions, further advance the field.
at least IC measurement and especially a In order to make significant progress in the field
consolidated measure such as the IC-Index, makes of IC measurement, IC researchers must move
a larger part of the organization visible and open to from current perceptual measures in isolated cases
valuation and to comparison of alternatives. to large-scale studies with objective measures. The
Finally, if KM continues to grow as a field, one measurement examples in the research literature
of its main thrusts will be KM metrics thus far have been too firm specific and no set of
development and implementation. The research indicators could hope to be general enough to
literature shows the evolution of the CKO or the encompass the needs of a variety of industry
chief learning officer (CLO), whose main focus is settings. The pursuit of measuring IC assets
to manage the knowledge within the organization objectively is a noble but difficult one. Top
and making it competitive. According to a study, executives of several large organizations worldwide
25 percent of Fortune 500 companies currently agree that new IC measures are required to help
have CKOs and 42 percent of Fortune 500 manage knowledge assets. A goal for this field
companies anticipate appointing a CKO within the should be that practitioners and researchers both
next three years. The main functionality of CKO is continue to share measurement practices across
to create high efficiency in the knowledge value industries in order to take full advantage of the
chain by the sharing of resources and realization of innovations that are already taking place.
synergies. However, this job description had by far
been quite abstract as the area itself is new and
though KM initiatives are popular among Conclusion
organization there is still no standardized
procedures to measure knowledge within KM is still defining itself because the body of
organizations. Therefore, one of the most theoretical literature and research in this area is
important functions of CKO must be to identify small, but growing. Will organizations develop and
and justify the metrics that organizations should maintain KM programs as we proceed further into
467
Knowledge management metrics Industrial Management & Data Systems
Ranjit Bose Volume 104 Number 6 2004 457-468

the twenty-first century? The interest and Groves, S. (2002), Knowledge wins in the new economy,
commitment of organizational leaders will Information Management Journal, Vol. 36 No. 2, p. 6.
influence this decision. To effectively convince Gupta, B., Iyer, L.S. and Aranson, J.E. (2000), Knowledge
management: practices and challenges, Industrial
these leaders, developing a better understanding of
Management & Data Systems, Vol. 100 No. 1, pp. 17-21.
the nature of IC and knowledge assets, and how to Herschel, R.T., Nemati, H. and Steiger, D. (2001), Tacit to explicit
measure, manage and leverage them, should be a knowledge conversion: knowledge exchange protocols,
key part of every corporate strategy. Journal of Knowledge Management, Vol. 5 No. 1,
The future usage of KM is heavily dependent on pp. 107-16.
both the quality of the metrics and whether output Kaplan, R.S. and Norton, D.P. (1996), The Balanced Scorecard,
generated by these metric management would Harvard Business School Press, Boston, MA.
provide tangible value addition to the Lee, S.M. and Hong, S. (2002), An enterprise-wide knowledge
organizations. This research surveyed and management system infrastructure, Industrial
Management & Data Systems, Vol. 102 No. 1, pp. 17-25.
reported on the types of IC measures being
Levett, G.P. and Guenor, M.D. (2000), A methodology for
developed and used today. The research findings knowledge management implementation, Journal of
should: assist organizations in identifying the Knowledge Management, Vol. 4 No. 3.
measures that are appropriate and suitable for McInerney, C. (2002), Hot topics: knowledge management a
them, for improving the quality of metrics they use practice still defining itself, Bulletin of the American
for measuring KM effectiveness; and assist Society for Information Science, Vol. 28 No. 3, pp. 14-15.
researchers in identifying future research needs Malone, M. (1997), New metrics for a new age, Forbes
toward the standardization of KM measurement Magazine, April 7.
Marwick, A.D. (2001), Knowledge management technology,
metrics.
IBM Systems Journal, Vol. 40 No. 4, pp. 814-900.
Murray, P. (2002), Knowledge management as a sustained
competitive advantage, Ivey Business Journal, Vol. 66
No. 4, pp. 71-6.
References Parise, S. and Sasson, L. (2002), Leveraging knowledge
management across strategic alliances, Ivey Business
Ahmed, P.K., Lim, K.K. and Zairi, M. (1999), Measurement Journal, Vol. 66 No. 4, pp. 41-7.
practice for knowledge management, Journal of
Ray, R. (2001), Economic value added: theory, evidence, a
Workplace Learning, Vol. 11 No. 8, pp. 304-12.
missing link, Review of Business, Vol. 22 No. 1/2,
Bontis, N. (2002), The rising star of the chief knowledge
pp. 66-70.
officer, Ivey Business Journal, Vol. 66 No. 4, pp. 20-5.
Roos, J., Roos, G., Dragonetti, N. and Edvinsson, L. (1998),
Bontis, N., Dragonetti, N.C., Jacobsen, K. and Roos, G. (1999),
Intellectual Capital: Navigating in the New Business
The knowledge toolbox: a review of the tools available to
Landscape, New York University Press, New York, NY.
measure and manage intangible resources, European
Management Journal, August. Soliman, F. and Youssef, M. (2003), The role of critical
Canadian Management Accountants (CMA) (1999), Focus Group information in enterprise knowledge management,
Draft: Measuring Knowledge Assets, CMA, Mississauga, Industrial Management & Data Systems, Vol. 103 No. 7,
April 16. pp. 484-90.
Davenport, T.H. and Beck, J.C. (2002), The strategy and Von Krough, G., Roos, J. and Kleine, D. (Eds) (1999), Knowing in
structure of firms in the attention economy, Ivey Business Firms: Understanding, Managing, and Measuring
Journal, Vol. 66 No. 4, pp. 48-54. Knowledge, Altamira Press, Walnut Creek, CA.
Dillon, R.D. and Owers, J.E. (1997), EVA as a financial metric: Wagner, C.G. (2002), The rise of the knowledge manager, The
attributes, utilization, and relationship to NPV, Journal of Futurist, Vol. 36 No. 2, pp. 14-15.
Applied Corporate Finance, Vol. 9, pp. 32-40. Wainwright, C. (2001), Knowledge management: aspects of
Duffy, J. (2000), Knowledge management: to be or not to be?, knowledge, Management Services, Vol. 45 No. 11,
Information Management Journal, Vol. 34 No. 1, pp. 64-8. pp. 16-19.
Duffy, J. (2001), The tools and technologies needed for Wang, S. (2002), Knowledge maps for managing Web-based
knowledge management, Information Management business, Industrial Management & Data Systems,
Journal, Vol. 35 No. 1, pp. 64-7. Vol. 102 No. 7, pp. 357-64.

468

Вам также может понравиться