Professional Documents
Culture Documents
4/2009
Ioan I. ANDONE
Alexandru Ioan Cuza University of Iasi,
Faculty of Economics and Business Administration,
iandone@uaic.ro
1 Introduction
Sustainable competitiveness can only
come through building robustness into
There are a number of approaches that are
increasingly being used to measure the value
of, and progress in, knowledge and
processes and their effective management knowledge management in organizations.
and control. Few corporate have developed a Some of the more common approaches are
separate “performance measurement system”; outlined in our article, with additional
performance measurement instead forms an references and resources.
integral part of the management processes Kaplan and Norton founded a new concept to
and systems within the corporate. For the performance measurement frameworks with
least two decades, the Romanian big four broad perspectives: financial, customer,
companies have measured the input of internal processes, and innovation. The
knowledge-based resources into their framework was further improved as a
knowledge management systems belief that strategic management system by Kaplan and
these resources have a positive, if indefinable Norton (2001). Neely and Adams, however,
effect on economic growth [3]. The first focus first on measuring stakeholders’ needs
theoretical constructs of the KMS benefits and contributions and then on the required
focused on the “linear” model of innovation strategies, processes, and capabilities. A lot
where an investment in new information more of Performance measurement
systems would eventually lead to wealth frameworks exist, other than those mentioned,
creation or a social benefit. Current theories that are sometimes national in nature.
take a much wider of the innovative
processes, and recognize that the KMS is 2 Measuring the Value of Knowledge
only one of several inputs to wealth Management
generation and social progress within a Measurement is undoubtedly the least
complex socioeconomic system like a developed aspect of knowledge management,
corporate. Our research has two main goals: which is not surprising given the difficulties
1) to explain the value of knowledge in defining it let alone measuring it. In fact
management and 2) to provide a general some practitioners feel that measurement is
overview of measurement approaches. premature at this stage and that trying to
Informatica Economică vol. 13, no. 4/2009 25
measure knowledge before you fully Measuring outcomes focuses on the extent
understand how knowledge is created, to which a project or a process achieves its
shared and used is likely to lead you to focus stated objectives. The success of the project
on the wrong things. Elaborate measurement or process serves as a proxy measure for the
systems, they say, cannot currently be success of the knowledge management
justified because we simply do not yet know practices embedded in it. In other words,
enough about the dynamics and impact of knowledge management is seen as an
knowledge. That being said, in practice, few integral tool for improving a project or
corporates have the luxury of being process, rather than as a separate thing. For
allocated resources to implement something example, outcomes might be measured in
without being required to demonstrate its terms of the reduced cost of a process,
value. Without measurable success, improved efficiency, the reduction in time
enthusiasm and support for knowledge taken to do it, the improved quality of
management is unlikely to continue. And delivery, etc. Measuring activities then shifts
without measurable success, you are the focus onto the specific knowledge
unlikely to be able to what works and what management practices that were applied in
doesn’t and therefore make an informed the project or process. What were the
judgment regarding what to continue doing, specific knowledge management activities
and what to adjust. behind this practice and what was their
effect? In measuring activities, you are
2.1 Common measurement approaches looking specifically at things like how often
There are a number of approaches that are users are accessing, contributing to, or using
increasingly being used to measure the value the knowledge resources and practices you
of, and progress in, knowledge and have set up. Some of these measures will be
knowledge management in corporate. Some quantitative (‘hard’) measures such as the
of the more common approaches are number and frequency of hits or
outlined here for the purposes of providing a submissions to an intranet site per employee.
general overview. However these measures only give part of
a) Measuring the impact of knowledge the picture – they do not tell you why people
management on the corporate performance. are doing what they are doing. Hence to
Given that the whole point of knowledge complete the picture, you will also need
management is to improve the performance qualitative (‘soft’) measures by asking
of the corporation and to help it to achieve people about the attitudes and behaviors
its objectives, the best and most logical behind their activities.
approach is tie-in measurement of b)The balanced scorecard
knowledge management with the corporate An increasingly popular approach to
overall performance measurement systems. measuring a corporate performance, and one
This can be done either at an organizational that is being widely adopted in knowledge
level, or for individual projects and management, is the balanced scorecard. The
processes. However, one limitation of this advantage of this approach in knowledge
approach is that if knowledge management management terms is that it directly links
practices are made an integral part of work, learning to process performance, which in
you cannot be sure of the relative turn is linked with overall organizational
contribution of those knowledge performance. The balanced scorecard
management practices to the success of a focuses on linking an organization’s strategy
project or process, versus other factors. In and objectives to measures from four key
view of this, O’Dell and Grayson [8, p.24] perspectives: financial, customers, internal
recommend a two-pronged approach that processes, and learning and growth. In
seeks to measures both outcomes and contrast to traditional accounting measures,
activities. the balanced scorecard shifts the focus from
26 Informatica Economică vol. 13, no. 4/2009
purely financial measures to include three Clare and Arthur Detore [7]. Such
key measures of intangible success factors. approaches tend to be rather complex, and
These roughly equate to the three therefore are probably more appropriate to
components of intellectual capital – namely organizations that are reasonably advanced
human capital (learning), structural capital in their knowledge management efforts,
(processes), and customer capital. The four rather than just starting out.
perspectives can be framed as follows: d) The knowledge management lifecycle
- Financial: How do we look to our Some corporate measure the progress of
‘shareholders’ (or governing bodies)? their knowledge management activities in
- Customer: How do our clients see us? terms of their maturity – how far ‘down the
Are we meeting their needs and line’ they are in implementing knowledge
expectations? management practices and ways of working.
- Internal processes: What do we need to For Romania could be very important a
do well in order to succeed? What are Corporate Road Map to Knowledge
the critical processes that have the Management Results. The aim is to provide
greatest impact on our patients and our corporate with a map to guide them from
financial objectives? getting started right through to
- Learning and growth: How can we ‘institutionalizing’ knowledge management
develop our ability to learn and grow in – embedding it in the organization and
order to meet our objectives in the above making it an integral part of the way a
three areas? corporate works. The map has five stages: a)
This knowledge management, which is Get started, b) Develop a strategy, c) Design
about learning and growth, is measured as and launch a knowledge management
an integral and yet distinct part of overall initiative, d) Expand and support, and e)
organizational performance. The balanced Institutionalize knowledge management.
scorecard approach can be applied to There are measures associated with each
individual initiatives as well as to a whole stage.
corporate. e) Employee surveys
c) Return On Investment (ROI) Given the importance of people in
Most initiatives that require resources will knowledge management, employee surveys
be expected to show a return in investment – can be a useful additional to your
what benefits did we get to justify the costs measurement toolbox. Surveys can be used
involved – and knowledge management in to assess aspects of organizational culture
usually no exception. The problem is that and the extent to which people’s opinions,
both the costs and the benefits of knowledge attitudes and behaviors are, or are not,
management can be notoriously difficult to changing. Obviously such surveys measure
pin down. While the costs associated with people’s subjective perceptions and these
an investment in information technology can may or may not reflect reality, but in many
be relatively straightforward to identify, ways that can be their very benefit, as
other costs can be less so, such as for people’s perceptions will determine their
projects that involve an amalgam of behaviors with respect to knowledge
resources from across the corporate, or those management. In order to be effective, it is
inherent in challenging an organization’s vital that any such surveys are carried out by
culture. On the benefits side, how do you people with the required expertise, whether
measure things like increased knowledge that be through in-house capabilities or by
sharing, faster learning or better decision- hiring external consultants.
making?
A number of approaches have been 2.2 The steps in developing measures
developed for showing financial returns on Dhansukhlal & Chaudhry [4] outlines the
knowledge assets, such as that of Mark following steps in developing measures:
Informatica Economică vol. 13, no. 4/2009 27
4 An Improved Framework for KMS distribution and application, but does not
Performance Measurement address the performance measurement of
As we know the goal of KMS is to discover, KBS and KMS.
develop, exploit, disseminate, and share To measure the performance of KMS is
corporate knowledge [10]. To achieve each difficult because mental work may not be
sub-goal of KMS, various types of observable, the success of KMS is not
approaches have been explored. Nissen [10] predictable and performance can be
integrates Knowledge-Based Systems (KBS) measured only after a long period of time. In
and KMS via reengineering application in the this section we propose an improved
field. He stresses the necessity and framework for KMS performance
importance of integration of KBS and KMS measurement model based on Balanced
from knowledge effects such as knowledge ScoreCard (BSC). The integration of BSC
capture, organization, formalization, and KMS derives from the reasons that KMS
30 Informatica Economică vol. 13, no. 4/2009
supports the foundation of corporate growth corporate and KMS. The framework for
measured by innovation and learning developing KPIs is divided into three phases:
perspective. Thus, initiative members can 1) strategy, 2) analysis, and 3) process. Most
improve operation process, promote recent studies aim at strategy step including
customer satisfaction, and increase financial how to set up corporate strategy and
revenue. measurement systems. We will focus on
Because western corporate applies BSC and analysis and process phases. The steps we
KMS, managers will usually prepare a set of use to develop the framework are described
Key Performance Indicators (KPIs) to in figure 3.
measure progress towards the objectives of