Knowledge is power. It's no surprise, then, that companies understand the value in storing their employees' aggregate wisdom. Some businesses that have implemented Knowledge Management (KM) systems have reaped healthy returns. Shell International Exploration and Production, for example, figured its use of KM resulted in more than $200 million in offset costs and new income in 2002.
Success is appealing. Bain & Company's 2005 Management Tools & Trends survey found that more than half of all respondents now use KM and its popularity has more than doubled in less than a decade. However, the study also revealed what businesses already know: KM can be a notorious underperformer. With respect to user satisfaction KM placed 22 out of the 25 technologies Bain studied –- just a slight improvement from 1999 when it ranked dead last.
Recognizing the dichotomy between an undertaking that seems like a no-brainer at first but ends up looking brainless is what drove Sury Ravindran, assistant professor of information systems at the W. P. Carey School of Business, and his colleagues to undertake what they believe is one of the first studies that provides more than anecdotal evidence of the factors that determine successful KM practices. Professors Anitesh Barua, and Andrew B. Whinston from the McCombs School of Business at the University of Texas, and Professors Govind Iyer and Uday Kulkarni, both from the W. P. Carey School, collaborated with Ravindran on one analytical study and two empirical studies that included surveys of more than 160 respondents. The results reaffirmed much of what the researchers expected to hear about the technology, but the research also produced new insights with respect to deriving real value from KM.
Building on their research, the group proposes a framework for a successful KM deployment which draws on sociology, communication theory and microeconomics. The multidisciplinary approach is necessary because knowledge sharing is fundamentally different than other enterprise applications. While IT projects generally focus on tangible needs requirements, Ravindran says that KM requires that one stresses the intangibles of corporate culture.
With enterprise resource planning (ERP) or customer relationship management (CRM) systems, employees have no choice but to use them every day. They are a crucial part of one's job, be it fulfilling orders or communicating with customers. KM on the other hand is quite simply not as crucial to the routine. It is highly dependent on employees wanting to use it. They will be more efficient when they contribute to and draw from a knowledge base with it –- but they do not need it.
"You can keep going without [KM] –- you'd just spend a couple of extra hours trying to figure out what to do," says Ravindran.
Therefore, he says, organizations should take a good, hard, objective look at their culture before moving to install a KM system. Companies should not be tempted by returns like Shell's to the point where they disregard the possibility that their organization is incongruent with the cultural requirements needed for a successful knowledge base. Ravindran says that companies should hold off on knowledge sharing projects if the culture is not right –- although he notes that organizational change initiatives can happen concurrently with a KM deployment.
One of the most significant cultural considerations for a non-crucial system is that it is not a priority in employees' eyes and they do not allocate their time to it. For example, consultants at American Management Systems and Russell Reynolds Associates thought they were too busy to contribute quality information to a knowledge base; they believed it was better to be doing their work than writing about it.
However, the biggest issue is whether employees will indeed want to contribute to a communal knowledge repository even if they have the time. The challenge, writes Ravindran, is that, "Sharing information is not a natural outcome in organizations."
From a managerial perspective it is easy -– too easy in fact -– to ignore the prickly cultural aspects to knowledge sharing and simply look at the benefits that come with such a system. And the benefits are substantial. Sharing what one knows means that redundant work or research could be eliminated, employees will more quickly connect with others who possess the expertise they need, valuable ideas can quickly permeate a company, and key tips and tricks stay with an organization even when experienced people leave.
For example, a single employee at Giant Eagle grocery stores posted an item to the company's KM system proposing a small change in how the store displayed seafood. The new approach produced $200 in extra sales in a week. A second store picked up the innovative idea and in just two locations the company saw an extra $20,000. With a rollout to all stores, Giant Eagle figured the idea was worth well into six figures.
These are the cases that companies gloat over, but still employees have very real concerns.
Many employees believe that banking one's knowledge inherently decreases their prestige, importance and job security. Knowledge, after all, is power and entering hard-won expertise into a sterile, impersonal database seems to make an individual less powerful. In a business climate where job security is tenuous and where headlines trumpet outsourcing, it is easy to understand employees' reticence to let go of what makes them indispensable. This inclination to preserve power plays out not only at a micro level but within small teams, departments, or entire divisions which guard their turf.
As the group's working paper notes:
An engineering group may not share specific product design features with Marketing because of the additional effort it entails and because non-sharing helps Engineering retain its position of strength. A salesperson may be unwilling to share her customer contact list with Marketing in order to safeguard her situation, though Marketing could use this information to design targeted promotions.
Ravindran says that companies must also consider whether their culture values a long-term perspective. At a managerial or executive level, necessity often dictates a focus on producing results today. Knowledge sharing is, by its very nature, a resource that becomes more valuable over time because with the passage of months or years more and more knowledge is amassed.
"All these things pay off over the long term, not over the short term. It's not going to affect this quarter's results or next quarter's results but it sure might affect results a year or two years or three years or four years down the line," says Ravindran.
This is in marked contrast to other enterprise applications which offer benefits after prolonged use (notably with respect to analyzing historical data) but which are essentially ready to use on day one.
Ravindran also points to the compartmentalization of organizations as a downfall to knowledge sharing. Once set up, a KM system may only be promoted to one department – for example, marketing or the help desk. While there are certainly advantages that come from one department sharing knowledge internally, greater contribution and use magnify the benefits. Some companies realize this and open up the system to everyone. However, while Ravindran sees this as a step in the right direction he cautions that just because the resource is available it will not necessarily be used and, if it is, it may not be used correctly.
Assuming that white-collar workers would be comfortable adapting to new technology could be an error, Ravindran notes, since these workers often cloister themselves in the same old comfortable applications. Changing someone's daily routine means making them comfortable with the change; employees will only extend themselves with significant training efforts -– a step given short shrift by many companies.
Getting people to use the knowledge base is only step one if it is being shared across departments as Ravindran advocates. Next, employees must understand how other people will use their knowledge nuggets, which necessitates overcoming organizational divides and getting divergent departments like IT and marketing to try to speak the same language -– or at least understand each other's.
To this end, Ravindran believes that it is crucial for companies to look at the "demand side" of knowledge sharing. Doing so means considering not only who will be using and contributing information but it also mandates an active approach where management continuously monitors the popularity of the system and helps bridge internal barriers. Popularity metrics for KM (similar to Web site analytics) show how frequently the system is used, by whom and for what purpose. Ravindran says that it is not crucial that everyone in the organization draws from and contributes to the knowledge base with total equality but it is important that employees make an effort. He encourages managers to incorporate "knowledge sharing" as a category in annual performance reviews and notes that GE, Halliburton and Shell have built it into their employee evaluation processes.
Ravindran and his colleagues acknowledge what many companies have learned the hard way: knowledge sharing initiatives present special challenges and require a holistic look at an organization rather than a narrow view of IT needs and back-of-the-napkin ROI analysis. A knowledge base is not just another IT project. It is not a system where if you build it they will come. More than perhaps any other enterprise application, it requires an open, mature organization and managers and executives who must champion it not just at the beginning but on a regular basis. Ravindran writes in one of his papers, "Impediments to successful IT use are people-related rather than technology or systems," and this is doubly true for knowledge sharing.
A secretive, political culture is antithetical to the successful sharing of knowledge and it is very difficult to transform such an organization into one that is altruistic and open to knowledge sharing. But for companies that are already open – or who are nearly there -- KM can offer real benefits.
Every company has its own culture, Ravindran says, making it difficult to prescribe one universal plan for successful knowledge sharing. However there are tactics that the research revealed to be constants. Management needs to be committed to long-term results and must communicate how donating one's knowledge not only benefits the company but can also benefit the individual.
"The entire senior management team has to take a very hands-on role in implementing the application and making sure that it's successful," says Ravindran.
Consulting companies have been particularly adept at integrating Knowledge Management by building steps into projects where employees institutionalize their experiences and advice, enabling others to gain from it in the future. In addition, research showed that employees of Booz Allen Hamilton gain prestige among their peers from contributing more and better knowledge. And while prestige may be its own reward, managers should consider more tangible accolades including paying employees a bounty for ideas that positively affect the bottom line. In the end though, employees want to know that contributing their knowledge won't make them expendable and that others will share and share alike.
"Implementing a KM system is certainly not easy," says Ravindran "The system is the least of a company's worries. It is the climate that's important."