May 20, 2008

Measuring Knowledge Management ROI

We've achieved unprecedented levels of unverifiable productivity! That's the punch line from a fabulous Dilbert cartoon I saw last year. And, it sums up so much of what passes for measuring the Return on Investment (ROI) of knowledge management. All too often knowledge managers report on their level of activity because that is concrete, but have a much harder time determining the true impact on their organizations of their KM activities.

In the context of law firms, the ROI of KM conundrum becomes even more vexing. When value to the organization often is summed up by the amount of billables realized, it isn't always clear how a particular how-to guide or model document made a financial difference to the firm. Sure, having that KM content probably allowed a lawyer to work more efficiently (reducing billables, which may not be seen as a good thing), thereby permitting that lawyer to provide service to more clients (expanding the client base) or get home earlier (improved work-life balance) and maintain better morale (increased retention levels and decreased recruitment costs). But exactly how do you reduce this to dollars and cents?

Given this perennial problem, it's worth taking a look at the commonsense advice contained in the European Guide to Good Practice in Knowledge Management -- Part 4: Guidelines for Measuring KM. This guide proposes the following starting points:

1. define your goals -- the clearer the goal of a KM initiative, the more obvious the measures
2. identify the stakeholders for your measures -- each stakeholder defines KM success differently
3. define the measures -- they need to be valid and reliable, and must yield actionable information
4. decide what data will be collected and how it will be collected
5. analyze and communicate the measures -- communicate your findings in a way that helps the reader understand the value of the KM initiative -- don't just present raw data
6. review your combination of measures -- finding the right measures comes through a process of trial and error, so you need to monitor and evaluate your measures regularly -- adjusting them as your goals develop.
7. "measuring for the sake of measuring is a waste of time" -- measure for a specific purpose
8. be sure that useful action will result from the measures
9. don't measure everything -- focus on what's important
10. to the extent possible and productive, use measurement systems that are already in use within your organization -- presumably, these measures exist because they relate to something important for the organization, and this piggybacking allows you to integrate your results within organizational reports.

[Thanks to the UK National Library for Health for pointing me to this guide.]

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