Thursday, 14 November 2013

Are you resourcing Knowledge management sufficiently?

Smilin' faces everywhere What level of KM resources are appropriate in a project?

Take a large construction and engineering project - the first of its kind in a new location.

The project will create two things -

  1. An income stream for the owner
  2. Knowledge, which can be used to reduce cost for future projects
Let's assume some facts for our imaginary project. Let's assume it's a big one.
  1. Budget of $500,000
  2. Timescale 2.5 years
  3. Net Present Value (NPV) $1 billion
  4. Work-hour estimate 10 million
  5. 2 similar projects planned
  6. Conservative estimate of the value of the knowledge - $30  million (3% cost saving on 2 follow-on projects of the same size and scope)
So we will spend 10 million working hours delivering the $1bn Net Present Value - how many working hours should we spend delivering the knowledge, given that it is worth 3% of the NPV?

Simple maths says we should spend 300,000 work hours delivering the knowledge. If the knowledge is worth 3% of the project value, then you should spend 3% of that effort on the knowledge, surely? 

300,000 workhours is 37,500 work days (at 8 hours per day) or 187 work years. That's a full time team of  75 people for the duration of the project.

75 people! Have you ever seen a project put 75 people onto KM?

Now a lot of the work would  be done by contractors, and you would assume a lot of those people would be knowledge managers working within the contractor organisation, so lets discount those for the moment.

The project management team itself might be, say 20 people, working 10,000 days over the life of the project. By the same logic, you would want 300 days (or 0.6 of a person full time) spent by the project management team on knowledge management. 

In most projects, the team would spend nowhere near this. They might have a one-day lessons learned meeting halfway through the project (1 day for 20 people is 20 workdays) and another one-day meeting at the end (another 20 workdays). That is a massive underinvestment of time and resource, given the value of the knowledge.

For your organisation, do the math.

Work out the value of the knowledge vs the value of the projects, and see what investment in KM would  be appropriate. 

It might surprise you - it SURELY will surprise your management, because in our (Knoco) experience, the vast majority of projects under-resource KM, compared to the value it delivers.


Eric Mullerbeck said...

This works well for projects where there is a revenue stream. But projects in the humanitarian or non-profit sectors don't have revenues. How should KM be properly valued and resourced in these sectors?

Nick Milton said...

I don't really know Eric, to be honest. How do you decide what to invest in humanitarian and not-for-profit projects? How do you decide how large the team or the budget should be?

Eric Mullerbeck said...

Nick, in my experience investments in such projects are determined by a combination of needs assessments (which are in principle objective) and a political process balancing availability of resources, other competing priorities and projects, interests of donors, fit with the current strategic direction, and many other factors. I'm not sure where this leaves us in terms of suggested resourcing for KM...

Nick Milton said...

You would have to include it in the needs assessment, and determine the level of need for knowledge related to the specific activity.

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