Friday, 29 November 2013

If you knew how much your knowledge was worth, you would manage it better!

Worth every penny Struggling to get traction with senior managers for your Knowledge Management initiative?

That's partly because they don't know how much the organisation's knowledge is worth.

Knowledge is a company asset, like your staff, your money, your customers, your brand. It is one of your more valuable assets too, and yet it remains all too often, unmanaged.

You almost certainly have implemented financial management, people management, customer relationship management, brand management. So it makes sound business sense to implement knowledge management too; to derive maximum business benefit from the invisible asset which is the operational knowledge held in the heads of your employees.

So why don't they support you?

Because they don't know how much their knowledge is worth.

And why don't they know? Probably because you have not told them!

So how do you value that knowledge?

  • Use Larry Prusak's rule of thumb - 60% of the non-capital spend (see here for how he works that out)
  • Think how your organisation would perform if you had no knowledge, and all your staff were straight out of university or training.  The difference between that performance, and your current performance is the value that knowledge brings. There would be loss of production and loss of revenue until you had retrained or replaced the staff.

Then estimate how much more value could be gained by better knowledge management. What would it be worth if you could eliminate the spend on defects and problems which are a direct result of poor knowledge management, such as

  • repeat mistakes (because nothing was learned from the first mistake)
  • wrong decisions, where people did not have the knowledge to make the correct decision (see the Longford refinery story for a really scary example of this
  • failed bids (because there was something you should have known, but didn't)
  • duplicate work (because neither party knew the other was doing the work)
  • rework (because people didn't know what they were supposed to be doing the first time)
  • the cost of non quality?

You will need to do some research to get these figures, but that's all part of gaining the knowledge you need to convince management.

Also look at, and put a value on, the potential loss of Knowledge as people retire.

If senior managers knew the value of your company knowledge, there is no way that they would leave it unmanaged.   For example, one oil-sector drilling organisation recently estimated the value of its knowledge of drilling to be worth half a billion dollars annually. Who would leave a half-billion dollar asset unowned and unmanaged?

So work out the value, and tell them. Make them sit up and take notice.

Remember, our favourite definition of KM;  "Knowledge Management is the way you would manage, if you understood the value of your knowledge".

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