KM and ROI

Kaye Vivian has written up her thoughts about KM and the Myth of ROI, based on a recent ACT-KM conversation.

... There is a fallacy in all discussions of ROI for KM. As long as accounting systems (and financial managers) reject the so-called “soft” or intangible values of KM and treat KM like they treat software or a new piece of equipment, the true ROI of KM will never be shown or appreciated. How can you value or assess the worth of KM without talking about improved morale, reduced employee turnover, employee satisfaction, better information flow throughout the organization, personal pride, more knowledgeable employees (who give better customer service), stronger affinity networks, brand enhancement, cultural change, improved communication, team building? Until there’s a way to get those kinds of things counted toward financial value, ROI is a meaningless discussion in relation to KM.

I agree with the problem Kaye states, but I'm not sure that KM can avoid the money issue completely.  Some of the technocratic KM solutions are not cheap.  Clearly, the decisions to pursue these strategies are not totally justified by traditional "hard" measures.  I heard a talk at CSCW 2004 that suggested ROI discussions are simply part of the fabric of making decisions.  If one can talk intelligently about the expected returns (in whatever form) and the benefits to the company and the people, then it is more likely to be approved.

As I've mentioned a number of times, I am fond of some simple questions around KM efforts: what is the limitation being overcome?  what is the power of the KM project?  what old rules were in place due to the limitation?  what new rules do we need?

2 Comment(s)

sean said:

I have helped (re)design and implement a number of KM systems for some big telecom companies in the Denver area. Some of these tools have been tremendously sophisticated and yet, enthusiasm seems to drop off as features get added.

The most successful (in terms of improving measurable performance) KM solutions we have implemented to date are unstructured wikis vetted by peer groups of 50 people or less.

We are experimenting with a "prediction economy" tool (see Sunstein's Infotopia) that uses peer review and "futures trading" on the likely success of anonymous posts. As an end user, you have no idea if the entry comes from a VP, M&P SME or someone still in training. Similar to digg.com, if a post gains popularity, it makes it to the top of the info heap and the poster's "whuffie" score rises. At the same time, the earlier a reviewer successfully predicts that the post will gain popularity, the more points get awarded to the reviewer. In this system, posting valuable info and predicting the likely value of posts is rewarded.

We'll see how it goes. So far, the early results are impressive (starting with "low-tech" paper-based trials with groups of supervisors and managers). Onward ho!

I don't understand why there should be any argument about whether the concept of ROI is or is not inappropriate for a KM project. Experienced project managers know some project impacts can be measured, some impacts are hard to measure but reasonable proxies can be found, and some "soft" impacts can't be measured but at least can be defined. Just because you can't assign a dollar figure to certain types of impacts doesn't mean you throw out the concept of metrics altogether. Sometimes I wonder if some of the folks actively resisting the application of ROI concepts to KM and related areas do so because they just don't want to be evaluated. (I'd be the first to admit that not everything can be measured, and I spent a good chunk of my career as a number cruncher.)

For those interested in the topic of ROI and justification, I'd be very interested in getting feedback to a post I wrote about justifying Web 2.0 projects; some of the concepts might be relevant to discussions of KM and ROI:
http://www.ddmcd.com/justification.html

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