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Many executives see organizational effectiveness as an outcome of various factors such as knowledge management within companies. Every executive is held to the grindstone of maximizing financial measures—their careers are tied to financial performance measures. Every executive also knows that financial measures can illustrate whether knowledge management is contributing to bottom-line improvement.

John Davies and Paul Warren argue that knowledge management in enterprises can be evaluated by measuring the practices of knowledge accumulating, integrating and networking. These practices reflect Jang-Hwan Lee and Young-Gul Kim’s model. The knowledge accumulation practice in Jang-Hwan Lee and Young-Gul Kim’s model plays an important role for companies through acquiring knowledge and information from the external business environment and developing the capabilities to create new knowledge within a company. Knowledge accumulation is based on the assessment of firms’ capacity to generate new ideas and create better solutions for organizational problems. Better solutions and innovative ideas can improve the quality of products and services, which in turn increases financial performance for companies. Executives should measure the following parameters to evaluate the effectiveness of knowledge accumulation practice:

  • My organization is effective in acquiring knowledge about new products/services within our industry.
  • My organization is effective in benchmarking performance with competitors or industry.
  • My organization is effective in using feedback to improve subsequent practices.
  • My organization is effective in utilizing teams (e.g. committees or management teams) to manage knowledge resources.
  • My organization is effective in developing and implementing education or training programs.
  • My organization is effective in carrying out a career path program or recruitment program to acquire experts.
  • My organization is effective in conducting organizational events (such as a “knowledge contest” or “knowledge fair”) that promote knowledge activities.

Executives can also synthesize new knowledge and information to improve the effectiveness of organizational processes and the quality of products or services. The key here is to internally integrate knowledge so that it is quickly retrievable at the right time and place. In fact, knowledge integration explores the degree to which accumulated knowledge is actually institutionalized and synthesized to produce higher quality outcomes, which can enhance sales, financial performance and market share for companies. Executives should measure the following parameters to evaluate the effectiveness of knowledge integration practice:

  • My organization is effective in monitoring or controlling organizational knowledge to keep product or services in line with market requirements.
  • My organization is effective in regularly assessing knowledge requirements according to environmental changes.
  • My organization is effective in linking the knowledge sharing system using various software and programmes.
  • My organization is effective in defining “core knowledge” or “core competence” areas.
  • My organization is effective in using expert groups to evaluate the quality and effectiveness of organizational knowledge.
  • My organization is effective in disseminating organizational knowledge among employees.
  • My organization is effective in rewarding individuals or teams based on the quality of knowledge generated.

In addition, competing organizations find ways to share common knowledge so that it can be used by industry alliance when the information is non-specific to a certain organization. For example, John Davies and Paul Warren highlight how organizations must collaborate with other companies, and share their knowledge with them to improve community issues and global problems in a manner that solves problems and creates solutions when necessary. The key kernel for executives is that knowledge is shared with other organizations to recognize the changes occurring in external environments and respond to them quickly and effectively. Thus, successful companies play a pioneer role and implement knowledge management to increase their financial performance and expand their business and market share across the globe. Thus, knowledge networking practice measures a company’s initiatives in sharing their knowledge with other organizations. Executives should measure the following parameters to evaluate the effectiveness of knowledge networking practice:

  • My organization is effective in creating knowledge alliances with suppliers, customers, or other partners.
  • My organization is effective in sharing knowledge management visions and goals with external partners (such as suppliers and customers or other partners) to develop collaborative activities, shared goals and trust-based relationships with them.
  • My organization is effective in extending (or linking) knowledge related policies or rules (measurement, rewards) with external partners (such as customers, suppliers or other partners).
  • My organization is effective in linking our knowledge sharing system with external partners (such as customers, suppliers or other partners).
  • My organization is effective in facilitating and implementing activities such as conferences, contests, seminars with external partners.

The three practices of knowledge management mentioned above, when carried out and measured correctly, can increase financial performance for companies in a knowledge-based economy.

About the Author

Mostafa Sayyadi headshotMostafa Sayyadi works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.

References

  1. Davies, J & Warren P 2011 .Knowledge management in large organizations. In Domingue, J, Fensel, D & Hendler, JA (ed.) Handbook of semantic web technologies, Springer-Verlag, Berlin.
  2. Lee, JH & Kim, YG 2001 ‘A stage model of organizational knowledge management: a latent content analysis’, Expert Systems with Applications, vol. 20, no. 4, pp. 299-311.