How to report ROI from KM or learning organisation projects in 90 days
Reporting the value of the knowledge effort is often the number one challenge for the majority of the organisations we work with. This is becoming even more significant with the emergence of new accounting frameworks that ask organisations to report on their human, social and intellectual capital, alongside the more traditional financial and manufactured capitals.
Ultimately, organisations are fast reaching a point where they need to clearly report on the outputs from their knowledge assets; to not do so could negatively impact the market value of your organisation.
To help, I developed the FAIR value model, which can be used on any KM project and should really be considered before you launch any new knowledge effort. We have used this approach to help organisations who have struggled with demonstrating KM value to report comprehensive ROI in less than 90 days – please consider that you can achieve ROI statements a lot quicker on small scale projects and the 90-day target is for medium to large scale knowledge efforts.
The following will give you an idea of how you too can achieve this for your business.
Level 1 – Feelings: Here you want know how people feel about systems, processes, tools and frameworks deployed to enhance the knowledge effort (think about lessons learnt frameworks and community of practice portals through to job design frameworks and appraisal processes that influence knowledge-based activities). This requires a process of employee engagement (e.g. surveys and focus groups). Any negative feelings need to be analysed, synthesised and actions need to be seen to be taken; negative feelings will amplify throughout the FAIR framework and will impact ROI.
Level 2 – Access: The access of resources (e.g. people, reports, lessons learnt, communities) demonstrates perceived value – for example, a person believed that it was worth their time to make contact with a person or accessed a knowledge repository to find an answer to a question. A lack of access could be caused by various reasons – for example, barriers that surface in Level 1. It is also possible that the resources available are simply not seen as being valuable enough (perceived value not meeting the needs of the real-time situation – leading to repetitional damage, where lessons learnt systems are believed to be worthless) and therefore are no longer accessed.
Analytic tools can assist you here, from network analysis tools through to document views/hits.
Barrier example: Negative feeling toward your knowledge services (e.g “Sharepoint just doesn’t let me run a community of practice the way I need to” or “our Lessons Learnt don’t tell me anything I don’t already know – I learn more over a beer in the bar with the project manager”).
Level 3 – Impact: We need to demonstrate that people who access knowledge are doing something with it. For this reason, we seek to explore impact, which we see as being a contribution to a demonstrable change in behaviour (people or process-based). If people cannot demonstrate a change in behaviour, as a result of accessing knowledge resources, then it could be because the knowledge being accessed is not valuable enough – the perceived value of the knowledge (person or artefact) does not align with the real world problems that people are facing.
It is unreasonable to expect that you will demonstrate how every single knowledge asset (person or artefact – think documents/schematics through to processes) creates impact in your business. Therefore you have to take a credible sample of the population. To do this, you will need to calculate the sample size required to achieve a minimum of 95% certainty in your findings (a +/- 5% error rate) and, to enhance credibility, you should take a random selection approach to populating your sample.
Barrier examples: Negative feelings at Level 1. A lack of access at Level 2.
Level 4 – Results: Knowledge is being accessed and you can demonstrate that it contributes to a change in behaviour. Now, using the sample collected in Level 3, explore quantifiable outputs from the change in behaviour; this could take the form of a reduction in error rates, a decrease in duplication of effort or efficiency/effectiveness savings that reduced the cost of doing business etc. This data will allow you to explore median results from your knowledge effort through to contributions to human, social and intellectual capital that impact the market value of the business.
Barrier examples: Negative feelings at Level 1. A lack of access at Level 2. A lack of impact at Level 3, which could surface as a problem at Level 1, where people speak in negative terms about the value of the resources they have access to.
Level 5 – ROI: The final part of this ongoing process is to synthesise the data in Level 4 to generalise, with 95% certainty, the Return On Investment for the organisation’s knowledge effort.
Barrier examples: Negative feelings at Level 1. A lack of access at Level 2. A lack of impact at Level 3, which could surface as a problem at Level 1, where people speak in negative terms about the value of the resources they have access to. People do not have the awareness or understanding to discuss, or they do not see the value in reporting, impact and therefore the value of the knowledge effort is lost at Level 4.