10 - EFQM - Knowledge Management Implications

8/2/2019 10 - EFQM - Knowledge Management Implications

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EFQMExcellence Model and Knowledge Management

Implications by Dilip Bhatt

Introduction

In spite of all the discussions and publications about Knowledge Management, many

business executives are still asking, “What does it mean?” “How can it work in my

organization?” “What benefits will it bring?" and “What will it cost?" Without a doubt

there is an inclination to believe in KM conceptually, but how it works in practice

remains in question.

The author has concluded that KM must be articulated in a given context. KM is

unique to any given organization, just like a fingerprint. A solution suitable for one will

most certainly not be appropriate to a another, even if the two companies have

similar products, services and are the same size. To help resolve the uncertainty of

what KM is about and apply it in a given context, the author shows how to link KM

implications to your business model. The idea is to articulate the issues around

business terms and not KM by itself. KM should be seen as a set of concepts that

could be tailored to meet business needs.

Please be aware, KM is not a substitute for a Quality system; it does not replace

TQM but helps to achieve the objectives in a smart fashion. It does this by

developing a certain mindset in the organization. It develops a different way of

thinking, of working solo and as a team member; it helps to run a business

dependent on the drivers and objectives. If the company is a product-based

organization, then KM implementation is set accordingly; if it’s customer-based, a

slight different approach is needed. KM supports and enhances the way the

business operates. It does not replace one's strategy setting, but the strategy itself

will be flavored differently if one adopts a KM mindset. In time KM will became simply

M, a way of managing the business.

Typically most organizations will develop their strategy around a well-recognized

business model. Therefore it would seem logical to map KM issues to a recognized



business model, also. For the purposes of this article, the business model used is

the one developed by the European Foundation for Quality Management (EFQM)

and refereed to as the Excellence Model.

EFQM ModelEuropean Foundation for Quality Management (EFQM) has developed a Model (fig

1) which is being widely adopted by thousands of organizations.

Fig 1 - EFQM Excellence Model

Prior to discussing how KM can be mapped to the model, a clear understanding of

the model components and fundamentals is required and highlighted in this section.

Fundamental Model Concepts

Results Orientation

Excellence is dependent upon balancing and satisfying the needs of all relevant

stakeholders (this includes the people employed, customers, suppliers and society in

general as well as those with financial interests in the organization).

Customer Focus

The customer is the final arbiter of product and service quality and customer

loyalty, retention and market share gains are best optimised through a clear

focus on the needs of current and potential customers.

Leadership & Constancy of Purpose The behaviour of on organization’s leaders creates a clarity and unity of purpose

within the organization and an environment in which the organization and its people

can excel.

Management by Processes & Facts

Organizations perform more effectively when all inter-related activities are

understood and systematically managed and decisions concerning current



operations and planned. Improvements are made using reliable information that

includes stakeholder perceptions.

People Development & Involvement

The full potential of an organization’s people is best released through shared valuesand a culture of trust and empowerment, which encourages the involvement of

everyone.

Continuous Learning, Innovation & Improvement

Organizational performance is maximised when it is based on the management and

sharing of knowledge within a culture of continuous learning, innovation and

improvement.

Partnership Development

An organization works more effectively when it has mutually beneficial relationships,

built on trust, sharing of knowledge and integration, with its Partners.

Public Responsibility

The long-term interest of the organization and its people are best served by

adopting an ethical approach and exceeding the expectations and regulations

of the community at large.

Overview of the EFQM Excellence Model

The EFQM Excellence Model is a non-prescriptive framework based on nine criteria.

Five of these are ‘Enablers’ and four are ‘Results’. The ‘Enabler’ criteria cover what

an organization does. The ‘Results’ criteria cover what an organization achieves.

‘Results’ are caused by ‘Enablers’.

The Model, recognizing there are many approaches to achieving sustainable

excellence in all aspects of performance, is based on the premise that: Excellent

results with respect to Performance, Customers, People and Society are achieved

through Partnerships and Resources, and Processes.

The arrows emphasize the dynamic nature of the model. They show innovation and

learning helping to improve enablers that in turn lead to improved results.



Model contents structure

The Model’s 9 boxes, represents the criteria against which to assess an

organization’s progress towards excellence. Each of the nine criteria has a definition,

which explains the high level meaning of that criterion.

To develop the high level meaning further each criterion is supported by a number of

sub-criteria. Sub-criteria pose a number of questions that should be considered in

the course of an assessment.

ENABLERS - how we do things RESULTS - what we target,

measure and achieve

LEADERSHIP - How leaders develop and facilitate the

achievement of the mission and vision, develop values required

for long term success and implement these via appropriate

actions and behaviors, and are personally involved in ensuring

that the organization's management system is developed and

implemented.

CUSTOMER RESULTS - What the

organization is achieving in relation

to its external customers.

POLICY & STRATEGY - How the organization implements its

mission and vision via a clear stakeholder focused strategy,

supported by relevant policies, plans, objectives, targets andprocesses.

PEOPLE RESULTS - What the


to its people

PEOPLE - How the organization manages, develops and

releases the knowledge and full potential of its people at an

individual, team-based and organization-wide level, and plans

these activities in order to support its policy and strategy and

the effective operation of its processes.

SOCIETY RESULTS - What the


to local and international society as

appropriate.

PARNERSHIPS & RESOURCES -How the organization plans

and manages its external partnerships and internal resources in

order to support its policy and strategy and the effective

operation of its processes.

KEY PERFORMANCE RESULTS -

What the organization is achieving

in relation to its planned

performance.

PROCESSES - How the organization designs, manages and

improves its processes in order to support its policy and

strategy and fully satisfy, and generate increasing value for, its

customers and other stakeholders.

How it works



Self-Assessment is a comprehensive, systematic and regular review of an

organization’s activities and results measured against the Excellence Model. All

sizes and types of organizations including local government, charities, the military,

police forces, hospitals and private companies use it. Some organizations undertake

Self-Assessment for the whole organization, others for a department or operationalunit. Fig 2 shows the RADAR against which various assessments are made.

RADAR is the method for scoring when using the Excellence Model - Results,

Approach, Deployment, Assessment and Review

Fig 2 – EFQM RADAR

THE BENEFITS

Self Assessment against the Excellence Model allows an organization to identify

clearly its strengths and those areas in which improvements can be made. It is also



an effective means to co-ordinate an organization’s quality initiatives (e.g. ISO 9000,

Investors in People, Process Re-engineering and Charter Mark) to form a cohesive

and structured approach to business excellence. A recent survey of British Quality

Foundation members who are undertaking Self Assessment identified the top

benefits as:• Development of clear, concise action plans• Clear and more focused leadership• Better and more focused policy and strategy• Process improvement enabling achievement of an organization’s objectives• Improved prioritization of resources• Greater motivation and satisfaction of an organization’s personnel

Knowledge Implications

Enablers

The enabler element of the model is whereby issues related to successful

implementation are determined, understood and implemented. This section

addresses each enabler and discusses associated KM implications.

Leadership

LEADERSHIP - How leaders develop and facilitate the achievement of the mission

and vision, develop values required for long term success and implement these via

appropriate actions and behaviors, and are personally involved in ensuring that the

organization's management system is developed and implemented.


Typically Leaders will set business direction based on influences and/or direct

knowledge about customers needs, product trends, technology advances,

competitors pressures, share holders objectives, financial performance and market

share being the prime drivers. Leaders by themselves cannot change direction

without the workforce. Often major changes in direction are required and without the

support and the movement of the organization pulling in the same direction, vision’s



will not be realized. Leaders are changing the way they lead, different styles and

methods are being used to generate the movement required.

To drive towards a vision, to which the whole organization can relate, requires

considerations to the softer issues, which are primarily cultural. The entire workforce

should be able to directly influence Senior Managers and Executives in direction-setting. People “at the coal face” are most likely to be in tune with customer needs,

competitors status, business constraints, value-blockers, resource requirements and

technology advances. It’s the people in the front-line who have the answers and who

know where the potential solutions exist. The Executives need channels to listen to

the staff and to tap into the vast knowledge base that exists. But the organization

needs to go a step further. Staff should be encouraged to voice their opinion (good

and bad), in the style of openness.

A good example, is ICL Ltd. They have developed a ‘conversation for change’

program whereby all employees are asked to provide input in direction-setting. Keith

Todd, CEO, invites all employees to participate in the program. In addition, Keith

Todd and other Board Executives also use online chat sessions to discuss with staff

issues in an open and non-judgmental environment. This style of openness

generates a feeling of ‘wanting’ which can be very powerful in generating

commitment and loyalty. Staff feels their views and opinions are wanted and

whatever they say will influence the future vision. Every view is considered valid and

important. This CEO has also set up a web space, whereby any questions asked of

him are posted with replies for all to see. ICL is one example of many companies

where leaders are changing the way they lead. These leaders are not simply

providing lip service, but genuinely believe that knowledge is a key asset and that

asset largely consists of the people in the organization.

In the new economy the empowerment of the staff is a key issue and leaders are

starting to understand the value and the power of openness. It can be messy at

times, discussing issues in the open that have too long remained buried, but in the

long term it builds trust, commitment and loyalty. Everyone feels they play a part in

the future direction and it is everyone’s responsibility to contribute. It is not just

‘management’ to determine the future.



For large organizations, developing a sense of oneness can be problematic.

However, every effort should be made to engage people from different geographies

and cultures. Use your technology to share and discuss company vision. All parts of

the organization can became a community using Teleconferencing and other

collaborative tools; staff should not feel isolated due to being sited away from HQ.The engagement of the entire organization in conversation and dialogue in order to

share and develop a company’s vision is vital and should be encouraged.

On a wider issue, vision realization will only come about through getting into the

people’s emotional side. Leaders will need to learn how to achieve that. Command

and Control behavior does not operate when the objective it to develop a ‘common’

vision. Leadership will have to provide a vision by means of creating excitement,telling stories in order to entice, energizing and inspiring people towards a common

goal.

In summary it comes down to the leaders listening to the workforce to determine a

future vision, in addition to the other elements that typically influence vision setting.

Open communications channels, fostering a no-blame culture, listening to all levels

of the organization and individual of all grades are some of the key elements of a

high performance organization. People in the organization must be able to share in

the vision, believe in a common sense of direction, take ownership of shared

objectives and feel they play a part in success (or failure) of the organization. Gain-

share for the employees and staff will encourage them to feel they have a stake in

the company and engage the staff in achieving the vision.

Policy and Strategy

POLICY & STRATEGY – How the organization implements its mission and vision via

a clear stakeholder focused strategy, supported by relevant policies, plans,

objectives, targets and processes.


“Top Management must stimulate not control. Its role is to provide strategic directive,

to encourage learning and to make sure there are mechanisms for transferring

lessons to demonstrate to people that they are capable of achieving more then they



could achieve and they should never be satisfied with where they are now.” John

Browne BP

To add to John Browne’s statement, the strategies being developed need to ensure

the ‘people capital’ is utilized and the extract is imbedded in the polices andstrategies of the company. Plus the strategies should have flexibility, so that they can

be changed and adopted by new learning and new ideas emerging from the rank

and file of the company.

A key element of a KM concept is a requirement to address People, Process and

Technology issues in tandem and not focus on any one element. Fig 3 provides

details of the sub-elements.

Fig 3 – Knowledge Management Components and sub-elements

Most likely any strategic implementation will impact ALL the elements to somedegree. Therefore careful consideration must be made to all implication of any



strategic implementation . A holistic approach is needed in strategy setting. This is an

area where many companies fail, whereby KM is seen as a technical

implementation. A typical example would be a strategic requirement to share

knowledge. A company would implement, say an Intranet, and wait for the benefits to

kick in. Sadly, the company will gain little from its investment. The Intranet is apowerful infrastructure element BUT it needs to be established with People and

Process implications not just Technology and must be tied with a desired business

objective. Change management considerations are paramount to the technology

implementation. KM will yield maximum benefits only when all the implications are

addressed. That does not mean to say technology is the least important of the

elements. The point is ALL the elements are important; however, the Technology

element is probably the easiest and quickest to implement.

KM gurus often say that Technology is 10% of the effort required; Process is 20%

and 70% being people/cultural issues. While technology is possibly the easiest and

quickest to implement, tapping into cultural and people issues, at the other extreme,

will most likely take longer and cost more. The true benefits will only be realized

when people-related issues are addressed and kick in. However, there is no reason

why small projects cannot be started, in manageable chunks to get the strategies

rolling. Implement the classic case of “start small but think big.”

The strategy should also address specific implementation issues, such as an

awareness campaign, understanding skills required to maximize knowledge,

developing a rewards scheme and developing measuring requirements. In other

words, a full change management program must be developed and implemented.

A wider policy implication would be to establish an innovation and learning culture

within the organization. New products of tomorrow are residing in people's heads.

Give them a channel to experiment. A learning environment is key to new learning

that takes place in the company. People need time to reflect and question. Attending

a training course is only a small element of learning that takes place.

Most learning takes place by the coffee machine or attending a seminar or a

departmental meeting. Tacit to Tacit exchange is possible and is proving to be one of

the most important aspects of learning. This needs to be considered when



developing policies and strategies. This should include softer issues such as

considerations to family issues, working from home, leave entitlement, offering

counseling services, etc. Stressed, over-worked staff members without the

organizational support or time for family will not remain productive. Leave it to the

staff to organize they way they work.

In addition, a knowledge audit is required that aligns with the business strategy. Not

only will the audit show gaps BUT also highlight areas where information which is

currently being created in fact adds no value. Numerous times the author has

questioned ‘Why is this report produced?" only to be told "Because we have always

done it." By eliminating no value information chains, a great deal of work can be

scrapped and help to address the working balance and reduce the burden.

Strategy should also include staff development with a wider scope. In other words,

leave it to the individual to develop new skills and set career direction. An

organization can play a vital supporting role in staff development; this is particularly

true in a ‘learning organization,’ where staffs are encouraged to learn and accept that

training courses are only a subset of learning. Learning has many components and a

right culture should be developed to foster learning.

In summary, KM strategies must be aligned with the business vision and

management and must ensure that staff are clearly onboard. They must understand

why knowledge is important, chiefs must practice what they preach. They must have

channels for discussion and allow a flow of ideas. Feedback must be given and

above all trust must be developed between the executive and the staff. Split the KM

program into manageable units; think big, but start small.

Partnerships and Resources

PARNERSHIPS & RESOURCES -How the organization plans and manages its

external partnerships and internal resources in order to support its policy and

strategy and the effective operation of its processes.


The shift in forming partnerships is clear in the knowledge economy. These include

suppliers, customers and even competitors. Dependent on the companies services



and products, a value chain is an important element. Sharing of knowledge assets

will lead to quicker and smarter customer solutions. Examples of partnerships are

banks that offer cars for sale to general public, telecons and IT companies to

develop WAP services, management consultancies and IT service companies to

provide clients with ‘total solutions’, cable TV and leisure industry to provideinteractive TV (Video on demand…etc). Why the partnerships? In essence, to

leverage on knowledge and to delivery a premium service. Clearly for such

partnerships to flourish, knowledge needs to be transferred and be made available

between the key parties. The greater the collaboration between the supplier and the

client, the better the product/service, not to mention lower development costs.

Beware of software single vendors that offer “complete out of the box solutions.” It’svery unlikely that all KM issues can be addressed by a single vendor, in particular IT

suppliers. The mindset should be: deliver an appropriate solution and understand

the knowledge/information chain required to meet the partnership requirements. A

KM audit would be ideal at the early stage to understand Where, What and How the

knowledge exists and is used in the organization. The audit should be conducted for

the full length of the information chain and not stop at organizational boundaries. By

understanding the information requirements, processes should be modified to

embrace the partnership and provide effective development of solutions. CRM is

one example of a service/product that could cut across organizational boundaries

and provide/share customer information between the partnership organizations.

Terms such as B2B (business to business) are becoming common place. For

example, companies want to link IT with their customers and suppliers not only to

provide smart solutions, as mentioned above, but also to primarily reduce cost. The

B2B will use IT to include process integration, knowledge chains and product/service

transfer where applicable. To achieve this, a clear knowledge audit is required to

determine the requirements and integration with people, processes and technology.

BP Exploration is perhaps one of the best examples of internal resources put to good

use in a large corporation. Virtual Team Network project launched in 1995, used

Videoconferencing and collaboration technology and information systems. Virtual

teams were able to work on problems with the team members distributed globally

and consisting of not only internal staff but also third party contractors. This is an



excellent example of tacit to tacit knowledge transfer. New processes were

introduced, new technology was used effectively. Utilization of the ‘right’ people to

resolve challenges being the prime objective. A key to the project was the early

realization that people will need to work differently. They realized working practices

and behaviors would need to change. BP felt that having a network in itself meantlittle and could not be forced upon the staff. However, as people were showed the

benefits, the project just took off. BP estimates, the Virtual Network produced at least

$30 million in value in its first year

Army’s After Action Review (AAR) is another example of a excellent process that

ensures that lessons are learned after the event. BP have introduced a version of

this plan, whereby prior to undertaking a large project, they learn before, learn duringand learn after. Major costing savings have been realized by introducing learning

processes. Another example would be Chevron. They introduced a simple learning

tool for their drilling operations. Every time they drill in a particular area lessons are

recorded. Next time drilling takes place in a similar area, lessons learned during the

last drilling operations are available. This results in fewer errors and less reinventing

the wheel. Again, Chevron have recorded waste savings in their drilling operations.

People

PEOPLE - How the organization manages, develops and releases the knowledge

and full potential of its people at an individual, team-based and organization-wide

level, and plans these activities in order to support its policy and strategy and the

effective operation of its processes.


To enable people in knowledge-centric organizations is possibly the hardest task of

all. Changes required will impact most likely deep- rooted cultural mindsets. The

approach suggested is based around recognition of individual contribution to the

organization. Motivation not only comes from the wage packet but also recognition

of individual contribution. If staff can see that they make a difference, then they feel

part ownership of the organization’s successes (and/or failure). Therefore, it is

suggested that a strong engagement of people is required in maximizing on people’s

ability to learn and bring about change.



Early adopters of KM have realized the power of knowledge and the rewards due to

staff empowerment. Most organizations have recognized that it’s the individuals that

are the key contributors to success. It’s due to people that new learning takes place,

new processes are developed and old ones enhanced, and new products/services

developed through the culture of innovation and experimentation. It’s the individualthat brings about change and the organization acts as the supporting mechanism.

Vast savings have been recorded by various organizations through exchanges of

tacit knowledge. The key to success is the cultural mindset of the organization

regardless of the key business drivers, be it time to market, operational excellence or

new product’s. It’s the people that will drive the change. The method and leadership

of mobilizing the people’s knowledge will determine the speed of transformation in

the knowledge economy. The faster the company can develop and adapt to changethen the chances of survival are increased. Vast knowledge typically exists in any

organization in both the explicit and tacit forms. If people can NOT trust or perceive a

benefit for sharing this knowledge then the organization is doomed for failure.

The cultural issues also relate to organizational makeup, some of the most

successful companies foster an environment, which maximizes on staff development

and on recognition that the staffs are key to maximizing the company’s intellectual

property. Key cultural issues include:• Deliver awareness and/or direct training relative to impact of

practices/tools/processes.• Allow experimentation and time for learning new ways of working.• Develop "out of the box" thinking.• Encourage feedback to on company performance and issues that people feel

strongly about.• Foster learning environment, allow staff time to reflect to improve skills but

also to create an environment for creation of ideas and innovation. Focus

should be on people rather then systems. Workgroup should believe they can

change the environment they work in and not wait for the ‘management’ to

establish it.• Accept failures and exchange best practices and lessons learned.• People have a massive capacity to generate ideas and innovation,

encouragement and freedom to explore is key. These ideas are the products



and services of tomorrow, some will work others not, and yet some will leap

us into the higher plane of profits and competitive strengths.• Take a holistic approach to problems; do not focus on narrow or short-term

fixes.

• Encourage open communications up and down the hierarchy of theorganization. Foster a no-blame culture. Shared commitments, aims and a

common language are vital elements of a learning organization.• People working within a framework of Trust, Co-ordination and Corporation

are the corner stones of team-working. Self regulated teams, with team

leaders that act as mentors and stewards are fundamental to knowledge

sharing community.•

Knowledge and learning are inter-related; knowledge leads to learning andevaluating. Learning is far bigger then training alone.

• Allow for variation; don’t impose a standard blanket. Listen to the needs of

individuals, groups, organization level and to external parties. There is no

such thing as wrong information, unless it is inaccurate.

As can be seen, learning or knowledge acquisition is a complex arena with a

spectrum of ‘soft’ issues that must be considered. These ‘soft’ issues are also

difficulty to implement and will take time before the benefits are evident. However, it

is clear in the knowledge economy that individuals’ knowledge has capital value.

Each person has know-how and know-why which must be utilized to gain

competitive advantage, operational excellence and to create the products and

services needed tomorrow. Intellectual knowledge is now seen as an asset, just like

the Personal Computer or a building. Financial Analysts are working towards

attaching a value to the knowledge of the organization, which includes knowledge in

people’s heads. These figures in time will be reported in annual reports. Fig 4 shows

the elements that constitute market value of a company.



Fig 4 – Market Value Components

Larry Prusak in an article in Ground Work titled "American Accounting Association

Wrestles with Intangibles," Oct 1996) comments: "Common account measures

captures only 20-30 % of the real worth of the company." As we have seen in the

dot.coms the market value is high even though financially most are not making any

money (as yet.)

Continuous skills development is required as technologies and/or customer

requirements change. Flexibility to learn and adapt to new ideas will be the

characteristics of the workers in the knowledge economy. KM organizations use

people’s ability to change and enhance business objectives, to develop standard

processes to capture ‘best practices’ in order to codify the knowledge and

technology and to enable the practices and process to happen. Care must be taken

not to became too formalized or control-centric.

There is a strong need to recognize that one of the best practices for sharing

knowledge is human interactions itself. These take place in the coffee room, in the

staff restaurant or in the hallways. The social aspects are very important for Tacit to



Tacit exchange and is a key element of learning and knowledge creation.

Knowledge-intensive companies should, in fact, encourage dialogue and

conversation, encourage staff to talk freely up and down the chains of command.

These informal structures must be insured as a part of the company’s ethos and

policy. Some of the knowledge-centric companies have or are designing officebuildings that foster informal structures.

Knowledge leaders of tomorrow will not lead teams but support them; a whole new

way of working is required in a knowledge-centric organization. Emphasis is moving

away from the old style command and control into more support and develop. Wages

today are based on length of service, age, scope of responsibility but likely tomorrow

the reward will be on know-what and know-how, the ability to handle a wide range of job, range of skills learned and amount of knowledge shared. Organizations are

introducing knowledge-sharing incentives in various shapes and forms. They

recognize that knowledge-sharing should be rewarded just like when someone’s

spends extra time at work and is paid overtime for the extra hours.

Be prepared to re-engineer organizational cultures and working models, and beware

that the hierarchical structures will not necessarily yield the highest benefits. People

working in communities of products, services, skills, experiences and/or interests will

be required to maintain a competitive edge. New models will mean new networks of

specialist experts working in teams, not the structures we are all used to.

ICL Ltd. has changed its entire organization into communities. These fall into two

types: Professional and Interests. All employees belong to a Professional community

dependent on their function (Sales, Project Management, Consultancy, etc) and any

employee can also belong to any one or more communities of Interest (KM, Quality

Improvement, etc). For example, a Consultant will belong to a Professional

Community of Consultants and work and develop within the consultancy framework.

The Consultant can also specialize in KM and therefore belong as a member of the

KM Community. S/he is able to discuss, share and develop in the KM field. The KM

community, for example, meets at regular intervals, guest speakers are invited to

the meeting, lots of tacit exchange takes place. It develops into a true community

spirit. The Interest community will typically regulate itself and have an administrator

to facilitate the web space and other co-ordination activities.



Speed of solutions, products and services will be key to success in order to maintain

the competitive advantage. People will need to react fast to changing environments

and will require tools and support to meet the demands. New skills in problem

solving and team working will be required. Reward systems for knowledge sharingshould be developed, whereby staff are rewarded for sharing tacit and explicit

knowledge. The sharing of knowledge as well as the transfer needs to recognize all

parties as providers and recipients.

Appraisal systems that measure knowledge-sharing need to be developed. The

rewards can take many forms from bonus payments to free training on any subject

they desire, to extra days' holidays. Suggested reading on this complex issues isFrances Horibe's book Managing Knowledge Workers (1999.) It discusses key

issues related to managing people in a knowledge-centric company.

A case example where a process has became a core element of an organization is,

perhaps, Xerox, where they implemented a system for technicians to share

knowledge. Technicians share tips on service repairs on their Web based system.

Xerox have commented that their service costs have been reduced by 10%; it seems

clear that any help given to technicians to increase their tacit knowledge and make it

available will be worth the cost. Xerox have also extended the system to include

customer questions. The systems holds hundreds of thousands of customer

questions, which allow Xerox to track common questions and split them into

categories. They are then able to track patterns and resolve issues accordingly.

In summary, people-development issues are largely cultural. Systems, processes

and technology can all enable but they can’t make change happen. Only with the

appropriate cultural climate will staff flourish and maximize upon their own potential.

“There is only way to get any competitive advantage and its not by having smarter

people then anybody else. If you can get your people to interact in fundamentally

better ways than other organizations then you have something that is absolutely

cannot be copied” John Old, Texaco

Q, What are the three critical factors in KM?

A, Culture, Culture, Culture. Bob Buckman, President and CEO of Bulab Holdings



Process

To determine the KM implications related to processes, it may help to revisit the

strategy and determine the following:

• Identify processes that implement strategy.• What are the information requirements for the process both in terms of input

and output?• How are processes ineffective due to information fragmentation?• What needs to be done to improve the fragmentation?• Does the process chain include partner and suppliers?• develop a plan for process improvements.

In addition to the process/knowledge audit, questions could be asked, such as:• Are we differentiating by using our knowledge?• Do have a smarter way of working?• Are we leveraging on the knowledge of the organization?

Key fundamentals:• Determine and understand key information requirements of the organization.

but beware that knowledge will mean different things to different people.

What is key to one is not key to another; do not judge what is important at a

global level, but leave that judgement to the individual. Keep in mind there are

varying needed levels of detail. A sales person will require detailed

knowledge about client organizations and its key contacts; the marketing

people will need a different level of detail, and a VP may require a summary

only. The key is to conduct a knowledge audit and determine what information

does the company need to do its business, and then establish the source of

the information. Fig 5 shows a table that could be used to determine

knowledge requirements at the process/function levels.



Fig 5 Function/Process - Assessment toolkit

• Knowledge will exist in people’s heads, in company procedures and in

information islands either geographically and/or organizational levels. It will

exist in a form of Tactic or Explicit knowledge, it may have a short life span or

be long term. But above all it must have value to the reader. This is a tricky

problem to address: how does the person that shares knowledge know the

value the recipient attaches to it? Ask the recipient.• Information can be classified: some is mission critical, other highly confidential

and some open knowledge.• Information will exist in variety of sources, formats and devices. It will be

found anywhere from people’s heads, databases, Intranets, Partners,

Clients…etc.• Ownership and legal requirements: information is generated and owned by an

author; understand that people have rights (data protection) as to what is

shared, organizations have legal requirements dependent on the company

type.



The KM process strategy, needs to therefore consider the following elements:• Information share, usage, flow requirements. To assist with maximizing

information usage.

• Need to map knowledge sources, dependencies, owners and targetsaudiences, which will help to determine knowledge gaps, highlighted areas of

frequently and infrequently used information, show mission critical information

paths, provide an inventory of information.• To maximize on best practices, share ideas and exploration. Extract expert

knowledge and share widely.• Foster environment for learning and improve Training. New skills are needed

in the knowledge economy, such as how to work in team environments, abilityto problem solve, experiment and mentor.

• Maximize on IC and improve business intelligence• Determine key information requirements for mission critical functions and

ensure as a minimum these are maximized in term’s process, people and

technology.• Understand the knowledge transfer process has recognized elements see Fig

6. All these elements must be considered in developing processes for

information/knowledge transfer.



Fig 6 – KM Transfer Process

Processes should be global wherever possible; they should reduce the risk of re-

inventing the wheel and also introduce best practices in the organization. Processes

should follow standard practices and procedures and conform to the company’sbusiness model and quality system. An example of one KM-type process is the

Problem Solving Process within Rank Xerox. Rank has a group-wide single process

for problem solving, used for all sorts of purposes and at all levels of the

organization.

On a wider issue, with the advent of data warehousing and neural networks,

companies are able to develop new processes to take advantage of newtechnologies. But be aware that while these data- rich applications can perform

pattern recognition, they still require human intellect to make a judgment in terms of

the value of the newly generated knowledge.

Mapping the knowledge chain will help to determine the process required. Some

elements of the process can and should be automated by use of workflow

technology. However, any process design and implementation must be flexible

enough such that it does not require high costs and time to re-engineer as the

requirements change. Bespoke application and closed systems are typically barriers

to information flow, but in some cases it is recognized that those barriers cannot be

avoided.

Results

Operational performance can be measured in a variety of ways. Most companies will

use statistical tools in some shape or form. The tools themselves are not discussed

here but mainly what needs to be measured.

Customer

CUSTOMER RESULTS - What the organization is achieving in relation to its external

customers.




Key indicators to success are positive financial results but wider issues can also

indicate success, larger market share being one. One key KM requirement is to

ensure company performance is measured using several indicators not just

financial.

Knowledge-centric organizations are using detailed customer information (using

CRM) to collect client information. Information collected is both tangible and

intangible, in order to develop products and services that the customers will need

tomorrow. Customers can play a key role in determining business strategy; however,

clearly, we need learn and develop accordingly. Partnerships and strategic alliances

are common-place today. Service providers have learned that customers are

sources of value and in more then just revenue terms.

As mentioned by Dr Karl-Erik Sveiby, “In a world where customers are more

interested in the knowledge and the intangible benefits you provide them with than

the tangible product, the customer relations become partnerships and your product

delivery becomes a co-creation of solutions. Knowledge flows both ways; you learn

as well as the customer. Customers bring more than financial revenues, they also

bring intangible revenues: product ideas, competitive intelligence, feedback,

referrals, etc. You know this, of course. But have you ever tried to measure the

intangible revenues? To manage them consciously? To put them in the strategic

plan?

If you do, you will take the first steps towards making your organization more

knowledge focused. To be knowledge focused is to take the intangibles seriously, to

see your organization as if it consists of nothing but intangible assets and the flows

of knowledge between them.

They provide training for employees, they can act as references, they talk to each

other and so spread the word and the image, and their demands encourage the

development of new products. Revenues arising from intangible assets take

intangible forms. Most companies use customer projects to develop new methods.

As anyone who has worked in sales will tell you, projects undertaken successfully for

"high-profile" customers are, irrespective of how profitable they are, invaluable aids



in selling, because they attract attention and can be used as "reference accounts" for

years afterwards."

As Sveiby points out, customer relationship is an important element. But be careful,

he says, not to rely on CRM based systems alone. Visit customer sites, watch themas they use your products, involve them in the development and project

management processes.

As well as specific process, companies should also introduce wider

policies/processes in terms of measuring customer and employee satisfaction and

exit interviews. This is in addition to the quality management systems in place.

Society

SOCIETY RESULTS - What the organization is achieving in relation to local and

international society as appropriate.


The main issues center around participation and information. Society in general will

have expectations, in particular for ‘public’ organization, Governments, Public

agencies. Society will expect these organization to adhere and understand

environmental standards and issues. They will also expect to be able to voice their

opinions, to feel they are participating and that they form listening culture.

Organizations are also expected to adhere to international HSE and occupational

standards within their organizations. Audits are performed to ensure compliance.

On a wider issue, society expects companies to work under a caring culture where

family values are part of the company’s ethics and values. The caring extends to

partners and suppliers, but also towards the environment. That may include issues

from waste disposal to building design. It might also include design of products that

are environmentally and ergonomically friendly. Society will also expect

organizations to support the local community and environment and ensure

compliance to global, regional and local regulations and rules.

Information access with regards to all these regulations and policies is important and

sources of which will reside with the policy making bodies. Therefore, links (through



the Internet and/or direct) should be established with these organizations.

Furthermore, the company should publish its successes and failures, progress and

policies for public view via the company’s Intranet.

PeoplePEOPLE RESULTS – What the organization is achieving in relation to its people.


In our new knowledge world, the managers' power base is their relative level of

Knowledge. The role shifts from supervising subordinates to supporting colleagues.

As well as traditional training and skills development that most organizations have in

place, a new emphasis is now required. Measures could include, competenceutilization, value added, knowledge flows, customer image and staff attitudes. The

old indicators of, for example, staff retention and numbers trained is not enough.

New measures could include, new ideas proposed, processes/service/products

improvements due to staff feedback, sharing of knowledge, skills acquired.

A good example of positive results achieved by using its intellectual capital is the

smart use of people’s capability to improve and innovate by Texas Instruments Inc.

By using people resources to improve productivity and hence increase capacity, T.I.

were able to save $500 million in building another fabrication plant by increasing

capacity in two existing plants. See the article "Measuring up Intellectual Capitalism"

in CIO Magazine, May, 1998.

3M encouraged a culture of innovation and experimentation and is able to continually

develop new products. In fact the company has over 60,0000 products and

constantly maintains a 30% revenue on new products ratio. That is 30% of total

revenue comes from products less than four years old. This high turnover of

products requires an effective knowledge transfer and sharing culture.

In the end it comes down to the cultural mindset of the organization. People should

be encouraged at all levels and at all disciplines. Just because you work in, say HR,

does not mean you have no channel to pursue an idea or suggest a product

improvement. ALL should play a part in product development and if necessary the

person should be given time and resources to develop the idea further. Once an idea



has been validated. then there is no reason why the ‘inventor’ can not play a key role

in commercialization of that product.

At 3M, all the employees are subject to a 15 percent rule. They are encouraged to

spend 15% of their work time to develop new ideas and generally think aboutprocess improvement. According to Geoffrey Nicholson, one of the 3M’s VP’s, says

"Some people take more than 15 percent; others less. But it's not the ‘15’ percent

that’s important. It’s a message that it’s OK to dream."

Specifics to people-results ensure staff surveys are conducted regularly. These can

be in a form of company-wide satisfaction surveys, conducted six monthly or yearly.

The results should be published for all to see and be part of the balanced scorecardmeasurement (see below). To supplement the company surveys, staff should have

an opportunity to provide 360-degree feedback of their Managers' performance.

These could be done during annual appraisal whereby both parties discuss

performance of the other. This is a sensitive issue and most staff would feel reluctant

to appraisal their direct Manager. As with the subordinate appraisal, if performance is

based on facts and evidence then there is no reason why the Manager will not

accept the subordinate's feedback.

Key Performance

KEY PERFORMANCE RESULTS - What the organization is achieving in relation to

its planned performance.


Key issues to consider are organizational performance measures, which should be

more than just financial. Bottom-line figures are traditionally seen as indicators of

success. The emphasis in the knowledge centric organization has shifted to a much

wider arena. New indicators are now considered based around, customers,

processes, people and use of technology.

Wider issues

Whatever the measures, they must go down to the individual level; individuals must

be able to gauge how they are performing in the framework of the overall and/or

specific strategy. These measures also evolve with time. What is considered



important to measure today may not be the case tomorrow. The organizational

dynamics, people-contribution, services/products, suppliers, partnerships and

customers’ base will determine what should be measured at a given point in time.

Although financial figures provide important indications of performance of the

company to, say shareholders, and CEO’s are hired and fired based on theseindicators, to the individual working on the ‘shop floor,' financial indicators are a

source of information only and often they are not able to perceive their own

contribution to the overall success nor have any direct contribution. And often they

don’t have direct responsibility for achieving or managing financial targets/results.

Therefore, at certain levels, non-financial performance improvements should be

established.

People who actually do the work (as opposed to a Manager) have important intimate

knowledge; they know competitors and customers very well. They understand

processes and practices of their work environment. The key is to tap into the

knowledge and allow staff to consider process/service/product improvements. The

management task is to listen to the shop floor. As improvements are suggested and

implemented, they should be recognized and rewarded accordingly. Managers will

also need to consider if these ideas/suggestions may have wider implications and

possibly could be adopted in other areas of the company. Some new ideas could

also mean new products and services.

Each business function within the organization has to be part of any measures

introduced. These indicators could be consolidated at the group level as appropriate.

However, measures must be marketed with care; the indicators should be used to

determine areas of improvement and not to be used in a political game. An example

of two business units providing the same client service/product can have completely

different performance levels. Allowance must be made for local influences and

practices; therefore, it is critical to derive several indicators for each business unit. A

set of indicators will provide a wider prospective and each business units will not feel

prejudiced by being measured on only one indicator.

One of the key hot topics right now is Balanced Scorecards to measure intellectual

capital. Many organization have balanced scorecard initiatives in place or are

working on one. As stated above, financial measures are not sufficient to gauge



performance. Balanced Scorecards devised nowadays address the issues of

deriving measures for elements that impacts the company’s strategy. In fact,

Balanced Scorecards are meant to be designed to put in place the company’s

strategy and then measure against it. The scorecards will measure at group, sub-

group and individual levels.

Other key element of performance measures can include better use of patents and

maximizing revenues on licensed products

Details of performance measures are discussed in the next section.

Measures This section provides a framework for self-assessment. The RADAR framework

provides an indication of results achieved for each element. However, direct

measures will be required in order to form an assessment and the concept of using

balanced scorecards is also discussed below to supplement the RADAR.

Balanced Scorecards As we have mentioned, one of the key topics of today is Balanced Scorecards (BS)

which provides an ability to measure intellectual capital and not just financial

indicators. As stated above, financial measures are not sufficient to gauge

performance and certainly give very little indication of the know-how of the company.

BS addresses the issues of deriving measures for elements that impacts the

company’s strategy. Therefore, BS should be designed so that they aid in measuring

a set of indicators which provide an indication of the company’s movement in terms

of strategy. The scorecards will measure at group, sub group and individual levels.

An example of balanced scorecard (edited) is highlighted below, as devised by

Michael S. Malone, from an article A New Age. Other scorecards also exist devised

by Karl Svieby 1997 and Kaplan & Norton 1996. As can be noted the various

indicators are presented for all the main business functions. The list below is by no

means the complete set, each business needs to determine their own based on the

specific strategy and business drivers.



F I N A N C I A L CUSTOMERS

Total assets ($) Market share (%)

Total assets/employee ($) Number of customers (#)

Revenues/total assets (%) Annual sales/customer ($)

Profits/total assets (%) Customers lost (#)

Revenues resulting from new business operations

($)

Average duration of customer relationship (#)

Revenues/employee ($) Average customer size ($)

Profits/employee ($) Customer rating (%)

Revenues from new customers/total revenues (%) Customers/employee (#)

Market value ($) Field salespeople (#)

Return on net asset value (%) Satisfied customer index (%)

Value added/employee ($) IT investment/salesperson ($)

Value added/IT-employees ($) Support expense/customer ($)

Investments in IT ($)

H U M A N RENEWAL & DEVELOPMENT

Leadership index (#) Competence development expense/employee

($)

Motivation index (#) Satisfied employee index (#)

Empowerment index (#) Marketing expense/customer ($)

Number of employees (#) Share of training hours (%)Employee turnover (%) Share of development hours (%)

Average employee years of service with company

(#)

R&D expense/administrative expense (%)

Number of managers (#) Training expense/employee ($)

Average age of employees (#) Training expense/administrative expense (%)

Share of employees less than 40 years (%) Share of employees below age 40 (%)

Time in training (days/year) (#) IT expenses on training/IT expense (%)

Number of full-time or permanent employees (#) R&D resources/total resources (%)

Annual turnover of full-time permanent employees

(#)

Average customer income ($)

20. Percentage of full-time permanent employees

(%)

Average customer duration with company

(months) (#)

Per capita annual cost of training, communication,

and support programs ($)

Training investment/customer ($)

New market development investment ($)



Company managers with advanced degrees:

business (%), science and engineering (%), liberal

arts (%)

Ratio of new products (less than 2 years old)

to product family (%)

P R O C E S S R&D invested in basic research (%)

Administrative expense/total revenues (%) R&D invested in product design (%)Cost for administrative error/management revenues

(%)

R&D invested in processes (%)

Processing time, outpayments (#) Average age of company patents (#)

Contracts filed without error (#) Patents pending (#)

Function points/employee-month (#)

IT expense/employee ($)

IT expense/administrative expense (%)

Change in IT inventory ($)Corporate quality goal (#)

Corporate performance/quality goal (%)

KM implications for measurement and assessment will require a framework of

processes that will determine and support the measures. Plus technology is needed

to gather and consolidate the data into performance indicators. The measures will

vary from simple to more complex indicators, each of which needs to be developed

with a clear business purpose. Be aware that Business Scorecards are not suitable

for every business case, and implementation can be a costly exercise. Another

consideration is the number of indicators; clearly, more indicators that require

tracking and reporting will increase the cost of administration. The purpose is to keep

the numbers to a minimum and to remain focused on measuring the effectiveness of

the business strategy.

Transformation Now that we have discussed the main KM implications, the next step is to formulate

a movement for change . Developing a transformation plan towards being a

knowledge–centric organization is a complex task. Careful preparation and planning

are vital to success. The exact nature of the transformation will be dependent on the

urgency and the organization type. However, there are some fundamentals that

apply. Six steps described by Beer, Eisenstat and Spector (1990) are relevant in the

context of KM. The steps are as follows:• Mobilize commitment to change through joint diagnosis of business problems.



• Develop a shared vision of how to organize and manage change for

competitiveness.• Foster consensus for the new vision, competence to enact it and cohesion to

move it along,

• Spread revitalization to all functions and departments• Institutionalize revitalization through formal policies, systems and structures,• Monitor and adjust strategies in response to problems in the revitalization

process.

The steps described above are referred to as the ‘bottom-up’ approach to

transformation in the Strategy Safari, H Mintzberg, B Ahlstrand and J Lampel (1998).

As often mentioned, people involvement is key in a knowledge organization. Thedeeper and wider the involvement, the faster the change.

It is also recommended that any transformation be in a shape of a program within the

organization. Do not create a KM department; it will act only as another silo.

Everyone is responsible for knowledge and sharing it, not just a new formed KM

department. Developing a KM ‘program’ will assist the organization through the

transformation process. Plus the transformation should be seen as a ‘change/benefit

for the staff’ and not something imposed from the executive. Buy-in and commitment

will come through the staff themselves developing and implementing the

transformation for change.

conclusions

Knowledge implications applied to the Excellence model are applicable to all types of

organizations. Some fundamentals are addressed in the document, some will be

inherent in current practices while others will be new. Simple messages that could be

emphasized are that cultural and process issues are critical for KM success.

Implementing an Intranet, although important in itself, is not sufficient. Often cries are

heard, “My intranet does not get used!” Why? Because it was not developed in the

context of business objectives or staff needs. Most likely, it does not address the way

people work and/or the processes that should be implemented to support the

Intranet. This may be a simplistic conclusion and the reasons for failure are probably

far more complex, but the point being any implementation MUST address people,

processes and technology NOT in isolation to each other but holistic.



Organizations tend to do the ‘easy’ aspects first. Implementing technology is

relatively simple compared to changing the whole organizational culture(s). This is

not to say that technology plays a second fiddle; no, certainly not. Technical issues

can be very complex and problematic to resolve and this needs to be understoodbefore even considering implementation issues. However, full benefits and return on

investment will only be realized when People, Process and Technology issues are

addressed. However, be cautious; “Think big but start small,” being the right

attitude to adopt. Pilots and proof concepts are needed to demonstrate and get buy-

in. Grand campaigns are fine as far as awareness is concerned but not when it come

to implementation . KM by definition is complex and dynamic; it requires great

attention to detail, and attention to the dynamics of change. Unexpected changes willoccur, education will be slower then anticipated, new working practices will be

foreign to many. KM implementation is an art form.

However, realistic expectations must be set. Issues like cultural change can and will

take a long time to implement but the vision once set should be followed through.

Holistic strategy is suggested which will embrace all aspects of the organization

towards the transformation into a knowledge-centric organization. The change will be

less painless if KM is inherently adopted as part of the business model. It should not

be implemented in isolation or as a silo function in the company. Leaders will be

pivotal, led by example and develop a strategy such that ALL feel they have

contributed. Benefits will be slow but sure.

Tap into the intangible assets and empower people to maximize their potential. And,

finally, let us return to the question: “Why KM?”

In the end, it all means one thing: arm people with the right information, so they are

able to make better judgements, smarter decisions and create environments in which

to encourage innovation, in order to be able to provide a high quality service to its

customers. All this, by implication, means a KM-centric company is a successful

company. If a company does not recognize some of the issues raised, then don’t be

surprised if one day a competitor sails passed carrying your client base. KM is not a

fad; we have been doing it for years, but now the focus has changed. Knowledge is

a valuable asset and one needs to use to gain that edge. Even if the company does



a lot to change cultures and foster knowledge sharing, in the end it comes down to

one thing: unless the knowledge is put into action, there is no reward, only pain.

Acknowledgements

I would like express my sincere thanks to Karen Speerstra for her editorial help andguidance whilst developing this document. My thanks also goes to the EFQM

organization for the permission to use some of their material.

References

Knowledge Mapping, A Practical Overview, Denham Grey, March 1999,

Intangible Revenues, Dr Karl-Erik Sveiby, August 1998

Leverage your Knowledge, Dr. Karl-Erik Sveiby 2000-01-27Working Knowledge, T Davenport and L Prusak,

Strategic Safari, H Mintzberg, B Ahlstrand and J Lampel (1998)

If Only We Knew What We Know, C O’Dell and C. Grayson JR (1998)

Managing Knowledge Workers, F Horbie (1999)

Documents

10 - EFQM - Knowledge Management Implications