Article Review: Measuring The Impact Of Knowledge Management

Measuring the Impact of Knowledge Management

Jong-Ae Kim, PhD

IFLA Journal, Sage Publications, 2006, 32, 362-367

Reviewed by Bambang Fahruddin Syahrir

Stud. No. 2057802

This paper is an overview of the approaches to evaluate the impacts of knowledge management implementations to organizational performance. It is considered to be very critical mainly because of the increasing implementation of knowledge management as a new management technique within organizations in which it is believed to be capable of contributing to business benefits. The writer addresses her views that demonstrating the direct correlation between KM and organizational performance is quite complicated to be evaluated since KM may not be the only factor affecting the organization’s performance. However, several academics and practitioners such as Grooijer (2000); Del-Rey- Chamorro, et al. (2003); Darroch (2003), Teruya (2004), and Bose (2004) are reported to have made examinations on their interrelationships.

Referring to several studies above, Kim recommends four methods to support practitioners to identify and develop the evaluation frameworks such as return on investment (ROI), balanced scorecard (BSC) approach, qualitative case studies (QCS) and success case method (SCM). In conjunction to these, by applying ROI can help justifying the resources invested in KM initiatives and assesses financial performance of the initiatives. Nevertheless, ROI is not the only one used in financial measure but several other alternatives can be reliable such as the payback period, the net present value (NPV), and the return of knowledge (ROK) as addressed by Chen & Chen (2005, p. 382).

Furthermore, two academics, Haugh and McDermott as cited in Kim (2006) put forward two different methods of ROI calculation to come up with value and benefits that KM activities have created. The writer, Kim then recommends four perspectives of performance measures: financial, customer, internal business, as well as innovation and learning perspective. If a company develops BSC, it should establish general goals and specific goals for each perspective on the BSC and identify appropriate measures based on the goals by establishing and employing a KM index based on the BSC. Conversely, it is not recommended to apply the same KM index to two different organizations in the same industry. However, since organization has four major elements such as vision, strategy, objectives, and performance measures, the explanations of the BSC application should be related to these variables (Chen and Chen, 2005). But, these are not touched clearly because the writer perhaps intends to keep her writing simple and easily understandable since she is merely to put a basic concept of KM performance measurement.

What is more, QCS approach is also valuable to evaluate KM performance using variety of methods such as interviews, focus groups, observations, and analyses of existing paper or electronic documents. The writer puts most emphasis on employing qualitative approach as the method to measure KM performance and neglects most at using quantitative with the reason that some types of benefits are quantifiable. Nonetheless, I partially disagree with this since Chen & Chen (2005, p. 382) say that a quantitative approach is used to represent a tangible, visible and comparable ratio in which qualitative can not be reliable. Last but not least is the SCM consists of two parts: locating likely success