The Opportunity Cost of Knowledge Management

This article discusses the cost of badly managed knowledge.

While this isn't directly related to Robotic Process Automation, it's important to consider that companies tackling automation are more successful when they establish a strong commitment to knowledge management.

The more documentation that exists around process design, process performance, and ancillary information, the easier it becomes to find opportunities for lean process improvement and automation.

On the other hand, large organizations that disregard their employees need to easily find and document critical information lose out on millions of dollars.

Knowledge management opportunity costs exemplified

Consider, for example, a company with 1,000 employees that are paid an average salary of $80,000. If they spend 2.5 hours searching for information each day and half of the time they can’t find what they’re looking for, that results in a 2.5 million dollar loss pear year (Feldman, S. and Sherman, C. (n.d.) the High Cost of Not Finding Information an IDC White Paper. - References - Scientific Research Publishing, 2016).

You might think the numbers above seem high, but when you consider how much time is spent tracking down files, emails, and other forms of records, they aren't that far off. Not to mention that IDC has been conducting studies on the value of knowledge management for decades so they're as reputable as sources can get.

IDC’s paper also reviews third party studies, such as those from Kit Sims Taylor in which it was determined that knowledge workers spent additional time recreating information after they were unable to find what was already documented internally on that topic.

When considering the cost of information duplication, the researchers arrived at an estimate of a company losing $5 million dollars per year (for those employing 1,000 workers).

Older business journals have tried to solve for the cost of knowledge management through the suggestion of information providers' knowledge pricing (within an internal organization) and information seekers’ departments paying for it (DeSouza et al., 2012). While such a method of evaluating knowledge was early for its time, the reality today is that organizations suffer from problems beyond the legacy academic theories and the variables that they attempted to factor for.

The modern enterprises' knowledge problems

Today's companies are mired in information portals ranging from intranet wikis, HR questions and answers, software development issue documentation, product planning documentation, CRM records and knowledge, and much more.

Employees aren't in a position to search all repositories of information when helping a client or customer. There are various solutions that help combine disparate systems into a single search solution (such as Coveo and Elastic search) but executives may view them as costly compared to existing search that's ‘free.’ Others may not even know they exist.

The mere act of buying search solutions also doesn't solve the problem of producing relevant and accurate information.

For the matter of training employees to document their knowledge, a training program such as Knowledge Centered Support (KCS) is beneficial. Once again, simply training employees in what it takes to document knowledge is problematic when stopping there and not fostering a culture incentivizes the right actions for the benefit of continuous improvement and productivity.

Companies that have tried to incentivize the creation of knowledge (through contests or paying out for a certain amount of articles written) have come to find out that low quality information was churned for cash. That same low quality information made it that much harder for them to find valuable documents needed to be productive. Put simply, knowledge management isn't something that you can 'pay employees to do' but rather, a culture that has to be instilled through effective change management.

Where will your company take it from here?

The good news is that any type of issue with knowledge management can be solved. Whether it’s systems not providing a single search solution, whether it’s outdated information that's low quality, or whether it’s a lack of training.

The not so good news for companies is that, like everything else, it’s going to take time and money. The benefits may not become readily apparent in a quarter or two, but rather, they are benefits that compound over the years.

The sooner you start to quantify the cost of knowledge management and how much opportunities are lost due to improper management, the sooner you’ll be on your way to recouping those losses and fostering a culture that values information.

If your organization is kicking off an RPA initiative and has suffered from poor knowledge management, then now would be a great time to prioritize an action plan. A great automation program isn't defined by only the present performance, but also the future of that program and how well it's documented, passed down, and its ability to continue increasing in value over time.

Footnote:

The term 'Robotic Process Automation' is used due to its popularity in the industry. Process automation is a clearer term that'll ideally replace 'RPA.'

References:

DeSouza, K. C., Yamakawa, S., Awazu, Y., Yamakawa, S., Awazu, Y., DeSouza, K. C., Bio, V., Yamakawa, S., Bio, F., Awazu, Y., Bio, F., Yamakawa, S., Bio, F., Awazu, Y., & Bio, F. (2012, July 5). PRICING ORGANIZATIONAL KNOWLEDGE: AN IMPERATIVE. Ivey Business Journal. https://iveybusinessjournal.com/publication/pricing-organizational-knowledge-an-imperative/

Feldman, S. and Sherman, C. (n.d.) The High Cost of Not Finding Information An IDC White Paper. - References - Scientific Research Publishing. (2016, June 21). https://www.scirp.org/(S(351jmbntvnsjt1aadkozje))/reference/referencespapers.aspx?referenceid=1840731