Should Knowledge Management be viewed as a Spend to Save or a Return On Investment?

Why is it so hard to justify Knowledge Management To The People Who Make The Decisions?

Having to justify to an organization why they should make a commitment to Knowledge Management (KM) is somewhat of a puzzling exercise. The first question that seems to be on everyones mind is “What is the Return On Investment (ROI)?”. The ROI question has appeared in various Linked-in discussion groups, with questions ranging from recommendations for Return on Investment tools, to how to quantify Return on Investment for KM, etc, etc.

This is like trying to put a tangible output, to something that is almost intangible, you cannot see a unit of KM, you cannot say that I will invest £200,000 and I will achieve KM, it is difficult to quantify and difficult to visualize. Unlike a word processing package, you can’t pop down to your local Computer Store and buy a box of KM; which is why I am so against these ‘so called’ “off the shelf” KM Packages; sure they may offer part of the solution, but KM is a change in the way people work and interact, it is a ‘Change Initiative’, a journey, an aspiration….I liken it to the TQM journey, it is an aspirational state where the organization protects knowledge, shares it and then innovates using the knowledge resources at its’ disposal.

The Justification for Knowledge Management should not be whether it offers an immediate, and quantifiable Return On Investment, but what benefits can KM deliver to my organization, and should be viewed as a Spend to Save measure. KM is like Risk Management, you need to assess firstly what the probability of the risk is, and what impact it will have on the organization. The risk is the loss of ‘Critical Business Knowledge’. So what form could this take? Some one leaving the organization; well we never hear of anyone having an accident do we!, someone being offered a better job!, someone being seriously ill!, someone dying, or even someone winning the lottery….it never happens does it.

If we take the National Lottery, someone wins nearly every week. To illustrate the point and for the sake of argument, lets say that someone does win every week.  That’s 52 people every year faced with the dilemma; ‘Do I carry on working?’, and if they decide no, they could take valuable, even key knowledge with them.

So we have a risk, with a probability and then there’s the impact? Here I would like to introduce my favourite scare story; The US National Nuclear Security Administration (NNSA) "lost knowledge" of how to make a mysterious but very hazardous material codenamed Fogbank. As a result, the warhead refurbishment programme was put back by at least a year, and racked up an extra $69 million (You can read the story at

So you need to ask yourself, do I adopt a KM approach within my organization, or do I take a risk that it might not happen?.......,because it might not happen. You may be lucky; there may be no accidents, no illness, and everybody may be blissfully happy and never leave and no lucky sods winning the lottery……….but do you want to take that risk?

When I talk to organisations I use an analogy that I came up with; “Knowledge Management is a bit like Travel Insurance - You only wish you had it when it is too late? (O’Neill, 2009)”.    Think about it; You go on a skiing holiday and don’t take out travel insurance, that’s fine if nothing happens……but what if you have an accident? You then have to pay your own medical bills….very expensive!  In fact £1000’s, compared to the £50.00 - £100.00 for Travel Insurance. With KM you take a risk and don’t protect your key knowledge – it cost the US Government $69 Million to replace key knowledge; and I can say for certain that it wouldn’t have cost them $69 Million to implement KM.  So the question that you must ask yourself is “Is it worth taking the risk?”.

The approach to the decision about adopting KM should be one based on aspend to save basis, spend a little to protect your key knowledge, and you can sleep better at night knowing that the knowledge is not going to disappear and is protected, rather than laying in a hospital bed thinking this is going to cost a fortune “I wish I had taken out an insurance to protect me against this”.