Performance Measures of Knowledge Management (KM) Identification Towards

Excellence
Vinay Singh1, Sanjay Kumar2, Sunil Luthra3, Abid Haleem 4
1Assistant Professor, Department of Mechanical Engineering, Akido College of Engineering, Bahadurgarh, Jhajjar,
Haryana(India)
Email: theahlawat89@gmail.com
2Professor, Department of Mechanical Engineering, International Institute of Technology and Management,
Murthal, Sonepat, Haryana (India)
Email: skbhardwaj19711971@gmail.com
3Lecturer, Department of Mechanical Engineering, Government Polytechnic, Jhajjar, Haryana, India
E-mail: sunilluthra1977@gmail.com
4 Professor, Department of Mechanical Engineering faculty of Engineering and Technology,
Jamia Millia Islamia, Delhi (India)
Email: haleem.abid@gmail.com

Abstract: In today’s competitive business scenario, Knowledge Management (KM) is becoming increasingly
important for the success and survival of firms. Managers are wrestling with continuously troubling issue of
performance measurement in managing KM activities because unanimously accepted framework does not exist. In
this paper, Performance Measures (PMs) of knowledge and knowledge management have been identified from
extensive literature review. KM performance measures may provide directions to understand changes required in
current KM implementation. Appropriate PMs of KM may help to manage the KM implementation activities
effectively through efficient performance measurement of KM.
Keywords: Knowledge Management, Performance Measurement, Performance measures (PMs), Innovation.

1. Introduction

Knowledge Management may be one of the recent topics in every field of engineering and management. Every day,
we deal with huge amount of data and information. Data and information is not knowledge until we know how to
dig the value out of it (Weick and Sutcliffe, 2001). Therefore, the requirement of knowledge management is
becoming important. Unfortunately, there's no universally accepted definition of knowledge management, just as
there's no agreement as to what constitutes knowledge in the first place; however, Knowledge Management (KM)
may be referred as the process of capturing, developing, sharing, and effectively using organizational knowledge
(Davenport Thomas, 1996). Despite the overwhelming feedback KM has gained in past few years, implementations
of KM initiatives often still lack appropriate performance measurement systems (Drew, 1997; Faisst & Resatsch,
2004). There has been need for metrics to justify KM initiatives. Also, linking KM initiatives to financial investment
may help justifying KM to senior management and thus improving the organization’s ability to manage knowledge
as assets in effective manner (Chang Lee et al., 2005).
1.1 Need of Study

Performance measures are recognized as important elements of all KM programs; and among many organizations,
which work in complex and dynamic business environment, standardized approach for developing and
implementing performance measurement systems needs to be devised (Hussain et al., 2004). Therefore, need arises
to identify performance measures of effective knowledge management.
 1.2 Organization of Paper

The remainder of this paper is organized as follows: Performance measures introduction and classification has been
presented in Section 2. Performance Measures of Knowledge and Knowledge Management identified fro m
extensive literature review have been explained in Section 3. Finally, concluding remarks have been given with
limitations of this research and the directions for future research.
2. Performance Measures: Introduction and Classification

Performance measures may tell us something important about our products, services and the processes that produce
them and they may be used as a tool to help in understanding, managing and improving current efforts and practices.
We need to answer (Artley & Stroh, 2001):
What are we doing?
How well are we doing?
Are we meeting our goals?
Are our customers satisfied?
Are our KM processes in control?
Where are improvements necessary?
How are we going to improve?
How are we going to measure the improvements?
These questions may help in identifying areas of improvement and their subsequent quantification for evaluation of
improvement and guidance for future scope of improvements (Wholey, 1999). Most performance measures may be
grouped into one of the following six general categories; however, organizations may develop their own categories
suitably (Artley & Stroh, 2001):

 Effectiveness: A process characteristic indicating the degree to which the process output conforms to
requirements.
 Efficiency or Input Output Ratio: A process characteristic indicating the degree to which the process produces
the required output at minimum resource cost.
 Quality/Customer Satisfaction: The degree to which a product or service meets customers' requirements and
expectations.
 Timeliness: Measures whether a unit of work has been done correctly and on time. Criteria may be established
to define what constitutes timeliness for a given unit of work based on customer requirements.
 Productivity: The value added by the process divided by the value of the labor and capital consumed.
 Safety: Measures the overall health of the organization and the working environment of its employees.
 Environment Friendliness: Degree to which product, processes and services are green.
 Societal Concerns: Degree to which product, processes and services are beneficial to society.
3. Performance Measures of Knowledge and Knowledge Management

The strongest argument for measuring the performance of knowledge assets and KM is to demonstrate its business
benefits so that the resources and support necessary for its successful implementation may be provided. Previous
studies have suggested that organizations may be benefited throughout entire project cycle of product (from
planning, organizing, staffing, designing and implementation to controlling including construction and facilities
management) by implementing KM activities (Robinson et al., 2005). Performance measurement facilitates
benchmarking and the identification of best practices in KM. Ten performance measures of knowledge and KM
have been identified from extensive literature review. Human Resource Capabilities, Economic
Value Added, Intellectual Capital (IC) of Organization, Organization Culture Improvement, Firm’s Entrepreneurial
Orientation, and Experience of an Organization, Organization Memory, Goodwill & Enhanced Brand Image,
Competitiveness and Innovation Capabilities. These are explained as follows:
3.1 Human Resource Capabilities

Human resource represents the human factor in the organization and the combined intelligence, knowledge, skills
and expertise give the organization its distinctive character (Baron, 2007) and human elements of the organization
are those that are capable of learning, changing, innovating and providing the creative thrust, which may ensure the
long run survival of the organization, if properly motivated (Kucharcikova, 2013). Human Resource Accounting
(HRA) practices are especially pertinent to the valuation of intellectual/knowledge assets in the economy (Bontis et
al., 1999) and its objective is to “quantify the economic value of people to the organization” to provide input for
managerial and financial decisions (Chen et al., 2004).

3.2 Economic Value Added (EVA)

Economic Value Added was introduced by Stern Stewart & Co., a New York-based consulting firm, in the late
1980s (Najibullah, 2005) and it is a comprehensive financial management measurement system that may be used to
tie: capital budgeting; financial planning; goal setting; performance measurement; shareholder communication; and
incentive compensation (Bontis et al., 1999). EVA may encourage practicing managers to take decision to maximize
shareholder value (Bontis, 2001).
3.3 Intellectual Capital (IC) of Organization

KM and IC are believed to influence each other, and the relationship between the two constructs is of vital
importance towards organizational effectiveness (Seleim & Khalil, 2011) and gaining competitive advantage. IC has
been very much a practitioner created concept and recently scholarly contributions have started to analyze its
application and potential (Asare et al., 2013).
3.4 Organization Culture Improvement

The organizational and strategic processes of organizations have been important because they facilitate the
manipulation of resources into value-creating strategies (Eisenhardt and Martin, 2000) and organizations must also
have an appropriate organization in place to take advantage of these resources (Barney, 1995). Previous empirical
studies focused on the direct link/relationship between individual strands/configurations of resources and
performance, while less attention has been devoted to utilization of these resources more effectively (Helfat, 2000).
3.5 Firm’s Entrepreneurial Orientation (EO)

Entrepreneurship Orientation (EO) refers to an organization’s strategic orientation, capturing specific

entrepreneurial aspects of decision-making styles, methods, and practices (Lumpkin & Dess, 1996) and it may be an
important measure of the way an organization is organized enhances performance benefit of organization’s KM
resources by focusing attention on the utilization to discover and exploit opportunities (Wiklund & Shepherd, 2003).
The managerial processes allow some organizations to be more competitive as EO facilitates prompt actions based
upon early signals from its internal and external environments (Lumpkin & Dess, 1996).
3.6 Experience of an Organization

The experience of an organization has to be transformed into ‘know-how’ before it may improve performance of
organization and tested experience and ‘know-how’ relationship; and the know-how and achievement (both of
tangible and intangible) relationship (Simonin, 1997).

3.7 Organization Memory (OM)

The promise of the possibility to manage knowledge inevitably may lead to questions how knowledge may be
created, stored, retrieved, utilized, rearranged and recollected and organizational memory concept has little distance
to travel (Karreman, 2002). Organization memory system (OMS) may be an effective tool for managing knowledge.
Since, OM may not be representing all knowledge in the organization; it is remembering only pertinent knowledge
to be reused in organizational activity (Basaruddin et al., 2011).
3.8 Goodwill and Enhanced Brand Image
Brand management includes managing characteristics, tangible and intangible in nature, of the brand. Positive brand
image enhances the goodwill and brand value of products/services. In brand management practices, brand image and
brand awareness are considered the central brand variables for assuring the effectiveness of marketing campaigns
(Esch et al., 2006). Several companies have integrated knowledge sharing into their business strategy to
improve/enhance goodwill and brand image (McDermott & O’Dell, 2001).
3.9 Competitiveness
Irrespective of tacit or explicit nature of knowledge, organizations are beginning to investigate how these intangible
assets serve as the basis for competitive advantage (Stewart, 1994); however knowledge-based theory of the
organization suggests that knowledge is organizational asset enabling sustainable competitive advantage in hyper-
competitive business environment (Alavi & Leidner, 1999). Various empirical and theoretical studies have proven
KM to be a key source of competitive advantage and organizational success (Choy et al., 2006).
3.10 Innovation Capabilities
In this knowledge era, KM has been about building core competencies and understanding strategic know-how; and
has been understood as a management tool used to improve efficiency, effectiveness and innovation (Gupta et al.,
2000) to: allow better decision making and problem solving; create better value for the organization and its
customers; and subsequently enhance an organization’s performance (Choy et al., 2006).
4. Conclusions
In today’s era, the importance of KM activities may be seen in every field of life for improving the performance. In
the present paper, literature has been conducted towards understanding of performance measures of effective KM
activities. We have discussed about performance measures and how these may be classified. Ten performance
measures (Human Resource Capabilities; Economic Value Added; Intellectual Capital (IC) of Organization;
Organization Culture Improvement; Firm’s Entrepreneurial Orientation; Experience of an Organization;
Organization Memory; Goodwill & Enhanced Brand Image; Competitiveness; and Innovation Capabilities) have
been identified through searching the literature. Our study may help in making knowledge management performance
measurement framework. We believe that this paper may serve as a good foundation for broadening research in area
of KM performance measurement.
5. Limitation and Scope of Future Research
We have discussed various KM performance measures from the available literature. More literature will be required
towards better understanding. Being KM as a relevant field, lot of opportunities may be identified for researchers
and practitioners. Enablers for effective KM and barriers hindering effective KM may be identified towards
development of knowledge management performance measurement framework/model validated by case studies may
be seen as a future research topic.

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