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Criteria for measuring KM

performance outcomes in
organisations
Chong Siong Choy

Measuring KM
performance
outcomes
917

Faculty of Business and Law, Multimedia University, Melaka, Malaysia

Wong Kuan Yew

Department of Manufacturing and Industrial Engineering,
Faculty of Mechanical Engineering, Universiti Teknologi Malaysia,
UTM Skudai, Malaysia, and

Binshan Lin
College of Business Administration, Louisiana State University in Shreveport,
Shreveport, Louisiana, USA
Abstract
Purpose This research attempts to comprehensively examine the criteria for measuring knowledge
management (KM) performance outcomes in organisations. To date, no studies have provided a set of
widely accepted measurement criteria associated with KM efforts. This paper, therefore, aims to fill the
gap.
Design/methodology/approach This study was carried out by systematically reviewing the
literature on KM performance outcomes. Case studies were carried out in two organisations identified
to have a KM programme in place.
Findings A review of the literature indicates that there are 38 outcomes from KM implementation
which have garnered impressive theoretical and empirical support. Based on this, a comprehensive set
of performance outcomes is proposed and grouped into five key dimensions. The findings from the
case studies indicate that this proposition is relevant.
Research limitations/implications The use of case studies limits the generalisability of the
findings, but it opens up new questions to be explored by further researching into the relationships
between KM efforts and performance outcomes.
Practical implications Such significant findings will have important implications to
organisations on how their KM efforts can be systematically measured for business success. To the
academics, this paper provides insights into the relationship between KM efforts and organisational
performance.
Originality/value This study is probably one of the first to comprehensively explain the criteria
for measuring KM efforts in organisations. It is hoped that the findings of this study will encourage
organisations to practise KM from the right perspective in order to reap the outcomes from KM
initiatives.
Keywords Knowledge management, Knowledge management systems
Paper type Literature review

Introduction
The current economy is characterised by increasing business competitiveness, leaner
organisations, products and services convergence and vast development of technology
(Davenport and Prusak, 1998). The risks and uncertainties inherent in such dynamic

Industrial Management & Data

Systems
Vol. 106 No. 7, 2006
pp. 917-936
q Emerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570610688850

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environments have increased the importance of managing organisational knowledge

(Paiva et al., 2002). Various empirical and theoretical evidences have proven knowledge
management (KM) to be a key source of competitive advantage and subsequently
leading to organisational success. It has been reported that successful large companies
that practice KM top the Fortune 500 list, while smaller related companies top the Inc.
100 Hot Companies to Watch list.
However, recent survey evidences have shown that, while many organisations are
claiming to have implemented KM, not many of them are considered to be successful in
their KM efforts. While KM has been acknowledged to improve organisational
performance, there are no well-developed performance measures within the
organisations surveyed to assess the value of their knowledge assets (Longbottom
and Chourides, 2001). A study by Takeuchi (1998) on a poll of executives from 80 large
companies in the US found that only a few executives felt that they manage their
knowledge well. Many researchers contended that the lack of understanding of KM
purposes and the failure to measure the value and performance of knowledge assets are
major obstacles in managing knowledge (Bassi and Van Buren, 1999; Dyer and
McDonough, 2001; Longbottom and Chourides, 2001; Ruggles, 1998). KM
implementation is an investment that needs resources and it requires efforts to
measure its results. Without measurable success, enthusiasm and support for KM is
unlikely to continue (Ranjit, 2004).
To deal with this, there is a critical need for formal and well-organised KM
development within enterprises (Liebowitz, 1999). Hallett and Stephens (1999) stressed
that organisations need to address the issue of KM paradox, i.e. failure of organisations
to refine their performance measures to consider the impact of KM activities even
though these activities increase the cost of doing business. Since many organisations
have begun their KM practices in the mid-1990s, it is therefore imperative and timely to
develop a comprehensive set of criteria for measuring the performance outcomes
resulting from KM efforts.
This paper thus fills the gap by comprehensively examining the KM performance
outcomes as identified from the previous literature. Interviews were carried out in two
case companies to further explore the performance outcomes. It is posited that an
understanding of KM performance outcomes would lead to a better understanding of
KM purposes. This will eventually help to enable organisations to practice KM from a
better perspective in order to reap its benefits.
This paper firstly presents a recapitulation on the definitions of KM, followed by a
description on some measurement issues in KM. It then provides an extensive review
of the literature in order to identify a list of KM performance outcomes and/or benefits
that has garnered impressive theoretical and empirical support. Based on the review,
five key dimensions or categories of KM performance outcomes are proposed and
discussed. Following this, the paper presents the results of the case studies conducted
to explore and examine the proposed performance outcomes. Finally, the paper
culminates with a discussion on the research findings and suggestions for future
research work.
Definitions of KM
While knowledge is not easily measured and audited, organisations must manage
knowledge effectively in order to take advantage of the skills and experience inherent in

their systems and structures as well as the tacit knowledge belonging to the employees
of the firm (Hung et al., 2005). However, one of the biggest challenges identified is the
ability to understand KM and its purposes. There is not yet a common consensus on
the concept of KM (Earl, 1999) since different researchers and practitioners tend to define
KM based on their fields and interests (Chong and Choi, 2005).
As such, current KM solutions are ad hoc, constrained by basic rigid and limited
views of knowledge to meet the requirements of todays competitive environment
(Malhorta, 1998). Different perspectives on the concepts of knowledge can lead to
different definitions of KM and therefore it is not surprising that the expected outcomes
of KM efforts are defined differently. Marr (2003) provided evidence that many
organisations have narrow focus on KM, linking it to information management
associated with technological solutions, such as intranet and databases. As such, their
KM practices and thus their expected outcomes will have a narrow focus. In addition,
the academic development of KM has not stabilised and filtered into the industry.
Although KM has been understood as a management tool used to improve efficiency,
effectiveness and innovation in this knowledge age (Gupta et al., 2000), commonly
accepted KM principles have yet to be developed (Stankosky and Baldanza, 2001). This
is because organisations usually implement well-established practices (Levette and
Guenov, 2000).
Some prior studies defining KM are shown in Table I. An analysis of these prior
definitions indicates that many of them share one common similarity KM will lead to
better organisational performance. As stated by Ranjit (2004), the purpose of managing
and leveraging a companys knowledge is to maximise the returns to the organisation. The
definitions in Table I imply that if KM efforts are systematically and deliberately carried
out, it will enable strategic planning; improve effectiveness and innovation; allow better
decision making and problem solving; create better value for the organisation and its
customers and subsequently enhance an organisations performance. In a nutshell, KM
can be viewed as the systematic management of knowledge resources and processes in
order to create value for an organisation (Wong and Aspinwall, 2004).
Measurement of KM
KM is complex because knowledge is intangible and surfaces in a variety of forms
(Rowley, 2004). Polanyi (1958) conceptualised knowledge as tacit and explicit. Both
tacit and explicit knowledge are the intangible assets of an organisation as they can
transform from one form to another in an organisation (Nonaka, 1990) as a result of
dissemination and application of knowledge. New and valuable knowledge is then
created and converted into products, services and processes (Skyrme and Amidon,
1997). While tacit knowledge is viewed as an important factor for competitive
advantage, one purpose of KM is to transform the tacit knowledge and make it explicit
so as to achieve desirable business performance. However, only a small portion of an
organisations knowledge is captured as explicit knowledge (guidelines, handbooks,
databases and so on). The often overlooked assets are the tacit ones such as insights,
intuitions, hunches, gut feelings, values, images, metaphors and analogies (Nonaka
and Takeuchi, 1995).
Regardless of whether the knowledge is tacit or explicit, firms are beginning to
investigate how these intangible assets serve as the basis for competitive advantage
(Stewart, 1994). Lin and Tseng (2005) found that the market values of many companies

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Table I.
Definitions of KM

Systematic approach to find, understand and use knowledge to create value

Management of the corporations knowledge through a systematically and
organisationally specified process for acquiring, organising, sustaining,
applying, sharing and renewing both the tacit and explicit knowledge of
Allee (1997), Davenport and Prusak (1998), Alavi and Leidner (2001) employees to enhance organisational performance and create value
Systematic, explicit, and deliberate building, renewal and application of
knowledge to maximise knowledge-related effectiveness of an enterprise and
return from its knowledge assets
Wiig (1997)
Process of capturing collective expertise of an enterprise wherever it resides and
Hibbard (1997)
distributing to wherever it can to provide performance enhancements
An explicit control and management of knowledge within an enterprise aimed at
van der Spek and Spijkervet (1997)
achieving enterprise objectives
A conscious strategy of getting the right knowledge to the right people at the
right time and helping people share and put information into action in ways that
strive to improve organizational performance
American Productivity and Quality Centre (APQC) (1999)
Formalisation of and access to experience, knowledge and expertise that create
new capabilities, enable superior performance, encourage innovation and
enhance customer value
Buckman (1999)
Process that helps organisations find, select, organise, disseminate, and transfer
information and expertise necessary for activities such as problem solving,
dynamic learning, strategic planning and decision making
Gupta et al. (2000)
KM is the creation, extraction, transformation and storage of the correct
knowledge and information in order to design better policy, modify action and
deliver results
Horwitch and Armacost (2002)
Systematic management of organisational knowledge which involves the
processes of creating, gathering, organising, store, diffusing, use and exploitation
of knowledge for creating business value and generating competitive advantage
Chong and Choi (2005)

Definition of KM

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ODell (1996)

Authors

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are higher than their accounting values due to the increased contribution of intangible
assets such as knowledge. All these imply that the value of an organisation in the
k-economy has to be based on intellectual capital, and thus, using financial measures
alone cannot measure intellectual capital adequately (Chong and Choi, 2005).
Knowledge is considered as a core competence of organisations which cannot be
captured by balance sheets and as such, to measure the core competencies and
distinctive abilities of employees would require the removal of traditional means of
quantification (Austin and Larkey, 2002).
Another key issue, which is the focus of this paper, is to measure the outcomes and
benefits of KM. This issue is crucial because it helps to demonstrate the value and
worthiness of a KM initiative to the managers, employees and stakeholders. All too often,
researchers try to adopt an approach that focuses on hard financial outcomes (e.g. cost,
profit, etc.) to evaluate KM, while ignoring soft non-financial outcomes such as learning,
creativity, new production introduction, etc. (Arora, 2002). According to Ellis (1997),
traditional measurement techniques that emphasise solely on financial performance can
be misleading and counter productive in a development environment. Hence, it is essential
to adopt a measurement approach that can holistically evaluate the outcomes and benefits
of KM. Carneiro (2001) suggested that besides using financial indicators, organisations
can adopt non-financial ones to measure the outcomes of KM. On this basis, this paper
reviews and investigates the KM performance outcomes that have been proposed by
numerous researchers and practitioners.
KM performance outcomes
In order to identify a comprehensive list of performance outcomes, an extensive review of
the literature was conducted. A narrative synthesis approach was used to compile
descriptive data and exemplars from individual studies and building them into a map
(Hammersley, 2001). This is a flexible approach that allows the reviewer to be reflexive
and critical (Hart, 1998). Since the literature documented for this study is derived from both
quantitative and qualitative results, meta-analysis is not a suitable approach as
meta-analysis is applicable to collections of research that are empirical rather than
theoretical (Cassell and Symon, 1994). Cassell and Symon (1994) also opined that narrative
approaches are particularly valuable when the sample of studies includes qualitative
contributions. It has the ability to provide deep and rich information (Light and Pillemer,
1984) and thus enable the wholeness or integrity of the studies to be maintained,
preserving the idiosyncratic nature of individual studies (Pawson, 2001). Rumrill and
Fitzgerald (2001) added that narrative approach is particularly useful in four situations:
(1) developing or enhancing theoretical models;
(2) identifying, explaining and providing perspectives on complicated or
controversial issues;
(3) providing information that can assist practitioners in advancing best
practices; and
(4) presenting new perspectives on important and emerging issues (for details, see
Denyer and Tranfield, 2006).
Since the objectives of the narrative approach fit the current study, it is therefore,
adopted.

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An extensive search on the literature reveals that there are ten related works on KM
performance outcomes. However, only seven of them have provided a list of impressive
and convincing performance outcomes based on theoretical or empirical support, and
hence, they are included in this study. Particularly, some of them have derived their set
of performance outcomes from quantitative survey (Chong, 2006; Chourides et al., 2003;
KPMG, 1999) while others have suggested their set based on qualitative description.
(Allee, 1997; Egbu et al., 2005; Ruggles, 1998; Wiig, 2000). By incorporating all these
previous work, 38 performance outcomes resulting from KM initiatives were identified
as shown in Table II. Some of the items have been found to overlap with each other and
have the same context, although different words were used to describe them.
Therefore, the related items were combined and described as one.
Based on the analysis results in Table II, it can be concluded that none of the
research work has attempted to develop a comprehensive list of performance outcomes.
The items that appeared the most number of times were:
.
Identifying and sharing best practices.
.
Enhanced business development and creation of new business opportunities (five
out of seven). These were followed by new or better ways of working (four out of
seven). This indicates that the main focus of prior research was targeted on
leveraging knowledge for the organisations to succeed commercially. Moderate
attention was given to six items (i.e. better decision making, better customer
handling through better client interaction, improved productivity, reduced cost and
improved new product development), indicating that the process of exploiting
knowledge, customers handlings and some aspects of organisational performance
such as cost reduction and new product development were given modest
consideration. How KM helps in solving organisational-wide problems, increasing
market share, size and share prices, enhancing intellectual capital, return on
investment, and entry to different market types (succeed commercially),
improving communication, efficiency, learning/adaptation capability,
empowerment of employees (employee development) and some knowledge
processes were the least favoured in the list. The difference in the level of
emphasis on the performance outcomes could be due to the diversity of the
researchers background and focus.
In general, the 38 items for measuring KM outcomes can be grouped into five
dimensions:
(1) systematic knowledge activities;
(2) employee development;
(3) customer satisfaction;
(4) good external relationship; and
(5) organisational success.
This proposition is based on a careful analysis and synthesis conducted on the
performance outcomes. The following sub-sections will explain each of the dimensions
in detail.

Better decision making

Better customer handling through better client
interaction and sharing knowledge with clients
Faster response to key business issues
Immediate results in solving organisational-wide
problems
Development and constant improvement of
competitive long-range service and technology
strategies
Development of entrepreneurial (intrapreneurial)
culture for organisational growth and success
Improved employee skills and quality through
capacity building and upskilling
Improved productivity in delivering products and
services to clients and by solving emerging
organisational problems
Increased profits
Identifying and sharing best practices
Reduced costs
New or better ways of working
Increased market share
Enhanced business development and creation of new
business opportunities
Improved new product development
Stimulation and motivation of employees
Better staff attraction/retention
Increased share price
Enhanced product or service quality
Creation of more value to customers
Enhanced intellectual capital
Improved communication

Outcomes

X
X

X
X

X
X

X
X

X
X

X
X

X
X

X
X
X

Egbu et al.

X
X

X
X

Researchers
Wiig
Chourides et al.

X
X
X
X
X
X

Ruggles

Allee

X
X

KPMG
3
3
3

X
X
X

2
X

5
3
2
3
1
2
2
1
1
(continued)
X
X
X

3
2
5
3
4
1
X

2
X

Frequency

Chong

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Table II.
KM performance
outcomes

Table II.

Increased innovation and creativity

Improved efficiency
Improved learning/adaptation capability
Return on investment in KM efforts
Increased market size
Entry into different market type
Increased empowerment of employees
Improved capture and use of knowledge from
sources outside the firm
Improved integration of knowledge within the firm
Enabled identification of knowledge gaps
Identified knowledge assets
Identified knowledge flow
Formalised knowledge transfer system established enhance transfer of knowledge between one
employee to another
Enhanced and streamlined internal administrative
processes
Better on-the-job training of employees

KPMG

Allee

Ruggles

Researchers
Wiig
Chourides et al.

X
X

X
X

2
2

2
X

3
1
2
1
1
1
1

Frequency

1
1
1
1
1

Chong

X
X
X
X
X

X
X

Egbu et al.

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Outcomes

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Systematic knowledge activities

Knowledge activities include the processes of creating, gathering, organising, diffusing,
using, exploiting, transferring and storing vital knowledge of an organisation. It
requires turning personal knowledge into corporate knowledge that can be widely
shared throughout an organisation and appropriately applied (Skyrme, 1997). It is a
conscious strategy of getting the right knowledge to the right people at the right time and
helping people share and put information into action in ways that strive to improve
organisational performance (APQC, 1999).
Through effective knowledge processes, knowledge assets can be identified.
Furthermore, knowledge flows can be examined and subsequently knowledge gaps can
be identified so that measures can be taken to close the gaps. Important knowledge can be
exploited for organisations to benefit from the use of knowledge processes. For example,
formalised knowledge transfer systems can be established in which ways to capture,
integrate and use knowledge are improved. With improved communication, this enables
sharing of best practices across the organisation. Such sharing improves employee skills
and their productivity. This is translated through creative and innovative approaches to
completing a work or task. Through the documentation of an organisations vital
knowledge, better decisions can be made. All in all, it improves learning and facilitates an
organisations adaptation towards the changing environment.
Employee development
Intellectual capital focuses more on capturing the best judgement and experiences of
todays employees, termed as knowledge workers (Chong and Choi, 2005). It is a
composite of knowledge, information, intellectual property and experience possess by
the organisational members, who come to work in the morning and go home at the end
of the day. When these employees leave an organisation for good, they bring valuable
knowledge and experience with them, leaving their previous organisations at the
losing end.
Problems faced by organisations can be resolved through KM where employee
involvement and commitment are emphasised. Brand (1998) proposed that people have
to be motivated to access and share information and to convert that information into
knowledge. Employees are required to collaborate with others to share their knowledge
and expertise. The focus of business and KM application is on providing an
environment in which knowledge workers of various disciplines can come together and
create new knowledge (Binney, 2001). By agreeing on common presumptions and
analytical frameworks, employee can co-ordinate diverse sets of activities and solve
organisation-wide complex problems (Bhatt, 2000).
As such, an effective management of knowledge benefits organisational members
as far as their current jobs and future developments are concerned. With an effective
knowledge process, communication is improved between employees and knowledge
can be effectively transferred to and among employees. This improves employees
learning and enhances their skills. All these lead to improved innovation and creativity
among the employees. Employees are not only performing meaningful tasks with
adequate knowledge in hand, they are also able to work effectively in teams and
empowered to make decisions on their daily tasks. As such, improved efficiency will
lead to faster responses to organisational key issues and immediate results in solving
organisational-wide problems.

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In addition, a better on-the-job training programme can be developed based on the

mission-critical skills needed by an organisation and the available knowledge, skills
and abilities of the employees. Proper utilisation of knowledge also enables employees
to identify new products and services in which the organisation has the potential to
offer to its customers, thus resulting in the development of an entrepreneurial culture
for organisational growth and success.
All these results in better stimulation and motivation among the employees and
thus, an organisation can better retain its employees. Furthermore, this also serves as
an attraction to outside candidates to join the organisation.
Good external relationship
Reliable, useful, up-to-date and timely knowledge can be created and shared not only
internally but also externally. That is, knowledge should be captured and created by
sharing knowledge with business partners and suppliers. There must be a well-established
knowledge structure, which includes knowledge about business partners and suppliers in
order for KM to be implemented successfully (Chong and Choi, 2005).
An effective management of knowledge thus allows a proper sharing of knowledge
between the organisation and its business partners and suppliers. Feedback from
business partners and suppliers increases the innovative and creative capacity of the
organisation, and thus product and service quality can be improved. Further new
product development is possible. All these benefits allow the creation of more value to
customers.
Customer satisfaction
The intellectual assets of a firm include not only employees know-how, but also
business processes and customers knowledge as well (Bassi and Van Buren, 1999).
In fact, one of the main goals of KM is to manage and enhance relationship with
existing and new customers (Roos et al., 1998). Companies must understand that their
clients problems and needs are paramount and that they are the primary driver of
continuous improvements and innovation (Stankosky, 2000). Clients now demand
products and services to be better, faster and more affordable (Kotter, 1996).
As such, with an effective management of knowledge processes in place, it enhances
client interaction with the company. This enables better customer handling as
organisations know the needs and requirements of their customers better. Quality of
products and services can be enhanced and productivity in delivering products and
services to customers will be improved. All these will definitely create more value to
customers.
Organisational success
Organisational success refers to the performance outcomes of an organisation as a
result of its KM initiatives. As discussed earlier, the success of a knowledge-based
organisation is measured not only by looking at its financial performance, but also the
intangible assets owned by the firm. This is because financial performance alone
cannot measure intellectual capital adequately (Bassi and Van Buren, 1999; Bukowitz
and Williams, 2000; Carneiro, 2001; Chong and Choi, 2005; Ellis, 1997).
From the above literature, it can be concluded that organisations with effective
management of knowledge are able to reap various benefits. When knowledge is well

managed with the proper use of information technology infrastructure as an enabler,

an organisation can streamline and improve its administrative processes. Furthermore,
all the vital knowledge necessary to its core business can be integrated and therefore,
the intellectual capital of the company will be enhanced. From the strategic point of
view, an organisation can benchmark industry best practices and thus, improving the
development of business strategies. This will allow constant improvements of
competitive long-range services and technology strategies based on the knowledge
available. As such, new business opportunities can be identified, including new
product development and entry into different market types.
From the knowledge and resource-based view, all these benefits allow a
knowledge-based organisation to sustain its competitive advantage. From the
financial performance point of view, effective management of knowledge allows the
organisation to increase profit and reduce cost, increase market share and market size.
All these will lead to higher return on investment (RoI) for companies that practice KM.
As such, the companys overall performance will be improved.
Based on the dimensions proposed, it is posited that with the effective management
of organisational knowledge, employees, customers and suppliers will be able to
benefit from the KM efforts. The effective management of organisational knowledge
involves primary knowledge activities (creating, gathering, organising, storing,
diffusing, using and exploiting knowledge); (as indicated by many definitions in
Table I) supported by secondary knowledge activities such as employee training;
employee involvement; teamwork; employee empowerment; top management
leadership and commitment; removal of organisational constraints; information
system infrastructure; performance measurement; knowledge-friendly culture;
benchmarking, and knowledge structure (Chong and Choi, 2005). Eventually, all
these activities will result in positive performance outcomes to the organisation.
To further investigate the validity of the 38 items, interviews were carried out with
two case companies. The following presents the methodology used and the results of
the interviews.
Methodology
Data were collected using qualitative open-ended interviews. The interviewees were
chosen based on three criteria:
(1) whether KM is implemented in their organisations;
(2) the stage of KM implementation in their organisations; and
(3) the position of the respondents.
Two IT organisations which were conferred the Multimedia Super Corridor (MSC)
status were identified to participate in the current study. The IT organisations are
chosen because of the recognition that these organisations are knowledge intensive
(Mohammad Nazir et al., 2005). In addition, these organisations are operating in
the Cyberjaya area (one of the two cities of MSC), an intelligent city designated by the
Malaysian Government to propel the k-economy initiatives of the nation (for details,
see Chong, 2006).
One of the IT companies is medium sized, and the other is large. The determination
of the company size is based on the definition provided by the Small and Medium
Industries Development Corporation (SMIDEC). According to this definition,

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companies operating in the information and communication technology (ICT) sector

with 50 or less full-time employees or annual turnover not exceeding RM5 million are
considered as small and medium enterprises (SMEs) (www.smidec.gov.my/detailpage.
jsp?section defsme&level 1). As per the companies requests and the researchers
assurance, their identities are kept completely anonymous and confidential. As such,
the two organisations will be labelled as Companies A and B.
The medium sized organisation chosen (Company A) was one of the pioneers to
receive the MSC status when it started its operations in 1997. It is an Electronic
Publishing Systems (EPS) and Management Information Systems (MIS) solution
provider to corporations in Malaysia and the region. It has 46 full-time employees, in
which two-thirds of them are knowledge workers (k-workers). The company recorded a
turnover of RM3.8 million last year. Since the company does not have a KM
department, the interview was carried out with the Managing Director.
The larger company selected (Company B) is a subsidiary of a group of companies.
It received its MSC status in 2000. The company currently employs 250 employees in
which its business involve the development of electronic commerce applications and
solutions, data centre facilities and shared services, SAP system implementation and
consultation services, information technology products procurements and reseller and
the development of research and development (R&D) systems. As of December 2004,
Company B recorded a turnover of RM100 million. This company is more advanced in
its KM implementation, with a Chief Knowledge Officer (CKO) being appointed to
oversee its KM activities. The CKO was interviewed in this case.
Since this study is an extension of another study conducted earlier (see Chong,
2006), the researchers have no problems contacting the entitled companies and
respondents for the interview. Furthermore, since the interviewees are familiar with
the researchers, they have no hesitation in providing honest information related to the
interview questions. Each of the interviews lasted about an hour. A cooperative
approach is used since the research focuses on individuals and their stories.
This approach is favoured by Reason and Rowan (1981) in order to guarantee a joint
learning process on the part of the researchers, interviewees and companies.
The interviewees were explained the purpose of the interview prior to starting the
interviews and they were encouraged to share their experience in their firms. Both of
the interviewees were asked similar questions on the vision of the organisations and
whether they consider or include KM as part of their business strategies; stage of KM
implementation in their firms, the outcomes they see from their KM efforts and what
are the major problems in their KM initiatives. For the outcomes, the interviewees were
first asked about the importance of the five dimensions mentioned above (systematic
knowledge activities, employee development, good external relationship, customer
satisfaction and organisational success) before dwelling into the detailed 38 items.
After the interviews, the data were analysed and sent by hand to the interviewees
separately for their feedback and comments. This is to ensure the veracity of both the
data and interpretations. The next section presents the results of the interviews.
Results
Company A
The vision of Company A is to become the premier developer of fingerprinting security
systems and a renowned provider of EPS and MIS solutions to Malaysian and the

regional corporations. The Managing Director indicated that the company has just
started its KM programme and is at the stage of assessing its importance to the
business. When being asked whether KM is part of the companys vision, he replied
that KM is indirectly embedded in the organisations vision since they are in the ICT
business. When asked on the success factors of the company, he indicated that
employees and culture are the most important factors for the company. He added that
KM is just a tool for effective and efficient management.
When being asked on his understanding about the KM processes, he replied that
KM is about knowledge creation and application, indicating that he did not understand
the whole spectrum of KM. Since the cooperative approach was used, the interviewers
took the opportunity to explain to him what constitute KM processes. When it comes to
KM performance outcomes, he indicated that the current KM implementation helps in
delivering the benefits indicated in Table III. According to the Managing Director,
since they are involved in developing software programmes for clients, developing
employees has been a main concern to enable them to know exactly what the
customers want. The employees maintain constant contact with the clients to ensure
that clients requirements are met. By having more clients, it helps the organisation to
improve both financial and non-financial performance.
The major problem outlined by the company is the lack of a KM specialist to drive
the organisations KM initiative. However, when being asked on whether the company
would like to consider having a CKO or a KM specialist, the Managing Director
indicated that he is not willing to invest in hiring a specialist and building a KM
department due to its size. He is contended with the current practice of his business
where he strongly believes that employee development is the best source to better
organisational performance.

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outcomes
929

Company B
Company Bs vision is aligned to its parent company where its mission is to
concentrate, aggregate, and consolidate the Groups resources on common IT processes
Company

Dimensions

Outcomes

Company A

Employee development

Stimulating and motivating employees to work

towards achieving the companys goals
Better training for employees
Enhanced innovation and creativity
Improved employee retention
Enhanced transfer of knowledge from one employee
to another
Better client interaction
Improved overall company performance
Improved ability to sustain competitive advantage
Means to identify industry best practices
Enhanced the development of business strategies
Enhanced business development and creation of
company opportunities
Enhanced and streamlined internal administrative
processes

Customer satisfaction
Company performance

Table III.
Outcomes from KM
implementation

IMDS
106,7

930

in order to service multiple internal business units at lower costs and higher service
levels. The company was formed as a result of the parent corporations effort to
consolidate all their IT-related resources to capitalise on the latest multimedia,
broadband and IT technologies as well as to support the subsidiaries KM efforts to
enhance the parent companys existing businesses. Besides servicing the parent and
the subsidiaries, Company B is also actively working with external customers in
developing IT systems and solutions for them.
The company has established a KM unit in 2000, under the R&D department. The
KM unit is headed by a CKO. Similar to Company A, the CKO indicated that KM is
embedded in the companys vision. We dont need a specific vision to spell the need
and importance of KM. What is more important is that our strategies must detail on
how knowledge is managed, he said. The company is still at an early stage of
becoming knowledge intensive where the CKO indicated that the company is in the
process of planning for one or more KM applications. KM is still at its infancy stage,
and we need to truly understand the requirements of a KM programme before we can
commit he added. However, he mentioned that he has been actively observing and
learning from companies such as Microsoft and IBM.
The CKO sees the importance of having both internal and external KM specialists in
managing knowledge in his company. According to him, a CKO has internal
advantages, while an external consultant has the external knowledge to provide best
practices to the company when implementing KM. He sees his ability to get support,
co-operation and commitment from employees in contributing, sharing and applying
knowledge as the most important role for him as a CKO.
When being asked on what are the KM efforts he is currently working on, he could see
that the processes of contributing, sharing and applying knowledge require the support
from an IT system, and the company is in the midst of developing the beta version of the
system. However, he hoped that the current ad hoc management of knowledge is
sufficient, at least, for the time being to create awareness to the whole organisation on the
importance of the knowledge processes. The CKO admitted that KM has brought
numerous benefits to the organisation, such as helping in systematically managing the
knowledge activities, employee development, building external relationship, and
improving customer satisfaction and company performance. Table IV shows the
detailed outcomes of KM implementation as reported by Company B.
There are two major challenges facing the CKO. First, the changes in technology
where better IT resources are needed to ensure that the company keeps pace with
changing technology. One of the main enablers to KM is IT. Without the latest
technology, well lose track of what the customers want he said. The second challenge
is the difficulty in measuring KM outcomes from the financial perspective. My bosses
wanted to see how KM implementation improves the RoI of the company, and how am
I going to convince them since it is hard to measure KM using dollars and cents?
Discussions and suggestions
Discussions
KM performance outcomes are one of the broad categories of research issues in KM.
An extensive literature review indicates that no studies have attempted to combine all
the KM performance outcomes and test them in a single setting. This might be
attributed to the differing definitions of KM based on the authors diversified

Company

Dimensions

Outcomes

Company B Systematic knowledge activities Establishing of a formal knowledge transfer system

established
Improved capture and use of knowledge inside and
outside the firm
Improved integration of knowledge within the firm
Identifying and sharing best practices
New and better ways of working
Improved communication
Improved learning/adaptation capability
Employee development
Enhanced innovation and creativity
Stimulating and motivating employees to work
towards achieving the companys goals
Better on-the-job and off-the-job training for
employees
Improved employee skills
Better retention of employees
Customer satisfaction
Enhanced value of products and services
Good external relationship
Creation of more value to customers
Company performance
Immediate results in solving organisational-wide
problems
Improved productivity
Development and constant improvement of
competitive long-range service and technology
strategies
Enhanced the development of business strategies
Enhanced business development and creation of
company opportunities
Improved overall company performance

backgrounds, interests and expertise. As such, a different focus on KM can lead to

different possible performance outcomes.
This study has attempted to comprehensively examine all the possible outcomes
derived from KM efforts. Thirty-eight items were identified and classified into
five dimensions. Two case studies were conducted to provide qualitative evidence to the
items. Two different findings were obtained from the case studies. Generally, employee
development, customer satisfaction and organisational performance have been
identified as the common indicators of KM performance outcomes in both companies.
However, to some extent, they differ in terms of the attributes measuring the outcomes.
While both companies give emphasis on employee development, it is obvious that the
orientation is different. Company A focuses more on general employee management
principles while Company B has a better understanding and orientation towards KM.
It was observed that Company A is having problem understanding the broad spectrum
of KM. KM might be seen in this case as a major tool for performance improvement that
supports general employee management practices without any assessment on its
processes. Therefore, only a few outcomes were achieved. The company may claim that
a KM programme is under way, but it is very important for KM to be properly
understood first before any initiative can be taken. While it is understandable that

Measuring KM
performance
outcomes
931

Table IV.
Outcomes from KM
implementation

IMDS
106,7

932

knowledge in peoples minds is the most important asset, having the right focus on why
employees knowledge must be managed is more important. This is because the
emphasis on employees and their management is a domain in the field of human
resource management (HRM). If the company looks at managing employees from the
HRM perspective, then the knowledge perspective will be largely ignored. This will
defeat the purpose of having a KM programme in place. Company A has also outlined its
major challenge; that is its inability to hire a CKO or KM specialist to manage its
knowledge activities. Resources have been identified as one of the biggest obstacles of
SMEs in implementing KM (Wong, 2005). To overcome this problem, it is suggested
that Company A appoints a top management member to manage the KM activities
(Chong and Choi, 2005). By having a senior member, this will show the organisations
commitment towards KM. It is also observed that Company A does not see the benefits of
the knowledge gained from their business partners and suppliers. In the ICT business,
there is a dire need to form networks and strategic partnerships with business partners,
suppliers and to some extent the competitors (Bukowitz and Williams, 2000) in
designing products and services that meet customers specifications and expectations.
Such relationships cannot be ignored by organisations if they want to be successful in
their KM endeavours.
Company B, on the other hand, has a better understanding of KM, and therefore, a
systematic KM process is in place to guide the employees. This is not surprising as
larger companies usually have more resources than the smaller ones, and therefore,
investments can be made on KM. Thus, to some extent, all the five dimensions are seen
as important indicators of KM performance outcomes. However, two major challenges
are identified; measuring the financial outcomes of KM efforts and the ability to
maintain an up-to-date IT infrastructure. To overcome the challenges, the CKO must
convince the senior management that it is possible to measure the financial gain from
successful KM efforts even though the exact measurement of KM initiatives remains a
challenge to organisations (Huseby and Chou, 2003). In addition, there is no pressing
need to update the KM system frequently as long as it meets the KM objectives of the
organisation. As mentioned by Tiwana (2000), there is no silver bullet in IT
infrastructure since it depends entirely on the organisational members to use the
system to create more value to the organisation.
Suggestions
Based on the results of the case studies, one may question whether are all the 38 items
really important for measuring KM performance outcomes, or whether there are some
items that are more important than the others? This illustrates that the investigation on
KM performance outcomes is not complete and a survey can be conducted to further
examine them. Based on the survey, the outcomes can then be statistically correlated
with the KM efforts to illustrate their importance. The qualitative method used in this
study cannot give a precise picture on how the outcomes are related. As opined by Boje
(1995), the storyteller and the story listener are co-constructors of each story event and
therefore, the voices of the storyteller and the researcher cannot be clearly
distinguished in all circumstances (Liao, 2003). Liao (2003) further added that the
qualitative and quantitative methods are different in both methodology and problem
domain. Furthermore, qualitative studies suffer from the problem of generalisability of
research results. As such, the use of quantitative methods or its combination with

qualitative approaches is an important direction for future work in proving the KM

performance outcomes.
In addition, the KM discipline is growing, and therefore, changes are expected on
how KM activities are applied in the organisational setting. These changes may
influence the KM performance outcomes. Merely looking at past and current KM
practices may inhibit the development of KM. Knowledge is continuously created,
shared and applied which is the source of KM development. As such, continuous
research is needed to build upon the current work.
Conclusions
This paper has reviewed the KM performance outcomes suggested by various
researchers and academics. By consolidating and integrating all these elements, the
authors propose a more comprehensive set of performance outcomes, which is grouped
into five key dimensions. Case studies were then conducted to further investigate the
proposed dimensions. The results indicate that all the performance outcomes
expressed by the case companies actually revolve around the five dimensions proposed
by the authors. This supports the relevancy and appropriateness of the proposed
dimensions. The findings of this research help to promote a better understanding on
the measurement of KM performance outcomes. It is hoped that organisations that
have yet to invest in KM will obtain a better insight into the outcomes and benefits of
implementing KM. For organisations that have already invested in KM, this study will
provide them with clues on how to measure their KM efforts. As stated by Wiig (1997),
such research would help organisations to act as intelligently as possible to secure their
viabilities and overall successes by realising the best value of their knowledge assets.
In addition, it is also hoped that additional research will be undertaken to build upon
this work, and to further develop and enhance the knowledge in developing performance
measures for KM initiatives. The use of statistical methods is suggested to broaden our
horizon on this subject. This will definitely foster a better understanding of the
importance of KM towards enhancing organisational performance and sustaining
competitive advantage. In this contemporary era, KM can play a more important role as
a source of competitive advantage.
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Corresponding author
Chong Siong Choy can be contacted at: scchong@mmu.edu.my

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