10) Assess Value
Measure the Right Things and Use the Measures in the Right Way
A good measurement model must serve many purposes. In a knowledge-centered environment, we need to be able to assess the health and value of both our knowledge base and the processes we use to create and maintain the knowledge. Measures help us identify learning and coaching opportunities for individuals, as well as enable us to acknowledge the creation of value by individuals and teams. Measures are integral to our process of continuous improvement. And finally, we need measures to assess the business value we are creating.
A successful adoption of KCS, and perhaps more importantly, sustaining the KCS practices over time, requires the organization to expand the measurement model. We must move from a tactical measurement model focused on transactions and activities to one that balances the tactical with the strategic. The strategic measures focus on value creation. It is not about replacing the tactical measures but rather adding strategic measures into the mix. A double loop process encourages us to work in the context of the bigger picture: recognize the long term potential value of what we are doing. The measurement model must support both the A loop and the B loop and is therefore more complicated.
Our management practices in business have evolved over the past 100 years from a foundation of making things: a production line or manufacturing model. In manufacturing, we create tangible products like toasters or TVs or cars. When the output is tangible, we can count it discretely. The activity of individuals on the production line is directly linked to the outcome. The number of knobs I put on the toasters (and the activity of my peers) is directly related to how many toasters come off the production line. My activity, time, and productivity is directly related to value created: the number of toasters.
In a knowledge-centered world, however, we are creating knowledge, relationships, experience, and loyalty. These are intangible outcomes: they cannot be counted discretely. Activity, time, and productivity in an environment of intangible outcomes is only loosely related to value. Our business has evolved from working with our hands creating tangible things (factory workers) to working with our minds (knowledge workers) creating intangibles. Yet our measurement systems have not evolved.
We know, from years of experience, that if we put goals on activities it will corrupt the knowledge base. In the formative years of KCS, many organizations put goals on article creation, modify rates, and/or linking rates. These activities are easy to count, but they do not correlate to the creation of value. They are also easy to game or manipulate. The great irony here is the things that are easy to measure are also easy to achieve without creating any value. These activities - leading indicators - can be very valuable in telling us about behaviors and can help us identify coaching opportunities that promote learning, growth, and improvement... so long as the indicators do not have a goal. Goals should be set for outcomes or lagging indicators. Outcomes are harder to measure and much harder to game or manipulate. There are lots of things we want to measure, but we need to be very thoughtful about where we put our goals.
There is no one measure to assess the creation of value. We use the concept of triangulation to assess the creation of value. While the name triangulation would imply three different points of view, we find that five to seven different perspectives gives us a higher level of confidence. Assessing the realization of value requires that we look at a combination of indicators, some qualitative (subjective) and some quantitative (objective), some explicit (surveys) and some implicit (inferred from people's behavior).
The measurement model for KCS needs to fit within the organization's larger measurement framework and support the business objectives. We organize the KCS measures for health and value by Evolve Loop Practice. The specific indicators must evolve as the KCS implementation matures.
KCS is a journey, and the measurements in each of the Evolve Loop practices must evolve as the team matures. The measures will depend on where a team or collection of knowledge workers are on the journey. For more on the measurement framework see the Measurement Matters paper.
