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Get more for your KM money with benchmarks and a solid business case

This article appears in the issue January/February 2019 [Volume 28, Issue 1]
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Defining a budget for knowledge management can be a struggle. It’s hard to know how much money is “enough” or how to allocate the available funds so that each dollar stretches further and has the greatest impact. This is particularly true when a KM effort is new and unproven, with no obvious points of comparison inside the organization.

APQC, a member-based nonprofit specializing in business benchmarking and KM, has released new research on KM program design that includes cost benchmarks. This data can help you determine what level of investment you should be making, how to earmark that money, and which investments are most likely to yield a positive return.

What organizations spend on KM

KM spending varies widely, even in companies with established KM programs, APQC found. Across 171 surveyed business entities, the total cost of KM ranged from $369 per employee at the 25th percentile to $750 at the median and $1538 at the 75th percentile (Figure 1). In other words, KM programs at the top end of the spectrum are spending $1,169 more per employee per year than KM programs at the bottom end. This is a huge gap, even taking into account variations in the number and type of KM approaches supported by each program.

Organizations are more consistent in how they distribute their KM investments, however. It’s common to focus on software and systems when evaluating KM costs, but this expense represents only 11% of total KM budget at the median organization (Figure 2). A much larger share of the pie goes to pay for employees who manage and support the KM strategy, tools, and approaches. Together, costs associated with staff and contract personnel make up 70% of the median KM budget.

Making budget decisions

What does all this mean in terms of KM investments decisions? While there is no right answer when it comes to KM spending, it helps to understand where you stand in comparison to others. If your costs are at the top end of the range, there may be factors that justify your level of investment—for example, your KM program may be focused on high-touch, resource-intensive activities like tacit knowledge transfer, or you may have unique needs around content management or security. But you should still look for opportunities to eliminate waste and reprioritize higher-yield investments.

However, if your budget is significantly lower than that of other organizations, you may not be expending enough to get any benefit. Many organizations spin their wheels for years by starving their KM teams of the funding required to implement their strategies at scale. In these cases, sharing the benchmarks with your leadership team may help jump-start a conversation about the inputs required to achieve the desired outputs and the ROI that can be anticipated 1, 2, or 3 years down the road.

In addition, analyzing your cost breakdown can lead to better decisions regarding KM strategy and investment. Many organizations think too much about upfront investments such as systems upgrades while ignoring the “hidden” cost of employee man-hours devoted to KM. But the truth is that KM programs spend a lot more on people than technology. Because of this, smart IT investments that cut down on routine, low-value KM work have the potential to enhance the user experience while lowering overall costs over time. If your KM team has a lot of people tagging and formatting content, for example, it may make sense to redirect funds towards systems that automate some of that work.

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