This website covers topics on knowledge management, personal effectiveness, theory of constraints, amongst other topics. Opinions expressed here are strictly those of the owner, Jack Vinson, and those of the commenters.

Rethinking ROI in KM initiatives

Anu Gupta at scale|free turned up an interesting article on ROI. I hear a little theory of constraints in it. scale|free: Rethinking ROI in KM initiatives

Rethinking ROI: Managing Risk and Rewards in KM Initiatives - a very interesting article about measuring ROI. Unlike many other articles I've seen on the subject, this paper gives some measures that might prove useful within a consulting / professional services environment.

The paper talks about what's important and using that as a metric in determining value to the organization. This is a theme that makes a lot of sense to me -- Where is the pain? And how is Project X going to reduce that pain?

The measures that Alber cites are Leverage (ability to get more talent working with a client - flexibility, speed), Effective rate (average hours billed), and Profit component (earnings per client). In my mind the Effective Rate measure sounds close to a measure of throughput - how many clients can you hand before and after the change represented by the KM system? Leverage gets at the idea of elevating the constraint. In a law firm, if the only people who can work on a specific issue are the partners, then they become the constraint. Creating systems where more junior partners can take on the responsibilities of the senior partners opens the firm to more work by building a larger pool of talent and off-loading work from the constraint.

I like the example presented in the article:

A group of lawyers within the firm specializes in doing work on behalf of regional banks in connection with loans made by those banks. The bulk of the work involves documenting loans. The agreements involved are complex and important to these clients. However, across all of the loan transactions handled by the group there is a good deal of repetition.

The group proposes to develop a knowledge management system jointly with a group of clients that would automate large parts of the documentation process. As transactions come together, the client would enter information into the system, answer questions posed by the system, and, occasionally, consult by phone on the particulars of the transaction.

The hope in using this new system is that far fewer partner hours will be required to complete the transactions. As a consequence, fees to the client can be held down. Indeed, it is hoped that a flat fee billing arrangement will become possible.

The article is on LLRX.com (Legal and Technology Articles and Resources for Librarians, Lawyers and Law Firms), written by John I. Alber, published February 23, 2004.

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