2. Her team had managed to find a combination of formal and
informal incentives that stimulated hundreds of staff members
to share their experience with others around the firm. The
technology architecture to connect the firm’s worldwide offices
was in place. Finally, senior management support for the effort
was, for the moment, sufficient to fund the current effort.
Now she needed to consider what was next for the program. The
satisfaction Ms. Johnson felt over the successful integration of
KM techniques into the company was tempered by concerns
about the program’s future. Surveys showed that staff
satisfaction and participation was quite high, and user feedback
about the quality and breadth of the KM system was positive,
though not as high as earlier in the year. There was particular
uncertainty about the attitude of SMSI’s partners, who paid for
the program but did not receive the direct knowledge benefits
seen by the field workers.
The planning for future KM activities at SMSI needs to focus on
sustaining the momentum and effectiveness of the program as
the firm moved from a booming consulting industry to one
where projects were becoming more scarce. Thus, the critical
issue becomes maintaining the current success of its KM
initiatives and system, given both external and internal changes.
BACKGROUND
SMSI, founded in the early 1970s, is a publicly held business
3. consulting and IT services firm. During the last three decades,
the firm has completed tens of thousands of engagements,
ranging in intensity from a few staff weeks to hundreds of staff
years. While technology implementations were still the main
focus of the firm, its expertise in change management and
specialized content areas (e.g., human resource management,
government operations, financial reporting) have become an
important part of the firm’s portfolio. By most measures, the
firm has been very successful. Gross revenues of the firm have
grown steadily since its founding, reaching $1 billion in the late
1990s. In parallel, staffing has grown from about 4,500
employees in 1994 to almost 9,000 by the end of 1999 ..
SETTING THE STAGE
The Resource Structure of SMSI is organized around lines of
business and geographic regions. Within each region, it
followed what is more or less a prototypical staffing model,
consisting of three professional levels. Consultants are the
“worker bees” responsible for the execution of specific tasks.
Managers, the next level in the organization, organize, instruct,
and review consultant work as well as develop work that
requires more experience. Partners, at the high end of the
structure, are responsible for leadership of major projects,
define strategy for the firm, develop business opportunities, and
maintain client relations. These three roles are “the grinders,
the minders, and the finders” of the consulting business
4. (Maister, 1997). These professional roles are backstopped by a
support organization that sustains the day-to-day operations of
the firm.
The Role of KM
Consulting is fundamentally a knowledge-based business.
Clients use consultants to provide hard-to-develop skills,
retaining them for short periods, the duration of a project, or
sometimes longer. Over the last decade a transition has occurred
in the consulting business, away from treating every problem as
a unique opportunity, and toward rapid leverage of experience.
This creates a new perspective on the role of the consultancy,
where consultants act as information brokers, using connections
across industries and projects to identify classes of problems,
and applying their collective skills to solve them (Sarvary,
1999). Consulting firms act as a resource hub, with networks of
staff that can reuse their knowledge for multiple clients.
Finding the right skills within the consultancy and bringing
them to bear quickly is a key selling point. Therefore,
consulting firms need to find techniques for sharing their
experience quickly, and creating the linkages and team
structures that attract clients.
Staffing and Knowledge Retention
Every year consulting firms organize hiring plans based on their
projected project demand. Many recruit from undergraduate and
graduate programs, preferring to train staff in their unique
5. approach to business and clients. New consultants face a great
deal of work pressure and competition for managerial positions,
and a large proportion of them leave before moving to the
managerial ranks. The combined effects of long work hours,
uncertain career paths, and competitive pressure for recognition
all exert adverse pressure on junior staff. Similarly, there is
churn in the managerial ranks as experienced professionals try
to develop the client relationships required to support
promotion to partner. A small proportion of managers achieve
partner status; the remainder may change firms or launch other
opportunities. There is something of an “up-or-out” structure,
similar to that seen in law firms.
Concern about turnover is of greater concern during upswings in
the market, as there is more competition for talented staff. In
these times, firms must replace staff recruited away by
competitors as well as recruit new consultants to meet swelling
demand for services. These two forces have generated hiring
rates as high as 40% per year for some large companies, which
in turn create a great strain on the firms to train and integrate
these new employees into the firm.
Turnover also affects the knowledge available to the firm. When
experienced staff leave the firm, they take their knowledge with
them. Rather than risk the loss of this knowledge, consulting
firms actively collect and codify project-based materials, write
practice guides and methodologies, and synthesize their
6. experience in written, oral, and multimedia forms. When new
inexperienced staff arrive, these codified assets provide
significant leverage. The “push” model of individual training
and mentoring of juniors by seniors has given way to a “pull”
model, where experience is made available on demand through
databases and communications networks.
KM in Consulting Companies
The staggering rate of change in the volume of information has
accelerated the need for information and knowledge
management. Individuals and companies that have their fingers
on the pulse of the newest and most useful information can
command a high price for their knowledge, if they can bring it
to their clients quickly. This, in turn, means that the experts
must access and leverage their own knowledge acquisition and
retention, so that they always have the best information for their
clients.
The consulting environment has always required mobility and
flexibility, and the knowledge resources of the firm must be at
the fingertips of consultants in the field. As one manager put it,
“We’re all road warriors now.” It’s not clear if staff spend more
time on the road than in the past, or if they are just expected to
be available and productive whether in or out of the office.
Consultants are expected to use technology, primarily email,
and to remain connected to the corpus of the firm. In these
firms, successful knowledge management implementations mean
7. that the road warriors can bring the intellectual resources of the
firm with them to client sites. It is not surprising that large
consulting firms were also early adopters of knowledge
management technologies (e.g.,Alavi, 1997; Bartlett, 1996;
Chard, 1997; Reimus, 1997). Knowledge management is a
competency of interest to consulting clients, and the ability to
demonstrate internal implementation competence and benefit
validates the credentials of the firm to potential clients.
CASE DESCRIPTION
For SMSI, the ability to leverage its existing experience through
KM technology came none too soon. The late 1990s were very
busy times for technology and management consultants, and
SMSI rode the leading edge of the boom. To meet customer
demand, SMSI hired staff at an unprecedented rate. At the same
time, staff turnover was very high, peaking at about 20% per
year, as the combination of work pressure and opportunities in a
skill-seller’s market makes retaining staff difficult. Much of the
turnover was among staff with experience in the most current
software platforms. As new skills were learned, many staff left
SMSI to chase better offers. This staff churn created a
continuing outflow of knowledge from the firm’s resources.
8. Surging growth, technical change, and high turnover created
great pressure within the firm to capture and disseminate
knowledge and experience. Lessons learned in one project might
be immediately useful elsewhere, and certainly would provide
value to someone else in the firm. When the firm was smaller,
staff with questions could discuss them with others in the same
office; now, expertise was more scattered and less available.
Individuals did not know each other as well as they did in the
past, and there has been a sense of reluctance to contact
individuals outside the immediate workgroup.
Long-time employees are concerned about the effects of rapid
growth on the organization’s culture of information sharing.
One termed the effect “intellectual sprawl,” where consultants
in different business units were re-creating the same work
products and techniques independently. In their view, there was
not enough sharing of the lessons of technology and engagement
management, at a time when the proportion of inexperienced
staff grew. While the knowledge management program attempts
to facilitate sharing, there was still a sense that the best ideas
were not always available, and that human contacts were
superior to the use of an information system.
Developing SMSI’s KM Program
The development of a formal KM program at SMSI was
facilitated by the firm’s history in information systems
consulting. From a practical standpoint, the firm was well
9. positioned to implement the complex technological
infrastructure associated with KM. The firm’s leadership
committed to solve the technical success and the cultural and
social challenges that KM presents. This recognition allowed
SMSI to avoid some of the stumbling blocks that less
sophisticated firms faced.
Experimentation with KM technologies started in 1992, with the
introduction of Lotus Notes as a groupware tool. By 1998,
almost 100 Notes servers were in place, and all office-based
personnel had desktop access to the tool; most field personnel
had shared access through one or more Internet-enabled
computers. When the tool was adopted as a firm-wide standard,
a number of special interest groups (SIGs) were established, and
used Lotus Notes as a tool to facilitate discussions across
offices ontopics of mutual interest as well as an e-mail
backbone. Most were informal discussions on emerging
technologies; these discussions rarely lasted more than a few
months as individual knowledge needs changed. Often they
became places to ask direct questions from individuals across
the firm, with additional follow-up through telephone calls.
Occasionally some synthesized databases stimulated working
papers or, eventually, encapsulations of SMSI’s best practices.
To stimulate further development and sharing of information,
SMSI established a Knowledge Colleagues program. Staff
working in business units proposed short-term technology
10. experiments or projects, resulting in the development of a paper
or prototype to share throughout the firm. Individuals were
released from their project work for two weeks to work on their
tasks, with the expectation that they would also contribute
additional time to complete their work. A series of activities
dealing with knowledge sharing was established in late 1996,
facilitating transfer of information across several core
disciplines around the firm. The initial series included systems
development, business process reengineering, customer value
management, engagement management, change management,
advanced technologies, and decision analytics. Knowledge
management and electronic commerce were added in 1998,
along with the firm-wide rollout of the technology platform.
During these first few years, the list of completed contributions
grew from 400 to over 4,000 topics (Figure 2). This growth was
a mixed blessing. Ms. Johnson noted that the more recent
documents were not as useful as earlier ones. The initial topics
tended to be of more general interest, and later ones were more
specialized to particular problems and industries, and less
relevant to the general population. In addition, there was less
review of the contents as the number of documents grew.
SMSI’s KM program extended beyond the development of the
Colleagues program. A small headquarters-based unit acted as a
clearinghouse for the firm’s current and past activities.
Databases of current activities across the firm, model
11. deliverables, and frequently asked questions were made
available. They were representative samples of well-received
project materials, client proposals, templates, and general
advice on the topics at hand. Experts and thought leaders in the
topic area were identified, and their particular expertise
highlighted. Discussion databases, where questions may be
posed to these experts, received several postings a day. These
discussion databases could be initiated by anyone in the firm,
and there were literally thousands of them. No central
repository was maintained, and the contents were often informal
and somewhat wild and wooly.
SMSI’s Knowledge Colleagues also agreed to participate in the
discussion databases and make themselves available for ad hoc
questions around the firm. Through their responses, the
Colleagues extend the informal information network that
corporate growth was dissolving. The time they spend in this
role was not billable to any project, and went largely
unmonitored. Here, more than anywhere, the altruistic nature of
the knowledge-sharing experiment was seen, as individuals who
answered questions were often contacted off-line for further
explanations.
CURRENT CHALLENGES
The success of the SMSI KM program was quite remarkable.
Almost all of SMSI’s staff used the KM system in some fashion.
The most pleased were the junior and mid level consultants,
12. who found ready reference for their project needs and routine
questions about the firm. Managers and partners used the system
to locate experts for use in proposals and to fill staffing gaps
for projects. This was particularly valuable when there were few
available resources, and there seemed to be a constant scramble
to match client needs with experienced consultants.
Of all the various facets, Ms. Johnson was proudest of the
Knowledge Colleagues program. Here, more than 800 members
of the professional staff, almost 10% of the firm’s employees,
were volunteering time to share their experience with others
around the firm. This was the essence of the cultural change
that SMSI needed to leverage its knowledge capital. The
program’s participants were eager to add new materials to the
collections available across the firm, as their contributions were
noted in their annual performance reviews as an important
contribution to the culture of the firm. While not a large
measure, there was clearly some recognition in the review
process that was felt to factor into raises and promotions.
Now that the program is in place, Ms. Johnson’s challenge is to
establish that SMSI’s KM can continue to provide value. Will
the KM system continue to provide useful information? She
considered the primary driver of the KM program’s success to
date: the perceived positive effect on users and the firm.
User value is subjective, resting in how the user applies the
knowledge to the problem at hand. A KM system may provide a
13. specific answer to a direct question, or it may provide some
insights into an issue that add value in a new context. In a
knowledge intensive industry, the results of answers may be
easy to measure (such as the foregone cost for work that could
be borrowed, rather than repeated), or may be very difficult to
quantify (as with the value of a confirming perspective prior to
taking a decision).
To facilitate the acceptance of the KM program, there was no
cost to using the system. It was hoped that a free system to
share knowledge would demonstrate its value organically, rather
than through a pricing mechanism. It was expected that the free
system would demonstrate particular deliverables (i.e., training
courses) that might be subject to internal development charges.
With KM systems, as with other types of decision support tools,
users who do not like the tool may choose to ignore it or not
contribute to it. Thus one measure of user value is the level of
participation. In traditional transaction-oriented IT systems,
users have little choice about using the technology. They may
love it, or they may hate it, but the computer is still integral to
performing their jobs, and users are compelled to make do with
the system. Thus continued participation and inquiry of a KM
system may be used as a surrogate for satisfaction.
In turn, satisfaction with a KM system often generates
additional demands for knowledge. The more value users found
with the information contained in the system, the more likely
14. staff were to come back with additional requests and inquiries
(and the higher the costs of the system to develop new
materials). The evidence that requests were growing was the
major justification for continued funding of KM efforts at
SMSI. A more formal measure of effect was still elusive. In
manufacturing environments, it is possible to identify the value
of knowledge through reductions in defects, worker
productivity, or other production-based metrics. In consulting,
the results of learning and transferred experience through the
use of KM tools tended to be a better quality of ideas, rather
than simply finishing work more quickly. One consultant noted,
tongue-in- cheek, that finishing work more quickly might even
be against the firm’s principles, particularly if the client was
paying by the hour. The senior managers reviewing the effects
of KM on the organization were asked to think about softer and
more anecdotal measures than they were used to, with user
satisfaction being a primary indicator of continued success.
Of course, reasoned Ms. Johnson, this would likely work in
reverse as well: A KM system that did not address the needs of
the users would get less use. Requests would taper off, starting
a possible downward spiral toward obsolescence. Such a spiral
would be hard to identify beforehand, and would be difficult to
reverse. Thus sustaining a KM program requires several critical
adjustments to the KM program to maintain the positive
momentum and continually demonstrate the KM system’s value
15. to users and the firm. Yet, Ms. Johnson thought, how does SMSI
(or any firm for that matter) meet these challenges?
Encouraging the collection of knowledge from a large number
of contributors had several unanticipated consequences. The
most concrete was a large accumulation of materials, not all of
which were adding to the available knowledge for several
reasons. First, redundant materials have little incremental
impact.
At the outset of the Knowledge Colleagues program all
contributions were welcome. In response, staff posted their
planning tools, interim deliverables, and project documents for
use by others. Over time, though, the incremental value of these
postings to others decreased. When searching for a topic, many
users looked only at the first few hits. Having seven or eight or
15 examples of a project schedule made little difference in
outcome, but they do consume resources.
Second, collected materials become obsolete, and their effects
on the organization decrease. The collection of project materials
and examples permitted the dissemination of new information
quickly. Over time, though, the older materials became less
useful as techniques change and market requirements shift. In
the fast-changing world of information technology consulting,
some materials were really only useful for a few weeks or
months. After that, they might be misleading or just plain
wrong. If users of the KM system find that materials are not
16. current, their satisfaction will drop, and they are less likely to
ask for information in the future.
Third, the “core knowledge” needed by the firm was about to
change because the marketplace was about to change as well.
When SMSI’s KM program was launched, the firm was
struggling with integrating thousands of newly hired employees
into the fabric of the firm. When a new hire arrives, the KM
system gives him or her a ready source for contacts around the
firm and exposure to SMSI’s project portfolio. This eased the
transition into the firm, and made these new hires much more
productive.
With the slowing of the consulting marketplace, however, the
firm may not be hiring staff as quickly, and the value of
indoctrination-focused knowledge falls. In a declining market,
emergent needs revolve around developing and maintaining
customers and looking for new opportunities, rather than
sharing knowledge about techniques to complete projects. The
SMSI partners, who made up the firm’s marketing and
management teams, needed support in their quest to obtain
work. Internal data sources, while providing information on the
firm’s existing project and resource portfolios, provided limited
value in their search.
SMSI was willing to pay for the KM infrastructure and support
participation in knowledge activities. This senior management
support came from the desire to retain and reward key
17. employees, and less from any formal calculation of the
knowledge benefits to the firm. In a time of high turnover, any
reasonable technique to retain staff through formal and informal
recognition was deemed useful. Even in the absence of financial
value, the firm’s partners and senior executives believed that
the program was helping the firm manage its growth in a time of
technical change and rapid expansion of staff.
The belief in the potential of KM to sustain the company
through this period of growth was most manifest in the
recognition of Knowledge Colleagues. Participation in the
program was specifically considered during staff personnel
reviews, and Colleagues were given special business cards that
identified them as participants. This provided both financial and
psychological incentives to participate.
As she considered these observations, Ms. Johnson saw that
they interacted in a complex way. Firm growth stimulated
demand for knowledge, and the programs she developed helped
to meet that need. The internal programs and incentives created
an active knowledge-sharing environment. Was there more
“knowledge sharing” than could be maintained while preserving
quality? Should there be additional screening or reviews put in
place? What effects would such changes have on the culture of
the firm and incentives to provide knowledge?
Forces external to the firm would also affect what direction KM
should take. SMSI had benefited from the explosive growth in
18. e-commerce paired with the millennial-driven Y2K systems
revisions. The suddenness of these industry changes created an
extreme demand for information and solution reuse, which
provided great leverage from the collected knowledge assets of
the firm. There was little expectation that this type of work
would continue at the same pace, and much of this previously
valuable information would no longer be needed. The cost of
keeping existing materials is small, as long as they are correct.
What new knowledge needs would emerge when markets start to
decline? Integrating new staff was going to be less important.
What knowledge will be needed to maintain SMSI’s revenue and
opportunities for growth? Are there unmet internal markets for
knowledge that might still be exploited? This is another area
Ms. Johnson wanted to explore.
The internal KM program at SMSI needed to shift its focus from
creating a knowledge-sharing organization to one that manages
its knowledge as an asset that depreciates over time. The
success of the program would be based on maintaining the value
and quality of its contributions to its users. In addition, a
somewhat shaky forecast for SMSI’s services would affect the
willingness to support programs that do not demonstrate
bottom-line contributions. Was there a way to directly
demonstrate thevalue of knowledge sharing to the partners of
the firm?
She believed that ongoing investment is needed, but was not
19. sure how it should be applied. Is the development of new
knowledge more important than cleaning up and review of older
information? Are the incentives in place adequate to keep the
internal knowledge channels open? What about developing new
markets for KM? What should be the focus of her team’s
activities?
Paper Points
What challenges is SMSI facing regarding their KM program?
How would your team address those challenges?
What are lessons can be learned from SMSI’s experience?