An Effectiveness Measurement Model For Knowledge Management

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Knowledge-Based Systems 22 (2009) 363–367

Contents lists available at ScienceDirect

Knowledge-Based Systems
journal homepage: www.elsevier.com/locate/knosys

An effectiveness measurement model for knowledge management


Yuan-Feng Wen *
Department of Logistics Management, National Kaohsiung Marine University, 142 Haijhuan Rd., Nanzih District, Kaohsiung City 81157, Taiwan, ROC

a r t i c l e i n f o a b s t r a c t

Article history: The aim of this study is to develop a model for the measurement of the effectiveness of knowledge man-
Received 26 November 2005 agement in Taiwanese high-tech enterprises. Following a survey of the relevant literature on the subject,
Received in revised form 12 August 2008 the study describes the construction of the model – including the opinions of specialists, scholars, and
Accepted 17 February 2009
practitioners of knowledge management practice among Taiwan’s high-tech firms, the use of focus
Available online 26 February 2009
groups, the application of analytic hierarchy process (AHP), and a questionnaire analysis of qualitative
and quantitative methods. The study summarizes the experts’ opinions, selects the measurement indica-
Keywords:
tors, and calculates the weightings of dimensions and items. An empirical study is then conducted to test
Knowledge management
Effectiveness
the validity and reliability of the model, and its suitability for improving the measurement of knowledge
Measurement management effectiveness in high-tech firms.
Analytic hierarchy process (AHP) Ó 2009 Elsevier B.V. All rights reserved.

1. Introduction 2. Literature survey

In today’s competitive business environment, knowledge man- KM can be defined as the creation, acquisition, sharing, and uti-
agement (KM) is increasingly recognized as a significant factor in lization of knowledge for the promotion of organizational perfor-
gaining a competitive advantage [8,9,14–16,18,23]. To obtain such mance [12]. Arthur Anderson Business Consulting [4] proposed a
a competitive advantage, companies must know how to manage schematic representation of the relationships among data, infor-
organizational knowledge by expanding, disseminating, and mation, knowledge, and wisdom (see Fig. 1), and stated that data,
exploiting it effectively [6,21]. information, and knowledge are necessary for dealing with regular
Assessing the effectiveness of KM operations is thus an impor- affairs, whereas wisdom is necessary for dealing with irregular af-
tant issue, but the measures that are available to evaluate the fairs and adopting appropriate actions when faced with a changing
effectiveness of KM are generally unsatisfactory. There is a need environment. According to their view, KM not only manages
to develop an assessment model that can be used to make an accu- knowledge, but also encourages individuals to utilize knowledge
rate assessment of the effectiveness of KM. This paper establishes effectively while working.
such a model. The model can be used to evaluate KM performance The term ‘performance’ refers to a measurement of extent to
in terms of the control and coordination of organizational which an organization reaches a given objective; and the term
knowledge. ‘operational performance’ refers to the measured effect of each
The steps adopted in the construction of the model include: (i) operational variable within overall ‘performance’. To evaluate the
consulting with specialists, scholars, and practitioners in knowl- ‘operational performance’ of KM, the American Productivity and
edge management among Taiwan’s high-tech enterprises; (ii) Quality Center [3] and Arthur Anderson Business Consulting [4]
obtaining the views of a focus group; (iii) the application of ana- developed a knowledge management assessment tool (KMAT) in
lytic hierarchy process (AHP); and (iv) a questionnaire survey of 1995. KMAT can be used by enterprises to select the appropriate
qualitative and quantitative methods used in KM assessment. type of KM. KMAT is composed of five fundamental elements: (i)
The validity and reliability of the model is then tested through strategy and leadership; (ii) culture; (iii) technology; (iv) measure-
empirical tests in high-tech firms. ment; and (v) knowledge management process. Four key success
An objective and comprehensive KM effectiveness assessment factors were proposed: (i) procedures of KM adopted; (ii) persons
model is thus established and presented for use by organizations involved in KM; (iii) supporting organizational structure for KM;
engaged in knowledge management. and (iv) information technology utilized in KM. However, at pres-
ent, the structure, processes, and procedures of KM have not been
defined as a concrete standard, and it is difficult to find compre-
hensive and explicit reference criteria.
* Tel.: +886 7 3617141x3461; fax: +886 7 3617141x3451. Andrew et al. [2] identified a strong relationship between orga-
E-mail address: ywen@mail.nkmu.edu.tw nizational effectiveness and KM capability (see Fig. 2).

0950-7051/$ - see front matter Ó 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.knosys.2009.02.007
364 Y.-F. Wen / Knowledge-Based Systems 22 (2009) 363–367

Table 1
Create value via action and application Organizational KM activity measures.

Wisdom Criteria Index


Direct material of value creation
Knowledge creation Knowledge generation
Knowledge Knowledge acquiring
Arrange and transmit intention with Knowledge retention Knowledge arrangement
Information purpose Knowledge storing
Knowledge collection
Illustrate the truth quantitatively and Knowledge presentation
Data qualitatively
Knowledge analysis
Knowledge classification
Knowledge sharing Knowledge socialization
Knowledge contribution
Knowledge distribution
Knowledge instruction
Fig. 1. Schematic representation of relationships among data, information, knowl- Knowledge innovation Knowledge changing
edge, and wisdom (Arthur Andersen Business Consulting [4]). Knowledge improving
Knowledge extending
Knowledge deepening
Allee [1] classified organizational KM activities as: (i) knowl-
edge creation; (ii) knowledge retention; (iii) knowledge sharing;
and (iv) knowledge innovation. This classification can be further
extended as organizational KM activity measures (as shown in high-tech firms. These qualitative data are collected, compared,
Table 1). Allee [1] was only focused on the organizational KM activ- and analyzed to reach a conclusion.
ities without considering the ‘‘effectiveness” of organizational Quantitative data are obtained from questionnaires and are
activity. analyzed statistically by computer using analytic hierarchy process
Hoy and Miskel [11] felt that measurement of the effectiveness (AHP), simple additive weight (SAW), and descriptive statistics.
of organizational activity could be classified into four phases: (i)
knowledge adaptation effectiveness; (ii) knowledge achievement
effectiveness; (iii) knowledge integration effectiveness; and (iv) 4. Establishment of KM effectiveness assessment model
knowledge potential effectiveness (as shown in Table 2). Therefore,
the four phases shown in Table 3 are used as a basis for the mea- 4.1. Developing the performance hierarchy
surement of effectiveness in this study.
Fernandez and Sabherwal [5] also proposed some measures of The first step of AHP consists of developing a hierarchical struc-
KM effectiveness. Sveiby [20] presented an operational effective- ture of the assessment problem. The first level in the present hier-
ness of KM. Some assessment tables were suggested by Storck archy is KM effectiveness. This is divided in the second level into
and Hill [19], Levett and Guenov [13], and Gold et al. [7]. Wen
[22] has also provided some measures of KM effectiveness. Housel
and Bell [10] pointed out that the most important index is the feed- Table 2
back received. The above-mentioned measures are taken into ac- Organizational KM effectiveness measures.
count in this study in developing a measurement index of KM for
Criteria Index
Taiwan high-tech enterprises.
Effectiveness Knowledge adaptive Knowledge adaptability
measures of effectiveness Knowledge innovation
3. Data analysis methodology knowledge Knowledge growth and
management development
This study analyzes qualitative data obtained from: (i) focus Knowledge achievement Knowledge achievement
group interviews and (ii) consultation with specialists, scholars, effectiveness Knowledge quality
and practitioners in knowledge management practice in Taiwan’s Knowledge efficiency
Knowledge integration Knowledge satisfaction
effectiveness Knowledge climate
Knowledge communication
Technology Potential effectiveness Knowledge loyalty
of knowledge Knowledge inspiring
Knowledge Knowledge identification
Structure Infrastructure
Capability

Culture

Organizational Table 3
Acquisition Effectiveness Judgment scores for the importance/preference of criteria using AHP.

Verbal judgment Numerical rating


Conversion
Knowledge Extremely important/preferred 9
Process Very strongly to extremely important/preferred 8
Capability Very strongly important/preferred 7
Application
Strongly to very strongly important/preferred 6
Strongly important/preferred 5
Protection Moderately to strongly important/preferred 4
Moderately important/preferred 3
Equally to moderately important/preferred 2
Fig. 2. Schematic representation of relationship between knowledge capability and Equally important/preferred 1
organizational effectiveness [2].
Y.-F. Wen / Knowledge-Based Systems 22 (2009) 363–367 365

Goal KM effectiveness H1 (0.062)

H2 (0.058)

Criteria Staff Data Information Knowledge Wisdom Staff H3 (0.020)


(0.223) H4 (0.012)
H5 (0.038)
Alternatives Measures
H6 ( 0.033 )
Fig. 3. Hierarchy for KM effectiveness.

I1 (0.078)

five main criteria: (i) human resources; (ii) information; (iii) data; I2 (0.047)
(iv) knowledge; and (v) wisdom. The third level consists of 30 I3 (0.049)
Information
alternatives. (Fig. 3) shows the performance hierarchy designed (0.277)
for this problem. I4 (0.034)
I5 (0.036)
4.2. Pair-wise comparison of criteria and calculation of relative
I6 (0.033)
weights

Model of KM effectiveness Measurement


In the past, an equal weight for each measure was commonly
used to assess the effectiveness of KM; however, the present study D1 (0.025)
posits that the importance of each measure is not equal in prac-
D2 (0.015)
tice. According to the AHP methodology, weights can be deter-
mined using a pair-wise comparison within each pair of criteria. Data D3 (0.009)
(0.103)
To determine the relative weights, experts or scholars were asked D4 (0.022)
to make pair-wise comparisons using a 1–9 preference scale (see D5 (0.015)
Table 3). Each comparison was then transformed to a numerical
value. D6 (0.017)
The pair-wise comparison data were organized in the form of a
matrix and summarized on the basis of Saaty’s eigenvector proce-
dure [17]. Saaty’s method computes w as the principal right eigen-
K1 (0.037)
vector of the matrix A. The pair-wise comparison data are
translated into absolute values and the normalized weight vector K2 (0.029)
w ¼ ðw1 ; w2 ; . . . ; wn Þ is obtained by solving the following matrix Knowledge K3 (0.061)
equation: (0.184)
K4 (0.026)
Aw ¼ kmax w; ð1Þ K5 (0.019)
where A is the pair-wise comparison matrix, w is the normalized K6 (0.012)
weight vector, and kmax is the maximum eigenvalue of the matrix
A (used to calculate the consistency index)
X
n
wj W1 (0.054)
kmax ¼ aij : ð2Þ
j¼1
wi
W2 (0.051)

The result is a positive reciprocal matrix A ¼ faij g with Wisdom W3 (0.039)


aij ¼ 1=aij , where aij is the numerical equivalent of the comparison (0.213)
W4 (0.021)
between criteria i and j.
W5 (0.019)
A judgment or comparison is made on the basis of a numerical
representation of the relationship between two elements that W6 ( 0.029 )
share a common parent [17]. Each judgment represents the domi-
Fig. 4. Structure of hierarchy.
nance (relative importance) of an element in the column over an
element in the row.
It is obvious that each criterion in level 2 should contribute dif- AHP’s results are obtained using the computer program entitled:
ferently to excellence in human performance. The experts were ‘Saaty – the expert choice software package’ [17].
asked to compare the relative importance of the three criteria on
a pair-wise scheme. From the data, a square pair-wise comparison 4.3. Overall ranking of alternatives
matrix was constructed. Each judgment represents the dominance
(relative importance) of an element in the column over an element After setting up the hierarchy and pair-wise comparison of the
in the row. To assist in the pair-wise comparisons, Saaty [17] cre- criteria and alternatives, it was necessary to calculate the global
ated a nine-point scale of importance between two elements. The value of priority of the alternatives. Saaty [17] offered a proof to
suggested numbers express degrees of preference between the show that the optimal set of scores is the principal eigenvector of
two elements, as shown in Table 3. the pair-wise comparison matrix.
Intermediate values (2, 4, 6, and 8) can be used to represent The principal vector is the relative ranking of the evaluation cri-
compromises between the preferences. The relative priorities can teria with respect to the goal. Applying Saaty’s eigenvector method
be considered as the results of using the geometric mean of the to the data, estimates of the weights were calculated for each pair-
pair-wise relative importance obtained from a set of participants. wise comparison matrix for each level of hierarchy. To synthesize
366 Y.-F. Wen / Knowledge-Based Systems 22 (2009) 363–367

the results over all levels, the priorities at each level were weighted Table 4
by the priority of the higher-level criterion with respect to which The weight of each index (overall weights).

the comparison was made. The eigenvector scaling technique of Index Weights
AHP then models the relative weights for each category (priorities) Staff (H1–H6)
and for each ratio (local weights). Global weights for each ratio 1. Rate of staff severance (H1) 0.276
were calculated as the product of its local weight and its category’s 2. Work attitude of staff (H2) 0.260
priority. 3. Average work seniority of staff (H3) 0.094
4. Number of staff who have obtained professional a certificate (H4) 0.054
There were 5 criteria and 6 alternatives, and then there were 5 5. Number of KM staff (H5) 0.169
principal vectors, all of which had 6 elements. Once the matrices in 6. Cost of education & training (H6) 0.147
each level were completed, the relative importance of the elements Information (I1–I6)
in that level was given by the principal right eigenvector of the ma- 1. Flow and utilization rate of network (I1) 0.281
trix of judgments. The number of eigenvectors (that is, local prior- 2. Periodical evaluation and knowledge update rate (I2) 0.170
ity vectors) was therefore equal to the number of criteria. The 3. Degree of information network system construction (I3) 0.180
4. Coordinating and integrating through interior information (I4) 0.121
results quantified the decision-maker’s preference for each alterna-
5. Information management capability (I5) 0.130
tive and provided a means for answering the ‘type-of-manage- 6. Information resources application effectiveness and data 0.118
ment’ question. completeness (I6)
The procedures used to solve this hierarchy system were as Data (D1–D6)
follows. 1. Time validity of customer complaint response 0.241
2. Number of improvement proposals by staff 0.148
 A pair-wise comparison was made of the criteria with respect to 3. Information-based degree of knowledge 0.092
4. Knowledge document standardization 0.213
the goal. In the problem there were 5 criteria in level 2. The
5. Plan of KM 0.143
experts made three pair-wise judgments among 10 with respect 6. Establishment of customer knowledge database 0.163
to level 1. After the construction of the pair-wise comparison Knowledge (K1–K6)
matrix, the next step was to retrieve the weights of each ele- 1. Return rate of innovation 0.200
ment in the matrix. The comparison results and the weights of 2. Acquiring and utilizing extent of knowledge 0.160
three criteria are shown in Fig. 4. The principal vector was com- 3. Support of KM by high-level superintendent 0.330
4. Knowledge sharing on staff 0.144
puted and can be interpreted as the relative importance of each
5. Repaid by superintendent for working performance 0.102
of the criteria. 6. Contribution of technology innovation 0.064
 A pair-wise comparison was made of the 30 alternatives in level
Wisdom (W1–W6)
3 with respect to 5 criteria in level 2. The comparison and the 1. Respect for intellectual property rights 0.254
relative contributions (that is, weights) among 30 alternatives 2. Innovation capability of staff 0.241
with respect to the three criteria results are shown in Fig. 4. 3. Investment on professional staff 0.184
 The final stage of the AHP was to compute the contribution of 4. Number of staff who obtained qualified international accreditation 0.100
5. Operating income of innovation staff 0.087
each alternative to the overall goal (that is, effectiveness of
6. Number of patent obtained 0.134
KM). The overall priority for each alternative was obtained by
totalling the product of the criteria weight and the contribution
of the alternative, with respect to that criterion. The final practice, the importance of each KM effectiveness measurement
weights were obtained, and a ranking was made of the alterna- index is not exactly the same. Therefore, 10 experts were asked
tives with respect to the goal. The results are shown in Fig. 4. to answer an AHP questionnaire and the relative weights of KM
effectiveness were compared.
4.4. Measurement of pair-wise comparison consistency
4.5. Results of the AHP application
To control the result of the method, the consistency ratio for
each of the matrices and overall inconsistency for the hierarchy Following the procedure described above, the relative ranking
were calculated. of the five criteria was then determined to facilitate the selection
The deviations from consistency are expressed by the following of the best alternative.
equation, and the measure of consistency is called the consistency On the basis of the preference vectors, the five criteria of KM
index (CI) effectiveness were ranked as follows: information (0.277), staff
(0.223), wisdom (0.213), knowledge (0.184), and data (0.103)
kmax  n
CI ¼ : ð3Þ (see Fig. 4 and Table 4).
n1
To synthesize the opinion of academic and enterprise experts,
The consistency ratio (CR) is used to estimate directly the con- ‘information’ and ‘staff’ were the most important criteria. ‘Rate of staff
sistency of pair-wise comparisons. The consistency ratio (CR) is severance’ was the most important alternative among those in the
computed by dividing the CI by a value obtained from a table of ‘Staff’ criterion. ‘Respect for intellectual property rights’ was the most
the random consistency index (RI). important alternative among those under the criterion of ‘wisdom’.

CI
CR ¼ : ð4Þ 4.6. Calculation of KM effectiveness
RI
If the CR is less than 0.10, the comparisons are acceptable. For After obtaining the weights of constructs and criteria of KM
this application, all CR inconsistency ratios values were less than effectiveness, 30 indices were normalized to obtain a standardized
0.1 (CR < 0.1); therefore, all the judgments were consistent. Each value (that is, Z value). The purpose of normalization of these indi-
alternative possesses a score on all criteria. The criteria scores were ces was to deal with the problem caused by different units. The
combined into an overall score. The overall score indicates the rel- Z value is between 0 and 1. The sum of each index multiplied
ative importance of each alternative. by the corresponding weight was the standardized value of
In the past, most of the relative weights of a KM effectiveness constructs. The sum of each construct multiplied by the corre-
measurement index were said to be of equal weight. However, in sponding weight created a score of KM effectiveness.
Y.-F. Wen / Knowledge-Based Systems 22 (2009) 363–367 367

Table 5 ‘staff’ were thus the most important constructs in KM practice.


Rank of the KM effectiveness for 76 high-tech enterprises in Taiwan. ‘Flow and utilization rate of network’ (I1) was the most important
Rank Company no. KM score Rank Company no. KM score index in ‘information’. ‘Rate of staff severance’ (H1) was the most
1 022 0.009303 39 029 0.006668 important index in ‘staff’. Such results show that the quantity
2 057 0.009278 40 071 0.006665 and quality of staff are recognized as the most important factors
3 027 0.008676 41 060 0.006655 in the operation of KM.
4 075 0.008577 42 063 0.006592 In the past, few studies have undertaken a systematic investiga-
5 073 0.008498 43 036 0.006589
6 056 0.008346 44 044 0.006478
tion of the effectiveness of the KM process. This subject is strongly
7 011 0.007886 45 030 0.006432 related to a range of output variables, including productivity, orga-
8 064 0.007843 46 033 0.006398 nizational performance, competitive advantage, and competitive-
9 012 0.007741 47 066 0.006287 ness. In the establishment of an assessment model of KM
10 015 0.007652 48 069 0.006277
effectiveness, there are several problems to be overcome – includ-
11 016 0.007598 49 009 0.006165
12 021 0.007468 50 028 0.006157 ing: (i) KM has multiple objectives; (ii) KM is difficult to evaluate;
13 025 0.007321 51 047 0.006076 (iii) KM is associated with ‘fuzzy’ problems; and (iv) KM is related
14 014 0.007245 52 017 0.006024 to individual cognitive behavior.
15 035 0.007237 53 038 0.005976 To establish a comprehensive and integrated assessment model,
16 013 0.007183 54 055 0.005965
the opinions of experts with different interests from various areas
17 045 0.007173 55 039 0.005954
18 009 0.007126 56 050 0.005938 of expertise have to be merged. In addition to utilizing the related
19 020 0.006982 57 008 0.005876 literature, this study has used focus groups, analytic hierarchy pro-
20 058 0.006875 58 054 0.005854 cess (AHP), and questionnaire analysis. These qualitative and quan-
21 037 0.006866 59 024 0.005851
titative methods have been integrated to find the relative weights
22 026 0.006824 60 052 0.005735
23 051 0.006739 61 074 0.005725 of different levels and indices. The final model consists of 5 major
24 008 0.006736 62 003 0.005689 constructs and 30 indices with ensured validity.
25 034 0.006728 63 023 0.005578
26 043 0.006721 64 040 0.005546
27 031 0.006716 65 059 0.005541
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