Funding project ROI with knowledge management

Introduction

Project management is dedicated to improving the chances that a project is completed within a set time frame and budget and achieves an acceptable level of quality. The project managers must know how to apply the right balance of knowledge, skills, tools and techniques. Instead of managing projects by the seat of their pants, companies need to develop standard project management best practices. These practices should be captured through the Knowledge Management System and shared among the projects. Standardizing practices company wide simplifies and shares the best practices in the management of projects across multiple business units or locations. Sammer (2001, pg. 1) cited an estimate that the average company devotes 8 – 10% of a project's total expenditures to the systems, training, consultants, and other resources necessary to support the projects. Companies that relegate project management to employees without required skills and knowledge can spend as much as 16% of total project costs on management-related expenses. Knowledge Management can help to reduce these costs. In determining Project ROI, it is tempting for project sponsors to focus solely on the financial payback. Other key metrics such as, time spent on the project vs. planned timeline, actual expenses vs. budget, and quality of the deliverable are also very important (Sammer, 2001). To maximize the ROI on projects, a company must invest in project management tools, such as project management software, project portals, knowledge management systems and collaborative tools, and training.

Knowledge and experiences are more and more important for projects that are innovative and interdisciplinary. The project organization and project teams are more and more decentralized and their knowledge fragmented. After finishing the project, often team members are off to other projects all over the company. Project documentation is stored in some folders often without consideration for re-use. Lessons learned, skills and competencies should be acknowledged and available for future projects (Disterer, 2002). Knowledge management can improve the ROI of projects by Improving the project processes, enabling communication with collaboration with project portals and community of practice, fostering proactive project management and employing an Electronic Project Repository.

Improving the project processes

Projects are one of the most common ways of managing. Many knowledge intensive initiatives, such as research and development, innovation, consulting, or organizational change initiatives are managed as projects (Katzy & Zigurs, 2000). Projects are defined as temporary organizations with detailed tasks, to be completed at a specific time, within budget, to achieve specific objectives. When a project is finished, the project team is disassembled. It is difficult to locate which employees worked in which project, who were responsible for which specific tasks, and where these employees are working now within the company. These problems increase with the increase in the number of projects running in parallel. We have to systematically capture project team knowledge and experiences and manage them (Disterer, 2002). Complexity increases even more when the team is geographically dispersed, from different organizations, and from different cultures. As computer and collaboration technologies allow project team members to be increasingly dispersed in time, place, and organizational affiliation, even greater opportunities and challenges arise (Katzy & Zigurs, 2000). Project management will be focused on tracking project work processes and efficient and effective sharing of information and knowledge. Task interdependence and member distribution across time, space, and technology make collaboration essential to successful project (Chen, et al. 2003).

Increasingly project management requires more collaboration. In the past, project management was focused on “management”. Only a few people knew the total picture of a project, planned the project and assigned tasks to project members. They did not make decisions, and were less concerned with the impact of their work on the project. They only had to know their individual tasks. The style of project management works in stable, repeat product and process environments, such as building a house. This style will not work well in projects with rapid technology advancement, business globalization; high personnel turn over, and distributed team membership (Chen, et al. 2003). Often companies are not systematically securing knowledge in projects for re-use. Knowledge and useful experiences are lost with the end of a project. Traditional project management focuses on planning, organizing, directing, and controlling resources to achieve specific goals on time and within budget. Efficiency and effectiveness of the work of the project's team members is critical. Most companies are investing in projects but investing nothing in evaluating and learning from it. People learn the most from within projects, but cannot pass on their experiences (Disterer, 2002).

Often project management focuses on corporate reporting with little information sharing. Low information sharing may lead to ineffective communication. Often project managers manage deliverables and resources, but not the project processes. Often project managers don't know something has gone wrong until the output report tells them and it may be too late (Chen, et al. 2003). Instead of managing projects by reports, project managers should introduce knowledge management in their projects. This involves explicit representation of project information, timely sharing of the information, converting the information into knowledge. In addition to project reporting, we need to analyze project processes. Instead of project manager producing a PERT chart or Gantt chart to schedule the project, the project team should together iteratively plan the project with multiple decision making iterations such as breaking down the project into manageable tasks, estimating processing time for each task, organizing task order, identifying task interdependencies, estimating possible risks related to each task, and selecting alternatives to mitigate the risks. This process should be documented with the chart, task information, decision rationale, and other related artifacts (Chen, et al. 2003). Project portal, Knowledge Management Systems, and collaborative technologies make this possible.

Enabling communication and collaboration

Collaboration is a fundamental component of successful projects. Team members need to know exactly when, what, and how something is being done and by which stakeholders or resources. Project coordination can be examined in knowledge management terms. Knowledge is defined as meaningful information that is put into a particular context. Knowledge management can be defined as the process of acquiring, creating, sharing, and using knowledge (Katzy & Zigurs, 2000). Based on these definitions, knowledge management can be considered as a fundamental cornerstone of project management. Knowledge Management can help improve project ROI.

Project Management and Knowledge Management

The following highlights the differences between Project management and Knowledge Management.

  • Projects are by nature finite endeavors, whereas knowledge should stay around as long as it is usable, typically far beyond the life of a single project (Katzy & Zigurs, 2000). Project Management is a finite effort for a specific period of time. Knowledge Management is ongoing and knowledge should be maintained as long as it is useful (Chen, et al. 2003).
  • Project management is goal oriented (Katzy & Zigurs, 2000). Knowledge Management is not necessarily an end in and of itself. Knowledge is created and modified as project activities occur. The context of the knowledge creation and application are important (Chen, et al. 2003).
  • Projects make Knowledge Management necessary across time and contexts. Projects also create their own distinct team and organizational context (Katzy & Zigurs, 2000). Project communication allows people to exchange tacit knowledge. Project process documentation transforms and externalizes tacit knowledge into explicit knowledge. By reviewing project lesson learned, the project team internalizes and turns explicit knowledge into tacit knowledge. By applying the project management methodology and experience, the project team combines and integrates implicit knowledge with explicit knowledge. No project is the same. Successfull project managers apply knowledge gained from internalization and documented project processes from externalization into their projects (Chen, et al. 2003).

Project management collaboration work levels

Knowledge integration is enabled through collaboration. Collaboration is to make joint cognitive effort toward achieving an agreed upon goal. Project team can collaborate in three levels: collected work, coordinated work, and concerted work (Chen, et al. 2003).

At the collected work level, each member makes an individual effort. There is no coordination among members. Team productivity is simply the aggregate of individual efforts. A typical Project Management scenario at this level is that the project is a single-location project, tasks in the project are very loosely coupled. Every individual in the project needs to know his/her own job. It is the project manager's responsibility to aggregate the final results. The coordination and communication among project members is very low. The project is simple and in a repeated, fixed environment. It can be managed by walking around physically. Project Management tool at this level should support: scheduling, resource allocation, task allocation, milestone process tracking, project information storage (Chen, et al. 2003). Knowledge management is not significant at the collected work level.

At a coordinated collaborative work level, team members still make individual efforts, but the success of some members depend on the timely receipt of the deliverables produced by others. The success of the team depends the coordination of member's efforts. Managing coordinated collaborative work involves managing interdependencies between activities. The processes tend to be ordered and characterized by hand-offs and progressive integration. The need for interactive communication increases to establish agreement and monitor progress for their coordinated hand-offs. Formalized coordinated work processes are an important part of an organization's Intellectual Capital. Project management at this level requires coordination among project individuals. In addition to collected collaboration functions, the project management tool should support: group calendaring, task interdependence analysis, timely change notification, easy access to project information, and process tracking (Chen, et al. 2003).

At the concerted collaborative work level, all members must contribute in concert to the group effort. Performance of one influences the ability of all other members to perform. Each member of the crew must perform a different task, but all must perform in concert. An aggregation of uncoordinated, individual efforts would achieve nothing. The need for interactive communication (verbal or non-verbal) is needed to be continuous. At the coordinated level, the project manager is responsible for document management by making documents accessible to other members. At the concerted level, every project member has the responsibility to manage the documents and privileges to view relevant documents (Chen, et al. 2003).

Fostering proactive project management

Reactive project managers often are reactive because of inadequate planning, i.e. failure to adequately plan and generate sufficient alternatives at the beginning, insufficient risk management, lack of planning under pressure, inadequate analysis and design. They often do not review past projects to gain insight from lessons learned (Chen, et al. 2003). Instead of being reactive, project managers should manage their projects proactively. Proactive project management requires project members to conduct detailed planning, identify potential risks, and mitigate those risks. Proactive project managers make decisions objectively backed by information. They anticipate and prepare for potential problems. It reflects past knowledge and experience, i.e. organizational memory. They can apply successful lessons learned to their projects. Proactive management requires an organizational “project memory” for the present project and refer back to on future projects. One way to externalize an effective organizational project memory is with an electronic project repository. (Chen, et al. 2003)

Employ an Electronic Project Repository

Project documentations are often not digitized or not managed. Information is often not shared among the project teams or the organization. Digital documentations and files are easy to store, access, retrieve, edit, and route. The goal of an electronic project repository is to efficiently and effectively manage and share project information. Effective management of the project repository can improve project performance by using the appropriate resources, reducing data entry and reentry costs, eliminating duplication and information loss, reducing product development time, fostering improvement in process quality, standardizing work processes, improving management's ability to efficiently retrieve accurate information, and increasing management control. An electronic project repository can be connected via middleware with other information systems in the organization and provide a smooth information flow (Chen, et al. 2003).

Project documentation

Project documentation (project folders, project plans, schedules, cost summaries, progress reports, protocols etc.) should support communication during the project and address the information needs of various people: project members, project management, project steering and supervising. Often the target audience of project documentations is management and users, and rarely the members of future projects. To transfer knowledge and experience, project documentation should also represent methods, outline problems, describe both successful and unsuccessful solutions, identify experts (both internal and external), successful collaborations, and their success factors, hand down tips and tricks, etc. “Lessons learned” would be helpful for following projects. It would be extremely useful to be able to find members of prior projects and talk to them. Often members of a project finished a year ago are hardly identified and information is not tracked (Disterer, 2002).

Explicit representation of project information is essential to effective and efficient communication. It allows the project team to have a common understanding about what is going on. Detail documentations enable team members to gain comprehensive understanding of the project. Project members should document process details such as the steps to perform the tasks, tools used, the rationale of decisions, and context (e.g. task participants, the assignment date, the due date, the actual finished date). It provides clear specification and important project information, e.g. key concepts, ideas, project process, and member responsibilities. This would transform information into knowledge by speeding the search process, identifying the trends for specific information or trends and patterns across time, tasks, and even multiple projects. (Chen, et al. 2003)

Concepts and examples of incentives for knowledge sharing,

Let us take a look at the barriers to knowledge sharing. Projects usually have time and budget constraints. We often have to work till the last minute. The necessary work such as capturing knowledge and experiences often are dropped due to the lack of time. Often the project team for the next project likes to “pull” members out as soon as possible. The project team is often dissolved before documenting the knowledge and experiences. There are considerable individual and social barriers to articulating and documenting individual knowledge and experiences. Analysis of failures and mistakes would be very valuable, but we tend not to articulate or analyze failure. Employees often avoid admitting mistakes because of the negative effects for them. Often we are looking for failures, i.e. what did not work in lesson learned. We should also document success, i.e. what went well. Often there is no incentive to address “What's in it for me?” There is no recognition and appreciation on documentation. To foster knowledge sharing, Knowledge Management requires an atmosphere of generosity in providing incentives, freedom to express issues and safety in admitting mistakes and learn from them (Disterer, 2002). One way to document “lesson learned” is to focus on the issues and not the people and document at the end of each project phase instead of at project closing.

In developing incentives for knowledge sharing, American Productivity & Quality Center (APQC) (September, 2001) recommend:

  • Recognizing and rewarding time to use and create knowledge. If the project team members feel that they have to ‘steal’ time from the ‘real’ work to do this, they won't. Budget time for knowledge sharing.
  • Using the knowledge system has to be self-rewarding to the project team member. Users have to get something out of it, e.g. knowledge they need or a sense of status and recognition. Encourage and reward project team to not “re-invent the wheel” and adopt best practices.
  • Recognizing individual as experts with the organization. Ensure that an internal expert's name should be attached to documents, guidelines, and presentations they created. This will help get the best people for the projects.
  • Creating recognition for sharing, transferring, and using knowledge and best practices by celebrating best-practice success stories and tales of big savings and important contributions.
  • Recognizing all parties involved, both those who share knowledge and those who receive knowledge. If both parties are not feeling rewarded, you won't get the desired results.
  • Implementing a ‘Standardized’ reward system. It may help institutionalize the practice into the culture of collaboration and sharing.

These recommendations can be applied in projects.

APQC (September, 2001) cited some examples of best-practice organizations in applying incentives in Knowledge Sharing:

  • Chevron builds metrics around knowledge sharing and reuse. They are integrated into the annual performance evaluation, technical career ladders, promotion, and job-posting processes.
  • Siemens measures and rewards participation in ShareNet. Contributors earn ShareNet Shares, relative to the quality and reusability of the contribution. Rewards include invitation to the ShareNet global knowledge-sharing conference, being part of a community, pride of excellence, reducing the time spend answering standard questions, expert exchange, and knowledge targets become part of the individualized incentive system.
  • Hewlett-Packard Consulting recognizes the employees knowledge sharing and applying in the culture of balancing innovation with reuse. The rewards include company-wide recognition and an all-expense-paid trip or cash award.
  • Xerox, in the communities of practices, being recognized by peers, is a measure of success in itself. Individuals are rewarded based on the number of times their tips were used by others in their community. The rewards include cash or prize award as well as a nomination to the Hall of Fame.

Knowledge transfer and sharing between projects:

The number of tasks and the amount of work within a company managed as projects is growing very fast. This is because the key characteristics of project organizations address success factors of companies: high flexibility, interdisciplinary work, promoting innovation. Development projects are influenced by “time-to-market”. For internal projects, sponsors want their benefits as soon as possible. Short term and quick return on investments projects, are common. By not “reinventing the wheel” and not “making the same mistakes”, knowledge management can significantly improve project ROI. The increasing complexity of project work also requires existing knowledge to deal with complexity and to increase efficiency (Disterer, 2002).

Project team members play the role in transferring knowledge and experiences from daily work into a project team. “User participation” provides opportunities to transfer knowledge and experiences from users and functional experts to developers. Internal documentation, standard operating procedures, etc. contains knowledge, which can be reused in projects. Experienced users and experts can be interviewed during requirements analysis. The transfer of knowledge from routine organizations to projects is well established. The transfer and sharing of knowledge and experiences from projects to the routine organization is explicitly assigned and addressed within the project management. For example: product documentation, users' manual and operating instructions, where knowledge about usage and operation are documented. Training courses and materials can also transfer knowledge. In addition to storing and disseminating the working results of projects, we need to transfer and share knowledge and experiences from preceding projects about methods and tools used. This knowledge should be passed on to following projects (Disterer, 2002).

Transferability is critical in project management because it involves the exchange of explicit information regarding when, what, and how something is being done, and by which different stakeholders. Transferability can be of implicit (to know how) or explicit (to know about facts and theories) knowledge. The transferability of these two types of knowledge can vary considerably. Explicit knowledge is transferred and shared by communication. Implicit knowledge is transferred and shared by applying knowledge and working together. Knowledge can result from combination, or the conversion from one type of explicit to a different type of explicit knowledge. Some of the tacit knowledge used by good project managers could also be tremendously relevant if shared with other stakeholders. A related problem is the fact that most project managers do not explicitly budget for time to perform knowledge transfer and sharing (Katzy & Zigurs, 2000).

The following are some ideas to foster knowledge sharing and experience transfer for projects (Disterer, 2002):

  • Dedicated time and budget to capturing, transferring and sharing knowledge and experiences. Define what is needed. Assign someone responsible for how knowledge and experiences are documented, stored and preserved.
  • Project closing is becoming an important phase to identify and to capture new knowledge and to prepare the knowledge for transfer to other projects. It provides the opportunity to identify and secure knowledge and experiences of project team members. Many companies have integrated systematic project evaluation in their project methodology. But the precondition is an open and constructive atmosphere of generosity, freedom and safety amongst the project team members. To foster learning from critical and somehow problematic project situations, a trustful and open working atmosphere, secured by management is needed.
  • Documented “lessons learned” covers descriptions of the identification and the solution of concrete and detailed explained problems. They can be used as examples for following projects. It should cover technical issues, organizational aspects or special social situations. It should also include failed approaches and approaches which are not chosen for implementation. It is a way to reveal, store and externalize knowledge. To focus on issues and not on the people, the project team should document “lessons learned” at each phase of the project instead of during project closing.
  • Another documentation tool for project knowledge is the project profiles with project characteristics and summaries. They are easily searchable. Systematic collection of project profiles provides a source of knowledge about projects and can be used by others to find people or documents to get some help or support.
  • Expert “yellow pages”, “expert registers”, “who knows what” databases to identify the project member to prior projects can be used to trace back knowledge and experiences. People can search them by keywords to find a contact person for a specific problem. External experts such as e.g. suppliers, consultants, former employees should also be in these databases so they can be contacted them if there is a problem.
  • Companies should formally define organizational responsibilities for transferring knowledge and experiences from projects. There should be people responsible for fostering and improvement of knowledge reuse.

You can also foster sharing of knowledge and experience:

  • By improving communication and collaboration using project portal. A Project portal is a suite of integrated applications that provide users with a single point of entry to information associated with a project. It is a gateway to the collection of project data and data resources. It is used for creating, organizing, navigating, viewing, and using project information, linking project information with underlying business processes, and capturing, sharing, and utilizing knowledge. Through communication and collaboration using a project portal, knowledge and experience are shared.
  • By promoting training and learning. Taking project management training and documenting “lessons learned”. Teaching and participating in class discussions in Project Management courses and attending Project Management conferences such as this one, provide opportunities of knowledge sharing and transfer.
  • By setting up Project Management Community of Practice. Communities of Practice are groups that form to share what they know, and to learn from one another regarding some aspects of their work. Through networking and sharing of experiences, problems and the solutions, A Community of Practice proved to be very effective in providing support in an organization. For the most part, it is a voluntary, informal gathering and sharing of expertise and knowledge. It is where best practices and innovations first emerge and where the solutions to shared problems are first identified. But it takes time for Communities of Practice to emerge, to flourish and to become productive. They cannot be mandated. Often Project Management Communities of Practice are Virtual with: searchable Project profiles and process to provide knowledge about projects; project documentation, expert databases and discussion forum to promote sharing and applying knowledge.
  • By recognizing the benefits, dedicating time, budget and assigning formal responsibilities.

Hawthorne Effect at work

Hawthorne effect proposed that “by simply making people feel valuable you increase their motivation and their performance!” By taking employees and giving them specialized training in project management skills they did not have, you have given them the feeling that “they is so valuable that you will spend time and money to develop them.” They feel “they are on a track to the top”, and that motivates them to work harder and better. The motivation is independent of any particular skills/knowledge that they gained from the training. They feel that they are valued. The Hawthorne Effect is at work in a Community of Practice too. In our case, the management trainee took a few project management courses. She enjoyed it so much that she started to apply the techniques at work. And the techniques worked! She shared her experiences in the project management Community of Practice that a few seasoned project manager set up. Other members appreciate her knowledge and consider her techniques as best practices. She feels she is valued among her peers and management, she is on track to the top and that motivates her to work harder and better. Instead of management making employees feel valuable. She is now an empowered learner/employee. She is self-motivated and has increased her performance by herself!

Organization benefits model of project management community of practice.

An IBM study suggested a causal model of community interaction and individual, community and organizational benefits. The central focus of this model is the level of participation within the community. Increased participation is correlated with increased resource use. By providing more content resources (documents, presentations and tools), Tools to help organize content, such as portal applications, or easily searchable (e.g., text classification and search engines) repositories would also make the community's resources more valuable. Increased participation would also generate increased levels of new documents and processes which contributed to the community. Increased participation can also lead to the increase in both interaction and coordination activities that can lead to increased personal job satisfaction and job-related skills. The increased satisfaction and job know-how supports greater organizational benefits such as increased sales and decreased employee turnover. The personal and organizational benefits due to the community will reinforce greater community participation. This model is important because the model allows program sponsors and community leaders to understand how the investments that are made in community resources are linked to various kinds of performance outcomes or benefits (Millen & Fontaine, 2003).

Maslow's human need hierarchy in project knowledge management

The Maslow's human need hierarchy supports this organizational benefits model. It proposed that lower level needs must be satisfied before higher level needs can be addressed. First, people have to fulfill the physiological needs. They need a job first. The team is employed in a project with adequate physical working condition. After satisfying the physiological needs, the project team members can engage in learning which help them to satisfy the safety need. They would be able to meet both personal and organizational objectives. By joining a Community of Practice, they can now move on to satisfy the social contact needs. They gradually build up a sense of belonging and love within the community. They start to enjoy working in the project and company so much they start to be passionate about the work they are doing. Like the management trainee example, she started to contribute in the Community of Practice and felt more and more productive. This satisfied the self-esteem needs. With more participation in the Community of Practice, as proposed by the IBM model, it leads to increased personal and organizational benefits which encourage the employee to participate more and more in the community, thus satisfying the self-actualization needs. We need to motivate and transform traditional project team member to empowered project team member, by providing management support, resources, content and just-in-time delivery of information and knowledge. After acquiring the knowledge, we need to motivate employees by providing rewards and encourage them to apply knowledge, share and create new knowledge by joining and contributing in Community of Practice with trust and passion.

Conclusion

More and more companies are organizing by projects to address complex business changes, to increase responsiveness, and to be flexible and innovative. Knowledge intensive organizations are often formed and managed with the project organization. But projects are temporal. Documents and contact persons are hard to access and often lost. Project managers need to identify, prepare and distribute knowledge and experiences to bridge the boundaries between one project and other projects or the firm's permanent organization. Successful projects often depend heavily on the right combination of knowledge and experiences. Dissemination and usage of existing knowledge is critical. Companies must spend sustainable learning efforts not only for one project, but also for the future projects. Project failures should be seen as lesson learned and opportunities to improve rather than to blame people involved (Disterer, 2002). Knowledge Management can significantly improve Project ROI and should be part of project management.

References

Chen, F., Romano, N.C., Nunamaker, J.F. Briggs, R.O. (2003). A collaborative project management architecture. Paper presented at the 36th Hawaii International Conference on System Sciences, Hawaii, USA.

Disterer, G. (2002). Management of project knowledge and experiences. Journal of Knowledge Management, 6(5), 512-520.

Katzy, B. E., Zigurs, I.R. (2000). Knowledge management in virtual projects. Paper presented at the the 33rd Hawaii International Conference on System Sciences, Hawaii, USA.

Millen, D.R. & Fontaine, M.A. (2003). ImprovingiIndividual and organizational performance through communities of practice, Paper presented at GROUP'03, November 9–12, 2003, Sanibel Island, Florida, USA.

APQC. (Sept. 2001) Developing rewards and recognition for knowledge sharing. Retrieval date, Aug. 15, 2004, from http://www.apqc.org/portal/apqc/ksn?paf_gear_id=contentgearhome&pafdm=full&pageselect=detail&doc_id=106982.

Sammer, J. (Dec. 2001) Project ROI. Retrieval Date, August 15, 2004, from http://www.businessfinancemag.com/magazine/archives/article.html?articleID=13824

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2004, Kenneth Fung
Originally published as a part of 2004 PMI Global Congress Proceedings – Anaheim, California

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