How to Measure the ROI of Knowledge Management

This blog post includes excerpts from our white paper: The Rise of Knowledge Engagement (And Why It Matters). You can check out the full white paper here.

If your organization or department lacks a good knowledge management framework, you can probably describe the challenges you need to solve: information is scattered across different repositories and is hard to find, teams are out of sync, the organization loses knowledge when employees leave the company. 

But what if you’re asked to quantify the benefits of knowledge management? That might feel more challenging.

If you’re a department or team lead overseeing a knowledge management initiative, it’s important to be able to demonstrate the positive outcomes and return on investment (ROI) of knowledge management. Measuring and communicating ROI is especially critical during times of change or uncertainty when many businesses are adjusting priorities and looking to ensure the most cost effective investments.

So how can you start measuring the ROI of your knowledge management efforts? The specific outcomes and key performance indicators (KPIs) will depend on your business and the objectives you’re focused on achieving, but knowledge management ROI can be measured across three fundamental areas: retention, innovation, and revenue.

Retention

Knowledge management helps provide entire organizations with a holistic view of the customer, leading to greater customer satisfaction and loyalty. But knowledge management doesn’t just improve customer retention: it can also improve employee retention. A culture of knowledge engagement demonstrates to employees that their knowledge is valued, gives them opportunities to collaborate with their peers, and gives them visibility into how their work supports larger organizational goals, all of which contributes to greater job satisfaction.

Outcomes:

• Increased customer satisfaction and loyalty through better customer experiences
• Higher employee satisfaction and engagement with decreased information frustration
• Reduced duplication of work or loss of information and intelligence

KPIs:

• Customer Satisfaction (CSAT) and Net Promoter Scores (NPS)
• Time saved per employee (productivity gain)
• Average decrease in redundant work
• Contribution views in knowledge engagement platform
• Decrease in average employee onboarding time
• Training materials delivered

Innovation

Innovation requires businesses to apply, combine, and build on existing ideas in a way that leads to something that is new and useful to the customer.  A knowledge management system allows businesses to bring together knowledge and insights from across the organization to fuel innovation.

Outcomes:

• Collaboration and cross-functional engagement on new ideas and information
• Delivery of insights to propel and inform business and go-to-market decisions
• Knowledge creation and augmentation to fuel competitive advantage

KPIs:

• Knowledge and insights contributed to knowledge management platform
• Consumption and communication of insights by business decision-makers and stakeholders
• Search volume and keyword trends in knowledge management platform
• Collaboration and engagement metrics in knowledge management platform (e.g. comments, questions, shares)

Revenue

Knowledge management can increase revenue in a couple of key ways. First, on-demand access to knowledge allows employees to be more productive, leading to greater output and costs saved on operational improvements. Second, organizations can increase revenue through new products, services, and processes that arise from cross-functional innovation and knowledge sharing.

Outcomes:

• Reduced time spent searching for information and increased time spent on impactful activities
• Elimination of silos between departments and teams
• Reduction of work errors and redundant activities
• Faster speed of decision-making and ability to take action

KPIs:

• Productivity gains (measured in time saved)
• Average decrease in redundant work
• Average decrease in work errors
• Contribution views in knowledge engagement platform
• Increase of contributions, comments, questions, and answers in knowledge engagement platform
• Bottom line revenue increases

Estimating the ROI of Knowledge Management Based on Time Savings

The sample outcomes and KPIs above should give you a good idea of what you can start measuring after implementing a knowledge management platform. But you may also need to estimate the ROI of knowledge management before purchasing new technology so that you can make a strong business case.

One way to come up with an estimate is to crunch the numbers on the time employees will save searching for information. According to McKinsey & Company, employees spend 20% of their day looking for information they need to do their jobs. That’s a day a week. 

If you’re a company of just 150 people with an average salary of $60,000, you’re spending $1.5 million to employ your people to search for information. A good knowledge management system reduces the time employees spend looking for information dramatically. Even if we assume a knowledge management system can cut the time employees spend searching in half (a conservative estimate), a company of 150 would save $750,000 a year. Companies with higher headcounts will have an even larger ROI. This is why, typically, knowledge management systems pay for themselves in months—not years.

Conclusion: Measure Early and Often

We’ve included a lot of different ways to measure the ROI of knowledge management–and not every metric or outcome will make sense for your business. But no matter what your specific use case, the key to assessing and communicating your company’s knowledge management ROI is to define the relevant metrics for your business objectives and then measure and report on them regularly. It can also be impactful to pair your data with success stories. For example, if you launch a new knowledge management platform and record productivity gains, you could share quotes from your platform users about the ease of finding information and the time they’re saving. 

It’s clear that the knowledge that exists across your business is valuable, and measuring the ROI of your knowledge management strategy best practices can help your organization understand just how significant an impact its collective intelligence has on revenue, retention, and innovation.

This blog post was expanded and updated in March 2022.