Knowledge management – Putting data on the balance sheet

Knowledge management is a topic which by its nature creates a collision of disciplines and functions: much of the initial impetus has come from the worlds of information management and IT; consultants too have latched onto KM as a tool for transforming their own and clients’ businesses.

Within the corporation, the site of the responsibility for knowledge management is a source of some debate. There are several claimants: Systems, the Library and HR are all front runners.

Knowledge management software provider Computron felt that one function wasn’t getting a fair crack of the whip in this debate: finance, although already the repository of key corporate information, was being left out of the picture. By commissioning a survey of 90 finance directors (carried out by independent marketing and strategy company Elmark), Computron hoped to understand the perspective of the financial community on knowledge management and establish the claim of finance directors to be the potential custodians of corporate knowledge.

The term “knowledge management” is not well known in finance circles, but once explained most finance directors were comfortable with the term and able to draw parallels with other, more established terms. Its importance to the financial function was felt to be “important or very important” by 82 per cent of FDs, while 71 per cent had at least one KM-related project underway in their departments. Finance departments were also investing in training as they restructure, on KM-related subjects such as teamwork and values creation. This last is seen by the survey as a sign that FDs are taking a forward-looking strategic view of their department, a vital first step towards a knowledge-based approach, and away from the backward-looking, audit-based approach.

The survey assessed the importance FDs attach to their processes in support of knowledge management. It found that FDs see budgeting as the most important process for forging relationships and sharing knowledge with their internal customers. FDs clearly also believe that their existing reporting tools will play a key role in capturing and sharing financial knowledge within the organisation. However, FDs are not yet abreast of viewing the corporation’s assets in wider terms than the traditional financial measures.

FDs feel certain technologies are key to knowledge management.

As well as their own reporting tools and e-mail, FDs show a high awareness of Internet and workflow technologies. Even in terms of their own function, finance directors see Internet technologies as nearly as important as financial reporting tools.

The survey shows that, whatever the awareness of knowledge management as a distinct discipline, finance departments are moving towards a model that will support knowledge management in the wider enterprise. This can be characterised as a move from low level financial processing to a “value-added” finance function. This involves a more active role in directing the strategy of the corporation, and forging stronger relationships both inside and outside the wider enterprise.

This will involve the finance function in a much more broadly defined range of asset management and risk management tasks. As well as the traditional capital assets of the organisation, we can expect the finance department to be controlling:

Human capital: core competencies, key staff, experience and knowledge.

Customer capital: trade marks, patents, licenses, customer bases and relationships.

Structural capital: processes and methodologies, information infrastructures, distribution systems and alliances.

Measuring the value of these assets and balancing them with the traditional financial measures will prove a new challenge for the finance department as it operates in the new “knowledge economy”. The report concludes that the finance department may well be the strategic choice to begin knowledge initiatives within an organisation.

More details from the report are available from

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