Intranet based management knowledge systems: getting a return for your investment

Managing Partner held its first annual conference in January. What clearly emerged was that:
1. most law firms already have intranets in place and want to fulfil their potential; and
2. delegates were interested not in the technology but in the business benefits - they wanted a return on their investment.
This article, therefore, focuses on an area of immediate concern to managing partners - how to extract real value quickly from intranet investments, by using them to manage the business more profitably. By John Morgan & Gerry Cryer.

There are many uses for intranets and even more written about their role as enablers of 'knowledge-based' organisations. Certainly, intranets can make it possible for professionals - in knowledge-based businesses such as legal firms - to share knowledge and convert (often jealously guarded) individual knowledge into corporate knowledge and corporate value. However, there are a multitude of technological, organisational, cultural and just simply human factors to take into account before reaching that goal.

Studies, such as Paul Strassmann's The Squandered Computer, show that there is no link between IT spend and company performance. Many costly examples testify to an almost iron law that the wider the canvass and the more ambitious the project, then the less likely is it to succeed. The same holds good for business articles. On both counts, therefore, we propose to focus on an area of immediate concern - how to extract real value quickly from intranet investments, by managing the business more profitably.

In short, this is definitely not about knowledge management systems but about management knowledge systems. In talking of management knowledge, we are defining knowledge in what has become the accepted hierarchical fashion, i.e. that data is transformed into information, which is transformed into knowledge. Management knowledge is, therefore, what a chief executive needs to run the business effectively to take well-informed and timely decisions, which turn his business strategy into action. (See Figure 1)

It is possible to manage with essentially paper-based reporting on, say, a quarterly basis. Such reports can concentrate on analysis of performance against business priorities and, therefore, qualify as management knowledge but it is historical knowledge. Decisions based on such reporting systems risk being neither well-informed nor timely. It is not good enough to know what has already happened to the business. A Managing Partner (chief executive) needs to know what is happening in the business now and how this relates to his business plan for at least the next 12 months.

An intranet-based reporting system, which represents the business plan, can meet this requirement for timely management knowledge. It can be designed to ensure that deviations from performance targets are highlighted as quickly as possible, in order that:

remedies can be swiftly put in hand,
individual plans and forecasts adjusted,
and the impact upon the total business plan seen immediately.

Therefore let us firstly look at the fundamental building blocks of a management knowledge system and then how the intranet can link these and deliver a business performance monitor to the computer screen on your desk or, indeed, your laptop anywhere in the world.

Building The On-line Management Knowledge System

Most firms have three essential requirements in place for an online knowledge management system:

a strategic business plan
practice management reporting systems
an intranet.

The practice management reporting will generally be generated through standard software packages. What is usually lacking is the vital linkage between business strategy and the standard software reporting systems. The practice management systems will provide a wealth of data but the questions still have to be asked of that data - as to how far the business strategy is being fulfilled and the business plan's targets met.

So what are the full complement of components that have to be in place to construct a management knowledge system which is geared specifically to help you to turn a business strategy into action throughout the firm?

An organisation's ability to generate, routinely and easily, useful management reports, which are informative and drive business improvement, requires:

A business strategy and plan
clear accountabilities, measures and targets of performance at all levels with in the business
procedures which generate and maintain useful information within operational systems
an ability to extract and record useful data from transaction processing systems within the business, which can be manipulated to provide management information
a flexible management reporting system which allows routine reporting and supports specialised extraction of information by non-programmers

These are the basic requirements. (The inset checklist expands these components into their constituent sub-components.)

With these requirements met, it is then possible to put in place the vital linkage to deliver management knowledge to the screens of the Managing Partner, the partners, fee earners and support service function heads who need to be able to monitor performance against the targets set to fulfil the business plan.

The vital linkage is through On-Line Analytical Processing (OLAP) software which enables the data to be prioritised, sifted and turned into knowledge which can then inform management action at all levels. OLAP is where the real value is being added in management systems and where the real payback can come from the investment in intranet and standard 'commodity' practice management reporting systems. Consequently OLAP is one of the fastest growing sectors in software applications.

To deliver management knowledge, the OLAP software programme must incorporate the strategic business model and plan. It, therefore, becomes an intelligent interface between the manager and the reported performance data which the plan requires.

It will be programmed to report on the priorities for each management level. For instance, an individual fee earner can see performance against his 'personal contract' with the firm. A partner heading up a department can likewise see departmental performance against plans and the progress of projects, which he is personally responsible for delivering. The Managing Partner/ CEO will have the fullest picture. So let us look at what he can expect to have delivered to his screen. (See Figure 2)
Management Knowledge on the Managing Partner's Screen

What is it reasonable to expect an intranet-based management knowledge system to deliver to the Managing Partner's screen?

Firstly, it is reasonable to expect it to be user friendly. So it will be accessed, navigated and explored in the same familiar way as for a web-site.

It will automatically produce the headline performance reports that he or she has prioritised. For instance:

matter profitability ratios against departments and teams with colour codes highlighting on-target, below target and above target performances
revenues and profits per department, team, industry sector
additional business from existing clients vis-à-vis new clients
revenues and profitability of business attributable to overseas offices or affiliates
marketing performance, e.g. advertising, PR and sponsorship activities delivered - tangible targets (new business), intangible but measurable targets (image)
HR performance, e.g. employment costs, retention rate, cost of recruitment.

And so one could go on but not for too long, because these are the headlines and as with any web pages the headlines can be further interrogated. Deviations from targets can be examined.

Proceed with Caution and Confidence

The very process of setting up a management knowledge system, improves the management of the business. It forces the business strategy to be fully articulated and translated into measurable targets that can be reported upon. It clarifies responsibilities and accountabilities. While, by having an intranet-based system, it ensures an early alert to slippages against targets and enables corrective action to be taken. It goes a long way to eliminating surprises.

In short, systems that transform the seeming data overload generated within a business into 'management knowledge' can dramatically improve a firm's performance. However, the information management field is threatened by its own overload of OLAP jargon and hype.

It is, therefore, essential to keep objectives and the processes to realise them as simple and transparent as possible. If an organisation is not alert to the dangers, it is possible for information systems and information technology to take on an independent life of their own. They are the servants of management not vice versa. Therefore, before embarking on the investment of both money and time, a Managing Partner has to be very clear as to why he or she needs to install effective management knowledge systems, what knowledge is needed by whom, when and how often it needs to be supplied and how presented and communicated.

The 'Why?' is simply answered, a Managing Partner or Chief Executive wants management knowledge systems which help them manage their business more effectively, that demonstrably add value to the enterprise.

It is the best led, most highly motivated, best communicating and fastest businesses that thrive. They have to be faster than the competition, respond more quickly to market changes, bring products and services more rapidly to market. The same applies to any business strategy. Unless rapidly acted upon, a business strategy has a short shelf life. Management knowledge systems are designed to turn a strategy into action with speed and sustainability.

As for 'What?', as we have seen, the requirement is for real management knowledge, i.e. the transformation of data into information and then knowledge. Management knowledge, by definition, is relevant to decision-making. When delivered to individuals it leads to action, because they know what they have to do, what they have to deliver. Strategy is, therefore, translated into personal action and accountability throughout the enterprise.

'When?' has to be mainly governed by the imperative for timely information. But management knowledge systems are a tool to improve performance not a goal in themselves. "A man's reach should exceed his grasp", but only by so much, and that goes for organisations too. If you look for a magical silver bullet, you risk shooting yourself. A gradualist approach is needed.

The aim has to be to put the systems in place without disruption to the business and without unreasonable demands for new or more frequent information. The systems will facilitate cleverer and quicker ways of reporting and measuring. A seemingly gradual roll-out results in managers and their staff wanting to participate in the benefits and paradoxically speeds up implementation.

It will be all managers and staff, who will want to access and provide the information upon which the company and their jobs depend and they will want to do so on-line. The process should result in a cultural change.

As ever, how the change process is communicated is a critical element in its success. Experience, as well as common sense, demonstrates that you can only fully benefit from management knowledge if the objectives, benefits and personal implications are effectively communicated ahead of and during implementation. The intranet can provide a powerful medium for this but before it can be fully effective managers and staff have got to be told how and why, using traditional interpersonal methodology. What we used to call talking face to face.

GoalFocus develops management knowledge solutions for clients with the concentration on value added services. GoalFocus was formed over 10 years ago and has worked with the Boards of many major UK companies. They have recently started to work with UK law businesses assisting with the translation of business strategies into action. They are currently advising a significant London practice on the translation of accountabilities around the business into performance measures which will be represented in a computer based system.