Knowledge Services: Financial Strategies and Budgeting
by Guy St. Clair and Martina J. Reich
Guy St. Clair is the consulting specialist for Knowledge Management and Learning at SMR International in New York City, and is a past president of SLA. He is the author of Beyond Degrees: Professional Learning for Knowledge Services, to be published by K.G. Saur in September 2002. He can be contacted at GuyStClair@cs.com.
Martina J. Reich is head of Business Intelligence U.S. at Roland Berger Strategy Consultants in New York City. She can be contacted at martina_reich@us.rolandberger.com.
Budgeting Begins with Buy-In
For those who have management responsibility (and accountability)
for providing knowledge services to their organization, financial strategy builds on the understanding that advocacy and political sponsorship are valid—indeed critical—elements in the overall management picture. This subject has often been given attention in the specialized library community. It is now commonly understood and accepted by those who manage specialized libraries, information centers and knowledge centers that power and influence are not simply obscure concepts to be invoked by "somebody else." They are core competencies, and are so recognized in SLA's famous Competencies for Special Librarians for the 21st Century—the document that provided specific and codified direction for those who employ specialist librarians. Published as a monograph that provided background information about competencies and the value of competency-based management, this statement has become a standard tool for describing what specialist librarians do. In the document, the specialist librarian is defined as a knowledge professional who uses "appropriate business and management approaches to communicate the importance of information services to senior management—an effective member of the senior management team and a consultant to the organization on information issues" (Spiegelman, 1997).
Even earlier, though, the terms had been defined:
advocacy and political sponsorship can be defined as those efforts, taken by the information services practitioners in an organization, community, or enterprise, to encourage others to support the work of the information services department and, at the same time, to encourage relationships which can have a positive influence in the decision-making process for allocating resources for the funding of information services (St. Clair, 1994, p. 10).
Obviously, since specialized librarianship and information management have evolved into knowledge services, the language of eight years ago must be updated, but whether we are speaking of "information services" or "knowledge services," the essential fact hasn't changed. The enterprise must buy into what is being provided through the knowledge services function (whether it be a specialized library, knowledge center, corporate archives or any other operational function that provides information or knowledge services delivery for the organization). There are specific people in the organization—its advocates and champions—who understand the role and the value of the operation. Successful financial strategy and budgeting for knowledge services depends on this recognition.
Knowledge services, as an operational function, has now been defined and is being increasingly adopted in organizations seeking to embrace enterprise-wide excellence in information management and delivery. Basically, knowledge services is a management approach that brings information management, knowledge management and strategic (performance-centered) learning together into an enterprise-wide, holistic and wide-ranging function. This convergence of related, but previously separate activities, results in high-quality service delivery for all information stakeholders. As mentioned above, the operational unit can be any unit responsible for information management, knowledge management or strategic learning, or one that is, ideally, responsible for all three functions (St. Clair, 2002).
There are people, certainly within the parent organization but perhaps including external stakeholders and observers, who are interested and committed observers of the work provided by the knowledge services operation. They understand the role of knowledge services, and they are willing to use their influence to see that the operation is supported. In managing knowledge services, identifying those with power in the organization is critical, and establishing relationships that benefit from that power is basic. This is a much misunderstood but elementary first step, which if not taken, can undermine the success of the operation. Of course, we optimists like to believe everyone functions for the common good and all of our efforts are undertaken because we can do some good. In fact, scratch even the most hardened knowledge services employee and you'll discover the reason he or she is in this line of work is because, as a knowledge service professional, he or she can make a difference. Without question, that is what drives most knowledge professionals to do the work they do.
But such lofty aspirations are often offset by less charming realities: there are cultural barriers, there are professional (or personal) agendas that inhibit collaboration and there are organizational and structural barriers, including financial restraints. Every organization or business has its own culture that contributes to the list of reasons why this or that activity cannot be undertaken. Regardless of the reasons, barriers do exist. In the management of knowledge services, there will be pockets of resistance. What can be done about those limitations is fairly straightforward: those with responsibility for managing the knowledge services function must find advocates and champions to aid them in achieving their objective.
This is an essential and critical stepidentifying advocates and champions. Rosabeth Moss Kanter is a management leader (well-known to specialist librarians) who makes a strong case for enlisting backers and supporters. Kanter recognizes that buy-in and coalition building are key to the success of any management effort, and that advocates and champions are essential to achieving that buy-in and coalition building. She agrees with successful innovators who proclaim that a personal network is essential, and that time and energy must be spent in nurturing and "working" that network. The network will be people who are committed to excellence in information delivery, and who understand that a clearly established and well-functioning knowledge development and knowledge-sharing environment is essential to enterprise success. According to Kanter, selecting these people and building a coalition that will support the provision of knowledge services as a concept requires three specific actions: pre-selling, making deals and getting a sanity check (Kanter, 2001, pp. 267-272).
For the knowledge services manager, these three actions can be undertaken as follows:
· Pre-selling—speaking to people, gathering intelligence or, as Kanter puts it, "planting seeds," ensuring that all knowledge stakeholders understand their feedback is valuable.
· Making deals—identifying people who possess resources, information and credibility that can be invested in the operation and who are willing to take some responsibility for its success.
· Getting a sanity check—listening to people with experience, accepting their wisdom, and, as Kanter puts it, "confirming or adjusting the idea in light of reactions from backers and potential backers." In some cases, this might mean postponing or even abandoning an original idea that—when discussed—isn't going to "go anywhere."
When it comes time to look for advocates and champions, they will in many cases, already be in place and willing to support activities, which they have already been supporting. Obviously, the people who work in knowledge services are going to be advocates and champions. Their participation is a given (or, if it is not, there is something seriously wrong in the unit where they are employed!). Other staff in the organization can be counted on as well, especially those who benefit directly from knowledge services delivery. The researchers who come to the specialized library for research materials; public relations staff required to delve regularly into corporate archives; financial planners seeking to identify prior investment strategies in the company's records management unit; middle managers who attribute their success to using content gleaned from training programs—all are prime candidates who will, in most cases, be more than willing to support the knowledge services operation when their support is required.
The list certainly includes management leaders and others who are recognized (as well as those unacknowledged) as having some power in the organization, especially those who have specific management authority for the knowledge services unit (that is, the person to whom the manager of the knowledge services unit reports directly). Likewise, those involved in any planning or oversight activities for the knowledge services function (committee members, task force members and others with similar roles) will be natural advocates and champions and, indeed, are probably the best source for identifying other supporters. Finally, it might be wise for those who manage knowledge services to look outside the organization, to see if they can identify external stakeholders (clients, of course, but also suppliers, vendors, professional colleagues, etc.) who have had some experience in such activities, and who might be in a position to offer wise advice.
Certainly the knowledge services operation is looked at in terms of what the costs are, and the availability of resources to support the activity, so determining financial support and providing a funding strategy is essential. As the budget process begins, three elements must be considered: personnel, content and technology. Generally speaking (depending on the nature of the organization for which knowledge services delivery is provided), budget percentages for these areas will break down to approximately 50 percent for personnel costs, 20 percent for content costs and 30 percent for technology costs.
Personnel costs, of course, are the largest item in the knowledge services budget. Depending on the size of the organization or enterprise, a relevant number of qualified staffwell paid and constantly trainedare required. These include highly motivated and well-educated knowledge professionals and information technology staff. Since the knowledge services operation will usually include content management for the company intranet, training and learning activities and management and publishing of learning content, employees with IT expertise are essential.
Personnel costs include salary, benefits (usually about 25-30 percent of the base salary) and training. In some organizations, depending on the nature of the knowledge services function, staff recruitment and/or the use of temporary staff must be considered, although in most cases organizational management will provide guidelines for these expenditures.
With respect to salary levels, of course, these will be established in relationship to the types of parent organization (for example, government agencies may have salary schedules that are different from compensation schedules in the private sector, and academic employers will use different compensation schedules than, say, a museum or a trade association). As for training costs (excluding such peripheral expenditures as travel, time away, etc.), a recent study from the American Society of Training and Development notes that on average training expenditures in recent years were 1.8 percent (1999) and 2.0 percent (2000) of payroll, respectively. As for the average costs for training activities for individual staff, "total training expenditures per eligible employee rose form $677 to $704 per employee" (Van Buren, 2002, p. 7).
As for content, the basic tools for research must be budgeted for. Research tools are selected in relation to the overall mission, and funds are not allocated for content that is not mission-specific. Generally, these tools include:
· databases, online and/or CD-ROMs;
· print and online services for journals, newspapers, books, published market studies, etc.; and
· out-sourced content providers/research services (e.g., commercial information brokers and/or specialized service providers, such as patent or law research services, or experts providing primary market research, etc.).
For the budget, it is customary to differentiate between research tools for a variety of knowledge workers. These include:
· knowledge professionals—librarians, business analysts and information professionals working within the knowledge services department who provide excellent research services for the company, and therefore require professional, high-end research tools.
· knowledge workers—professional staff in the enterprise who need to be empowered to do their own basic research independently of the knowledge services unit, but who are guided, trained and monitored through the knowledge services department.
· in-sourced knowledge staff—staff of the knowledge services unit assigned (sometimes on a temporary basis) to a particular team or project. These expenditures are usually charged to the project and do not fall under the knowledge services budget, per se, but in some situations they are the responsibility of that unit.
Investments in information technology are essential for providing quality excellence in knowledge services delivery. The knowledge services budget must include basic hard- and software tools for knowledge professionals, representing a significant part of the technology investment for setting up, running and maintaining the company's knowledge management system (intranet). In some organizations these expenditures and budget considerations may dovetail with considerations in an enterprise-wide IT function, but in either case, knowledge services staff must be prepared to understand and communicate their unit's specific requirements.
When decisions must be made for financing expenditures, a variety of choices are available. Of course, simply having knowledge services supported by the parent organization or enterprise is the most common practice, and it is the arrangement most managers of a knowledge services function will inherit. In such a situation, the unit providing knowledge services is naturally at the mercy of resource allocation authorities, and it is not uncommon for services provided to be treated as overhead (a situation long familiar to many in the specialized library community).
A better method for financing knowledge services is to charge for the services (or, in some cases, to combine charging with some level or organizational support). For most managers with responsibility for providing knowledge services there are a number of ways this can be done, but generally speaking, any of the following (or any variation of these) will work:
· daily fee rate (e.g., a daily fee charged to the project or team requesting the service);
· fixed-price for specific services (e.g., an add-on for routine products and services such as a press search, book purchases, etc.); and
· current payment for general services (e.g., research fees based on the number of staff in a particular office, team, department, etc.).
Within the knowledge services unit, services provided to or performed for the department's customers (what we can refer to as "professional services") include:
· information research, with the subjects of that research depending on the type of organization (business, law or sci-tech, etc.);
· research workshops for employees as part of the company's training program (with the knowledge services department charging for providing these learning activities);
· content provision and management for the company's intranet, as well asin many situations—providing the technology platform for other departments through which they present themselves through the intranet;
· internal consulting in all knowledge-related areas, such as knowledge management, information management or training and learning programs for project teams; and
· the provision of knowledge services products, services and consultations for the organization's clients, using fee schedules designed to provide profit for both the larger organization and the knowledge services unit (with the next step, of course, to be offering these same products, services and consultations to the wider marketplace beyond organizational clients).
Successfully managing the knowledge services budget requires attention to identifying, understanding and implementing the activities included in the larger classifications of personnel, content and technology. To ensure that these activities receive their "due" in the enterprise at large, creating and maintaining alliances and networking with a wide variety of people is going to be required. As described earlier, one of more serious management roles in the knowledge services function is to raise awareness about the value of knowledge services in the organization, including the establishment of good relationships with key voices in the enterprise. This effort becomes critical once the specifics of the work performed in the knowledge services function have been established. Among the key voices will be not only the obvious candidates, such as the CEO, the CIO, the CFO, the CLO and the HR director, but also other critical senior managers, such as the people in charge of enterprise-wide IT operations. Obviously, among these influential people, senior management can be valuable and, in fact, will be the department's best allies when the knowledge services managers need to know about the company's processes and policies. Naturally the person with direct authority for the knowledge services unit will need to be on good terms with the manager of the unit (and staff as well) and have an understanding of knowledge management and information technology.
Equally important are people within the organization who rely on knowledge services products and consultations to be successful. High-quality knowledge services delivery is crucial for these people. Since they are frequently the company's opinion leaders, they can provide strategic word-of-mouth support for the department's efforts. When there are success stories (as for example, when the knowledge services unit has supported users in a critical situation such as helping to win a project for the company or providing a briefing before an important client visit), these accomplishments should be captured and used for describing how the knowledge services function can support others in the enterprise. And, as usually happens, the original participants will be flattered to be recognized and are then on the way to becoming the unit's best advocates.
On the other hand, advocates and champions may not always be obvious, because they can be people who have not yet become key voices or opinion leaders in the enterprise. As these people begin their careers in the organization, they can be targeted so that, as knowledge services, products and consultations are delivered to them, alliances are formed at an early stage. Such efforts will ensure that these employees and colleagues are advocates in the future.
For knowledge services, financial strategy and budgeting are two sides of the same coin. Those with management responsibility for knowledge services must first identify what their work will provide—the products, services and consultations that will emanate from the knowledge services function. At the same time, they must identify advocates and champions with whom they can share their enthusiasm about the work they do. If all goes according to plan, these people will play a role in establishing the value of the knowledge services function throughout the larger enterprise. 
| References Kanter, Rosabeth Moss. Evolve! Succeeding in the Digital Culture of Tomorrow. Boston, MA: Harvard Business School Press, 2001.
Spiegelman, Barbara M., ed. Competencies for Special Librarians of the 21st Century. Washington, D.C.: Special Libraries Association, 1997.
St. Clair, Guy. Beyond Degrees: Professional Learning for Knowledge Services. Munich and New York: K.G. Saur, to be published September 2002.
St. Clair, Guy. Power and Influence: Enhancing Information Services Within the Organization. London: Bowker-Saur, 1994.
Van Buren, Mark E., and William Erskine. State of the Industry 2002 : ASTD's Annual Review of Trends in Employer-Provided Training in the United States. Alexandria, VA: ASTD, 2002. |
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