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This article looks at a model for risk management of knowledge loss in a project-based organization (PBO). A recent study took an analytical approach and constructed a six-step integrated model that manages the risk of losing critical knowledge. The results show that, after a year of implementing the model, the job positions facing knowledge loss were reduced by 88 per cent.
The integrated knowledge management (KM) and risk management (RM) model can be used to assist the planning, establishment and evaluation of knowledge loss in projects. This helps to ensure that key issues regarding knowledge loss are covered during the planning and implementation phases of project management.
Projects and the main barriers to organizational learning
Projects are unique and impermanent activities with altering manpower that are usually short term. Project members must respond rapidly to new situations in their tasks. The uniqueness and impermanent nature of projects are the main barriers to organizational learning. This type of organizational form is learning-intensive and it has some limitations such as high rate of employee turnover that are obstacles to the acquisition of experience and knowledge gained in projects. In addition, it is easily possible for projects to become separated from one another, and this can lead to the fragmentation of an organization's knowledge and expertise.
In view of these limitations, the implementation of a process for protecting project knowledge is a necessity for organizations.
In terms of the balance-sheet, evaluation of risk is of limited use because in traditional definitions knowledge and intangible assets are unaccounted for. Losing these kinds of assets does not affect income directly but it has important effects on the organization as a dynamic concept. Nowadays, knowledge is the key resource of economy and maybe it is the only dominant resource of competitive advantage. Knowledge as an asset compared to other kinds of assets has a unique nature in which the more it is used the more its value increases.
Knowledge Management and Risk Management
The study took the Fraunhofer IPK KM model, which focuses on value-adding organizational processes in which improvement of their key knowledge leads to improved organizational operation, and fused it with the PMBOK approach. It also took the Tennessee Valley Authority (TVA) framework as a basis for developing a new KM and RM model. The TVA started a project for controlling the knowledge attrition of its processes in 1999, and developed a framework, also named TVA.
Based on a literature review and considering the strengths and weaknesses observed in past studies, the authors decided to firstly consider the TVA framework as a basis for developing a new KM and RM model. The Fraunhofer KM model was chosen among the KM models because of its simplicity and worldwide application. In addition, the PMBOK approach was considered to be the RM approach to proceed with because of the comprehensive nature of its approach. A new integrated model was developed based on these three models and approaches where management of organizational knowledge can be followed through identification, prioritization and dealing with the knowledge risk factors (KRFs).
The study defined a total risk factor for each of the employees based on two factors. The first factor was adapted from the date of attrition of human resources as a result of retirement, resignation, or replacement (attrition risk), and the second factor showed the importance degree, the knowledge that the individual has in an organization (position risk factor). Total risk factor can be obtained by multiplying these two factors. Afterwards, by developing knowledge preservation plans and their accomplishment, it can pave the way for organizational KM and a management solution for this potential threat.
“After designing and implementing the knowledge preservation plans, the most important thing is monitoring the process of knowledge preservation.”
The six steps
Step 1: planning of knowledge risk management
This step is mainly to influence organizational culture and to acquire top managers' commitment. Organizational policies about how to face KRFs, responsibilities, and authorities should be determined in order to cover RM duties. Also the acceptable risk level in an organization should be defined in this step. In addition, project risk assessment techniques should be determined as well as a timetable for doing RM activities during the project life cycle and the estimation of required budget for establishing the RM process should be defined.
Step 2: identifying KRFs
This step is to identify the characteristics of KRFs that have influence on the project or organizational goals. There are two kinds of KRFs: attrition risk factor (AR) and position risk factor (PR). AR states the expected date of losing human resources. PR is determined on the basis of uniqueness or criticality of employees' knowledge, and by estimating the difficulty degree or level of effort required for employees' to be replaced with a newcomer.
Step 3: qualitative assessment of KRF
In this step, individuals or job positions that could potentially be a cause of loss of organizational knowledge should be identified. In RM literature, the risk factor can be calculated by multiplying two factors: risk likelihood and risk severity or impact. So, here we consider the likelihood as AR the date of losing human resources. The date can be determined based on personnel's opinions or their ages and tenure date. In the research we also considered the risk severity as the PR factor that can be allocated. To determine PR value, direct and indirect supervisors should evaluate responsibilities, individuals' practical experience, informal and formal tasks, indirect duties, recurrent assignments (e.g. trouble shooting or problem solving) and other elements that have an influence on individual knowledge. Here, the supervisor may decide to consult the project members, customers or other stakeholders to allocate PR.
So, total risk factor (RF) can be obtained by multiplication of AR and PR, and two responsible people who are direct and indirect (higher level) supervisors will assign values to KRFs. Finally, allocated values will be added together. Allocation of an upper coefficient value to RFs refers to direct supervisors' closer contact with subordinates and more complete awareness of individual's AR and PR. A group revision of allocated PRs is a necessity because supervisors and managers usually allocate an upper KRF value to the more active employees. In other words, the fact that some employees perform better than others is not a reason to make their knowledge critical for the organization.
Step 4: quantitative assessment of KRF
In this step, the impact of each important KRF on project objectives (time, cost, and quality) will be determined through interviews with experts and acquiring their opinions. After that, critical KRFs with the most harmful impacts should be identified through sensitivity analysis. After a comprehensive qualitative and quantitative risk assessment, knowledge preservation plans can be developed and implemented.
Step 5: designing and accomplishing the knowledge preservation plans
After completing the process of qualitative and quantitative risk analysis, the next step is to decrease the risk of losing knowledge from personnel who have a very high importance in RF terms. Basically, any response to risk factors can be categorized into four main reaction groups:
- Avoidance
- Transferring
- Mitigation
- Acceptance of risk factors.
Regarding the risk importance, usually it is necessary to perform a reaction for each risk factor by selecting one, or more than one, group of them. Also, there are different options for reaction to the risk of critical knowledge loss.
However, because a project manager needs to pave the way for making decisions about the solutions facing KRF, it is necessary to get enough information through technical interviews with the knowledgeable person, by an expert interviewer.
Therefore, the initial priority is to acquire and preserve knowledge of personnel who are going to retire soon. It means that this plan should be developed and implemented for each of those personnel who have an RF of over 15 and the quantitative risk analysis shows their significant impact on project goals. They may get promotion, replaced or leave the organization for any reason and this will lead to loss of their valuable knowledge.
Step 6: monitoring and controlling KRFs
After designing and implementing the knowledge preservation plans, the most important thing is monitoring the process of knowledge preservation. This consists of:
- Reviewing the progress of knowledge preservation plans.
- Identifying positions or incumbents for which or whom reassessment or development of the knowledge preservation plan is required.
- Trying to recognize related emergent subjects.
- Reviewing the measurement criteria of knowledge preservation plans as follows:
- prediction of future likely attritions;
- numbers of positions given high priority;
- numbers of determined positions for developing the knowledge preservation plan;
- completion of knowledge preservation plans;
- knowledge metrics such as workforce performance; and
- evaluation of impact of other activities on risk analysis.
With slight changes, this model can be applied to a wide range of profit and non-profit project-based organizations.
June 2011.
This is a shortened version of “Development and evaluation of a knowledge risk management model for project-based organizations” which originally appeared in Management Decision, Volume 49, Number 3, 2011.
The authors are Mostafa Jafari, Jalal Rezaeenour, Mohammad Mahdavi Mazdeh, and Atefe Hooshmandi.