I have found it helpful to think of KM results in these 5 categories.  

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1. Product or service cost reductions evidenced by Estimate At Completion (EAC) or Forward Pricing Rate (FPR) reductions cited in internal company financial reviews of P&L areas of the business (e.g. programs).

• EAC reviews are usually conducted at the project or program level or operating unit by a financial leader who needs to report profit and loss up the business chain. These often occur quarterly.

• FPRs may adjust less often, perhaps annually as part of long range business planning.  FPRs are determined by the finance group usually over a larger area of the business and reflect the rates charged by the business as they bid on future contracts.  Lower cost is of course better to win business against competitors.  Category #2 reductions may contribute to FPR reductions.

• EAC or RFP benefits may result from a productivity improvement, benefits from knowledge reuse (avoiding reinvesting in the same capability), or booked as a benefit in another category below.

• A business / finance leader acknowledging even a small contribution to this financial category is a huge KM result. 

2. Lower indirect or overhead cost as evidenced by a budget line item reduction for an overhead group.

• Overhead groups like HR, Finance, Facilities also submit costs and future budgets to finance for inclusion with overall business financials, and these costs are spread across the P&L units as a "burden" they must cover.

• Reducing these indirect or overhead costs helps reduce the burden on the P&Ls, thereby helping the overall business and competitive posture.

• Business efficiencies from KM collaboration and other knowledge sharing activities may be strong enough to influence an indirect or OH budget item - head count, travel costs, facility space, electricity bills, parking space, etc. - and may fall in this category.

3. Future Cost Avoidance that would have hit a product or service baseline cost, had the issue not been averted.

• These results are important even if they may not reach the level of inclusion in category #1 or #2.

• Avoidances come from solving problems early and passing fewer defects along the value chain. Otherwise time, capital, or head count will be required in the future impacting the EAC.

• If a way to reduced that impact is found, and believed in by a P&L group or an OH group, whether booked in financials or not, it counts as a result in this category.

4. Capacity Creation - productivity improvements or efficiencies that enable more work to be accomplished with existing resources.

• Capacity creation doesn't reduce the EAC or OH budgets which is good for growth and avoiding layoffs.  

• If employees find themselves spending less time looking for information because KM helped them find it faster, capacity (time) is created.  They can repurpose that time for business benefit.

• Problems solved faster also creates capacity by accelerating business, letting the employee move to the next task sooner than they otherwise would, accelerating business (relative to the competition).

5. Business Continuity is somewhat subjective, but still measurable.  This includes knowledge transfer (KT) from senior employees to junior employees, or enduring work processes, to preserve knowledge necessary for the business. It could also include innovation which keeps the company leading or growing in its market compared to competitors. 

• The cost of replacing a departing employee can be 1 to 4 times their salary, and around 3X for professionals. Find examples of mentees who successfully picked up the work of attritted employees, dollarize, and extrapolate.

• HR has attrition rates by skill code and average salaries.  Use these factors with the 3X multiple to derive a dollar value representing impact to the business, and then take a fraction of that amount as credit for KT.  Anchor the fraction you select to KT survey data.

• See step 2, developing a business case, under "Learn More How" under the KM home page.