By Roman H. Kepczyk, CPA
The influence of technology is being felt in every business today, especially in light of discussions stating that a company’s ability to adapt to new technologies and to maximize the "intellectual capital" within the organization, may be the last (and only sustainable) competitive business advantage. This is especially true within service organizations such as CPA Firms, where the higher value capabilities of tax, audit, and business consulting usually reside in the minds of personnel. "Knowledge Management" is today’s buzzword used by business to describe how to capture and access a company’s intellectual capital.
We have all heard it said that "knowledge is power." The issue of capturing intellectual knowledge will be difficult for many Firms to instill, as it is traditionally our individual knowledge and capabilities that determines our value within, (and success to), the organization. Asking staff to codify their experiences and make this knowledge available to all other staff is often viewed as giving up power. To make knowledge management work within firms will require a major change in culture from the traditional CPA firm environment; one that fits within your eBusiness future.
Businesses that have successfully implemented knowledge management programs have done so by changing the culture to reward people for their contributions of knowledge, rather than hoarding "experience" and doling it out when it has maximum value. According to an article in the Harvard Business Review (March/April 1999), Ernst & Young evaluates personnel on five dimensions, one of which is the individual’s usage of the knowledge management system and overall knowledge contributions to the organization. Without participation incentives, any attempt at knowledge management will fall short of expectations.
There are generally two ways of capturing intellectual capital within service/consulting organizations; through the results of previous engagements or through the identification of personnel who have the appropriate intellectual capital. At the lower end of knowledge capture, are previous engagements in which the basic approach, workpapers, and results can be reused for other clients. The intention is to not have to "re-invent the wheel" while being able "cookie cutter" successful engagements to similar clients after sanitizing and codifying all files. This is the method used predominately by traditionally accounting-oriented firms to capture unique tax and auditing knowledge.
At the other end of the spectrum are the pure "consulting" firms that deal with unique expertise and engagements that are not often repeated. These firms have found that the management of the "network of people" is preferable, as each consulting interaction is unique and cannot be codified to make it useful. The Bain’s and McKinsey’s of the world usually deal with issues that have never been addressed before and where there are no standards for comparison or answers. Not surprisingly, the value of this type of consulting is much higher than "cookie cutter" knowledge and is much more difficult to come by.
As CPA firms move into knowledge management, we believe they will tend to lean towards the "codifying of experiences" model, rather than the "people networking" model. They will make their research, experiences, processes, and workpapers available to the rest of the organization through keyword searches on "knowledgebases" using products such as Lotus Notes, Intranets, or organized directories on networks. The most robust "knowledgebase" product today is Lotus Notes, which is the tool of choice for the larger firms. While very expensive to implement and maintain, it has many unique capabilities to search, display and append data on a global scale. The second level is development of an intranet to store and access data, which is much more cost effective and will meet the majority of CPA firm needs. At the lowest level is setting up "public folders" on the network to store standardized knowledge such as documents, spreadsheets, forms, and other internal information.
Knowledge Management will become a critical component of every businesses strategic plan. The tools and examples to make it work effectively are all available today. The key to knowledge management success lies in your Firm’s decision to make it a priority and to adapt your culture to make it work effectively.
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