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Knowledge Management Strategies
Author Jerry Honeycutt
Pages 272
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Level Intermediate
Published 06/28/2000
ISBN 9780735607248
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Chapter 5:Knowledge Management Strategies

Employee Management

Think of knowledge management as customer service for your employees, helping them become happier, smarter, and more productive in their roles.

Few companies can say that their employees are not their most valuable assets; knowledge management can help every company take better care of its employees. With an effective knowledge-management solution, companies can better motivate their employees, better reward them, and align their skills with corporate needs.

Effective knowledge-management solutions deliver training, track employees' skills and competencies, remove barriers to productivity, provide current company information, manage benefits, help supervisors staff their departments, and simplify expense reimbursement. Dynamic market conditions can catch companies without valuable skill sets across its employees, for example. Knowledge-management systems can identify skill gaps as well as provide mechanisms for closing those gaps. Identifying employees that significantly outperform their peers is useful for finding best practices that companies can share with other employees.

Employee management is thus an ideal area for companies to improve with knowledge-management solutions. This chapter describes how some companies, including Microsoft, address the issues you've just read about.


Training is an obvious target for knowledge management. Connect Austria is a prime example of a company that relies on its system for orienting the employees it hires. Training 50 to 100 new hires a month quickly and keeping veteran employees up to date on new policies and procedures remains a top priority for managers at this company. Thanks to the company's knowledge-management system, new employees can ramp up more quickly than before. According to Peter Filka, IT Codirector for Connect Austria, the average person takes less than half an hour to learn how to use the system.

For training and company information, new and veteran employees find the corporate intranet a valuable part of the knowledge-management system. Connect Austria publishes its handbooks, manuals, and other administrative information on its intranet. While knowledge-management systems won't replace existing training materials, they do make those training materials more available to users. Using the system's search tool, employees can find information they need quickly. Whenever managers approve a change, they notify employees by e-mail. By publishing this kind of information to its intranet, the company saves both the time and the fixed costs associated with frequently printing and distributing thousands of memos and handbooks.

Skill Alignment

Training to keep employees' skills current is only half the story, though; effective solutions also help companies align employees' skills with the companies' needs. For example, Siemens' 400,000 employees make it the fourth largest company in the world and a leader in highly complex SAP R/3 implementation. Siemens Business Services division has 1600 SAP R/3 consultants working around the globe to provide customers with solutions to complex business and technical problems. For Siemens, the key to managing such a geographically dispersed workforce was to create Consultant Network.

Consultant Network includes a resource-planning tool that helps Siemens track its experts and assign them to projects worldwide. Illustrated in Figure 5-1, this tool gives the company an easy way to profile consultants, identify expert skills, and look up availability so that it can assign the right person to the right job at the right time. "In the consulting business, changes can happen very quickly," says Martin Luckfiel, KM Solution Manager for Siemens. "A project may be delayed unexpectedly, causing us to shift our resources. A customer in London is expecting a consultant with certain skills to show up next week, while the assigned consultant has been delayed in Malaysia for two weeks. Using our resource planning tool, we can zero in on all consultants who have the right qualifications and availability to get the job done."

Figure 5-1.

Figure 5-1 Consultant Network

Consultant Network enables Siemens' consultants to find answers and best practices faster than they could previously. "Customers expect fast, professional responses," Luckfiel says. "This knowledge base gives us the ultimate competitive advantage by enabling us to provide that fast, accurate response. A customer knows they can't get our five best people assigned to their project; but this system lets us leverage all our best consultants for every assignment. The sharing of expertise lets our junior consultants be almost as smart and productive as our senior consultants. Customers really appreciate this."

Siemens' knowledge-management system has enough flexibility and scalability to meet the company's continually growing business needs and to stay a step ahead of the competition. According to Luckfiel, "The knowledge-management solution has had quite an impact on our company, and people see this system as a real aid to their daily work. The technology makes people eager to collaborate, and its accessibility allows everyone to stay up to date on every customer. The Consultant Network has truly become our digital nervous system. It's the backbone of our business, giving us a major competitive advantage."


Microsoft is leading the knowledge-management charge. In my conversations with the company's employees, they always rave about how easy it is to work with human resources through its knowledge-management portals. They also tell me how little paper they have to use to process forms such as vacation requests. Before delving into that, however, a bit of background is appropriate. Microsoft is well known for hiring smart, highly productive people who are focused on developing top-quality products, programs, and services. To help keep employees enthusiastic and dedicated, the company offers a variety of benefits, including stock options, a stock-purchasing program, comprehensive health insurance, and a 401(k) program.

In the past decade, Microsoft has grown from fewer than 10,000 employees to more than 20,000. This rapid growth contributed to a complex benefits package, which increased the number of paper and e-mail forms employees were required to use to enroll for and manage their benefits. Additionally, all human-resources materials—including benefits information, enrollment forms, and time cards—were scattered throughout the company's servers and buildings. This lack of centralized information made it difficult for employees to find what they needed quickly and distracted them from their work. Employees needed an easy way to access this information, to personalize and update their records, and to check the status of their benefits. To solve this problem, the Human Resources (HR) department faced the challenge of developing an intranet site that offered one-stop shopping for all its information and processes. "Our goal with an HR intranet is to provide excellent customer service to Microsoft employees, so that they can focus on getting their jobs done," says Kimberly Mecham, product manager for HR Operations. "They need easy access to information, and they need to be able to get that information from anywhere at any time."

In October 1995, Microsoft's HR group introduced HR Web, an intranet site that serves as the foundation for a growing number of specialized applications. These applications include information about and enrollment for stock options, employee stock purchase discounts, a 401(k) plan, and absence reporting. Additionally, the site hosts a wide variety of employee-related publications, including the employee handbook, a weekly newsletter, and campus maps. Employees also enjoy visiting one site to learn about commuting options, vacation travel packages, tuition assistance, and community-volunteer opportunities.

HR Web is available seven days a week, 24 hours a day so that employees can access information and forms from any location—at home, while traveling, or at work—when they need it. This flexibility frees them up from having to come to the office to retrieve paper forms. The environment is personalized and secure so that an employee can check how many stock options she's vested, how many vacation days she's used, and if her medical insurance will cover a particular ailment—all in less than five minutes. The employee data in the site—including name, social security number, manager, hire date, and employment status—flows from Microsoft's SAP HR module, eliminating the need for someone to enter the data more than once. This process also ensures that the data is current.

Since its inception, HR Web has saved Microsoft more than $1 million a year, and it has eliminated more than 200 paper forms. More than 21,000 users access the site each month, which has helped eliminate the need to retain nine people just for answering e-mail and phone requests. The company is saving 75 to 90 percent in postage and material costs. The following sections tell you more about how Microsoft realized these terrific gains.

Paperless Management

HR Web simplifies the process for reporting vacation time, sick time, and, for hourly employees, work time with a time-card/absence-reporting application. This application can determine if an employee is hourly or salaried and direct him to time cards or absence-reporting forms accordingly. It can also calculate how many vacation hours an employee has left, based on how many he has already used. It replaces a paper-based time-card system and an e-mail-based absence-reporting system, decreasing processing time by half.

Payroll and Direct Deposit

The payroll area of HR Web includes an online direct-deposit feature that enables employees to specify how they want to allocate their paychecks to a selected bank, investment accounts, and personal benefits. Additionally, HR Web posts earnings statements for each employee to view in a secure environment. This has eliminated the need to print and mail paychecks or paystubs, saving the company $600,000 a year.

Stock Purchase Programs

Microsoft's Employee Stock Purchase Plan (ESPP) enables employees to buy Microsoft stock at a discount. Prior to HR Web's ESPP application, HR sent a record of individual stock purchases to each participating employee who requested one. These records, which include the total number of shares an employee has purchased along with the purchase price, had to be downloaded from the company's source system, printed, and distributed. In addition, HR sent a memo to notify employees of their purchases after each six-month purchase period.

Now, using HR Web's ESPP intranet application, each employee can access a view-only page that provides a record of her stock-purchase history. Employees can also use the ESPP application to enroll in or withdraw from the program, receiving a full refund on their contributions at any time. In addition to providing these services, the ESPP application houses a real-time Microsoft stock ticker, Microsoft's stock-split history, and information that helps employees navigate tax-related issues. By channeling the employee stock-purchase program onto the intranet, HR has eliminated paper and e-mail enrollment forms, reducing administrative costs dramatically. Materials and postage expenses have dropped 75 percent, and e-mail volume resulting from employee questions has decreased 25 percent.

Like the ESPP application, the stock-option application provides an individual account of each employee's stock-option history. It indicates how many options an employee has been granted, how many options that employee has vested, how many he has exercised, and how many are left to exercise. HR uses this application to distribute stock-option grants upon hire or after a review period and to confirm when an employee exercises options. Before this tool was available, a stock administrator spent more than four hours each day sending individual e-mail summaries to employees who requested the information. Now it takes an administrator no more than an hour a day to answer stock-related questions. HR also eliminated the need to hire three temporary employees during each review period to distribute grant packages. Now packets are ready for distribution in only eight hours, versus three weeks, and only one full-time employee is involved in the process. Finally, HR has reduced the time required to distribute exercise confirmations (from 15 hours to five hours a week), and the department no longer needs to store paper records of employee stock transactions because the records are all online.

401(k) Administration

Microsoft offers all salaried employees a 401(k) plan and matches their contributions up to a certain amount. The plan is administered by an investment firm, which manages a variety of top-rated mutual funds, as well as other investment vehicles, from which employees can choose to invest their money. With HR Web's 401(k) application, employees can enroll in the plan, choose investment options, and change the percentage of eligible compensation they want to contribute to the plan. The application provides detailed information on different funds and a link to the investment firm's home page, where employees can reallocate their contributions. After an employee signs up for the 401(k) plan, the application automatically notifies the investment firm and the Microsoft payroll department, eradicating the need for human intervention.


Small organizations can be nimble. They are often quick to reorganize and reconfigure in response to escalating competition, demanding customers, and changes in market conditions. Because of these abilities, they are frequently well positioned to take advantage of new and emerging market opportunities. If they change effectively, they are more likely to prosper and grow larger to build on their successes. But there lies one of the major challenges to all successful companies: a larger organization is rarely as nimble as it was in its early days, yet its need to respond promptly to changes and opportunities remains unchanged.

This was the challenge the Microsoft HR department faced. The company's success had resulted in an explosive growth in personnel, as noted earlier. However, this rapid growth made it significantly more difficult to manage staffing issues throughout the company. Each of the company's business units had its own system for tracking and managing headcount. When managers changed their teams, they initiated a paper-based transaction to update the corporate records. Managers would submit updates to HR personnel, who maintained 18 databases located worldwide. Twice a week, these 18 databases were consolidated into one reporting database. By the time the information was consolidated, it was at least four days behind reality.

Such a complex set of systems and processes did not lend itself well to rapidly transferring information, which is what managers needed to do to make effective staffing decisions. The information in the central reporting database was useful to corporate HR and Finance for quarterly and annual closing information; however, it was of virtually no use to the business-unit managers because they had no way to access it. That compromised the abilities of managers to change their organizations quickly in response to rising business challenges.

Tracking Headcount

To solve these problems, Microsoft installed SAP R/3's HR module to consolidate the 18 HR databases and developed an intranet-based application called HeadTrax. HeadTrax provides Microsoft employees throughout the world with Web access to headcount information for the entire organization. Both SAP and Microsoft's domestic recruiting database download data into the HeadTrax database every night, ensuring that the information in HeadTrax is current.

HeadTrax is particularly useful to managers who need to view and change their organizations rapidly. Managers can view employees by cost center or by their positions in the organizational hierarchy. HeadTrax also enables managers to look at headcount information in different timeframes for planning purposes. They can view data from the preceding business day, data that is effective as of the end of the fiscal month, or all open positions before the end of the fiscal year. HeadTrax also lets managers query organizational data—for example, finding all employees with a specific job title attached to a specific organization. This feature provides them with a wealth of accurate, up-to-date information that was difficult, if not impossible, to get by using the previous system.

HeadTrax not only makes it easy for managers to draw current information from a global database, but it also provides managers and other employees with an easy-to-use, paperless system for entering and updating information. HeadTrax enables managers (and administrative assistants working on their behalf) to view and update data, making it simple for an assistant to process an employee transfer or initiate a request for a contingent staff position. In addition to increasing data accuracy and detail, HeadTrax increases the finance department's visibility into the details that drive its headcount reports. HeadTrax reduces the workload for HR administrators because headcount information entered on the intranet is automatically uploaded into Microsoft's SAP HR module within one day. This represents a 300-plus percent improvement from when it took three or more days to manually reenter the information into SAP. Moreover, because the data is entered on the intranet and automatically sent to SAP, it is subject to significantly fewer of the typing errors that plagued the paper-based system. To ensure accountability, HeadTrax provides a complete audit trail for every transaction.

Managing Headcount

With more than 20,000 employees worldwide, HeadTrax has dramatically changed how Microsoft manages headcount. Those changes enable managers to respond more quickly to opportunities in the marketplace. HeadTrax processes approximately 24,000 employee transactions per month, which is a boon to the growing organization. Prior to HeadTrax, the task of collecting and processing headcount-change data was so time intensive that only 10,000 transactions per year could be completed. This represents a significant improvement in the throughput of information for such a rapidly growing company.

For Microsoft, HeadTrax ensures the easy access to accurate information about their organizations that managers need. It is decreasing the costs and increasing the efficiency of Microsoft's HR and Finance departments, which own the person and position information, respectively. These departments have replaced the 18 HR databases and all the business-unit systems with one effective application that works for everybody. HeadTrax improves data integrity throughout the company by providing a single repository for global headcount information. Future versions of HeadTrax will do even more. They will enable designated users to initiate recruitment for an employee position, to create and post job descriptions on Microsoft's intranet and on the Web, and to model their organizations in different ways without having to save each version in the SAP HR module.

This ability to reshape the organization quickly to respond to new opportunities and new market conditions is a requirement in today's fast-paced business world. HeadTrax helps ensure that Microsoft is nimble enough to spring when opportunities present themselves.

Performance Reviews

Technology will never replace a personal, face-to-face performance review, but knowledge management can make establishing and recording the review information more efficient. At Microsoft, some 3,000 managers conduct performance reviews for more than 20,000 eligible employees. The process of evaluating, updating, and managing review information has been enhanced by a desktop application used around the world: MS Review.

Managers and employees discuss performance plans and goals year-round in an ongoing process that encourages frequent communication and feedback. Twice a year, most employees participate in a comprehensive performance review. The Microsoft process for reviewing performance provides a structured method for managers and employees to set goals, review achievements, and develop an action plan for professional development. During the biannual performance-review periods, managers assign numerical performance ratings for each employee and might adjust employee compensation as a result. To help administer the biannual performance reviews, Microsoft managers rely on MS Review to see what review scores employees earned in previous periods and to enter information for the current period. They can also use MS Review to see whether the review decisions they made fall within corporate guidelines. For mid-level and senior managers, this information is particularly useful; it shows them the aggregate amounts determined by all managers within their organization and allows them to compare their numbers against their overall compensation budgets. If a particular business unit exceeds its budget, the senior manager can push the review set back to the responsible managers for reconsideration.

"MS Review isn't a tool to help managers write performance reviews," says Debbie Hickox, the product manager for MS Review. "All Microsoft employees and managers use a Microsoft Word template to prepare a summary document. Once the reviews are written, managers use MS Review to add employee review details, including a numerical performance rating, and consolidate information on employees in their organization. MS Review enables managers to analyze statistics, view budgets, and track their numbers against corporate or subsidiary budgets. It's a kind of one-stop shopping experience—providing managers with a single place where they can enter and view review details and compensation information."

Out with the Old

Prior to MS Review, the task of collecting and managing the data required for the review process was labor intensive and time consuming. Microsoft's HR group used to rely on Microsoft Excel spreadsheets to gather review information from managers. The spreadsheets grew more sophisticated, but the method for gathering and processing review information remained constant. Managers had to send the spreadsheets back to Microsoft HR, where the information would be consolidated by hand from the multitude of files. HR would roll up information for individual groups into larger group statistics, and it would then roll that information into still larger organizational information. The aggregate information could then be sent to Microsoft senior managers, who could see whether the amounts fit within the budget.

The problems associated with this method were apparent. To begin with, Microsoft did not have a centralized HR information system. Microsoft's domestic operations were handled by an HR department based in Redmond, while each subsidiary operated its own HR department and system. No system consolidated data across the entire company. HR managers could manually consolidate information from each group and subsidiary to create a corporate-wide picture; however, it was difficult to ensure that the overall view was accurate due to the possibility of human error from any point of data entry.

Moreover, managing so many files required a great deal of time. From the day HR began to develop and distribute the spreadsheet templates to the day the final information was entered into the HR systems was a full six months—and then it was time to begin the process all over again.

In with the New

Today, the review process takes about two months. Company-wide reviews still take place twice each year, but a variety of changes at Microsoft have streamlined the process considerably. Microsoft now uses the HR module of SAP R/3 to manage employee records for all its operations, domestic and international. Prior to each of the review periods, Microsoft HR extracts employee performance information from the SAP database and creates a data mart running on Microsoft SQL Server. This information serves as the core database for the review process.

Microsoft HR managers then send an e-mail message to managers of the other departments. Not only does the message remind them that it is time to do performance reviews, but it also provides a link that enables the manager to install the latest version of MS Review. When the manager logs onto the intranet and launches the application, MS Review encrypts and downloads the corresponding employee information to the manager's system. The data is then stored securely on the manager's workstation while the review period is underway.

When the time comes to make compensation decisions, managers can use MS Review to see the employee's past compensation and review ratings. They can then compare that information to other employees in the group. MS Review informs a manager precisely where an employee's salary falls relative to the recommended salary range for his position. It provides current information on performance-review ratings and an account of the number of employees who have received certain performance ratings. It even provides budget information for different compensation elements, for example, salary increases and bonuses. As the manager makes review recommendations, she enters that information into MS Review. As soon as that information has been entered and accepted in MS Review, the application transfers that information from the manager's desktop to the HR database. When an individual manager has completed her reviews, the manger then approves the entire review package by clicking a button in MS Review. At that time, MS Review notifies that manager's manager by e-mail that a set of reviews is complete and ready for examination.

Executives at the top of each organization determine how far down the management chain the MS Review tool is pushed, and they can designate certain access levels for individual managers in the hierarchy. Senior managers can use MS Review to record the information for their direct reports; they can also use MS Review's tools for real-time analysis to see how the performance review scores and compensation budgets are being distributed. "I really like the MS Review tool. I used the Excel spreadsheet review models previously, and this is a vast improvement," says Sabina Nawaz, a group program manager in HR Management and Leadership Development. "The statistical reporting lets me track employee to employee how I'm doing against my budget and other review guidelines. There are great ways to sort the data as well as see employee detail and history. MS Review is a tool that makes my job a lot easier."

After a manager has approved the review recommendations for her organization, the recommendations are passed up the managerial chain for further approvals. Mid-level and senior managers can view and modify recommendations for individual scores. If a senior manager discovers that one of his direct reports has exceeded a budget, for instance, he can send the entire set of recommendations back to that report for reconsideration. Ultimately, all the data for each group is approved by the department's top-level managers. From there, it is passed from the MS Review database to SAP R/3, where the information is linked to the employee record in the HR module. Three months later, HR personnel download all employee records to the data mart again, as the review process begins anew.

For Microsoft, MS Review is a streamlined solution that maximizes the efficiency with which managers can record their evaluations of employee performance. It provides managers throughout the organization with timely, accurate information and enables the company to manage its budgets with a higher level of effectiveness. It has cut in half the amount of time HR personnel must spend preparing materials for each review period. This frees them up to work more closely with organizational managers on other aspects of employee management. MS Review provides better information for better decisions, and that enables Microsoft managers to run their organizations more effectively.

Expense Management

Microsoft has subsidiaries in more than 60 countries around the world. Because it has a strong worldwide presence, employees spend nearly $200 million a year traveling on business. Additionally, they often spend out-of-pocket money on work-related expenses such as meals, supplies, and entertainment. Because Microsoft is a fast-paced, dynamic work environment where employees manage a large workload, people don't want to spend a lot of time filling out expense reports. If they find time, they want to be able to submit expense-reimbursement reports easily and to be reimbursed promptly.

This was not possible with the previous system, which was based on paper forms. When employees filled out expense reports, they often did so at work because the forms were located in the office. An alternative was to complete one of many templates based on Excel. The employee then printed the reports, attached the receipts, and submitted the package to her manager, who often took longer than a week to approve it and send it on to Accounts Payable. After the form was approved, Accounts Payable would enter the information manually from the paper form into the financial system, which would issue the check. On average, this procedure could take up to three weeks, often putting employees behind on paying their bills for corporate credit cards. "Employees wanted to be reimbursed faster," explains Clayton Fleming, director at CPG Process Design. "Our challenge was to figure out how to repay them in a timely fashion without hiring more people in Accounts Payable."

Another problem was that department-specific versions of the expense-report template had been created throughout the company. At one point, 136 expense-report templates resided on various servers. The multiplicity of forms slowed processing in Accounts Payable because form processors had to standardize data from different formats. Also, outdated forms often had old account codes, obsolete mileage rates, or incorrect or missing classifications, such as airfare and entertainment expenses. These issues posed a problem for the Corporate Procurement Group (CPG), which oversees Accounts Payable.

To solve these problems, CPG developed MS Expense, an expense-reporting application that links directly with Microsoft's SAP R/3 financial module. After an employee fills out and submits an expense report over the intranet, it's automatically parked, pending management approval, in the SAP module without any manual uploading or dual entry. The employee's manager automatically receives an e-mail message that the report is ready for review. If the manager approves the expense report, the report's status changes to Postedin the SAP module. At this point, the report is ready for payment, which the SAP module does. Because all these steps directly create and update transactions in SAP, no manual processing is required. The automated procedure thus cuts costs, shortens the payment cycle, and eliminates data-entry errors.

An average of 15,000 Microsoft employees use MS Expense in 29 countries to process 2600 Microsoft expense reports each week. MS Expense has greatly improved Microsoft's expense-reporting function, saving the company significant sums of money and hours of work while eliminating errors that occur when processing paper forms. It saves Microsoft approximately $400,000 a year in personnel costs alone, because CPG was able to re-deploy half of its expense-reporting group to other positions. Only four people manage the expense reporting and audit processes, and CPG expects that number to diminish even further. MS Expense has also improved employee satisfaction with the expense-reimbursement process. Employees get paid in three days, not three weeks, and they can report expenses at any time from anywhere in the world.

Wrap Up

Knowledge management can help companies save significant sums of money by enabling them to improve employee management. Key areas in which knowledge management is most effective for this include the following:

  • Training helps keep employees sharp.It can take many forms, including multimedia, online handbooks, and so on.
  • Skill alignment ensures that the right people are working on the right projects at the right time.Knowledge management enables companies to find experts that are available for a par-ticular job.
  • Benefits management is a natural target for any knowledge-management system.Companies can simplify paper-based systems, reduce HR costs, provide corporate information to employees, and more.
  • Bigger companies can benefit most from better staffing management.Using knowledge management, those companies can keep track of headcount and reorganize more quickly.
  • Performance reviews, as demonstrated by MS Review, are more efficient when moved from manual processes to knowledge-management systems.As a result, reviews are completed on time, and supervisors can better manage their budgeting processes.
  • Expense reimbursement is best done on an intranet. Companies can significantly reduce the cost and turn-around time for reimbursing employees for out-of-pocket expenses, improving morale and productivity.

Taking Stock

  1. Are your HR processes automated as much as they could be?
  2. Do your employees grumble about your HR processes?
  3. Do your employees receive the training required to perform their jobs the way you'd like?
  4. Do your employees have available training for the skills that might be required as the business climate and other pressures change?
  5. Do you know who the experts are in your organization? Can managers in your company quickly identify the right people to assign to a particular project and determine their availability?
  6. Does your organization use paper-based forms for vacation requests, benefit-enrollment forms, and other HR information?
  7. Can your employees view relevant HR information about themselves on your intranet?
  8. Would your company be able to reorganize or move staff around quickly?
  9. Do you view your performance review process positively or negatively?
  10. Do you submit expenses using paper-based forms? How long does it take for employees to get expense checks after submitting forms?

Action Plan

  • Identify the various sources of HR data that exist in your organization.
  • Identify the key HR processes that would benefit most from online automation.
  • Walk the halls and talk to employees to get a better feel for the types of problems a knowledge-management system might solve, as well as opportunities it might seize.

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Last Updated: Friday, July 6, 2001