It's a popular question from the Chief Financial Officer these days... if we are going to invest 'x' amount of dollars in your project, what will the company get in return?
This post identifies ways that intranets can add bottom line value to an organization. If you are putting together a business case to obtain funding for intranet improvement initiatives you will find this post very helpful.
What are the key business reasons for having an intranet?
The following diagram identifies key business reasons for having an intranet. At the core of this diagram is the assumption that the primary purpose of an intranet is to help employees do their jobs more effectively. From this central assumption, there are 8 key business drivers that can be addressed by having an effective organizational intranet.
Business Processes | Knowledge Management | Collaboration | Change Management | Continuous Improvement | Portal to data & applications | Employee Engagement | The Environment
A business process can be defined as a set of related, structured activities or tasks that produce a specific service or product for a particular customer or customers. It often can be visualized with a flowchart as a sequence of activities.
As both Henry Ford - considered to be the father of the modern assembly line - and Ray Kroc - the founder of McDonalds - knew, having effective, efficient and repeatable processes can give you a competitive edge that is almost impossible to beat.
Intranets can directly assist staff complete business processes in three ways:
Indirectly, intranets also assist staff complete business tasks through enabling collaboration, knowledge sharing, change management and continuous improvement initiatives. The Finding ROI (Intranet ROI) white paper by Prescient lists a number of examples of how intranets have returned a positive ROI to many organizations through improved business processes.
Knowledge Management is an approach used in organizations to identify, create, distribute and enable adoption of insights and experiences. Collectively this knowledge comprises an organization's intellectual property or intellectual assets. Intellectual property is often recognized as the most important asset of many of the world’s largest companies [1]. Management of an organization's intellectual assets is no less important than managing the financial, brand, physical or human assets of an organization.
Knowledge can be comprised of a wide variety of documents such as concept briefs, proposals, business cases, forecasts, project plans, processes, procedures, policies, forms, presentations, white papers, research papers, strategy papers, spreadsheets, mission statements, values, and many many other document types.
Management of these document types can be done through an organization's intranet by developing an information architecture or taxonomy that allows employees to save and tag their documents in a way that then enables other employees to find them when they need them. Document management, content management, and search functionality are the key intranet technologies that enable organizations to manage this important asset.
Collaboration is where two or more people or organizations work together to achieve common goals by sharing knowledge, learning and building consensus. Research shows that a staggering 36% of a company's overall performance is driven by its ability to collaborate [2]. This shows that good collaboration can improve business performance.
Former chairman of General Electric (GE), with a reputation for uncanny business acumen and unique leadership strategies, Jack Welch, believed that you could not be successful if you went it alone in a global economy. He became a driving force behind not only collaboration between organizations, but also collaborative project management.
Intranets and extranets can help facilitate collaboration in 4 ways:
- An effective staff directory that allows employees to know who to contact about what
- Electronic communication tools such as Wikis and blogs
- Electronic conferencing tools such as discussion forums and video conferencing
- Collaborative management tools such as calendars, online project management systems, and online spreadsheets
Change management is a set of processes used to ensure that significant changes are implemented in an orderly and systematic manner to effect organizational change. Change management includes a wide range of communication and training activities.
A McKinsey study [3,4] reviewed 40 major projects and examined the effect of an Organizational Change Management (OCM) program on a project's Return on Investment (ROI). The study concluded that the ROI was:
- 143 percent when an excellent OCM program was part of the initiative
- 35 percent when there was a poor OCM program or no program.
Another study conducted by Prosci concluded that projects with excellent change management programs met or exceeded objectives 88% of the time, while projects with poor change management met or exceeded objectives only 17% of the time. [5]
Other reasons to provide effective change management are listed on the Change Management Learning web site.
An intranet can be a significant tool in implementing change management. It can provide the primary communication and training channel to keep employees up-to-date with new changes. Communication can include news items from senior executives explaining why the change is important, how it is going to affect staff and what support and training will be provided. The actual training and support itself can be delivered via the intranet. In addition to the this, the collaborative nature of intranets enables the project team to work more effectively together and to obtain ongoing feedback from end users.
Continuous improvement is an approach where business and manufacturing processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility. W. Edwards Demming, an American statistician who is best known for his contribution to Japan's renown innovative high-quality products and its economic power, believed that the key to increasing quality while simultaneously reducing costs was to practice continual improvement.
In Japan this philosophy of continuous improvement is known as Kaizen. People at all levels of an organization can participate in kaizen. The format for kaizen can be individual, suggestion system, small group, or large group. So how can an intranet contribute to kaizen or continuous improvement?
Portal to data and applications
Many organizations have structured data (ie. customer details) and applications that are not fully leveraged or utilized. This is because end users either don't know the data or applications exist, don't know how to access the data or find the application or, most likely, don't know when or why they should be using the data or applications.
The intranet is able to act as a portal to this data and applications by providing a meaningful context that drives end users to the correct data or application. For example, you could use your intranet to provide a list of links to key applications, describing what each application is, who should use it and when.
Toby Ward in his blog post, the intranet as a shopping mall compared the intranet to a shopping mall, where the intranet benefits applications just as a shopping mall benefits the stores. If the shopping mall doesn’t exist, a lot of retailers lose out. He goes on to say, "based on my anecdotal and measured observations, that many applications owe 50% of their value to the intranet".
Employee engagement Is "a heightened emotional connection that an employee feels for his or her organization, that influences him or her to exert greater discretionary effort to his or her work".
There is clear evidence that high levels of employee engagement correlates to individual, group and corporate performance in areas such as retention, turnover, productivity, customer service and loyalty. While differences varied from study to study, highly engaged employees outperform their disengaged counterparts by a huge 20 – 28 percentage points. [6]
Alex Edmans, MIT Sloan School of Management, agrees with these key findings. He analyzed the financial performance of a portfolio of stocks selected by Fortune magazine as the “Best Companies to Work for in America” from 1998 -2005. By the end of 2005, these stocks “earned average annual returns of 14 percent by the end of 2005, over double market return”. [7]
Studies have identified the following drivers that can improve employee engagement within an organization:
All of the above can be addressed to some extent by an effective intranet. Internal communications can be news items and a CEO blog on the home page, improved trust and integrity by discussion forums, blogs and wikis, improved line of site by use of performance dashboards, career growth can be addressed by internal job boards, pride in the company by news stories about the organization's success, and employee development by providing online training and other tools to improve skills.
The Kyoto Protocol establishes legally binding commitments for the reduction of greenhouse gases. Some industries have a mandatory requirement to reduce their carbon footprint while for others its'voluntary. The Intranet is well positioned to play a key role in many organizations in reducing carbon emissions.
The Intranet benchmarking Forum (IBF) lists 10 ways organizations can build environmental practices using the intranet. Some of these practices include enabling staff to work remotely which reduces the need for office space and the need for travel, using web meetings to cut travel, providing news items about the environment and automation of business processes thereby reducing the need to print.
The IBF has also identified the requirement to work remotely and from home as being on the rise, accelerated by the economic crisis and environmental needs.
If you are are interested in assessing how your current intranet is meeting your organization's business needs, consider participating in the Worldwide Intranet Challenge (WIC). The WIC will provide you with a measure of how your intranet end users perceive the intranet and will allow you to identify ways it can add further value.
References
1. The Value of Intellectual Property, Intangible Assets and Goodwill
2. Meetings Around the World: The Impact of Collaboration on Business Performance
3. Helping employees embrace change 4. The Business Impact of Change Management 5. Prosci Study With 426 Organizations Reveals Key Success Factors for Government and Corporate Change
6. Employee engagement: What exactly is it?
7. Employee engagement is good for the bottom line
Great article, Andrew. This should be helpful for a lot of intranet managers working on business cases.
Jane
Posted by: Jane McConnell | June 19, 2009 at 05:36 PM
Thanks Jane. There is a lot more evidence available about the value that the topics identified in this blog can add to a business, if intranet managers want to add more substance to their business cases.
Andrew
Posted by: Andrew Wright | June 20, 2009 at 10:11 PM