Description
Knowledge management is an emerging phenomenon in service and profit-oriented organizations. The survival of organizations in the 21st century's competitive business environment has been hinged on effective and efficient knowledge management practices.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
1
Budgeting for Knowledge Management in Organizations
Ifijeh Goodluck
Covenant University
Nigeria
[email protected]
ABSTRACT: Knowledge management is an emerging phenomenon in
service and profit-oriented organizations. The survival of organizations in
the 21
st
century’s competitive business environment has been hinged on
effective and efficient knowledge management practices. One critical
success factor in knowledge management is budgeting. This paper
discusses the processes involved in budgeting for knowledge management
in organizations. It also highlights the important role of proper budgeting
and identifies the sources and constraints of budget funding in
organizations.
I. Introduction
In recent times, knowledge has become a resource with which organizations including
business enterprises achieve their aims and objectives. Drucker (1993) asserted that in the
new economy, knowledge is not just another resource alongside the traditional factors of
production -- labor, capital, and land -- but the only meaningful resource today. Not only
socio-economic theorists have called for our attention to the importance of knowledge as
management resource and power, but also an increasing number of scholars in the fields
of industrial organization, technology management, management strategy, and
organizational theory have begun to theorize about management of knowledge (Zhou &
Turnbull, 2008).
Knowledge management (KM) attempts to build a range of strategies to facilitate the
definition, identification, capture, organization and dissemination of knowledge across an
organizational community (Desenberg, 2000). It focuses on building a culture of
collaboration that enriches the firm’s knowledge base. Knowledge management relies
heavily on building a strong social community that sees sharing and support for the
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
2
organization’s strategic needs as crucial. As a consequence, management and the
development of a knowledge culture are particularly important (Debowski, 2006).
Organizations seek to use a range of authoritative sources, including knowledge held by
individuals and within knowledge systems maintained by the organization. Such
knowledge draws from different organizational knowledge sources (Tsoukas &
Valdimirou, 2001). This includes data housed in organizational records and systems,
explicit knowledge which is documented and accessible, and tacit knowledge held by
employees, customers, shareholders and other organizational shareholders. Debowski
(2006) asserted that when important decisions are to be taken, it is common to seek
guidance from these varying authoritative sources and to build a richer and more
informed response by learning and considering the different perspectives each may offer.
Canvassing opinion, examining past experience and analyzing facts and statistics are
important processes in developing organizational knowledge.
The creation of effective organizational knowledge relies on many things. First, the
sources of knowledge that can be accessed need to be known, available and useful. Many
systems need to be regularly updated to reflect the changing organizational context and
experiences (Narasimha, 2000). In large organizations, libraries and archives provide
guidance on internal and external knowledge resources. These corporate knowledge
systems need to be carefully managed and organized so that they can contribute
effectively to organizational knowledge creation and use. This demands budgeting and
effective and efficient use of provided funds.
Organizations are either service or profit-oriented. As such, they practice financial
planning and procedures through budgeting to show a direct relationship between clearly
stated goals and objectives. In other words, the financial plan of any organization as
regards knowledge management demonstrates how the results to be achieved during the
period relate to the long range goals of the organization. To date, many organizations
have initiated at least one knowledge management project (Mann, 2007). Also, according
to Rivard & Roy, at least 80% of large companies have undertaken initiatives to better
manage their explicit knowledge (Rivard & Roy, 2005). Even though there are many
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
3
expected benefits through KM improvements, results show that these improvements are
not always observed (Peyman et al., 2005). Some studies even suggest that KM project
failure may be higher than 80%.
Given the importance of KM project objectives and their high failure rate, understanding
the underlying success factors is critical. Many reasons have often been cited for the
frustrating results: lack of updates, failure to integrate KM into normal working practices,
complicated systems, lack of training, lack of time, and the fact that users did not
perceive personal benefits.
There is probably a variety of sources that may hinder these projects, many being related
to improper technology implementation. However, a major cause of failure is the lack of
formulation and implementation of appropriate budgetary policies (Popoola, 2000). In
view of the above, adequate finance and good financial management practice are required
for the day-to-day implementation of KM policies in any organizations.
This paper discusses the various means by which knowledge managers in organizations
match estimates of expenditure with expected income, with the aim of effectively and
efficiently deploying funds to implement knowledge management policies in their
organizations.
II. Budget and Budgeting for Knowledge Management
A budget, according to Ozigi (1977), is the expected total revenue and expenditure for
each year based on estimates of the income accruing to the unit in an organization. It is a
formal written statement of management’s plan for the future, expressed in financial
terms. A budget charts the course of future action for knowledge management in an
organization.
Kooniz et al. (1980) saw budgeting as the formulation of plans for a given future period
in both financial terms (e.g., revenue and expenditure) and non-financial terms (e.g.,
direct-labour hours, materials, and physical units of an organization). The origin of
budget and budgeting could be traced to the early 1920s when large industrial
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
4
organizations first used them as tools for managing costs and cash flows. Many
researchers in management literature view budgets in terms of a board organizational
plan referring to managerial concepts such as planning, coordinating, and control (Evans
& Ward, 2005).
A budget as a rational model includes: 1) clearly stated goals or objectives, 2) inputs
selected and combined in such a way as to maximize goal attainment, 3) a number of
alternatives identified and compared before a decision is made to implement a given
procedure, 4) information systems used as a basis for the improvement of decision
making, and 5) a rational model with an emphasis on a long-term planning.
Features of a good budget plan for Knowledge Management in Organizations are: 1) a
financial plan which contains programmes and projects for managing knowledge in an
organization, 2) a fixed period, which is usually one year, 3) both estimated incomes and
expenditure of KM personal, materials and equipment, 4) an authority that collects and
incurs expenditure once it is approved, and 5) inclusion of all the financial activities
around knowledge management in the given organization.
III. Mechanisms of Budgeting for Knowledge Management in Organizations
Mechanism stresses the methodological approaches to budgeting in any organizations.
Depending on the nature and purpose of the budget and operational level of the
knowledge management in an organization, the process of budgeting lends itself to quite
a number of mechanisms or techniques, which are sometimes not mutually exclusive.
These budgeting techniques include:
1. Incremental budgeting. This is a system of budgeting where the budget of the
current year depends on the previous year’s estimates.
2. Zero-based budgeting. This involves periodic (annual) re-evaluation of all
programmes. The existing and new programmes are scrutinized on the same basis
and ranked according to their relevance to the prevailing knowledge management
policy thrust of the organization for the fiscal year.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
5
3. Performance budgeting. Under this system, knowledge management programmes
and projects are classified and subjected to cost-benefit analysis. It equally
involves performance measurement and reporting.
4. Programming, planning and budgeting system. This involves classification of
knowledge management programmes by functions and activities, applications of
qualitative criteria or assessment of programmes and services that will lead to
policy formation and evaluation.
5. Line budgeting. It is an old technique of budgeting, which lists items in a budget
document on a purely object basis. It shows cost by type of output but does not
indicate the costs on a programme-by-programme or project-by-project basis. It is
important to note that line-item budget has very little informative value.
IV. Budgeting Process for Knowledge Management
Budgeting for knowledge management must include finance, labour, equipment and
materials. These are the main factor inputs for implementing such a knowledge
management plan. Therefore, knowledge managers charged with the responsibility of
managing organizational knowledge must ensure that costs in the budget of their units are
as realistic as possible. They should establish a budget committee, appoint some budget
officer(s), and provide a manual for guiding the implementation of the budget.
A typical budgeting process for knowledge management should include: 1) design of
budget guideline, 2) issuing of call circular, 3) submission and defense of proposals by
the knowledge management unit before the organizations’ management, 4) budget
approval, 5) budget implementation, and 6) budget monitoring and evaluation.
V. Components of a Budget Plan for Knowledge Management
Ideally, a budget plan of any Knowledge Management unit must contain four essential
elements: 1) Recurrent Revenue (i.e., funds allocation), 2) Recurrent Expenditure (i.e.,
labour costs such as salaries and wages, staff training, local travels and transport, utility,
postal/telephones, stationery, vehicle maintenance, and hospitality), 3) Capital Revenue
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
6
(i.e., balance carried forward, proceeds from bonds and shares, grants and aids, and loan
prepayment), and 4) Capital Expenditure (i.e., cost of projects and programmes, building,
and computerization).
VI. Budgetary Control of Knowledge Management System
Budgetary Control is a system of controlling costs, which includes the preparation of
budgets, establishing responsibilities, comparing actual performance with what was
budgeted and acting upon results to achieve optimum benefits (Popoola, 2000).
Budget control should be based on such factors as: 1) the creation of a budget centre’s
accounting system, 2) general instruction on budget technique and in operating the
system, 3) the preparation of an organizational chart, 4) the formation of a budget
committee, and 5) designing the system for reporting.
VII. The Role of Budgeting in Knowledge Management
Budgeting plays a crucial role in knowledge management. Very importantly, a budget
demonstrates how results to be achieved during the budget period relate to the long–range
goals of the unit and the organization in general. Ideally, progress in reaching those long-
range goals should be made each year of the multi-year projection.
Budget serves knowledge managers in several important ways. It is an aid to orderly and
progressive planning, a tool in administration, an instrument of operational control, and a
device for evaluating results.
VIII. Financial Sources for Knowledge Management Units
Knowledge Management units of organizations spend a lot of funds on knowledge
identification, generation, organization, storage and dissemination for the achievement of
the overall goals of the organizations. Usually, Knowledge Management units are funded
by their parent organizations. The amount of fund an organization allocates to the
Knowledge Management unit may depend on what priority or value it places on the
importance of organizational knowledge in achieving its goals and objectives. Other
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
7
sources of funds for Knowledge Management units include grants and bequests from
friends of the organization. Loans from finance houses may also help to fund Knowledge
Management units. However, this must be approved by the organization.
IX. Necessary Information for Budgeting
Stueart (1980) identified historical and current information as necessary ingredients for
budgeting.
1. Historical Information
This includes long term trend analysis, derived from the Knowledge Management unit’s
own budget reports, supplemented by the various price-index analysis and annual
statistical records. Items to look out for include: changes in total budget and changes in
the relationship between the various parts and pattern of expenditure. The pattern of
expenditure should be compared with such matters as numbers of items purchased,
significant variations or changes that suggest that item prices have brought about a
redistribution order.
The evaluation of past budgets and examination of statistical reports should be compared
with the goals and objectives of the Knowledge Management unit. This comparison will
reveal whether budget allocation or changes in prices have caused a significant deviation
from the original plan. Any deviation in original plan should be thoroughly examined for
its causes and effects. Some deviations may require budgeting corrections, either by
providing more money in order to obtain more materials or reducing the number of items
to be purchased in order to bring expenditure more in line with general goals. However, if
the survey reveals persistent deviations, it may be an indication that the budget system
used is unresponsive to current needs, and as such, should be changed or develop an
alternative recommendation like provision for contingency funds to be incorporated in
the budget system.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
8
2. Current Information
This includes information from the immediate past year’s budgetary performance and the
year-end statement of performance. Latest information on price trends, whether from the
unit’s own records or from external sources (like vendors, suppliers, etc) is of great
importance in the preparation of budget for the current year. Unless such information is
taken into consideration in the preparation of the current year’s budget, price increases
are likely to overthrow any knowledge management goals. This is especially true of
materials supplied on quotations.
X. Conclusion
Budgeting for knowledge management in organizations is a complex process. No simple
set of rules works for all. The general intention of budgeting for knowledge management
is to distribute funds in such a way as to support the overall attainment of organizational
objectives. While it must not be seen as a rigid control mechanism, budgeting is a means
of encouraging accountability. It also sets measurable goals. Care must be taken to
forestall the rigidity that always develops over time. Formulas in particular must be
reconsidered periodically. If one method does not work well, the knowledge manager
should try another. It must be noted that no knowledge manager succeeds in any
organization without budgetary provision for implementation of programmes and
policies. A suitable budgeting technique must be chosen and correctly used to achieve
maximum benefits and support for set goals both on short- and long-term bases.
References
Debowski, S. (2006). Knowledge management. Sydney: John Wiley.
Desenberg, J. (2000). Moving past the information age: Getting started with knowledge
management. The Public Manager, 29(2), 52.
Evans, G. E.; & Ward, P. L. (2005). Management basics for information professionals
(2nd ed.). New York: Neal-Schuman.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
9
Kent, A. (Ed.). (1990). Encyclopedia of library and information science. Boca Raton, FL:
CRC Press.
Kohut, J. D. (1974). Allocating the book budget: A model. College and Research
Libraries, 35(3), 192-9.
Koontz, H.; O'Donnell, C.; & Weihrich, H. (1980). Management. New York: McGraw-
Hill.
Lucier, C. (2003). When knowledge adds up to nothing: Why knowledge management
fails and what you can do about it. Developed and Learning in Organizations, 17(1), 32-
35.
Mann, J. (2007). Best practices for knowledge management. Stamford: Gartner, 2007.
Morello, D.; & Caldwell, F. (2001). What are knowledge workers? What makes them
tick? Stamford: Gartner.
Ozzigi, A. O. (1977). A handbook on school administration and management. London:
Macmillan.
Peyman, A.; Jafari, M.; & Fathian, M. (2005). Exploring Failure-Factors Of
Implementing Knowledge Management Systems In Organizations. Journal of Knowledge
Management Practice.
Popoola, S. O. (2000). A cost model approach to records management system in Oyo
state civil service, Nigeria. (Unpublished doctoral dissertation). University of Ibadan,
Nigeria.
Rivard, Lucie; & Roy, Marie-Christine. (2005). Gestion stratégique des connaissances.
Québec: Les Presses de l'Université Laval.
Tsoukas, H.; & Valdimirou, E. (2001). What is organizational knowledge? Journal of
Management Studies, 38(7), 973-4.
Yelden, E. F.; & Albers, J. A. (2004). The business case for knowledge management.
Journal of Knowledge Management Practice.
Zhou, Y.; & Turnbull, P. (2008). Budgeting and the organizational knowledge creation.
Retrieved 5 January 2011 from:http://www.ischool.utexas.edu/~i385q/student_presentations/fall2008/KMS Research
Paper (Yongyi Zhou).doc
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
10
Author:
Ifijeh Goodluck, Serials Librarian, Centre for Learning Resources, Covenant University,
Ota, Ogun State, Nigeria. Email: [email protected]
Submitted to CLIEJ on 7 June 2011
Copyright © 2011 Ifijeh Goodluck
Goodluck, Ifijeh. (2011). Budgeting for knowledge management in organizations.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
doc_332306683.pdf
Knowledge management is an emerging phenomenon in service and profit-oriented organizations. The survival of organizations in the 21st century's competitive business environment has been hinged on effective and efficient knowledge management practices.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
1
Budgeting for Knowledge Management in Organizations
Ifijeh Goodluck
Covenant University
Nigeria
[email protected]
ABSTRACT: Knowledge management is an emerging phenomenon in
service and profit-oriented organizations. The survival of organizations in
the 21
st
century’s competitive business environment has been hinged on
effective and efficient knowledge management practices. One critical
success factor in knowledge management is budgeting. This paper
discusses the processes involved in budgeting for knowledge management
in organizations. It also highlights the important role of proper budgeting
and identifies the sources and constraints of budget funding in
organizations.
I. Introduction
In recent times, knowledge has become a resource with which organizations including
business enterprises achieve their aims and objectives. Drucker (1993) asserted that in the
new economy, knowledge is not just another resource alongside the traditional factors of
production -- labor, capital, and land -- but the only meaningful resource today. Not only
socio-economic theorists have called for our attention to the importance of knowledge as
management resource and power, but also an increasing number of scholars in the fields
of industrial organization, technology management, management strategy, and
organizational theory have begun to theorize about management of knowledge (Zhou &
Turnbull, 2008).
Knowledge management (KM) attempts to build a range of strategies to facilitate the
definition, identification, capture, organization and dissemination of knowledge across an
organizational community (Desenberg, 2000). It focuses on building a culture of
collaboration that enriches the firm’s knowledge base. Knowledge management relies
heavily on building a strong social community that sees sharing and support for the
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
2
organization’s strategic needs as crucial. As a consequence, management and the
development of a knowledge culture are particularly important (Debowski, 2006).
Organizations seek to use a range of authoritative sources, including knowledge held by
individuals and within knowledge systems maintained by the organization. Such
knowledge draws from different organizational knowledge sources (Tsoukas &
Valdimirou, 2001). This includes data housed in organizational records and systems,
explicit knowledge which is documented and accessible, and tacit knowledge held by
employees, customers, shareholders and other organizational shareholders. Debowski
(2006) asserted that when important decisions are to be taken, it is common to seek
guidance from these varying authoritative sources and to build a richer and more
informed response by learning and considering the different perspectives each may offer.
Canvassing opinion, examining past experience and analyzing facts and statistics are
important processes in developing organizational knowledge.
The creation of effective organizational knowledge relies on many things. First, the
sources of knowledge that can be accessed need to be known, available and useful. Many
systems need to be regularly updated to reflect the changing organizational context and
experiences (Narasimha, 2000). In large organizations, libraries and archives provide
guidance on internal and external knowledge resources. These corporate knowledge
systems need to be carefully managed and organized so that they can contribute
effectively to organizational knowledge creation and use. This demands budgeting and
effective and efficient use of provided funds.
Organizations are either service or profit-oriented. As such, they practice financial
planning and procedures through budgeting to show a direct relationship between clearly
stated goals and objectives. In other words, the financial plan of any organization as
regards knowledge management demonstrates how the results to be achieved during the
period relate to the long range goals of the organization. To date, many organizations
have initiated at least one knowledge management project (Mann, 2007). Also, according
to Rivard & Roy, at least 80% of large companies have undertaken initiatives to better
manage their explicit knowledge (Rivard & Roy, 2005). Even though there are many
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
3
expected benefits through KM improvements, results show that these improvements are
not always observed (Peyman et al., 2005). Some studies even suggest that KM project
failure may be higher than 80%.
Given the importance of KM project objectives and their high failure rate, understanding
the underlying success factors is critical. Many reasons have often been cited for the
frustrating results: lack of updates, failure to integrate KM into normal working practices,
complicated systems, lack of training, lack of time, and the fact that users did not
perceive personal benefits.
There is probably a variety of sources that may hinder these projects, many being related
to improper technology implementation. However, a major cause of failure is the lack of
formulation and implementation of appropriate budgetary policies (Popoola, 2000). In
view of the above, adequate finance and good financial management practice are required
for the day-to-day implementation of KM policies in any organizations.
This paper discusses the various means by which knowledge managers in organizations
match estimates of expenditure with expected income, with the aim of effectively and
efficiently deploying funds to implement knowledge management policies in their
organizations.
II. Budget and Budgeting for Knowledge Management
A budget, according to Ozigi (1977), is the expected total revenue and expenditure for
each year based on estimates of the income accruing to the unit in an organization. It is a
formal written statement of management’s plan for the future, expressed in financial
terms. A budget charts the course of future action for knowledge management in an
organization.
Kooniz et al. (1980) saw budgeting as the formulation of plans for a given future period
in both financial terms (e.g., revenue and expenditure) and non-financial terms (e.g.,
direct-labour hours, materials, and physical units of an organization). The origin of
budget and budgeting could be traced to the early 1920s when large industrial
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
4
organizations first used them as tools for managing costs and cash flows. Many
researchers in management literature view budgets in terms of a board organizational
plan referring to managerial concepts such as planning, coordinating, and control (Evans
& Ward, 2005).
A budget as a rational model includes: 1) clearly stated goals or objectives, 2) inputs
selected and combined in such a way as to maximize goal attainment, 3) a number of
alternatives identified and compared before a decision is made to implement a given
procedure, 4) information systems used as a basis for the improvement of decision
making, and 5) a rational model with an emphasis on a long-term planning.
Features of a good budget plan for Knowledge Management in Organizations are: 1) a
financial plan which contains programmes and projects for managing knowledge in an
organization, 2) a fixed period, which is usually one year, 3) both estimated incomes and
expenditure of KM personal, materials and equipment, 4) an authority that collects and
incurs expenditure once it is approved, and 5) inclusion of all the financial activities
around knowledge management in the given organization.
III. Mechanisms of Budgeting for Knowledge Management in Organizations
Mechanism stresses the methodological approaches to budgeting in any organizations.
Depending on the nature and purpose of the budget and operational level of the
knowledge management in an organization, the process of budgeting lends itself to quite
a number of mechanisms or techniques, which are sometimes not mutually exclusive.
These budgeting techniques include:
1. Incremental budgeting. This is a system of budgeting where the budget of the
current year depends on the previous year’s estimates.
2. Zero-based budgeting. This involves periodic (annual) re-evaluation of all
programmes. The existing and new programmes are scrutinized on the same basis
and ranked according to their relevance to the prevailing knowledge management
policy thrust of the organization for the fiscal year.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
5
3. Performance budgeting. Under this system, knowledge management programmes
and projects are classified and subjected to cost-benefit analysis. It equally
involves performance measurement and reporting.
4. Programming, planning and budgeting system. This involves classification of
knowledge management programmes by functions and activities, applications of
qualitative criteria or assessment of programmes and services that will lead to
policy formation and evaluation.
5. Line budgeting. It is an old technique of budgeting, which lists items in a budget
document on a purely object basis. It shows cost by type of output but does not
indicate the costs on a programme-by-programme or project-by-project basis. It is
important to note that line-item budget has very little informative value.
IV. Budgeting Process for Knowledge Management
Budgeting for knowledge management must include finance, labour, equipment and
materials. These are the main factor inputs for implementing such a knowledge
management plan. Therefore, knowledge managers charged with the responsibility of
managing organizational knowledge must ensure that costs in the budget of their units are
as realistic as possible. They should establish a budget committee, appoint some budget
officer(s), and provide a manual for guiding the implementation of the budget.
A typical budgeting process for knowledge management should include: 1) design of
budget guideline, 2) issuing of call circular, 3) submission and defense of proposals by
the knowledge management unit before the organizations’ management, 4) budget
approval, 5) budget implementation, and 6) budget monitoring and evaluation.
V. Components of a Budget Plan for Knowledge Management
Ideally, a budget plan of any Knowledge Management unit must contain four essential
elements: 1) Recurrent Revenue (i.e., funds allocation), 2) Recurrent Expenditure (i.e.,
labour costs such as salaries and wages, staff training, local travels and transport, utility,
postal/telephones, stationery, vehicle maintenance, and hospitality), 3) Capital Revenue
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
6
(i.e., balance carried forward, proceeds from bonds and shares, grants and aids, and loan
prepayment), and 4) Capital Expenditure (i.e., cost of projects and programmes, building,
and computerization).
VI. Budgetary Control of Knowledge Management System
Budgetary Control is a system of controlling costs, which includes the preparation of
budgets, establishing responsibilities, comparing actual performance with what was
budgeted and acting upon results to achieve optimum benefits (Popoola, 2000).
Budget control should be based on such factors as: 1) the creation of a budget centre’s
accounting system, 2) general instruction on budget technique and in operating the
system, 3) the preparation of an organizational chart, 4) the formation of a budget
committee, and 5) designing the system for reporting.
VII. The Role of Budgeting in Knowledge Management
Budgeting plays a crucial role in knowledge management. Very importantly, a budget
demonstrates how results to be achieved during the budget period relate to the long–range
goals of the unit and the organization in general. Ideally, progress in reaching those long-
range goals should be made each year of the multi-year projection.
Budget serves knowledge managers in several important ways. It is an aid to orderly and
progressive planning, a tool in administration, an instrument of operational control, and a
device for evaluating results.
VIII. Financial Sources for Knowledge Management Units
Knowledge Management units of organizations spend a lot of funds on knowledge
identification, generation, organization, storage and dissemination for the achievement of
the overall goals of the organizations. Usually, Knowledge Management units are funded
by their parent organizations. The amount of fund an organization allocates to the
Knowledge Management unit may depend on what priority or value it places on the
importance of organizational knowledge in achieving its goals and objectives. Other
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
7
sources of funds for Knowledge Management units include grants and bequests from
friends of the organization. Loans from finance houses may also help to fund Knowledge
Management units. However, this must be approved by the organization.
IX. Necessary Information for Budgeting
Stueart (1980) identified historical and current information as necessary ingredients for
budgeting.
1. Historical Information
This includes long term trend analysis, derived from the Knowledge Management unit’s
own budget reports, supplemented by the various price-index analysis and annual
statistical records. Items to look out for include: changes in total budget and changes in
the relationship between the various parts and pattern of expenditure. The pattern of
expenditure should be compared with such matters as numbers of items purchased,
significant variations or changes that suggest that item prices have brought about a
redistribution order.
The evaluation of past budgets and examination of statistical reports should be compared
with the goals and objectives of the Knowledge Management unit. This comparison will
reveal whether budget allocation or changes in prices have caused a significant deviation
from the original plan. Any deviation in original plan should be thoroughly examined for
its causes and effects. Some deviations may require budgeting corrections, either by
providing more money in order to obtain more materials or reducing the number of items
to be purchased in order to bring expenditure more in line with general goals. However, if
the survey reveals persistent deviations, it may be an indication that the budget system
used is unresponsive to current needs, and as such, should be changed or develop an
alternative recommendation like provision for contingency funds to be incorporated in
the budget system.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
8
2. Current Information
This includes information from the immediate past year’s budgetary performance and the
year-end statement of performance. Latest information on price trends, whether from the
unit’s own records or from external sources (like vendors, suppliers, etc) is of great
importance in the preparation of budget for the current year. Unless such information is
taken into consideration in the preparation of the current year’s budget, price increases
are likely to overthrow any knowledge management goals. This is especially true of
materials supplied on quotations.
X. Conclusion
Budgeting for knowledge management in organizations is a complex process. No simple
set of rules works for all. The general intention of budgeting for knowledge management
is to distribute funds in such a way as to support the overall attainment of organizational
objectives. While it must not be seen as a rigid control mechanism, budgeting is a means
of encouraging accountability. It also sets measurable goals. Care must be taken to
forestall the rigidity that always develops over time. Formulas in particular must be
reconsidered periodically. If one method does not work well, the knowledge manager
should try another. It must be noted that no knowledge manager succeeds in any
organization without budgetary provision for implementation of programmes and
policies. A suitable budgeting technique must be chosen and correctly used to achieve
maximum benefits and support for set goals both on short- and long-term bases.
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Retrieved 5 January 2011 from:http://www.ischool.utexas.edu/~i385q/student_presentations/fall2008/KMS Research
Paper (Yongyi Zhou).doc
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
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Author:
Ifijeh Goodluck, Serials Librarian, Centre for Learning Resources, Covenant University,
Ota, Ogun State, Nigeria. Email: [email protected]
Submitted to CLIEJ on 7 June 2011
Copyright © 2011 Ifijeh Goodluck
Goodluck, Ifijeh. (2011). Budgeting for knowledge management in organizations.
Chinese Librarianship: an International Electronic Journal, 32. URL:http://www.iclc.us/cliej/cl32goodluck.pdf
doc_332306683.pdf