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Technical Report 2002.01
Understanding the Benefits and
Costs of Communities of Practice
David R. Millen, Michael A. Fontaine, and Michael J. Muller
ABOUT THE AUTHORS
David R. Millen is a Research Scientist at IBM Research’s Collaborative User
Experience Group. Michael Fontaine is a Senior Consultant with IBM’s Institute for
Knowledge-Based Organizations. Michael J. Muller is a Research Scientist at IBM’s
Research’s Collaborative User Experience Group.
The press version of this white paper was originally published in the April 2002 issue of
Communications of the ACM, Vol. 45, No. 4. It can be located at
http://portal.acm.org/citation.cfm?id=505276&coll=portal&dl=ACM&CFID=2233583&CFTOKEN=49128487
Copyright © 2002 by the Association for Computing Machinery, Inc.
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UNDERSTANDING THE BENEFITS AND COSTS OF
COMMUNITIES OF PRACTICE
ABSTRACT
Promoting healthy collaboration in communities of practice takes management support
at all levels. And management, of course, wants and needs to comprehend what the
organization gets for that investment.
INTRODUCTION
There has been increasing interest within large organizations in the development and
support of communities to promote collaboration, improve social interaction, increase
productivity, and to improve organizational performance [3, 8]. These worker groups,
often called communities of practice, are defined by a common disciplinary
background, similar work activities and tools, shared stories, contexts and values.
Dating back to the trade guilds of the Middle Ages, these longstanding worker
associations have developed rich and various forms of both formal and informal social
interaction in the modern workplace (e.g., hallway exchanges and water-cooler
conversations, meetings and conferences, brown bag lunches, newsletters,
teleconferences, online environments, shared web spaces, email lists, discussion
forums, and synchronous chat.)
Not surprisingly, supporting these physical and virtual interactions demands both
financial and technological resources, forcing knowledge managers to justify their
investment while trying to determine the value that communities ultimately deliver to
their bottom line. As with any other significant investment in information technology
and human capital, managers are naturally interested in understanding the impact that
these communities have on individual performance, team effectiveness, and overall
productivity.
To address the challenge of how organizations can begin to address these financial
tradeoffs, we explore the benefits and costs of communities of practice within large,
geographically dispersed organizations and discuss the challenges inherent in
justifying the corporate investment such communities. To better understand these
challenges, researchers from the IBM Institute for Knowledge-Based Organizations
(IKO) and IBM Research conducted a study of nine communities in eight firms sampled
from a broad range of industry sectors—finance, manufacturing, pharmaceutical,
software, chemical, and telecom (see Acknowledgements). In total, we conducted semi-
structured interviews with more than 60 community members, leaders and knowledge
management personnel. The sample communities were both local and global in scope,
and ranged in “practice” from programming, to bio-chemical research, to land and real
estate development in poverty plagued nations. After analyzing the interview data, we
developed a mind map, [2] a nonlinear graphical representation of the factors and
relationships in our findings. While an earlier version of our mind map focused on all
five dimensions of communities of practice, Development Path, Membership, Activities,
Organizational Support, and Value, the final two serve as the basis for this paper.
• Organizational Support: How was the community supported by the organization?
What costs are incurred in launching and supporting a community of practice?
• Value: What value did community members receive? How did the organization
benefit from the community?
These two themes provided the lens and categorization scheme that we used to extract
the benefits and costs discussed below (see Figures 1 and 2).
RECOGNIZING COMMUNITY BENEFITS
Our analysis of member interviews originally depicted in the value section of the mind
map revealed three distinct categories of community benefits: individual, community and
organizational. Individual benefits spanned many topic areas including improved
reputation, a better understanding of what others where doing in the organization and
increased levels of trust. The familiar and supportive environment found in many
communities of practice encourage member interaction and ongoing professional
development and learning about new tools, methods and procedures. Study
participants expressed the benefits of increased access to subject-matter experts and
valuable information resources. Together these benefits allowed members to develop
professionally, remain at the forefront of their discipline, and gain confidence in their
own expertise. The following highlighted quotes provide a representative sample of a
larger collection of similar comments:
If you’ve done good work on a project, package it up, put it into the tool [community
knowledge sharing database] and its well-perceived by other developers around the
world, it’s a good way of getting your name known and raising your profile in the
organization.
If I have a question about an offering, for instance … to find the right person to answer
the question might take several phone calls. This way, I can go out here [online
community portal] and I will not only find the answer to my questions, but I will also
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find documentation and information that goes well beyond what I was thinking of in the
first place, and it will expand my knowledge. I think that is not only helpful
professionally, but personally in that it expands my knowledge about the offerings, who
the contacts are, and who I can contact for more information.
Community benefits consist of those accrue to the community. These benefits included
increased idea creation, increased quality of knowledge and advice, problem solving,
and creating a common context. Communities provide a forum for the free expression
of creativity and new ideas, providing members the opportunity to share ideas and
think outside of the box:
Members might be in a project where they need advice, or they need guidance on how to
do something. That’s when they really feel good about the fact that they can go
somewhere [community portal] and find out where things are, or they can ask on the list
server and get some good advice. They get professional, high knowledge advice.
Well, I think because there is a sense of community, shared values, and shared goals; you
can talk to people about similar issues that they will have had before. Everybody is quite
open and they will give you lots of help.
Organizational benefits involve the most tangible types of value that are expressed in
communities—business outcomes. Study participants indicated that the improved
communication among community members contributed to successfully executed
projects, increased new business, and product innovation. By far, the more compelling
evidence of community benefits for the firm was in the area of time savings. The
comments below highlight the reduced time to perform a variety of information-
seeking and -sharing tasks that contributed to improved operational efficiency:
It’s the fact that we don’t have to reinvent the wheel all the time. If we’re sharing our
information, then I can use what somebody else has learned and work on it somewhere
else, instead of spending 80 hours doing it myself. It not only saves time, but also it has
improved the effectiveness of people’s delivery material.
It’s probably 50% of the time that you will find someone else who has had the problem
and who has solved it. Basically, that can save a lot of work.
We are gaining information that enables us to make value decisions quickly. It benefits
the business and it benefits customers. I’ve got a good example. One of my project
managers came to me and needed a project implementation for a big proposal going out
the next day, and we hadn't yet done a similar project, [so we] requested a PM [online]
discussion. He came back within five to ten minutes. The project implementation part
was done in a completely different sector and we were able to quickly doctor it into our
customer’s proposal. If we had had to do it internally, it would have taken us three or
four days. It would have taken somebody the afternoon just to collect the information,
put it in and go.
In summary, study participants described a rich qualitative set of individual,
community and organizational benefits provided by their respective community of
practice, some of which can be quantified through traditional time, financial and
transaction cost analysis.
EXPLORING COMMUNITY COSTS
For a complete understanding of the contributions of a community of practice, we must
also consider the costs of supporting a community. All too often the cost estimates for
communities are based on the technology investments, which significantly
underestimates the total cost of community ownership (TCO). In studying organization
support section of our study, we found four major categories of TCO cost drivers. These
include the costs of the participation time for community members, meeting and
conference expenses, technology, and content publishing and promotional expenses.
Specifically, the costs of participation included the salaries for members who were
identified as supporting the community through eleven identifiable roles (e.g.,
facilitator, sponsor, cybrarian/journalist) [6]. Technology costs included the costs of
synchronous and asynchronous group messaging applications and community Web
sites. Meeting costs included the expenses associated with face-to-face meetings,
including travel expenses, as well as the costs associated with electronic meetings (e.g.,
teleconferencing). And finally, the cost of publishing content included the cost of online
content development and production costs for community newsletters and promotional
materials.
To assess whether the cost categories were reasonable and complete, 36 knowledge
management professionals divided into teams of six were asked to consider the TCO
framework in a budget allocation exercise. In this exercise, a case study of a developing
community of practice was presented and the teams decided how to allocate financial
resources across each of the cost areas. There was remarkable consistency among the
responses from the six groups. On average, the groups allocated 52% of the community
budget to pay for salaries (and incentives) for community workers. On average, 32%
was used to pay for meeting expenses, 10% for technology and 6 % for publishing and
promotion expenses. The relatively low investment in technology was a bit of a
surprise, but may be reasonable given that the exercise assumed that general corporate
communication infrastructure (e.g., telephone and email), was available to the
community at no additional expense.
5
DEVELOPING A BUSINESS CASE FOR COMMUNITY INVESTMENT AND ROI
The results of our multi-company research reported above offer qualitative evidence for
several kinds of benefits from communities of practice, and a reasonable framework to
consider the costs to support such communities. There is increasing pressure, however,
to augment the qualitative results with more formal measurement of the financial
benefits and costs of the communities Measures of value are instrumental for
communities to gain visibility and influence as well as to educate and guide their own
development [11]. This emphasis on financial measurement is similar, in most respects,
to the formal cost/benefits analysis for investments in information systems [10],
electronic performance support systems [5] human factors [9] and usability [1].
No doubt, precise financial measurement of the costs and benefits of a community of
practice is a significant challenge. To measure the financial benefits, we have
considered two approaches. The first approach is based on measurements of the cost
savings due to specific community activities. An example would be the time saved
preparing a customer proposal by using a template found on a community portal (as
reported by interviewees). Measurements of these kinds of cost savings could be
gathered through a variety of means, including self-report surveys and through well-
designed activity logs within the community software environments. This approach is
promising, as there were several participants in our study who described costs savings
due to community knowledge sharing activities.
A second approach to estimating the financial benefits of a community of practices is by
using a special form of storytelling referred to as a “serious anecdote” [4]. A serious
anecdote is a story that has a punch line that is easily quantifiable. An example can
seen in the above highlighted quote where an employee utilized his community
relationship and community portal to find a specific person and template to achieve a
customer-facing business objective in three to four days less than expected. The benefits
associated with decreased preparation time can be easily calculated.
In contrast to measuring the benefits of a community, the measurement of the cost to
support a community is more straightforward. Based on the TCO workshop results,
we believe that reasonable estimates of the costs associated with communities are
readily available to community leaders.
Once reasonable estimates of the costs and financial benefits of a community are in
hand, there are several traditional ways to evaluate community investment decisions.
One method, frequently used in capital budgeting exercises, is to look at the discounted
costs (cash outflows) and returns (cash inflows) over a multi-year horizon, and compare
the resulting Net Present Value (NPV) of several investment alternatives [3]. A good
illustration of the use of NPV and related financial measures (e.g., Return on
Investment – ROI) can be found in a discussion of the cost justification of usability [7].
The financial evaluation of a community is useful for at least two reasons. First,
community builders and managers need to be aware of the path to value for their
communities and some cost justification is required for many corporate environments.
Second, financial measurement allows community managers to compare different
communities and focus attention on community activities that work and those that
need to be changed.
Measuring and demonstrating the value of communities of practice is as difficult, in its
way, as is the measurement and demonstration of the value of user centered design or
usability work (for example [7]). It should be noted that while we have described
various approaches to measuring the costs, benefits and returns for a community of
practice, we feel that there is much work to be done in this area. Financial
measurements of community are often based on soft measures or estimates of costs and
benefits that are of questionable reliability and validity. Many economics and finance
researchers are looking into radically different approaches to measuring the value of
communities by looking at the assets that a community creates. The valuation of these
intangible assets may be a promising approach to evaluating community contributions.
7
FIGURE 1: COMMUNITY OF PRACTICE MIND MAP: ORGANIZATION SUPPORT THEME
Organization
Support
Communication
Infrastructure
Physical
Spaces
Technology
Collaboration
Repository
Geography
Architect
Layout
Meeting
Room
Distributed
Core/
Periphery
Co-located
Asynch
Unmanaged
Managed
Synchronous
Consensus
Autocratic
Video
Chat
Audio
One to
Many Shared
Space
Funding
Source
Activity
Related
Blanket
Support
Budget
Individual Line Corporation
Long-term
Commitment
Annual
Individual Whole
CoP
Support
Roles
Sponsor
Admin.
Support Support Team
Core
Leadership
Cybrarian
Conferences
Time
CoP
Activities
Face-to-Face
Meetings
Recognition Mentor
Award
Incentives
IndividualCoP
Culling
Repository
Management
Editing
Education
Internal
Consulting
Active Advocacy
Tech Support
Networking
Acquiring &
Distributing
Funding
Convening & Running
Events
Networking
Boundary Management
FIGURE 2: COMMUNITY OF PRACTICE MIND MAP: VALUE THEME
Intangible
Int/Ext
Reputation
Easier to Comm.
Tacit Knowledge
Quality of
Authority
& Advice
Provide
Viewpoint
Professional
Development
Fun
Understanding What
Others are Doing
Maintain
Organizational
Memory
Easy Acess
to Experts
How
Communicated
Storytelling
Tangible
IntuitiveAnalyzed
New Business
Development
Rapid Identification
of Experts
Time
Savings
Innovation
Increased
New Busness
Project
Success
Decreased
Learning Curve
Value
9
REFERENCES
1. Bias, R. G., & Mayhew, D. J. Eds. Cost Justifying Usability. Academic Press, New York, 1994.
2. Buzan, T. The MindMap Book: How To Use Radiant Thinking to Maximize Your Brain’s Untapped
Potential. Dutton, New York, 1994.
3. Clare, M. & Detore, A. W. Knowledge Assets: A Professionals Guide to Valuation and Financial
Management. Harcourt, New York, 2000.
4. Davenport, T. H. and Prusak, L. Working Knowledge. Harvard Business School Press, Boston,
1998.
5. Desmarais, M. C., Leclair, R., Fiset, J., & Talbi, H. Cost justifying electronic performance
support systems. Communications of the ACM, 40,7 (July 1997), 39-48.
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in communities. Knowledge Management Review. 4, 4 (Sept./Oct. 2001), 16-21.
7. Karat, Claire-Marie. A business case approach to usability cost justification. Cost Justifying
Usability. Bias, R. G. & Mayhew, D. J. Academic Press, New York, 1994.
8. Lesser, E. & Storck, J. Communities of practice and organizational performance. IBM Systems
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9. Mantei, M. M., & Teorey, T. J. Cost benefit analysis for incorporating human factors in the
software lifecycle. Communications of the ACM 31, 4 (April 1988), 428-439.
10. Sassone, P. G. Cost benefit analysis of information systems: A survey of methodologies. In
Proceedings of the ACM Conference on Supporting Group Work. (Palo Alto, CA). ACM Press,
New York, 126-133.
11. Wenger, E., McDermott R. M., & Snyder, W. M. Cultivating Communities of Practice. Harvard
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ACKNOWLEDGEMENTS
The authors and IKO would like to thank the following organizations and their
communities who participated in the field and/or survey research:
Bristol-Myers Squibb
British Telecom
Buckman Laboratories
IBM
NSA
SAS
World Bank
United Technologies
Additionally, the authors would like to thank David Mundel and Eric Lesser for their
contributions to the research effort.
