KMM in governance

Knowledge mismanagement sits at the very heart of corporate failures. By Jerry Ash

In too many executive suites for too long the unofficial mantra of board management has been to treat board members like mushrooms – that is, keep them in the dark and feed them excrement. And for too long, boards of directors have been content to hire executives with implicit instructions to do just that.

This scenario is the root of today’s board and executive failures, which involve half-truths, untruths, fraud, failure to act, bad decisions and ultimately bankruptcy or dissolution. Worse, these have been the accepted practices of board/management relations and behaviour for decades.

Carol Tucker, a bank VP in the US, likes to tell the story of an old country farmer with serious financial problems who bought a mule from another old farmer for $100. The seller agreed to deliver the mule the following day. However, the next day he drove up and said:

“Sorry, but I have some bad news: The mule died.”

“Well, then, just give me my money back.”

“Can’t do that. I went and spent it already.”

“OK, then. Just unload the mule.”

“What ya gonna do with a dead mule?”

“I’m going to raffle him off.”

“You can’t raffle off a dead mule!”

“Sure I can. I just won’t tell anybody he’s dead.”

A month later the two met up and the farmer who sold the mule asked,

“Whatever happened with that dead mule?”

“I raffled him off just like I said I would. I sold 500 tickets at $2 a piece and made a net profit of $898.”

“Didn’t anyone complain?”

“Just the guy who won. So I gave him his two dollars back.”

Knowledge mismanagement (KMM) is a lot like that. Knowledge is often used or withheld in order to capture short-term capital gain to satisfy a board of directors mostly concerned with short-term value, which may or may not be in the long-term interests of the organisation or its employees.

True, the surface issues are about ethics and corruption, but the core issues are about a corporate culture that implicitly encourages creative accounting, and wheeling and dealing, while the governing board meets occasionally to get spoon-fed reports from the CEO.

This seems to be a knowledge management (KM) problem, a view that was once considered by the Association of Knowledgework’s STAR Series Dialogue with mixed results.

Steve Denning, former programme director, knowledge management at the World Bank, led with concerns: “One sure way to kill a good idea (KM) is to suggest that it can do something it cannot,” he wrote in an e-mail. “Knowledge sharing takes place if, and only if, there is a trusting, non-hierarchical environment in place. The top of a large private-sector organisation will never be a trusting, non-hierarchical environment. There will always be a struggle of individuals to get to the top or replace others. The competition will be intense and exacerbated by relentless pressure from the stock market to show continuing short-term gains.”

Tom Stewart, then a member of the board of editors of Fortune magazine and now editor of the Harvard Business Review, commentated: “I think it’s always, or almost always, misguided to say, ‘Here is KM - how can we use it?’ Instead, one should ask, ‘Here is a problem - can knowledge management contribute to solving it?’ If the problem is renegade accounting and management, the answer is yes, knowledge management can contribute to solving it.”

The data supports both views. Booz Allen reports that one in seven CEOs at the world’s 2,500 largest publicly-traded companies lost their jobs in 2004, compared with one in ten a year earlier. The rate of dismissals has surged 300 per cent since 1995 as shareholders and regulators press companies to shore up performance. In Europe, CEOs were ousted after an average of two-and-a-half years. The unanswered questions: For what reasons? Does it mean boards are doing a better or worse job?

“If boards are catching their executives with their hands in the cookie jar as a result of improved executive reporting and/or better audit committee practices, then this is good,” says Doug Macnamara, president and CEO, Banff Executive Leadership, and the primary source for this month’s cover story on KM and governance (page xx). “However, I have had many CEOs tell me they would dearly love to be taking more sustainable approaches and making socially responsible decisions, but their boards just don’t get it.”

Somehow, KM must replace KMM in the boardroom and executive suite. To do so would be to address the root problem. The question is, how do you get through those doors? One answer is management consultants with KM in their portfolios. The recent hiring of Lesley Shneier as senior knowledge and learning specialist to the World Bank’s board of directors and senior executives is another. Lesley was part of Steve Denning’s original KM team. By combining KM and training, Lesley has a wonderful opportunity to apply the principles and practices of KM where they count the most. And once boards and executives become KM practitioners themselves, their savvy will increase the likelihood the organisation will become even more KM driven.

KM leaders and practitioners should not shy away from the boardroom or executive suite. They need to join Doug Macnamara in his quest to bring transparency and a trusting non-hierarchical partnership to management and governance.