posted 1 Jul 2000 in Volume 3 Issue 10
From rhetoric to reality: Strategies
for the knowledge economy
The rhetoric of knowledge management as a major source of competitive advantage in today’s information-driven global economy is well established. The real challenge, however, is putting it into practice. Michael D. Bekins, chief operating officer at executive search firm Korn/Ferry International, examines the findings of one of the most comprehensive KM studies undertaken to date.
It is widely accepted today that companies able to capture and share knowledge enhance their strategic capabilities, achieve higher levels of technical effectiveness and obtain superior business performance. Knowledge management is one of the most fascinating, yet daunting challenges for businesses that have reached such maturity that lateral thinking has become one of the key skills needed right across the leadership team. For national and international organisations, the business, social, political and cultural dynamics mean that in today’s highly competitive environment, there is a real knowledge imperative.
A recent study by Korn/Ferry International and the University of Southern California’s Center for Effective Organizations, Strategies for the Knowledge Economy: From Rhetoric to Reality highlights the management challenges for global organisations in generating, retaining and leveraging knowledge. The research reveals that even world-class, technology-intensive companies struggle in the face of such pressures. Despite all the talk of learning organisations, the research shows that the majority of employees report that knowledge-sharing across boundaries rarely occurs. In fact, nearly three quarters of them feel they are constantly reinventing the wheel.
Each company in the study has a variety of initiatives in place to foster more targeted generation, sharing and application of knowledge. However, nearly three-quarters of employees report that knowledge is not reused across the company; nearly 90 per cent say they do not have access to lessons learned elsewhere in the organisation; and well over half do not take advantage of the electronic tools available to them. As a result, the majority give their companies low marks for generating new ideas and applications.
My aim in this article is to highlight leadership issues for the successful knowledge organisation and to examine ways in which knowledge management is becoming more important in the recruitment and retention of key executives.
Importing knowledge is key
Those individuals making an impact in their organisations are continuous learners, and collectively the organisation needs to follow suit. The study shows that importing knowledge from external sources is another key element in managing a knowledge organisation that tends to be overlooked by a significant number of the companies surveyed. According to the study, only a third of employees have access to good information about technical developments relevant to their work – and over three quarters claim they do not have adequate knowledge about what their competitors are doing.
In the information age, valuable, useful knowledge is at best scarce, and at worst buried. One way to gain knowledge is through effective external partners. This allows companies to combine their special expertise with the competencies of other organisations to reach the market quickly on a global basis. The companies that are most successful in these partnerships approach each one as a learning opportunity, with clear processes for transferring what is learned to the rest of the organisation.
Role of the leader
The study emphasises that knowledge must be embedded in the corporate strategy and must be woven into the very fabric of the organisation – from structure, to processes, to rewards systems. But in practice, what does this mean? Knowledge management is not merely about building an electronic network – these tools play only a supporting role in the knowledge organisation. Essentially, the challenge of leading a knowledge organisation is to foster behaviour that encourages the knowledge-sharing needed for a company to accomplish its goals. The fact that nearly 70 per cent of respondents say they do not share in the success of the organisation, and only half have a stake in improving corporate performance, should come as a wake up call to CEOs everywhere.
The challenge for hard-pressed CEOs is that leaders cannot delegate knowledge management. It requires more than rhetoric and persuasion, more than a new information system that moves knowledge around more easily, more than specially dedicated staff. Changing the focus and behaviour of employees at all levels lies at the core of knowledge management.
At the group level, knowledge management decisions can have a major impact on the balance sheet. Due to the accelerated pace of knowledge generation, companies cannot possibly remain cutting-edge in all areas relevant to their mission. They must pick and choose what they will focus on and what competencies they will develop as their strategic differentiators.
Role of the leader – structure
Many of the organisations studied initially found that cross-functional units – focused on particular products or customers in order to share knowledge – actually inhibited knowledge leverage. The units were set up to focus on customer needs – and often had goals that required new and higher levels of performance. Each product line, programme or development unit easily became fully absorbed in meeting its own objectives, and in customising and advancing its own technology. This is a situation ripe for redundancy and ‘reinventing the wheel’. Specialists were operationally detached from their peers; and in many cases, the contributors to projects were geographically dispersed and organisationally belonged to different business units.
If knowledge is to be leveraged, there is a compelling need to build communities of knowledge whose members are able to work effectively together and learn from each other, despite being dispersed. Companies that are creating successful communities of knowledge are applying structural approaches that weave networks through the organisation to connect knowledge workers across boundaries. New roles are being developed to build and nurture these networks, capable of diffusing best practices, promoting the growth and development of knowledge workers and providing a foundation for collaboration across units.
Some of the successful structural approaches in the companies that were studied include:
Role of the leader – processes
Receiving information about company goals, plans and performance promotes the generation and incorporation of knowledge. This study finding supports the point made earlier that understanding the company’s strategy and direction fosters and guides knowledge activity. Making improvements to work processes is driven by local unit goals and performance feedback. This may be because the motivation to make work process improvements stems from the need to do things differently in order to accomplish the stretch goals that characterise today’s corporation. It appears, however, that these companies are under-utilising goal setting by not explicitly incorporating knowledge management objectives. Just under half of employees feel they are well informed about company plans, goals and performance.
In our study, the type of communication that has the greatest impact on performance is not internal information but rather external information – about customers and competitors. This type of information is even more compelling in driving the knowledge enterprise than internal operating information.
In fact, many interviewees see their unit’s, and indeed their company’s, goals as arbitrary. Customer requirements and competitor capabilities, on the other hand, are ‘real’. In combination with an understanding of overall company strategy, this external information helps guide and motivate knowledge-sharing activities. In short, knowledge-oriented activities are stimulated by helping employees understand the business environment and the knowledge challenges facing the company. Again, these companies are under-utilising this knowledge management tool. Only 19 per cent of employees feel they are well informed about customers, and just 11 per cent report they are knowledgeable about competitors. Action leaders can take:
Role of the leader – people
The Internet and the new knowledge economy have created further pressures on companies to retain top talent. Organisations are finding that with increasing executive mobility and changing competitive tactics, knowledge management is an important factor in recruiting and retaining employees.
Retention strategies are on the leadership agenda every day for companies around the world – whether privately-owned, public sector, established Internet companies or young start-ups. But there are actions companies can take to retain their top knowledge workers. From the research, we can articulate more precisely the knowledge management factors that impact personal commitment, loyalty and behaviour changes.
While leaders today are becoming dependent on knowledge workers – scientists, engineers and managers – to create value, these knowledge workers are more mobile than ever before. The explosive growth of the Internet has helped fuel the mobility of knowledge workers. The opportunities the Internet brings, in generating large fortunes in short periods of time, are making retention difficult. In addition, the Internet is making it much easier for employees to determine their true market value. Companies risk losing their key performers if they do not provide rewards and internal opportunities for career development.
The employer/employee relationship
Above all, knowledge management changes the psychological contract with the employer/organisation. Findings show that understanding the company’s strategy and direction fosters and guides knowledge activity. On an individual level, clear definition of the competencies required to achieve corporate objectives is a crucial part of the new employment bargain. This both enhances an individual’s security by increasing employability, and provides the company with the skills it needs to be effective.
For example, an aerospace company realised that its future business mix would focus more on state-of-the-art after-market services and upgrades. It provided employees with a heads-up that gaining experience with the latter phases of a product’s life cycle, gaining more knowledge of the customer, and learning specific technical support skills would be valued in the future.
Other companies have taken a more formal approach. United Technologies and its largest subsidiary Pratt & Whitney, has made a commitment to provide all employees with 100 hours of formal training a year. It also offers a series of rotational programmes for its engineers that not only gives individuals a broader exposure to the company and different technical disciplines, but also provides them with a network of contacts that they can use for sharing knowledge and joint problem solving.
Knowledge management also enables decision-making on whether to join or stay with an employer. The new mobile workforce assesses the future of a company and determines whether to stay, based in part on whether employees feel the company is going to be a leader in the industry and provide opportunities for interesting work. One of the survey respondents commented: “People are jumping ship because they don’t see a future. They don’t think there’s a viable strategy and believe that we’ll become a secondary supplier. They want to go where the interesting work is.”
Knowledge management tactics include differentiation through strategic reward plans. The focus now is not on how much employees are paid, but more on how they are paid; this has a significant impact on whether companies become effective knowledge organisations. For example, findings show that pay for individual performance reduces turnover of scientists and engineers who are under age 30, but has no impact on those over age 50. Also, pay for organisational performance fosters commitment of all generations of employees, with commitment one of the strongest predictors of knowledge-sharing.
Alongside financial reward as a high priority, findings show that 50 per cent of respondents are motivated by having a stake in improving company performance – they want to be a part of the success process, as well as share in the end result – with 30 per cent enjoying ‘pay that reflects the value I have helped to create’.
Actions leaders can take
Actions for leaders, developed from findings in the study, cover the following retention recommendations:
The focus on knowledge must be built into the fabric of the organisation. For most companies, successfully competing on knowledge demands fundamental shifts in norms, values and behaviour. Knowledge orientation must be able to outlive the departure of particular champions to become the strategic engine of the company, not the flavour of the month. KM
Case study - Building collaborative networks in an energy company
A global energy company found that its projects were encountering similar technical challenges in all parts of the world as it pushed up against technological frontiers. Its many highly specialised scientists and engineers belonged to different regional business units, often did not know each other and were separated by deep cultural differences.
Today, the company is building networks across the various projects in each geographical sector – meetings hosted by a discipline manager but with the agenda determined by the participants. As the networks break up into subgroups and focus on particular issues and problems, they are encouraged to contact participants in other regions who are dealing with similar issues (word of mouth among discipline managers provides enough information to seed this process).
Every six months, a face-to-face meeting is held for self-nominated groups that feel that time working together on a particular technical problem will speed up the solution and add value throughout the company. Discipline managers make the groups aware of other expert resources to include in the meetings, facilitate the logistics and act as contributors and recorders to make sure the information that comes out of the session becomes part of the web page established to share technical learning.
The company has found that projects are being completed more quickly because of the collaborative problem-solving, and employees are enthusiastic about the emphasis on technology advancement. Discipline managers are more aware of the technical areas causing problems in the field and are better able to craft a research programme to address areas of high pay-off.
About the Study
Strategies for the Knowledge Economy: From Rhetoric to Reality is based on in-depth research with 10 leading technology-intensive companies operating across a range of sectors in North America, Europe and Asia. The research includes analysis of a survey completed by more than 4,500 scientists, engineers and managers; interviews and focus groups with more than 500 business and technical leaders; and written documentation of the knowledge management, human resources practices and performance of these 10 companies. The study was carried out to support Korn/Ferry’s knowledge partnership with the World Economic Forum; highlights of the research were presented at the Summit in Davos in February this year.
Michael D. Bekins is Korn/Ferry International’s chief operating officer and president of Europe.
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