posted 1 Jun 2000 in Volume 3 Issue 10
What’s in it for us?
For any KM programme to be successful, the active participation of each member of staff is an absolute necessity. Focusing on the case of business consulting firms, Ines Mergel and Matthias Reimann explore incentive reward systems for knowledge management.
The most important performance factor in ensuring that a holistic knowledge management programme is carried out successfully is the participation of the staff. The sharing and distribution of the knowledge existing within an enterprise are of overriding importance, particularly in business consulting firms, since these are naturally orientated towards knowledge.
To keep the staff motivated to participate in a knowledge management initiative, many enterprises run incentive reward systems directly related to the knowledge management programme. In the following article, the incentive reward system, and the critical factors of performance at Gemini Consulting, will be described.
Knowledge as the dominant resource
Knowledge constitutes the dominant production factor, especially in business consulting firms. Competitive advantage and thus long-term retention and improvement of market position can only be achieved by identifying one´s own resources of knowledge and know-how. That is why unexploited knowledge and unidentified capacities of knowledge can lead to curbs on productivity for business consulting firms.
In order to safeguard the future potential of a company’s knowledge assets, it is above all necessary for business consulting firms to realise the problems and the risks evolving from the drain, destruction, and disuse of knowledge, and to find out how best to preserve and exploit existing knowledge.
In 1999, the authoress carried out a survey for which she interviewed knowledge managers from the top business consulting firms. It revealed that employees are highly motivated to incorporate third-party knowledge into their own projects, thus enabling them to offer more efficient solutions. Nevertheless knowledge is – often unintentionally – not passed on to other consultants because of the non-transparent infrastructure and unwanted knowledge barriers; that is, the experts are either not aware of what they know or it is not clear to others which projects have already been carried out concerning which subject area, in which field, for which client and by whom.
The greatest obstacle to ensuring participation in a knowledge management programme within the surveyed business consulting firms is partly explained by the slogan ‘knowledge is power’. Above all though, it comes from a lack of team spirit. Solutions to consulting problems are often ‘invented’ again for each client, without utilising the experience of professional colleagues.
But there is a way out of this miserable situation towards a more efficient knowledge management approach; by transforming the existing corporate culture into a knowledge culture. It will then not be the individual staff member who benefits from the knowledge exchange but the complete project team, the department and, ultimately, the whole organisation.
Appropriate incentive reward systems should be created for knowledge exchange that are based on openness and honesty, and which thereby give confidence to the staff in his or her ability to share knowledge and to use the knowledge of professional colleagues. The specialist literature on knowledge management, in particular Probst, repeatedly insists on the necessity of incentive reward systems for knowledge management: “For the successful sharing and distribution of their knowledge the staff must be motivated by adequate incentive-contribution systems to make their relevant knowledge available for and exchange it with others voluntarily.” Probst (1999), p.134.
Incentive reward systems for knowledge management
The term incentive is understood as a situational condition that can motivate staff members, because of their individual structure of needs, to a certain conduct/performance (von Rosenstiel 1987, p.320).
Incentives activate motives (=readiness to behave in a particular way) and have a ‘stimulative nature’, as they influence the staff member to take certain actions as intensively as the enterprise requires. The benefit of the work done by the staff must at least equate to the benefit of the incentives (for instance wages/salary), or even go beyond it (=compensation) (compare Becker 1990, p. 6).
Extrinsic and intrinsic incentives
According to the sort and source of satisfaction of one´s needs, we can differentiate between extrinsic and intrinsic incentives.
The prospect of remuneration comes under extrinsic incentives. Here the incentive for carrying out a task is not inherent in the job, but rather lies in monetary benefits. In the case of intrinsic incentives, the satisfaction of one´s needs comes from carrying out the task itself. Intrinsic incentives can not be quantified to the same degree as extrinsic incentives, which can be expressed through a definite amount of money and are thereby comparable.
Material and immaterial incentives
We can differentiate between material and immaterial incentives according to the objective of the incentive.
Monetary remuneration is deemed a material incentive. It constitutes a reward for the staff member having performed his/her duties as he/she was asked to. The size of the reward indirectly contributes to the satisfaction of needs in view of status and power and determines the position of the staff member in the organisation.
Immaterial incentives express themselves in the conditions for carrying out a task and have no immediate monetary effects. Examples for immaterial incentives are: Contents of the job, decision-making structure, management style and career prospects. Since material incentives are usually limited through salary-level and the like, the importance of immaterial elements is considerable.
Classification of incentives
In correspondence with the differentiation between intrinsic and extrinsic, as well as material and immaterial incentives, it is possible to classify incentives appropriately.
Demands on incentive reward systems for KM
The specialist literature also calls for specific incentive reward systems for knowledge management in order to support the sharing/distribution of knowledge. The existing incentive reward systems should be extended so that they can contribute to a recognisable change of conduct. Staff can be motivated, through well-directed incentives, to take part in the sharing/distribution of knowledge, and to voluntarily put their tacit knowledge at the disposal of others. To find out what incentives can induce staff members individually to pass on their knowledge, it is important that project leaders should try to talk directly with single members of staff to determine their individual structures of motives.
Demands on remuneration systems and status symbols
Demands on career incentives
Demands on incentives regarding the contents of the job
Demands on participation
Demands on the management style
Demands on the corporate culture
The demands on the corporate culture constitute the most comprehensive requirements regarding incentive reward systems for knowledge management. They refer to the general treatment of knowledge within the organisation.
KM incentives at Gemini Consulting
Gemini Consulting is one of the leading international management consulting companies. Its activities are particularly focused on the implementation of solutions designed in co-operation with the client. Gemini Consulting employs a staff of about 2,300 worldwide. As an independent part of Cap Gemini Ernst & Young, it has access to the knowledge of 40,000 employees. Renowned business publishing houses and employers´ associations chose the Cap Gemini Group as ‘European Enterprise of the Year’ in 1999. Power of innovation and the development of knowledge as capital beside various quantitative factors constituted the fundamental criteria of assessment. Sustainable systems for knowledge management have been in existence since the foundation of our company. This development has intensified through a number of acquisitions – since 1990 – which have transformed Gemini Consulting into its current shape.
Emphasis has always been put on the introduction of incentive reward systems for the active transfer of knowledge and the extension of existing systems. In our company there are various incentive reward systems in place. The basic instrument is our system of agreements on targets within the company. This instrument, orientated towards the Management by Objectives (MbO) approach, is binding for every member of staff and constitutes the basis for the internal review process. At the beginning of every year, each member of staff has a meeting with their direct superior to agree on specific targets, which will set the standard for the performance of the member of staff in a subsequent set period of time. The agreement reached is genuine, as it stems from a real exchange and compromise between the interests of the staff member and the superior. This results in a system of different targets, classified by different categories; for example, contribution to Gemini´s organisational development, participation in the knowledge management programme, contribution to Gemini´s public relations work, co-operation with universities and associations, and so on. This target system consists of concrete quantitative and qualitative targets. A review process takes place once a year, which measures how far these targets have been realised.
This approach exists in parallel with the ‘culture of permanent feedback’. It contains an MbO process for every external or internal project, together with a system of 360-degrees-feedback. This is a mutual assessment between members of staff and is integrated with the review process.
Gemini Consulting relies on a system of various material and immaterial incentives. The most essential instrument having a material effect is the remuneration system, which, according to the sort and source of satisfaction of one´s needs, appeals most to extrinsic motives. At the end of every financial year the extent of salary-rise and profit-sharing is determined via the review process, as mentioned above. This highly transparent process of assessment, which is also internationally standardised, can essentially be seen as a balance between what the member of staff has achieved in the course of the year and what was initially agreed upon. For this purpose, assessments of all the projects dealt with by the staff member, as well as all the feedback conversations that have taken place, are evaluated and together lead to an objective assessment on the basis of the defined criteria. One of the essential criteria of this assessment system is the contribution of the staff member to the development of new knowledge or, on the other hand, to the further development of existing knowledge by making service offerings, tools or by publishing specialist essays.
At the same time, the result of this process of assessment constitutes the basis for the decision on whether the consultant is promoted to a higher level. Here we find the most essential immaterial incentive to the active implementation of our knowledge management programme; the career incentive. The possibility for each staff member to become a recognised expert in a certain field by actively taking part in the development and transfer of knowledge also counts among the group of career incentives. At this point Gemini Consulting utilises further stimuli, two of which should be emphasised: Publicising the personal knowledge through documentation within the database, and the incentive resulting from the employee being ‘flagged’ as an expert. By storing documents in the database, active participation in the internal knowledge management programme leads to a wider acceptance of the author as an expert in a certain field. This effect is supported by the statistics showing which staff members feed the most documents into the database, and also by the contact records of the expert evident within the database. Consequently, the personal network, which is crucial within a consulting firm, is extended and the expert within a given field is formally recognised.
Corporate culture and management style probably represent the two most important fields of immaterial incentives, because they determine how the treatment of knowledge within the enterprise is seen strategically. The value of a management consulting firm is mainly measured on the basis of immaterial factors, in particular the knowledge and expertise of the organisation. Thus the essential questions that have to be answered by a business consulting firm are those concerning the culture of confidence and communication. Is each staff member aware that he/she will not only suffer no disadvantages but will in fact actively benefit from the open transfer of their knowledge into the organisation as a whole? Is there a culture of communication consciously supporting this active exchange? The target agreements made between the member of staff and the superior constitute the most important instrument within Gemini Consulting to convey the culture of confidence. These ‘contracts’ explicitly support the transfer of knowledge within the enterprise. Beyond that, our company fosters a culture of communication supporting and promoting direct and efficient communication, via email, voicemail, the telephone, forums for discussion over the intranet, and also the personal talks with the superior, the project leader and so on. When using the voicemail system, for example, every staff member – be they a consultant or the vice president – is obliged to answer requests immediately and to the best of their ability. This also demonstrates the co-operative style of management at Gemini Consulting; an employee’s superior not only receives knowledge but also actively pursues the transfer of knowledge, encouraging this within the project teams and the units of organisation as well.
As stated above, Gemini Consulting is a global enterprise. Every consultant has the chance to deal with fascinating projects in an international environment. This opportunity alone provides an incentive for the individual consultant to get noticed as a recognised expert in a given field. Active participation in the knowledge management programme is an important first step in this process.
Another non-monetary incentive is a highly sophisticated IT-system which is, above all, easy to operate: Gemini Consulting uses Knowledge Portal MyGalaxy. It adopts the concept of portals on the Internet, and offers staff the opportunity – by using this tool – to gain access to the intranet and thus to internal knowledge databases, as well as to the Internet, in the easiest possible way. The essential components are such commonplace tools as the email system, an online diary, an online news magazine dealing with issues within the company as well as external ones, various news groups and forums for discussion, and more. The success of this portal will essentially guarantee the future success of our internal knowledge management programme.
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Ines Mergel is an assistant Lecturer at the University of St. Gallen.
She can be contacted at: firstname.lastname@example.org
Matthias Reimann is a knowledge manager at Gemini Consulting.
He can be contacted at: email@example.com