denotes premium content | Nov 18 2008 Feature
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.”
Reward
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.
He can be contacted via:
ruth.grierson@kornferry.com
