Understanding knowledge management

The terms knowledge and information are often used interchangeably. Although related - knowledge is typically described as information that is put to productive use - there is a clear distinction between the two which is significant in understanding knowledge management: information becomes knowledge only when people transform it by making comparisons and connections, identifying consequences and discussing it with others (see figure 2.1 for an examination of knowledge). The process of turning information into knowledge provides a clue as to what should be the most important focus of a knowledge management strategy: people.

As the previous chapter outlined, this has not always been the case. Information technology has been at the forefront of many knowledge management strategies thus far. An emphasis on IT approaches to knowledge management suggests a very narrow view of what knowledge is and how it is shared, one that sees knowledge as "objective and unchanging."¹ Yet knowledge is constantly changing as people test what they know by applying it. For example, a manager may learn from a training manual - this type of knowledge is known as explicit knowledge - that the best way of undertaking a performance appraisal is to follow five simple steps. He or she will apply that knowledge at the first opportunity. They will subsequently evaluate its success or otherwise, possibly modifying the approach to suit themselves by applying their own know-how or intuition - this is known as tacit knowledge.

The primacy of IT to support knowledge management has been described as first wave of knowledge management, while a more people-centred approach is deemed the second phase. Knowledge management guru Karl Erik Sveiby believes that the former focuses on information (what Sveiby calls the IT-Track KM) and the latter on people (the People-Track KM).² He defines the two by describing how each approach is being used and the backgrounds of those involved:

Sveiby suggests that the knowledge management "movement" is split along the IT- and people-track lines, with the former "US led and heavily promoted by IT firms", while the latter is based on his and the work of the Japanese knowledge management advocate Ikujiro Nonaka (see below).^3,4

Knowledge management requires the input and leadership of several business functions, especially human resources. Yet, according to IT research organisation IDC, it is only recently that managers other than those with responsibility for information technology have started to initiate knowledge management projects.⁵ The previous over-emphasis on knowledge management technologies without understanding the people and cultural aspects of knowledge management could explain why many organisations are disappointed with the outcomes of their KM strategies. The annual Bain & Company look at management tools, for example, reported in May 2000 that knowledge management "consistently receives low satisfaction scores and high abandonment rates."⁶ Likewise, a study of knowledge management in the UK by the Cranfield School of Management found that many companies failed to match their expectations from exploiting knowledge.⁷ Further evidence that knowledge management initiatives are not reaching their full potential was reported by KPMG's 2000 survey of knowledge management.⁸ More than a third (36%) of the survey's respondents said the benefits had failed to meet expectations. The report concluded that "these problems reflect organisations' failure to grasp the cultural implications of knowledge management."

Knowledge management supporting information technologies should be seen as tools to help knowledge sharing rather than the sole emphasis of a knowledge management strategy. As Roger Chaddock, associate director at the management consultancy Computer Sciences Corporation, explains:

"Obviously there is a set of tools, such as Lotus Notes, intranets, etc, which you need to be knowledge-based. But technology is only 20% of the picture. The remaining 80% is people. You have got to get the culture right. Knowledge is power and people have got to want to share it."⁹

Managing knowledge requires a holistic approach, one that consists of people, processes and technology. Unless the combination of these three components - described in one report as a knowledge triad - is correctly balanced and integrated there is every possibility of failure. Corporate contributors to a study of knowledge management by The Conference Board suggested failure could include: "Online knowledge that no one uses, knowledge that degrades into information as it moves through the organisation, and groups that remain unable or unwilling to share their knowledge or learn from others."¹⁰

While the role of people, processes and knowledge-supporting information technologies are all important features of managing knowledge, what does knowledge management actually mean and how do the various components fit into an integrated KM strategy?

DEFINING KNOWLEDGE MANAGEMENT

The term knowledge management was first added to the popular business language following Tom Stewart's 1991 article, "Brainpower", in Fortune magazine. In the 1980s, academic articles on the subject of knowledge management began appearing in the Sloan Management Review and Harvard Business Review, among others, while technologies for managing knowledge, such as Doug Engelbert's Augment (for augmenting human intelligence) first appeared in the late-1970s.¹¹ Peter Drucker and a number of business writers from the mid-1990s have identified knowledge as the major new source of competitive advantage, and in 1995, Ikujiro Nonaka and Hirotaka Takeuchi published the highly influential The knowledge-creating company, looking at how Japanese companies generate knowledge.^12,4

Yet despite the growing number of books and articles dedicated to the topic, knowledge management is hard to define. Writing in the US journal Knowledge Praxis, Rebecca Barclay and Philip Murray say that the problem of finding a precise and simple definition of knowledge management is due to its complexity.¹¹ The fact that knowledge management is an evolving concept also makes it difficult to define succinctly. A simple definition might be how knowledge is shared throughout an organisation, but knowledge management is much more than that. It also involves, among others, measuring intellectual capital, developing knowledge-enhancing skills and competence, building internal support structures and maximising knowledge assets. A plethora of business strategies, including benchmarking, best practice, change management, continuous improvement and employee involvement, are linked to knowledge management. It is also closely aligned to the concept of the learning organisation (see Management Review 8).

Judging by the number of companies investing in knowledge management services - IDC estimated the market to be worth $1.3 billion in 1999, rising to $8 billion by 2003 - the lack of a clear definition is not slowing the spread of knowledge management.⁵ It might actually mean that organisations are less inclined to embrace off-the-shelf knowledge management solutions. As Patrick Wright, chair of human resources at Cornell University, has explained: the fact that "there is no universal consensus regarding what knowledge management is… allows firms and local units to define it for themselves in a way that is useful to their particular context."¹³

While the terminology differs, the various definitions of knowledge management that do exist - examples can be found in figure 2.2 - contain some common threads: identification of knowledge, intellectual assets, explicit knowledge, tacit knowledge, sharing knowledge, experience, leveraging knowledge. The bottom line is that knowledge management is about ensuring that organisational knowledge - both knowledge which is written down in procedures, manuals etc, and that which resides in employees, such as know-how and intuition - is used to improve business performance. How an organisation identifies, acquires and makes use of its existing knowledge base, and the new knowledge that flows from making existing knowledge accessible and from innovative thought, depends on establishing a process to leverage knowledge. The American Productivity and Quality Centre (APQC) has suggested a three-stage process consisting of finding and collecting internal knowledge, sharing and understanding what is uncovered, and adapting and applying it to new situations.¹⁴ A variation on the APQC's three-stage approach comes from Thomas Davenport and Laurence Prusak, who have divided the knowledge management process into four types of activity: creation, codification, distribution and use.¹⁵ Whatever approach is taken, it needs to be self-perpetuating, so that it becomes a normal everyday activity - part of the company culture. Also, the main emphasis, at least initially, should be on identifying and sharing the knowledge people require to do their jobs better.

While information technologies are part of the infrastructure to support knowledge management, creating the right cultural conditions is the key factor in ensuring the three-stages identified by the APQC function successfully and KM becomes fully integrated into the way things are done in an organisation. Knowledge management proponent and author Laurence Prusak of the IBM Consulting Group stresses the importance of culture: "When it comes to successfully managing knowledge, culture trumps all other factors."¹⁶ His view is echoed by Mark Koskiniemi of Buckman Laboratories, the US biotech company often featured as successful knowledge management case study. He says: "Ninety percent of moving an organisation to success in knowledge sharing and learning is in having the right culture."¹³

Culture in relation to business (ie corporate and organisational) is discussed in depth in figure 2.3 . As culture is considered the major factor in the success or otherwise of managing knowledge, we must distinguish the values and beliefs in which the process can thrive before examining the different knowledge management activities. Creating the right cultural conditions for knowledge management requires top-level leadership and middle management buy-in, the development of trusting relationships, a high degree of employee autonomy and staff involvement in the decision-making process. A culture that does not exhibit these features, but values command and control over cooperation, hierarchy and status over open management, and bureaucracy over innovation and creativity, will undoubtedly fail to make effective use of its knowledge base. Under such circumstances any knowledge management initiative is potentially doomed.

A KNOWLEDGE MANAGEMENT CULTURE

Ikujiro Nonaka believes that business organisations are a "living organism", and like any individual they "can have a collective sense of identity and fundamental purpose" - that is a shared understanding of what the firm stands for, a vision of its future and how to make it a reality.¹⁷ Nonaka says that knowledge companies and their staff are engaged in continual self-renewal, inventing new knowledge to drive the business forward. He provides the following examples to illustrate how employees at all levels use their knowledge and experience to benefit business: "A middle manager's intuitive sense of market trends becomes the catalyst for an important new product concept; a shopfloor worker draws on years of experience to come up with a new process innovation." Nonaka explains that in each case, an "individual's personal knowledge is transformed into organisational knowledge valuable to the company as a whole."

Creating the right conditions for people to make this kind of positive contribution to the organisation, and to see it as natural behaviour, requires a knowledge-supporting culture. Chris Harman and Sue Brelade, authors of Knowledge management and the role of HR, have identified the individual and organisational characteristics required to support knowledge management.¹⁸

Individuals who are good at knowledge management:

exploit new sources of information/knowledge

generate new and creative ideas from knowledge

create trusting relationships with colleagues

share ideas with others

continuously learn and develop

Individuals will be able to develop and use these abilities in cultures which encourage:

networking, both internally and externally

creativity and innovation

sharing ideas

trust

Individuals will be able to demonstrate their knowledge management abilities in organisations characterised by:

high levels of individual autonomy respect and recognition of skills, knowledge and talents

low level of office politics

minimal but effective bureaucracy

cooperation, as opposed to competition

high level of involvement in decision making

A cross-functional team of employees brought together in 1997 at Weyerhaeuser, the US paper manufacturer, to examine how and whether to establish a knowledge management strategy identified the following people and culture aspects necessary for knowledge management:

"1.      Senior management needs to set the tone and show support. Day-to-day reinforcement and coaching must come from mid-level.

2.       Learning and sharing are equally important.

3.       Trust is essential: it must be built to overcome the effects of 'not invented here' and the 'knowledge is power'. You must trust your employees. Employees must trust that sharing enhances employment status and does not undermine the business's need for them.

4.       Human interaction cannot be replaced. It is especially needed to transfer tacit knowledge.

5.       Rewards and recognition linked to specially to knowledge management must be carefully evaluated. They can have unexpected and unintended consequences."¹³

Research by Roffey Park, the management development institute, found that the six "underpinning values" in successful knowledge-creating firms were:

One way of distinguishing the type of culture required to support knowledge management is to look at some common managerial and organisational values and what they should change to. For example, a closed and secretive corporate culture should turn into one that is open and trusting; a status-oriented organisation should be replaced by a meritocracy; a competitive environment by a collaborative one; formalised reporting procedures by autonomous work groups; separate functional departments by porous boundaries and cross-functional collaboration; a fear of change and new ideas should be discarded in favour of support for innovation and creativity; and a tendency to apportion blame substituted by a belief in learning from mistakes. Some the cultural shifts needed for knowledge management are summarised in figure 2.4 .

Figure 2.4: Moving to a knowledge-sharing culture

Source: Beyond knowledge management: new ways to work and learn, Brian Hackett, The Conference Board (2000); can be downloaded as a pdf file from www.conference-board.org

Creating a knowledge-supporting culture

Organisations that do not have the environmental conditions required to facilitate knowledge identification and knowledge sharing face a long haul to create the right ones. Deep-seated cultures are hard to change. Asked whether he had seen organisations successfully change their cultures to be better at sharing knowledge, Thomas Davenport answered: "Very rarely. Cultural change is hard."¹⁶

Nonetheless, those intent on establishing a robust knowledge management system can begin to develop a suitable environment by adopting the appropriate management style and rewards, and by transforming the existing organisational values, such as individualism and secrecy, to those more akin to knowledge collaboration. Leaders can lay the foundations of a knowledge-supporting culture by providing a clear vision of the organisation's goals and values. Managers can implement new ways of working, of developing shared objectives and the wider dissemination of information. The organisational structure, the rules and procedures that govern workplace activities, the responsibilities people are given and reward systems all need to be consistent with knowledge sharing and knowledge acquisition. As with any change initiative, employee buy-in is more likely if management behaviour is consistent with the new vision. Our BT Global case study affirms that companies can be proactive in shifting their culture (see pp.30-33). While acknowledging that "it can take six to 15 years to change the culture within an organisation", Marc Auckland, chief knowledge officer at BT Global, points out that "culture can be shaped through practices such as leadership, training and education and management."

It should be emphasised, however, that culture cannot be imposed from above - that is by senior management. Anthropologists who are largely responsible for developing the concept of culture would attest to this view, as one commentator points out:

"Most anthropologists would find the idea that leaders create cultures preposterous: leaders do not create culture, it emerges from the collective social interaction of groups and communities."²⁰

Top-down change, especially when it is accompanied by a threat to accept the new way or leave, will only succeed in creating a superficial attachment. Better the right conditions are put in place and the new culture emerges, slowly permeating the whole organisation. People generally tend to stand back in periods of change, waiting to see what it means for them as individuals and to see whether their superiors are committed, visibly via their actions, to the espoused new values. This is particularly true in the case of trust, especially if there was little of it under the old regime. Once individuals are convinced of the need to change and see their managers are providing visible leadership they will embrace the new approach.

Management Review 4, which looked at how organisations were transforming their existing cultures, identified communication as the most important issue affecting success or failure.¹⁹ Several companies participating in this earlier Management Review research were of the opinion that communication played a central role in the change process. Financial services business Cheltenham and Gloucester - now part of Lloyds TSB - advised anyone contemplating a cultural shift to "consider communications and their effectiveness in greater detail", while Sainsbury's distribution depot at Hoddesdon stressed the need for "much greater communication from earlier and surrounding the issue more". Marc Auckland at BT Global also acknowledges the importance of communication to overcome long-held beliefs.

A cultural change short cut is to build change where the existing conditions are already favourable. Management Review 4 noted the existence of subcultures within the dominant culture - that organisations are made up of a number of interest groups, each with a different perspective and way of doing things.²¹ Where subcultures already exhibit widespread communication and collaboration they can act as a catalyst for the spread of knowledge management elsewhere in the organisation, convincing sceptics and persuading those resistant to change of the benefits. These groups act as champions of change - the Enterprise Oil and ICL case studies in chapter five provide examples of this approach. Several corporate contributors to a 1997 Conference Board study focused on small groups of employees to "kick-start" their knowledge management initiative, as the report's authors explain:

"One road to success runs through groups within the larger culture that already do communicate and cooperate. Enhancing existing connections is easier than creating new ones. Knowledge initiatives including BP's Virtual Teamworking project and IBM's Intellectual Capital Management System have focused initially on communities that were already working together or had common interests that gave them a reason to want to work together. The positive results they get from the systems help solidify management support, convince sceptics that knowledge management makes sense, and put pressure on diehards who resist change."¹⁶

A related method for establishing a cultural change beach-head is to build the new approach on the foundations of the existing values and expectations. The Document Company - Xerox, for example, attached its knowledge management strategy to its existing and deep-seated total quality management (TQM) culture.¹⁹ The commitment to TQM ensures collaborative working and the sharing of best practice. The company's quality philosophy states that "continuous improvement is the job of every Xerox employee."²² Xerox's competency framework includes knowledge-creating behaviours and staff are aware of the need to demonstrate active knowledge collaboration (the use of competencies and performance management to encourage sharing are discussed in the following chapter). SmithKline Beecham, the pharmaceutical company, has also built knowledge management on its existing total quality strategy. In this case, the company's knowledge management initiative has been linked to its "Simply Better Ways" quality programme, which rewards individuals and teams who submit the best analysis of the lessons learned from projects they have been involved in.¹⁹

The importance of language

The choice of language used to describe and communicate a knowledge management initiative can have significant impact on whether people support, ignore or rebel against it. Giving a knowledge-sharing strategy a formal name such as knowledge management can hinder its widespread adoption and obstruct the informality on which much knowledge collaboration thrives. In some people's minds, the language used might have negative connotations. One example is that management equals control. For this reason, some organisations choose more suitable titles. Johnson & Johnson, for example, prefers the term "knowledge networking" because it signifies "connections between people".¹⁰ Similarly, BP Amoco calls its knowledge directory "Connect" - it is an electronic network of individual home (web) pages detailing personal interests, as well as work expertise and experience - to emphasis collaboration between people and between business units.²³

Adopting language that is already regularly used in the organisation - that people are comfortable and familiar with - to refer to knowledge management activities can generate greater enthusiasm and prevent the initiative being seen as just another management fad that does not need to be taken seriously. This point was made by a contributor from the Royal Bank of Canada to a Conference Board study of knowledge management: She explained:

"If you talk about sharing best practices, learning from mistakes, using what others have learned and business results, nobody questions the value of knowledge management. However, if you talk about knowledge management as something separate and distinct from 'business priorities' many will question it. People are too busy to get excited about one more programme or 'great idea'. For this reason, Royal Bank of Canada does not use the term knowledge management internally, except within a community of practice of champions."¹³

Using language that fits the existing organisational cultural values can also help integrate knowledge management activities. A study by the APQC, which involved Apple Computers, American Management Systems, Ford, Lotus, Monsanto, National Semiconductor and PricewaterhouseCoopers, found that knowledge sharing was not described as a "new direction, a change programme or shift in values".²⁴ Instead language that reflected the existing corporate values was used, such as "collaborating" at Lotus and "complete analysis" at Ford. Chevron, the US oil business, prefers the concept of "the learning organisation" to knowledge management because learning is enshrined in the company's guiding set of objectives, principles and values - the so-called "Chevron Way".²⁵ Another example is the company that called its knowledge management project "best practice sharing" because knowledge did not fit its pragmatic culture.²⁶

THE KNOWLEDGE MANAGEMENT PROCESS

It was noted earlier that the APQC sees the knowledge management process as consisting of three activities, and Davenport and Prusak suggest four. The APQC's three-stage process is: finding and collecting knowledge; sharing and understanding knowledge; and adapting and applying knowledge. Although each activity can be viewed as a progressive step in the knowledge learning process, the reality is that knowledge activities are not distinct stages; rather they are merely "parts of a web" that is "open and fluid".¹⁶ For example, understanding knowledge may only occur when it is being applied, and adapting knowledge invariably results in new knowledge. The following section, looking at the different parts of the knowledge management process, illustrates how the various activities are linked and how they overlap.

Finding and collecting knowledge

As figure 2.1 explains there are two types of knowledge: explicit and tacit. Explicit knowledge is relatively easy to track down; it has already been codified (ie captured in a document or manual) and is being, or has been, used, although not necessarily by the whole organisation and often not where it could be most beneficial. This is particularly true in large organisations, which are constantly reinventing the wheel - that is solving the same problem over and over again. Ensuring that explicit knowledge is available across the whole company depends on giving people the means to access it. Organisations have relied on information technologies to solve this access-to-knowledge conundrum. Document repositories and intranets, among others, have been employed to provide staff with the tools to locate and make use of explicit knowledge. Knowledge maps - guides or inventories of a firm's knowledge sources - are often used to help people find what they need. Because explicit knowledge is relatively easy to transfer, it can yield financial benefits quite quickly. Thus many organisations concentrate their knowledge management efforts on widening the spread of current internal best practice, rather than looking to identify new ways to do things.

Yet directories of expertise and databases of corporate information which enable firms to make their existing knowledge base accessible are only part of the process of finding and collecting knowledge. Knowledge is not static, it changes rapidly and requires constant updating. Thus organisations need to create and acquire new knowledge. There are several short cuts to this. According to Joseph Badaracco Junior, the most direct and most effective way of acquiring knowledge is simply to buy it.²⁷ Davenport and Prusak use the example of IBM's $3.5 billion purchase of Lotus in 1995 to illustrate this point, explaining that Big Blue paid 14 times more than the book valuation of the software business to acquire its knowledge base.¹⁵ Another short cut to knowledge acquisition is to "rent" outside knowledge. Companies paying universities to conduct research and development is one example; hiring a consultant is another. Organisations using this method should ensure that they retain whatever knowledge is generated by the rental process.

Although organisations, or the people in them, are constantly creating new knowledge it is difficult to exploit. All knowledge begins as tacit knowledge - that is, it is constructed in someone's mind, from a hunch, or years of experience, or simple know-how. Tacit knowledge is action oriented, meaning that new knowledge is generated from our analysis of the information we receive. Tacit knowledge is hard to find and even harder to collect - or at least write down. While it may be possible to collect all the knowledge a person has about a topic, some features of tacit knowledge, especially that which provides an understanding about the relationships between facts, such as how they combine in certain situations, remain hidden. It remains so because it stems largely from creation and invention in particular situations. Yet it is a firm's most valuable asset.

What managers need are processes to ensure that, as far as is practicable, tacit knowledge can be captured - most will not be - and turned into explicit or shared knowledge for the benefit of the whole organisation: or at the very least, those areas that need it. This involves codification, say Davenport and Prusak, which they describe as "capturing knowledge in a documented or formalised process."¹⁵ Codification, or turning tacit knowledge into explicit knowledge that is accessible and understandable, is time-consuming as it requires constant refinement to "classify, synthesise and update".¹⁶

Prusak says that intuitive knowledge should stay tacit, only shared between the people who have it and those that really need it. He recommends "story telling" - that is getting knowledge holders to communicate it directly to others - because it is one way of retaining the complexity, subtleties and distinct nature of much tacit knowledge without destroying that which makes it valuable.¹⁶ This generally involves experts teaching what they know. An example of this approach is the consultancy Ernst & Young. It established a group of designated learners and teachers who assist projects from start-up through to delivery and culmination.²³

Sharing and understanding knowledge

The Ernst & Young example illustrates one method of transferring knowledge, while the document repositories referred to earlier provide another, albeit technical solution. However, knowledge transfer or sharing is not easy. Knowledge can only be volunteered; it cannot be forced out of people. As well as providing the means or tools to share knowledge, a knowledge management initiative also requires systems to encourage people to transfer what they know and others to learn. Whether staff have a positive attitude to knowledge sharing will be partly determined by the accompanying cultural values (see above). It might also need inducements and senior management sponsorship to generate enthusiasm. People often want to know "what's in it for me?" Suitable rewards, both financial and non-financial, such as peer recognition, and performance management systems, among others, can all underpin knowledge transfer. Getting people to engage in knowledge sharing and learning is discussed in much greater depth in chapter three.

According to Sveiby, the most common method used to pass on information - the lecture - is the least effective.²⁸ He cites research suggesting that after five days people only retain 10% of what they heard during a lecture. Knowledge retention is slightly better, at 20%, through a combination of hearing and seeing. Learning by doing is by far the most effective means of transferring knowledge, with retention rates of between 60% and 70%. Sveiby calls the latter knowledge transfer by tradition - that is the master-apprentice model. He says that most people do not refer to manuals to gain competence but learn through experimentation and by participating in the process. Celemi's use of simulation models, such as Apples and Oranges^TM and Tango^TM, both internally and externally in client organisations, is an example of applying the principles of knowledge transfer by tradition because they resemble the master-apprentice learning model (see case study 2, chapter five).

Unfortunately people tend to judge the knowledge they receive on the basis of who provides it; this usually rests on the status and reputation of the provider. However, using status to select what knowledge to retrieve can lead to important knowledge being ignored - some of the best knowledge comes from staff without grand job titles. But because the amount of information being generated in most companies is growing inexorably, some method of selection is needed, and past performance is often a better guide than status.

Nancy Dixon has suggested the following five categories of both explicit and tacit knowledge transfer:²³

Dixon believes their are four key principles of far knowledge transfer, that is sharing tacit knowledge:

As the Near transfer category described above by Dixon illustrates, tacit knowledge is best transferred through personal contact. Often the personal contact involves a working relationship of some kind, such as an apprenticeship or mentoring. One method of transferring tacit knowledge, which is suggested by Davenport and Prusak, is to move people around the organisation, where they absorb and generate new knowledge to use elsewhere in the business. This approach has a long tradition in Japan where engineering executives, for example, spend time in the manufacturing process so they acquire a full understanding of product development and production.

Some knowledge transfer occurs quite by chance, and although companies should not rely on an unstructured method to spread knowledge, it has a place in the knowledge-creating firm. Often the most creative knowledge results from a chance encounter, a casual conversation or a spontaneous brainstorming session over a drink. Davenport and Prusak make the point that, although the term knowledge management indicates a formal structure it should also contain space for "spontaneous, unstructured knowledge transfer". Celemi's specially designed communal refreshment area, with newspapers and magazines to encourage staff to spend time there, was established to provide a space for staff away from their desks where they can talk, share ideas and garner advice (see case study 2, chapter five). Rather than view canteen talk and socialising as a waste of time, it should be encouraged as it is often one of the most important means of transferring knowledge. Some companies, notably Dai-Ichi Pharmaceuticals in Japan, have attempted to build some degree of formality into the unstructured knowledge transfer process. This company requires its researchers to spend 20 minutes each day in specially created "talk rooms", discussing their ongoing research with whoever is in the room at the same time. Davenport and Prusak have described this approach as a: Brownian motion theory of knowledge exchange, its very randomness encouraging the discovery of new ideas that a more specifically directed discussion would miss."¹⁵

Knowledge sharing is discussed in more detail in the following chapter.

Turning knowledge into action

Successful knowledge transfer occurs only when knowledge is transmitted and the potential recipient has absorbed it and made use of it. The last point is the most difficult to achieve as getting someone to change their behaviour often involves challenging long-held views on how something should be. Yet unless knowledge is turned into action it is useless; it has no economic value. Although the mechanistic model of human behaviour suggests people will adopt a new approach that is better than the previous way of doing things, they are not always so rational. Their own personal agendas and goals tend to influence whether or not they accept change. Sometimes people resist using knowledge developed by someone else. Dorothy Leonard-Barton, author of Wellsprings of knowledge, suggests that people define themselves professionally through personal "signature skills" - that is their abilities and competence.³⁰ Hence they resist change that means abandoning those things on which their professional status rests.

Successful knowledge management therefore requires systems to ensure that transferred knowledge has a positive influence on behaviour and activity. Davenport suggests two ways of encouraging the use of knowledge:

Providing people with the space to contribute new knowledge themselves, which they can they apply not only in their own jobs but share with their peers, can foster a culture of putting knowledge to use, and undermine the "not invented here" mentality. This is illustrated by Davenport and Prusak and their discussion of Mobil Oil's development of a successful new drilling process in Kansas.¹⁵ The company wanted all its drilling operations to adopt the new approach and it was communicated via a memo. Despite demonstrable financial benefits from the new process, Mobil made slow progress in getting other parts of its drilling operation to use it. An investigation concluded that the choice of a paper memo to communicate the new process had not helped to get it widely adopted. The company subsequently used a variety of techniques to spread knowledge of the new drilling process, including several days of discussion and debate. Giving everyone the opportunity to discuss the new approach gave them a degree of collective ownership over it and six months later 30% of drilling operations had adopted the process.

Aside from getting staff to adopt transferred knowledge by generating some form of ownership, there are several other ways managers can motivate people to embrace knowledge created elsewhere. Changing working practices to make knowledge use a feature of day-to-day activity has the potential to substantially increase activity stemming from transferred knowledge. As one report stated: "Knowledge management works to the extent it is embedded in work itself and helps people achieve their work objectives in support of the organisation's mission."³¹ Employee involvement in decisions that govern their jobs and to solve the problems they face, as well as participation in the wider corporate decision-making process, can make people exercise the knowledge they hold and apply knowledge acquired from elsewhere. One of the five principles of knowledge networking (the preferred title, see above) at Johnson & Johnson is:

"Understand how behaviour is affected. Move beyond access to usage - how people use what kinds of knowledge to solve problems, address opportunities and make decisions."¹⁰

Linking knowledge use to career progression is another way of encouraging greater application of shared knowledge. The APQC study referred to earlier reports that all the companies participating said that "failing to build on the ideas of others has visible and sometimes serious career consequences."¹⁴ These include peer group sanction and limited career progression. Active senior management commitment and line management support may also encourage use of knowledge, as will the organisation's cultural values. Establishing a dedicated knowledge management function, such as a chief knowledge officer (CKO) role, can motivate people to share and use knowledge by coordinating and facilitating knowledge activities. The presence of a CKO also indicates to the whole organisation the level of importance given to knowledge sharing and knowledge use.

Measurement will enable a firm to assess how well it is using its knowledge. Traditional metrics, including customer satisfaction, cost savings and better time to market, can provide an insight into how well or badly knowledge is being transferred and used.

COMMON BARRIERS TO SUCCESS

As was noted earlier, effective knowledge management rests on a combination of people, processes and technology. A weakness in any one of these areas can prevent knowledge sharing or use. Some of the common pitfalls of effective knowledge management, such as a failure to share and use knowledge, have already been mentioned. Research conducted in organisations using knowledge management has uncovered some of the main managerial and organisational failings.

Thomas Davenport, in collaboration with Ernst & Young, examined 22 firms with knowledge management projects. This work identified four common symptoms of failing initiatives. These were: the need to scrounge resources; excessive reliance on a single visionary; people "just don't get it" - don't see the value of knowledge projects; and lots of knowledge talk, but little action.¹⁰

Liam Fahey and Laurence Prusak have analysed knowledge management in several large US organisations. They found that managers were often "reluctant to distinguish between data and information on the one hand, and knowledge on the other."³² As a result of their research, they have produced the what are referred to as the "¹¹ deadliest sins of knowledge management":

1.       Not developing a working definition of knowledge.

2.       Emphasising knowledge stock over knowledge flow.

3.       Believing knowledge exists outside individuals.

4.       Failure to create a shared context of knowledge management.

5.       Not emphasising tacit knowledge.

6.       Separating knowledge from its uses.

7.       Downplaying thinking and reasoning.

8.       Not focusing on the future.

9.       Failing to experiment.

10.     Substituting technology for human contact.

11.     Seeking to measure knowledge.

KPMG's second knowledge management survey, published in 2000 and based on the responses of 423 organisations from across the UK, Europe and the US, reported three main challenges that firms need to overcome: the lack of time to share knowledge; failure to use knowledge effectively; and the difficulty of capturing tacit knowledge.⁸

Answers to some of the most frequently asked questions about knowledge management can be found in figure 2.5.

Figure 2.1: What is knowledge?

Knowledge differs from data and information. Data has been defined as a set of discrete, objective facts about events and information as a message which must inform. Thomas Davenport and Laurence Prusak, in their book Working knowledge: how organisations manage what they know, describe "information as data that makes a difference".³³ Nancy Dixon, author of Common knowledge: how companies thrive by sharing what they know, suggests that information is data that is "in formation - that is, data that has been sorted, analysed and displayed, and is communicated through spoken language, graphic displays or numeric tables."³⁴

Knowledge is much broader and more meaningful than either data or information. Just as data is transformed into information through categorisation and contextualisation, knowledge gives information more substance. Information only becomes knowledge when people transform it by making comparisons and connections, identifying consequences and discussing it with others. As Dixon explains, knowledge is:

"The meaningful links people make in their minds between information and its application in action in a specific setting."

Davenport and Prusak's definition of knowledge encompasses its major elements and illustrates how it fits into the everyday activities of business organisations. Knowledge to them:

"Is a fluid mix of framed experience, values, contextual information and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organisations, it often becomes embedded not only in documents or repositories but also in organisational routines, processes, practices and norms."³³

Karl Erik Sveiby, a long-standing proponent of knowledge management, suggests that knowledge is "multi-faceted", so that, among others, it means awareness, experience, skill, insight, competence, capability, learning and wisdom.³⁵ This illustrates the complex and unpredictable nature of knowledge, and the difficulties of managing something that exists within people.

As the quote above illustrates, Davenport and Prusak consider experience, truth, complexity, judgment and rules of thumb to be the main components of knowledge. Experience provides insight, enabling connections to be made between current events and previous happenings. Truth means knowing what works and what doesn't in specific situations and results from experiencing something first hand, not relying on theories. Knowledge enables people to deal with complex situations rather than opt for easy solutions. Davenport and Prusak point out that "knowing more usually leads to better decisions than knowing less, even if the 'less' seems clearer and more definite". The ability to judge situations and information comes with knowledge. What we know is refined over time and through experience, evolving so that we can judge new situations and respond to new information.

Knowledge is closely linked to action - which is why organisations find it an attractive concept to exploit. Rules of thumb, intuitive guides to action developed over time through trial and error, and observation, are essential knowledge. They have been described as problem-solving "short cuts". This is because solutions to previous problems can help provide answers to similar or related current difficulties. As a result, knowledge has the capacity to stop people and organisations continually reinventing the wheel - what you already know should prevent you starting from scratch every time a problem occurs or a new situation arises.

Explicit and tacit knowledge

There are two main types of knowledge: explicit and tacit. Dixon explains the difference between the two by placing each at the opposite ends of a knowledge continuum: "At one end of the continuum is knowledge that can be laid out in procedures, steps and standards - explicit knowledge. It can be translated into checklists and specifications. At the other end of the continuum is knowledge that is primarily in the heads of people - tacit knowledge."³⁴ Tacit knowledge is essentially how people handle the situations and objects they are faced with, such as how they should accomplish a task.

The distinction between explicit and tacit knowledge was popularised by Ikujiro Nonaka and Hirotaka Takeuchi in their 1995 book, The knowledge creating company, but was identified much earlier by the philosopher Michael Polanyi.^36,37

Polanyi described tacit knowledge as "we can know more than we can tell" - meaning that most of what we know cannot easily be communicated; that small part which can is explicit knowledge, while the remainder is tacit knowledge.³⁷ Polanyi believed that all knowledge derived from tacit knowledge. Sveiby agrees, explaining that tacit knowledge acts as "background knowledge", assisting in the accomplishment of tasks and activities.³⁵ For example, once you can read, you focus on the text's meaning rather than how to read the words.

Sveiby offers the following exercise to illustrate tacit knowledge: shut your eyes and touch the tip of your nose with your index finger. Most people manage to touch their nose even though they cannot see it because they tacitly know where the tip of their nose is, and they know how they must move their arm and finger to touch it.³⁵ Although this exercise involves the individual consciously focusing on the act, most physical movements are done subconsciously - that is, they are performed automatically. Subconscious acts are governed by unconscious rules which have been developed and modified over years through doing things. Actions help to formulate these rules because it is only through practice that they are perfected.

Knowledge is both personally and socially constructed, so that what we are taught mixes with our own experience. Our perceptions change over time through new experiences and learning. Polanyi coined the term process-of-knowing to explain our acquisition of new knowledge.³⁷ It relies on clues and past experience to help make sense of new objects and situations, and, as a result, is highly individual and not easily transferred. The unconscious rules that govern much human behaviour also play a part in developing new knowledge: new objects or activities remind us of a previous experience and our mind involuntarily fills in the blanks. Sometimes this is beneficial, providing us with a short cut to acquiring new skills and knowledge - we act more quickly when there is no need to reflect. On other occasions, unconscious rules limit our ability to grasp new knowledge. For example, once you have learned to ride a bicycle, it is difficult to forget. If you subsequently attempt to ride a unicycle, your actions will in part be governed by your early experience riding a two-wheeled machine even though a single-wheel vehicle requires a different approach.

Tacit knowledge relies heavily on the physical environment in which it is constructed. Knowledge cannot be separated from its context, says Sveiby.³⁵ People's values and belief system influence how they act. Davenport and Prusak claim that: "values and beliefs are integral to knowledge, determining in large part what the knower sees, absorbs and concludes from his observations."³³ Nonaka and Takeuchi also acknowledge the presence of values and beliefs in determining knowledge, believing that "knowledge, unlike information, is about beliefs and commitment".³⁶ In other words, people interpret things differently depending on how they see the world.

To exploit tacit knowledge, organisations should aim to turn tacit knowledge into explicit knowledge, says Dan Moorhead, head of organisational learning at British Telecom.³⁸ As he explains: "Turning tacit knowledge into explicit knowledge is part of the continuous cycle of learning, sharing, reflection and use of that knowledge." Sveiby notes that reflection, sharing and learning can only occur when tacit knowledge is made explicit through language.³⁵ Ikujiro Nonaka suggests a kind of virtuous circle of tacit knowledge becoming explicit knowledge, which in turn can fuel new tacit knowledge as individuals use it to "broaden, extend and reframe their own tacit knowledge".³⁹

Nonaka offers an example from Japan to illustrate how tacit knowledge becomes explicit knowledge. He recounts the story of software developer Ikuko Tanaka at Matsushita who provided a solution to the kneading problems of a new home bread-baking machine. She suggested using the Osaka International Hotel - which had a reputation for making the best bread in the region - as a model. Tanaka studied the hotel's head baker and learned his distinctive stretching of the dough. The adoption of special ribs inside the baking machine replicated the baker's stretching technique and the product became a best seller. The solution to Matsushita's problem with its bread-making machine was, as Nonaka explains: "a movement between two very different types of knowledge". The solution - the product specifications for the machine - is explicit knowledge. The starting point was the highly personal tacit knowledge possessed by the head baker at the Osaka International Hotel.

Based on the distinction between explicit and tacit knowledge, Nonaka has suggested the following four basic patterns for creating knowledge in an organisation:

1.       From tacit to tacit - when one person's tacit knowledge is shared directly with another. The knowledge recipient, such as an apprentice, learns the tacit skills through observation, imitation and practice. They become part of his or her own tacit knowledge base, or, as Nonaka describes it, they are "socialised" into the craft. However, neither the master nor the apprentice gains any systematic insight into their craft knowledge, and because it is not explicit it cannot be used by anyone else, let alone the organisation.

2.       From explicit to explicit - when an individual combines discrete pieces of corporate knowledge to produce new knowledge. Nonaka gives the example of someone who combines company information for a financial report. However, this process does not extend the corporate knowledge base; it is simply reproducing knowledge that is already explicit in another form.

3.       From tacit to explicit - when tacit knowledge is articulated it converts into explicit knowledge, allowing it to be shared.

4.       From explicit to tacit - when new explicit knowledge is shared, others internalise it and use it to extend their own tacit knowledge.

Nonaka says that in the "knowledge-creating company, all four of these patterns exist in dynamic interaction". However, it is only the last two patterns of knowledge creation - when tacit and explicit knowledge interact - that "something powerful happens". Articulation (converting tacit knowledge into explicit knowledge) and interaction (using tacit knowledge to extend the knowledge base) are the "critical steps" in the knowledge spiral - that is, when the four knowledge patterns have been completed, the process starts again only from a higher knowledge starting point. This is what knowledge management aspires to.

Figure 2.2: Defining knowledge management

"Knowledge management is an integrated, systematic approach to identifying, managing and sharing all of an enterprise's information assets, including databases, policies and procedures, as well as previously unarticulated expertise and experience held by individual workers."

US Department of the Army (1999)

"The developing body of methods, tools, techniques and values through which organisations can acquire, develop, measure, distribute and provide a return on intellectual assets. It is fundamentally about creating self-sustaining ecologies in which communities and their artefacts can organically respond to, and confidently proact with, an increasingly uncertain environment."

David Snowden, Liberating knowledge (1999), CBI/IBM

"The systemic process of finding, selecting, organising, distilling and presenting information in a way that improves an employee's comprehension in a specific area of interest. Knowledge management helps an organisation to gain insight and understanding from its own experience."

University of Texas at Austin (1998)

"A framework or system designed to help companies capture, analyse, apply and reuse knowledge to make faster, smarter and better decisions and achieve competitive advantage."

Ernst & Young (2000)

"The acquisition and use of resources to create an environment in which information is accessible to individuals and in which individuals acquire, share and use information to develop their own knowledge and are encouraged and enabled to apply their knowledge for the benefit of the organisation."

Chris Harman and Sue Bredale, Knowledge management and the role of HR (2000) Financial Times Prentice Hall

"Creating a thriving work and learning environment that fosters the continuous creation, aggregation, use and re-use of both personal and organisational knowledge in the pursuit of new business value."

The Document Company - Xerox (2000)

"By knowledge management, we mean the strategies and processes of identifying, capturing and leveraging knowledge to help the firm compete."

American Productivity & Quality Centre (1996)

"A formal process that evaluates a company's organisational processes, people and technology and develops a system that leverages the relationships between these components to get the right information to the right people at the right time to improve productivity."

IDC, (2000)

"The systematic and organised attempt to use knowledge within an organisation to improve performance."

KPMG (2000)

Figure 2.3: What is corporate/organisational culture?

Definitions of corporate or organisational culture are plentiful; they range from the simple - "the way we do things around here" - to the more elaborate:

"Social or normative glue that holds an organisation together… the values or social ideals and the beliefs that organisation members come to share. These values or patterns of belief are manifested by symbolic devices such as myths, rituals, stories, legends and specialised language."⁴⁰

While the different definitions of culture vary in substance, they all contain some common threads: values, and the systems and symbols that reinforce and maintain them.⁴¹ Geert Hofstede, author of Cultures and organisations, has suggested that organisational culture is:

Management Review 4 - Cultural change - defined organisational culture as:

The commonly held values, attitudes and beliefs that distinguish one group from another, and the systems and symbols that perpetuate the culture.⁴³

It is important to make a distinction between corporate and organisational culture; and the idea that culture is something an organisation is, rather than a commodity it has. Both have serious implications for cultural change initiatives.

Corporate culture and organisational culture

Corporate culture is the "formal" or official way of doing things, while organisational culture is the way things are actually done.⁴⁴ This begs the question of whose culture is being referred to. Many descriptions of culture are "based on the statements of CEOs [chief executive officers] and senior executives of large multinationals". As a result, they have been described as "myths of culture".⁴⁵

The difference between the two terms is important for a number of reasons, not least the ability to identify the real culture: the "reality of behaviour, beliefs and assumptions".⁴⁴ Corporate culture can only provide a top-down view of the enterprise. It may simply relate to a "wish-list" of espoused values - which is the way employees are expected to act rather than how they really act. Significantly, the term "organisational culture" acknowledges that a culture is likely to include one or more subcultures. In contrast, the term "corporate culture" does not readily accept the existence of cultures other than the dominant one.

Despite the differences outlined above, the terms "corporate culture" and "organisational culture" are often used interchangeably. Yet the distinction between the two rests on very different ways of looking at organisations. Corporate culture is associated with a unitary perspective (hence the widespread contemporary use of the concept of integration), whereby an organisation has a common task, a shared set of values and essentially only one source of authority. Under such circumstances there is very little scope to deviate from the norm, or the common interest. In contrast, a pluralist perspective claims that organisations are made up of a number of interest groups, each with its own turf to protect. This suggests that informal or, in cultural terms, subcultural groups exist that seek to perpetuate the status quo.

Culture - something an organisation is, not something it has

The other important distinction that arises in any discussion of culture is the notion that it is something the organisation is, not something it has.⁴⁰ The former suggests that organisations are cultures, just as societies are cultures. In contrast, the latter considers culture to be an object and just one of the many components that make up an organisation. If culture is a commodity that an organisation has, then it follows that it can be analysed, changed and manipulated.

Cultural anthropologists, on the other hand, believe that culture is something that the organisation is. As a result, culture is synonymous with organisation and vice versa. It follows, therefore, that organisational change and cultural change are one of the same. As Paul Bate, author of Strategies for cultural change, has explained:

"Strategies aimed exclusively at changing the culture of an organisation are based on the false notion of culture as a 'thing' and should be avoided on account of the fact that they are, in effect, strategies for something that does not actually exist - mythical strategies for a mythical entity."⁴⁶

The notion that an organisation is a culture leads to the conclusion that change, and strategies for change, are more likely to be shaped by the existing culture than the other way round.

To understand fully the nature of culture, its various constituent parts - attitudes, behaviour, beliefs and values - and their relationship with each other need to be explored in greater detail.

CULTURAL CHARACTERISTICS

Beliefs provide the base of the cultural iceberg. Beliefs influence attitudes and values, which in turn affect behaviour. It is not, however, that simple.

Beliefs

Beliefs are based on the information that an individual has about an object, including an organisation. Moreover, beliefs link the object to a specific attribute. Marks and Spencer, for example, is typically associated with quality. In terms of understanding organisational culture, beliefs are typically used in this way. There are, however, two other ways in which beliefs are used: first, I believe in a specific object, such as "I believe in God"; and second, I agree with something, such as "I believe in democracy".⁴⁷ The latter is also synonymous with values (see below).

Beliefs are learned from experience and by observation, and can be altered by additional information. If organisations are continually implementing different change programmes, for example, employees may eventually come to the belief that it is pointless taking the current initiative seriously because it is likely to be superseded by something else in the not too distant future.

The beliefs gained early in life tend to influence a person's world view. Beliefs derived from childhood experiences at school and in the home, for example, may condition how a person reacts to authority. Over time people construct their own belief systems, which remain stable and are largely resistant to alteration unless people are convinced of the need to change. Beliefs provide the basis for a person's attitudes and values, and they (often unconsciously) guide their behaviour.

Attitudes

Attitudes are views that individuals hold that influence their behaviour. They affect a person's predisposition to act, or to respond, in a certain manner to a specific object. Like beliefs, attitudes are learned through experience (although this does not necessarily have to be direct knowledge). But unlike beliefs, they contain an element of assessment, so that the object in question - such as work - will be associated with positive or negative connotations (like and dislike).

Attitudes are not stable and can change, and they tend to develop over time. Employees may, for example, possess a favourable attitude to the organisations for which they work, but a proposed change may engender the opposite reaction. Attitudes are principally governed by beliefs. They follow an assessment of the attributes the individual holds about a given object. It is not that people perform a conscious mental evaluation of an object when asked for their attitudes towards it. Rather, they often have deeply held attitudes about specific objects, such as trade unions, that may or may not be based on their own direct experience.

Values

Values determine whether an individual agrees or disagrees with something. Like attitudes, they are learnt and are based on, and are evaluated against, a person's beliefs. But unlike attitudes, values are consciously assessed on the grounds of whether or not they are consistent with existing beliefs. There are two types of values - instrumental values and moral values. The former are very similar to attitudes and reflect a person's desire or preference, and result in feelings of satisfaction or dissatisfaction. Moral values, on the other hand, are concerned with socially acceptable behaviour and result in feelings of pride or humiliation.

Behaviours

Beliefs, attitudes, values and behaviour should all perfectly interact; in the real world, however, people do not always act this way. Honesty, for example, may be an important value, but there are situations in which an individual will lie or cheat, and although certain behaviour may be morally unacceptable, some people find it attractive nonetheless.

This is because behaviour is largely governed by situational contingencies, rather than attitudes towards objects. In the workplace, situational contingencies are the individual employee's beliefs about the rewards and costs associated with performing a task, as well as an assessment of his or her own capabilities to carry out the assignment and an evaluation of the likelihood of success. Employees may have a positive attitude towards the organisation for which they work in abstract terms, but this may not affect behaviour if, for example, their beliefs indicate that the rewards being offered are insufficient; that what they are being asked to do will jeopardise their relations with colleagues; or that they do not possess the necessary skills and knowledge to complete the task successfully.

It follows, therefore, that any change initiative must address employee beliefs about acting in a wholly new manner: what rewards and costs are appropriate; whether staff possess the requisite expertise; the probability of successfully achieving the required performance; and whether it is acceptable to perform differently within the social boundaries of the organisation. This suggests that the work environment is the key to organisational culture. As a result, the reward system or the management style, among others, may have to be transformed (realigned) to achieve successful change in attitudes, values and behaviour.⁴⁵

To reiterate: beliefs are based on the knowledge that an individual holds about an object; attitudes are whether a person likes or dislikes an object; values relate to whether he or she agrees or disagrees with something; and while behaviour is in part dictated by beliefs, situational contingencies are generally more important.

UNDERSTANDING ORGANISATIONAL CULTURE

People entering a specific entity, such as a workplace, will bring with them plenty of "emotional" baggage that may or may not be in conflict with the organisation's cultural norms - the acceptable way of doing things. All individuals will possess their own sets of beliefs that determine their attitudes, behaviour and values. These have been likened to an iceberg: behaviours can be observed above the waterline; attitudes and values are submerged just below the waterline; and beliefs (many of which are unconscious) are deep down in the depths of the water.

As was noted earlier, individual beliefs are gained from direct experience and observation, and they are based on the knowledge the individual holds about an object, such as a person, a group or an organisation. If individual beliefs are formed by the person's environment, it follows that organisational culture - which was defined earlier as the commonly held values, attitudes and beliefs that distinguish one group from another, together with the systems and symbols that perpetuate it - is determined by its own unique environment. Shared attitudes, beliefs and values are the basis of culture. And it is this "commonality" that is the key to the development of culture.⁴⁵

A culture is specific to a group and it will attempt to "integrate" and "socialise" its members so that they accept, believe in and adhere to a specific way of doing things.⁴⁸ Cultures have been described as being "about the control of people's behaviour and beliefs; ultimately they are about the control of people's behaviour."⁴⁹ In essence, organisations try to mentally programme individuals to operate and behave in a way that is in tune with the dominant culture (this is highlighted by the fact that one cultural change consultant has called his programme "Mindstore").⁵⁰

Culture, therefore, is entirely learned. As a result, common attitudes, common behaviour and common beliefs emerge, but these are influenced by the individual belief system that each person will have developed since early childhood. A person's belief system will affect his or her capacity to accept and adapt to new beliefs; generally people will need to be convinced of the appropriateness of change by direct experience.

The internal and external environment in which the organisation operates will set the tone of its culture. Internally, management style and the systems and structures used to manage staff form the work environment for all of its members. Over time, managers become products of the environment in which they function and their decisions are largely conditioned by that culture. The culture, therefore, becomes self-perpetuating. For example, if the industrial relations climate is adversarial, it is unlikely to alter unless there is an influx of "new blood" committed to a wholly different type of employer-employee relationship.

Externally, the social, political and legal environment in which an organisation operates will affect the way that it does things. The legal constraints placed on trade unions by successive legislation in the 1980s, for example, coupled with high levels of unemployment, undoubtedly encouraged the emergence of "macho management" in many businesses as they struggled for survival. As a result, the managerial prerogative became firmly entrenched and individualism supplanted collectivism. The privatisation of many publicly owned organisations and the introduction of market forces into the remaining public services has forced them to embrace a more businesslike approach. In such circumstances, the organisation has very little control over the external environment.

The type of industry will also have a significant impact on organisational culture. Highly unionised sectors such as engineering, with a tradition of strong shop steward organisation, are likely to have different cultures from less unionised companies. Culture is also historically determined. The original culture, often reflecting the wishes and assumptions of the organisation's founder(s), will continue to exert its influence over succeeding generations. Although memories are clouded by the mists of time, long-service staff can still be heard to say that "this would not have happened if Mr So-and-so had still been around".

As was mentioned previously, organisational cultures are not entirely homogeneous. While all social groups attempt to adopt commonly held attitudes, beliefs and values, it is rare for all members to share identical ones. Numerous subcultures are likely to exist, which are often located within different functions or employee groups.

Figure 2.5: Frequently asked questions

What is knowledge?

Knowledge is defined in one dictionary as the "act or process of knowing". Knowledge writers describe it as information that has been transformed by people. Transformation occurs when people make comparisons and connections, discuss it with others and use it to guide activity. Knowledge resides in people's heads and includes competence, experience, values and insights. It is fluid, constantly changing. What people already know provides a framework for assessing and managing new knowledge. It is specific to an entity and is a guide to action. Because knowledge resides in people it is difficult to capture.

Organisational knowledge is the sum of its collective know-how. It often becomes embedded in manuals, patents, processes and procedures, and informs "how we do things around here". Knowledge that is codified is called explicit knowledge. The more meaningful, but harder to extract, knowledge is known as tacit knowledge and includes know-how, intuition, experience and insight.

Why is knowledge valuable?

A company's knowledge base is fast becoming its only sustainable competitive advantage. Most companies can quickly replicate products and services and match quality standards. The knowledge that is unique to an organisation is much more difficult to copy. It is a resource that should be nurtured and shared for the benefit of the business. As the economy of most long-standing industrialised countries shifts from turning raw materials into manufactured goods to one that is service-based, so the need to build knowledge-generating and knowledge-sharing capabilities increases. The industries replacing manufacturing tend to rely on the skills and creativity of their workforce - that is their knowledge.

What is knowledge management?

There are numerous definitions of knowledge management (see figure 2.2). Most contain a reference to the systematic process of identifying, selecting, organising and sharing knowledge. It helps firms gain an insight and an understanding into their own experience. It enables peers to transfer knowledge, preventing firms from continually reinventing the wheel. It is also about ensuring that people who need knowledge have access to it.

However, the name knowledge management is a bit of a misnomer. Knowledge cannot be managed as such. All organisations can do is provide the infrastructure and tools, and create the culture, in which knowledge creation and knowledge sharing can thrive. Karl Erik Sveiby, the Swedish writer on knowledge, suggests that knowledge focus or knowledge creation are better terms than knowledge management because they describe it as an activity rather than an object.

Is knowledge management all about IT?

The concept of knowledge management has gone through two phases. The first focused mainly on the information technologies available to organisations to store information and enable staff to communicate easily. The advent of network computers and the development of software to support collaborative working and to store data, which could be easily retrieved by anyone with access, increased the potential for organisations to make greater use of their existing knowledge. However, there has been disappointment with many of these systems. Many employees have refused to use them - preferring instead to retain what they know - or they have simply not had either the time to put their insights into a repository or to access whatever information is held there.

As a result, the emphasis of most knowledge management initiatives has shifted to people. This second phase of knowledge management is concerned with creating the cultural conditions in which knowledge sharing thrives. Information technologies are now seen as enablers, helping staff to communicate and share knowledge, rather than the entire focus of a knowledge management strategy. Investment in information technology does not equate to a knowledge management strategy; better to develop a culture in which people are comfortable with exchanging knowledge and who see it as a natural part of their day-to-day activities.

How can knowledge be transferred?

Given the right cultural conditions, knowledge transfer - that is sharing knowledge with others - can occur in a variety of ways. Formal knowledge management systems attempt to codify knowledge so that anyone with access to the storage facility can make use of it. Organisations as diverse as the US Army and BP Amoco have put in place systems for analysing current practice so that the lessons learned can be applied in similar future situations. Providing staff with access to experts, by giving them a Yellow Pages listing individuals and their specialism, for example, is also a popular way of transferring knowledge.

However, some of the best knowledge transfer tends to occur in informal situations and through informal networks. The workplace canteen, kitchen, coffee machine or water cooler have been identified as particularly good environments for knowledge sharing, because these places are where employees come together to discuss things informally, trade ideas and generally gossip about the business. Some companies encourage staff to spend time in these areas. Others have attempted to replicate informal gatherings by staging largely unstructured forums, such as knowledge fairs, to enable people to meet and discuss their own agendas.

How do you get people to share knowledge?

Most experts believe there should be no direct financial reward for sharing knowledge. Intrinsic rewards, such as peer group recognition, are claimed to be better long-term motivators. Some organisations link career progression to knowledge behaviour so that staff who frequently share what they know and take part in knowledge generation are more likely to gain promotion. Making knowledge sharing activity a component of performance management systems or a competency framework can ensure people actively are engaged in the knowledge process and this is becoming popular. The induction process for new staff can also help by instilling a knowledge-sharing ethos into recruits.

Generally people will share knowledge if they see some form of benefit or reason for doing so. The benefit can be on a personal level, such as increased peer group status or simply because it will make their job easier. Employees might also be more willing to transfer knowledge when they can see the organisational benefits. People are also more likely to engage in knowledge activity if they see others doing so, especially their superiors. Ultimately, getting staff to share knowledge comes down to the organisational culture. A typical knowledge management culture is one where there are high levels of trust, extensive employee autonomy and staff involvement in the decision-making process. A culture that does not exhibit these features, but values command and control over cooperation, hierarchy and status over open management, and bureaucracy over innovation and creativity, is unlikely to enjoy a great deal of knowledge exchange.

What are the benefits?

Knowledge itself cannot be measured so it is difficult put a bottom-line figure on knowledge activity. Nonetheless, companies report a range of benefits resulting from their knowledge management initiatives. These include: better strategic planning and decision making; better innovation and creativity; reduced product development time; enhanced customer relationships; productivity improvements; and cost reduction. Also, increased collaboration and knowledge sharing lead to less duplication of effort - companies and staff are not continually reinventing the wheel.

¹     "Collective wisdom", Frank Blackler, People Management, 2 June 2000.

²     "What is knowledge management", Karl Eric Sveiby (revised April 2000), http://www.sveiby.com.au/KnowledgeManagement.html

³     "Frequently asked questions", Karl Eric Sveiby (revised January 2000), http://www.sveiby.com.au/FAQ.htm

⁴     For example, The knowledge-creating company, Ikujiro Nonaka and Hirotaka Takeuchi, Oxford University Press, Oxford, ISBN 0 1950 9269 4.

⁵     "Knowledge management hits its stride", IDC news release, 24 May 2000, http://www.idc.com

⁶     "Digital economy diminishes usage of management tools", Bain & Company press release, 3 May 2000, http://www.bain.com/marketing/insights/toolspressrelease.html

⁷     Releasing the value of knowledge, Cranfield Business School and Microsoft UK, www.microsoft.com/uk/knowledgereport

⁸     Knowledge management research report 2000, KPMG Consulting, www.kpmg/consulting.com

⁹     Roger Chaddock, quoted in "Knowledge is the key, whatever your sector", Nuala Moran in Knowledge Management: Financial Times survey, April 28 1999.

¹⁰    Managing knowledge in the new economy, Don Cohen (1998), The Conference Board, report 1222-98-CH, ISBN 0 8237 0671 0.

¹¹    "What is knowledge management", Rebecca Barclay and Philip Murray, Knowledge Praxis (1997), http://www.media-access.com/whatis.html

¹²    Post-capitalist society, Peter Drucker, Butterworth-Heinemann, Oxford, ISBN 0 7506 2025 0.

¹³    Patrick Wright, quoted in Beyond knowledge management: new ways to work and learn, Brian Hackett (2000), The Conference Board, ISBN 0 8237 0711 3, www.conference-board.org

¹⁴    Knowledge management: consortium benchmarking study, American Productivity & Quality Centre (1996).

¹⁵    Working knowledge: how organisations manage what they know, Thomas Davenport and Laurence Prusak (1998), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4655 6.

¹⁶    Managing knowledge for business success, Don Cohen, David E Smith, Laurence Prusak and Richard Azzarello (1997), The Conference Board, report 1194-97-CH, ISBN 0 8237 0643 5.

¹⁷    "The knowledge-creating company", Ikujiro Nonaka, in the Harvard Business Review on knowledge management (1998), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4881 8.

¹⁸    Knowledge management and the role of HR, Chris Harman and Sue Brelade (2000), Financial Times Prentice Hall, London, ISBN 0 2736 4456 4.

¹⁹    Developing the knowledge creating culture, Christina Evans (2000), Roffey Park Institute, Horsham, www.roffeypark.com

²⁰    "Organisational culture: origins and weaknesses", L Meek (1988), Organisation Studies, vol 9 (4).

²¹    "Cultural change", IRS Management Review 4, January 1997, IRS/Eclipse, London.

²²    "Benchmarking best practice", IRS Management Review 14, August 1999, IRS/Eclipse, London.

²³    Common knowledge, Nancy Dixon (2000), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4904 0.

²⁴    "Overcoming the 'cultural barriers' to sharing knowledge", Richard McDermott and Carla O'Dell (2000), American Productivity & Quality Centre, http://www.apcq.org/free/articles/km0200

²⁵    "Managing knowledge the Chevron way", Kenneth Derr, Chair and CEO Chevron Corporation, speech at the Knowledge management world summit, San Francisco, January 1999.

²⁶    "Secrets of successful knowledge management", Thomas Davenport, Knowledge Inc., February 1997.

²⁷    The knowledge link, Joseph Badaracco Jnr (1991), Harvard Business School Press, Boston, Massachusetts.

²⁸    The new organisational wealth: managing and measuring knowledge-based assets, Karl Erik Sveiby (1997), Berret-Koehler Publishers, San Francisco, ISBN 1 5767 5014 0.

²⁹    "The insight track", Nancy Dixon, People Management, 17 February 2000.

³⁰    Wellsprings of knowledge, Dorothy Leonard-Barton (1998), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4859 1.

³¹    Using information technology to support knowledge management, American Productivity & Quality Centre (1997).

³²    "The eleven deadliest sins of knowledge management", Liam Fahey and Laurence Prusak, California Management Review, vol 40 (3), Spring 1998.

³³    Working knowledge: how organisations manage what they know, Thomas Davenport and Laurence Prusak (1998), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4655 6.

³⁴    Common knowledge: how companies thrive by sharing what they know, Nancy M Dixon (2000), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4904 0.

³⁵    The new organisational wealth: managing & measuring knowledge-based assets, Karl Erik Sveiby (1997), Berrett-Koehler Publishers, San Francisco, ISBN 1 5767 5014 0.

³⁶    The knowledge creating company, Ikujiro Nonaka and Takeuchi Hirotaka (1995), Oxford University Press, Oxford, ISBN 0 1950 9269 4.

³⁷    Personal knowledge: towards a post-critical philosophy, Michael Polanyi (1958), Routledge & Kegan Paul, London.

³⁸    Quoted in Beyond knowledge management: new ways to work and learn, The Conference Board (2000), available from www.conference-board.org

³⁹    "The knowledge creating company", Ikujiro Nonaka, in Harvard Business Review on knowledge management (1998), Harvard Business School Press, Boston, Massachusetts, ISBN 0 8758 4881 8.

⁴⁰    "Concepts of culture and organisational analysis", L Smircich (1983), Administrative Science Quarterly 28.

⁴¹    "The characteristics of organisations", Roy Payne (1996) in Peter Warr (ed), Psychology at work, Penguin, Harmondsworth, ISBN 0 14 024648 7.

⁴²    Cultures and organisations, Geert Hofstede (1994), HarperCollins, London, ISBN 0 00 6377408.

⁴³    "Cultural change", IRS Management Review 4, IRS/Eclipse Group, London.

⁴⁴    Managing human resources and industrial relations, John Storey and Keith Sisson (1993), Open University Press, Buckingham.

⁴⁵    Changing cultures, Alan Williams, Paul Dobson and Mike Walters (1989), Institute of Personnel Management (now the Institute of Personnel and Development, London, ISBN 0 85292 415 1.

⁴⁶    Strategies for cultural change, Paul Bate (1995), Butterworth-Heinemann, Oxford, ISBN 0 75062 3284.

⁴⁷    "Structure and culture change in two UK organisations: a comparison of assumptions, approaches and outcomes", C Mabey and G Mallory (1995), Human Resource Management Journal, vol 5 (2), Winter.

⁴⁸    Organisational behaviour in international management, Terence Jackson (1993), Butterworth-Heinemann, Oxford, ISBN 0 7506 1571 0.

⁴⁹    "Scientific management and the control of workplace culture", L Taksa (1991), quoted in H Willmott (1993), "Strength is ignorance; slavery is freedom: managing culture in modern organisations", Journal of Management Studies, vol 30 (4).

⁵⁰    "Taking stock of corporate culture", Roy Payne, Personnel Management, July 1991.