Lecture 5 - Knowledge Management PDF

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International Human Resource Management Lecture 6 – Knowledge Management Learning objectives and structure Interrelationship between each of the areas, integrated process of all the areas of IHRM to understand how organisations function. ● ● ● ● ● ● ●

What is knowledge? What is knowledge management? Why is it important? The knowledge economy Understanding knowledge and people Knowledge workers What connects knowledge management and IHRM? Theorising IHRM and knowledge management Critical perspectives on global knowledge work

When you approach a question, it is important to first define what you understand is knowledge management and how it is relevant. How knowledge links to people and debate around how workers change, for example they are now driven by the idea of “knowledge worker”, as the economy changes towards what workers know more than what they produce. Important: level of criticism, analysis and evaluation. Try to understand at a deeper level, how they connect with other ideas. What is knowledge? ●

Data: raw, discrete, semantic units (e.g. binary codes, temperatures, names, telephone numbers).

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Information: data that has been processed to render it meaningful (e.g. aggregated, categorised, contextualised).

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Knowledge: information that is justified and connected with lived experience to enable actions, intentions and sometimes predictions.

Knowledge is how we use our information, data, to a lived experience. How you apply the information that you have. It refers to the processing of information and how you use it. That idea of how you use discretionary knowledge and how you build from experience. Source: Kins (2018) What is knowledge management? ● ●

A sub-discipline of management concerned with understanding and improving the creation, sharing and capture of knowledge within work organisations. Almost all experiences of work involve knowledge practices, to a greater or less extent….

If we look at the concept of knowledge, it is this foundation of trying to understand how knowledge is created, disseminated and captured. The big question/discussion when we look at knowledge is how organisations are seeking to tap into workers’ knowledge because, from an organisational point of view, this gives a process of “organisational competitiveness”. The idea of capturing this knowledge is the essence of an organisation. Workers are naturally reticent about passing on their knowledge to an organisation, why would this be? If you think knowledge as a form of currency, workers are naturally going to be reticent about how that knowledge/currency is spent. If your knowledge no longer has a currency, you have no value to

an organisation potentially. Research covers this underlying tension where organisations are seeking to build in knowledge systems that tap in explicit knowledge and tacit knowledge. In effect, in today’s modern economy, which is built on services, especially professional services, you have heard discussion on what is known as “life-long learning”. As graduates, once you start your career how you develop that knowledge and how do you keep up to date. The whole process is of accepting that knowledge is an effective currency, how that currency is then traded and how it’s used by individuals and organisations, how organisations can make the most out of their people. The rise of the ‘knowledge economy’ ●

In 1959 the American management guru, Peter Drucker, described how the most important resource in the global economy is knowledge: “Productive work in today's society and economy is work that applies vision, knowledge and concepts -- work that is based on the mind rather than the hand.” (Source: Drucker, Landmarks of Tomorrow – 1959).

See also Roberts (2009) ● ●

Drucker titled a chapter in his 1969 book the Age of Discontinuity – the Knowledge Economy. Drucker makes a distinction between knowledge that allows us to repeat something (productivity) and knowledge that produces something new (innovation).

Within Western economies in the last 40 years, we see a transformation of industrial and employment sectors going from a focus on manufacturing and heavy industries to that of the service industries and professional services. In the UK, one of the biggest areas in terms of the economy is within financial services and banking. In the last 40 years, we have experienced de-industrialisation, where heavy industries are in decline. Manufacturing is also into decline. The argument that we are in transition from a primarily manufacturing economy to that of a knowledge economy. This has speeded up with technology which has shaped how this currency of knowledge can be transferred readily on an international scale. See Drucker (1992) Managing for the Future. Drivers of the knowledge economy Drucker (1999) identified globalization as a major driver of the knowledge economy, which he also termed the ‘third industrial revolution’ (Drucker, 1982): 1. Global capitalism (intensifying innovation as the focus for competition). 2. Expansion of global ICTs (accelerating the pace of knowledge creation, capture and transfer). With the UK leaving the EU, the US is keen to enter the UK healthcare market. The question of knowledge management and the process in relation to research and development and the development of drugs, giving emphasis on pharmaceuticals to invest on their workforce. Term used over the last 20 years: “global village”, the world is actually small: in terms of availability to move, or transfer from market to market is readily available. Not only in terms of working internationally, but also how this knowledge moves and is transnational (borderless). That process of how organisations can engage with global capitalism and how this ICT is used as a medium of promoting knowledge. See Drucker, P. (1999) Management Challenges for the 21st Century (1999). Drucker (1982) The Information Explosion in The Changing World of the Executive (p39). ● ● ●

The first was mechanical power The second was electrical power The third is information power.

But the knowledge economy does not imply the reduction in the power of nation states as neoliberal globalists tend to suggest (e.g. Friedman, Ohmae, Levitt), rather national states, and national governments become more important.

The paradox of place in the global knowledge economy “In a world of increasing global competition, nations have become more not less important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown. Competitive advantage is created and sustained through highly localized processes. Differences in national values, culture, economic structures, institutions and histories all contribute to economic success” (Porter, 1990). See Porter (1990) The Competitive Advantage of Nations, HBR March-April ● ●

Companies achieve competitive advantage (in advanced economies) through innovation. So, the knowledge economy is being driven by the movement of knowledge and capital (and labour) but is also actually intensifying the differences between nations as they seek to become more competitive, maximizing their competitive advantage.

This is particularly important in developed economies that cannot compete on price, raw material costs with the developing world. ●

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As we saw last week globalization is about mobility and immobility. Mobile knowledge and capital (and even knowledge workers), but immobile regulation, universities, living environments etc. Also, the knowledge economy encourages companies to lobby government for improvements in their parent country and host countries. This creates networks of universities, companies and government. Porter calls these networks clusters. Education and much primary research and development is risky and expensive, so companies ask that government and families often, but not always, provide the funding.

The things that he considers in IHRM relate to this idea of organisational competitiveness. So, the discussion about knowledge is linked to this idea of organisational competitiveness. The idea that you have this development and simulation of knowledge and how that knowledge is then transferred on a national and international level. We have this medium of knowledge, but it is also dependent on historical, cultural and social contexts of how that knowledge is then developed and implemented across international communities. Cultural differences – challenge that organisations have. Clustering effect (Porter, 1998)

Source: World Bank (2012)

The World Bank knowledge economy index (KEI) is composed of: ● ● ● ●

A ‘business friendly’ economic and institutional regime – trade tariffs, price controls, good banking regulation, rule of law An educated and skilled population – average years of education An efficient innovation system – patent applications, licenses and royalties, science and engineering journal articles Information and communication technology telephones/computers/internet users per 1000 of population.

In the graph above, we can see that in essence where investment in terms of knowledge is the highest among for example European nations, the US, Switzerland, Japan, Germany and then at the bottom we can see the ‘brick’ economies like India, China, Brazil, Russia where knowledge is not so much of a premium. However, we must be cautious. If we look at the investment, for example, in India and if we look at their technology development (particularly in space technology), we can see how they are putting a lot of effort on to change this and the same happens with China, if you look at their growth in their use of technology and knowledge. This is not static. This is constantly moving. However, we can see that within Western economies, knowledge is seen as a key conjugate to organisational competitiveness, effectiveness and profitability.

Knowledge and people: the ‘knowledge worker’ ●

“The most valuable assets of a 20th-century company were its production equipment. The most valuable asset of a 21st-century institution, whether business or non-business, will be its knowledge workers and their productivity" (Drucker 1999: 135).

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"We know now that the source of wealth is something specifically human: knowledge. If we apply knowledge to tasks we already know how to do, we call it 'productivity'. If we apply knowledge to tasks that are new and different, we call it 'innovation'. Only knowledge allows us to achieve these two goals. “(Drucker, 1992: 23)

If you look at the example of Apple, Apple is a company that has nothing to do with manufacturing, the company designs the products, markets the products and a third party produces the devices. When you look at an Apple product, they are not selling the technology but what they are selling is for example reliability and signus connectivity. This is driven by the technology in terms of being simple to use, but highly complex in its development. If you look at the engineering that goes into Apple products, this is where you have what Porter and Drucker refer to “competitive advantage”, what makes an organisation distinctive and competitive than a similar organisation within the sector. In the UK, another example of where we look at knowledge work/management or knowledge organisation is Dyson. Dyson’s production was based in the UK but over the last 20 years, they have now moved to Malaysia for cheap labour for example. The only thing Dyson has kept here in the UK is their headquarters where they conduct research and development and their technology is developed. Almost all Dyson’s products are patented. Dyson’s financial strength comes from its intellectual knowledge and how does it ensure that it maintains that standard and in terms of competitiveness and R&D. The critical aspect for organisations like Dyson and Apple is actually what is their future, their future development. You hear in the management rhetoric about HRM the discussion that ‘people are our greatest asset’. For a lot of CEOs, this only had a a pure PR role. The difference is now it has evolved beyond the

idea of rhetoric to a reality of saying that in most cases for organisations that are not taking employees’, they are losing competitiveness. We can see that this whole element, particularly where Drucker refers to productivity and innovation, these are the things that if an organisation is not innovating, it is actually going backwards. When going backwards it loses competitiveness within its sector. Some companies that we highly successful but were not able to keep up with the technological advances, is for example, Nokia. Nokia were leaders in the mobile phone industry, but with the introduction of smartphones Nokia lost the competitive edge. The big question for companies like Apple is what do they develop as their net product, a paradigm shift and that is what organisations are looking for: what makes them innovative and distinctive. Drucker and Porter (and the World Bank) suggest that nations that develop knowledge workers, and attract organisations requiring knowledge workers, will be the most productive, innovative, competitive and prosperous. See: http://www.knowledgeworkerperformance.com/Peter-Drucker-Knowledge-Worker-Productivity.aspx Oxford Druker P.F. (1992) Managing for the Future, Butterworth-Heinemann, Oxford Drucker P.F. (1999) Management Challenges for the 21st Century, Butterworth-Heinemann, Oxford The challenge of knowledge management is people ● ● ● ● ●

Knowledge workers may be expensive to develop, attract and retain (Porter, 1990). Important knowledge can be difficult to formally capture, and so share, because much of it is often tacit knowledge (Polayni, 1985). Tacit knowledge is that which is performed, but difficult, even impossible, to formally express (e.g. knowing how to ride a bike). People may not want to share knowledge because it may undermine their power within an organisation (e.g. face-saving when discussing failure). “Organisational gatekeepers”. If people leave an organisation, then knowledge may be lost.

A research which was conducted and addressed the relation between placement students and graduate careers, found out that students who have performed a year of placement, are 50% times more likely to find a job in their field of interest within a year of graduation than students who have not done a placement. Employers can reasonably predict that with the knowledge you have acquired during your placement, that has a direct applicability to making you a sound choice in selection: not only you had a theoretical understanding of your subject area, but also you were likely developed this knowledge from an experience point of view. Once an employer attracts an employee, the organisation needs to think about how to keep that employee. And this is something that graduates should be looking at when they are looking for jobs. One of the things you will be looking at is what is the career development potential, what sort of investment the organisation will give you. As an example, if you were to start a career in HR, you would expect that an employer would offer you the opportunity to do the Chartered Institute of Personal Development examinations, to be qualified as a HR practitioner within the profession or the ICAEW or CIMA, ACCA for accounting professions. But when we are talking about innovation competitiveness within an organisational level, individuals are their own brand because organisations today cannot offer you this idea of a “job for life”, but what organisations can offer you is employability to give you the skills and development so that you can find your ongoing position. You have to manage your career. You acquire knowledge, that knowledge is used as a currency from a financial point of view and from a career point of view, promotion for example.

What do we understand by tacit knowledge? Unsaid. Something which is within and people, depending on their personality, experience, could be very wary about how they express that knowledge because that tacit knowledge is the currency and so like spending money you need to be careful how you use your knowledge. This is where organisations are desperate to tap in your tacit knowledge, it is the level that you give in exchange. The organisation is driven by, in effect, a control of that knowledge in terms of delivering services. If people leave an organisation, that knowledge might be lost which is critical. If you use the example of research scientists what they hold is mostly in their head and not in some kind of platform. When you look at people leaving, it has a huge impact to the negative and that is why from an organisational point of view, organisations are very keen to try and ensure they can hold on to their ‘talent’. What connects KM and IHRM ●

If competing in the global knowledge economy is essential to the success of nations and businesses (as Porter, Drucker, KEI suggest), then developing, attracting, retaining and assigning the best knowledge workers from across the world underpins competitive advantage for firms and nations.

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HRM assumes an increasingly strategic importance to organisations, particularly MNCs, as it can help address the challenges of the knowledge economy.

If you look at high-tech organisations in Silicon Valley, if you look at their business model or their setup, they’re almost like theme parks. For example, Google has soda fountains, basketball courts, because they want to create an attractive environment for employees to stay there. However, this is very sector-specific: what kind of employees are you looking to attract, how can you make the environment attractive to them. There are all sorts of things: physical, geography. The element of geography is also important, for example how a certain location is attractive to international employees. Universities, for example, how attractive they are for international academics. This idea of competitive advantage covers a wide range of elements as we can see: what can we do to attract, retain people. This is a refining process. When we talk about HRM you have to think from its strategic element, how all this links to organisational competitiveness: how the functions relate to the strategic aims of the organisation. What is the IHRM aim of global knowledge management? To provide managerial mechanisms that help integrate the cultures, systems, structures of an organization within which new knowledge can be effectively and efficiently developed, captured and shared (Sparrow, 2006: 115). Sparrow, P. (2006) Global knowledge management and HRM. In Handbook of Research in IHRM. Global knowledge management involves two tasks ● ●

Knowledge sharing and capture Knowledge exploring (or ‘acquisition’ and ‘innovation’) – see Harzing and Pinnington (2018: 309-313)

IHRM and knowledge sharing and capture Three key elements influencing knowledge sharing and capture between units in an MNC: 1. Disseminative capacity (e.g. technical skills, interpersonal skills, unit competition, trust, social status) 2. Absorptive capacity (e.g. cultural distance, costs of absorbing, affirmation and attribution biases)

3. Relationship between the two units and their capacities (e.g. strength of weak ties, density of connections) The 3 themes that we are looking at here within the context of MNCs are: the ability of looking at how we connect in relation to the technical skills, relationships with people, the idea of social engagement; the second point is about the idea of how we can navigate through culture differences, which is a critical aspect when we look at MNCs because, in effect, workforces these companies are made up of people from different cultural backgrounds and it is this idea of how do create an integrated response that you can harmonize those differences to create a working environment that can maximise the way in whic...