Knowledge Management and Creative HRM

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1 Knowledge Management and Creative HRM Professor Ingi Runar Edvardsson University of Akureyri, Iceland Occasional Paper 14 Department of Human Resource Management University of Strathclyde 2003

2 Knowledge Management and Creative HRM Introduction Knowledge management (KM) is about developing, sharing and applying knowledge within the organization to gain and sustain a competitive advantage (Petersen and Poulfelt 2002). How, then, is human resource management (HRM) related to knowledge management? Scholars have argued recently that knowledge is dependent on people and that HRM issues, such as recruitment and selection, education and development, performance management, pay and reward, as well as the creation of a learning culture are vital for managing knowledge within firms (Evans 2003; Carter and Scarbrough 2001; Currie and Kerrin 2003; Hunter et al 2002; Robertson and Hammersley 2000). Stephen Little, Paul Quintas and Tim Ray go as far as to trace the origin of KM to changes in HRM practices: One of the key factors in the growth of interest in knowledge management in the 1990s was the rediscovery that employees have skills and knowledge that are not available to (or captured by) the organization. It is perhaps no coincidence that this rediscovery of the central importance of people as possessors of knowledge vital to the organization followed an intense period of corporate downsizing, outsourcing and staff redundancies in the West in the 1980s (2002: 299). The aim of this paper is, first, to analyse which impact HRM practices, such as strategy, selection and hiring, training, performance management, and remuneration have on the creation and distribution of knowledge within firms. Second, the paper attempts to assess whe ther or not knowledge management requires a particular human resource strategy. This paper is a work in progress based on a literature review. However, at the end of the paper a synthesis of previous debate is presented to enrich the theoretical debates. Knowledge Management The popularity of KM has increased rapidly, especially after 1996, and it has become a central topic of management philosophy and a management tool. This popularity is reflected in the growing number of articles and books on the topic. In 1995 there were 45 articles about knowledge management in the ABI/Information database, 158 in 1998, and in 2002 the number has increased to 835 (Edvardsson, 2003; Petersen and Poulfelt 2002). Specific journals have even been established. In 1997, the Journal of Knowledge Management and Knowledge and Process Management were introduced, and the Journal of Intellectual Capital was introduced in 2000 (Petersen and Poulfelt 2002). Many organisations have also introduced knowledge management programmes. A recent KPMG survey of 423 leading European and American companies found that 68 per cent of respondents were undertaking some kind of KM imitative (KPMG 2000). Another recent UK survey found that 64 per cent of the responding firms had introduced KM and 24 per cent were at the introduction stage (Moffett et al. 2003). 1

3 Scarbrough and Swan (2001) argue that the rise and growth of KM is one of the managerial responses to the empirical trends associated with globalisation and postindustrialism. These trends include the growth of knowledge worker occupations, and technological advances created by ICT. In organisational terms, they argue, this new era is characterised by flatter structures, debureaucratisation and virtual or networked organisational forms. As already noted Little, Quintas and Ray (2002) point out that outsourcing and staff redundancies made organisations vulnerable regarding the knowledge of core processes. Kluge et al. (2001) ague that the value of knowledge tends to perish quickly over time and that companies need to speed up innovation and enhance creativity and learning. Finally, Daft (2001) stresses the shift in the environment and markets of organisations. Ever more organisations have been transformed recently due to the shift from stable to unstable environments. Accordingly, the uncertainty of the business has escalated, with more external elements to consider and frequent, unpredictable changes. A growing number of organisations have adopted team working, organic structures and knowledge-centric cultures as a consequence. There is no agreed definition of KM, even among practitioners. One reason for this lack of agreement stems from the fact that people working in the KM field come from a wide range of disciplines, such as psychology, ma nagement science, organizational science, sociology, strategy, production engineering and so on. Most definitions are, however, similar on one point as they take a very practical approach to knowledge, i.e. how knowledge can contribute to organisational effectiveness (Hlupic et al. 2002). In most cases the term is used loosely to refer to a broad collection of organizational practices and approaches related to generating, capturing, disseminating knowledge relevant to the organisation s business (World Bank 1998). Moreover, there is also a lack of consensus on knowledge itself. Some see knowledge as a commodity like any other that can be stored and made independent of time and place, while others see knowledge as social in nature and very dependent on context. Of particular importance is the need to separate the concepts of data, information, tacit knowledge and explicit knowledge (Daft 2001; Hunter et al. 2002). Data can be viewed either as factual, raw material or as signals with no meaning. Information is data related to other data, has meaning and is refined into structured or functional forms within a system for example, client database or directories. The most fundamental and common classification of organisational knowledge is along the explicit-tacit dimension. In this classification, explicit knowledge is considered to be formal and objective, and can be expressed unambiguously in words, numbers and specifications. Hence, it can be transferred via formal and systematic methods in the form of official statements, rules and procedures and so is easy to codify. Tacit knowledge, by contrast, is subjective, situational and intimately tied to the knower s experience. Thus, it is difficult to formalise, document and communicate to others. Insights, intuition, beliefs, personal skills and craft and using rule-of-thumb to solve a complex problem are examples of tacit knowledge (Daft 2001; Hunter et al. 2002; Chua 2002). These two categories are closely interlinked so a bipolar map is difficult to draw in practice. To understand completely a written document (explicit knowledge) often requires a great deal of experience (tacit knowledge): A sophisticated recipe is meaningless to someone who has newer stood in a kitchen, and legal text can be all but incomprehensible without some legal training (Kluge 2001:10) for example. 2

4 Given the different nature of explicit and tacit knowledge the knowledge management process varies for the two types of knowledge (see Figure 1). Lynn Markus (2001) sets out to improve the use of ICT in knowledge management, and in particular in knowledge re-use. Her attempts are therefore entirely of explicit knowledge character. She takes knowledge creation (as in research or new product development) for granted, but divides the knowledge ma nagement process into the following stages: capturing or documenting knowledge, packaging knowledge, distributing knowledge (providing people with access to it) and reusing knowledge. Figure 1: Explicit and tacit knowledge management processes Explicit knowledge Knowledge creation Capturing knowledge Packaging knowledge Distributing knowledge Using knowledge e Tacit knowledge Knowledge creation Distributing knowledge Using knowledge Source: Based on Lynn Markus (2002) and Daft (2001) Capturing or documenting knowledge can occur in at least four ways, according to Lynn Marcus. First, documenting can be a passive by-product of the work process of virtual teams or communities of practices, who automatically generate archives of their informal electronic communications that can be searched later. Second, it can occur within a structure such as that provided by facilitators using brainstorming techniques, perhaps mediated by the use of electronic meeting systems. Third, documenting can involve creating structured records as part of a deliberate, beforethe-fact knowledge re-use strategy. Finally, it can involve a deliberate, after-the-fact strategy for later re-use, such as learning histories, expert help files or the creation of a data warehouse. Packaging knowledge is the process of culling, cleaning and polishing, structuring, formatting or indexing documents against a classification scheme. Lynn Markus argues that knowledge distribution can be passive as sending mass mail, newsletters, or establishing a notice board. An active distribution of knowledge involves After Action Reviews, selective knowledge pushing and specialised conferences. In the end, using knowledge is divided by Lynn Markus into recall, i.e. that information has been restored, in what location, and under which classification, and recognition (that the information meets the user s needs, and actually applying the knowledge). McAdam and Reid (2001) give a different version of knowledge use. According to them, the benefit of KM is to produce commercial value for the customer, increasing 3

5 innovation, and for employees knowledge management can mean increased autonomy and intrinsic benefit of increased learning. The tacit knowledge management process has fewer parts than the explicit one. Although the knowledge creation process is similar in both cases, the main differences lie in the distribution of knowledge. Distribution of tacit knowledge has been most successfully achieved by apprenticeship, communities of practices, dialogue, meetings, informal talks, conferences, lectures and mentorship. The use of knowledge is also similar to that of the explicit one interpreted by McAdam and Reid. The solid arrows in Figure 1 show the primary flow direction, while the broken arrows show the more recursive flows. The recursive arrows show that KM is not a simple sequential process. Thus it is likely that in the distribution phase some problems in the packaging stage might be discovered, leading to changes in the packaging of knowledge. Similarly, in the knowledge use stage it is often revealed that a certain type of knowledge is not available or that specific knowledge is outmoded. More often than not, that would mean that new knowle dge has to be developed (knowledge creation). Probably no company starts at square one, as it already has knowledge that is waiting to be distributed and used. In the early stages of KM, the literature was heavily biased towards technological solutions and lacked any deeper analysis of knowledge. A literature review of KM themes of articles in ABI/Inform database in 1998 revealed that approximately 70 per cent of all themes discussed were related to information technology or information systems (Scarbrough and Swan 2001). Moreover, the KM strategies adopted by firms are predominantly technical in nature. Thus Moffett. (2003) found that 43 per cent of UK firms had adopted a technical strategy towards KM, 27 per cent of firms had no strategy at all, 14 per cent had cultural strategy (stressing organisational structure, strategy, culture and employee emancipation), and only three per cent had a mixture of technical and cultural strategy. In a similar manner, the KPMG Consulting Company came to the following conclusion: The finding of this report confirms that knowledge management is an accepted part of the business agenda... However, the full benefits of KM are being missed and organizations are failing to tackle KM s real challenges. In particular, they are blind to the employee considerations and many still see knowledge management in purely technical terms. As a result, employees complain of information overload and of policies that fail to reward them for driving KM initiatives for instance, by sharing and maintaining knowledge. Organizations are failing to grasp the fundamental changes to their day-to-day operations and culture that successful KM implementation requires. (2000: 24) Although KM did originally concentrate on ICT-issues to codify explicit knowledge in databases for re-use managers soon faced knowledge management problems. These problems included encouraging employees to use existing knowledge stored in databases instead of reinventing the wheel. Scarbrough (2003) describes a global bank, which invented KM in 1996 because a major client left the bank because they felt they were not getting an integrated service across countries. Also, the feeling among the bank s top management was that resources were being wasted because different units and departments failed to learn from one another and were therefore 4

6 continuously reinventing the wheel. Many managers faced the problem that employees did not use the million dollar ICT-systems, but relied on the old personal networks to receive relevant information. Furthermore, for a knowledge worker it tends to be a challenge to find a new solution to a problem, but from a company s perspective that is a waste of time if a good solution is already available. Also, knowledge sharing within organisations is an issue. Hoarding knowledge is common for various reasons, such as power relations, property rights over who owns the knowledge and job insecurity. A good example of the latter case is a middle manager fearing about his job in the future quoted in Currie and Kerrin (2003:1035): The experience I have built up over the years is knowledge the organization needs. They have to keep me if they want to benefit from my years of experience. They can t replace me with a young kid and I m certainly not going to help them do so by giving away to young kid what I have learned through my years of experience. Finally, there often occur problems in the knowledge creation, or innovation process, where general structure and culture of the organisation seem quite essential. So far, I have given a brief summary of KM, and pointed out some problems in the KM process. The following HRM practices have been found essential for knowledge management (Evans 2003; Scarbrough 2003): KM and HRM strategy; recruitment and selection; training and development; performance management; reward and recognition; career management, and creating a learning environment. Human Resource Management Human Resource Management gained much popularity in the 1980s. Beardwell (2001) points out in a summary of the field that there exists considerable controversy as to the origin, characteristics and philosophy of HRM, and its capacity to influence the nature of the employment relationship. Moreover, the debate surrounding HRM can be characterised by four predominant approaches (Beardwell 2001:9): That HRM is no more than a renaming of basic personnel functions, which does little that is different from the traditional practice of personnel management. That HRM represents a fusion of personnel management and industrial relations that is managerially focused and derives from a managerial agenda. That HRM represents a resource-based conception of the employment relationship, some elements of which incorporate a developmental role for the individual employee and some elements of cost minimisation. That HRM can be viewed as part of the strategic managerial function in the development of business policy, in which it plays both a determining and contributory role. Torrington and Hall (1998) interpret HRM by comparing it with traditional personnel management. They argue that personnel management is workforce-centred, directed 5

7 mainly at employees. This approach includes finding and training them, arranging for them to be paid, explaining management s expectations, justifying management s actions and satisfying employee s work-related needs. The people who work in the organisation are the starting point, and they are a resource that is relatively inflexible in comparison with other resources, such as cash and mate rials. HRM, on the other hand, is resource-centred, according to Torrington and Hall. HRM is directed mainly at management needs for human resources (not necessary employees) to be provided and deployed. Demand rather than supply is the focus of activity. It is totally identified with management interests, being a general management activity, and is relatively distant from the workforce as whole, as employee interests can be enhanced only through effective overall management. Finally, it is argued by Torrington and Hall (1998) that both personnel management and HRM can be present in one organisation, sometimes in one person. This duality can cause tension and ambiguity, but in the long run there is a tendency for HRM duality to increase at the expense of personnel management. Independent of the similarities or differences between HRM and personnel management, the core business of the HR function is to develop the employees in accordance to the business strategy, select and hire people, train and develop the staff, evaluate their performance, reward them, and create a culture of learning. The next section turns to these issues, and focus upon their role in enhancing knowledge management. KM and HRM strategies Beardwell (2001) points out that strategy has been one of the cornerstones of the HRM debate since the 1980s. The extent to which HRM has come to play a role in the direction and planning of organisations has been a persistent theme not only among academics but also among practitioners in the field. Beardwell also mentions that there are two rival approaches in strategic HRM. On the one hand is the matching model emphasising the necessity of tight fit between HR strategy and business strategy. On the other hand is the more flexible Harvard model. Tha t model recognises that there are a variety of stakeholders in the organisation, such as shareholders, various groups of employees, the government and the community. The creation of HRM strategies are bound to recognise these interests and fuse them as much as possible into the human resource strategy and ultimately the business strategy. 1 Schuler and Jackson (2003) link competitive strategies with HRM practices in an interesting way. They make use of Porter s competitive advantage, as the essence of competitive strategy (a prescriptive approach). Emerging from his discussion is that there are three competitive strategies that firms can use to gain competitive advantage. The first, innovative strategy, is used to develop products or services different from those of competitors. Enhancing product and/or service quality is the primary focus of the second strategy, quality enhancement strategy, while with the final one, cost reduction strategy, firms typically try to gain competitive advantage by being the lowest-cost producer (Schuler and Jackson 2003). The three strategies require people with different knowledge, abilities and technical skills, or role behaviours, as Schuler and Jackson term it. When deciding what human 6

8 resource practices to use to link with which competitive strategy, organizations can choose from five human resource practice menus. According to Schuler and Jackson (2003) these aspects are planning, staffing, appraising, compensating, and training and development choices. Each dimension runs along a continuum. Planning choices can either be formal or informal, short term or long term, based on job simplification or job enrichment and so on. Schuler and Jackson argue that firms pursuing the innovative strategy are likely to have the following HRM characteristics: (1) jobs that require close interaction and coordination among groups of individuals, (2) performance appraisals that are more likely to reflect long-term and group-based achievements, (3) jobs that allow employees to develop skills that can be used in other positions in the firm, (4) compensation systems that emphasize internal equity rather than external or marketbased equity, (5) pay rates that tend to be low, but that allow employees to be stockholders and have more freedom to choose the mix of components (salary, bonus, stock options) that make up their pay package and (6) broad career paths to reinforce the development of a broad range of skills. These practices facilitate co-operative, interdependent behaviour that is oriented towards the longer term, and foster exchange of ideas and risk taking (Schuler and Jackson 2003). The key HRM practices of firms that pursue quality-enhancement strategy are likely to have (1) relatively fixed and explicit job descriptions, (2) high levels of employee participation in decisions relevant to immediate work conditions and the job itself, (3) a mix of individual and group criteria for performance appraisal that is mostly shortterm and results orientated, (4) relatively egalitarian treatment of employees and some guarantees of employment security and (5) extensive and continuous training and development of employees. These practices facilitate quality enhancement by helping to ensure highly reliable behaviour from individuals who can identify with the goals of the organization and, when necessary, be flexible and adaptable to new job assignments and technological changes. In attempting to gain competitive advantage by pursuing a strategy of cost reduction, key human resource practice choices include, according to Schuler and Jackson (2003): (1) relatively fixed (stable) and explicit job descriptions that allow little room for ambiguity, (2) narrowly designed jobs and narrowly defined career paths that encourage specialization, expertise, and efficiency, (3) short-term, result-orientated performance appraisals, (4) close monitoring of market pay levels for use in making compensation decisions and (5) minimal levels of employees training and development. These practices maximize efficiency by providing means for management to monitor and control closely the activities of employees. 7

9 Schuler and Jackson (2003:318) summarise the three HRM practices thus: Thus, the innovation strategy has significant implications for human resource management. Rather than emphasizing managing people so that they work harder (cost-reduction strategy) or smarter (quality strategy) on the same products or services, the innovation strategy requires people to work differently. This, then, is the necessary ingredient. Finally, Schuler and Jackson argue that in reality firms combine strategies, such as low cost and quality, or quality and innovation. These combinations might result in the challenge of stimulating and rewarding different role behaviours while at the same time trying to manage the conflicts and tensions that may arise as a consequence. The main features of Schuler and Jackson s link between strategy and HRM practices are presented in Figure 2. Figure 2: The link between strategy and HRM practices Skill requirements Broad Creative HRM Smart HRM Strategy Innovation Effectiveness Hard HRM Narrow Hansen et al. (1999) argue that there are basically two strategies for managing knowledge. They term these strategies codification and personalization. The former refers to the codification of knowledge and its storage in databases where it can be accessed and used readily by anyone in the company. Such organisations invest heavily in ICT for projects like intra net, data warehousing and data mining, knowledge mapping (identifying where the knowledge is located in the firm), and electronic libraries. This increases effectiveness and growth (Hansen et al. 1999:110): The reuse of knowledge saves work, reduces communications costs, and allows a company to take on more projects. It is thus closely related to exploitative learning, which tends to refine existin g capabilities and technologies, forcing through standardization and routinization, and is risk-averse (Clegg and Clarke 1999). 8

10 Personalization refers to personal development of knowledge and it is shared mainly through direct person-to-person contacts. Dialogues, learning histories, and communities of practise are among the techniques that have to be used in order to facilitate tacit knowledge sharing. It is based on the logic of expert economics, that is, it is used primarily to solve unique problems, w here rich, tacit personal knowledge is needed, such as in strategy consulting. Personalization and explorative learning are closely related, where explorative learning is associated with complex search, basic research, innovation, risk-taking and more relaxed controls. The stress is on flexibility, investment in learning and the creation of new capabilities (Clegg and Clarke 1999). The codification and personalization strategies help to frame the management practices of the organization as a whole as outlined in Table 1. Table 1: Knowledge Management Strategies General Strategy Use of ICT Human Resources: Recruitment and Selection Training and Development Rewards Systems Codification Strategy Develop ICT system that codifies, stores, disseminates and allows reuse of knowledge Invest heavily in ICT Hire new college graduates who are well-suited to the re-use of knowledge and the implementation of solutions Train people in groups and through computer-based distance learning Reward people for using and contributing to document databases Personalization Strategy Develop networks for linking people so that tacit knowledge can be shared Invest moderately in ICT Hire MBAs who like problem - solving and can tolerate ambiguity Train people through on-to-one mentoring Reward people for directly sharing knowledge with others As Table 1 indicates, Hansen et al. s study makes several useful contributions to HRM. First, it links both KM and HRM to the competitive strategy of the firm, that is, it is not knowledge in itself but the way it is applied to strategic objectives that is the critical ingredient of competitiveness. Second, this account stresses the need for best fit between HRM practices such as reward systems and an organization s approach to manage knowledge work. According to Hansen et al. (1999:113) the relevant fit is as follows: The two knowledge management strategies call for different incentive systems. In the codification model, managers need to develop a system that encourages people to write down what they know and to get those documents into the electronic repository In fact, the level and quality of employees contributions to the document database should be a part of their annual performance reviews Incentives to stimulate knowledge sharing should be very different at companies that are following the personalization approach. Managers need to reward people for sharing knowledge directly with other people. 9

11 Hansen et al. warn against mixing strategies but instead suggest using one strategy predominantly and use the second strategy to support the first: We think of this as an split: 80 per cent of their knowledge sharing follows one strategy, 20 per cent the other (1999:112). Other studies however have found that a mix of strategies were usually the case in highly successful knowledge management companies (Kluge et al. 2001). For example, as Davenport (1998:54) states, successful knowledge projects usually address knowledge transfer through various channels, recogniz ing that each adds value in a different way and that their synergy enhances use. Recruitment and selection Given that knowledge management is often adopted by organizations in complex, unpredictable environments, traditional selecting and recruitment practices have more often than not to be modified. Thus, Scarbrough (2003) points out that in innovative organisations the selection of individuals with both appropriate skills and appropriate attitudes has been identified as crucial to the project team s ability to integrate knowledge from diverse sources. He stresses that conventional approaches to selection may need to be revised in the light of the unpredictable knowledge flows involved in innovation projects. In such settings, it may simply be too difficult to specify the requisite knowledge and expertise in advance. This view is closely related to the social process model of recruitment and selection deriving from social psychology. Its primary concern is to analyse the often immediate social context assessors use to make judgements and to show how those judgements are not the outcome of objective, quantifiable processes but the result of more complex social judgements. The main assumptions of this model are: that people change constantly in the course of their careers in firms; that subjective self-perceptions are critical to people s work motivation and performance; that self-perception are influenced by assessment selection procedures; and that modern jobs tend to involve interaction, negotiation and mutual influence, often taken place in multi-skilled, flexible, selfdirected work teams (Iles, 1999). Currie and Kerrin (2003) argue that traditional recruitment and selection practices can even block knowledge sharing between groups or departments in firms organised according the functional principle. In their study of a pharma ceutical company, they found that assessment centres through which graduates were selected were functionally focused, with sales assessment centres and marketing assessment centres being run separately. This strengthens the sub-cultures of functions and made knowledge sharing between functions very difficult. Currie and Kerrin emphasis that in order to enhance knowledge sharing employees with an appreciation of others perspectives have to be preferred, and they encourage the use of lateral career movement by employees in order to develop the necessary appreciation of others perspectives. Other studies highlight the importance of a fit between new recruits and the organisation s knowledge culture. These studies are, therefore, related to the personorganisational fit literature within HRM, stressing a fit between organisational culture and hiring of suitable personality, as well as the socialisation of individuals into the culture of the firm (see Kristof 1996; Judge and Cable 1997). Swart and Nicholas Kinnie (2003) description of recruitment in a software company in a niche market. The company had extremely strict selection criteria, which served to strengthen 10

12 knowledge integration. The most important element in the recruitment process was the company s culture, not technical ability. A senior software engineer was responsible for recruitment. He usually used his wide networks within the industry to identify candidates. At this stage, it was normally taken for granted that the employee would have adequate technical tacit knowledge, as technically competent employees would be well-known within their industry, and only excellent software engineers were invited for an interview. Swart and Kinnie continue by saying (2003:67): The senior software engineer and some of the directors then conducted interviews, which were very informal and took the form of a communication of ideas or solutions to a particular software problem. The ability to generate innovative thought and then to communicate these ideas was important criteria in the selection process. Recruits needed to show how they would share their innovative ideas and cutting-edge know-how within a project team. This formed the basis on which the knowledge network worked (as one senior software engineer referred to it). Similarly, Robertson and Hammersley (2000) describe the selection process in a consulting firm where candidates were screened out in two interviews. These interviews involved several consultants from a number of disciplines as well as the HR manager. The overriding importance was on the candidate s ability to fit in to the firm s distinctive way of working, which involved willingness and ability to work in groups and share knowledge. Moreover, psychometric tests were used but little weight was placed on their results. 2 Usually, the majority of the candidates were rejected. On this finding Robertson and Hammersley write (2000:246):...atypical approaches to recruitment and selection have also be noted by other researchers in KIFS... highlighting what Keegan terms the mis-fit between these practices and those within mainstream HRM literature. Finally, Evans (2003) argues for revising the interview and selection processes so that they gather evidence about individuals knowledge-building behaviours. New questions need to be asked, such as: How well networked is the individual? What role does he/she play in the networks they belong to? What types of communities of practice do they belong to? How have they helped develop their colleagues? How do they keep their own knowledge up-to-date? Training and development Robertson and Hammesley (2000) point out that continuous professional development is considered to be essential to professional and knowledge workers. In order to stay at the forefront of their professional fields they must be constantly aware of developments within their specific disciplines and professions and they need to participate in activities that offer opportunities to further their own professional development. Many researchers on knowledge management take this as given, and do not devote considerable attention to it. Hansen et al. (1999) argue, as already noted, that codification and personalisation strategies require that organisations hire different kinds of people and train them differently. Codification firms tend to hire undergraduates and train them in groups to be implementers, that is to develop and implement change programs and information systems. Personalisation firms hire MBA graduates to be inventors, that is, to use their analytical and creative skills on 11

13 unique business problems. Once on board, their most important training comes from working with experienced consultants who act as mentors. Performance management Performance management identifies who or what delivers the critical performance with respect to the business strategy and objectives, and ensures that performance is successfully carried out (Roberts 2001). Evans (2003) points out that on the basis of what gets measured normally gets done it is important that firms consider the knowledge component in their performance management systems. Moreover, she recommends that a balance scorecard approach be adopted if employees are to realise that the firm is taking knowledge management seriously. It has already been noted that Schuler and Jackson (2003) argue that the general strategy of organisations tend to shape HRM practices. They noted vast differences between, among other things, performance management in organisations stressing innovation on one hand, and effectiveness on the other. In the former the performance management system tends to focus on long-term and group-based achievements, while in the latter, performance appraisals tend to be short-term and result-oriented. In their study of a pharmaceutical company Currie and Kerrin (2003) found out that the performance management system inhibited knowledge sharing, as much of the conflict between different functions was due to the divergent objectives set out for employees in the performance agreements. For example, objectives were volume focused for sales employees and focused upon brand profitability for marketing employees. The objectives were, moreover, short-term and mostly measurable in nature. Any long-term considerations, such as development of learning capability was therefore very marginal, and considered the merely nice to do (p. 1037). The opposite was found in a software company. Swart and Kinnie (2003) argue that a long-term developmental focus on performance management was one of the central factors in integrating knowledge within the organisation. The company had a complex performance management process, which evolved through the suggestions and practice of the software engineers. In the first stage, project performance reviews, conducted by the project manager focused on project efficiency and the employee s technical ability within the project. Here, three forms of review were implemented: a self-appraisal focusing on jointly set objectives, project performance, technical ability, self-management, team contribution and customer satisfaction; a peer review of the same dimensions; and a management review of the employee. A direct link was established between project performance reviews and annual increases. In the second stage, performance appraisal was conducted bi-annually by a mentor, focusing on employee development and spanned project boundaries, thereby ensuring that practice was shared throughout the organisation. The mentor collated all project performance reviews, completed a protégé appraisal on overall performance areas and conducted a performance discussion. Performance management needs to consider, according to Evans (2003, 171), the different ways in which in dividuals contribute knowledge. Managers need to consider: 12

14 Knowledge acquisition What knowledge has the individual brought into the organisation? Knowledge sharing How has the individual applied their knowledge to help others to develop? Knowledge re-use How frequently has the individual re-used existing knowledge and what has been the outcome? Knowledge development Has the individual actively developed his/her own knowledge and skills? How well has the individual applied his/her learning? Reward and recognition Reward systems indicate what the organisation values and shapes individuals behaviour. Evans (2003) argues that there are mixed views as to whether organisations need to introduce separate rewards to encourage knowledge building and sharing. On the one hand, there is no need for separate rewards in theory, if organisations have introduced a competency framework that includes knowledge building and sharing behaviours, and which is linked to the performance management system. On the other hand, another school of thought argues that rewards for knowledge sharing and reuse should be more immediate and be of a public nature, as this type of behaviour is important to the organisation. Zárraga and Bonache (2003) write that traditional reward systems reward those who produce rather than those who share. Therefore, if an individual is rewarded (by promotion, for example) for what he/she knows and the others do not know, he/she is being assessed as doing his/her job better than his/her colleagues, and sharing and disseminating has a high cost to the individual. Knowledge sharing rewards is therefore about lowering the cost of sharing or, similarly, increasing the benefit associated with that type of behaviour. Furthermore, they argue that group incentives, promotion systems that encourage individuals to be more collaborative and 360 appraisal systems are practices that help create a suitable climate for the transfer and creation of knowledge. Studies on knowledge workers have found that they tend to have high need for autonomy, significant drives for achievement, stronger identity and affiliation with a profession than a company, and a greater sense of self-direction. These characteristics make them likely to resist the authoritarian imposition of views, rules and structures (Depres and Hiltrop 1995; Hertzberg 1997; Horwitz et al. 2003). Accordingly, mixtures of rewards are needed to motivate knowledge workers. These include: equitable salary structures; profit-sharing or equity-based rewards; a variety of employee benefits; flexibility over working time and location, as well as being given credit for significant pieces of work. Also, a reward is needed in those cases were participation in communities of practices is expected of knowledge workers, for their building up and keeping the community alive. Non-financial rewards are also motivating for knowledge workers. For many knowledge workers it is as motivating to have free time to work on knowledge-building projects, going to conferences, or spending time on interesting projects, as monetary rewards (Evans 2003; Depres and Hiltrop 1995). Thus, in their study on the ways in which Singapore companies attract, motivate and retain knowledge workers, Horwitz et al. (2003:34) found that in terms of motivating strategies which may reduce knowledge worker turnover, it appears that 13

15 non-financial strategies may have had a relationship with lower turnover. These included leadership, fulfilling work and participation in key decisions. Career management Currie and Kerrin (2003) observed in their study of a pharmaceutical company that through different job placements during their training period, or more generally through their career, graduates and a limited number of senior staff built up an informal network of contacts that they trusted and who trusted them. This facilitated the sharing of knowledge. Others have also noted how career systems are important in shaping the flow of employees over time and the way that this interacts with the acquisition and exchange of knowledge (Evans 2003; Scarbrough 2003; Swart and Kinnie 2003). Creating a learning environment Evans (2003) stresses the role of HR managers in helping their organisation to develop an organisational culture that supports knowledge building and sharing. The steps necessary in such transformation process include: agreeing strategic priorities and areas for change, helping demystify knowledge management by linking knowledge management activity to established business processes and HRM practices, and engaging others in the knowledge management dialogue. Specifically HR can add value by developing a knowledge awareness programme as a separate development activity, ensuring that the right leadership and receiving the right developmental support. Most importantly, HR has to build a culture in which learning from day-to-day practice is valued, encouraged and supported by providing time, public and private spaces for learning, providing learning resources (information centres, special learning laboratories, virtual university), and reward sharers and learners. Conclusion and Implications This paper has concentrated on how HRM practices can encourage knowledge sharing and re-use. Attention has been given to strategy, selection and recruitment processes, training, reward systems, performance management, career management and the creation of learning environments. Table 2 summarises some of the many possible relationships between HRM and KM. Most importantly, the table illustrates that management practices do not operate alone, divorced from the rest of the organisation. Practices are, instead, interrelated and require a degree of compatibility and careful coordination. 14

16 Table 2: Exploitative and explorative learning strategies towards knowledge management Exploitative learning strategy Explorative learning Strategy General strategy Effectiveness, low cost Innovation, new capabilities KM Strategy Codification of knowledge Personalisation of knowledge Focus Short-, medium-term Long-term HRM practices: Psychometric testing, Social process, cultural fit of Recruitment descriptions of knowledge share and networking Reward Mostly monetary, varied Non-monetary and monetary, group incentives, collaborative rewards Performance Hard objectives, result- Developmental objectives Management oriented, short-term, Balance-scorecard, 360º, functionally specific goals group-orientation, long-term Training At start, then continues, Mentorship, on-going, broad skills specific skills Career Management Individual advancement Integrated part of organisation knowledge development and transfer Desired Behavioural Documenting knowledge, Risk-taking, exchange of Outcomes low risk-taking, specialisation ideas, co-operation, long-term effectiveness, short-term commitment The KM and HRM strategies presented previously have many things in common. Thus the codification strategy and low -cost strategy both focus on effectiveness, lowering cost and standardisation. That is the essence of exploitative learning. Similarly, personalisation strategy and innovation strategy centre on new capabilities, innovation and new ways of working. This is at the heart of explorative learning. The general strategy has an overall impact on HRM policy as stressed in the table. It is not necessary to mention each HRM practice in the table, but interestingly, exploitative learning strategy fosters the following behavioural outcomes: people document their knowledge on databases, low risk-taking is preferred, there is a specialisation of tasks, effectiveness and short -term commitment between employers and employees. This can be termed effective HRM. In essence, the codification of a knowledge strategy is an attempt to mechanise knowledge. The explorative learning strategy, on the other hand, encourages the following behavioural outcomes: risktaking, co-operation, exchange of ideas and long-term commitment. I, therefore, term it as creative HRM. It is clear then, that there are at least two strategies associated with knowledge management. As with all other strategies, these can be mixed within firms, such as an explorative learning strategy being dominant within R&D, while exploitative learning strategy being common within production departments. However, as Hansen et al. (1999) emphasises, the general investment in ICT, the hiring of particular staff, their 15

17 training, as well as job design, usually mean that one strategy becomes dominant within firms. Hansen et al. also argue that firms that offer standardised and mature products and services tend to choose the exploitative strategy, while firms offering customised and innovative products tend to choose explorative strategy. Given globalisation, rapid technological changes, shifting markets, and ever more complex organisational environments, the explorative learning strategy and creative HRM will probable be utilised by a ever growing number of organisations in the near future. However, it is a paradox that many managers still rely on the e xploitative strategy due to the prevalent ideology of work standardisation and extensive division of labour (Warhurst 2002). Knowledge management and the role of human resource management in knowledge management are still in their infancy. Most of the research conducted so far is based on case studies and interviews, so generalisations of results are problematic. Former studies reveal that HRM strategies may differ depending on mediating variables such as industry type, ownership structure (multinational domestic) and cross-cultural factors (Horwitz et al. 2003). Future research would thus benefit from longitudinal studies, cross-national comparisons, as well as industrial sectors differences. Also, basic concepts of the debate have to be defined and theor ies developed. Future research should address these shortcomings and in this paper I have attempted to push the theoretical framework further ahead. 16

18 References Beardwell, I. (2001) An introduction to human resource management: strategy, style or outcome in I. Beardwell and L. Holen (eds.) In Human Resource Management: A contempory approach, Harlow: Prentice Hall. Carter, G. and Scarbrough, H. (2001) Towards a second generation of KM? The people management challenge, Education and Training, 43:4/5, Chua, A. (2002) Taxonomy of organisational knowledge, Singapore Management Review, 24:2, Clegg, S. and Clarke, T. (1999). Intelligent Organizations? in S. R. Clegg, E. Ibarra- Colado and L. Bueono-Rodriquez (eds.) Global Management: Universal Theories and Local Realities, London: Sage. Currie, G. and Kerrin, M. (2003) Human resource management and knowledge management: enhancing knowledge sharing in a pharmaceutical company, International Journal of Human Resource Management, 14:6, Daft, R.F. (2001) Organization Theory and Design, Cincinnati: South-Western College Publishing. Davenport, T.H., De Long, D.W. and Beer, M.C. (1998) Successful Knowledge Management Projects, MIT Sloan Management Review, 39:2, Despres, C. and Hiltrop, J.M. (1995) Human Resource Managment in the Knowledge Age: Current practice and perspectives on the future, Employee Relations, 17:1, Edvardsson, I.R. (2003) Að miðla og nýta þekkingu. Hugleiðingar um þekkingarstjórnun. Unpublished mimeo, University of Akureyri. Evans, C. (2003). Managing for Knowledge: HR s strategic role, Amsterdam: Butterworth-Heinemann. Hansen, M.T., Nohria, N. and Tierney, T. (1999) What s your strategy for managing knowlegde? Harvard Business Review, 77, Herzberg, F. (1997) The Motivation Hygiene Theory in D.S. Pugh (ed.) Organization Theory. Selected Readings, London: Penguin Books. Hlupic, V., Pouloudi, A. and Rzevski, G. (2002) Towards an Integrated Approach to Knowledge Management: Hard, Soft and Abstract Issues, Knowledge and Process Management, 9:2, Horowitz, F.M., Heng, C.T., and Quazi, H.A. (2003) Finders, keepers? Attracting, motivating and retaining knowledge workers, Human Resource Management Journal, 13:4, Hunter, L., Beaumont, P. and Lee, M. (2002) Knowledge management practice in Scottish law firms, Human Resource Management Journal, 12:2, Iles, P. (1999) Managing Staff Selection and Assessment, Buckingham: Open University Press. Judge, T.A. and Cable, D.A. (1997) Applicant Personality, Organizational Culture, and Organizational Attraction, Personnel Psychology, 50, Kluge, J., Wolfram, S. and Licht, T. (2001) Knowledge Uplugged. The McKinsey & Company global survey on knowledge management. Houndsmills: Palgrave. KPMG Consulting (2000) Knowledge Management Research Report 2000, Annapolis/London. Kristof, A.L. (1996) Person-Organization Fit: An integrative review of its conceptualisations, measurement, and implications, Personnel Psychology, 49,

19 Little, S., Ouintas, P. and Ray, T. (2002) PART III Knowledge, Innovation and Human Resources in S. Little, P. Ouintas and T. Ray (eds.) Managing Knowledge: An Essestial Reader, London: The Open University in association with Sage Publications. Lynne Markus, M. (2001) Toward a Theory of Knowledge Reuse: Types of Knowledge Reuse Situations and Factors in Reuse Success, Journal of Management Information Systems, 18:1, McAdam, R. and Reid, R. (2001) SME and large organisation perception of knowledge management: comparisons and contrasts, Journal of Knowledge Managment, 3:3, Moffett, S., McAdam, R., Parkinson, S. (2003) An empirical analysis of knowledge management applications, Journal of Knowledge Management, 7:3, Mount, M.K., Barrick, M.R. and Steward, G.L. (1998) Five -Factor Model of Personality and Performance in Jobs Involving Interpersonal Interactions, Human Performance, 11, Petersen, N.J. and Poulfelt, F. (2002) Knowlegde Management in Action: A Study of Knowledge Management in Management Consultancies, Working Paper , Kaupmannahöfn: Copenhagen Business School. Roberts, I. (2001) Reward and performance management in I. Beardwell and L. Holen (eds.) Human Resource Management: A contemporary approach, Harlow: Prentice Hall. Robertson, M. and Hammersley, G.O. (2000) Knowledge management practices within a knowledge -intensive firm: the significance of the people management dimension, Journal of European Industrial Training, 24:2/3/4, Scarbrough, H. (2003) Knowledge management, HRM and the innovation process, International Journal of Manpower, 24:5, Scarbrough, H. and Swan, J. (2001) Explaining the diffusion of knowledge management: The role of fashion, British Journal of Management, 12, Schuler, R.S. and Jackson, S. E. (2002) Linking Competitive Strategies with Human Resource Management Practices in S. Little, P. Ouintas and T. Ray (eds.) Managing Knowledge: An Essential Reader, London: The Open University in association with Sage Publications. Steinthorsson, R.S. (2003) Stefnumiðuð stjórnun: Fimm greiningarlíkön. Tímarit um viðskipi og efnahagsmál, 1:1, Swarts, J. and Kinnie, N. (2003) Sharing knowledge in knowledge-intensive firms, Human Resource Management Journal, 13:2, Torrington, D. and Hall, L. (1998) Human Resource Management, London: Prentice Hall. Warhurst, C. (2002) Towards the better job : Scottish work and employment in the knowledge age in G. Hassan and C. Warhurst (eds.) Tomorrow s Scotland, London: Lawrence & Wishart. World Bank (1998) What is knowledge management? A background to the World Development Report. Washington, DC: World Bank. Zárraga, C. and Bonache, J. (2003) Assessing the team environment for knowledge sharing: an empirical analysis, International Journal of Human Resource Management, 17:7,

20 Endnotes 1 This represents the debates within the strategy approach in general. On the one hand there is the prescriptive approach, where the strategy process is seen as a straightforward rational process, where top management can both analyse the business environment and implement the most appropriate strategy within the company. The emergent strategy approach, on the other hand, looks at strategy as a process, and a co-operative activity of employees, customers and top management. Also, it states that the planning stage cannot easily be separated from the implementation stage (Steinthorsson 2003). 2 According to the adherences of psychometric testing (Five Factor Model of Personality), then openness to experience (imaginative, original, unconventional, and independent individuals) would fit quit well to innovative and knowledge sharing organisational culture. Moreover, these qualities could be codified and measured (Judge and Cable 1997; Mount et al. 1998). 19

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