A STRATEGIC ARGUMENT FOR KNOWLEDGE MANAGEMENT Paul S. Chinowsky 1 and Patricia M. Carrillo 2

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1 A STRATEGIC ARGUMENT FOR KNOWLEDGE MANAGEMENT Paul S. Chinowsky 1 and Patricia M. Carrillo 2 ABSTRACT Knowledge management has been on the periphery of AEC company initiatives for nearly a decade. Many AEC organizations understand the benefits of knowledge management and are keen to capitalize on its publicized benefits. However, after years of implementing knowledge management initiatives, it is imperative to critique whether the AEC sector has accrued the anticipated benefits. Anecdotal evidence hints that AEC organizations have not achieved these benefits leading to a loss in confidence in knowledge management. The paper argues for a more strategic approach towards knowledge management. It recognizes that, although many companies have invested in knowledge management, they have been focusing too heavily on tactical activities, rather than adopting a strategic perspective. Adopting a strategic perspective will place knowledge management in a wider organizational context, that of using knowledge management as a stepping stone towards becoming a learning organization. The paper also introduces a case study to illustrate the need for organizations to adopt a strategic approach to improve performance. KEYWORDS: Knowledge management, strategy, performance, learning INTRODUCTION Knowledge management (KM) provides the opportunity to redefine and expand success metrics to address the need for high performance in construction projects. It provides an opportunity to expand the traditional cost, schedule, and quality perspective to include measures that indicate a greater organization impact including strategic and business goals. In this modified perspective, knowledge management is viewed as both a tactical and strategic performance investment. The tactical perspective on knowledge management has been researched extensively both inside and outside the construction domain (Nixon, 2000). As stated repeatedly in these research efforts, knowledge management provides the opportunity for project constituents to access and utilize knowledge in current project scenarios. However, these research efforts also document that knowledge management is achieving limited success in terms of fundamental changes to organization and project processes (Chinowsky and Carrillo, 2007). The reason for this lack of success is varied and individual to each organization. However, an underlying theme that emerges is the lack of appropriate focus for knowledge management. Specifically, it is time to view knowledge management from a strategic performance perspective rather than a reactive, tactical perspective. 1 Associate Professor in the Department of Civil, Environmental, and Architectural Engineering, University of Colorado, USA 2 Professor of Strategic Management in Construction, Department of Civil and Building Engineering, Loughborough University, UK 1

2 In an attempt to change the current focus, this paper will debate the issue in four sections. The first section describes the role of knowledge management in achieving successful projects. The second section looks at the key barriers to implementing knowledge management. The third section looks at strategies for overcoming the knowledge sharing barriers and the final section introduces a case study that exemplifies the need for a strategic approach to knowledge management. KNOWLEDGE MANAGEMENT AND PROJECT SUCCESS As a project-based industry with low profit margins, AEC companies rely heavily on the success and profitability of individual projects. Additionally, there is a growing move towards continuous improvement that dictates that we learn from projects and exploit project knowledge in a smarter manner. For this reason knowledge management has a role to play throughout the project lifecycle. Overview of Knowledge Management in Project Lifecycle Knowledge management consists of a number of sub-processes (Jashapara, 2004). These include creating, acquiring, capturing, sharing and using knowledge (KPMG, 1998). AEC companies have, thus far, focused mainly on sharing existing project knowledge. Various phases in the project lifecycle offer numerous opportunities to share knowledge, both from an interproject as well as intra-project perspective (Kamara et al., 2003). In the UK, the RIBA (Royal Institution of British Architects) Plan of Works divides construction into five mega stages. Table 1 shows these phases, the stages within each phase and knowledge sharing opportunities. Table 1: Knowledge Sharing Opportunities through Project Life Cycle Project Phase Phase Description Example Knowledge Sharing Opportunities Preparation Stage A: Project Appraisal Different functions within the client teams share Stage B: Design Briefing knowledge on user requirements and potential Design Pre Construction Construction Use Stage C: Concept Design Stage D: Design Development Stage E: Technical Design Stage F : Production Information Stage G: Tender documents Stage H: Tender Action Stage J: Mobilization Stage K: Construction to Practical Completion Stage L1: Contract administration during construction Stage L2: Initial occupation services Stage L3: Review project performance constraints to determine feasible outcomes The different disciplines of the design team (e.g. architects, structural and HVAC engineers, urban planners, etc.) share their knowledge to satisfy both legal and clients requirements Different disciplines collaborate to ensure the various drawings are complementary and suitable for tender submission Tremendous scope for sharing lessons learned from other projects and between different trades and professions. Potential for re-use of knowledge on future projects in terms of design, construction and facility management. 2

3 The advent of long-term partnerships (McGeorge and Palmer, 1997), increasing reliance on repeat client business and modern procurement methods such as Public Private Partnerships has also increased the drive to share knowledge and encourage learning throughout the project lifecycle (Carrillo et al., 2006). Impact of KM on Project Success The past decade has seen many AEC companies focus on continuous improvement, both in terms of project and company performance. As a project-based industry, the quest for continuous improvement has focused on delivering more successful projects. This is an area in which KM, learning and innovation is expected to deliver. Knowledge management impacts on a number of project success factors, many of these extend beyond the normal time, cost and quality triangle. Project success now incorporates both hard metrics such as number of accidents, impact on the environment as well as soft metrics which include client satisfaction, employee satisfaction, teamwork and collaboration. The rewards for companies and projects managing their knowledge more effectively results in the dissemination of best practice, locating expertise rapidly - wherever it resides, learning from good and bad experiences, retaining and exploiting both individual and corporate knowledge, responding to clients quickly, reducing re-work, etc (Carrillo et al., 2004)). Effectively, knowledge management draws on the collective expertise of a number of professionals and a body of knowledge, much wider than the immediate project team, to deliver successful projects. Current Use of KM by Companies KM is a problem characterized by large, geographically dispersed teams and hence much research has focused on helping these firms. There is a clear division on the approaches adopted between design firms and engineering contractors. Design firms KM efforts have mainly focused on improving communication and collaboration between their dispersed employees. The main manifestations of this are the use of Communities of Practices to share knowledge on a specific domain. Examples of these are Fluor s 40+ knowledge communities and MWH s three strategic knowledge centers and 120+ knowledge bases. This approach attempts to tap into the global company expertise (tacit knowledge) to provide design solutions. This differs from that adopted by engineering contractors who have mainly focused on reviewing project performance of their project teams, their sub-contractors and their supply chain. Examples of these include the project and stage reviews conducted by PCL Construction, JE Dunn and Taylor Woodrow (UK). This approach attempts to store project knowledge in an explicit format with the intention of creating a database of project histories that would be valuable both for later project stages or indeed future projects. Both of the above approaches rely on an integrated perspective to knowledge sharing. This is a hybrid of the Human Resource perspective (Scarbrough, 1999) and IT perspective (O Leary, 2001). The Human Resource perspective relies on fostering greater communication between employees so that they can share knowledge and discover new knowledge. The IT perspective exploits the use of existing communication technologies to provide a repository for project knowledge in the form of company intranets and, more recently, the use of collaborative tools or project extranets. The integrated perspective attempts to facilitate better communication and collaboration by using existing communication and collaboration tools (Nixon, 2000). This 3

4 perspective mirrors the fact that AEC is very much a people and relationship-oriented industry and dependence on retrieving solutions from IT systems without an understanding of the context (obtained from a human perspective) is not highly regarded. KEY BARRIERS TO KNOWLEDGE EXCHANGE Companies in all sectors recognize that knowledge management competes with other areas for investments. Thus it is important to understand the main barriers and challenges to KM and how KM can be linked to performance. Cultural Challenges The AEC industry has a strong emphasis on project performance and competition between project teams. Hence organizational culture has shifted towards securing the performance of the team, rather than the organization at large. Project teams are therefore busy ensuring that their individual projects succeed, and busy workloads do not offer much opportunity (or desire) to share their experiences with the rest of the organization. Narrow Organizational Focus Whilst many AEC organizations undertake project reviews and produce lessons learned, there is evidence that these lessons learned are not being disseminated to the project teams who would find them useful. In one UK example, although the corporate process dictates that project reviews are undertaken, the company cannot find any documentation of these project reviews. In another case, the documentation of the project reviews is too brief to be meaningful to anyone not attending the review. This emphasizes the point that organizations are focusing on the details (the lessons learned), rather than the big picture of how lessons learned fit into knowledge management and how knowledge management then translates into organizational learning. Lack of Management Support Many organizations consider knowledge management without a true understanding of how it needs to be done and how to do it properly. In many cases it is those who shout loudest who are heard. This results in knowledge management being approached in a very fragmented manner without looking at a top-down (strategic level) to provide bottom-up solutions (tactical level). One example is of an organization having a dedicated KM resource and a willingness of some employees to engage in knowledge management, but they have other more pressing commitments which have led to a delay in the launch of their KM initiatives. This is a prime example of where executive management needs to make it explicit to their senior managers that KM is strategically important to the organization and time must be allocated to these activities. Typically this happens when a business case for KM has not been made and has not been communicated to all levels within the organization. Geographic Spread Many AEC organizations play on their international status but do not exploit the knowledge held in various geographical areas both nationally and internationally. There are numerous problems to overcome but this is certainly one area where communication 4

5 technologies have a role to play. However, the more fundamental issue is how do you know here to find expertise in your organization, wherever it resides? This calls for companies to have white pages and communities that are easily searchable to find the relevant expertise. Inappropriate Technical Solutions The AEC sector is very much a people-based sector providing construction service to clients. KM should thus be able deliver real solutions to problems faced by construction personnel, using the most appropriate medium. Too often solutions are provided that are not what was requested. Tiwana (2002) points out that it is all too easy to provide quick solutions, many of these technology-based, because a technological fix is easier to implement than a radical cultural shift. Trust as a Strategic Element for Knowledge Management A fundamental component for successfully creating a knowledge-based environment is the existence of trust between individuals. High performance organizations exhibit high levels of trust between individuals in the organization (Katzenbach and Smith, 1993). Repeated research demonstrates that a requirement for free and open knowledge sharing is a high level of trust between the individuals involved in the exchange process. Additionally, these individuals have a belief or trust that mutual benefit will occur due to the knowledge sharing. However, time is required to build interpersonal relationships, develop reputations for trustworthiness, and alter the trust focus from predisposed perceptions of trust to actual experience. As a result, two scenarios may be possible; trust levels may increase between individuals because the perceived reputation was too low as originally regarded or trust levels may decrease after individuals determine that the initial level of trust was too high as proven by the actual personal interaction. It is the role of the organization to place greater strategic emphasis on developing successful interactions between individuals and creating the potential to build trust within project and organization teams. It is through these successful interactions that a foundation for trust emerges and the opportunity for open knowledge sharing evolves as required for successful knowledge management. OVERCOMING KNOWLEDGE SHARING BARRIERS The barriers to knowledge management are making it increasingly clear that the traditional approach of building a knowledge management system, making it available to project participants, and then waiting for users to populate the system is proving to be a less than successful model. This tactical approach to knowledge management needs to be replaced by a strategic model that emphasizes long-term results and organization goals. A significant amount of research energy has been placed on discussing productivity in the construction industry. Underlying this emphasis has been the topic of performance. From individual assessment to crew and resource control, the topic of performance has consistently been at the forefront of construction research for the past two decades (Oglesby, Parker and Howell, 1988; Walsh, Hershauer, and Wacker, 2004). Using this emphasis as a foundation, the following sections provide a series of performance-based arguments for adopting a strategic approach to knowledge management. At the core of these arguments is a focus on collaboration among the participants rather than an optimization of individual results. This change of focus is 5

6 a key element for the future success of knowledge management in construction as it emphasizes the benefit of knowledge and knowledge sharing to a group solution rather than to an individual benefit. Learning Organizations The fundamental basis of establishing a learning organization is the requirement to enhance learning within the organization. Research within this domain divides learning into two distinct categories. Essentially, learning is categorized based on when and why it takes place and the effect that it has on those who are learning. The first type of learning can be thought of as incremental or reactive learning in which knowledge is gained in a piecewise manner as it becomes a necessity while the second is a dynamic process of continual learning in which knowledge is proactively sought out before it becomes a necessity. In today s dynamic business world, it is no longer enough for knowledge to be possessed at the individual level. New technologies and an abundance of competition require that knowledge be shared and utilized at an organizational level if a company hopes to survive. Hendricks and Vrien suggest that the knowledge assets possessed by a company create the possibility for sustainable competitive advantage (1999). This being the case, a learning organization actively adapts individual knowledge into information that can be readily used to the benefit of the organization as a whole. Aside from extracting and clarifying knowledge from the individual, learning organizations organize and provide structure to knowledge so that it can be used consistently to update existing practices. In a study conducted by the Construction Industry Institute on Learning Organizations in Construction, the authors document that a key to achieving a learning organization and thus improving organization performance is collaboration and knowledge sharing infrastructure (Chinowsky, Molenaar, and Realph, 2007). The study emphasizes that learning occurs when organizations not only capture, but also actively acquire and utilize knowledge to retain competitive advantages in the market. The study documents that very few of the studied organizations have achieved this level of learning, and very few have reached a learning maturity level beyond the first of the five maturity stages. Specifically, a minority of the organizations (41%) is proactively modifying processes based on new knowledge, and a small percentage of the organizations (15%) have the passionate management required to support knowledge sharing. In summary, the need to establish a learning organization is based on a strategic requirement to remain competitive and establish sustainable competitive advantages. At the core of this learning culture is the continuous sharing of knowledge. Therefore, a strategic basis for aggressively overcoming knowledge management barriers is the need to establish knowledge sharing as a basis for learning and long-term sustainable advantage. New Process Implementation The second strategic imperative for establishing a successful knowledge management program is the need to implement new practices on a regular basis. As outlined by Collins (2001), the greatest threat to achieving greatness is an organization that is content with being very good at what it does. In the context of new practices, this thought transfers to the greatest 6

7 threat to achieving high performance is being content with established practices that have achieved acceptable and above average results. However, a key element to successfully introducing these new practices is the development of a change management program that provides a framework for the implementation process. A central thread in change management is the need to have multiple individuals collaborating and sharing knowledge to successfully introduce the practice. In a study by the Construction Industry Institute, an analysis of new practice implementation was conducted (Chinowsky 2007). Within the study framework, a key question focused on communication and collaboration within the organizations. Specifically, the question of whether organizations were promoting new practices through communication and collaboration was explored. The study found that this key strategic area was a focus in a minority of organizations with only 40% of the respondents stating that communication of the practice expanded beyond a local project or the local community. Only 20% of the respondents stated that communication of the practice was extended throughout the organization up to the top levels of the organization. The challenge to new practice implementation in terms of collaboration is the need for organizations to work collectively and share knowledge to move new practices from individual project levels to broad organization implementation. As demonstrated in the CII study, the strategic importance of this collaboration is struggling to overcome cultural barriers and individual concerns of credit and power sharing. Additionally, the concern of management support for new practices is a principal concern with only 7% of the respondents stating that management champions new practices. In summary, knowledge management is a central theme in collaboration. Collaboration is a central requirement for implementing new practices. Finally, new practices are a key to continuously updating an organization s approach to the market forces impacting business practices. Given this relationship, organizations need to place a greater strategic priority on knowledge sharing as a path to increasing the introduction of new practices and long-term market performance. Innovation The third strategic initiative supporting the implementation of knowledge management is the need for greater innovation in the construction industry. The ability to innovate is a fundamental requirement for long-term performance improvement. This need for innovation has been overlooked and undervalued within the construction industry. Given that the industry is undergoing significant changes as it addresses issues such as the introduction of advanced field and office technologies, the aging of the construction workforce, globalization, economic integration, and international partnering, this underperformance in the area of innovation is developing into an industry crisis. Although individual exceptions exist, a study of the designconstruction industry has demonstrated there are significant economic, organization, and industry structural barriers within construction organizations of all sizes towards innovation improvement ( Toole 2001). 7

8 Similar to the findings in learning organizations and new practice implementation, innovation is dependent on collaboration and knowledge sharing. As documented in many studies, innovation occurs when individuals exchange knowledge and believe that a greater opportunity exists to improve performance than what is currently being achieved (Katzenback and Smith 1993). Although the innovation suggested may not always be breakthrough innovation, the importance of continuous stepwise innovation cannot be overlooked (Slaughter 1998). Specifically, it is the continuous introduction of small innovations that collectively raise performance and project outcomes. The overall benefit of innovation can be seen in long-term industry performance. Organizations such as Apple Computers and Toyota Motors which regularly invest in innovation have emerged as international leaders in their market sectors (Fisher 2008). At the core of this success is a corporate culture that encourages and rewards knowledge sharing. Rather than focusing on individual achievement and cultural barriers, these leading organizations emphasize organization performance and long-term success. A CASE FOR STRATEGIC KNOWLEDGE MANAGEMENT To illustrate the importance of taking a strategic perspective on the role of knowledge management, a case study is presented of an organization that exhibits islands of knowledge, or a lack of knowledge sharing. The focus of this case study is Company A, established in 1940 with a focus on structural engineering. The organization has grown steadily to now include six regional offices. Reflecting this growth, the organization moved to a decentralized organization six years ago. The idea behind this move was to give individual offices more autonomy to pursue work and to optimize the client focus of the office operations. This tactical focus was intended to increase an already successful design operation by emphasizing knowledge exchange within the offices. Unfortunately, the move to a decentralized organization did not have the anticipated or desired results. Some of the offices turned in poor financial results and high degree of turnover was evident in the regional offices. Additionally, a lack of communication and knowledge sharing was becoming evident with the offices acting as separate entities. A study of the organization was undertaken to determine the current state of knowledge sharing in the organization and where the organization could improve to achieve high performance. The analysis was performed using the Social Network Model of performance (Chinowsky, Diekmann, and Galotti 2008). The 31 managers in Company A participated in the study to obtain a 100% response rate. The results of the study provide a clear indication of how knowledge management can fail if placed in the context of a tactical rather than a strategic perspective. Although the Company A leadership supports organization communication, organization communications focus inward within individual offices rather than throughout the network. In the network, communication clusters appear in the regional offices with the regional managers assuming a central position in the clusters. This clustering effect is creating a hindrance to potential knowledge sharing as minimal relationships are developing between remaining staff members and is reflecting the difficulty of the offices to return to a centralized business model. 8

9 In contrast to the communication side, trust between the managers is relatively high. However, based on the low communication numbers evident in the analysis, this trust could be based more on team building than in actual work processes. If the trust is based in collaboration, then knowledge sharing should be evident. If the trust is based more on social interaction, then a lack of knowledge sharing may be evident. The result of this split support for knowledge exchange is illustrated in the knowledge exchange network in Figure 1. Using a threshold of a minimum of a weekly exchange of knowledge, the organization is failing to achieve knowledge exchange using this threshold. As indicated in the network, the arrows illustrate which individuals (the nodes) are exchanging knowledge with other individuals. As illustrated, the network has a minimal number of knowledge links in place (5%) and is divided into a series of clusters around the regional offices. The only connection between the offices is through the President. The Region 2 office is completely separated from the remainder of the organization. Of greater concern, four managers do not have any weekly conversations related to knowledge exchange with other managers. It is clear from the network that the organization is focusing on individual office performance rather than strategic performance. However, even within the offices, minimal knowledge exchange is occurring. The result of this low density and clustering is that the organization is acting like knowledge islands with the knowledge isolated in regional offices. However, the lack of knowledge exchange within each regional office illustrates that the knowledge islands themselves are weak in knowledge management. In this example, an organization with a strong performance history has underperformed based on a mistaken assumption that knowledge exchange would continue at an organization level after the organization was changed to a regional or tactical focus. As illustrated, the change to a tactical focus significantly reduced knowledge exchange between the offices. Although the managers had a strong sense of social trust, the lack of collaboration experience failed to provide Figure 1: The Knowledge exchange network for Company A. 9

10 a basis for mutual working trust required for knowledge exchange. In summary, the organization failed to focus on strategic objectives for knowledge management. CONCLUSION Knowledge management is one component of a larger management focus to maintain a high level of organization performance. As a component of this larger focus, knowledge management must be placed at a strategic level within an organization. As illustrated in this paper, numerous barriers exist that can inhibit the knowledge sharing that is the foundation of knowledge management. The premise of this paper is that these barriers primarily exist because knowledge management has been approached as an individual or tactical objective rather than as an organization or strategic objective. The benefits of approaching knowledge management as a strategic objective focus on the ability of an organization to leverage individual expertise into innovative organization and client solutions. When viewed from a strategic perspective, opportunities begin to open for organizations to pursue learning, innovation, and continuous behavior and practice improvement. In each case, the requirement is a strong sense of collaboration versus individual achievement. As presented in this paper, the future success of organizations will not reside in this individual emphasis, but rather will focus on the ability of an organization to collectively leverage knowledge to achieve broad results and high performance. RELATIONSHIP TO OTHER PAPERS Each paper in this session focuses on different aspects of knowledge management. This paper focuses on the barriers to knowledge management and the need to emphasize the strategic benefits of knowledge management. Enabling this emphasis is the focus of the Suresh paper. Leadership is required to enable knowledge management to meet its intended goals. Developing that leadership is a challenge that the industry must address if knowledge management is going to succeed. Similarly, the Will paper focuses on the reason that knowledge management is required to address the global nature of projects. As the Will paper states, the emergence of these projects will affect not only knowledge but how the organization responds to a global project economy. REFERENCES Carrillo, P.M., Robinson, H.S., Al-Ghassani, A.M. and Anumba, C.J. (2004). ''Knowledge Management in UK Construction: Strategies, Resources and Barriers'', Project Management Journal, 35(1), Carrillo, P.M., Robinson, H.S., Anumba, C.J. and Bouchlaghem, N.M. (2006). ''A Knowledge Transfer Framework: The PFI Context'', Construction Management and Economics, 24(10), Chinowsky, Paul (2007). Implementing New Practices: Steps to Success, CII Research Report , Construction Industry Institute, Austin, TX. Chinowsky, Paul, Molenaar, Keith, and Realph, Allison (2007). Learning Organizations in Construction, ASCE Journal of Management in Engineering, 23 (1),

11 Chinowsky, Paul, Diekmann, James and Galotti, Victor (2008_. A Social Network Theory of Construction, ASCE Journal of Construction Engineering and Management. Chinowsky, P. and Carrillo, P.M. (2007). ''Knowledge Management to Learning Organization Connection, ASCE Journal of Management in Engineering, 23(3), Collins, James C. (2001). Good to Great, Muze, Inc. Dainty, A., Qin, J. and Carrillo, P.M. (2005) HRM Strategies for Promoting Knowledge Sharing within Construction Project Organisations. In Knowledge Management in the Construction Industry: A Socio-Technical Perspective. Kazi, A.S. (ed.), Idea Group Publishing. Fisher, Anne (2008). America s Most Admired Companies, Fortune, March 17, 2008: Hendricks, P and Vriens, D. (1999). Knowledge-Based Systems and Knowledge Management: Friends or Foes? Information & Management, 35, Jashapara, A. (2004). Knowledge management: an integrated approach, Financial Times Prentice Hall, UK. Kamara, J. M., Anumba, C. J., Carrillo, P. M. (2005). Cross Project Knowledge Management. In Knowledge Management in Construction, Anumba, C. Egbu, C. and Carrillo, P. (eds.), Blackwell Publishing Katzenback Jon R. & Smith Douglas K. (1993). The Discipline of Teams. Harvard Business Review. Reprint R0507. pages KPMG (1998), Knowledge Management Research Report, KPMG Management Consulting. McGeorge, D. and Palmer, A. (1997) Construction Management: New Directions, Blackwell Publishing. Nixon, N. (2000) Common Knowledge, Harvard Business School Press. O Leary, D.E., (2001). How Knowledge Reuse Informs Effective System Design and Implementation. IEEE Intelligent Systems, January-February, Oglesby, Clarkson, Parker, Henry, and Howell, Gregory (1988). Productivity Improvement in Construction, McGraw-Hill College. Scarbrough, H., Swan, J. and Preston, J. (1999). Issues in People Management: Knowledge Management: a literature review, Institute of Personnel and Development, The Cromwell Press, Wiltshire. Slaughter, E. Sarah (1998). Models of Construction Innovation, ASCE Journal of Construction Engineering and Management, 124(3): Tiwana, A. (2002). The Knowledge Management Toolkit (2 nd ed). Upper Saddle River, NJ: Prentice Hall. Toole, T. Michael (2001). Technological Trajectories of Construction Innovation, ASCE Journal of Architectural Engineering, 7(4): Walsh, Kenneth, Hershauer, James, and Wacker, John (2004). Engineering Productivity Measurements II, CII Research Report , Construction Industry Institute, Austin, TX. 11