Moderating Role of Organizational Culture Between Knowledge Management and Organizational Effectiveness in Service Sector

World Applied Sciences Journal 20 (1): 45-53, 2012 ISSN 1818-4952 IDOSI Publications, 2012 DOI: 10.5829/idosi.wasj.2012.20.01.1740 Moderating Role of Organizational Culture Between Knowledge Management and Organizational Effectiveness in Service Sector 1 2 3 Rizwan Qaiser Danish, Yasin Munir and Saleh Shahbaz Din Butt 1 Hailey College of Commerce, University of the Punjab, Lahore, Pakistan 2 Faculty of Management and HRD, UTM, Malaysia 3 University of the Punjab, Gujranwala Campus, Pakistan Abstract: The aim of this research is to identify the effect of knowledge management practices on the effectiveness of the organization and simultaneously considering the interactional effects of organizational culture on this relationship. Self administered questionnaires were distributed to collect the responses from the employees in different service organizations while descriptive statistics and moderated analysis were used to analyze the data and draw the conclusions. The overall response rate for the data collected through stratified random sampling was 79% from service sector employees. It was concluded that Knowledge management practices have a strong positive association with organizational effectiveness while this relationship is positively moderated by the conducive organizational culture. Managers all over the world should strive to promote the knowledge management practices along with conducive culture as both of these contribute towards improved organizational effectiveness. Key words: Conducive Culture Knowledge Sharing Transformational Leadership Organizational effectiveness Interaction INTRODUCTION dollars to develop effective knowledge management systems and to improve and resolve knowledge Knowledge Management has been inevitable since management issues. According to Prusak [2], the the very inception of the modern day organizations and significance of knowledge management was first tested currently it has emerged as a scientific discipline by McKinsey and Company. With the help of other contributing towards improved organizational consulting organizations, it was trying to develop a more effectiveness. Its timeline can be traced back from the human-network response system other than the conference held by Laurence Prusak and his colleagues electronic document management systems. General in early 1993, at Boston. Its importance has increased Motors Corporation and Hughes Aerospace and many folds as the organizations throughout the world Electronics Company had initiated some knowledge have started using it as a tool for gaining competitive management projects which resulted in solution of advantage, boosting up the innovation and improving problem with shorter development cycles and less operational effectiveness. The knowledge sharing is errors, consequently improving the overall organizational passion and commitment for emerging economies as it effectiveness. The early explorers of knowledge leads to new ideas that provides competitive edge by management include High-Tech organizations like Xerox appropriate knowledge sharing which results in Corporation, Hewlett-Packard Company and IBM. innovations and opens new horizons for industries which Pharmaceutical firms (Hoffman-LaRoche Ltd. and Merck will ultimately provide benefits to the economy [1]. and Company) also had some early successes due to The developed countries have recognized the knowledge management. Developing countries have importance of knowledge management. As every year also started realizing the importance of knowledge organizations throughout the world spend millions of management practices. Some organizations which lack Corresponding Author: Rizwan Qaiser Danish, Hailey College of Commerce, University of the Punjab, Lahore, Pakistan. 45

infrastructure, face scarcity of resources now having knowledge is not their responsibility [9]. They are some stability in Government are slowly developing reluctant to involve employees in decision making and business as small/medium sized enterprises. These share knowledge because in this way they have threat to enterprises are sharing information internally and lose extent of control. The major determinants that can externally with stakeholders which allows them to move help in developing Knowledge Management are (i) towards full knowledge management system [1]. Organizational Culture: Constructive cultural values like Keeping in view the importance of knowledge achievement, encouragement and self-actualization help management in learning organizations the aim of in successful knowledge management (ii) Knowledge this study is to identify the effect of the knowledge Sharing: the factors behind influence on sharing of management practices on organizational effectiveness and knowledge are knowledge self-efficacy, enjoyment in moderating role of organizational culture between this sharing knowledge, communication openness, mutual relationship. From previous researches Organizational benefits, Support by top management, social interaction Culture and Knowledge Sharing have been identified as culture and Information Technology. the most significant determinants of knowledge The objective of this study is to find the role of management in learning organizations. Efforts for knowledge management and its impact on organizational knowledge management are often resisted by effectiveness specifically focusing on moderating role of organizational culture and as a result they have limited the organizational culture. Previous studies mainly impact [3]. The biggest hindrance to manage Knowledge focused on the effects of knowledge Management and is the inability to change peoples behavior [4]. Organizational culture on organizational effectiveness Constructive culture (with values such as achievement, separately. But this paper aims at combining effects of encouragement and self-actualization) helps in successful Knowledge Management and Organizational Culture as a knowledge management [5]. Knowledge sharing in the tool for enhancing the organizational effectiveness. organization facilitate knowledge management as knowledge Management involves both the tacit Literature Review knowledge and explicit knowledge. Davenport and Prusak Knowledge Management: Anantatmula [10] points out [6] defines knowledge as personal. Therefore employee s that definition of knowledge and importance varies from willingness and support by top management organization to organization. There is a need to develop (in providing social interaction environment) helps a system in which, regardless of the origin and location building trust and sharing of tacit knowledge of any organization in the world and its employee can (that is mostly specific to individuals) among share knowledge. Transformational leadership style has colleagues which ultimately results in the Knowledge a capacity to control ideas about the good labor power Management [7]. generated by the subordinates and impact of these ideas on organizational benefits. The leaders that adopt this Knowledge Management is a combination of all leadership style have an opportunity to increase the the activities involved in the collection, organizational benefits by convincing employees in dissemination and utilization of Knowledge [8] management of Knowledge. They provide such an and the organizations which use such a process to environment in which sharing of knowledge between adapt to the changing environment, to control and staff is promoted [11]. Nguyen and Mohamed [12] shape their future manages to achieve recommended that for effective training of knowledge Organizational effectiveness. management practices transactional and transformational leaders should be part of these trainings. Now Knowledge Management is considered as an According to Watanabe and Senoo [13], essential asset of organizations contributing towards the administrative practices and the social environment organizational effectiveness but it is not that much impacts the Knowledge management practices. His famous in many developing countries like Pakistan. research indicates that organizational behaviors and Manager s job insecurity and negative chaosism make attitudes have more impact on knowledge management him reluctant to develop effective knowledge management than country s social culture. Xue, Bradley and culture. Pakistani Managers consider knowledge Liang [14] stated that, the team environment and management as a problem of business and they don t supportive top management have an influence on pay much attention to it thinking that managing employees attitude towards knowledge sharing. 46

Overall knowledge collecting and donating behavior those employees who experience a loss of authority, job within a company is also influenced by these factors. insecurity during knowledge sharing. Lack of appreciation Knowledge sharing is not possible to define completely and inadequate rewards that are not proportional to their as it involves much broader terms like knowledge contribution are the barriers to knowledge sharing [18]. management, enterprise innovation and information Among the top management those who are involved in sharing systems [1]. Knowledge sharing involves the decision making and thinks knowledge sharing as exchange of knowledge of the employees, skills and superior, uncomplicated and compatible means of experiences among entire department or within accomplishing organizational objects, show high level of organization having a social interactional culture [15]. keenness to encourage knowledge sharing [19]. The unpredictable nature of business environment According to Yuen and Majid [20] the positive tests the ability of firm s capabilities to connect their attitude regarding knowledge sharing should be internal resources and capabilities among employees to developed among the students as students are more share knowledge, as these capabilities are important for likely to get employed after their graduation. The firms to gain competitive advantage. In the twenty first student s willingness or unwillingness to share century those firms will be able to develop competitive knowledge will become a part of their personality and advantage that will be able to identify the strength of students will show same behavior at the workplace. knowledge and will be able to grow supportive culture The factor that undermines the knowledge sharing for knowledge sharing [16]. The knowledge sharing is among the students is lack of strong peer passion and commitment for emerging economies as it relationship as students are more motivated to do leads to new ideas that give competitive edge by better than their classmates. The academic institution appropriate knowledge sharing which results in revealed a teaching approach in which mutual trust and innovations and opens new horizons for industries which respect among students increases and students will will ultimately provide benefits to the economy [1]. consider their fellows as a learning partner rather than a The willingness to share knowledge among competitor. employees mainly depends upon one s satisfaction in helping others and the self confidence in efficiency of Organizational Culture: Culture is defined as the his knowledge. The employee for whom helping and collective programming of mind which distinguishes the sharing knowledge is pleasurable is keener to gather and member of one category of people from others [21]. spread knowledge. Information and Communication There is a positive association between job satisfaction Technology in an organization also plays a vital role in and clan and adhocracy culture while market and knowledge collection but it is not effective in spreading hierarchy cultures are negatively associated with job knowledge among the employees [17]. Insufficient satisfaction [22]. Industry membership limits unique training to use available Information and communication culture types. Development of distinguishing values that technology is a barrier to knowledge sharing [18]. characterize the industry is a consequence of industrial It means that investing in information and technology dynamics. In some cases there exists a relationship alone will not facilitate knowledge sharing as between the cultural strength of organization and its Information technology just provides access to performance [23]. Constructive cultural styles have knowledge. This access is not enough to share positive impact while dysfunctional defensive styles knowledge as knowledge exchange process involves have negative impact on both the individual and social and human interaction [19]. Top management organizational level performance drivers [24]. support in knowledge sharing effectively encourages Leadership competency and organizational culture employees willingness to gather and spread knowledge. have strong positive association with responsiveness Organization s rewards for knowledge sharing do not [25]. Adhocracy culture promotes innovative strategies encourage in-out knowledge exchange among employees while the hierarchical culture favors and fosters imitation effectively. For the promotion of knowledge sharing culture [26]. Bureaucratic culture exists where leaders activities in an organization, top management should prefer control over flexibility while an innovative culture encourage employees by facilitating social interaction exists where leader prefers flexibility [27]. Conflict is culture rather than encouraging employees with other positively associated with bureaucratic culture while non-inherent motivations like monetary compensations negatively associated with innovative and supportive [17]. Top Management should not be worried about culture [28]. 47

Achievement culture has a direct, strong and The relationship of beliefs and values, policies and positive association with organizational performance practices and the environment of organization and effectiveness while humanistic culture has indirect positive impact on the organizational performance [29]. High organizational performance is associated with Different types of organizational culture show different an organization having strong culture with an effective levels of acceptance of attitude towards organizational and well integrated set of behaviors values and beliefs change thus it is easy to implement change in some [37,38]. However it is believed that culture will stay organizational culture types as compared to others [30]. related to high performance only if it is capable of Control oriented organizational culture is favorable for adopting to change in the environment. Moreover it must information security management while the flexibility not only be greatly shared but it must also possess some oriented organizational cultural traits such as cooperation unique set of qualities which are extremely hard to be and innovation are unfavorable for information security imitated [39, 40]. management [31]. From the literature review we are able to formulate the following hypotheses; Organizational Effectiveness: Organizational effectiveness refers to the extent to which an organization H 1: Knowledge Management has a significant is successful in achieving the results that it intends to association with Organizational Effectiveness achieve [32]. Different models have been presented to H 2: Organizational Culture has a significant association measure the organizational effectiveness. The system with Organizational Effectiveness recourse model defines the organizational effectiveness H 3: Knowledge Management is a significant predictor of as the ability of the organization to exploit its Organizational Effectiveness environment for scarce and valued resources. The H 4: Organizational Culture is a significant predictor process model focuses on the transformational process Organizational Effectiveness of the organization and its ability to convert inputs H 5: Organizational Culture has a moderating impact on into desired outputs. While, according to the multi the relationship between Knowledge Management constituencies model, different measures of effectiveness and Organizational Effectiveness should be adopted to reflect the different criteria of organization s constituencies [33]. Although each of MATERIALS AND METHODS these models is helpful to measure certain aspects of organizational effectiveness, the most important thing for Questionnaires were used to collect the data from a manager is to consider how well the organization meats respondents regarding the study in different its goals [34]. organizations. For this purpose 325 questionnaires were An increased effort of management to develop and distributed among the employees and managers of 26 promote an open innovative culture is expected to lead leading service organizations in Gujranwala Division, to high organizational effectiveness [35]. Denison [36] including Food, hospitals, Telecommunication firms, formulated a framework of relationship between Education, Courier and Transportation service providers, organizational policies, organizational culture and through stratified random sampling technique. organizational effectiveness. According to him the Gujranwala is the fifth largest city of Pakistan situated in success of an organization is attributed to some the north east of the Punjab province. Local language is combination of practices and policies, values and beliefs Punjabi but Urdu and English are also spoken and and the relationship that exists between the two. understood. It is an industrial city with well-developed More specifically he suggested the organizational industrial and agricultural markets with about 400 effectiveness to be a function of; organizations operating and competing in this region. A recent development is the rapid growth in the services Values and beliefs which the organizational members sector in this area. hold Each of the Questionnaires distributed in this region The policies and practices prevailing in the consists of two sections; one is the demographic section organization while other consists of research variable section. Translation of the beliefs and values into The demographic section comprised of Age, Gender, organizational practices and policies in a consistent Education Level, Sector, Industry Type and Experience way while the subjective portion is composed of 48

organizational culture, Knowledge sharing and practices while the standard deviation for the organizational effectiveness. Questionnaire was responses was 0.44 on average and reliability was comprised of 36 items are mentioned to get the responses 82%. In the case of organizational culture the mean from the respondents on five point Likert scale. of the responses of 256 respondents was 3.97 All the questions are closed ended for the purpose of which is again close to 4. It shows that the mean collecting appropriate data. Participants were 72% male average response of the respondents was Agree and 28% female. The response rate remained 79% as 256 regarding the conducive culture. The variation of the 325 questionnaires were completed and returned around the mean in these responses was 0.52 on by the respondents. average and Alpha was 0.80. Similarly for organizational effectiveness the mean average responses of the 256 DISCUSSION respondents was 3.97 which is near to 4 indicating that respondents collective response is Agree Moderating effect of organizational culture (OC) regarding the organizational effectiveness. While on the relationship of organizational Knowledge in this case the variation in the responses was 0.43 Management (KM) practices and organizational and Alpha was 0.70 indicating the reliability of effectiveness was analyzed by computing descriptive the survey regarding the organizational effectiveness statistics, Cronbach s alpha and Pearson moment to be 70%. correlation by using SPSS 17 while ITALASSI 1.2 Table 1 also indicates that there is a strong positive software was used to measure the interactional effects of association between knowledge management practices moderating variable. and organizational culture as P < 0.01 so we can conclude Table 1 indicates the values of mean, standard that the study supports H 1 which means that deviation, Cronbach s Alpha and Pearson correlation for organizational culture has a significant association with knowledge management, organizational culture and knowledge management. It is also evident from Table 1 organizational effectiveness based on the data collected that knowledge management has a strong positive from 256 respondents. For knowledge management mean association with organizational effectiveness as P < 0.01 vale of 256 respondents is 3.95 which is close to 4. so we can say that study supports H 2 which states that It means that respondents average response was organizational effectiveness has a strong association with Agree regarding the successful knowledge management knowledge management. APPENDIX Table 1: Mean, Standard Deviation, Cronbach's Alpha and Pearson Correlation (N=256) Mean S.D Alpha KM OC OE Knowledge Management (KM) 3.95 0.44 0.82 1.00 Organizational Culture (OC) 3.97 0.52 0.80 0.51** 1.00 Organizational Effectiveness (OE) 3.97 0.43 0.70 0.67** 0.74** 1.00 ** Significant at Level of Significance 0.01 (Two Tailed) Table 2: Result of Regression with interaction (N=256) Model B S.E. Corr T P-Value R 2 #1 B0 1.37 B1 0.66 0.46 0.67 14.45 0.00 0.45 #2 B0 1.56 B2 0.61 0.35 0.74 17.50 0.00 0.55 #3 B0 0.68 B1 0.39 0.41 0.67 9.44 0.00 B2 0.44 0.35 0.74 12.69 0.00 0.67 #4 B -1.63 0 B : Intercept 0 B : Knowledge Management 1 B : Organizational Culture 2 B : With Interaction 3 B 0.99 0.23 0.67 4.35 0.00 1 B2 1.09 0.25 0.74 4.44 0.00 B3-0.17 0.06 0.81 2.68 0.01 0.67 49

Fig. 1: Relationship between Knowledge Management and Organizational Effectivness When Organizational Culture is equal to 2.83 Fig. 2: Relationship between Knowledge Management and Organizational Effectivness When Organizational Culture is equal to 4.83 We can also see in Table 1 that there exists a strong This Model indicates that for every 1 unit change in positive association between organizational culture and knowledge management organizational management will organizational effectiveness as P < 0.01 so we can say that change by 0.66 units in the same direction. And if the the study we conducted supports H3 which states that knowledge management in an organization is reduced to organizational culture has a significant association with zero the organizational effectiveness will be 1.37 units. organizational effectiveness. Moreover table 2 indicates 45% of the total variation in the organizational effectiveness can be explained with Moderating effect: Figure 1 shows the strong positive variation in organizational knowledge management. moderating role of culture on the relationship of Table 2 presents; organizational knowledge management practices and organizational effectiveness. It is evident from the Organizational Effectiveness = 1.56 + 0.61Organizational interactional plot that when the value of organizational Culture culture is low i.e. 2.83 the value of organizational effectiveness as well as knowledge management is low. This Model shows that 1 unit increase in In figure 2 we can see that if we increase the value of organizational culture will increase the organizational organizational culture to 4.83 than it results in increased effectiveness by 0.61 units and vice versa. values of organizational effectiveness and knowledge While if the value of culture is decreased to zero management. Thus from the above two plots it is clear the value of organizational effectiveness will be that organizational culture has a strong moderating effect 1.56 and Table 2 shows that 55% of the total on the relationship of organizational knowledge variation in organizational effectiveness can be management practices and organizational effectiveness. explained with the variation in organizational culture. Table 2 reveals; In Table 2; Organizational Effectiveness = 1.37 + 0.66 Knowledge Management Organizational Effectiveness = 0.68 + 0.39Knowledge Management + 0.44Organizational Culture 50

In this Model it is indicated that if organizational knowledge management is increased by 1 unit keeping the value of organizational culture constant the organizational effectiveness will increase by 0.39 units and vice versa. Similarly, if the value of culture is changed by 1 unit keeping the knowledge management constant, the organizational effectiveness will be changed by 0.44 units in same direction. However if the values of both the knowledge management and culture are reduced to zero simultaneously, then the resulting organizational effectiveness will be 0.68. Moreover table 2 also indicates when the effect of organizational culture and knowledge management are combined together 67% of the total variation in the organizational effectiveness can be explained. From Table 2; Organizational Effectiveness = -1.63 + 0.99Knowledge Management+ 1.09Organizational Culture - 0.22 (Knowledge Management)(Organizational Culture) This Model shows that if both the knowledge management and organizational culture are reduced to zero then the organizational effectiveness will -1.63 because of its strong association with both of them. However, if we increase the knowledge management and organizational culture by 1 unit each, the organizational effectiveness will increase in a decreasing trend. As Table 2 indicates in Model 4 P<0.05 for knowledge management and organizational culture and for their combined effect as well, which indicates both are significant predictor of organizational effectiveness. The results of data analysis clearly indicate that knowledge management practices have a strong positive association with organizational effectiveness and this relationship is positively modified by the organizational culture. Thus we can conclude that organizational effectiveness is improved with the improvement in the knowledge management practices particularly when such practices are accompanied by a supporting culture. Practical Implications: Knowledge management is a need of time. Managers all over the world should actively promote and improve the knowledge management practices in their organizations to enhance the organizational effectiveness. These efforts are more likely to be fruitful if these practices are accompanied by conducive culture. This paper helps service organization to focus on the knowledge management and make their culture supportive in order to increase the effectiveness of the organization. Such culture should be promoted by providing knowledge and awareness about knowledge management and its importance within the organizations. Simulations are also important to make employees familiar with the required processes about knowledge sharing and culture. Limitations and Future Directions: The paper is intended to study the moderating role of Organizational culture in the relationship of KM and organizational effectiveness. The paper mainly focuses on services sectors. So the findings are limited to services sector. Moreover we didn t have adequate time and resources to study the components of KM and Organizational Culture and studied these constructs as composites. We didn t have the access to top management which could have help us to identify the type of leadership, extent of participative decision making that impacts the organizational effectiveness more specifically. Further study can be conducted to identify the Knowledge management practices role in effectiveness in different departments within organization. And also knowledge management practices in company owned Service Centers and sublet franchises can be compared. REFERENCES 1. Burke, M.E., 2011. Knowledge sharing in emerging economies. Library Review, 60(1): 5-14. 2. Prusak, L., 2001. Where did knowledge management come from? IBM System Journal, 40(4): 1002-1007. 3. Delong, D.W. and L. Fahey, 2000. Diagnosing Cultural Barriers to Knowledge Management. Academics of Managerial Exectives, 14(4): 113-127. 4. Watson, S., 1998. Getting to Aha! Computer World, 32(4). 5. Balthahazard, P.A. and R.A. Cooke, 2003. Organizational Culture and Knowledge Management Success. As Seeing the Behaviour Performance Continuum (Working Paper). Arizona State University. 6. Davenport, T. and L. Prusak, 1998. Working Knowledge. Harvard Business School Press, Cambridge MA. 7. Lin Hsiu, F., 2011. Antecedents of the stage-based knowledge management evolution. Journal of Knowledge Management, 15(1): 136-155. 8. Newman, Brain 1991. An open discussion of knowledge managment.. 9. Bano Schehar, U. Kashif Rehman and A. Muhammad Khan, 2010. Study of factors that impact knowledge management fit in corporate sector of pakistan. Far East Journal of Psychology and Business, pp: 15-31. 51

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