There are some executives that like to look at academic journals but unfortunately, the crossover literature has not reached them enough. In an effort to enhance the knowledge of executives worldwide, this article blends scholarly concepts with real world applications. With a clear understanding of the concept of knowledge management, executives can make more effective managerial decisions.
Knowledge within Companies
Executives across the globe have found that knowledge management is critical to business success. Knowledge, in and of itself, is not enough to satisfy the vast array of changes in today’s organisation. Therefore, knowledge management is only a necessary precursor to effectively managing knowledge within the organisation.
First, executives must have an understanding of the concept of knowledge itself. Knowledge is identified as a multi-faceted concept and is distinct from information and data. Data has been defined as raw entities, and information is understood as a meaningful pattern within these raw entities. Knowledge is quite elusive and is changing on a day-to-day basis with discontinued products and the ever-changing vast array of technology. Therefore, to counter the above definition of knowledge, Ruggles defines knowledge as a blend of information, experiences, and codes. The key take-away for executives is that knowledge is a resource that enables organisations to solve problems and create value through improved performance, and it is this point that will narrow the gaps of success and failure leading to more successful decision-making.
Executives still wonder where knowledge is and how can it be captured, utilised, and enhanced when it comes to decision-making. Scholars found that within organisations, knowledge resides in various areas such as management, employees, culture, structure, systems, processes, and relationships.
Organisational knowledge cannot merely be described as the sum of individual knowledge, but as a systematic combination of knowledge based on social interactions shared among organisational members. Executives, being more conceptual, agree with Tsoukas who determines organisational knowledge as a collective mind, and Jones and Leonard who explain organisational knowledge as the knowledge that exists in the organisation as a whole. Most importantly, organisational knowledge is owned and disseminated by the organisation. To analyse knowledge in organisations, there are two important taxonomies of organisational knowledge that need to be discussed. The following section addresses these two important taxonomies in depth to set the record straight on the importance of knowledge management within companies.
Tacit and Explicit Knowledge
Why would executives care whether knowledge is tacit or explicit? The simple answer is that tacit knowledge is not shared and sometimes bottled up in individuals causing a bottleneck in the organisation. If knowledge can be categorised as tacit and explicit knowledge then how can executives manage knowledge to enhance productivity?
Since tacit knowledge is knowledge that exists in the minds of organisational members which is gained from their individual experiences, and is difficult to formalise and transfer unless directed to do so, executives need to pinpoint and encourage this type of knowledge to be drawn out or be shared. On the other hand, more controllable, explicit knowledge is knowledge that is highly formalised and codified, can easily be recorded and communicated through formal and systematic language, and manifested in rules and procedures providing the necessary tools and processes for executives to manage. It can also be captured in expert systems and tapped by many people throughout the organisation via intranet. Executives know that explicit knowledge is more formal and has the potential to be shared more easily. When it is expressed in words and specifications, it is much more useful compared to tacit knowledge. Executives can have organisational development experts to use focus groups to draw out follower’s tacit knowledge.
Private and Public Knowledge
Since executives are constantly dealing with the public, especially if they are a publicly traded company, the private and public knowledge is something they pay a great deal of attention to. Of course, this is not new but definitely worth mentioning. For example, a scholar by the name of Matusik, argues that knowledge in organisations can be categorised as either private or public knowledge and can be advantageous to executive decision-making. A firm’s specific knowledge must be guarded and should not be shared with the competition. Any leak of such information may expose the organisation and increase the operational risk. Contrary to private knowledge, public knowledge differs and it is not unique to any organisation. Public knowledge may be an asset and may provide potential benefits when posted on social media and other means of communication.
It is important for executives to consider the ownership of knowledge as a factor and as a significant contributor to the knowledge of organisations as a whole. Moreover, knowledge emerges in two additional forms, including the knowledge that is only accessible by one company and the knowledge that is accessible to all companies. The best approach to knowledge is for executives to know which knowledge is to remain private and which is to go public. A mistake in this area may be vital to the organisations and executives must choose wisely.
The Importance of Knowledge Management
Executives now are spending more time concerned about operational risk than ever before. Operational risk is an operational approach to represent knowledge management but in this case, it seeks to apply organisational knowledge in order to satisfy and exceed customer’s expectations. Similar to customer relationship management, knowledge management is an enabler for identifying and satisfying customer’s needs and manifests itself as a significant driver that motivates the development of relationships with customers. Scholars have proven that executives can use knowledge management to improve customer satisfaction through acquiring additional knowledge from customers, developing better relationships with them, and providing a higher quality of services and/or products for them.
The key function of knowledge management is to help executives use it for employee development. In this context, training has become the forefront to success for organisations worldwide. The more training opportunities they provide for their employees, the better and higher return on investment to shareholders. Why is this, you may ask? Because learning is a process that leads to acquiring new insights and knowledge, and potentially may correct sub-optimal or ineffective actions and behaviours that cause companies to spiral out of control.
Executives have found that organisational learning as modifying behaviour results in newer insight and knowledge. Thus, changing existing behaviours of followers will generate new knowledge, and is, therefore, a key factor in improving a firm’s competitive advantage.
How can we establish the relationship between knowledge management and organisational learning? Well, one scholar by the name of Bayyavarapu suggests a learning-based approach to knowledge management to understand how organisational learning is related to various processes of knowledge management. More importantly, the effective implementation of knowledge management requires learning and sharing of best practises and experiences among employees and thus enhances overall organisational performance. However, a more comprehensive model needs to be introduced to put various aspects together of potential contributions to organisational performance. For example, an industry research conducted by Lau and Tsui show that effective organisational learning requires various processes such as knowledge acquisition, collaboration, dissemination, sharing, generation, and storage to acquire knowledge within an organisation. Knowledge management improves organisational processes through various practises and can also enhance organisational learning that increases both follower engagement and personal development.
Knowledge Management is the Key to Firm Performance
Executives today realise that knowledge is one of the most strategic factors for organisations from a competitive standpoint. The question lies in how to maintain, store retrieve, and protect it. This has been a focal point of organisations since the corporation was first initiated and will always be an ongoing issue for leaders. Knowledge creation and utilisation are pertinent to an organisation’s success, thus, executives create new ideas and knowledge for innovation and to motivate employees to solve their current problems in a more innovative manner. The acquisition of new knowledge is an ongoing process and can be essential to identify the needs of customers and recognise changes in the business environment.
Executives then integrate knowledge internally to enhance the effectiveness and efficiency in various systems and processes, as well as to be more responsive to market changes. In knowledge integration, the accumulated knowledge is shared and synthesised with an aim to providing higher quality of products and services. This can improve financial and non-financial performance in various metrics such as the customer focus, the quality of products and services, and the organisational revenue. Shared knowledge can contribute to the development of a learning organisation in which people continuously grow and develop personally and professionally.
Executives must also curtail the knowledge within organisations. The integrated knowledge needs to be reconfigured to meet environmental changes and new challenges and at the same time, should not be leaked to the competition in any shape or form unless agreed upon by senior executives. Therefore, knowledge reconfiguration enables organisations to actively respond to environmental changes through developing interactions and awareness from the external environment. Knowledge management can, therefore, improve financial and non-financial performance through increased sales, customer satisfaction, learning opportunities, innovation, and the quality of products and services.
Many executives are familiar with knowledge management surveys developed by scholars and this article is not about measuring aptitude or defining knowledge management. This article is about getting the information needed by the executives worldwide to be more successful. Some scholars emphasise that knowledge management is tantamount to executive’s success. Knowledge management has been a focal point of executive’s span of control but has not been associated enough with firm’s performance to make it an integral part of the organisational success. I found that knowledge management is a latent concept but one of great importance for the executives. From a scholar’s corner, I place a great deal of emphasis on the literature on knowledge management as a significant indicator for organisational performance. Thus, this article adds to a relatively small body of literature but pays homage to the scholarly contributions.
About the Author
Mostafa Sayyadi, CAHRI, AFAIM, CPMgr, works with senior business leaders to effectively develop innovation in companies, and helps companies – from start-ups to the Fortune 100 – succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to HR.com and Consulting Magazine and his work has been featured in these top-flight business publications.
1. Bayyavarapu, H.B. (2005). Knowledge management strategies and firm performance, Doctoral Dissertation, The University of Western Ontario, Canada.
2. Jones, K., & Leonard, L.K. (2009). From Tacit Knowledge to Organizational Knowledge for Successful KM. In W.R. King (Eds.), Knowledge Management and Organizational Learning, (pp. 27-39), Berlin: Springer.
3. Lau, A., & Tsui, E. (2009). Knowledge management perspective on e-learning effectiveness. Knowledge-Based Systems, 22(4), 324-325.
4.Matusik, S.F. (1998). The Utilization of Contingent Work, Knowledge Creation, and Competitive Advantage. The Academy of Management Review, 23(4), 680-697.
5.Ruggles, RL. (1997). Knowledge management tools, Boston, MA: Butterworth-Heinemann.
6.Tsoukas, H. (1996). The Firm as a Distributed Knowledge System: A Constructionist Approach. Strategic Management Journal, 17, 11-25.