University of South Wales

Business School

Section B: Strategic Knowledge Management (ST4S39-V1)

Lecturer: Christodoulos Kakouris

Literature Review

“Before we measure something we must ask whether we understand what it is

we are trying to measure.” (Gray et al, 2015)

Itai Madzivanyika

18 August 2017
Contents

Introduction............................................................................................................................ 2

Analysis.................................................................................................................................. 3

Knowledge Management........................................................................................................4

Intellectual Capital & Social Capital........................................................................................6

Communities of Practice.......................................................................................................10

The Challenge of Performance Measurement......................................................................12

Conclusion........................................................................................................................... 13

References........................................................................................................................... 14
Introduction
In today’s knowledge society, there has been a shift on the assets that define how

well an organisation continually develops superior value than that of the competitors.

As Volkov and Garanina (2007, p.539), Bhatti and Zaheer (2014, p.188) accentuate

it is the intangible assets that now define the value of an organisation. The value that

accrues from the use of machinery hinges on the effective use of an organisation’s

knowledge base.

The purpose of this paper is to expound the validity of the statement by Gray et al

(2015) that anything which needs to be measured has to be understood as to the

purpose why it is being measured. Performance measurement hence the thrust

behind measurement of something has always been in existence since time

immemorial. This review aims to critique the implication of the statement by critically

evaluating how knowledge management, intellectual capital and social networks,

communities of practice/ interest and performance measurement define the quality of

organisational knowledge base which forms unparalleled competitive edge. This is a

theoretical article which shall critique the above topical areas through support from

scholarly articles and use practical examples in the current work place scenario or

experienced elsewhere in my professional career to reinforce the thinking behind

these theories. It will wrestle to find the relevance of performance measurement as

supported through organisation learning which contribute to the company

competitive advantages enshrined in the organisation’s processes, ethics, and code

of conduct, work systems, culture, and knowledge retention. In this social setup there

is critical evaluation of communities of practice which are built up, tacit and explicit

knowledge management systems which are developed and the outcome of the

social interaction taking place is evaluated using performance indicators for the
purposes of benchmarking, reward and recognition and improvement areas in work

systems.

Analysis

The analysis of the hypothesis by Gray at al shall be to validate the positive benefits

that accrue due to performance management as a tool that benefits decision making

in improving processes, work systems, benchmarking, reward and recognition as

opposed to the demerits that ensure due to undertaking the process of performance

management. The theoretical analysis is based on scholarly articles on knowledge

management systems, intellectual or intangible assets, performance management

and the correlation between the topics is defining. The analysis will delve on the role

played by each of the four topic areas in defining my company’s knowledge base.

The deep understanding of the topics is important is defining how well each of the

areas shape the organisation by providing invaluable tools which ensure that the

organisation continuously seek to uniquely develop products which are non-imitable

by competitors. As Volkov and Garanina (2007, p.540) quote from (Bouteiller, 2002),

intangible assets form the core strategic asset for value creation in a firm. The value

a firm derives from the management of the intangible assets through communities of

practice forms the premise of this theoretical research paper. The analysis will reflect

on the value added to my organisation in regards to management of its knowledge

base.

Knowledge Management

Today’s society is faced by a challenge of dwindling resource base but ever growing

population which is conscious about their needs and expectations. As such the way
of business operations is to minimise resource usage whilst delivering an ever

growing expectations by the customer. As customers become more conscious about

their needs and expectations it puts pressure on organisations to provide superior

value than that of the competitors (Davenport and Prusak 2015, p.10). This is also

supported by Stemke (2004, p.2) on Essex Police case study which highlights that

the support services was faced by dwindling resource base due to global economic

downturn but the government still demanded performance results using minimal

resources.

As Davenport and Prusak (2015 p.6), Alavi, Smith and Liedner (1999, p.2) purports

there are benefits that can accrue from the use and correct amount and type of

knowledge with support focusing on the creation, gathering and dissemination

organisational knowledge management hence Knowledge Management Systems

(KMS). Knowledge management therefore entails the coding, transmission through

individual development programs (IDP) policies, routine procedures and manuals

aimed at consolidating the organisational knowledge base. This has the potential of

integrating IT into the mix through use of intranet, internet, data warehouse etc.

However, as Nonaka (2007, p.1) outlines this is inclined to the westernised

management school of thought which had been existence since the days of Fredrick

Taylor and Simon which represents objective approach to knowledge which can

easily be measured in terms of financial performance resulting from improved

efficiencies. Today’s organisations are faced by a dynamic and highly competitive

environment and as Nonaka (2007, p. 1) highlights only companies that consistently

create knowledge can survive in such a kind of environment. Nonaka had a different

school of thought which represents a paradigm shift which has been evident in the
success of Japanese companies like Honda, NEC, Mutsushita, Canon and Sharp.

This is the hidden knowledge which can be transformed to the objective knowledge.

Tacit knowledge as it is coined is the harnessing of subjective, intuitive thoughts and

availing them for benefit of the organisation as a whole.

As covered in earlier discussion above tacit and explicit knowledge systems are

evident in the case study by Marr and Creelman (2015. p.2) at Essex police where

knowledge was gathered through consultation with the frontline officers in the

formulation of the organisation strategy. It was also gathered through one on one

interviews with high ranking police officers and senior management and through

iterative workshops which covered priority areas which address the police mission.

The tacit knowledge is also found in the police culture which has defined their way of

operation for a long time. As concurred by Botha et al (2008), Nonaka(2007), Alavi et

al(1999, p.2), Alavi and Leidner(1999), (2001) who define tacit knowledge as being

enshrined by the working culture , beliefs, capabilities, skills transferred through a

socialisation and mentoring. In my organisation the human capital is the

organisation’s enduring advantage. It is the through the people where systems of

work have been developed and are continuously refined. New product brands have

been developed through the organisation strategy of allowing innovation and

supporting the people associated with development of those products.

Marr and Creelman (2015. p.2) found out that this as explicit knowledge is found in

the statistics on daily, weekly and long term data crime trends. Data trends are

managed in my organisation for the purposes of profit and loss tracking and

improvements and benchmarking. The data is preserved in computer databases for

future referencing.
Another type of knowledge exists in work systems Embedded knowledge systems is

also evident which are embedded in the code of conduct, processes of dealing with

crime and ethics by the police force all which are aimed at supporting the police

mission. As Horvath 2000, Gamble & Blackwell 2001 highlighted knowledge is

locked in the cultures, process and systems of work.

Intellectual Capital & Social Networks

There are different names which intellectual capital is referred to, with some scholars

such as Harrison and Sullivan (2000, p. 34), Sullivan (2000, p. 228), Nahapiet and

Ghoshal (1998, p. 245), Edvinsson and Malone (1997, p. 22), Brooking (1997, p. 13)

referring them as Intellectual capital while some scholars such as Itami (1991) and

Hall (1992, p. 136) referring to them as “intangible assets” and “intangible asset”

respectively. Volkov and Garanina (2007, p. 540) accentuate that accounting

scholars refer to them as “Intangible Assets”, economics scholars referring to them

as, “ Knowledge Assets” and “ Intellectual capital” in law literature. Despite all these

definitions Intellectual capital or intangible assets can be referred to as the ability of

an organisation to convert tangible assets into value added goods and or services as

concurred by Bhatti and Zaheer(2014, p. 188). The quality of human capital an

organisation has implies the competitive advantage in providing superior value than

the competitors. Rastogi (2003, p. 230) defines it as the ability of an organisation to

exploit the internal capabilities of its human capital by coordinating, master-minding,

retaining and distributing its internal intellectual knowledge in pursuit of organisation

strategy by developing superior value than that of the competitors. It is categorised

into three categories major capital ratios which are human capital ratio, customer

capital ratios and structural ratios as described by Bucklew and Edvinssion (2001, p.
4). The human skills base emanates from the knowledge employees acquired before

joining the organisation and which they amass through cross fertilisation when they

join the organisation. The cross fertilisation of the team aims at skills gap closure

which overly improves skill levels in the organisation.

In my organisation the knowledge base improvement initiative has been formed

around Capability Assessment Programme (CAP) and SABMiller Manufacturing Way

(Man Way). While CAP guides have scoring matrices for individual positions that are

applicable within the organisation Man Way focuses on Global Evaluation of

Manufacturing Standards (GEMS) tailor made for the organisation’s beer industry.

The GEMS are the universally accepted standards applicable to manufacturing

industry. From onset the recruitment drive is aimed at providing the organisation with

the best brainpower than that of the competitors. As such core competences for a

particular position which can be improved upon are considered as minimum

requirements for the shortlisting of the job position. After assuming a post a series of

CAP assessments are carried out as part of formative assessments before a

summative assessments is conducted by subject matter experts by the organisation

hub. CAP regularly assess the competencies and individual developments plans are

aimed at raising the skills gaps tailor made for improving business operations. This

has been a unique and defining strategy in improving the levels of individual,

community and organisational competence in the organisation.

Structure capital are the procedures and operating structures of the business used in

changing intangible knowledge base into value created assets. As Volkov and

Garanina( 2007, p. 540), Bhatti and Zaheer( 2014, p.188) accentuate it is in the form

of processes, operating procedures, ethics, codes of conduct, company strategies

promoting participation, reward systems for achievement or lack of, support facilities
such as IT. In my company structural capital is in the form of ERP system (SAP)

which is aimed at consolidating all the company activities and providing checks and

balances to the activities. Intellectual Capital also manifests itself in the Standard

Operating Procedures (SOPs) which are used for product and service realisation.

SOPs ensure consistent delivery of product and or services with the violation

penalties defined in the company code of conduct. The company also uses

internationally recognised system of work such as ISO, NOSA, and OSHAS for

benchmarking and building systems of operation. The benefits of using such

systems are clearly traceable and understood from organisations which use them

which the organisation can benchmark with.

The third form of measurement of Intellectual asset is relational capital. As Bhatti and

Zaheer (2014, p.188), Bontis (2008) supports it the organisation’s relationship with

its internal and external customers which are aimed at increasing the organisation’s

growth and formulation of mutually beneficial relationships. In my organisation

Service Level Agreements (SLAs) are signed with suppliers ensure long lasting

support partnerships which provide a win-win situation. This has provided the

organisation with reference points in the breach of such service agreements.

However the organisation has been found wanting in most instances due to it not

honouring their part of the bargain especially on paying its suppliers in time due to

harsh economic environment. The organisation has also formed the procedure for

external communication with the company secretary as the responsible person for

external communication. This is aimed at preserving the company emerge though in

other instance it covers up for the misdeeds of the organisations. The perception of

the general populace about the company is good though the company has not been
spared by the economic downturn which has bedevilled the nation for over two

decades.

Intellectual capital has therefore defined the organisation in developing superior

customer value than that of the competitors and enabled the organisation to retain

the skills base which has defined the company over the years. My organisation has

been able to develop new beer brands which has appealed to neighbouring

countries to Zimbabwe such as Zambia, Mozambique, Botswana and Malawi with

similar product offers now being extended by sister beer plants in Ghana in West

Africa. The company’s commitment in developing the skills base so as continuously

adapt to the ever changing business environment has left its rivals awed by its level

of competitiveness. As highlighted by the discussion above the three forms of

intellectual capital have been blended and understood from a strategic level and

mutually benefits for the organisation and its support partners.

Communities of Practice (CoP)

As Das (2017, p.3) defines it CoP is active group of self-chosen members who

continuously engage to share learnings and expertise in a particular common field of

study. Members continuously seek engage and remain relevant to the group which

they fill they belong. Wenger and Tyner (2011) , Wenger(2002, p. 1), Davies et al

(2017) identify the common domain, community and the practise as the key

characteristics defining a CoP. Eckert (2001) accentuate that the participation in

such a network as voluntary. From the case study studied at Chevron Texaco

(Stemke 2004) these key attributes are manifested through a community/ network

that has a leader and has voluntary membership of individuals with the similar skills

or responsibilities who meet regularly and allow members to consult with subject
matter experts, develop solutions and improvements to common problems,

disseminate learnings in their common area of work hence forming the practises that

define them. Stemke (2004, p.2) CoPs differ from organisation work in that

organisational network as described by Wenger and Tyner (2011), Team EB (2011,

p.1) as a “…. set of relationships, personal interactions, and connections among

participants, viewed as a set of nodes and links, with its affordances for information

flows and helpful linkages.” Stemke (2004, p. 2), highlights organisational network

formed for strategic intent with chosen leaders and members having a defined

deliverables with funding across BUs. However these can be disbanded as soon as

the task is accomplished or the desired goal is not met.

According to Wenger, McDemont and Synder (2011, p.5) CoP are natured through

encouraging different levels of participation, participation at all levels, open dialogue

inside and outside , public and private partnerships, At Chevron Texaco ( Stemke,

2004, p.2) dialogue is facilitated through yearly forums, regular teleconferences and

sharing of successful ideas. As highlighted by Wenger, McDermott and Snyder

(2011, p.5) there is management involvement with clear objectives and targets for

the network to achieve set goals though this is less noticeable. Subject matter

experts play a role of stimulating the networks through problem solving and

suggesting members who should be part of the Operational Excellence network

(Stemke, 2004 p.3)

According to Stemke (2004) knowledge sharing is done through web based learning

tools that are shared with others. Subject matter experts come in handy in providing

knowledge on problem and critical areas. Metrics have been developed for
performance measurement on issues addressing safety through Operational

Excellence Strategy. Metrics save as performance indicators on safety performance

which enables networks to adjust their performance and close the gaps. In my

organisation the concept of communities of practise has been supported though

mostly at higher level with financial support in place for managers to attend

conferences, research forums and access to subject matter experts in shaping these

practises. However such initiatives have not been largely supported at a lower level

which is worrisome trend.

The Challenge of Performance Measurement

The challenge of business performance measurement is what you measure is what

you get. As managers and researchers tried to grapple with short comings in

measuring KPIs that matter most has measured those which have larger financial

implications. The development of the balanced scorecard (Kaplan and Norton 1992,

p. 1) has been a welcome development though it does not present a cook book

recipe as the scorecard has to be tailor made for a particular application.( Kaplan

and Norton 1992, p.1, 1998, 2001) In the case study example by Marr (2015, p.1-6),

the police support services developed performance indicators through the help of a

consultant. One on one interviews were done with chief Constable, high ranking

officers and senior managers. Workshops were done to iterate priority areas which

support the police mission. From these workshops the key themes and strategic

objectives were used to develop the Key Performance Indicators (KPI) Gray et al

(2015, p. 3). By using the Key Performance Questions (KPQs) development

selection. The KPQs address the KPI demands through a structured way of

addressing organisational goals aimed at meeting KPI. KPQs aim at properly

defining the nature of the problems hence ability to address the root cause of the

problem. It is also important to note that the road shows as a way of communication

strategy were used to involve the grass roots involvement in contributing ideas to

formulation of the organisation strategy which not had been done before.

In my organisation KPI have been adopted from good manufacturing practises in the

beer industry. Most of the KPIs have a financial measurement. The use of the

balanced scorecard is still at its infancy with performance measurement in

communities of practice and tacit knowledge to explicit knowledge still subjective

measurement. Only explicit knowledge has been defined in the value impressed on

code of conduct, SOPS, ethics, values which have been codified and improved upon

over the years.

Conclusion

Despite the several pitfalls which befall many organisations greater are benefits

which can be realised from systems thinking approach to performance management

be it in improving knowledge systems, understanding and improving intellectual

capital and improving communities of practice as an organisational strategy to

developing superior non-imitable value than competitors. What defines the success

of the strategy can be realised through accounting metrics which is the difference

between the book value of an organisation and the tangible assets of the

organisation. The success of strategy for human capital development can be seen

through innovativeness of the organisation in solving problems that arise from time to
time by developing corrective actions which have far reaching implications to the

company’s profitability. There has been limitations to this success due to company

holding on to redundant staff who are no longer value adding considering the

technologically changes that defines the knowledge economy. However this is

inclined on accounting standards. There is need to develop standards on measuring

tacit knowledge which is a subjective. The absence of universally accepted

standards on the measurement of such knowledge is an area which need to be

looked into which can improve standards for reward and recognition. The same goes

for Communities of Practice which breed tacit knowledge. Apart from accounting

standards no universally accepted performance standard has been developed for the

measurement of such activities. However the discovery of the balanced scorecard

has been a welcome development in measurement of business process

performance combining financial and operational measures. Knowledge has not

been able to be fully retained because the increase in competencies emanating from

IDPs should be matched by reward increases which have not been done due to the

skewed job market characterised by high labour lay off. In spite of these negatives

the organisation has accrued far much benefits amidst the myriad of challenges

which the organisation operates in hence the company has been able to define what

they wanted to measure in order to improve its knowledge base.

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