Development of Knowledge Management Practices in Consulting Firms
Abstract – Knowledge became one of the most important resources, and organisations should decide which methods should be used to achieve competitive advantage. Knowledge management (KM) is an approach the exploit all possibilities of organisational knowledge. This paper analyses the enablers that are certain factors that can support the effectiveness of different KM processes: strategic issues, organisational issues, technological issues and performance analysis. Organisational introduce knowledge management by using different patterns of these enablers. It is argued that organisations should use enablers based on their goals and possibilities. Even organisations can successfully manage their knowledge for a certain time with incomplete use of enablers, the integrated use of the enablers is required for an effective KM practice, based on two case studies from the consultancy sector. Based on empirical 3 applied KM strategies pairs are identified: Pioneer-Follower, Voluntary-Pressured and Reorganised-Founded strategies.
Keywords: KM enablers, KM strategy
1.Introduction
In the last decades, knowledge became one of the most important resources of organisations, and competitive advantage is based on the effective management of organisational knowledge (Sanchez, 2001). In the past, management researches analysed the alignment of the strategy and the environment (Porter, 1980, 1985), but with the emergence of the resource based view of the firm (Wernerfelt, 1984; Grant, 1991) and core competence theory (Prahalad and Hamel, 1990), researches explore the internal possibilities of organisations.
Knowledge is interpretable as a special resource that has a strategic importance, if knowledge supports the competitiveness of the organisation (Zack, 2002). The knowledge based view of the firm concentrates to this resource, and the goal of knowledge management is to accomplish the effective management ways, and support the organisational strategy.
The knowledge based view of the firm emphasises the role of management in supporting the cooperation, and coordination of the knowledge processes. Grant (1996) indicates the possible conflict between the knowledge based approach and other organisational approaches, especially the bureaucratic and information processing models. The knowledge based approach highlights the connection between knowledge as resource and input, and products and services as output (Mueller and Dyerson, 1999).
Theories are the reflection to the changes in the competitive markets, in the “New Economy”. With the spreading of Globalisations borders are open for capital, products, services and workforce, while the technological developments can reach different geographically markets fast. This openness means more possibilities for companies, but in the same time, they have to face increasing competition. Markets and customers have higher expectations related to quality, design, uniqueness and novelty. Therefore the life cycle of products and services have shortened (Alleen ,1997; uit Beijerse, 1999).
The question is, whether the companies have already realised the strategic importance of knowledge, and whether they are prepared to apply new methods. In the old business model internal and external environment is roughly stable, the basis of production is labour and capital. The changes are controllable, the future is calculable. The organisational strategies, structures, external relations and processes are based on these assumptions.
The goal of this paper is to explore, how companies adapt to the changes of the environment, what kind of patterns are used to introduce a knowledge-based view. Another question is what kinds of enablers are used to support the knowledge-based activities.
2.Research Framework
There are several models, approaches to analyse the enablers of the knowledge management practices (van der Spek and Spijkervet, 1997; Stankosky, 1999; Apostolou et al, 2000; Ehms and Langen, 2000; Wiig, 2000; Gongla and Rizuttu, 2001; Handzic and Jamieson, 2001; Mertins et al, 2001; Rubenstein-Montano et al, 2001). Early KM explanatory frameworks focused on sub tasks of knowledge management processes (Heisig, 2002). In the last few years, holistic, integrated frameworks have been developed. In these models, not only the KM activities, but their environment and enablers also appear. Knowledge management enablers are certain factors that can support the effectiveness of different KM processes: evaluation, process, leverage, and development. The used research model of knowledge management enablers (Figure 1) consists of four groups of enablers.
Figure 1: Framework of KM Enablers (based on: Fehér, 2003)
Strategic issues present the consciousness of organisations about knowledge, as strategic value. The assumption is that those organisations that have a knowledge strategy that includes the management of knowledge activities are more successful (Truch and Bridger, 2002). Therefore organisations should decide about the importance of knowledge as resource, as value that builds into the organisational processes. The question is judgement of knowledge management, and the connection to the organisational strategy.
Knowledge management strategy of organisation defines the method of use of organisational knowledge that requires to support organisational strategy (von Krogh et al, 2000). There are different approaches of developing a knowledge management strategy: Nonaka and Takeuchi (1995), Davenport (1997) and Jones (2000) emphasise the role of middle management in initiation of knowledge management. Zack (1999) analyses the external, while Ali et al (2002) the internal knowledge position of the organisations, as basis of KM strategy. Hansen et al (1999) and Sveiby (2001) appoint the most widely known strategic choice: personalisation and codification KM strategies, but several researcher denies the necessity of compulsory option (Wiig, 1999; Truch and Bridger, 2002; Adelmann és Jashapara, 2003). Bierly and Chakrabarti (1996) and Zack (1999) analyse the effectiveness of internal and external knowledge. Another view of this approach is analysing the shift between exploiting existing knowledge, or acquiring and developing new knowledge (March, 1991; Kogut és Zander, 1992; von Krogh et al, 1994; Hedlund, 1994; Volberda, 1996; Krogh et al, 2000; Sanchez, 2001). In their recent article, Nonaka and Toyama (2003) argues that the knowledge management strategy of an organisation is a reflection for the internal possibilities, and external position of the firm. Earl (2001) and Klimkó (2001) explore the different schools of knowledge management, based on the used approach, and the implemented processes.
Technological issues highlights the relationship between ther organisation and the application of technological solutions. Technological solutions consist of wide interpreted knowledge management systems (KMSS) that include every technological solution – not only IT – that could support KM processes. Organisational issues include the organisational structure that supports processes, making use of motivation tools, incentives, knowledge sharing and development of organisational culture, the leadership style, and the role of HR management. These enablers provide the organisational environment of the KM practice.
Performance analysis is the method that is applied the least of all at KM enablers. Direct measurement of KM effectiveness is complicated, therefore rarely used. The continuous monitoring and feedback system can not only realise the possible problems, but to provide the possibility to enhance processes, or to develop enablers.
3.KM Practice Development at Consultancies
In this part, two consulting companies are described, compared and analysed, how each company changed the organisational processes to adapt to the new, knowledge intensive environment. Knowledge is the main asset of consultancies, their competitive advantage is based on how they are able to manage this strategic asset. They were, and are the pioneers of investing into development of knowledge management practices, methodologies and tools to support their employees, and to enhance their performance (Apostolou and Mentzas, 1999; Hansen et al, 1999).
The cases are analysed with a focus on the knowledge enablers. Because of the different possible patterns of the organisations this research is performed as an explorative research. Based on Yin (1994) and Eisenhardt (1989) the case studies are useable to validate and develop the theories, and analyse contemporary events. Elenurm (2003) argues that qualitative research is more suitable for descriptive and explorative researches, and more appropriate in the research of such a new concept as knowledge management.
The investigated companies are dominant players of the Hungarian IT and Management consulting sector. Although, both firms show the typical properties of consulting companies, however some differences and uniqueness can be also found. Information about these companies has been collected mainly by structured personal interviews, personal experiences and document analysis. Inasmuch as these case studies present some problems and difficulties of the companies and the researcher wants to keep the trust of employees and managers of these firms, the names of the organisations are altered.
3.1.Case 1: Pioneer in trouble
“Consult-One” is the Hungarian office of an international consulting company that has a major practice in IT and management consulting area. The office was opened in 1989, simultaneously with the political and economic transition in Hungary, similarly to the other (at that time) big-six companies. Consult-One is a traditional consulting company, with about 100.000 employees and over 100 offices worldwide, even as in the Hungarian IT and Management Consulting department around 100 consultants are working.
3.1.1.Knowledge and strategy
This multinational organisation has high quality standards, and it is one of the first few companies that have realised the importance of knowledge as a strategic resource, already in the early 1990s. Since 1996, knowledge management has an important role to accomplish the strategic goals of the organisation.
As a first step, the management emphasised the importance of the standardisation of work processes and applied methodologies that are used in every international office. Despite of the hard belief of the management that valuable knowledge exists in the head of the employees, a global electronic knowledge repository system has been implemented. The organisation is proud both of its well-educated, classified employees and of the advanced technology. Because of the several international departments executives forced the codification knowledge management strategy, thereby the importance of the personal interactions decreased.
Although the company is a pioneer of knowledge management, the introduction of a new approach was not easy, similarly to other organisations. Not only, the technology had to be implemented, but also the organisational culture had to be changed. At the beginning the concept of knowledge management was widely emphasised, especially for the employees, however to the clients as well. Consult-One successfully built the image of a “knowledge management expert organisation” that resulted several client assignments to plan and develop the KM system of several companies.
3.1.2.IT solutions
The company implemented a central knowledge repository system, based on the Lotus Notes that was very popular and effective solution for the fulfillment of expectation from KM and is used by several companies. The databases of this system are accessible both via the organisational Intranet system, and from outside the firm by several step of authentication and identification, authorization method. With these options remote work is available for employees, although these are mostly used by executives.
The goal of this system is to share the gained experience internationally, in order to avoid the “reinvent the wheel” syndrome, and to speed up the problem solving, and solution finding processes. Tailor made solutions for clients, and fast reaction time were expected. Because the organisation has several department around the world, the fastest and probably the most effective knowledge leverage method is a central knowledge repository. Consultants, project leaders write down their experiences in a specific format attached by keywords and suggested topic. The submitted documents (new knowledge items) are supervised by regional knowledge centres, where field experts analyse, summarise and update the incoming documents.
In the Hungarian office the central knowledge repository was used. Employees received regularly an update reminder about the most important knowledge bases, but there was not any feedback about the new knowledge items, submitted by the office consultants. Although the international judgement of the system was rather good, employees in the Hungarian office did not like it as much, as the American workers, because it was very hard to find relevant, and up-to-date, useful knowledge items.
3.1.3.Organisational solutions
Consult-One has a traditional, typical “consulting company”-like matrix organisational structure: in every geographical office there are different service areas, which are relatively independent of the others. By projects the different service areas could be combined, but regularly the project workers are from the same area, although not definitely from the same country.
The hierarchical structure is also typical and traditional. Most of the new employees are fresh graduates, who begin their career after a few months long training at the junior consultant level. Based on their skills and performance, they have the possibility to be a senior consultant, a manager and a partner. It is also possible to continue the career abroad, as an international consultant, or region manager.
Before the introduction of the knowledge management approach, the organisational culture was based on the appreciation of the experts. Employees believed in personal competences and expertise, while the organisation expected the share of these, and the use of “canned-knowledge”, standardised processes and methodologies. Because of this conflict, knowledge sharing was motivated by different incentives, and the contribution to the organisational knowledge base became an important part of the personal appraisal process.
In the Hungarian department – which organisational structure is absolutely similar to the international standards – the executives were committed to the goals of the organisational knowledge management efforts. Therefore the new approach was strongly communicated internally to the employees. At the same time the mid-level management did not support these efforts, because they believed in the local knowledge, and because they felt that it queries their expertise. Based to the codification knowledge strategy most of the new employees are graduated young talents, directly from the school, without any work experience. A few new employees from other companies are only in the local top management.
3.1.4.Problems and changes
After the successfully introduction of the knowledge based approach at Consult-One, and after a few years of successfully considered practice, some problems were realised: the knowledge management practice is not so perfect, as it was expected. Although a knowledge-oriented organisational culture displaced the old one, this culture was fare from adequate. Firstly, because the old values of the organisation, like personal knowledge, competence, expertise disappeared. Secondly employees are more likely reusing the “canned knowledge” of the knowledge repository without radical changes, rather than developing it.
The incentives and performance evaluation systems make the employees submitting knowledge items, but the quality and the value of these items are rather low. There is a central unit for the maintenance of the knowledge base, but it is almost impossible to distinguish between the worthy and unworthy items, because of the huge number and the diversified topics. Furthermore both the management and the employees felt, that experts are more useful, and can create more profit in client projects than in the maintenance team. Therefore the possibilities of the maintenance activities are bordered.
In the national and regional offices the problems were more serious: although the top management of the offices supported the knowledge-oriented approach, neither the central corporate culture, nor the power of the local culture was strong enough. Especially, if the fluctuation in the Hungarian office is rather high: the expected employment period of a fresh graduate, as a new employee is around 3 years. Therefore new employees do not feel that they should support the knowledge management activities of Consult-One. “We feel almost as a punishment the handling of the knowledge base”, argues a young employee in Hungary. But while the use of the official knowledge repository is ignored, personal knowledge bases, and informal knowledge sharing get more importance, although these are not neither controlled nor coordinated.
While the central department of knowledge management realised the global quality and usage problems of the knowledge repository, the Hungarian management did not realised any problems. Incentives were cancelled centrally, and it was believed, that the existing culture and habits will vitalise the system. It was expected, that the quality of the knowledge items will arise without forced submission, and it will solve also the behavioural problems. The outcome was a total failure, because of the weakness of the culture: the number of the submitted items is almost dropped to zero, and the usage is lower than ever.
On technological side, the structure and search methods of the knowledge base were also enhanced, in order to provide easier access to the relevant knowledge items. “Now, it is much easier to find a relevant item, the structure is more comfortable” say the employees, but they are still missing the up-to-date content. It seems that the problem handling efforts did not reach their goal.