Managers’ Perceptions Of The Value
Of Knowledge Management
In Small And Medium Sized
Knowledge-Intensive Enterprises (SMEs)
Miguel Baptista Nunes1, Fenio Ananasingh1, Barry
Eaglestone1, Richard Wakefield2
University of Sheffield1
ABSTRACT:
This paper presents a study of knowledge management understanding and usage
in small and medium sized knowledge-intensive enterprises (SMEs). The study focus on managers’ perception
of knowledge management (KM) and has taken an interpretive approach, using two
knowledge-intensive South Yorkshire (England) companies as case-studies, both
of which are characterised by the need to process and use knowledge on a daily
basis in order to remain competitive.
The case studies were analysed using a qualitative research methodology,
composed of interviews and concept mapping, thus deriving a characterisation of
understandings and perceptions of managers concerning the value of KM for
SMEs. The study provides evidence that,
while managers of SMEs, including knowledge intensive ones, acknowledge that
adequately capturing, storing, sharing and disseminating knowledge can lead to
greater innovation and productivity, they are not prepared to invest in the
relatively high effort of long term knowledge management goals for which they
have difficulty in establishing the added value. Thus, without changing managers’
attitudes and beliefs, KM activities within SMEs will continue to happen in an
informal way, rarely supported by appropriate and purposely designed
strategies.
1. Introduction
Knowledge Management (KM) is probably one of the most controversial concepts that has recently emerged in both IS and Business Studies literature. Apart from epistemological and ontological discussions on its nature and applicability, recent studies adopted a more pragmatic view of trying to establish its intrinsic value in organisational operation and management. The vast majority of these studies aim at establishing this value by identifying either a value added within the value chain of the business or a corresponding return on investment (ROI) (Lee & Yang, 2000; Carlucci & Schiuma, 2003; Appleyard & Kalsow, 1999). These studies may be particularly useful when addressing KM issues in large organisations but in small and medium knowledge-intensive enterprises (SMEs) this type of analysis is particularly difficult due to a general lack of systematic adoption of KM. In fact, it is impossible to measure value added or ROI of a strategy such as KM, when there has been virtually no success in systematically implementing it in SMEs. Curiously, the value of KM is generally accepted in principle by managers of SMEs, but general strategies are rarely implemented in practice. This is the case even for knowledge intensive organisations, where as suggested by van Zolingen et al (2001), SMEs usually include KM in their general strategies, “but strategy is insufficiently converted into decisiveness”, that is, translated into practice.
Thus, while KM seems to be successfully applied in large companies, it is largely disregarded by small and medium sized enterprises (SMEs). This has been attributed primarily to a lack of a formal approach to the sharing, recording, transferring, auditing and exploiting of organisational knowledge, together with a lack of utilisation of available information technologies. However, this very informality within SMEs can also be viewed as a strong motivation for adoption of KM, since it will affect dissemination and transfer of experiences and relevant knowledge to future projects and organisational development (Egbu et al., 2004). Specifically, like any large corporation, SMEs also need appropriate and up-to-date knowledge in order to compete. However, they tend to be more susceptible to problems of high staff turnover and knowledge retention. Thus, this knowledge should be appropriately managed, disseminated and retained in the company. Consequently, even though KM processes are onerous in terms of both direct and indirect costs, the consequences for an SME of not maintaining those processes can potentially make the SME vulnerable to knowledge leakage and consequent losses in efficiency, productivity and competitiveness.
Despite
the strength of the above argumentation, the lack of uptake of KM within SMEs
suggests that managers are currently not fully convinced of the advantages of
adopting a KM strategy for innovative purposes and business growth. Kerste & Muizer’s (2002) explanation
for this is that for SMEs, acquisition of knowledge is only interesting if this
knowledge can be easily obtained, disseminated and will result in pragmatic and
immediate increase in efficiency, higher profit margin or competitive
advantages. In other words, KM
advantages have to be clear and easily attainable, otherwise SMEs will continue
to focus on the traditional way of working.
However, there is currently a scarcity of information available on KM in
SMEs (McAdam & Reid, 2001) and thus it is very difficult to have a clear
view of the situation.
This
paper, presents the results of a study that aimed at addressing the gap in
perception of utility of KM and its actually implementation in SMEs. Since SMEs, more then any other organisation,
depend on the driving force of their managers, it was decided to try to
understand their current awareness, perceptions and requirements in terms of
KM. An interpretivist approach was
chosen, in order to acquire an in-depth appreciation of these
understandings. Therefore, a
questionnaire-based study was deliberately excluded in favor of a case-study
approach. Before initiating the
interviewing process, an exhaustive literature review was undertaken, in order
to gain an insight into the above-mentioned debates and to establish an
appropriate conceptual KM model for SMEs.
Accordingly, the paper is organised into three main sections. The
literature review is presented in the first, followed by a description of the
research methodology and design. Finally, results are discussed and conclusions
drawn.
2. Knowledge Management
Characterisation
From the
literature, definitions of knowledge vary widely. Furthermore, many articles in the KM field
often confuse knowledge with information, as identified by
understanding of or information about a subject
which has been obtained by experience or study, and which is either in a
person's mind or possessed by people generally
Postmodern schools of thought hold that
“knowledge of the world is not a simple reflection of what there is, but
a set of social artefacts; a reflection of what we make of what is there”
(Schwandt, 1997). In other words, there
is a meaning that people in organisations attach to acquired knowledge and
information that is associated with their work practices and experiences, as
well as their work environment and culture.
KM therefore is the management of such understandings, artefacts and
information sources. However, this very
generic definition will be interpreted by different individuals according to
their perspectives, epistemological assumptions, and specialisation. Consequently, this definition would mean
different things to different people. In
fact, KM itself is not without contradictions at both epistemological and philosophical
levels. Authors such as
Kontzer (2001) quotes Drucker to the effect that: “You can’t manage knowledge. Knowledge is between two ears, and only between two ears. When employees leave a company, their knowledge goes with them, no matter how much they’ve shared.”
2.1. Types Of Knowledge
Nevertheless, and despite the more purist
philosophical conceptualisations of knowledge, the literature in KM
distinguishes different types of knowledge in order to be able to propose its
management. Not negating the internal
nature of knowledge creation and construction, KM authors prefer to focus on
the nature of the captured knowledge that emerges from the process of knowledge
extraction and acquisition.
KM authors divide and typify knowledge in
different ways. For example, some
authors differentiate technical and strategic types, (Liebeskind, 1996). However, the more common characterization of
knowledge is tacit knowledge, explicit knowledge and implicit knowledge
(Srikantaiah & Koenig, 2000; pp. 223; Nonaka, 1994; Nonaka &d Konno,
1998; Cavusgil et al., 2003).
2.1.1. Explicit Knowledge
Explicit knowledge can be formalised and
represented, and thus articulated in formal languages. This is the type of knowledge that most
critiques of KM equate to information (e.g.
2.1.2. Tacit Knowledge
According to Ryle (1984; pp. 5-61), the
distinction between tacit knowledge and explicit knowledge has sometimes been
expressed in terms of knowing-how and knowing-that respectively; or in terms of
a corresponding distinction between embodied knowledge and theoretical
knowledge (Barbiero, 2002).
“On this account knowing-how or embodied
knowledge is characteristic of the expert, who acts, makes judgments, and so
forth without explicitly reflecting on the principles or rules involved. The
expert works without having a theory of his or her work; he or she just
performs skillfully without deliberation or focused attention. Knowing-that, by
contrast, involves consciously accessible knowledge that can be articulated and
is characteristic of the person learning a skill through explicit instruction,
recitation of rules, attention to his or her movements, etc.” While such
declarative knowledge may be needed for the acquisition of skills, the argument
goes, it no longer becomes necessary for the practice of those skills once the
novice becomes an expert in exercising them, and indeed it does seem to be the
case that, as Polanyi argued, when we acquire a skill, we acquire a
corresponding understanding that defies articulation” (Barbiero, 2002).
The term tacit knowledge was first coined by
Polanyi (1958) and refers to hidden or non-verbalised intuitive and
unarticulated knowledge (Cavusgil et al, 2003):
“the idea that certain cognitive processes and/or behaviours are undergirded by operations inaccessible to consciousness” (Barbiero, 2002).
More pragmatically, tacit knowledge can be
described as experience that is embedded in an individual such as perspective
and inferential knowledge. It includes
insights, hunches, intuitions, and skills that are highly personal and
difficult to formalize, and as a result are hard to communicate or share with
others. Tacit knowledge therefore cannot
be easily codified and thus is not readily transferable from one person to
another. It can only be
‘learned’ by close association over an extended period of
time. The core differentiation between
information management (IM) and KM lies in the assumption that tacit knowledge
forms the basis of intellectual capital of organisations (Srikantaiah & Koenig
2000; pp. 223) and needs to be expressed and managed. Traditionally, IM authors do not consider
tacit knowledge in their frameworks and models and focus on explicit knowledge
alone. Explicit knowledge is relatively
uncomplicated, therefore, it is with tacit knowledge that KM enters into a new
and unexplored field. According to
Srikantaiah & Koenig (2000; pp. 11) and Nonaka (1991) explicit and tacit
knowledge have a symbiotic relationship where the each contribute or benefit
from the other. In order for KM to be
effective it is essential that both explicit and tacit knowledge are present in
the organisation’s infrastructure.
This infrastructure may include benchmarking, training, sophisticated
information technology and a basis of trust and will vary depending on the
complexity of the organisation and its goals and objectives.
2.1.3. Implicit Knowledge
The concept of tacit knowledge is not
accepted without discussion by the opposing sides in the KM debate. In fact,
2.1.4. Definition Of KM
Thus, and in generic terms, the aim of KM
practices is to maximize organisational and individual knowledge by extracting
tacit and implicit knowledge and translating these into explicit knowledge,
which then can be interpreted, represented, codified, stored, retrieved, shared
and disseminated. Therefore, academics such as Srikantaiah & Koenig (2000),
Sanchez (2001), Firestone (2001b), Nonaka & Takeuchi (1995), Howells
(1996), Schultze & Stabell (2004) as well as a well known number of
multinational organisations and educational institutions have embraced the
concept of KM. Not that these
individuals and organisations reverted to a platonic objectivist view of the
world, but because it is agreed that KM must include processes of
interpretation, extraction, translation and acquisition of knowledge that are
not usually included in traditional information management (IM). Nevertheless, it is undeniable as stated by
Wilson (2002), that some KM use, both in organisations and educational
institutions, has been synonymous to IM and IS and that in some cases KM has
been promoted by consultants and companies through simple renaming of existing
solutions and technologies.
In general, KM in organisations should be
seen as the process of critically managing knowledge to meet existing needs, to
identify and exploit existing and acquired knowledge assets and artefacts and
to develop new knowledge in order to take advantage of new opportunities and
challenges (Quintas et al., 1997). In
holistic terms, KM must be seen as a strategy to manage organisational
knowledge assets to support management decision making to enhance
competitiveness, and to increase capacity for creativity and innovation
(Zyngier, 2004).
2.1.5. KM And Knowledge Intensive
Organisations
In relation to KM, Prichard et al. (2000)
argue that in addition to interest and dissemination undertaken by the
consultancy companies, KM has grown because of the emergence and reproduction
of research from established academic institutions which gave the concept
important credibility. But
realistically, KM emerged mostly due to the era of downsizing that
characterised the 1980s and early 1990s, when companies where aiming to achieve
a leaner organisation with fewer employees, through outsourcing of services and
systems. In addition to the reduction in
the staff force, mergers and acquisitions where forcing employers to realise
that the knowledge gained and developed over the years with their long-term
employees was being lost through early retirements and redundancies. This phenomenon was particularly important
for knowledge intensive organisations that were losing their chief assets when
employees left.
As defined by Alvesson (1995; pp. 6),
knowledge-intensive companies as opposed to labour-intensive or
capital–intensive companies are characterised by the following factors:
¨
significant
incidents of problem solving and non-standardized production;
¨
creativity
on the part of the practitioner and the organisational environment;
¨
heavy
reliance on individuals (and less dependence on capital) and a high degree of
independence on the part of the practitioners.
¨
high
educational levels and a high degree of professionalisation on the part of most
employees;
¨
traditional
concrete (material) assets are not a central factor. The critical elements are in the mind of
employees and in networks, customer relationships, manuals and systems for
supplying services;
¨
heavy
dependence on the loyalty of key personnel and- this is the other side of the
picture –considerable vulnerability when personnel leave the company.
Consequently, the potential loss of key
personnel lead to the fear that the organisation could lose their competitive
edge, which was dependent on the knowledge acquired and developed by these
employees. This is particularly crucial
for SMEs, which traditionally rely heavily on particular individuals and lack
the recruiting capacity of large organisations.
Realistically, this was the main reason behind the development and
growth of KM concepts, models and systems.
Companies soon discovered that there is a need for systems that enable
the retention and exploration of knowledge developed in the organisation over
time by these key personnel and to develop and establish methods which allow
for the sharing of this knowledge (Prichard et al. 2000; pp. 3; Srikantaiah
& Koenig 2000; pp. 11). However, in
practice, managers of SMEs are still very reluctant in taking KM principles in
their strategic thinking and daily routines (McAdam & Reid, 2001; Sparrow,
2000). This study aims top explore why.
3. Methodology
3.1. Research Aims And
Objectives
The main aims of the study, reported in this paper, were to investigate managers’ perceptions of KM value within knowledge-intensive SMEs as well as to investigate their understanding and perceptions of KM as an organisational strategy. Thus this study aims at exploring the depth of penetration of KM ideas in SMEs, rather then just surveying the levels of awareness of their managers. Specifically, the study aims at exploring these issues in the context of knowledge intensive organisations as these seem to be ideally suited to the implementation and use of KM.
3.2. Methodology
Since, this study seeks to understand the perceptions and perspectives of mangers of SMEs, it was felt that yet another questionnaire survey would not provide the depth of exploration needed to understand these perceptions and consequently the study would not be served by a more positivist approach. Thus, an interpretivist approach was needed in order to enable the understanding of the social world of the organisations as the human activity systems being studied. Additionally, the study seeks to acquire an understanding of the subjective experiences of individuals in these human activity systems, including the individuals’ consciousness and subjective perceptions as proposed by Burrell and Morgan (1989 pp. 28).
There are a number of fundamental motivations for adopting an interpretivist approach to this study. These primarily were:
¨ it addressed qualitative issues aimed at producing an understanding of the social contexts and the social processes of the organizations into which the study has been conducted;
¨ it supports the acquisition of knowledge and understanding of complex social phenomena in human activity systems, namely to understand the sociological aspects in KM as it focuses on human thought and action in social and organizational contexts;
¨ interpretivist research does not predefine dependent and independent variables, but focuses on the complexity of human sense making as the research proceeds (Galliers, 1992);
¨ interpretivist research deals with the abstruseness of research in complex human activity systems under enquiry (no repeatable experiments, continuously evolving systems composed of a myriad of different motivations, behaviours and constraints).
3.2.1. Research Design
Two knowledge intensive SMEs, within the
The interviews were led in-loco in the organisations. Immediately before the start of the interview, interviewees were guaranteed anonymity and provided with an “aide memoir” that contained an explanation of the main KM terms that could emerge in the discussion. The aide memoir was then discussed with the interviewee to ensure that both the researchers and the interviewee had an appropriate understanding of the expectations, focus and the direction of the interview. The interviews were followed by research focus group discussions with the entire research team aiming at building a common understanding of the results obtained and fine tuning the interview scripts accordingly.
The interview data collected was transcribed and subsequently analysed. The analysis was performed by interpretation and coding of data and representation through concept maps. These served to provide finer levels of detail and define interrelationships. These maps were used, as they are useful exploratory tools and an efficient method to share, discuss and represent qualitative data (see Fig 1 for an example of concept map).
Figure 1. Concept Map Representing the Interview with CEO of Company
B.
3.3. Discussion Of Findings
3.3.1. Knowledge Use, Knowledge
Dissemination And Organisational Learning
It clearly emerged from the interviews with both companies that sound
technological infrastructures are in place that theoretically would allow for
efficient knowledge use and dissemination.
“For Office 2000 we use it for internal
budgeting and day-to-day office use mostly.
The software which is mostly used is office 2000. We also use Mind maps
to put ideas down. We use Visio to make
diagrams and flow charts of the procedures.
We use Tempest Pro for the recording of our time, how we spend our
time. There is a software we have been
using called CRM which we use to record all conversations and correspondents
with our clients. It records also our client contact details.” (TD Company
A).
However, it was also obvious from the interviews that the mere availability of ICT infrastructures does not necessarily mean that knowledge is shared and disseminated throughout the organisation. This fact is highlighted by the Technical Director (TD) of company B:
“The information is shared but I don’t think sharing of information is made use of by everyone. So the policy is to make sure that everything I’ve got is made available to people and let them know it is there. If they then choose not to take advantage of the fact that the information is there then that is up to them but they cannot complain about not being told about things. You get this straight across the organisation some people make good use of it and know what is going on everywhere some people don’t do it at all. I think you find that everywhere it is more of a personality thing rather than an organisational procedural thing.” (TD Company B).
In fact, and by analysing this statement more carefully, it is evident that there is also confusion between the concepts of availability of knowledge and sharing and dissemination. These two very different aspects of knowledge management should not be considered to be synonymous and in reality sharing and dissemination require a carefully planned and implemented strategy to be successful. This needs to be more than “everybody talks to each other” (CEO Company A). Without such a strategy organisational learning is not a systematic process and knowledge sharing is at most haphazard. Despite recognising that “the informal communication around the coffee machine works very well”, the Managing Director (MD) of Company B went on to admit that “we are reinventing the wheel in three different parts of the world, just in a 75 employee company”. His own CEO had also previously recognised that “knowledge is everything in that sense. Having the right information/knowledge is crucial and sharing it is crucial”, before surprising us by using the famous quote by Lew Platt, former CEO of Hewlett-Packard: “If we knew what we know, we’d be three times as profitable!” This same CEO then provided a response to this apparent paradox:
“It is going to take you a good month of
thinking and work out how you are going to do it. A month’s investment is nothing but it
requires a month of senior management time—a month of my time and that is
going to take a year to get” (CEO Company B).
3.3.2. Business Value Of KM
The analysis of the interviews conducted indicates that owners/managers of SMEs do not perceive KM as a critical business function. While both companies collect and store explicit knowledge in the form of training materials, newsletters, databases, company’s website etc, they do not seem to make active use of them as a source of knowledge. As a result very few employees actually bother reading or searching for information from these sources. According to one interviewee “the information is shared, but I don’t think sharing of information is made use of by everyone” (TD Company B). This reveals lack of understanding of the value of knowledge in competition, innovation and even survival by both managers and employees.
“We honestly don’t lie awake at
night and worry about it [KM]. We have got lots of things that are going on
that yes individually could be better in our moving the right way” (MD
Company A)
Consequently, management perception of KM in these companies --where KM is not seen as a business imperative or even as a priority- has had a waterfall effect on the employees. In fact, the pragmatics of competition and survival and very hard business environments result in short term thinking and planning, as so cogently stated the Managing Director (MD) of Company B:
“I am management and I am focused on what
invoices are we going to get through the door this month, what sales we are
going to make this month. Those are the
top of my list. Next down the way is
what cash is going to come in this month.
Those are the top 3 priorities further down the list come things like
are we going to release the next version of the product on time and where is
next month sales going to come from and that settle those set of priorities.
[…] So I am thinking what is going
to generate business for me in 18 months time.” (MD Company B)
This short term thinking is not conducive to the devising of long term sustainable KM strategies. KM is perceived to be useful, if only there was the time and the funds to invest in it. Actually, and quite surprisingly, it is not the even the complexity of KM in itself that represents a barrier to implementing it:
“It all boils down to the fact that it is
long term investment and long term investments are always lower priority than
short term investment and the stuff that I talked about I don’t think it
is difficult to do. I don’t think it will cost me any money but it will
cost me my time and I generally spend my time getting cash in the bank this
month. What time is left after doing
that, you generally spend on doing long term strategic but there is generally
no time.” MD Company B)
Curiously, KM is recognised as crucial in avoiding knowledge leakage in businesses that traditionally have very high staff turnover and are highly dependent of knowledgeable employees:
“If knowledge is inadequately captured in
peoples head then the knowledge walks out the day the people walked out
whenever somebody leaves. [..] if anybody becomes a unique source of
knowledge, we move them away from that position. 3 or 4 years ago we would have a problem were
a person if he walked out it would be a problem, but now if he walked out it
still wouldn’t be a problem other than a skilled person is gone his
unique knowledge has been captured by other people so we have a KM strategy in
that sense to make sure nobody has or is carrying unique knowledge in their
head.”(MD Company B)
Therefore it became apparent that, although not having any explicit KM strategy, both companies have guidelines and implicit strategies to deal with KM issues:
“We got a procedure or working
instructions for managing paper files, electronic files, file structures on the
computer, database structure, have we got a systems strategy, have we got IT
policies and all that sort of stuff, yes absolutely we have all that. […] but we don’t call it a KM
strategy” (MD Company A).
4. Conclusions
It is widely acknowledged in academia that all organisations, both large and small, require efficient KM in order to maximise their competitiveness and survival chances in the modern Information Society. Large organisations have readily adopted KM principles and its inherent business value. These large organisations, normally multinationals as described by Davenport & Probst (2002), generally implement KM systems which typically take advantage of explicit knowledge represented in the form of documents and other files uploaded to a central repository. Such companies also make significant efforts to try and elicit tacit knowledge from work procedures and heuristics. However, the latter form of knowledge is not easy to capture and represent. The reality of this approach is that it requires a considerable investment in both time and resources to implement. Classifications, hierarchies and ontologies have to be established and corresponding documents classified, indexed and uploaded.
SMEs, including knowledge intensive ones, cannot afford this investment and have difficulties in establishing a creditable business value to KM. This study uncovered evidence that while acknowledging that adequately capturing, storing, sharing and disseminating knowledge could lead to greater innovation and productivity within their organisation, managers are not prepared to invest the relatively high effort on long term goals for which they have difficulty in establishing the added value. This seems to stem from pragmatic concerns related to competition and survival in highly unforgiving and competitive business environments. This organisational culture and management style in SMEs in clearly explained by the CEO of Company A:
“Actually the most important part of this
business is getting the business and living the business and all the other
stuff is there to keep it going.” (CEO Company A)
Therefore, although it became clear from the interviews that there is a strong need to create, share and disseminate knowledge within SME’s, this tends to happen in an informal way, rarely supported by purposely designed ICT systems. In order to implement an appropriate knowledge management strategy in SMEs, cultural, behavioural, and organisational issues need to be tackled before even considering technical issues. Further studies in this field should focus on the former issues in order to close the gap between theoretical propositions and the reality of practice. This may help mitigate the syndrome that “we don’t think about it the way you academics do” (CEO of Company A) and reinforce the feeling that academic contributions “might […] enthuse me to think about it a little bit more” (CEO of Company B).
5. Acknowledgement
This study was funded by a
UK Higher Education Innovation Fund (HEIF), and resulted from a collaboration
between the University of Sheffield and Kusala Web Developments Ltd., a company
that specialises in the development of applications that allow organisations to
extract data from their existing legacy databases, format it and publish it,
either across their Intranet or on a public-facing web site.
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Contact the Authors:
Miguel Baptista Nunes, Department of Information Studies, University of Sheffield, Regent Court, 211 Portobello Street, Sheffield, S10 1PB, UK; Email: j.m.nunes@sheffield.ac.uk
Fenio Ananasingh, Department of Information Studies, University of Sheffield, Regent Court, 211 Portobello Street, Sheffield, S10 1PB, UK; Email: lip01fpa@sheffield.ac.uk
Barry Eaglestone, Department of Information Studies, University of Sheffield, Regent Court, 211 Portobello Street, Sheffield, S10 1PB, UK; Email: b.eaglestone@sheffield.ac.uk
Richard Wakefield, Kusala Web Developments Ltd.,