Journal of Knowledge Management Practice, Vol. 9, No. 1, March 2008

Reconciling Entrepreneurial Culture With Knowledge Management And Organizational Learning

Christopher Schultz, University of Maryland University College

ABSTRACT:

This paper examines the organizational evolution and structure of a large US non-profit NGO and how this organization attempts to respect diverse constituencies and reconcile these tensions in the design of its approach to knowledge management.  The example of an NGO provides interesting contrasts to the corporate world, as some of this organization’s experiences reflect those of the private sector, while other facets are completely different and pose unique challenges to both entrepreneurship and knowledge management.

Keywords: Knowledge management, Non-profit sector, International development, Communities of practice

Introduction

One school of thought regarding encouraging innovation and supporting new ventures contends that the best way to nurture innovation and new product development in an organization is to create separate business units, even separate companies, shielding the new venture from the current business (Christensen & Overdorf, 2000).  Others (Day & Wendler, 1998) suggest that our very conception of organizational structure needs to change and to encourage innovation we should integrate various external entities into our processes, including networks (Cross et al, 2007; Rizova, 2006), suppliers (Dyer & Hatch, 2004), users of products and services (von Hippel, 2005).    However, there is also much to be said for keeping innovations and new ventures close to the core of the organization, to benefit from organizational economies of scale allowing new venture managers to concentrate on innovating.  The tensions, however, between localized project-level entrepreneurship and innovation on the one hand, and organization-wide knowledge management and coordination, on the other, can be a constant managerial challenge.  

Organizational Development And Culture

Social Change International (pseudonym, hereafter: SCI) is an international non-profit NGO based in Washington, DC.  Although the organization was founded in the early 1960s as a consulting firm specializing in research and analysis for the higher education sector, the company gradually branched out into other areas including instructional technology, communications, social marketing, public health and nutrition, democracy building, environment and other international and social development issues.  The organization experienced slow but steady growth for the first thirty years of its existence.  The expansion of SCI’s offerings occurred organically, following market opportunities.  The organization was able to leverage successes in one sector and apply them immediately to another, often a very different sector, thus introducing innovations across a range of human and social development fields. 

Two distinct cultures evolved at SCI, one of localized decision-making, entrepreneurship and innovation and another of central coordination and efficiency.  From the outset, SCI’s culture was client-focused and project-driven with heavy emphasis given to proposal writing, one of the primary vehicles for business development in the non-profit sector.  Proposal development was localized; if a group of staff members felt they could win a project, they put together a proposal. It was a successful formula resulting in an entrepreneurial, decentralized culture.  If internal staff resources were insufficient, the organization would tap into their ever-growing network of external consultants, which allowed a large proportion of internal staff to concentrate predominantly on project management, finance and operations tasks.  Accounting and reporting procedures, particularly for US government aid projects, can be complicated and time-consuming.  SCI developed its knowledge and expertise in these areas and streamlined its processes.  As a consequence, administratively, a parallel culture of efficiency and operational excellence developed. 

In many ways, the organization has evolved to resemble a new venture incubator.  As projects are born and developed and new contracts are won, staff can be transferred internally and/or hired externally to fulfill project roles.  Sometimes as projects fade out, either for failure to obtain continued funding or simple shifts in the interests of funders, staff then move to other projects within SCI, thus transferring skills, insights and innovations across the organization.  Others move to other non-profits or government agencies and it is not uncommon for some to return later to more senior positions with new knowledge, expertise and external contacts.

SCI’s superior technical performance and culture of efficiency were highly regarded by funders and these capabilities often led to contract extensions or follow-up work—proposals still won and work still driven at the project-level, under the broad umbrella of the SCI-label.  As contracts became more regular and long-term, the organization grew and staff specialization within a single project increased.  By the early 1990s, however, the organization remained small enough so that most employees were at least acquainted with one another.

Organizational Infrastructure

SCI resisted major spending for central services and centralized infrastructure for many years.  Typically, foundations that fund projects encourage this practice by focusing on short term project funding, rather than non-profit organization building.  In 1998, for example, only 2.2% of foundation grants were designated to improve their recipient’s performance (Porter & Kramer, 1999).  At SCI, human resources-related benefits were kept rather lean compared to the private sector and professional development was left largely to individual employee initiative. 

Furthermore, SCI did not have a centralized information technology department until 1994.  At that moment, SCI had no organization-wide internal network.  Although some individual projects were networked, these smaller networks were not necessarily compatible with one another.  The organization had no common technology strategy; projects basically addressed their own technology needs.  Furthermore, many centers and projects continue to maintain their own resource areas and employ project or center-focused information and research services professionals.

The Changing Environment In The 1990s

During the 1990s, the organization experienced a period of massive growth.  SCI responded well to changing environment, which included completely new work in Eastern Europe and the former Soviet Union and also increased funding for domestic social development projects in the US.  The organization seized these new opportunities, winning new contracts and adding new projects, resources, people, and office space.  The revenues of the organization grew more quickly in the late 1990s, by 56% in the last four years alone. By the mid-2000s the organizational budget exceeded $300 million. SCI staff numbers increased with the growth in revenue and exceeded one thousand for the first time in 2001.  In addition to offices in New York and Washington, the organization staffs offices in five other US cities and in 29 countries.

The 1990s also brought change to the non-profit sector in the US.  From 1993 to 1998, the non-profit sector grew at an annual rate of 5.1%, faster than the 3.1% annual growth rate of the GDP (Independent Sector, 2001).  Small niche players were arriving regularly on the scene.  In the same five-year time period, over 30,000 new non-profit organizations were being formed annually (Independent Sector & The Urban Institute, 2002).   Other new players included universities and even for-profit consulting and advertising firms.  New forms of organization also developed for SCI in the form of formal partnerships with competitors on projects.

Restructuring The Organization

As SCI followed this course of growth, it became evident that the organization’s size was not as much of an asset as it could have been.  Anecdotal evidence includes testimonies from a small group of SCI employees attending an out-of-town conference who met other SCI staff at the conference, not realizing their mutual interests.  Another example involved an SCI staff member who during a conversation with a client, heard about a technical expert who came highly recommended.  The SCI staff member asked for more information, knowing that he had a major proposal coming up in the near future.  The expert happened to be an SCI employee in another division of the organization.

In 1999, SCI responded to the organizational complexity with a comprehensive restructuring initiative.  In terms of technical expertise, the organization was previously split unevenly into three divisions.  One single division, however, comprised roughly two-thirds of the organization with projects as diverse as behavioral research, organizational strengthening, population and nutrition, education services, global communications and environmental projects.  The new organizational structure defined twenty-three ‘centers of excellence’, which would essentially continue to be the client-facing, project-driven entities.  These 23 centers were structurally grouped into five Program Groups, intended to serve an internal coordination role.

Initial evaluations of the effectiveness of the restructuring give good marks for the exchange of information and knowledge within centers.  Some centers did not see a significant change in their daily functioning as certain projects were already strategically grouped together, while other centers were created by linking projects that had not previously worked together.  The fundamental operating principle of centers as the client-facing, entrepreneurial-focused entities remained true.  While center staff either continued or began to work together as a result of the restructuring, exchange between centers, however, continued to be a challenge.

Challenges To Organizational Learning And Knowledge Sharing

Organizational economists contend that markets motivate and hierarchies coordinate and that the fundamental challenge in an organization lies in reconciling these tensions and establishing a workable combination of the two (Day & Wendler, 1998).  Most organizations oscillate along this continuum from individual, project-centered, market-driven initiatives to organization-centered, centrally controlled, efficiency-focused structures.  SCI is no exception, and the reconciliation of these tensions and juggling of objectives is continually a challenge for senior management.  The entrepreneurial objective is at the heart of SCI’s proposal-driven culture and thus is clear to communicate to staff, even if it is not simple to achieve.  Entrepreneurial center-level staff and managers would most likely assert that this objective is best achieved by an organizational policy that minimizes central services intrusion. 

Organization-wide knowledge management objectives, however, are more difficult to understand.  Few staff members or center-level managers would disagree with the need to share knowledge and encourage learning in the organization.  They recognize SCI as a knowledge-based organization and see the link between knowledge sharing and increased innovation and consequently, their project-oriented, entrepreneurial objectives.  The complex, abstract and, perhaps most important of all, shared nature of knowledge, however, makes knowledge management both a driver of innovation and entrepreneurship and an obstacle, since knowledge management typically requires some central coordination and even persistent persuasion to encourage participation.  Although knowledge management activities, in the long run, should benefit the project and entrepreneurial culture, in the short run the participation required to make knowledge management successful does take people away from their immediate project work.  However, knowledge management is indeed a long-term process and rarely gives immediate return on time invested.

The entrepreneurial-knowledge management tension is further complicated by SCI’s funding sources, its billing “culture” and the very nature of the not-for-profit organization.  Over the years, SCI evolved into an archetype of a consulting firm, except that unlike private sector firms, SCI pursues the double bottom line, social return and financial return on assets.  Like other consulting firms, the culture of utilization rate or billing rate was pervasive at SCI.  But unlike their private sector counterparts, the organization-wide norm for utilization rate at SCI was 100%, since all employees must be covered at all times.  Some contracts explicitly provided for professional development or education for staff members, while others did not.  For many employees, there was little leeway to work on side initiatives or “shadow” other project work in an effort to learn on the job.  For project staff, there was little time allotted for training or professional development and the training that does occur is typically directly and immediately applicable to the project objectives.  In 2001, a major initiative in professional development was introduced by the central administration, which included the hiring of a full-time director of professional development and a significant increase in the professional development allowance for each employee, from $600 to $2400 per year.  Many employees, however, used their own personal time to take advantage of these professional development opportunities due to project demands on work time.

It is clear from private sector consulting and professional services firms’ experiences that continual professional development, internally and externally, is essential to success.  Therein lies an important paradox in the non-profit world.  SCI is a knowledge-based consulting firm that cannot possibly match these private sector industry best practices in investment in intellectual capital, knowledge management and professional development.  When the organization was smaller, human interactions and connections were sufficiently frequent, intense and cross-organizational to facilitate informal professional development through knowledge sharing and to encourage relationships that favored a diverse interaction of people, perspectives and ideas.  As the organization grew larger, these opportunities decreased, even though the number of potential sources of knowledge increased (such as number of employees, projects, ideas, and perspectives).

Developing A Strategy For Knowledge Sharing And Organizational Learning

Faced with this organizational history and culture and the tension between maintaining a decentralized entrepreneurial culture and implementing an organization-wide knowledge sharing and organizational learning strategy, any plan must respect the balance between both ends of the continuum.  It would be easy to fall into the trap of viewing the project-focused culture simply as an obstacle to knowledge management—when in reality this project-focused culture and the accompanying innovation and entrepreneurial drive was one of the organization’s strengths and a true source of competitive advantage.  At SCI it was clear that participation in knowledge management could not be funded outright due to lack of resources, but it could not be mandated by the central administration either.  At the center level, some projects did not even have funding for staff development, much less knowledge management activities. For those that did have funding, knowledge management benefits at the center-level were not immediate enough, as was the case with on-demand skills training, to steer significant funds to its cause. 

Set against this backdrop, SCI’s strategy unfolded on two levels, targeted at individual staff members and also on the level of the five Program Groups.  The decision to target individual staff members recognizes that just as driving motivations differ from central administration to center-level managers, so too do they differ from center-level managers to individual staff members.  Since funding for participation according to the current billing code culture was unavailable, any knowledge management strategy at SCI needed to tap into individual passions and foster relationships between staff members that they themselves want to develop. 

Initially, the knowledge management initiative introduced the concept of communities of practice which was met with great enthusiasm among the staff.  Ideas for cross-cutting communities were proposed by staff members themselves and some initial meetings took place and work plans were developed.  Six months after their introduction, however, participation was low.  Some of the feedback received from participants noted that it was extremely difficult to make a long-term commitment to these communities.  SCI staff were already stretched for time, and not solely due to their project work.  The typical SCI staff member also volunteers for causes external to their work at SCI, whether in charities, schools or churches.  Furthermore, with crosscutting community of practice themes such as “Corporate Social Responsibility” and “Public Policy”, in an international policy and diplomacy city like Washington, these communities faced considerable competition from established professional associations external to SCI. 

Shortly thereafter, the knowledge management approach changed somewhat and gatherings and events were organized that minimized long-term commitment but still facilitated exchange between staff members.  An example of such an event is the IdeaLab, a roundtable discussion group based on a book chapter or journal article and moderated by a staff member.  SCI had always had a long tradition of lunchtime “brown bags” during which staff may present recent findings or results from their project work.  However, these presentations usually attracted an audience that was already familiar with the project, its staff and their work.  Furthermore, since these presentations tended to be one-way in communication, time for discussion and exchange was limited—true knowledge transfer across the organization was limited.  IdeaLab, in contrast, was entirely based on discussion, with staff members proposing a crosscutting theme, such as “Notions of Leadership” or “Emotional Intelligence at Work”, along with one or two seminal articles.  Participants read the article and participate in the discussion, with no inherent obligation to attend another.  SCI’s experience with IdeaLab showed that employees tended to speak about their own project experience within the context of the discussion and staff members did learn about other SCI projects and people in this manner.  This strategy was less focused on knowledge capture or transfer, although some knowledge transfer does occur, particularly tacit knowledge.  IdeaLab fit well with SCI’s intellectual culture and the concepts discussed led to knowledge creation and the application of some of the management ideas in the workplace.  The main purpose of IdeaLab, however, was to establish and reinforce connections between individuals, so that when a question or concern does arise in the future, a staff member will hopefully have more personal points of contact to access and thus reduce search time and transaction costs to locate an answer.

Program Groups provided an important point of leverage for knowledge management.  Program Groups were broadly organized along thematic lines and were designed under the restructuring to play an internal coordination role.  Yet Program Groups were close organizationally and relationally to the entrepreneurial centers, thus they represented a well-positioned, low-friction point of intervention for knowledge management initiatives.  The first layer of group-level knowledge sharing involves the Technical Council, which is comprised of Program Group leaders and other members of senior management, including the President, the Executive Vice President and the Chief Management Officer.  The Technical Council meet monthly for an informal session and for semi-annual half-day retreats to discuss development trends, technical issues, innovations, new management theories and any issues other than proposals, personnel or day-to-day management problems.  Initial feedback from the Technical Council participants was overwhelmingly positive; senior executives welcomed the opportunity to strategize about the future and reflect on theory and practice with their peers shielded, at least momentarily, from the administrative weight of their work.

The strategy for explicit knowledge capture and transfer was also based on Program Group level interventions.  Currently under development is a network model of “knowledge activists” in each group, one or two project staff who would be given the mandate to develop communication tools and products and organize knowledge dissemination activities specific and appropriate to the Program Group.  This approach allows knowledge activists to remain close to the project work, where knowledge is used and created.  It also increases knowledge management’s credibility since the knowledge activist is an insider and a respected participant in the local knowledge culture.  Criteria for selecting knowledge activists are varied and there is no typical profile—some are new hires, others are veterans—one key is that they are chosen locally within the Program Group rather than by central management.  Often the desire to acquire a vision ‘beyond project work’, to see the bigger picture of the organization’s impact is highly motivating.  Another common characteristic is an interest in creating tangible, useful knowledge management tools and to apply them to diverse situations.  A conceptual interest in knowledge management is helpful, but in this organization at least the focus on results that will actually be used in the field is most critical.    The focus on tangible tools is also a way to avert potential challenges from managers who view knowledge activists’ KM work as an unnecessary distraction from “real” project work.  Ultimately, the knowledge activist role could become a rotational position, for example, for one year or eighteen months, then passed on to a new knowledge activist within the Program Group.  In this way, the tools and techniques for knowledge management can be spread throughout the organization.  Furthermore, the group of five to ten knowledge activists across the organization forms a community of practice of its own to share knowledge about experience and expertise in the field. 

Conclusion

In this paper a case study was set out that described one non-profit organization’s experience with an evolving organizational structure and the managerial challenges involved in encouraging innovation and entrepreneurship, while institutionalizing an organization-wide knowledge management initiative.  Developing a knowledge management program is a long-term endeavor and even our “knowledge about knowledge management” evolves and changes, but SCI’s experience does confirm that knowledge management must be culturally relevant.  In an entrepreneurial culture, resistance to centralized coordination is a given.  SCI is entrepreneurial on the one hand, and centralized coordination mandates a billing code culture that seems to stifle participation on the other—this can make implementing knowledge management seem next to impossible. However, cultural insiders, such as knowledge activists can help facilitate explicit knowledge management on a shoestring budget.  On another level, individual staff members, whose personal motivations may differ from managerial motivations, can offer alternative points of leverage to help institutionalize knowledge sharing.   While this case study has concentrated on evolving organizational structure, one of the lessons learned and a potential area for future research lies in identifying and leveraging individual motivations for knowledge sharing and as a critical element to knowledge management practice.

References

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Rizova, P. (2006). Are you networked for successful innovation? MIT Sloan Management Review, 47(3), 49-55.

von Hippel, E. (2005). Democratizing Innovation. Cambridge, MA, MIT Press.

Contact the Author:

 Christopher Schultz, Associate Professor, University of Maryland University College, Graduate School of Management and Technology; Email: cschultz@polaris.umuc.edu