This is basic reading before the session on the 7 March.
You will need to have read and thought about the topics. We will learn more about them and the applicability in the class session.
I can be contacted at email@example.com if you have any queries or comments
Your first assignment is also enclosed.. Think about this and begin to plan your action. Contact me with any queries or suggestions you might want to discuss with me.
A successful strategy requires considerable information. This series of three seminars on strategic tools explores some of the techniques and tools that are available to us. Initially we need to look at the environment within which our organisation exists. In effect it is an intelligence gathering process.
PEST (or Pestle or lest)
P = Political / legal
E = Economic
S = Social / cultural
T = Technological
A bank looking at its environment might well be interested in some of the following economic factors and how they may affect our organisations :
Level of disposable income Average earnings
Inflation rates Stock market trends
Value of pound Value of other currencies
Economic trends Tax rates and policies
The same bank might well be interested in government and legal factors such as :
Trust law Tax law
Financial regulation Regulation on "laundering"
Relations with UK Relations with EC
These are some examples and indications of the sort of information / intelligence we may require.
The next set of data we need to gather and analyse are what we call the internal and external influencers. The examples given are indicative and what I feel are appropriate to the Guernsey environment.
Competencies Innovation Needs Analysis
Develop competencies Diversify
Having determined our internal influencers we especially our strengths and weaknesses we are in a position to explore the external influencers :
Opportunities / Threats Pest
Porter's five factor approach Generic strategies Differentiation
Threat from new entrants Focus MIS
Threat from substitute products Cost leadership Design
Power of buyers Differentiation Financial
Power of suppliers Marketing
Intensity of rivalry Personnel
This is a detailed and time consuming exercise that can only be completed at the end of the strategy forming process. It is only then that we can fill in the gaps or revise our initial assumptions made at this stage of the process.
At this stage it is worth while looking at two general approaches that interrogate our organisations position on strategy development. The first is :
Developed by Leol Bleeke of McKinsey and Company this checklist sees five common failures in the process of strategic planning. These are :
1 Focus is too much on where to compete and not on the how's of competing.
2 Low emphasis on uniqueness and adaptability. In many ways this is about differentiation i.e. how do we persuade a customer to purchase our product rather than that of another.
3 Low emphasis on when to compete. When a company enters the market it is emphasised to the detriment of where and how.
4 Focus on firms and competitors rather than individuals. Knowing the people helps us understand competitors.
5 Common performance measures. We should measure performance according to the measures that are applicable to our specific strategy.
In Haim A (1990) The Vest-Pocket CEO Prentice Hall.
This checklist is one developed at Kepner-Tregoe for its managers and puts the practical focus on strategic management.
1 The direction of future organisational development is clearly
defined by upper management yes no
2 Each manager knows details of strategy yes no
3 Each manager agrees on details of strategy yes no
4 Each manager has a common view of new products/
markets based on strategy yes no
5 The organisation's strategy is the most important
factor in evaluating opportunities yes no
6 Strategy is developed independently of long range planning yes no
7 Strategy determines plans and guides resource allocation yes no
8 Strategy is based on analysis and assumptions, not plans yes no
9 Strategy guides acquisitions, capital expenditures, and
systems development, not vice versa yes no
10 Each division or subsidiary has a clear strategy yes no
11 Each division /subsidiary strategy is completely
consistent with the organisation yes no
12 Each department has a clear strategy yes no
13 Each department strategy is completely consistent with
the organisations strategy yes no
14 The organisation and its divisions or subsidiaries are
evaluated on the basis of performance as well as
operating performance yes no
Adapted from Tregoe B and Zimmerman J (1980) Top Management Strategy : What It Is and How To Make It Work New York Simon and Schuster in Haim A (1990) The Vest-Pocket CEO Prentice Hall.
We are now in a position to determine where our products / services fit in the organisation. One very famous technique is the
Stars Question Marks Cash Dogs Cows
The Boston matrix and the multitude of uses to which it can be put, allows us to visualise our product position. Remember that the approach uses the fact that we think in terms of pictures that are then translated into words. It is an indication not a definitive statement.
Boston matrix – general terms :
Cash cow "milk it" but be careful about putting too much new money into the product.
Star "feed it" develop it as the next cash cow
Dog "bin it" it may be draining us of resources
Question mark "decide on it" wait and see, but not for long.
A practical view of the Boston Matrix is seen in :
Boston matrix and cassette tape
Birth early 1970s born as a question mark
Growth late 1970s and early 1980s grew into a star
Maturity late 1980s and early 1990s matured into a cash cow
Decline late 1990s declined to a dog
It will be seen that this example links the Boston Matrix and the product life cycle concept.
Numerous organisations have personalised the Boston Matrix. One is the :
Orchard Matrix of Market Attractiveness
Based upon the more famous Boston Consulting Group's marketing matrix.
Growth Ripe Harvested
Low Low High
Construction Engineering's Competitor Analysis
Purpose : Anticipates major moves by competitors
Facilitates competitor analysis
Select competitor to analyse
Hold meeting of managers who might have information about competitors
Determine recent and current information
Hold second meeting to review and discuss information gathered by managers. Group then perform a relative strength and weaknesses analysis. This requires concentration on :
1 areas where competitor is distinctly stronger or weaker
2 area(s) that has potential to affect customer behaviour
Next, group does a comparative cost analysis
Prepare simple breakdown of costs in bringing our product to market
Rank competitor's costs for each factor on following scale :
Next, quantify overall cost difference i.e. significantly lower = 30% lower
Next, Construction Engineering analyses competitors motivation by determining how competitor, measures success and what the objects and strategies are.
Finally the group creates a picture of competitor by combining information on its relative strengths and weaknesses, relative cost structure, goals and strategy.
Another approach is that of :
Technology Marketing's Missing Piece Analysis
Purpose : To identify key weaknesses in competitors and to anticipate competitor moves
1 Rate each competitor's strengths on six dimensions
sales and marketing
2 Create a competitive strengths matrix to display each competitor's scores on each dimension and highlight the weakest dimensions
3 Each of the six areas in 1) are measured on a scale of :
5 excellent /superior
4 very strong / competitive
3 adequate / average
2 weak /uncompetitive
1 very weak
Scores are entered on a competitive strength's type matrix.
Competitive Strengths Analysis
Competitor Competitive Dimensions
1 2 3 4 5 6
A 5 5 4 2 4 3
B 4 4 3 2 3 4
C 1 3 3 5 2 3
D 5 4 4 4 5 4
It will be appreciated that our basic fact finding prior to developing our strategy is detailed and complex. It requires of participants competence in critical and creative thinking.
Critical thinking and strategy development
Critical thinking, ... implies curiosity, scepticism, reflection, and rationality.
Critical thinkers have a propensity to raise and explore questions about beliefs, claims, evidence, definitions, conclusions, and actions.
"Critical thinking is best understood as the ability of thinkers to take charge of their own thinking. This requires that they develop sound criteria and standards for analyzing and assessing their own thinking and routinely use those criteria and standards to improve its quality." (Elder and Paul 1994 pp 34 - 35)
Kuhn (1991, 1993) regards critical thinking as having the "abilities : a) to differentiate opinions (or, as she calls them, 'theories') from evidence, b) to support opinions with non spurious evidence c) to propose opinions alternative to one's own and to know what evidence would support these and d) to provide evidence that simultaneously supports one's own opinions while rebutting the alternatives and e) to take an epistemological stance which involves weighing the pros and cons of what is known" (in Anderson et al 1997 p 1)
Use of questions in critical thinking
Questions of clarification
Questions that probe evidence and reasons
Questions that test for implications
All of this suggests the need to ensure that we understand what motivates creativity. Percy Barnevick who used to head the giant ABB said that one of main problems facing management was to encourage employees to put their creative skills at work. Barnevick believed that employees only use 5 to 10 per cent of their talents whilst at work
Anne Cummins, Michael Tushman, Charles Handy are amongst those who have examined the organisational structure and motivation needed for orgnisations to develop creativity and use for their talents in the workplace.
A SWOT analysis requires us to look at strengths, weaknesses, opportunities and threats on not only our own organisation but also of our competitors. It is important to ensure that the rules of SWOT analysis construction are known and followed by all participants. SWOT analysis requires a considerable amount of honesty and exposure to personal criticism.
The random growth and evolution of organisations is seen in the following Hypothetical Development of an Organisation Structure
This exercise demonstrates what happens to the structure of a hypothetical business as the company responds to the opportunities for expansion and growth.
We start with a small one man business, producing a single, lets assume a high tech type product and employing 15 people.
Initially, the owner knows everyone and the company structure is simple and informal.
The high tech business is booming and on the road to success. Increased sales means new staff. The consequence of this is that our one man business is changing its shape and structure.
The company takes on additional specialist staff. It appoints a Marketing /Sales Manager and a Finance Manager. In addition, the day to day production is now looked after by a Production Manager, rather than by the owner.
At this stage the structure of the business shows considerable change. It may look something like this, a typical functional structure :
Marketing Production Finance
Foreman etc. Accountant
Our Functional organisation is now taking on a distinct line appearance, with the specialist posts and the line responsibilities of the foremen etc. We may also see staff relationships develop. The structure will have adopted various financial and procedural rules and controls that will continue to develop and usually multiply in number. The organisation may become environmentally aware. It most certainly is aware of external affairs due to its growth. We are seeing the evolution of a very complex organisation.
Our Managing Director finds himself more and more occupied with strategic planning, whilst the new financial man is busy devising various financial controls.
Our successful company is expanding by product and geographically. New products and locations appear. The consequence is that our structure begins to take on a product function look. This is especially so when the products are totally different. An example is domestic and trust banking.
A product structure often moves to a Divisional Structure. The company should be going through the pros and cons of centralisation as against decentralisation.
Soon our company structure could be looking like this.
Main Board of Directors
Each of the subsidiary companies will have their own structures. These will usually be of the functional variety but can also include a geographical structure.
Main Board of Directors
Subsidiary Companies Guernsey Operation
The Divisional structure leads to more sophisticated controls from the service functions as well as the setting up of profit centres. The Divisions are acquiring significant autonomy. The style of the Managing Director may have changed from autocratic to participative, and we should see the style of management move towards the right side of Tannenbaum and Schmidt's Continuum of Management Styles.
In a highly complex industry, our company could also see the development of project teams using a matrix type structure.
The structure will at various times be subject to the moans and groans of communication problems, conflicts occur both vertical and horizontal. Writers such as Peters and Waterman "In Search of Excellence" see the organisation structure as a potential danger in that it does not reflect what goes on in the organisation. The organisation structure chart shows what management thinks is going on. It is about the formal, is almost certainly out of date and fails to consider the mass range of informal communication and other channels that actually exist in the organisation.
Returning to our business, the organisational structure is developing a substantially different form from the simple informal structure that existed in the early days. In the Divisional structure there can exist a diverse combination of functional, product, divisional, geographic and matrix structures. The permutations are endless.
The important point is that the organisation structure is, or should be constantly adapting to the needs of the business. It does not have to, and usually does not follow the neat academic version of being either a functional or divisional or geographic structure. There may be some degree of doubt about whether the organisation structure meets this objective. However it may be a case that something is better than nothing.
Organisational structures in reality
We can now set about reading and thinking about some of the more theoretical aspects of organisations. You will soon appreciate that this journey through some of the theoretical jungle has a sense of reality about it.
The more bureaucratic the organisation the more it is likely to love organisation charts. Often such organisations are mechanistic in approach. Education is an example. When change does occur it is frequently piecemeal and does not succeed. Perhaps environmental aspects help prevent it achieving its objectives. (we can examine this in greater detail in the notes on strategy)
The more dynamic organisations such as our high tech company will frequently be able to adopt an organic type of approach. Often the organisation chart, if there is one; is of little consequence. Informality, co-operation are keywords. Some organisations such as advertising and research laboratories adopt the team approach and use a matrix type organisation structure.
What we do know of organisational structures is that they are complex. What we may not fully appreciate is the danger an unswerving loyalty to the organisation chart may present to the organisation. Perhaps the reality of the organisation is more important than the myth of the organisation structure.
Finally, on organisations I want to put to you a few ideas on organisation structure for your consideration.
New World of Organisations
This is the title of a chapter in "Key Management Ideas : Thinking that changed the management world" by Stuart Crainer published in 1996.
The whole chapter is worth reading and thinking about. The section from page 52 can be regarded as essential reading. Crainer stresses the problems caused by hierarchies in recent years. These include the slow speed of decision making within bureaucracies, increasing costs of such organisations, often without offsetting gains in productivity. Crainer at page 53 quotes from Christopher Lorenz that "Most managers are still stuck with an outdated view of the organization and their own role in them".
How accurate is this view of Lorenz?. Crainer supplies a good dose of evidence much of it from the writings of Charles Handy.
The first writers mentioned are Burns and Stalker who in the 1960s came up with the contrast between the mechanistic and the organic organisations. As Crainer states the original concept of Burns and Stalker whilst receiving passing academic interest did not make a significant impact on management practice even though the organic organisation concept emphasises "networks", teamworking, shared vision and values and effective sharing of knowledge and expertise. (Crainer 1996 p 53).
The achievement of Jack Welch in breaking down the bureaucratic nature of GE is given in some detail. We read how Welch reduced the layers of management at the giant GE from 9 to 4, and how the organisation slimmed down from 400,000 to 220,000 between 1981 and 1990. Interestingly, at this time the span of control increased from about five or six to fourteen. This increasing span of control necessitated managers to learn new ways of management and skills of management.
Adhocracy is a term made famous by Alvin Tolfer and describes an organisation that is the opposite from bureaucracy. Adhocracy involves :
Flexible and free flowing organisations
Organisations based on participation
Non hierarchical organisations
Organisations that are creative and entrepreneurial
Organisations based around networks
Organisations driven by corporate goals
Organisations that utilise IT as a key resource.
Handy like many modern writers on management sees people as the most important asset of the organisation. Like many writers on strategy such as Hamel and Prahalad, Handy sees "Human assets becoming core of organisations" (Crainer 1996 p 60)
Crainer spends time on the view on the new organisation of Charles Handy. First he mentions the Shamrock organisation and provides an example of UK firm FI Group that has a shamrock type structure.
Mention is made of the parable of the boiled frog and the shamrock organisation. Handy stresses that companies should examine whether they should become shamrock organisations.
Another new organisation term associated with Handy is the "Federal Organisation" - this is where the organisation has a small head office and multiple units. It is the classic control and autonomy issue so well discussed in Winning Streak II. The "now you see it now you don't" nature of control and autonomy and the efforts of some firms to stress autonomy is better understood when we remember that Handy believed that federalism only works when you have subsidiarity (transfer of power to the subsidiaries)
What is clear is that federalism requires a new type of manger with willingness to give power.
The third type of new organisation mentioned in the works of Handy, is the Triple I organisation. This involves intelligence, information, and ideas. It is fuelled by the increasing use of IT and requires intelligent people to be treated with honesty and respect.
One of the terms used by Tom Peters in his list of Six key ideas for business transformation in Peters T (1995) The Pursuit of WOW! London Macmillan pp 15 - 17 is the virtual organisation. The virtual organisation is a fast changing, edgeless, flexible organisation geared to its environmental needs. It is one that deplores bureaucracy and utilises the concepts seen in adhocracy, the organic organisation etc.
In their book Winning Streak Mark II Clutterbuck and Goldsmith state that at Granada plc the role of the Head Office include being :
Holder of purse strings
Source of internal challenge
Source of culture and shared values
Resource for advice and best practice.
Your task is to prepare to join a discussion with your tutor and course colleagues that will focus on the validity of these four roles. You will need to determine what each of the four roles mean to you.
Having discussed the organisation we can now explore how the organisation decides what course of action to follow.
Decision making model
Leads to use of
Impact of Development of Intuition Empathy Six silent
Group think strategic thinking killers
This provides a more informed decision making process that leads to
Change strategy that involves the following
Management Kotter's Communication Participation
Approach check list
This is an important part of your learning. This basic learning is supplemented by wide read and reflection on the following notes on aspects of change
Kotter J (1995) Leading Change : Why Transformation Efforts Fail Harvard Business Review March - April 1995 pp 59 - 67. The paper opens by claiming that most initiatives to change flounder for one or more reasons.
The general lesson to be learnt from the more successful companies is that the change process goes through a series of phases that, in total, usually require a considerable length of time. Skipping steps creates only the illusion of speed and never produces a satisfying result. (Kotter 1995 p 59)
Kotter also draws attention to the fact that critical mistakes in any of these phases can have a devastating impact, slowing momentum and negating gains.
On page 61 Kotter provides a list of what should be done to facilitate transformation. The following examines the reasons for failure to achieve successful transformation.
Error number 1 - Not establishing a great enough sense of urgency
Most successful change arises out of a sense of urgency. This is important as it encourages a sense of urgency and motivation needed by the organisation. Kotter believes that more than 50% of companies fail in this seemingly simple first stage. "Sometimes executives underestimate hoe hard it can be to drive people out of their comfort zones" (Kotter 1995 p 60)
In a few of the most successful cases, a group has manufactured a crisis. One CEO deliberately engineered the largest accounting loss in the company's history, creating huge pressures from Wall Street in the process. (Kotter 1995 p 60)
Error number 2 Not creating a powerful enough guiding coalition
Get the gatekeepers involved. This area involves commitment from senior management as well as strong leadership.
Error number 3 Lacking vision
The successful company "develops pictures of the future that is relatively easy to communicate and appeals" (Kotter 1995 p 63)
In failed transformations you often find plenty of plans, directives, and programs, but no vision. In one case, a company gave out four inch note books describing its changing effort. In numb minding detail, the book spelled out procedures, goals, methods, and deadlines. But nowhere was there a clear and compelling statement of where this was all leading. (Kotter 1995 p 63)
Kotter suggests that if you cannot communicate the vision in five minutes or less and get a reaction that signifies both understanding and interest - then you are out in business.
Error number 4 Under communicating the vision by a factor of 10
Communicate at all times and in all ways, even if you have not got that much to say.
Error number 5 Not removing obstacles to the new vision
Too often, an employee understands the new vision and wants to help make t happen. But an elephant appears to be blocking the path. (Kotter 1995 p 64)
Sometimes the obstacle is the organisation structure... sometimes compensation or performance appraisal systems make people choose between the new vision and their own self interest...Perhaps worst of all are the bosses who refuse to change and make demands that are inconsistent with the overall effort. (Kotter 1995 p 64)
One company began its transformation process with much publicity and actually made good progress through the fourth phase. Then the change effort ground to a halt because the officer in charge of the company's largest division was allowed to undermine most of the new initiative. (Kotter 1995 p 64)
Error number 6 Not systematically planning for and creating short term wins
This is based on the reinforcement theory of motivation, "without short term wins, too many people give up or actively join the ranks of the people who have been resisting change". (Kotter 1995 p 65)
"Creating short term wins is different from hoping for short term wins" (Kotter 1995 p 65)
Error number 7 Declaring victory too soon
Ironically, it is often a combination of change initiators that creates the premature victory celebrations. In their enthusiasm once a clear sign of progress. the initiators go overboard. They are then joined by the resistors, who are quick to spot any opportunity to stop change. (Kotter 1995 p 66)
Instead of declaring victory, leader of successful efforts use the credibility afforded to them by short term wins to tackle even bigger problems
Error number 8 Not anchoring changes in the corporate culture
In the final analysis, change sticks when it becomes "the way we do things around here", when it seeps into the bloodstream and the corporate body. Until new behaviors are routed in social norms and school values, they are subject to degradation as soon as the pressure for change is removed. (Kotter 1995 p 67)
Find out what Kotters’ most recent views on change management are.
Strategic thinking is more and more important in an age of fast changing economies. Change is all around us, we experience change all the time, yet we are so incompetent at managing change. Is this because we are naturally more comfortable with the familiar rather than the uncertainty?
Ray Procter said that we all accept the need for change as long as it does not affect us. We dislike anything that threatens to damage our comfort zone. Change often intrudes on our personal life, our own territory. We don't like it.
What is there rational for our resisting of change?
Change can a alter our psychological make up by presenting new challenges, relationships, roles etc. The ability to deal with change depends on personality.
Reasons why we resist change.
2 Disruption of known relationships
3 Relative position
5 Reduction of the value of previous scarce skills
6 Determination to survive
7 Disruption to social life
Our behaviour to change might be characterised by :
- acceptance whether real or not
- passive resistance i.e. work to role, non co-operation
- active resistance i.e. go slow, absenteeism or even strikes
It may now becoming clear that change will bring on stress.
Change and the stress it may bring may affect the individual in several areas:
1 physiological change
2 circumstantial change
3 psychological change
I have found the list of errors that lead to the failure of change initiatives that was developed by John Kotter to an invaluable check list.
1. Not establishing a great enough sense of urgency
2. Not creating a powerful enough guiding coalition
3. Lacking vision
4. Under-communicating the vision by a factor of 10
5. Not removing obstacles to new vision
6. Not systematically planning for and creating short-term wins
7. Declaring victory too soon
8. Not anchoring changes in the corporate culture.
Schein (1985 pp 39-40) provides a range of strategies for implementing change :
present a non threatening image
present arguments in terms of the client's interests
diffuse opposition and bring out conflict
align with powerful allies
bargain and make trade offs
begin with an experiment
begin small (Schein 1985 pp 39 -40 in Robbins 1989 p 541)
Leadership and Change
In his book "How to Manage Change Effectively" Donald Kirkpatrick said :
"Those who are in charge must know how to decide on changes and implement them effectively or they will fail. The principles for doing it are quite simple. The application of the principles is not so easy".
Management can help overcome the resistance to change by any of the following :
- adjusting the pace of change
- adjusting the manner of change
- altering the scope of change
Empathy means putting yourself in the shoes of the other person. This means we must get to know people (Tom Peters story of the talents)
Communication is the process of creating understanding and involves feedback
Participation use quality circles, task forces and problem solving groups
Problem is when to involve and how?
Answer = think of empathy (above) and you have the answer.
Role of manager in change
1 to encourage innovative ideas, from subordinates, colleagues, etc.
2 to encourage a willingness amongst colleagues to accept change
3 to evaluate ideas about change
4 to make decisions about what changes to make
5 plan the changes
6 implement the change
7 review the consequence of change
Reaction to proposed change may involve:
- acceptance whether real or not
- passive resistance i.e. work to role, non co-operation
- active resistance i.e. go slow, absenteeism or even strikes.
In some instances resistance occurs but it may not be obvious. We may play for time, want more detail, be negative by seeing all the problems etc.
Management can help overcome the resistance to change by any of the following :
- adjusting the pace of change
- adjusting the manner of change
- altering the scope of change
Change, in order to succeed needs to be taken step by step with full and skilful use of the communication systems.
Charles Handy has examined statistics that will that will result in discontinuity and change.
The main factors to consider are :
1 Substantial increase in part time employees
2 Most post 2000 jobs, will require cerebral skill and not manual skill
3 The demographic bomb i.e. vanishing school children will put extra pressure for changed attitudes
4 The growing army of what Handy terms the "Third Age" citizen
5 The changing work day
Have you ever had a poor change experience?
How did you cope?
What would you have done to minimise the prospect of a poor change experience?
Should we care if we hurt anyone due to a poor change experience?
If no, what about stress? Is this a factor leading to negative performance?
Can you relate to any of Kotter's lists of errors?
Is it more important to plan the change process rather than bother with the need to empathise with people?
If behaviour to change might be characterised by acceptance, indifference, passive or active resistance does this mean that we have to work with people in order to make the path to change a smooth one?
Charles Handy spoke in 1992 of the role of discontinuity on change. How important do you think this concept is for Guernsey?
Would you see change management as a static or evolving experience?
Change leadership: Selling Up
By John Joseph, Research Associate, Wharton Center for Leadership and Change October 2001.
Being a mid-level change agent is a challenge. It requires the ability to "sell" ideas, influence decision-making across functions, and draw top management's support. Change managers are continually faced with the task of obtaining buy-in from subordinates, peers, and superiors. Without proper funds or supportive coalitions, the best of projects rarely get off the ground. But what are the necessary components for successful change leadership from the middle?
Researchers at the University of Michigan and Suffolk University recently studied "issue-selling" at a regional hospital in the northeast. They interviewed 42 middle-level managers to determine the strategies they used to initiate change and shape the way that resources were allocated. Their agendas were typical of those in many large organizations: cost savings, revenue enhancements, and improvements in administrative, logistical and technical systems.
Almost two-thirds of the interviewed managers used the logic of a business plan to promote their ideas, referring to strategic, financial, marketing or operational objectives. They said that their proposals for change were most favorably received when the plans were supported by numbers, charts and an emphasis on the bottom line.
Many said that an especially productive tactic was to take their proposal repeatedly to their superiors over the course of weeks or even months. Others reported success when they tied their proposals to company profitability or increased market share, concerns of particular interest to top management. A third advantageous tactic was to involve the right people: fully half of the change managers engaged both their peers and superiors.
The researchers also found that timing proved very important: a keen sensitivity was required for when to push and when to hold back. This allowed managers to prepare constituents incrementally and respond to resistance along the way. Preparation was important too: many reported that they had pushed their ideas through by first "doing their homework."
The researchers recommend that change managers gather depth knowledge about the people, procedures, and organizational goals that they will have to address. Key questions include: Who will be affected by the issue? Who cares about the issue? How have similar issues been sold before? How much time does it take to sell an issue? What are the organizational goals? With answers to these questions in hand, and a proper plan of attack, mid-level change managers can go a long way in taking their ideas to the top.
Wharton Leadership 27 Feb 2002
Often when we talk of performance management we think of people appraisal. This look at performance management suggests that there is considerable more than people appraisal in performance management.
Why monitor? Why bother with performance management?
Richard Lynch in "Corporate Strategy" 1997 stresses the importance of monitoring and control procedures. They allow us to :
Assess resource allocation choice
Monitor progress on implementation
Evaluate performance of individual managers
Monitor the environment for significant changes from the planning assumptions and projections
Provide a feedback mechanism and the fine tuning essential for emergent strategy implementation, especially in fast moving markets. (Lynch 1997 pp 691 - 692)
A strategic control system will involve itself with both financial as well as more qualitative data such as customer satisfaction and quality
A look at the range of performance indicators
The essence of control is that part of process where feedback is compared with the plan and means of feed forward control setting targets to be aimed at.
We now recognise the need to plan, develop and monitor performance because of:
The addition of quality and customer satisfaction to the traditional performance management criteria of cost
Increasingly fickle and transient customer base (especially in
UK public sector attitude to excellence and value for money
Many organisations are recognising that the "new" performance criteria will be achieved only through empowerment of employees.
Performance measurement means evaluation that ought to consider :
What is evaluated and why.
What constitutes performance and whether it is good or bad.
Is there a single purpose or conglomeration of values.
Is measurement quantitative or qualitative.
It is important that we decide what we want to evaluate, why and how. This may take some time but as we shall see later when we look at the concept of the balanced scorecard it will be time well spent.
Randell sees appraisal being used for :
Evaluation, auditing, succession planning, training, controlling, development, motivation, validation. (Randell 1994 p 230)
For Randell appraisal should be development rather than assessment led.
Performance assessment should be called performance development.
What does all this mean?
It means that appraisal can be a positive management tool, However, it is one that needs considerable thought before its introduction and for maximum effect must be part of an overall management development programme. Easier said than done!!
Pitfalls in Appraisal and Evaluation
Everyone accepts the value of performance appraisal. Appraisal usually requires one person to make an objective assessment of another persons performance. This is the first major issue - we are dealing with people and their perceptions, which are not objective but subjective.
Identifying the main areas of bias in the appraisal procedure will help the internal validity of the whole process. It provides an indication of the learning needs of those who carry out the appraisal.
One of the major problems in appraisal is the fact that perception has in built bias.
Hogan (1987) clearly demonstrates the fact that personal perceptions tend to be a major influence on actual grades awarded. Add to this the work of Mitchell et al (1982) who showed that we frequently assign higher ratings to subordinates where results appear to be due to high motivation and effort, rather than to subordinates whose similar performance stems mainly from talent or past experience. Our feelings about a person, whether they are in our ingroup (those we like) rather than our outgroup. The work of Heneman et al (1989) suggests that the ingroup influencer means that appraisal depends not only on performance but also on relations between appraiser and appraisee. This seeing of performance in terms of personal perceptions also was seen in the work of Salaman (1987)
Ilgen (1980) has shown that we are far more objective in dealing with the competent but lazy staff member than we are with the employee who does not have the necessary ability to perform to the expected standard.
More general problems with appraisal validity are :
Single criterion - most jobs are multi tasks. One or two critical aspects of the job influence may have disproportionate impact on the appraisal. It is this type of bias that needs to be identified to trainee appraisers.
Traits - what do we mean by terms such as employee loyalty and the like. Loyalty to whom, the head, the caretaker, the business, the customer. The problem of identifying the component part of trait analysis is compounded by the fact that few agree on the traits for individual jobs. Traits is an ambiguous area of organisational behaviour
Halo error - we tend to rate employees according to some recent significant incident. Such a grading may be realistic, but experience suggests that it is likely not to be realistic.
Similarity error - Giving people credit for behaviour we see in ourselves.
Low differentiation - Pizam (1975) warned of distortion in grades through what he terms "social differentiation" - that is the evaluation style of the appraiser. The low differentiator will give grades that are clustered together i.e. on a 5 point scale the grades might be in the 2,3, or 4 areas. The high differentiator would use all the scale.
Fit the data - It is by no means unknown for the appraiser to have determined the grade to be awarded before the appraisal interview takes place. During the interview the appraiser 'fits' the data to the preconceived grade.
Every duck is a swan - Some appraisers see the outcome of subordinate appraisal as a personal test. Thus, such people portray they staff as swans whilst performance might suggest that some or most were ordinary ducks.
Various studies suggest that training of appraisers is not a matter for a few hours but an ongoing experience.
It is necessary for appraisers to be constantly aware of the ease with which bias becomes part of the appraisal process. It is also true that retraining every year or two is also essential, even if this simply involves a review of the appraisal scheme and sufficient audit activity to ensure that the scheme is meeting the stated objectives.
Adrian Furnham article Sunday Times March 1993 said
(a) Subordinates tend to know their superior better than superiors know their subordinates. They see their bosses and know their moods, foibles and preferences, their adequacies, skills, strengths and limitations and things they do and do not like doing.
(b) As all subordinates rate their managers statistically, these ratings tend to be more reliable - the more subordinates the better. Instead of the biases of individual managers' ratings, the various ratings of the employees can be converted into a representative view. If the employees have very differing views of their bosses this can present problems, but represents very significant data meriting further investigation.
(c) Subordinates ratings have more impact because it is more unusual to receive ratings from subordinates. It is also surprising to bosses because, despite protestations to the contrary, information often flows down organisations more smoothly and comfortably than it flows up. When it flows up it is qualitatively and quantitatively different. It is this difference that makes it valuable.
All of this suggests that we need to be aware of the pitfalls in appraisal and to accommodate these in appraisal training. Appraisal properly done is good. However, when we subject appraisal to a cost benefit analysis we may receive quite a shock.
How to inspire creativity and reward good employees
Anne Cummins of the Wharton Business School in her September 2000 paper tells the story of the MBA student who came up with an idea that saved his company millions of pounds. The reward was pen set. The company lost a creative employee.
Cummins feels that the student would have been motivated through three kinds of incentive - autonomy, more time, more resources. These are the incentives creative people respond to.
A managers job is to identify those areas where their employees are most creative...then come up with ways to give them autonomy to pursue ideas in those fields.
It is clear that Cummins believes that facilitating and empowering creativity leads to a better work environment.
The fastest way to destroy motivation is to punish failures that arise from creativity.
Autonomy about how to do something even if there is a lot of autonomy about what (is important for creativity)
Innovative ideas claims Cummins, come from employees talking to colleagues in unrelated areas. Feedback is also essential for motivating people to be creative.
Non-financial Performance Measures: What Works and What Doesn’t
Knowledge at Wharton 23 November 2000
In an article on Oct. 16, 2000, in the Financial Times’ Mastering Management series, Wharton accounting professors Christopher Ittner and David Larcker suggest that financial data have limitations as a measure of company performance. The two note that other measures, such as quality, may be better at forecasting, but can be difficult to implement.
Choosing performance measures is a challenge. Performance measurement systems play a key role in developing strategy, evaluating the achievement of organisational objectives and compensating managers. Yet many managers feel traditional financially oriented systems no longer work adequately.
A recent survey of U.S. financial services companies found most were not satisfied with their measurement systems. They believed there was too much emphasis on financial measures such as earnings and accounting returns and little emphasis on drivers of value such as customer and employee satisfaction, innovation and quality.
In response, companies are implementing new performance measurement systems. A third of financial services companies, for example, made a major change in their performance measurement system during the past two years and 39% plan a major change within two years.
Inadequacies in financial performance measures have led to innovations ranging from non-financial indicators of "intangible assets" and "intellectual capital" to "balanced scorecards" of integrated financial and non-financial measures. This article discusses the advantages and disadvantages of non-financial performance measures and offers suggestions for implementation.
Non-financial measures offer four clear advantages over measurement systems based on financial data.
First of these is a closer link to long-term organisational strategies. Financial evaluation systems generally focus on annual or short-term performance against accounting yardsticks. They do not deal with progress relative to customer requirements or competitors, nor other non-financial objectives that may be important in achieving profitability, competitive strength and longer-term strategic goals. For example, new product development or expanding organisational capabilities may be important strategic goals, but may hinder short-term accounting performance.
By supplementing accounting measures with non-financial data about strategic performance and implementation of strategic plans, companies can communicate objectives and provide incentives for managers to address long-term strategy.
Second, critics of traditional measures argue that drivers of success in many industries are "intangible assets" such as intellectual capital and customer loyalty, rather than the "hard assets" allowed on to balance sheets.
One study examined the ability of non-financial indicators of "intangible assets" to explain differences in US companies' stock market values. It found that measures related to innovation, management capability, employee relations, quality and brand value explained a significant proportion of a company's value, even allowing for accounting assets and liabilities. By excluding these intangible assets, financially oriented measurement can encourage managers to make poor, even harmful, decisions.
Third, non-financial measures can be better indicators of future financial performance. Even when the ultimate goal is maximising financial performance, current financial measures may not capture long-term benefits from decisions made now. Consider, for example, investments in research and development or customer satisfaction programs. Under U.S. accounting rules, research and development expenditures and marketing costs must be charged for in the period they are incurred, so reducing profits. But successful research improves future profits if it can be brought to market.
Similarly, investments in customer satisfaction can improve subsequent economic performance by increasing revenues and loyalty of existing customers, attracting new customers and reducing transaction costs. Non-financial data can provide the missing link between these beneficial activities and financial results by providing forward-looking information on accounting or stock performance. For example, interim research results or customer indices may offer an indication of future cash flows that would not be captured otherwise.
Finally, the choice of measures should be based on providing information about managerial actions and the level of "noise" in the measures. Noise refers to changes in the performance measure that are beyond the control of the manager or organization, ranging from changes in the economy to luck (good or bad). Managers must be aware of how much success is due to their actions or they will not have the signals they need to maximise their effect on performance. Because many non-financial measures are less susceptible to external noise than accounting measures, their use may improve managers' performance by providing more precise evaluation of their actions. This also lowers the risk imposed on managers when determining pay.
Although there are many advantages to non-financial performance measures, they are not without drawbacks. Research has identified five primary limitations. Time and cost has been a problem for some companies. They have found the costs of a system that tracks a large number of financial and non-financial measures can be greater than its benefits.
Development can consume considerable time and expense, not least of which is selling the system to skeptical employees who have learned to operate under existing rules. A greater number of diverse performance measures frequently requires significant investment in information systems to draw information from multiple (and often incompatible) databases.
Evaluating performance using multiple measures that can conflict in the short term can also be time-consuming. One bank that adopted a performance evaluation system using multiple accounting and non-financial measures saw the time required for area directors to evaluate branch managers increase from less than one day per quarter to six days.
Bureaucracies can cause the measurement process to degenerate into mechanistic exercises that add little to reaching strategic goals.
The second drawback is that, unlike accounting measures, non-financial data are measured in many ways, there is no common denominator. Evaluating performance or making trade-offs between attributes is difficult when some are denominated in time, some in quantities or percentages and some in arbitrary ways.
Many companies attempt to overcome this by rating each performance measure in terms of its strategic importance (from, say, not important to extremely important) and then evaluating overall performance based on a weighted average of the measures. Others assign arbitrary weightings to the various goals. One major car manufacturer, for example, structures executive bonuses so: 40% based on warranty repairs per 100 vehicles sold; 20% on customer satisfaction surveys; 20% on market share; and 20% on accounting performance (pre-tax earnings). However, like all subjective assessments, these methods can lead to considerable error.
Lack of causal links is a third issue. Many companies adopt non-financial measures without articulating the relations between the measures or verifying that they have a bearing on accounting and stock price performance.
The lack of an explicit casual model of the relations between measures also contributes to difficulties in evaluating their relative importance. Without knowing the size and timing of associations among measures, companies find it difficult to make decisions or measure success based on them.
Fourth on the list of problems with non-financial measures is lack of statistical reliability - whether a measure actually represents what it purports to represent, rather than random "measurement error". Many non-financial data such as satisfaction measures are based on surveys with few respondents and few questions. These measures generally exhibit poor statistical reliability, reducing their ability to discriminate superior performance or predict future financial results.
Finally, although financial measures are unlikely to capture fully the many dimensions of organizational performance, implementing an evaluation system with too many measures can lead to "measurement disintegration". This occurs when an overabundance of measures dilutes the effect of the measurement process. Managers chase a variety of measures simultaneously, while achieving little gain in the main drivers of success.
Once managers have determined that the expected benefits from non-financial data outweigh the costs, three steps can be used to select and implement appropriate measures.
Understand Value Drivers
The starting point is understanding a company's value drivers, the factors that create stakeholder value. Once known, these factors determine which measures contribute to long-term success and so how to translate corporate objectives into measures that guide managers' actions.
While this seems intuitive, experience indicates that companies do a poor job determining and articulating these drivers. Managers tend to use one of three methods to identify value drivers, the most common being intuition. However, executives' rankings of value drivers may not reflect their true importance. For example, many executives rate environmental performance and quality as relatively unimportant drivers of long-term financial performance. In contrast, statistical analyses indicate these dimensions are strongly associated with a company's market value.
A second method is to use standard classifications such as financial, internal business process, customer, learning and growth categories. While these may be appropriate, other non-financial dimensions may be more important, depending on the organisation's strategy, competitive environment and objectives. Moreover, these categories do little to help determine weightings for each dimension.
Perhaps the most sophisticated method of determining value drivers is statistical analysis of the leading and lagging indicators of financial performance. The resulting "causal business model" can help determine which measures predict future financial performance and can assist in assigning weightings to measures based on the strength of the statistical relation. Unfortunately, relatively few companies develop such causal business models when selecting their performance measures.
Most companies track hundreds, if not thousands, of non-financial measures in their day-to-day operations. To avoid "reinventing the wheel", an inventory of current measures should be made. Once measures have been documented, their value for performance measurement can be assessed. The issue at this stage is the extent to which current measures are aligned with the company's strategies and value drivers. One method for assessing this alignment is "gap analysis". Gap analysis requires managers to rank performance measures on at least two dimensions: their importance to strategic objectives and the importance currently placed on them.
Our survey of 148 US financial services companies — a joint research project sponsored by the Cap Gemini Ernst & Young Center for Business Innovation and the Wharton Research Program on Value Creation in Organisations – found significant "measurement gaps" for many non-financial measures. For example, 72% of companies said customer-related performance was an extremely important driver of long-term success, against 31% who chose short-term financial performance. However, the quality of short-term financial measurement is considerably better than measurement of customer satisfaction. Similar disparities exist for non-financial measures related to employee performance, operational results, quality, alliances, supplier relations, innovation, community and the environment. More important, stock market and long-term accounting performance are both higher when these measurement gaps are smaller.
Finally, after measures are chosen, they must become an integral part of reporting and performance evaluation if they are to affect employee behavior and organisational performance. This is not easy. Since the choice of performance measures has a substantial impact on employees' careers and pay, controversy is bound to emerge no matter how appropriate the measures. Many companies have failed to benefit from non-financial performance measures through being reluctant to take this step.
Although non-financial measures are increasingly important in decision-making and performance evaluation, companies should not simply copy measures used by others. The choice of measures must be linked to factors such as corporate strategy, value drivers, organisational objectives and the competitive environment. In addition, companies should remember that performance measurement choice is a dynamic process - measures may be appropriate today, but the system needs to be continually reassessed as strategies and competitive environments evolve.
One means of determining, assessing nd monitoring performance is the balanced scorecard approach. It was originally developed by Kaplan R (1992) Harvard Business Review January - February 1992 provides managers with a "fast but comprehensive view of the business".
The balanced scorecard requires us to formulate our objectives (strategy) before we develop the scorecard.
The purpose of the balanced scorecard is to provide us with a visual assessment of organisational performance. It allows us to use our visual skills - "a picture is as good as a 1000 words" on the performance of the organisation.
Kaplan's initial work concentrated on qualitative factors but he extended his analysis in a later work (1996) to include qualitative factors such as customer satisfaction and employee morale.
The balanced scorecard is intended to provide us with a more precise approach to performance management techniques than we would obtain just by using appraisal, and terms such as effective and efficient. Whilst the intent is to provide a more precise approach the balanced scorecard is indicative and not prescriptive. It is a guide that derives from reflective and hopefully, strategic thinking. Its component parts need not be as Kaplan stated but may be adjusted to deal with our own particular circumstances.
The balanced scorecard allows us to utilise the four box / one page approach
The Balanced Scorecard
Goals Measures Goals Measures
Internal business Innovation and learning
Goals Measures Goals Measures
The success of the balanced scorecard is in its flexibility. We can decide for ourselves what are the most important measures of performance for our organisation. Kaplan suggested in his balanced scorecard that managers look at four important perspectives :
How do customers see us
Time, quality, performance and service are key words.
Innovation and learning
Can we improve and create value?
How good are we at anticipating and meeting future needs?
What are staff attitudes
Does continuous improvement occur?
The balanced scorecard is usually associated with strategy and providing us with a visual impression of how well (or otherwise) we are doing. You will appreciate that a knowledge of the range of performance management measures open to us. It is of considerable help in developing our own balanced scorecard.
An example of a balanced scorecard at an airline
Lets look at an example of our own. Assume that we operate an airline. Through strategic thinking we identify the key success factors (KSF) we feel are appropriate :
Quality of inflight service
Convenient flight scheduling
User friendly aircraft
User friendly staff
High load factors (75% plus)
High utilisation of aircraft
Maximising of yield management
These objectives, purposes are essential to the success of the company. It can be seen why it is important to have some form of quick check to see that the multiple influencers on our chosen strategy is working. This is where the balanced scorecard comes in.
We can begin to set up our own scorecard by establishing the criteria we want to monitor :
Positive cash flow cash budgets and reports
Aircraft maintenance figures maintenance costs and deviations
Aircraft load factors load factors for various planes and routes
In our case customer perspective is all important. It is essential that we discover what the customer really wants and thinks of our service.
Convenient flight schedules survey of customer attitudes, focus groups
User friendly staff survey, focus group, complaints per thousand passengers
Electronic booking system Working by 1. 4. 2003!!
Internal goals perspective
This part of the balanced scorecard often derives from customer needs.
Staff training in customer relations All staff complete initial training by 1. 9.2003
Staff appraisal Self appraisal scheme introduced 1.1.2004
Develop It system Electronic booking system operative 1.12.2003
These are just a few ideas, a part of each section. It is sufficient to give an idea of how we can develop the balanced scorecard for our organisation.
Remember the balanced scorecard is an aid to management and not a master of management. It is our servant.
We can develop a balanced scorecard approach for any performance management task. In personnel we can utilise, indeed we should utilise, the balanced scorecard concept. Our personnel department might decide that it wants to monitor key data in the following areas :
The personnel department then needs to determine the key goals and measures that will give good reliable feedback on performance management.
What is Knowledge Management (KM) and how can it help us? Surely we know what KM is – or do we?
It is only when we try to describe KM that we realise the difficulty is describing what it is.
There are at least four explanations of the term KM:
1. When we place codified information and expert knowledge in a database that can be accessed by others. This information can include documents, e-mails, powerpoint presentations, etc. This type of KM is static and is a giant electronic database.
2. When we develop the database in (1) and use the information in an interactive form. This may involve us ensuring that individuals can access the individuals whose knowledge is contained in the database and discuss the contents with them.
This type of KM database often has a sophisticated search function and will contain details of individuals we can contact for specialist help. BP Amoco is one organisation to use this approach.
3. A development in (2) is where we place not only codified (known) knowledge on a database but also seek to capture tacit information on that database.
4 KM is sometimes seen as the attempt to harvest information from staff who, if they left the organisation, would take knowledge that is unique to them away with them. All of our organisations have staff who in this category.
Knowledge harvesting will also provide information for the three definitions
Knowledge harvesting will attempt to gather this for the organisation before
that individual leaves.
Georgia Pacific in the USA were faced with this problem a few years ago when a key manager suddenly became ill. This manager was the in-house expert in collections and dealing with delinquent accounts--an obviously important function directly related to the company's bottom line. Over the years, he had built a network of relationships with attorneys, collection agencies and credit managers and developed instincts for such issues as when to send a past-due account to a collection agency. It quickly becomes that this manager has a significant amount of knowledge of how to do things and how things are done , that needed to be retrieved (harvested) for the benefit of those who took over the job.
More recently Astra Zeneca in the UK have made serious attempts to capture knowledge from staff about to retire.
The ultimate goal of knowledge harvesting is to capture an individual's decision-making process with enough clarity that someone else guided by it could repeat the steps of the process and achieve the same result.
What does Knowledge management mean to your organisation?
How can knowledge management help your organisation?
There must be senior managers in your organisation whose departure means that they would take valuable information held in their heads with them. What steps do you think the organisation should take:
1 to identify and
2 to capture this information?
What unique information do you hold?
How should we plan a knowledge management proposal?
To take just one organisation as an example Fritto Lay the successful potato crisp subsidiary of Pepsi Cola have identified a number of advantages from adopting KM.
Has become an extremely valuable for communication that helps cut down on travel,
Has become a distance learning tool
Has helped foster a sense of camaraderie and relationship building.
Provides the latest news about their customers.
Has become an invaluable tool for helping assess employee skill sets.
Has also helped boost employee retention rates
The advice from many organisations who have tried to capture KM is:
a) Learn from the experiences of others.
b) Don't take what KM vendors point of sale information tell you at face value.
c) Examine how KM can solve your problems.
d) Look at what KM means to your employees.
e) Devise policies, standards and organisational structure necessary to ensure KM thrives.
f) Select appropriate technology.
g) Learn from the experiences of others.
How useful is this advice?
Lessons from organisations who have adopted KM.
"If Hewlett Packard only knew what it knows, the company could dramatically improve its performance" (Lew Platt)
We have to ensure that KM is not simply a database that makes our knowledge portals often appear like black holes where information gets dumped, never again to see the light of day.
When it comes to knowledge management, a lot of organizations begin by connecting people with static information such as that contained in documents, e-mail messages or PowerPoint presentations. Such a strategy is fine for starters, but it shouldn't end there,
It's through face-to-face contact where conversations often diverge and thus become really interesting. True moments of discovery come not from asking a concise question and getting a direct answer, but from tangential asides and spontaneous give and take. No matter how well-designed or intentioned the software, technology just can't take the place of real, live conversations.
The experiences of organisations such as Rank Zerox, Hewlett Packard and Corning confirm that a receptive culture is a major player in getting people to share what they know and can be as simple as recognizing them as go-to people. In these organisations just helping others provides the motivation to share information. This is in stark contrast this with the views of Gabriel Szulanski and others on the “stickiness” of KM where the culture of the organisation is such that we feel that sharing information with others is giving them part of our own competitive advantage.
Ana Sancovich of Cornell tells of how the IT company IDEO Inc uses its culture of participation to promote creativity and uses brainstorming to support the culture of openness and extensive storing of information.
If you take what many knowledge management vendors tell you at face value, you'll think solving a perplexing KM problem is as easy as buying a piece of technology and slapping it onto your network. Take Web-based searches, for example. On the surface, providing surfers with better search results—and hence more accurate and timely access to relevant knowledge—may seem straightforward. Just buy a search engine, install it and voila—you have KM. Not so in reality.
How does the people interaction affect your developing ideas of knowledge management so far as your organisation is concerned?
How are you going to deal with information “stickiness” or cultural appropriateness in order do develop knowledge management in your organisation.
Recently Singh and Kale of Wharton Business School claimed in their paper "Alliance Capability and Success: A Knowledge-Based Approach" that there four ways of building corporate knowledge. These were :
The skill to manage alliances resides in employees who have actually
done the job.
Convert knowledge into an articulate form.
Hewlett Packard regularly debriefs its alliance managers so "that their personal knowledge is articulated and others have access to their experience".
This recording of knowledge is easier said than done. In a 1999 article in People Management, there is the account of the difficulties encountered by BT in 'articulating' and recording this knowledge. It is interesting that BT have resorted to interview as a medium for collating this information, and recognise the considerable amount of time needed for this process.
A company can codify its alliance know-how in the form of guidelines, checklists or manuals. Hewlett
Packard has a 400 page document that transforms the knowledge articulation into frameworks, checklists, etc.
Knowledge can be shared through informal discussions, conversations, as well as more formal groups and committees.
It will be seen from the experience of both Hewlett Packard and Corning that knowledge sharing comes from "anchoring change in corporate culture" (Kotter).
Individual managers need to imbibe relevant alliance management
know-how in the form of new mental models into individual knowledge.
Internalisation focuses on the recipient absorbing knowledge rather that the instructor imparting knowledge.
Finally, Singh and Kale feel that merger/alliance activity is sufficiently important to be a
The theme of Knowledge Management is also seen in the Wharton article of April 2000 "Helping
Companies Know What they Know".
The paper opens with a comment by a former CEO of Hewlett Packard. "If Hewlett Packard only knew
what it knows, the company could dramatically improve its performance"
The question "Why does knowledge move slowly in organisations?" usually gets an answer - "stickiness".
Corporate micropolitics is one reason for stickiness. Competition - if I give you what I know, I lose a competitive edge over you - is another.
Gabriel Szulanski, of Wharton Business School, sees knowledge transfer as a process. Stickiness is common in organisations.
Szulanski sees four stages in the knowledge transfer process. In each stage different factors cause stickiness. Amongst them are :
- difficulty people face in recognising opportunities to transfer knowledge and act upon them. Remember it (knowledge transfer) is a process. We often fail to see what needs to be transferred - we often fail to accept the process because it may weaken us or whatever, and we become entangled in micropolitics.
In a recent INSEAD paper summarising “In Leveraging the Customer Base: Creating Competitive Advantage through Knowledge Management” Management Science 47, no. 11, November 2001 Elie Ofek and Miklos Sarvary ask whether knowledge management is a worthwhile investment in troubled economic times.
Some will argue that we retrench others that times of slow growth are opportunities to strengthen the organisation through developing knowledge management.
What could explain this KM dichotomy? Elie Ofek (Assistant Professor of Business Administration, Harvard Business School) and Miklos Savary (Associate Professor of Marketing, INSEAD) say it may stem from the two conceptual categories of KM: Knowledge Exchange and Knowledge Creation. These two branches have scale economies of different types with varying implications for competitive dynamics.
KM processes may facilitate Knowledge Exchange in the firm, leading to more efficient operations and lower costs, i.e. supply-side scale economies. They can lower the firm’s marginal costs and increase efficiency, making it easier for professionals to access and adapt previously-generated solutions. Many firms do this in a centralized (through electronic documents of client and project information) or decentralized way (through communication, directories, and general sharing of information among colleagues).
On the other hand, KM processes may enhance Knowledge Creation if the experience gained through individual assignments is synthesised and integrated. Knowledge Creation results in deeper understanding of the business environment, better service quality, i.e. demand-side scale economics. They enrich the end-product, creating analytic frameworks and transform problem-solving time into time spent getting at the core concepts involved. This eventually leads to happier clients.
To discover what aspect of KM the firms truly value in a competitive environment, the authors pose some direct questions: How does KM generate sustainable competitive advantage for the firm? And in a situation where a firm makes cutbacks, which aspects of KM are the ones worth keeping? Which are more important to secure competitive advantage?
They find that the answers depend on two factors: the competitiveness of the business environment and the firms’ ability to leverage the customer base. Specifically, in a non-competitive environment, the firm is always better off focusing on Knowledge Exchange. This is in sharp contrast with the situation where competition is significant. Then, if the ability to leverage the customer base is relatively high, firms should shift the emphasis of their KM system to Knowledge Creation.
The authors also explore the evolution of the professional services industry where firms compete with KM systems geared to Knowledge Creation. The results indicate that, while the quality of their services increases with a better performance of the KM technology, long-term industry profits first increase but then decrease because of more intense competition.
Just in Time Knowledge Management
Thomas Davenport and John Glaser HBR July 2002
"Knowledge management programmes often fail because they make it harder, not easier, for people to do their jobs".
This article on the need for medical practitioners to be able to know something about 10,000 diseases, 3,000 medications, 1,100 laboratory tests and many of the 400,000 medical articles published each year.
The study concentrates on the Boston-based Partners Healthcare which 10 years ago suffered from a need to be able to access medical knowledge quickly. Mistakes occurred.
The traditional approach to knowledge management was, as Singh and Kale put it, 'to articulate, codify and share information a la Xerox, Hewlett Packard'. But Partners Healthcare needed something extra. "The key to success … is to bake specialised knowledge into the jobs of specialised workers".
This baking of specialised knowledge is interactive. If a doctor has a patient with a chest problem, the symptoms can be put into the computer and a number of possible causes are suggested. At all times the doctor is in control, but has on-line, interactive access. If the doctor decides the person is suffering from angina and prescribes a particular drug, the computer programme checks if the patient has unusual reactions to the drug or similar drugs and what are the consequences of the reaction. All this specialised knowledge, as well as references to articles, is available for the doctor to make his diagnosis.
The cost of such an integrated specialised knowledge management system is high. "Embedded knowledge in initiatives should only be undertaken for truly critical knowledge work processes". (p 10)
Partners Healthcare developed their knowledge system from scratch. Such systems need:
a) Support from the best and brightest.
b) An expert and up-to-date knowledge base.
c) Prioritised processes and knowledge domains (only use for really critical functions, because of cost).
d) Final decisions by experts (doctors, not computer makes final decision).
e) A culture of measurement (tracking mechanisms to see what systems are used – use made of system by doctors, etc.)
f) The right information and IT people.
How does the work of Ofek and Savary affect your organisation?
Knowledge management in practice - a lesson for us all?
A recent article in the Harvard Business Review (May - June 2000 entitled "How to Capture Knowledge without Killing it" sees John Seely Brown and Paul Duguid take a practical look at how one company went about the difficult task of recording for the benefit of the organisation the particular knowledge of its employees
Knowledge management assumes that managers can best foster knowledge by responding to the inventive, innovational ways people actually get things done. (p 74)
The HBR article states that we should identify best practice. In practice we need to establish the difference between what the manual says and how things are actually done. This is compounded by the fact that there is a problem gap between what people think they do and what they actually do.
Brown and Duguid provide the example of service staff and procedures. They claim that service staff are effective because they so often depart from formal processes. This is because procedures so often assume that machines are predictable even when they break down. The assumption is that we look at the manual and, by magic, the problem is resolved.
Zerox know different. Julian Orr who as an anthropologist with Zerox's Palo Alto laboratory who studied what service representatives actually did. Orr refers to the breakfast and other meeting where the Zerox service staff would share problems, discuss and develop insights into difficult machines. This is of course the knowledge sharing process identified by Singh and Kale.
One feature of a strongly cultured organisation such as Zerox is the role of storytelling. We tell stories of problems. Solutions, triumphs and disasters.
Improvisation is an important part of job knowledge acquisition and can be compared with the more formal process described by those such as Kolb's experiential learning cycle.
As Orr's study shows, executives who want to foster best practices must pay very close attention to the practices as they occur in reality rather than as they are represented in documentation or process design (p 78)
The Zerox example shows how much knowledge management exists in the minds of our employees who when they leave take that knowledge with them. The effort involved in harnessing the knowledge unique to the individual must have a positive effect on efficiency and effectiveness.
At Northwestern University (www.northwestern.edu) "Someone looking for the homepage for 'The College of Engineering,' would instead get press releases that mentioned the school," Staci Roberts director of Web communications says.
It was clear to Roberts—as it was to anyone looking for relevant Web-based information—that Northwestern needed to revamp its search capabilities.
Rather than evaluating search tools in a vacuum, Roberts surveyed Web developers throughout the university's schools and departments. Her objective: Find out what documents the developers wanted to make accessible for searching, and devise a strategy for standardizing terminology.
Now equipped with better search capabilities, Roberts and her staff are improving site management and boosting operating efficiency. "We know what areas of the site are the most visited, and what kinds of information visitors are looking for," Roberts says. In response, Web developers are constantly tweaking content, whether it's adding relevant information or removing stale pages. (For the record, admissions, news and athletic information are the most visited areas.)
So the next time a vendor comes knocking on your door promising to sell you a complete KM program in a box, borrow a few pages from Roberts' book. First, examine how KM can solve your organization's problems. Next, look at what KM means for your employees. Then devise the policies, standards and organizational structure necessary for KM to flourish. Then—and only then—should you select the technology.
Does this case study present any ideas for you to adopt?
Frito-Lay. Potato crisp subsidiary of Pepsi Cola
Corporate executives knew that capturing best practices and corporate information would give employees something they could sink their teeth into. But information was scattered around the company in disparate systems, and there was no easy way for the geographically dispersed sales force to get at it.
"We had knowledge trapped in files everywhere," says Mike Marino, vice president of customer development at Frito-Lay, an $8.5 billion division of PepsiCo in Plano, Texas. Marino says that he knew if the 15-member sales team could only access the same information, it would solve its ongoing problems with information sharing and communication.
For example, multiple salespeople would ask the corporate sales, marketing and operations staff for the same types of information and data, such as current private-label trends in their snack category or research on people's shopping behaviour, he says. The result? Frito-Lay's support staff ended up performing the same tasks over and over. If that information lived in a central, easily accessible spot, the salespeople could access it as needed.
How appropriate is this comment so far as your organisation is concerned?
Additionally, Marino says, much valuable knowledge was squirreled away on each salesperson's system. There were many idiosyncratic methods of capturing information, "none of which were terribly efficient," he says.
How appropriate is this comment so far as your organisation is concerned?
Marino says the sales team also lacked a place for brainstorming and collaboration online. "If somebody got a piece of research and wanted to get input from account executives in Baltimore and Los Angeles, the ability to collaborate [online] just wasn't there," he says.
How appropriate is this comment so far as your organisation is concerned?
The answer, so far as Fritto Lay was concerned was to build a knowledge management portal on the corporate intranet. A KM portal is a single point of access to multiple sources of information and provides personalized access.
Companies are starting to pay attention to portals because they offer an efficient way to capture information, says Carl Frappaolo, executive vice president and cofounder of the Delphi Group, a consultancy in Boston. A KM portal at Frito-Lay would give the sales department a central location for all sales-related customer and corporate information and cut down on the time it took to find and share research. In addition to different types of information about the team's customers—including sales, analysis and the latest news—the portal would contain profiles on who's who in the corporation, making finding an internal expert a snap.
Marino chose this sales team as the portal pilot because it was working with a Frito-Lay client that Marino says is an industry leader in marketing, product promotions and merchandising. The sales team was dispersed across the country, making it ideal for determining whether the portal would succeed in bridging geographic boundaries when it came to sharing internal information.
What team, in your organisation, would you use as a portal pilot?
Based on input from the pilot team, Marino's group established three goals for the Frito-Lay portal: to streamline knowledge, exploit customer-specific data and foster team collaboration. He brought in Navigator Systems, a consultancy based in Dallas, which has worked with Frito-Lay in the past and had some experience building knowledge management portals. Navigator built a prototype in about three months using technologies previously approved by Frito-Lay's IT department, including Lotus Domino, BusinessObjects' WebIntelligence, Java and IBM's DB2 database. Since there was no advanced search engine in use at the company, Navigator's consultants recommended a tool called Autonomy, a natural language search engine that allows users to search information in different repositories such as intranet sites, PowerPoint presentations and spreadsheets, says Todd Price, the principal consultant at Navigator who worked on the implementation. "The search engine enabled the person to get to all the disparate data sets through one view," explains Marino.
Marino and Price essentially had to start from scratch when it came to populating the portal. "Never before at Frito-Lay had they tried to capture expertise systematically in one place," notes Price. Marino and Price did an audit within the company and then created expertise profiles on the portal so that sales staff in the field would have an easy way to learn who's who at headquarters in Plano. That way, people who have expertise in areas such as promotion planning, activity planning, costing or new product announcements can be readily tracked down and contacted for information. "In a large organization, that's critical, because there's a wealth of knowledge. But for someone new in the field it takes a lot of tries to figure out who they are," Price says.
Security was also a big concern because the pilot team would be working with confidential client information. The particular customer supported by the pilot team "had custom information about sales performance that they shared with members of the Frito-Lay team, but we were contracted not to let that information get outside the team that worked with that customer," says Marino. His group built the portal so that different sections of it were password-protected, ensuring that only the pertinent users could get to the confidential information.
What security issues are immediately obvious in your organisation?
The portal went live in January 2000. Since then, three additional sales teams, or customer communities as they are called internally, have been given access to the portal with different content—including research abstracts and what Marino calls performance scorecards, which evaluate account performance. "If somebody in sales or market research did a study in a particular area like private-label trends, [the user] would be able to click to that abstract and get a summary of that study." Users access the portal, known as the Customer Community Portal (CCP), through a Netscape Navigator browser and enter their name and password on the Frito-Lay intranet
The CCP has paid off with increased sales. "What we expected to see was that the pilot team would outperform others in terms of sales and profitability," Marino says. While he declined to give figures, he says the test team doubled the growth rate of the customer's business in the salty snack category. "The retailer is happy because they're doing more business in their market, and we're doing business at a faster growth rate with this customer than with other customers," Marino says
Can you be specific about the results you would expect in your organisation?
It also made the sales team happier. For example, the pilot team members reside in 10 different cities, so "the tool has become extremely valuable for communication" and helps cut down on travel, says Joe Ackerman, a customer team leader in the sales division based in Portland, Ore. A year after implementing the portal, the pilot group has been able to share documents concurrently instead of having to send faxes around the country to different offices. "We have to manipulate large amounts of data, and now we can look at it online versus having to have somebody physically travel to the retail customer. It's almost a distance learning tool as much as anything else," he says.
The CCP has also helped foster a sense of camaraderie and relationship building. For example, the portal homepage lists the team members' birthdays. People can also share best practices—on anything under the sun. If someone developed an effective sales presentation for a potential customer in Boston, a salesperson in San Francisco could co-opt the information. Salespeople can also find the latest news about their customers, and there's an automatic messaging feature that informs team members who is online.
For Ackerman, the portal has also been an invaluable tool for helping him assess employee skill sets, because each salesperson is required to catalogue his or her strengths and areas of expertise. "As a team leader, it helps me analyse where people's gaps might be without having to travel to another member's location," he says
The portal has also helped boost employee retention rates, says Ackerman. Turnover used to be terrible, he says, because salespeople felt pressured to find vital information and communicate with the rest of the team. Marino adds that salespeople felt frustrated and disconnected because there was no way to efficiently collaborate with the rest of their group unless they flew into a central location.
Are any of the above advantages of value to your organisation?
Since the portal has been in place, not one person on the 15-member team has left. Part of that can directly be attributed to the portal, says Ackerman, "because it helps build the connection." In company surveys, salespeople previously complained about geographic constraints and how they didn't feel connected and part of a team, he says.
The portal has proven so successful that its use has now become a PepsiCo initiative, says Marino. That means it will soon have added functionality so that employees across all three divisions—including Tropicana—can take advantage of product performance information on a jointly shared customer like a supermarket, he says. Marino says the different PepsiCo divisions will have the ability to co-promote and co-merchandise multiple products that are consumed together—such as carbonated beverages and salty snacks—to drive greater sales internally, naturally and for its customer. That's talking more than just peanuts.
Gathering Knowledge While It's Ripe Growing its inventory of knowledge assets enables an enterprise to work faster and move on to new things.
It has become something of a cliché in business theory, but that makes it no less true: a large portion of any company's assets reside in the heads of its employees, and a key goal of any knowledge management program is to enable the company to make effective use of those assets.
How true is this comment so far as your organisation is concerned?
In addressing day-to-day responsibilities, employees develop skills and expertise that through repetition eventually become nearly instinctive. This experience increases the productivity of the individual worker, but it also creates a problem. An employee who is no longer conscious of the individual steps in what he or she does probably won't be able to explain the task to a newcomer.
If their expertise remains tacit in those employees' heads, others in the company must go through their own trial-and-error experiences to build their own best practices. At least, this is inefficient; in some cases it can cause serious problems.
For example, in mid-1999, Georgia-Pacific Corp., an international forest products company based in Atlanta, faced such a dilemma. Senior management was notified that the company's veteran collections manager had been diagnosed with melanoma, a form of skin cancer, and had been ordered to start chemotherapy. In two weeks he would go on indefinite medical leave.
This manager was the in-house expert in collections and dealing with delinquent accounts--an obviously important function directly related to the company's bottom line. Over the years, he had built a network of relationships with attorneys, collection agencies and credit managers and developed instincts for such issues as when to send a past-due account to a collection agency.
The manager's peers in the credit organization had expertise in their own specialties but only rudimentary knowledge of collections. Within two weeks, Georgia-Pacific had to find some way to make as much as possible of his know-how and work processes available to his colleagues in his absence. The key component of that solution was knowledge harvesting.
Preparing and proceeding
Knowledge gathering or harvesting has a place in almost any enterprise KM strategy. It aims to make tacit knowledge explicit and is well-suited to eliciting information for a clearly defined purpose. It can be used to capture the knowledge of departing employees, facilitate new product development or jump-start a knowledge management project by rapidly generating a body of specialized information from in-house experts and making it available to colleagues across the company.
Larry Todd Wilson, president of Knowledge Harvesting Inc. in Birmingham, Ala., describes his information gathering approach as a way to help people talk about what they know so that information can be shared with others and ultimately used for competitive advantage. However, for the effort to succeed, conditions must be conducive to harvesting. The first step is to determine whether the enterprise's corporate culture fosters or discourages the practice of sharing.
Successful knowledge gathering and sharing cannot take place in an adversarial, competition-oriented environment where people feel that they would be jeopardizing their own status and job security by giving up knowledge. Therefore, as part of a company's overall KM strategy, management must take steps to encourage sharing behaviour across the company so subject matter experts are willing to share what they know
After the enterprise ascertains that its work environment will support the project and that its goals and methods have been made clear to employees, the harvester should meet with management to determine the nature of the expertise the company wants to gather and the business issues surrounding it.
A key issue is to identify the target audience who will use the harvested information and their specific needs. The harvester should study existing explicit data pertaining to an expert's specialty within the company (such as existing job descriptions and published documents) and use other techniques such as having the expert and his or her colleagues write profiles of their jobs. In this way the harvester can form a sense of their expertise, where it has gaps and where it overlaps with the knowledge of others.
The central event in the process is a series of interviews with each expert, conducted by a trained knowledge harvester who may be an outside consultant or an in-house specialist. In the course of these interviews, the harvester seeks to identity the expert's valuable practices, clarify information previously discussed and fill gaps with new knowledge. A complete interview also entails extensive refinement by the interviewer before and after the conversations
An effective knowledge harvester has certain qualities, according to Dan Fredericksen, a business systems consultant at Georgia-Pacific who studied harvesting techniques with Wilson and works on harvesting projects at his company. Such a person "has good human and interpersonal skills and is good at organizing information on the fly as well as mapping that information," he says. "The harvester can probe and see where the holes are and get to them."
Next, the harvester begins a series of one-on-one meetings with the individual experts. At Georgia-Pacific, for example, this process started with an interview with the departing collections manager; Fredericksen then presented the results to the peers who would be assuming his responsibilities in his absence. The gaps between what he found and what the target audience needed to know formed the basis for the next round of questioning.
Cycling between the expert and the eventual users is essential to avoid wasting time and exhausting their patience. Fredericksen notes two touchstones that the harvester should consider often during the process: "Who is going to use this? Is this unique, or does everybody already know this? You don't want to use the harvestee's time for what is already common knowledge to the target learner."
The desired results
The ultimate goal of knowledge harvesting is to capture an individual's decision-making process with enough clarity that someone else guided by it could repeat the steps of the process and achieve the same result. To get there, the harvester should constantly ask, says Fredericksen, "If I was in this situation, would I get to the same place they did?" If the answer is no, the harvester must focus on filling the gap between what the user currently knows and what is needed to duplicate the expert's practices.
Once the information is gathered, it is edited and presented. The presentation may take the form of a paper checklist or questionnaire, but a more common and useful form is interactive software on the company intranet. Georgia-Pacific tries to reduce the entire decision-making process to yes/no or multiple-choice questions.
One of its tools, devised after harvesting the collections manager's knowledge, is a series of questions in a branching structure, which guide the user to define the problem and apply the necessary criteria to solve it. The company tries to capture this activity by keeping records of the interaction--noting things such as what questions are asked in what circumstances, which issues are common or uncommon and points at which people have difficulty--that can provide a knowledge base for future refinements.
Beyond crisis mode
When Georgia-Pacific learned of the impending knowledge crisis in its credit department, Dan Fredericksen was already familiar with knowledge harvesting. He had concluded that there were numerous instances in which his company could benefit from it, and the crisis of the departing collections manager unexpectedly provided the first opportunity to try it.
Fredericksen and Wilson gathered the information over a six-week period that included some interviews with the manager after he left as well as follow-up with those who assumed his duties. Developers then packaged it as the Web-based tool mentioned above, which guides credit managers through collection recovery processes gleaned from the knowledge of their departed colleague.
Looking beyond the current crisis, Fredericksen says he believes that a harvesting process could save Georgia-Pacific time and money by keeping people from having to reacquire knowledge that already exists within the company. He plans to harvest knowledge from experts across Georgia-Pacific as part of a larger KM strategy to connect individuals within specific disciplines for the purpose of growing knowledge through sharing and collaboration.
For example, he says, the paper-making machines used at various production facilities are generally quite similar, and if those machines ran more efficiently they could produce millions of dollars in savings or increased revenue. While the experts responsible for maintaining the systems had each acquired deep, almost intuitive knowledge of their particular machines, they rarely communicated with their colleagues at other locations. Indeed, the geographic and organizational boundaries would have made it difficult for them to do so.
Realizing good intentions
Aside from the catastrophic error of beginning the harvesting process before the company is culturally ready for it, other issues can affect the outcome adversely. The biggest problem he has encountered, Fredericksen says, is a lack of resources to process the knowledge generated by harvesting projects. "I wish I'd thought to have more commitment in the area of packaging the harvested material from our information resources department," he says. "I have a lot of harvested knowledge that is just in the queue waiting for someone to be available to put it into usable form."
Left unaddressed, this problem can undermine a harvesting project's momentum. "You have the euphoria of realizing you've captured some great stuff, and your client or the person you're providing the results to is excited. Then you wait, and the excitement wears off," Fredericksen explains. "It's important to keep that excitement going, because that's going to drive other harvesting projects."
Does "It's important to keep that excitement going, because that's going to drive other harvesting projects" suggest the importance in any KM imitative of a supportative culture and support form the leadership?
Other observers point out the limits of this process. The specific focus of knowledge harvesting can result in a relatively static document, and for knowledge to retain its value it must be continuously refreshed, refined and adjusted to changes in the company's business. Other tools and techniques may be needed to meet those requirements, which should also be part of the company's overall knowledge management plan.
Daniel Rasmus, vice president of strategic knowledge initiatives for Giga Information Group Inc. in Aliso Viejo, Calif., says that while knowledge harvesting theoretically allows for updating and refinement, it may not work over the long term. "Knowledge management is much more about collaboration than about the asset," he says. While there is value in a document, a canned application or another deliverable, it will lose value if it doesn't remain subject to ongoing refinement. Integrating the results of knowledge harvesting into the continuously evolving core documents of a community of practice is crucial in Rasmus's view.
In the end, knowledge harvesting is only one tool in the KM box. It is suited for collecting what someone already knows. But ultimately Buckman doesn't know where its next insight will come from, according to Koskiniemi. "It could come from anywhere," he says. "We're not out there proactively trying to harvest insights, but we want a field where the crops can grow and produce, and we can harvest them as it becomes appropriate." Tactics include collecting them into searchable documents or abstracts so the next person or group working on a similar problem can retrieve them. "We don't have to reinvent the wheel or rely on serendipity to solve a problem we've already solved," he says. Instead of wasting time on redundant issues, employees can focus on doing new work that adds value to the company. And that's the larger point of knowledge management.
Knowledge management is the topic of the 21st century. It features in an article entitled Introducing T-Shaped Managers – Knowledge Managements next Generation by Marten Hansen and Bolko Oetinger in the March 2001 edition of The Harvard Business review
The article opens with the statement that companies continue to squander their greatest asset – "the wealth of expertise, ideas and latent insights that has scattered across or deeply embedded in their organisations" (p 107).
This intellectual capital, it is claimed, "can help companies respond to a surprising array of challenges, from fending off smaller, nimbler rivals to integrating businesses shoved together in a merger" (p 107).
Hansen and Oetinger remind us of the scarce success in capturing knowledge – either through interview or computer programme.
In this paper they suggest a new approach which they call 'T-shaped management'.
T-shaped management requires:
Managers who break out of the usual corporate hierarchical approach and actually share knowledge freely across the organisation, (horizontal part of T), whilst at the same time they remain firmly committed to the objectives of the individual business unit (the vertical part of T).
This dual responsibility creates tensions, but tensions the manager must live with.
The authors put the question: "Why rely so heavily on managers to share knowledge?" The problem is that codified (known) information is easy to transfer – implicit (unconscious) knowledge is considerably more difficult to identify, articulate and transfer.
The authors use BP Amoco as an example of how knowledge can be shared. This sharing is more likely to occur when senior executives put in place mechanisms that simultaneously promote and discipline managers' knowledge-sharing activities.
BP's T shaped management approach has its origins dating back to the early 1990s.
At this time, BP's business unit leaders were personally accountable for their own unit's performance, focusing on the success of their own business rather than on the success of BP as a whole.
Since 1995, after a few false starts, BP set up a number of cross-unit networks focused on areas of shared interest.
BP has an electronic "yellow pages" that identifies experts in different areas. At the same time, the company developed sophisticated digital-networking capabilities – such as multimedia e-mail and desktop video conferencing.
The system used by BP has been developed and is still being developed.
BP managers wanting information/help on specific issues can seek help from peers in other business units. In like manner, the managers reciprocate and provide help and information to others.
Each business unit manager at BP has a two-part job description.
1. As CEO of his business
2. To engage in a variety of cross-unit knowledge-sharing activities (15-29% time).
Creating Horizontal Value
Increasing efficiency through transfer of best practice
Improving quality of decisions through peer advice
Growing revenue through shared expertise
Developing new business opportunities through the cross-pollination of ideas.
Making bold strategic moves through the promise of well-coordinated implementation
Managing the inherent conflict in T management:
Create clear incentives
Formalise cross-unit interaction
Curb cross-unit interactions (know when to say 'no')
Replace bloated rolodexes with "human portals
Does this BP case study present any ideas to you?
In February 2002 Personnel Today reported that Astra Zeneca are using
what they term “retirement rundown scheme” in a bid to retain knowledge of
retiring executives. During the final six months executives will work shorter
hours and hopefully engage in passing on their individual specific knowledge,
skills and contact to thro successors.
What Astra Zeneca are doing is trying to develop a culture of passing on our
specific and often unique knowledge in the same way as firm such as 3Ms and
HP are knowledge management cultured organisations.
One final question. Will KM provide your organisation with a competitive advantage?
The original approach to quality was final inspection or random quality control. In recent years the whole philosophy towards quality has changed.
The modern approach to quality is total organisation quality.
Quality from beginning not end. Uses statistical techniques. Explodes some management myths in his famous fourteen points.
Zero defects, right first time is the performance standard.
Identifying specific improvements for enhancing quality, quality of design, quality of conformance. Customer oriented.
Quality circles, allow everybody to contribute to solving problems. Used Fishbone (Ishikawa) diagram
Reduce variation of quality, mathematical model of loss
Quality assurance and quality enhancement
BS EN ISO 9000 quality systems
Basic principle of TQM is that the cost of preventing mistakes is less than the cost of correcting them.
Note concept of internal customer and ethos of continuous improvement.
Quality assessment - identify factors that enhance or hinder quality
Overview of quality assessment process
Usage of quality techniques
Responsibility / authority for quality
More quantitative research [Note Daewoo approach to getting information on quality]
Analysis of data
Holmes model for improving quality
1 Find out problem
2 Select action targets
3 Collect data
4 Analyse data
5 Identify possible causes (brainstorming)
6 Plan improvement action
7 Monitor effects of improvement
8 Communicate the results
Task : What are the organisational implications of the introduction of TQM?
Right first time
Listen to customer (including internal customer)
Task : Does quality management have a strategic role?
Does it influence cost leadership?
Does it influence differentiation strategies?
Does it influence focus strategies?
Stephen John BSc(Econ) MSc MEd MBA MPhil
10 December 2002.