Knowledge Management and Organizational Design

Paul S Myers

• Publisher: Routledge
• Year: 2009
• Print ISBN:
  9780750697491
• eBook ISBN:
  9781136389887
• Topic: Business
• Subtopic: Management
• Index: Business

The first in the readers' series called Resources for the Knowledge-Based Economy, Knowledge Management and Organizational Design is a unique compilation of articles and book excerpts that describe how the management of an organization shapes the levels of knowledge transfer, innovation and learning. The collection draws on fifty years of management thinking and presents key issues facing knowledge-intensive organizations. The selections are concise, clearly written and present a rich framework of examples drawn from real management experience. Arranged thematically, the chapters discuss decision-making, organization structure, innovation, strategic alliances, managing knowledge workers and power relations. Represented in this volume are the ideas of influential academics including the late economist Frederick Hayek and French sociologist Michael Crozier, as well as world-renowned management thinkers such as Harvard Business School Professor Rosabeth Moss Kanter and Charles Handy.

1

Knowledge Management and Organizational Design: An Introduction

Paul S. Myers

For more than a decade, management thinkers have heralded the arrival of the new information economy characterized by globalization, increased complexity, and rapid change. “Do more with less!,” “Don’t automate, obliterate!,” and “Get innovative or get dead!”¹ are but a few of the leading words of advice for meeting the newly shaped competitive environment. Underlying many of these prescriptions is the need to explicitly manage the intellectual capital and other knowledge assets of a firm. Corporate success in today’s economy comes from being able to acquire, codify, and transfer knowledge more effectively and with greater speed than the competition.

But, managers and practitioners sensibly ask, how do we get there from here? Fortunately, for now we can draw on decades of research and ideas developed by social scientists and management consultants as a starting point for understanding how to manage organizational knowledge. Research on decision-making, innovation, and work design, to name but a few subjects, has a lot to say about the contemporary concerns and practical problems of knowledge management. This present volume is a collection of articles and book excerpts selected for their insight into the relationship between organizational design and knowledge management. It is the first anthology of its kind to draw together the work of leading economists, sociologists, psychologists, management thinkers, and practitioners, each with a unique contribution to our understanding of how the form and management of organizations shapes their levels of knowledge transfer, innovation, and learning.

While much of the work in the field of organization design done prior to the 1990s discusses “information” and “expertise” rather than “knowledge” per se, its distinctive perspective is readily applicable to knowledge management issues. These connections become clearer, of course, once we have a working definition of organizational knowledge. We can define organizational knowledge as processed information embedded in routines and processes which enable action. At its core, knowledge must be seen as tied to the personal or human element. Knowledge, as we generally understand it, resides in peoples’ heads; for, after all, individuals must identify, interpret, and internalize knowledge. The representation of knowledge, however, can be mechanical, digital, visual, and so forth. For knowledge to provide a company with sustainable competitive advantage, such knowledge must be independent from any given individual. For this reason, we can identify—and then manage—organizational knowledge only to the extent it has been captured by an organization’s systems, processes, products, rules, and culture.

Organization Design and Knowledge Management

Organizational performance is the result of the interaction of strategy, organizational context, and individual behavior. At the risk of over-simplification, this means managers need to choose the right approach to the right markets, create processes to deliver quality goods and/or services to those markets, and motivate people to act in line with the company’s objectives. Volumes have been written about business strategy, including some recent books on the centrality of knowledge management to successful strategies (e.g., Nonaka & Takeuchi, 1995; Davis & Botkin, 1994). The high level of attention fueled by the “reengineering” movement has added the language of business processes to every manager’s vocabulary for structuring work and organizations (e.g., Hammer & Champy, 1993; Davenport, 1993). Many recent management books and articles emphasize creating empowered teams and valuing diversity as ways to motivate high performance in knowledge-intensive businesses (e.g., Nevis, Lancourt, & Vassallo, 1996; McGill & Slocum, 1994).

Organizational design takes into account all three critical performance factors: strategy, organization, and motivation. At its base, the approach presumes that a person’s actions are influenced by his or her situation.² Most practices derived from this tradition are based on the belief that firms achieve effective performance by aligning, or making consistent, various organizational features. Organization design interventions deal with modifying elements of an organization’s structure, including the division of labor, allocation of decision rights, choice of coordinating mechanisms, delineation of organizational boundaries, and networks of informal relationships (see Cash, et al, 1994).

The impetus for this collection of articles is the belief that businesses will find it increasingly difficult to succeed in a knowledge-intensive economy without leveraging the power of organizational design for effective knowledge management. Organizational design is about enabling a group of people to combine, coordinate, and control resources and activities in order to produce value, all in a way appropriate to the environment in which the business competes. In this view, design is more a process than a structure in that the resulting organization should be intended as constantly adapting and evolving, not fixed forever in some predetermined form. Recent empirical work provides evidence for this view. Mohrman and her colleagues concluded from their study of knowledge work in eleven Fortune 500 companies that “appropriate organizational design enables an organization to execute better, learn faster, and change more easily” (1995:7). The task for leaders is to implement (by using the various structural levers) the mix of factors which increases the likelihood that individual and organizational knowledge acquisition, codification, and transfer will occur regularly, appropriately, and productively.

The increased importance of organizational design for business performance challenges the current paradigm and experience of many managers who may be quick to propose a technological (“We need better databases!”) or a personnel-related solution (“Hire smarter people! Fire the laggards!”), rather than a structural one, to address business performance issues. As part of their respective training, doctors study the basic structures of the human body, engineers and architects understand the fundamentals of physics and materials science, auto mechanics learn how a combustion engine works. Only when they understand the underlying concepts, phenomenon, and variables in their field and how they interrelate, can these professionals deal with specific issues and identify solutions. Similarly, managers need to raise to a conscious, actionable level their understanding of the fundamental behavior, processes, and dynamics of the organizations they lead.

The Selections

This collection draws on fifty years of management thinking to present a useful introduction to key issues facing knowledge-intensive organizations. The articles have been selected from among classic works which have influenced the field of organizational design as well as from more recent contributions which describe contemporary leading practices in knowledge management.

Even the most cursory review of writings on the subject of organizational design during this century reveals an enormous array of approaches and perspectives, topics of interest, underlying assumptions, research methodologies, and levels of analysis. On one side the field is anchored by social science discipline-based researchers who strive to understand society and organizations as they are and who treasure that knowledge for its own sake. On the other end of the spectrum are action-oriented consultants who are interested in providing solutions to practical problems of administration, but who pay scant attention to any higher-order or more generally applicable learning. Located between these two groups are those practitioners and management thinkers who seek to combine theory and practice, to understanding social systems in order to change and improve them.

This volume, I hope, falls squarely in the middle of that spectrum. The selections are clearly written and concise and reflect the mix of empirical data and conceptual richness which makes their message for practitioners both credible and actionable while being suitable for further testing and refinement by academic researchers. Arranged thematically, the chapters discuss decision-making, organization structure, innovation, strategic alliances, managing knowledge workers, and power relations.

The anthology begins with a pair of theoretical pieces to introduce a perspective that is useful when reading the remaining selections. Theories allow us to identify critical variables and their relationships in a particular situation and then to generalize those findings to wider applicability. Without a theory of action— an explanation of cause and effect or a prediction about likely outcomes—a manager’s anecdote or an office’s experiment cannot be a reliable and sustainable source of leveragable knowledge or replicable learning.

Hayek’s classic essay provides an economic theory of the link between knowledge and organizational structure. He provides a taxonomy which distinguishes between two kinds of knowledge by pointing out the importance of context and interpretation to its value. While Hayek addressed issues at the macro-economic level, fifty years later Jensen and Meckling have written a companion piece to Hayek’s which places his ideas in an organizational context. They expand on Hayek’s ideas about the cost of transferring knowledge and argue that organizational design is about more than simply choosing between centralization and decentralization in the allocation of resources. Rather, they posit a framework for understanding the links between knowledge, decision making, and organization design which identifies the choices managers must make about their organizations in order to align individual behavior with corporate objectives.

Not surprisingly, the vast majority of management writing on organization design has dealt with industrial age organizations. The dominant factor influencing design choices, as the contingency theory approach posits, is the external environment of markets, technologies, and regulations. Pinchot and Pinchot describe the familiar, traditional bureaucratic organization and explain why it is no longer suited to the knowledge era. They focus their analysis on the changing nature of work and argue that the old model is being replaced by an interdependent set of structures and practices which better fits the demands of today’s environment. Bahrami’s research in high technology companies suggests that flexible, agile firms with “novel organization structures and management processes to accommodate them” may be the leading organizational form of the next decade. He points out that this new form presents managers with a fresh set of dilemmas and tensions to be addressed on an on-going basis, rather than resolved ex ante through a single design choice.

Innovation requires applied knowledge, and highly innovative organizations are adept at knowledge acquisition, codification, and transfer (see Nonaka & Takeuchi, 1995; Kanter, 1983). Burns and Stalker give an historical review of how innovation became organized in this century. While the book from which this selection has been excerpted, The Management of Innovation, is best known for introducing the concepts of “organic” and “mechanistic” organizations and linking their respective desirability to the stability of the external environment, this early chapter helps us understand how conditions at the societal level influence levels of innovation. They emphasize that invention is a social phenomenon relying in great part on the diffusion of information through professional relationships and suggest that an organization’s design can hinder or facilitate that process. In a thorough review of the field, Kanter fully fleshes out Burns and Stalker’s ideas about the importance of organizational context in producing innovation. Breaking down the innovation process into four sets of tasks, she describes the structural, collective, and social conditions which enhance the flow of information and knowledge, facilitate and strengthen relationships, and support individual and group creativity.

Kanter’s article touches on the importance of inter-organizational relationships as an important source of input for the innovation process, and the growing numbers of business alliances and joint ventures over the past decade suggests that companies are well aware of this benefit from partnerships (e.g., Lewis, 1995; Yoshino & Rangan, 1995). Badaracco studied the variety of alliances created by IBM and General Motors and found that among their main benefits were the creation of knowledge and learning new practices. This was particularly true regarding “embedded” knowledge; for Badaracco, embedded knowledge is a more social notion than Hayek’s “particular knowledge” for it “resides primarily in specialized relationships among individuals and groups and in the particular norms, attitudes, information flows, and ways of making decisions that shape their dealings with each other” (1991: 79). Although such knowledge is difficult and costly to transfer, alliances create an arena for building ties which will facilitate learning over time. Pucik provides some guidance for practitioners in how to increase the chances that such learning actually occurs. He outlines a role for the human resource function in supporting organizational learning, which requires transforming HR from an administrative unit to a valued business asset. Drawing on the alliance experiences of firms which demonstrate high levels of learning, he also offers specific advice for human resource professionals.

The need to manage knowledge more consciously raises more direct human resource implications: how can firms attract and retain knowledge workers? The rise of the “intelligent organization,” in Pinchot’s phrase, has placed a premium on human assets rather than natural resources or financial capital which reigned supreme in earlier eras. Handy explores this phenomenon by reviewing the global demographic shifts which are occurring simultaneously with the emergence of the information-intensive economy. If Handy suggests that finding workers prepared for knowledge-era businesses will be a limiting factor for corporate success in the years ahead, Tampoe reminds us that motivating excellent performance presents challenges as well. More and more, companies must meet the expectations of their knowledge workers in terms of work environment and quality of life issues or else face lower productivity or even turnover of their most highly valued assets. Addressing the personal and social objectives of employees to build effective and “empowering” workplaces, he argues, is the key to motivating knowledge workers.

The final group of articles deal with the nexus of knowledge, work, and power. Organizational design shapes the flow of information, resources, and support within a firm, and in this way strongly determines the powerholders. Crozier’s classic description of the French cigarette factory demonstrates the power that can accrue to holders of technical knowledge, especially when few or no others possess that knowledge. The transformation of the shop floor through computerization, however, threatens to diminish or even eliminate such expert power for some individuals. The excerpt detailing the experience of paper mills workers from Zuboff’s insightful ethnographic study of the effects of technological change illustrates how power is shifting from workers to college-trained process engineers. Clearly, some employees gain while others lose power as a result of the increased value placed on organizational knowledge. Baker provides some guidance about how to exploit one’s position in the organization structure to create opportunities and advantages for individuals and firms. He points out that not merely knowledge, but social capital—who one knows and how one handles those relationships—are critical assets for business and personal success.

Taken together, these thirteen selections connect organizational design concepts and ideas to the exigencies of knowledge management for today’s corporations. They are intended as a catalyst to management action, whether by sparking a conversation among colleagues, providing a solution for a project team, or inspiring a leader to try an innovative design. Whil...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Acknowledgments
• Introduction to Series—Why Knowledge, Why Now?
• 1. Knowledge Management and Organizational Design: An Introduction
• 2. The Use of Knowledge in Society
• 3. Specific and General Knowledge, and Organizational Structure
• 4. The Rise and Fall of Bureaucracy
• 5. The Emerging Flexible Organization: Perspectives from Silicon Valley
• 6. The Organization of Innovation
• 7. When a Thousand Flowers Bloom: Structural, Collective, and Social Conditions for Innovation in Organizations
• 8. Knowledge Links
• 9. Strategic Alliances, Organizational Learning, and Competitive Advantage: The HRM Agenda
• 10. The Numbers
• 11. Motivating Knowledge Workers—The Challenge for the 1990s
• 12. The Social System at the Shop Level
• 13. The Abstraction of Industrial Work
• 14. Building Intelligence Networks
• Index