Module 1

MODIFIED EXTRACT EDITION FOR EDUCATIONAL PURPOSE 2013 Units of Study BSBLED710A Develop Human Capital & JNB515 Knowledge Management

Andermark Publishing

© Marcus Bowles 1996, with Heather Schoenheimer 2005, 2009, extract 2013 All rights reserved.

Original Copyright © 2005 Dr Marcus Bowles. As original author Dr Bowles retains copyrights on all original text, graphic images, design, sound, and other copyrighted content. It is noted by the author that the content contains text, information, images, photographs, graphics, icons, trademarks, trade names and other viewable material (collectively, ‘Content’) that may be protected by existing copyrights, trademarks, trade secrets or other proprietary rights, and that these rights are valid and protected in all forms, media and technologies existing now or subsequently developed.

Reproduction for educational purposes is permitted with written permission by the authors.

National Library of Australia Cataloguing-in-publication data

ISBN-10: 0646910280 ISBN-13: 978-0-646-91028-4

First published 2005, second edition 2009 Sydney

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Graduate Certificate of Management (Learning)

Human Capability Development

Contents PART A: HUMAN CAPABILITY DEVELOPMENT

1

1. A THEORETICAL OVERVIEW

3

Introduction Our approach to the study of the Human Capital Human Capital Management Perspectives on the Digital, Knowledge or Information Economy Knowledge management in organisations: Theory and practice Information and knowledge

3 3 4 6 8 8

Distinguishing information, data, knowledge and wisdom .................................................................................................... 9 Knowledge defined and managed ....................................................................................................................................... 11

2. DIMENSIONS OF KNOWLEDGE Type and structure of knowledge

13 13

The structure of purposeful knowledge in an organisation .................................................................................................. 13 Explicit and tacit knowledge ................................................................................................................................................ 15

Acquiring knowledge

17

Sources of knowledge .......................................................................................................................................................... 17 Interactions between people as knowledge ......................................................................................................................... 19 Technology as knowledge .................................................................................................................................................... 19 Culture as knowledge .......................................................................................................................................................... 20 Meaning as knowledge ........................................................................................................................................................ 20 The ability to learn as knowledge ........................................................................................................................................ 21 Types of knowledge and culture, meaning, and learning ..................................................................................................... 21 Knowledge management necessitates well balanced learning and HRD strategies ............................................................ 24

3. FROM COMPETENCE TO CAPABILITIES Introduction Defining capacity, capability, and competency

27 27 27

Differentiating capacity ....................................................................................................................................................... 27 Differentiating capabilities .................................................................................................................................................. 28 Differentiating competency ................................................................................................................................................. 29 Differentiating identity ........................................................................................................................................................ 30 Capabilities: The interface between the individual and the organisation ............................................................................ 31

Capabilities within an organisational setting

32

Aligning capabilities to strategic direction ........................................................................................................................... 33 Capabilities, alliances, networks and partners ..................................................................................................................... 34 Capability frameworks ......................................................................................................................................................... 35 Individual capabilities and organisational knowledge capital ............................................................................................. 38

4. LEADING KNOWLEDGE MANAGEMENT WITHIN AN ORGANISATION Introduction A Knowledge Management Framework

39 39 39

Stages in KM Cycle ............................................................................................................................................................... 41 Conceptualise ...................................................................................................................................................................... 41 Plan...................................................................................................................................................................................... 41 Contextualise ....................................................................................................................................................................... 42 Improve................................................................................................................................................................................ 42 Dimensions to KM Strategy.................................................................................................................................................. 43 Leadership dimension to KM ................................................................................................................................................ 43 Governance and policy dimension ....................................................................................................................................... 43 Architecture dimension ........................................................................................................................................................ 43 Absorption dimension .......................................................................................................................................................... 44 Measurement dimension ..................................................................................................................................................... 44

KM implementation Life cycle

44

Knowledge as the basis for organising................................................................................................................................. 46

The Knowledge audit

46

Conducting an knowledge audit .......................................................................................................................................... 47 The Audit Process................................................................................................................................................................. 48

5. GENERATING KNOWLEDGE CAPITAL

51

Graduate Certificate of Management (Learning) Original © Institute for Working Futures 2009, 2013

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Introduction Building an organisational Knowledge Capital framework

51 51

IC and KC .............................................................................................................................................................................. 51 The value of knowledge ....................................................................................................................................................... 52

Social capital Pools of Knowledge Capital

57 59

Knowledge Capital and capabilities ..................................................................................................................................... 59 Creating pools of capability to build knowledge capital ...................................................................................................... 61 Structural capital ................................................................................................................................................................. 61

Valuing forms of knowledge assets

62

Valuing Intellectual assets ................................................................................................................................................... 63 Valuing knowledge as an intangible asset ........................................................................................................................... 63 Measuring KC....................................................................................................................................................................... 64

6. MANAGING HUMAN CAPITAL Introduction Human Capital Management defined

67 67 67

Capital resources for organisations ..................................................................................................................................... 67 The individual as a capital resource ..................................................................................................................................... 68 Ingredients to HCM .............................................................................................................................................................. 69 Measuring HC ...................................................................................................................................................................... 70

Human capacity and human capital

70

Developing human capacity ................................................................................................................................................. 71 Developing potential and talent .......................................................................................................................................... 73 The knowledge worker......................................................................................................................................................... 74 Talent matters as much as skills .......................................................................................................................................... 75

A model for developing human capability

76

PART B: HUMAN RESOURCE DEVELOPMENT

79

7. HUMAN RESOURCE DEVELOPMENT: A THEORETICAL OVERVIEW

81

Introduction Perspectives on HRD

81 81

Strategic or Outcomes based approach ............................................................................................................................... 81 Structural functionalist HRD ................................................................................................................................................ 82 The study of HRD ................................................................................................................................................................. 82

HRD origins and current state of play

82

Evolution of HRD - Structural Functionalism ........................................................................................................................ 82 Defining HRD ....................................................................................................................................................................... 84 Post-World War Two Development of the HRD 'Discipline' .................................................................................................. 84

HRD and Knowledge Management

86

Impediments to HRD ............................................................................................................................................................ 88

HRD, KM and Human Capital: A theory in progress

89

Transforming HRD ............................................................................................................................................................... 89

8. TRANSFORMATIVE HRD Introduction Transformative HRD

91 91 91

Transactional versus transformative view of HRD ............................................................................................................... 91 Link between HRD and KC .................................................................................................................................................... 92 HRD transforms HC .............................................................................................................................................................. 92 A framework for HC Development ....................................................................................................................................... 97

Designed in practices: HR activities, capabilities and competencies

97

Organisational structures and their impact on job design ................................................................................................... 97 The integration of strategic and operational activities ........................................................................................................ 97 Designing jobs for individual performance .......................................................................................................................... 98 Organisational structures and job design ............................................................................................................................ 98 Developments in work design .............................................................................................................................................. 99 Structuring work within organisations ............................................................................................................................... 100 Approaches used when designing jobs .............................................................................................................................. 101 Profiling individuals within organisations .......................................................................................................................... 102 Functional job profiling ...................................................................................................................................................... 102 Profiling human capital...................................................................................................................................................... 102 Linking individual and organisational capabilities ............................................................................................................. 103

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Individual development and job design ............................................................................................................................. 104 Needs analysis and organisational performance ............................................................................................................... 105 Building on core competencies and capacities ................................................................................................................... 105 Changing needs of the workplace: innovative work design. .............................................................................................. 105

9. DEVELOPING DEEP ORGANISATIONAL CAPABILITIES - LEARNING Introduction Individual learning and engagement

107 107 108

Enhancing identity capabilities (collaboration and cultural based).................................................................................... 109 Identity, culture and convergence of action ....................................................................................................................... 109 Enhancing mental capabilities (Cognition and intelligences) ............................................................................................. 112 Cognition ........................................................................................................................................................................... 112 Emotional intelligence (EQ)................................................................................................................................................ 114 Multiple intelligences and how individuals learn ............................................................................................................... 116

Developing a systematic approach to organisational learning

118

Distinguishing learning organisation and organisation learning ....................................................................................... 118 Enabling organisational learning: Back to basics ............................................................................................................... 119

10. DEVELOPING DEEP ORGANISATIONAL CAPABILITIES - AGILITY Introduction Organising human capital for agility

121 121 122

What is organisational agility? .......................................................................................................................................... 122 Organisational agility and the art of rapid change ............................................................................................................ 123 Transformation and organisational design ........................................................................................................................ 124 Agility and environmental attunement .............................................................................................................................. 124 KM Lifecycle and agility ..................................................................................................................................................... 125

Learning, strategic readiness and agility

126

Levels of learning and performance ................................................................................................................................... 126 Learning capacity ............................................................................................................................................................... 127 Learning, agility and competitiveness ................................................................................................................................ 129

Agility and innovation

132

Types of change solutions and their impact ....................................................................................................................... 132 Innovation.......................................................................................................................................................................... 133 Improvement ..................................................................................................................................................................... 133 Re-engineering................................................................................................................................................................... 134

11. DEVELOPING DEEP ORGANISATIONAL CAPABILITIES - ABSORPTIVE CAPACITY Introduction Maximising absorptive capacity of human capital

137 137 137

Dimensions of absorptive capacity .................................................................................................................................... 138

Moving beyond being learning disadvantaged

138

Cycle time to proficiency .................................................................................................................................................... 139

Networks, relationships, communities and absorptive capacity

140

Why absorption and communities matter ......................................................................................................................... 140

Confirming the knowledge vested in relationships

141

Social capital ...................................................................................................................................................................... 141 Extracting tacit knowledge across personal relationships ................................................................................................. 141 Extracting knowledge and capabilities from relationships ................................................................................................. 141 What do I need to know, who knows what I need to know? .............................................................................................. 141 What have I learnt in the past ........................................................................................................................................... 142

12. FUTURE TRENDS IN THE MANAGEMENT AND DEVELOPMENT OF HUMAN CAPABILITY Introduction Knowledge Management

143 143 143

The structure of purposeful knowledge in an organisation ................................................................................................ 143 Differentiating capacity, capability and capacity ............................................................................................................... 144 Measuring Knowledge Capital ........................................................................................................................................... 146 A Knowledge Management Framework ............................................................................................................................ 147 Knowledge as the basis for organising............................................................................................................................... 148 Developing Human Capital and Capacity ........................................................................................................................... 148

Transformative Human Resource Development

149

A framework for HC Development ..................................................................................................................................... 151

Where to next?


153

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REFERENCES Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12

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155 155 155 156 157 157 158 159 159 160 161 162 163



PART A: HUMAN CAPABILITY DEVELOPMENT


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PART A: HUMAN CAPABILITY DEVELOPMENT

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1. A Theoretical Overview Introduction New opinions are always suspected, and usually opposed, without any other reason but because they are not already common… [and]… No man's knowledge here can go beyond his experience. (John Locke, 1690, Essay Concerning Human Understanding) Wisdom is not a product of schooling but of the lifelong attempt to acquire it. (Albert Einstein) This is the first topic in our study on human capital and the perspective we will term Human Capability Development (HCD). While development of human capital forms the backdrop to our study as the title suggests study in this unit is very much separated into two distinct parts; knowledge management (KM) and the development of human resources in an organisational setting: human resource development (HRD). While at times this separation will blur the overall intention is to illustrate how the development of people in today’s organisations must blend both how we manage knowledge and develop people. In this first topic we will also divide our study. We will introduce two main themes:  

What we will cover in this unit; and The concept of knowledge and its management.

Much of what we will introduce herein will provide the historical foundations to the theory that will underpin later chapters. In what is variously called the Knowledge Age, Information Age or so-called Digital Age, there has emerged a strong recognition that knowledge cannot be owned by any one organisation. Rather it may reside in relationships and networks. More importantly, knowledge will reside with the individual, whether alone or working in groups. This has important ramifications for the management of knowledge. Some organisations assume that they can manage knowledge assets as if they were tangible, physical or financial assets. Under the Information Age mentality knowledge is a factor of production adding value to inputs to help create more valuable outputs (goods or services). There is a fundamental problem with this approach. No organisation can own all the knowledge assets that contribute to its productive capabilities. In fact, most knowledge resident within people is not ‘owned’ by the organisation. It is owned by individuals and groups, many of which are outside the organisation’s domain, including service providers, specialist contractors, supply chain partners, or financial and accounting service providers. This means that we need to move our measures of the ‘value’ of knowledge beyond gauging how well individuals and groups apply knowledge to enhance productive outcomes. We need to understand how well individuals and organisations can absorb, transfer and expand existing knowledge while also generating new knowledge in response to emerging opportunities. We will see that in the Digital Economy knowledge has value to the organisation not just because of how it is used to improve the efficiency and effectiveness of outputs (the ‘old’ Industrial Age paradigm). Rather, value resides in the current and potential capacity individuals and their networks have to create sustainable competitive advantage for the organisation (the ‘new’ Digital or Knowledge Age paradigm).

Our approach to the study of the Human Capital This course will examine Human Capital. But we need to state upfront that we will do so by thoroughly understanding the academic and applied setting within which it sits. This will require we study Human Resource Development and Knowledge Management; particularly with regards to Knowledge Capital and the development of capabilities. Human Capital will be shown to be one part of a wider field of study. Equally, we cannot understand Human Capital Management unless we appreciate KM and HRD. These fields of study are converging. At the point of convergence the fields both deal with human aspects within an organisational context that relate to the complex interactions surrounding how we can develop people to achieve and sustain an organisation’s future competitive advantage. Our approach will show how sustainable competitive advantage can be achieved through the combination of human resource development and knowledge management by identifying the importance of capability, engagement, and culture, creating a link between them, and demonstrating how to make people the most valuable asset in an organisation or society.


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1. A Theoretical Overview

Our approach will be termed Human Capability Development (HCD). HCD recognises knowledge held by individuals or by the organisation has a capital value that can be managed, evaluated and manipulated. Knowledge has been variously described as contributing to what we will call ‘pools’ of capital value. Knowledge Capital (KC) is the valuable tangible and intangible knowledge assets that drive current performance, enable future capacity, and sustain the organisation's competitive advantage. Knowledge can be formed in human, social and structural capital ‘pools’ that are accessible to employees and the organisation. These ‘pools’ are described below: Human Capital intrinsic to leadership (the ability for people to create of a vision and lead others to achieve this outcome) and competency (the skills and knowledge required to attain a standard of performance at a given level of employment) Structural Capital, intrinsic to the knowledge assets that represent the systems, processes and structures able to bring achieve employee engagement (orientation of individual to collective ends) and design-in work practices (the design of work and jobs to maximise operational outcomes and responsiveness) Social Capital, intrinsic to networks and relationships, covers both absorption (the ability to acquire and hold new knowledge) and agility (the ability to deploy knowledge to new opportunities or contingencies) Sustainable competitive advantage can be derived from the integration and alignment of knowledge capital with human resource development i.e. our Human Capability Development Reference Model, shown below.

Figure 1 Human Capability Development reference model

Human Capital Management Initial thought has been that the convergence of HRD and KM occurs at the point where the capital value of humans, as assets of the organisation, is evidenced through job performance. This convergence has been encapsulated in the emerging discipline of Human Capital Management (HCM). Human Capability Development is not the same as Human Capital Management. The aim of this book is to overcome the confusion confronting the development of people at an applied or operational level and the narrow strategic focus occurring when taking a HCM lens that sees people as capital assets that mainly have a value only realised through job performance and productivity that contributes to business outcomes. The HCM view is not necessarily incorrect, it is just narrow. It all too often assumes human capital is the result of some linear relationship between learning, performance or service excellence, knowledge management and the management of human resources (Bowles, 2004:Ch5). But none of these components have a bounded relationship, all exist independently and have different ways to be deployed in an organisation. Debate on HCM highlights differences between academic and business practitioners’ use of key terms in the fields of knowledge, human resources and the surrounding and related practices. A core reason for writing this book is to overcome the division of thought and practice engendered by this debate.

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The authors’ experiences span both the academic and business fields, and both are applied practitioners with backgrounds consulting with and working within corporations. Through their joint experience in the field they have developed a frame of reference for Human Capability Development that relates it to the practical needs of business; the delivery requirements of HRD professionals; and the theoretical concepts and constructs of academics. This book is an effort to ensure that the classic academic models that influence current practice are examined as part of a wider, more holistic canvas. The text is neither a ‘how to do it manual’ nor an academic treatise aimed at proving or disproving other models. Rather it seeks to highlight the convergence of the knowledge, human resource development and human capital fields of practice. It explores these fields and invites further study and analysis. We show how, HRD can be implemented as a transformational practice that encompasses knowledge and human capital management in what we have termed human capability development (HCD). Three areas of debate in the evolving field of HCD stimulated the development of this convergence of thought and practice: 1.

Transactional versus transformational HRD—whereby it is argued that the development of human resources needs to extend beyond improving performance for pay (transactional HRD), to develop the cultural and identity attributes that engage the knowledge and experience innate to the individual (transformational HRD).

2.

Competency versus capability—whereby the development of an individual’s competencies and qualifications involve more than upskilling an individual to perform better within a job.

3.

Current productive capacity (CPC) versus potential productive capacity (PPC)—whereby the development of market value and sustainable competitive advantage is argued to involve strategies that develop deep capabilities (for example capabilities that span and affect all aspects of the businesses’ operation; i.e. increasing individual commitment and organisational responsiveness) beyond the human capital domain of knowledge and include the structural capital and social capital domains of knowledge capital.

Each of the three points above involve some complex aspects and issues. They will be explored in detail in the following Chapters. The core components to our study are depicted below in Figure 2 below. Where HRD is Human Resource Development; KC is Knowledge Capital; PPC is Potential Productive Capacity and CPC is Current Productive Capacity. HRD and KC interact as the fields of academic and professional endeavour. CPC and PPC are the dimensions depicting application of HRD and KC instances to achieve outcomes at a point in time; current or future.

Figure 2 Components to the study of Human Capability Development To progress our examination of these dimensions the first part of our study will establish a theoretically grounded while practical view on, firstly HRD and then on knowledge management (KM) as a component to our study of KC. The ensuing Chapter four will then establish a model for where HRD and KM converge, or what is herein is termed Human Capability Development.


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Perspectives on the Digital, Knowledge or Information Economy Knowledge management often seems far more important when we cast it against a backdrop of an ‘age’ where everything revolves around knowledge. But what is the Knowledge Age? More importantly, how do we separate it from the Information Economy, the Knowledge Economy, the Network Economy, or as it is now more popularly called, the New Economy? Indeed, how do we separate the ‘economic’ terms from the social constructs that variously indicate an Information Revolution, Digital Revolution or even a Knowledge Revolution? Firstly, a statement of the obvious. In human history the emergence of a new age is not marked by a narrow point in time. It takes years for one age to pass and another to emerge. As we have progressed through history the transition times have shortened, but one would still expect the emergence of any ‘Knowledge Age’ to occur over at least 20 years. The last major transition from Agrarian to Industrial Age took at least 80 years. The sense of a ‘revolution’ may be sustainable in terms of the social impact, but labelling so many things as a revolution downplays both the related nature of the changes and their individual importance.

Figure 3 Knowledge development and evolution curves The figure above serves to highlight the overall increase in the speed of major economic and social evolution. The Knowledge Age commenced being labelled the Information Age or Digital Age. This resulted from the emergence of the computer from the 1960s and the rapid creation of service industries selling non-manufactured items. For instance, in Australia the 100 years of change from manufacturing to service industries in 2001 can be depicted as follows.

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Figure 4 100 years of change in the Australian economy and industry share of GDP. (ABS, 2003) By 2012, over 80 per cent of all Gross Domestic Product (GDP) is produced by service industries. Starting in the 1950s but entrenched from the 1980s, the industrial economy based on manufacturing had shifted to what has been variously termed the Information Economy or the Knowledge Age. This change was not so much a new economic age as a shift in the reality that knowledge was central to industry productivity and success. The emergence of the Internet as a public network in the early 1990s also confirmed the move from information collection to deployment of knowledge in digital form. Information was not a sufficient basis to examine the changes to industry or markets. Knowledge was a better basis to examine how information once tied to a purpose developed a higher capital value. As technology came to be the key competitive factor in the capture, processing and movement of knowledge even the title Knowledge Age came to slip as the alternative moniker, Digital Age became popular. Whether or knowledge or information was seen as the core attribute, the Digital Economy remains a popular economic classification. The Digital Economy came to be a common term that encompassed features that included:      

Globalisation of markets and competition; Removal of geographic boundaries between virtual markets; Wealth that flows from what people know rather than what they could do; The emergence of flatter, more responsive digitally connected organisations, economies, nations, markets, communities and people; The development of business networks and relationships (i.e. across extended supply chains); and The need for organisational speed in terms of responsiveness, agility and adaptation of existing people, processes and technologies.

Before the dot.com crash and the huge losses on the NASDAQ in the late 1990s, the Digital Age stood for the destruction of old views of how wealth was created and economic growth achieved. The crash of the late 1990s illustrated what many felt, the hype surrounding technology ignored the fundamentals of how wealth is created and economic growth sustained. The fundamentals had not changed, just the perception as to what role technology and the digitisation of information can play. As wealth was stripped away from individuals, companies and nations the economic ‘fundamentals’ once again we re-established. There was no new age where technology and knowledge could introduce ‘exponential’ value creation in defiance of robust organisational design and customer demand. By late 2012 an estimated 2.4 billion users had subscriptions to the internet (ITU, 2013; Internet World Stats, http://www.internetworldstats.com/stats.htm). In 2013, over 6.5 billion users had mobile phones (ITU, 2013). The growth in connections has not slowed with dot.com or with a global financial crisis. First world economies and those striving to compete are driving up ICT usage and digital networks, even while connection types multiply. The speed of change has not only been profound but it continues to accelerate. The advent of mobile and wireless connections has fostered a shift in how people and businesses can share information, communicate and learn. Access to the Internet had been dominated in the decade leading up to the twenty-first century by those using ‘fixed’ terrestrial ’phone connections. However this has changed; now some 30 percent of global users access the Internet by other means such as satellite, wireless or mobile devices. The access to the Internet via new technologies, including mobile and wireless, has seen worldwide Internet traffic double between 1998 and 2002, and quadrupled again by 2010 (OECD 2008a: 249, ITU, 2010).


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Figure 5 Computers rapidly becoming faster and more powerful (OECD, 2008:1) What the above indicates is far from the dot.com crash marking the end of the Digital Age, growth has recovered and profits exploded in ICT companies such as Microsoft. The ‘hockey stick’ profit projections have yielded to the realisation that in the Network Economy the more sustainable the relationships, the more resilient the organisation is to change, and the more flexible the organisation is in terms of seizing opportunities, the more returns increase over time. Enter the term the ‘New’ Economy, the term used for what has been titled by different analysis as the knowledge, information or digital economy. The New Economy is an acknowledgement that value resides not just in the sale of goods and services. Nor is it solely about productivity and the efficiencies related to processes and leadership of organisations to achieve such ends. While these principles are critical it is ultimately about sustaining profits from the sale of goods and services while being innovative and being able to anticipate and seize opportunities before one’s competitors. It is a shift that necessitates organisations develop the means to identify and develop the people and systems necessary to be agile and responsive. This ties the concept of the Digital Age not just to the products and services being offered in the marketplace, but the knowledge value created by people and systems that have the capabilities necessary to connect with each other and sustain an organisation, industry or nations’ competitive advantage.

Knowledge management in organisations: Theory and practice Before we progress further we need to confirm what we mean by knowledge management (KM). Herein the study of KM will follow both a theoretical approach and a framework. It is not just about information and technology, or the knowledge held by an individual, organisation, or group. Nor is it limited to a process of management. Our study must create a framework that can make sense of knowledge at all these levels and endure into the future. Our view of knowledge will be a human view. Our focus will move beyond the information technology (IT) dominant view whereby KM is about capture, organisation, search, transfer and reporting knowledge. A view where data mining, knowledge clusters, and content or documents are management to maximise operational efficiency and effectiveness. This study of KM will establish a broad foundation of what KM is, but then drill down on the human aspects of KM. This will enable us to branch out our study in the second part of this text to look at HRD and KM related aspects such as how individuals and organisations learn, develop and undertake KM in a situated cultural and social context. In this course we will use the following definition: Knowledge management is the creation of an environment where knowledge is not only captured, transferred and generated, it is the creation of systems of thinking and dynamic action that has purpose and whereby meaning is created for the individuals involved (Bowles, 1999:5).

Information and knowledge It is the interaction between the information and the existing knowledge of the agent that is defining in this case. Data becomes information when the agent receiving it can ascribe meaning to the data; knowledge is generated through the interaction of existing knowledge with the flow of information to the agent. In contrast to

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information, knowledge cannot be directly observed. Its existence can only be inferred from the action of agents (Boisot, 1998:12).

Distinguishing information, data, knowledge and wisdom Confusion often exists between terms such as knowledge and information. In recent times this confusion has intensified with a further hierarchy of differentiation building across data, information, knowledge and wisdom. Many texts and papers talk about the huge amount of knowledge available on the Internet, while it would be more accurate to refer to a huge amount of information available there. Similarly, when those management texts talk about KM, they also include the management of information. The difference between managing knowledge and information is enormous. There is a profusion of texts and perspectives on knowledge management, and the diversity of approaches has confused some of the simple messages concerning what KM can and cannot do. To manage knowledge effectively, we need quite a sophisticated understanding of what knowledge is and how it works in different contexts. First, we need to look briefly at the processes by which knowledge is formed from data and information, and how it relates to the more philosophical notion of wisdom. The basic building blocks of an information system are data — unstructured, discrete ‘packets’ or ‘objects’. These building blocks are transformed into information when they are given structure and meaning. Information in turn gives rise to knowledge when it is shaped by its relevance to a particular purpose or set of values. The crucial point to note is that this is a matter of human agency: it is people who select the information and assemble it for a purpose, thereby transforming it into knowledge. Finally, wisdom is accumulated knowledge shaped by an individual’s experience over an extended period of time (Katezenbach & Smith 1993).

Figure 6 Knowledge taxonomy and relationship to organisational purpose Knowledge is a body of information (or data) given meaning by its relevance to a particular purpose or set of values. The individual pieces of information which finally form the ‘knowledge’ assume the new category of ‘knowledge’ because they relate together in some way in the eyes of the person using the information. Knowledge can be divided into four groups (Bowles, 1999:34): 1) Knowledge of what (declarative knowledge) The knowledge of people, processes and objects and the ability to actively deploy intelligence to construct responses to problems or complexity encounter in everyday life or work.


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For example: you may know what project planning is, but not know any more facts about the detail of project planning processes. However, you may also be able to solve problems encountered in a project because you can develop mental constructs to deal with the problem.. 2) Knowledge how (procedural knowledge) The knowledge of how to do things, such as skills or competencies. For example: you can know how to fix a TV set, use a computer, or clean a house. 3) Knowledge that or why (conditional knowledge) The knowledge that shapes perceptions and personal responses to people and things. For example: you can know that there is a computer in front of you because you can show it is there, you believe it is there and there is good evidence for believing it to be there. 4) Acquired knowledge (self-regulated or situational knowledge) The knowledge acquired to acquit everyday activities. For example: This kind of knowledge is most often collected into an established body of knowledge, that may be kept by specific discipline groups and deployed by occupations or professionals such as transport clerks, marine scientists, information systems architects, psychologists and such like. For instance a transport clerk may have many seemingly isolated components of knowledge that make sense only when applied to a specific content (i.e. Processing export forms to Customs requirements). As such knowledge is gathered it also forms a basis of experience that can be applied in other contexts over the long term. Identifying these four groups of knowledge is different from identifying how knowledge is created and transferred, a study to be completed in the following sections in this Chapter. What is necessary, therefore, is a definitional basis to distinguish learning from some other related terms such as data, information, knowledge and wisdom. The following definitions are proposed: Data is usually used in information systems terms as a direct parallel to information. However, the term may also be used to denote structured ‘bits and bytes’, or unstructured information that is to be processed and given a strategic purpose. Information may simply be defined as the systematic, structured data organised and communicated to transfer knowledge (Castells, 1996:17). Knowledge is typically data and information structured for an agreed purpose, or as defined by Bell (1973:175): A set of organized statements of facts or ideas, presenting a reasoned judgement or an experimental result, which is transmitted to others through some communication medium in some systematic form. Wisdom is accumulated knowledge, usually covering knowledge with a more intense and contextual relationship because of an individual’s ability to bring their own experience to bear on the knowledge (Katezenbach & Smith, 1993). In summary:

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Data

The basis for forming information

Information

Data + meaning

Knowledge

Data + meaning + purpose

Wisdom

Data + meaning + purpose + experienced (in a specific context)



(a)

Figure 7 Information without a known relationship or purpose (b)

Figure 8 Information with a known relationship and purpose

Knowledge is therefore differentiated from information because it has a purpose.

Figure 9 Purpose converts information into organisational knowledge

Knowledge defined and managed Existing writings explore a range of perspectives on knowledge application in organisations and these perspectives can be sorted into three broad levels: individual and collaborative groups, organisational and societal. At the individual and group interaction level, there are the following types:    

Knowledge communities; Communities of practice; Knowledge alliances; and Learning communities (Lessem, 1993; Argyris, 1993; Katezenbach & Smith, 1993; Bowles, 1997; Wenger, 1998; Falk & Kilpatrick, 1999).

At the organisational level, there are: 

Knowledge assets;


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       

Knowledge management; Intellectual or knowledge capital; Human capital; Organisational learning; Corporate intelligence; Corporate memory; Corporate wisdom; and Knowledge innovation (Quinn, 1992; Katezenbach & Smith, 1993; Nonaka & Takeuchi, 1995; Boisot, 1995, 1998; Prusak, 1996; Amidon, 1997; Sveiby, 1997; Edvinsson & Malone, 1997; Stewart, 1997; Allee, 1997; Brooking, 1999; Davenport & Prusak, 1998; Dixon, 2000, Fitz-ens, 2000, Davenport, 2000; Von Krogh, Ichijo & Nonaka, 2000; Bontis, 2002).

At the wider societal level, one sees:    

Knowledge-based economies; Learning societies; Knowledge economies; and Knowledge societies (Masuda, 1990; Nonaka & Takeuchi, 1995, Young, 1995; Amidon, 1997; Castells, 1996).

Knowledge cannot be sorted and managed based on desired outcomes without first understanding the limitations of such an approach and possessing a very sophisticated understanding of the structure of knowledge. For instance any organisation that assumes it can establish a knowledge manager to manage knowledge assets in the same way that it manages physical and financial assets ‘has missed the point and wasted money’. This assumption fundamentally ignores the fact that the organisation cannot own all knowledge assets. In fact, the majority of knowledge that contributes to productive capacity and the majority of knowledge assets that can hold a capital value for an organisation are not owned by the organisation — and they do not need to be owned by the organisation. The assets are actually owned by individuals and groups that, in many cases, are external to an organisation’s domain of operation. The value of learning to KM becomes apparent when one accepts that if the majority of knowledge is owned by individuals then its ‘value’ can be measured only in terms of how well individuals and groups transfer information into knowledge that enhances productive outcomes. Both the process of absorbing, transferring and expanding this knowledge and the ability to re-orient and generate new bodies of knowledge in response to emerging demands on the organisation are learning processes. Learning is the crucial process of leveraging knowledge assets that an organisation does not and in some cases cannot own. The development of knowledge resident in individuals will be explored in depth during the second half of this on HRD. However, the next Chapter will explore the relationship between KM, the structure of knowledge and its transfer between people and organisations.

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2. Dimensions of Knowledge Type and structure of knowledge This chapter examines how the structure of knowledge will impact its creation, management and transfer within an organisation seeking to harness that knowledge.

The structure of purposeful knowledge in an organisation Joseph Badaracco (1991) suggests organisational success will be dependent on their identification of two types of knowledge; migratory and embedded knowledge. Appreciating the distinction between migratory and embedded knowledge is an appropriate starting point for examining the structure of knowledge. Competitive advantage or organisation survival can depend on how well an organisation manages both types of knowledge. When knowledge crucial to an industry has migrated to firms with lower costs, greater flexibility, or the capacity to improve the knowledge, other companies face challenges that affect activities such as finance, marketing, and manufacturing, as well as their corporate culture and strategy (Badaracco, 1991:55). In reality, many companies have ‘discovered’ the importance of managing knowledge to preserve vestiges of competitive advantage when they have already lost the knowledge associated with the product and its production to companies with lower margins of profit and higher levels of quality output than its competitors. Migratory knowledge is knowledge that can be accessed by another individual or firm, or moved away from one firm to another. Basically it is knowledge that once identified becomes hard to control and protect (Badaracco, 1991:34).

Embedded knowledge is differentiated from migratory knowledge because this knowledge ‘moves very slowly, even when its commercial value is high and firms have strong incentives to gain access to it’ (Badaracco, 1991:79). Badaracco defines firms as ‘vast repositories of embedded knowledge’ (1991:80). How they manage embedded knowledge across its absorption, transfer and expansion can determine a company’s competitive success.

Table 1 Conditions for migration of knowledge Conditions for migration of knowledge

Examples of knowledge types

Ability to exit one organisation – how well it is articulated and packaged together

Designs (blueprints, patents, trade marks, instructions for design and use) Machines & technology (knowledge encoded into use and construction of technology) Individual minds (knowledge to replicate discoveries or for specific purposes)

Ability to enter another organisation

Complementary capabilities (human and financial capabilities to exploit knowledge) Legal and regulatory restrictions (trade marks, contracts of employment, etc.) Incentives (e.g. paying for an individual’s intellectual capacity)

(Badaracco, 1991:34-36)

Fundamentally knowledge has to be sourced, captured, stored and retrieved with sensitivity to its migratory or embedded nature. This is illustrated in the table below.


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2. Dimensions of Knowledge

Table 2 Dimensions of knowledge and its management MANAGEMENT OF RESOURCES TYPES

Finance

Marketing

Strategy

Culture

Partnerships

Migratory Threat

Inability to invest in specific knowledge creation

Competitor builds knowledge relationship with customer and dealership/ service provider to reinforce their competitive advantage

Investment in knowledge that can be replicated by competitor able to operate on lower profit margins or lower production costs for equivalent quality.

Lack of value placed on sustainable change and role of workforce in visioning and achieving goals.

Inability to share costs, risk, market analysis, competitor information or develop relationships that enhance responsiveness.

Reduce costs and risk through collaboration; accelerate speed to market through aggressive migration and sharing of knowledge; flexibility through management of environmental constraints and monitoring of competitors by allies in regions/ sector, channels to ‘share’ knowledge for advantage, and neutralise competitors through networks (E.g. Establish product distribution network).

Focus on redundant not emerging capabilities.

Opportunity

Embedded Threat

Opportunity

Innovation and research, and investment in technology or human capabilities

Greater responsiveness to customer needs and use of knowledge migration through advertising, warranties, incentives, image promotion

Cognisant of the strengths or weaknesses in their management of migratory knowledge when framed

Overcome problems and respond to market demands.

Financial management imperatives loses relationship with existing organisational capital and (infrastructural, social, and human) capabilities.

Loss of identity for product, workforce or customers.

Investing in production competencies or types of knowledge that, when codified, can migrate outside the organisation (E.g. Designs, skills, machines, etc.)

A productionfocussed culture not a long-term market success or shared basis for wanting to work and meet new challenges.

Invest in developing sense of craftsmanship and expertise beyond competencies to just ‘do a job’.

Basis for individual, team and group behaviour and interaction is reinforced within and outside the organisation by public communication, advertising, training and image reinforcing activities.

Focus on developing highly specialised personal knowledge in individuals and processes that promote organisational learning (collective and generative learning)

Reinforce sense of craftsmanship and expertise of individuals and teams

Pool of people committed to agreed purpose, vision and outcomes.

Inability to focus strategic relationships on problems that limit responsiveness, market agility or a focus on customer needs. Inability to manage geographic-specific relationships that impact market success.

Establish planning processes that are learning processes that confirm commitment and individual and shared purpose.

Exchange of embedded knowledge to create shared capabilities, rapid information and communication flow, and shared search for opportunities.

Ability to empathise and relate to customers, markets, societal factors and political issues in a geographic region.

(Table based on Badaracco 1991:55-73 & 80-114)

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Using Badaracco’s model (1991:34) the degree to which knowledge is migratory will depend on how the systems for capture, storage, retrieval and use permit:    

Knowledge to be linked, articulated and packaged together; Other individuals access to ‘open the packages’; Other individuals sufficient incentive to open the ‘knowledge package’; and Barriers to be constructed that limit migration.

Embedding knowledge requires strategies to address internal factors such as craftsmanship, teams, the organisation’s culture and communication relationships; and external factors such as strategic partnerships and its community or geographic context (Badaracco, 1991:80-96). Companies seeking to achieve market responsiveness before a competitor or to move the marketplace to a new product or service that competitors cannot match with their existing capacity, need to allocate resources into attracting competitive knowledge or prevent migration of its knowledge to a competitor (Badaracco, 1991:56).

Explicit and tacit knowledge Badaracco’s structure of knowledge into two categories is a helpful counterpoint to an examination of two other categories commonly used to delineate knowledge; the tacit or explicit dimensions. As early as the 1940s Michael Polanyi (1948; 1966) advanced significant arguments for broadening of focus on the constitution of knowledge. Polanyi raised intricate arguments for separating what an individual knew, the knowledge they were conscious of holding, and the knowledge they could transfer. Basically knowledge could be tacit or explicit. Respectively this referred to knowledge that by its structure and creation could be highly personal and context-specific or it could be codified in a manner that made it transferable between individuals (Nonaka and Takeuchi, 1995:59). This approach to the structure of knowledge has become widely adopted due to the success of Nonaka and Takeuchi’s work, The Knowledge Creating Company (1995). It explores the link between tacit and explicit knowledge and focusses on how management of both aspects of knowledge and their sources could advance a company’s competitive advantage. Our dynamic model of knowledge creation is anchored to a critical assumption that human knowledge is created and expanded through social interaction between tacit knowledge and explicit knowledge. We call this interaction “knowledge conversions”. It should be noted that this conversion is a “social” process between individuals and not confined within an individual (1995:61). Nonaka and Takeuchi extend the social process of knowledge conversion to include not only individual, group or the organisational levels, but also inter-organisational or levels beyond the organisation. Movement of knowledge and its transferral from tacit to explicit was argued to be central to how Japanese organisation’s successfully generated new knowledge, and encouraged greater creativity and innovation. The speed with which knowledge was transferred and converted also was critical to an organisation’s competitive advantage (Nonaka and Takeuchi, 1995:5-7). Tacit knowledge may include subjective knowledge such as experience, simultaneous knowledge use in a specific context, and analogue knowledge relating to practice or application (Nonaka & Takeuchi, 1995:61-65). Explicit knowledge may include objective knowledge such as rationality (mind), sequential knowledge (procedures and rules), and digital knowledge (theory) (Nonaka & Takeuchi, 1995:61-65).

Nonaka and Takeuchi then argue for four types of knowledge conversion represented in the diagram below.


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Figure 10 Dimensions to Nonaka and Takeuchi’s Knowledge Conversion (See Nonaka and Takeuchi 1995:62-70) Let’s use another set of descriptors that further refine our understanding of the structure of tacit knowledge. Harry Collins produced some useful ideas that help to further explain the structure of knowledge in relationship to individuals (1997:146-148). Collins differentiates transferable knowledge – what we have discussed above as explicit knowledge able to be transferred through interaction between humans or between a human and a machine – and three other sub-types of knowledge. Transferable knowledge could be embodied in symbolic or forms of communicated knowledge that can be generalised without loss of meaning or understanding between brains/ computers. Collins stressed that this type of knowledge was tacit and can be said to reside in symbols. However some knowledge could not be transferred without risk of loss because knowledge embedded in symbols did not necessarily equate with knowledge embedded within each individual. Three types of knowledge embedded in individuals and societies included (Collins, 1997:146-147): Embodied knowledge - includes the "knowledge/ability/skills that cannot be transferred simply by passing signals from one brain/computer to another" (Collins, 1997:146). This may be due to physical or hardware differences but reinforces how this type of knowledge will relate to the individual holder of that knowledge more than others, E.g. It is five steps to the door; this relies upon the individual’s length of stride. This knowledge can be said to reside in the individual. Embrained knowledge - this is knowledge that relates specifically to the physical brain functioning of the individual. For example when explaining a theory to others they may understand the general principles being espoused but the physical linkages for recalling specific information will be different in everyone's brain. Language provides a common frame of reference but the significance of one or another variable may relate to how each individual makes memory linkages. This knowledge can be said to reside in the physical.

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Encultured knowledge - knowledge acquisition certainly must use the linguistic and social framework that the individual has inculcated into them. Symbolic interactionists express this form of knowledge well in the identification of individuals in terms of the reference groups they participate in. Members of these groups (such as gangs or social classes) will have their own language and frame of reference. For participants in workplaces this may mean we use a language common to our group in the work or nonwork environment and this can influence interaction within the workplace. This knowledge can be said to reside in the cultural or social context (Collins, 1997:147). Fundamental to how a manager accesses individual knowledge is the fact that it is:   

Tacit; Owned by the individual; and Shaped through interaction with others.

Whether knowledge is explicit or tacit; migratory or embedded; or subject to individual attributes (embodied, embrained or encultured), managers of knowledge need to appreciate its structure before they can better influence how it is captured, transferred, assimilated and created.

Acquiring knowledge Knowledge has value. Knowledge held by individuals or by the organisation has a capital value that can be managed, evaluated and manipulated. Knowledge has been variously described as contributing to ‘pools’ of capital value. There are many forms of capital. Financial capital deals with qualification of value of assets; physical capital covers various resources which may be described as natural and environmental which have not been adequately valued but are on the agenda. Human capital is used to describe the knowledge owned and acquired by individuals for use to earn and produce, and cultural capital is the knowledge used by individuals in the course of daily life …social capital is different completely because it deals with the social links which create society and cannot therefore be owned or depleted by one. (Cox & Lewis, 1998:2-3) Knowledge also has a value that is not determined through its possession. It is also determined through the processes that impact the acquisition, transfer and expansion of the knowledge required by an organisation. This is a knowledge management process that can promote an organisation’s agility and responsiveness to new and emerging markets and changing customer needs. In other words, knowledge also has a social value. It is valued by colleagues as a possession - something that gives the 'owner' some respect, authority and a market value for their labour. It is valued by the organisation, however, for its strategic capacity to enhance productivity in the dollar value sense.

Sources of knowledge Do individuals and organisations need to hold all the knowledge required to achieve their strategic purpose, or do they need to know where to find it? Tom Davenport and Larry Prusak (1998) identified five types and related source of knowledge or information within an Organisation. Table 3 Five source of knowledge or information within an organisation Typology

Definition

Source

Acquired knowledge

Knowledge sourced from outside the organisation. While it may be employed for the organisation’s strategic purpose, its ownership remains outside the organisation’s domain of operations. In some cases, an organisation may purchase or graft such knowledge to its purpose for a period of time.

Common forms of such relationships will include training, contract work or consultancies.

Such knowledge results from experience in a new working or operational context. The organisation

An example of the source of adapted knowledge may be retailers or

Adapted


May be rented or ‘grafted’ from an external source. This may be through formal relationships (eg. research laboratories with manufacturers), outsourcing partnerships, labour hire firms, contracts or consultancies.

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and work groups adapt to new situations and conditions and so acquire the capacity (competencies, new processes or technologies) to operate in the market place. Such knowledge also enhances agility and the ability to remain competitive.

companies moving from traditional approaches to business and the new requirements to trade online or complete business to business transactions.

Dedicated knowledge results when an organisation sets aside some staff members or process resources to develop within the business for a specific purpose. These dedicated resources balance the need to generate specific competence in one knowledge set, while also ensuring that they do not become parallel to the organisation to such an extent that knowledge cannot be integrated into the organisation’s knowledge management and information systems.

Sources may include a dedicated research team, technical experts within a work group implementing a new IT system, specialist teams or teams built for particular purposes.

Fused

Bringing together people with different perspectives to work on the same project can create fused knowledge. Their very difference may be the catalyst for generating new knowledge or insights. In some cases the purpose is simply to have individuals who hold tacit knowledge or such highly specialised knowledge together in an environment whereby they can share and ‘fuse’ knowledge together. It is not uncommon for conflict to exist in such situations.

After merging its training and documentation departments, one developer of ERP software also sought to fuse their processes into one. The merged group achieved this goal but the manager noted that reaching the single process involved substantial conflict as members of one discipline would challenge the core beliefs of the other as the first would question a phase in the proposed process.

Networked

Networked knowledge is one of the most important and poorly understood forms of knowledge within the corporate world. It exists in the network of interactions and understandings created when people share information with one another formally or informally. Knowledge networking, where professional or communitiesof-practice gather together or share a discipline (such as in programming, marketing, human resource development, etc.), is most often viewed as the basis for networked knowledge. This is a limited view.

Sources should include interaction of community groups, individual and work groups with formal (e.g. professional associations, health and safety groups, supply chain partnerships, government regulatory or planning groups and bodies, etc.) and informal groups outside the workplace (e.g. sporting groups, local, hobby groups, etc).

Dedicated

Networked knowledge for an organisation exists not so much because individual employees can share information with one another and those outside the organisation, nor because they may generate new ideas and knowledge. The knowledge value of networks resides in their existence. It resides in the potential to utilise network interactions or the information resident in multiple sources to generate relevant knowledge not held by the organisation.

It could also involve moving across cultures or markets in different countries.

Often teams of dedicated knowledge are built to commercialise or realise an immediate, short term strategic opportunity.

Networked knowledge also resides in the social fabric of the location. This may include political stability and the wellbeing of the work force at a particular workplace. Knowledge sourced in these settings is often studied as ‘social capital’.

In a world where adequate time and space cannot be devoted to creation or acquisition of all knowledge that may be important to an organisation, networks are critical.

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Interactions between people as knowledge Knowledge can be held by complex interactions between people. These interactions can filter information to gain relevant knowledge. The relationships can develop structures, processes or codified actions (e.g. Manuals and procedures), that not only filter information but also hold knowledge. Such relationships may occur in teams, between teams, informal groups or individuals within an organisation that hold a common relationship that may exist outside the organisations purpose (E.g. religious, cultural, sporting, smokers, etc.) In many cases, the enterprise needs to manage the knowledge held by more than one individual to ensure:    

Those with complementary knowledge work together to achieve an agreed outcomes; Individuals holding different set of knowledge cooperate as required, when required to guarantee the efficient delivery of an outcome; Operational efficiency is enhanced by sharing the facilities or job responsibilities between individuals and teams (Badaracco, 1991:84); and Knowledge can be generated through the complex interaction of ideas, synthesis of creative suggestions, and realisation of innovations into services or products through different knowledge levels encompassing stages such as concept development, design, production and sales.

Paradoxically enterprises also need to manage the knowledge held by more than one individual to avoid problems such as:     

Knowledge held by one group is used to the detriment of the overall strategic purpose; The knowledge held by groups of individuals concerning their interaction is lost causing a resulting inability of individuals and groups to effectively work together to achieve enterprise outcomes; "Group think" is created where individuals conform to predominant thinking in a group and either alienate individuals who 'think differently' or collectively put group cohesion above enterprise-wide strategic imperatives (Hellriegal & Slocum, 1979:298-302); Groups create thinking that challenges rather than complements the enterprise strategic needs; and Groups develop their own frame of reference that is supported by the enterprise but develop outcomes and frameworks that don't advance the strategic goals or knowledge of the enterprise.

Other than serendipity and intuition explicit or migratory knowledge can flow only simultaneously or serially, or in a combination of these. Examination of hierarchical, bureaucratically structured large corporations has highlighted how knowledge, as with communication, flows either simultaneously or serially (Bowles, 1999). This means knowledge becomes compartmentalised and is hard to hold corporate-wide. This makes it difficult to develop a holistic approach to management of knowledge held in the processes and interactions occurring across the organisation. In this sense, the formation of groups of individuals (sub-cultures) that hold knowledge or do not contribute to corporate outcomes may create barriers to the flow of knowledge. Two types of groups may directly inhibit the transfer of knowledge and reduce the access of the total organisation to information. These groups are cliques and rhetorical community. Cliques are groups of people who tend to work in close proximity and communicate more than fifty per cent of their communications with each other. They frequently consist of individuals who have both formal and positional reasons for making contacts as well as interpersonal and informal reasons. (Pace & Faules, 1983:138) That is, clique members reinforce clique beliefs and their difference through their communication and language. A rhetorical community consists of people who participate in a rhetorical vision. (Bormann, 1983:115) Rhetorical communities parallel the 'discourses' or shared language and meaning (Falk, 1997). Such groups may share a rhetoric or discourse based on an inside joke, an admiration of a past (or present) person, a language or belief system, or shared experiences. A rhetorical vision involves a common consciousness about good, bad, proper, improper, and aspiration as applicable to the group. Rhetorical communities typically:     

will have agreed procedures for problem-solving; build their own symbols and language sets; ensure learning patterns reinforce behaviour within their community; rely on both formal and informal channels to exchange information; and question power structured that challenge their 'shared vision'.

Technology as knowledge The technology of an enterprise holds and creates knowledge. This may be easy to accept if one focused on computers and information systems. Nevertheless, this ignores the complexity surrounding how technology creates and holds an enterprise's knowledge. Learning to use technology, shaping business systems to account for technology used, and even how individuals interact given the technology present in their workplace will impact learning and knowledge. The ability of


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individual employees to adapt to new opportunities may solely reside with the knowledge sentient in the people and processes established to use technology (Zuboff, 1988). Extending this concept even further, reliability and the goodwill generated by technology and processes also has been identified as part of a company's distinct knowledge or intellectual capital (Quinn, 1992:343). Technology also involves an implicit management and maintenance activity that is on-going. The acquisition, use and replacement of technology does not occur in a vacuum. Technology involves the capabilities to conceptualise use and diagnose continuous development requirements (Lawless & Goodman 1994:vii & 5-10). Enterprises have to successfully link technology to strategic success. Management and staff also have to develop processes that not only link technological capacity to strategic targets, but manage the constraints technology places on servicing customer and market needs (Lawless & Goodman, 1994:8 & 10).

Culture as knowledge The culture of a corporation includes a vision and a reality. Jeanne Kirkpatrick, former US ambassador to the UN, defines culture as follows: Culture includes the entire symbolic environment. Culture defines reality: what is, what should be, what can be. It provides focus and meaning ... Culture gives us values and standards of values. (Cited in Clampitt, 1991:50) Employees assume membership of a corporate culture when they join an enterprise. Unfortunately, it is very difficult to encourage managers to analyse and thence to better manage their corporate culture. While they manage their budgets and other aspects of the corporation, they commonly attribute employee inefficiencies to ‘the employee’s poor attitudes to work’ or some other platitude. They rarely acknowledge, let alone realise, that the corporate culture is operating on two different realities: that is, a management view of what the enterprise is and will be and an employee’s view of what is and will be. As one writer puts it, ... values rest at bottom on acts of judgement. And every act of judgement is a division of the field of experience into what matters and what does not. (Bronowski, 1978:32) Managers and employees in many organisations have different values based on different judgements. A set of judgements about the way to do something can be so ingrained as to preclude any other way of doing it. The different sets of judgement between managers and employees can inhibit co-operation and preclude productive efficiencies. Clampitt (1991) posits three notions of culture relevant to the study of management communication: To function in society, people must share a common set of ideas and beliefs The notion of an enterprise's culture

Culture is an efficient means of coordinating employee activities Corporate culture allows managers and employees to pursue a common purpose and vision

Clampitt's categories suggest that an enterprise that can manage these aspects of culture will be undertaking process of translating the myriad of ideas and beliefs individual staff members possess, or develop, and translating them into a few that the business will operate under (1991:52). Co-operation, learning, communication and hence knowledge generation are impossible if the structure of individual behaviours and perceptions of reality are randomly governed (Gioia & Thomas, 1996; Bontis, Crossan & Hulland, 2002). The foundation of culture depends upon a communicative spirit and a common purpose. Where an enterprise details it purpose - that is, what business it is in - and the members of it supposedly cooperate with a communicative spirit directed by a common purpose.

Meaning as knowledge As long ago as 1938, Barnard (1938) and later in 1957 Selznick, (1957) argued that the function of managers is the embodiment of purpose: not only to make plans but to build purpose into the corporation’s social structure; that is, to infuse the corporation with meaning. For them, strategic planning can be seen as the management of meaning and of conveying meaning: [The key to executive planning is in defining interpretations] ... that can become widely shared by organization members so that their actions abide by common definitions and explanations of situations. Individual organization members in the performance of their roles can [then] apply a common system of meaning to their own enactment processes. (Selznick, 1957:236)

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Ernest Bormann defines communication as the human social processes by which people create, raise, and sustain group consciousness. He refers to these social processes as symbolic and shared. A public consciousness is a crucial element in a group or an organization’s culture. Culture in the communicative context means the sum total ways of living, organizing, and communing built up in a group of human beings and transmitted to newcomers by means of verbal and non-verbal communication. Important elements of an organization’s culture include shared norms, reminiscences, stories, rites and rituals that provide the members with unique symbolic common ground. Communication is a necessary but not a sufficient condition for organizational culture. Other things are required such as material goods, artefacts, tools, and technology, but without communication these components would not result in a culture. (Bormann, 1983:100) Bormann contends that the symbolic constructs of reality that a group shares evolve new patterns of reality. He argues, for example, that technological change - the revolution in computers and information technology - is preceded by symbolic change. According to this argument, the way we symbolically create and interpret the world has changed our technology, which is contrary to the usually accepted view that technology has changed our world.

The ability to learn as knowledge The focus on knowledge sources has raised the issue about the role learning plays in not only creating knowledge, but also transferring knowledge. At the societal, organisation or even individual level, the management of knowledge can determine success. But how does KM relate to learning? Characteristics of KM have raised some important rethinking. In brief, this includes:   

        

How useful are those management theories that embrace a more 'scientific' and rational view of processes and individual skills and knowledge required to meet current and future service and product delivery needs; Business opportunities are often missed not only because a company takes too long to respond, but also because employees (especially management) fail to possess the skills and commitment to identify the opportunity in the first instance; Learning can take many forms and appreciating learning styles of the individual and capacity to learn (individually and as part of a group) can dictate the ability of training and development activities to add value to the business; The ability to absorb learning and rapidly transfer this learning into productive outcomes is a knowledge asset that once acquired by a company can further accelerate and expand learning and performance; Harnessing collective knowledge of individuals, teams or groups, corporate levels and external strategic partners is a learning process; Knowledge and learning has long been ignored as a corporate asset that can be valued and add real value to the net worth of a company; Societies need to recognise their ability to development learning that enhances both employable skills and knowledge and the overall capacity of the individual and society to cooperate and promote lifelong learning; Knowledge, intelligence, data and information are related but distinct; Change management and competitiveness involves knowledge management; Human resources are valuable not only for what they can do, but also as an investment and realisable capital asset. Boundaries of knowledge and learning in an enterprise are integrated with the external environment; and It makes poor business sense to introduce new management philosophies such as quality improvement and organisational change without getting to the heart of the issue that centres on individual and team's capacity to learn and build commitment to the transfer of learning into action.

Types of knowledge and culture, meaning, and learning This chapter outlines many of the foundation concepts that will later underpin study in the second half of this study. Knowledge is diffused subject to the distance and time factors that impact different individuals and groups. It may, for instance, be easy to train one team in a new service strategy. However, it may take longer for the knowledge to diffuse to other teams. How this knowledge is communicated or learnt will impact knowledge


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diffusion. Boisot suggests that to be effective the communication strategy, as with learning, has to consider the social and physical constraints impacting the target audience (Boisot, 1995:106). One of the key constraints is the meaning a message has for the audience.

Figure 11 Boisot’s knowledge typology (Boisot, 1995:146) Meaning promotes ‘an individual’s disposition to act’ and serves to ‘code’ the individual’s receptivity to future messages (Boisot, 1995:107). Diffuse refers to knowledge that can be transmitted. Undiffused means knowledge that is in a form that cannot or does not possess the necessary features to enable it to be transmitted. This parallels what we have previously identified respectively as mobile and embedded knowledge.

Converged, Shared Identity

Figure 12 Boisot’s knowledge relationships (Adapted from Boisot, 1995:146) The level of competency required as an outcome of the learning is an essential question. Is the aim of learning to achieve an immediate threshold of proficiency for a new employee or apprentice/trainee? If so, the transfer of knowledge has to occur with an appreciation that the individual will not have the cognitive awareness or tacit knowledge cultivated within the specific situation. The individual may have already made some progress towards competence in the required application of the skills and knowledge but lacks the appropriate behaviours to effectively deploy the required skills and knowledge. In this case, the organisation may require competence to move to a basis where the individual can become aware of their own performance deficiencies (conscious incompetence). The employer may require performance standards to a level of mastery or unconscious competence. In organisations that learn, the aim is to ensure that all individuals achieve a level of unconscious competence in order to ensure those with mastery level competence can training other employees on the job. This promotes how well new employees, or employees new to a job move beyond conscious incompetence/competence. Mastery, unconscious competence — Ability to demonstrate competent performance, integrating all aspects of the required skills, knowledge and attitude, on a consistent basis across a range of conditions and

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variables, without full concentration. This is where tacit knowledge built from experience applying explicit knowledge in a context builds to create situated performance excellence. Conscious competence — Ability to demonstrate competence in performance while concentrating on requirements, integrating most aspects of the required skills, knowledge and behaviours but still requiring supervision and support on various conditions and variables. Conscious incompetence — Awareness of task and performance requirements but inability to achieve the performance standard. Unconscious incompetence —Unawareness of the performance requirement or that own performance falls below required standards. As individuals progress in a job they develop the understandings and insights necessary to perform better. While competence can be taught and proficiency reached (conscious competence), it is situated experience in applying skills and interacting with others that builds mastery. Mastery requires self-reflection and the ability to move to a stage where action is completed with unconscious competence. Competence becomes an inbuilt, instinctive ability to learn from ongoing actions (experiential learning).

Figure 13 Competence and the type of knowledge As suggested by the figure above, competence is a longer journey that just proficient performance. It requires experience in the situated context and the development of underpinning knowledge that enables meaning to be attached to performance. The following figure provides an example of how different jobs involve different knowledge. The examples provided represent tasks (A to E) performed by a financial adviser. Each task has a different mix of knowledge types and each can be transferred to a different extent. Different competency or capabilities require different modes of transferral. Different knowledge types can be modified over time to be incorporated into more mobile and explicit forms. This can promote transferral by textbook, manual and similar forms of learning. As represented by moving knowledge from (D) to (E) the company may take jargon and slang regularly used by employees and integrate it into a manual or training program on government compliance training. The government language may be better understood or adopted once employees see it codified in a way that uses language appropriate to the workplace culture.


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Figure 14 Knowledge structure and typology for a freight forwarder clerk The figure below brings together many aspects of our discussions on knowledge and learning. It illustrates how learning can influence not only the capture, transfer and generation of new knowledge from the information base, but also can stimulate the flow of knowledge across existing typologies to build the overall knowledge assets available to an organisation or entity.

Figure 15 Learning and organisational knowledge assets © Bowles, 1997, with permission. Knowledge development is not a linear process where by one individual transfers knowledge and skills to another individual through a learning experience. Nor is the learning inherently held in a set of information or actions that one individual can convey to another individual or group of individuals. Learning is omnipresent. Living is a process of learning, adapting existing knowledge to new situations and learning to learn for new experiences. The myriad of different situations and means to stimulate learning, mirrors the complexity and diversity of ways to acquired and transferred knowledge.

Knowledge management necessitates well balanced learning and HRD strategies Contemporary research verifies that tacit knowledge dominates an organisation’s capability requirements (Bowles 2003; Tough 1999).

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Figure 16 Balancing learning for tacit and explicit knowledge requirements (Bowles, 2005:6) However, investment in learning globally seems to be overly focused on delivery of content and knowledge with a known or codified purpose, i.e. explicit knowledge (see the above figure). While explicit knowledge is the small fraction of an organisation’s knowledge capital assets, it has attracted the greatest attention. This has come in the form of skills training for products, services and compliance requirements. Tacit or uncodified knowledge while forming a major percentage of knowledge assets has, by way of contrast, generally attracted substantially less investment. This is also despite the fact codified knowledge is tangible and easy to transfer or replicate by one’s competitors. Making tacit knowledge explicit so that it can be ‘transferred’ across the organisation or a supply chain is very risky. As stated, once explicit knowledge is much more mobile. Learning is tied to knowledge as both a physical process and human social processes by which people create, raise and filter information (Bowles, 2005:6). HRD practitioners can use learning to ensure knowledge is created and transferred using processes that encourage physical, symbolic and interpersonal interaction. These processes can be very dynamic and highly embedded in the organisation’s own context. The majority of learning received by an individual in a workplace situation will, however, not be restricted to formal channels. HRD has to recognise that it is no longer sufficient to manage individual and collective knowledge just through formal training programs tied to job descriptions, products, and codified procedures and manuals. The development of general rules for application of knowledge or codification of tacit knowledge to make it explicit, such as that found in manuals, work instructions and training programs, cannot capture all the knowledge that dictates performance. Only novices use expressible rules to guide their actions while experts use intuitive, inexpressible competencies. (Collins in Dreyfus & Dreyfus, 1997: 151) Tacit knowledge may be used through the internalisation and unconscious use of what is known. Some of this may relate to tasks that are so highly routinised that they can be made explicit. One can, therefore, manage the absorption, transfer and expansion of some forms of knowledge. However, if the tasks require thinking then solidified processes, rules and structures can actually inhibit the development of tacit knowledge that individuals use to achieve expert performance, intuition, creativity and innovation within an organisation (Dreyfus & Dreyfus, 1997:33–35; Robinson & Stern, 1997:89). Maximising capital value of knowledge assets requires recognition of the volatile mix of the dimensions. It also must recognise the need to promote tacit knowledge assets that will deliver the human capabilities necessary to make organisations and teams responsive, agile and able to seize potential market opportunities (Bowles, 2003:132). Learning is therefore the key to maximisation of an organisation’s knowledge capital assets. The true determinant of effective management of knowledge may therefore reside in an organisation's capacity to harness learning that can transfer knowledge that is either embedded or mobile or falls into either tacit or explicit dimensions.


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3. From Competence to Capabilities Introduction Charles M Savage, the ‘basis of wealth is shifting from that which is “possessed as a commodity” to the value of human capability’ (1996: 12). In the New Economy, employees’ skills, knowledge and motivation have economic value because they enhance an organisation’s performance and ability to adapt to change. In this context, the assessment of value has refocused on people as they constitute the organisation’s human capital. Knowledge Management has to encompass not just the dimensions of knowledge resident in the organisation, but also resident in people. A common ‘currency’ is needed to judge the success of KM and gauge its contribution to the development of human resources (HRD) and thence to overall knowledge capital. Capability can provide that common currency. This chapter sets out the conceptual frameworks used to describe what is learnt and how it is translated into performance and knowledge outcomes. The key point to be made here is that an employee’s effectiveness cannot be determined solely by focusing on the development of task competencies, but requires learning activities supported by applied tools and a knowledge base that can orient the individual’s development to the need of the organisation. In effect, this chapter is setting the scene for the following three chapters in this half of our study to translate the concept of the management of knowledge to the management of knowledge assets that hold value as part of an organisation’s Human Capital and Knowledge Capital. We will show that the identification of capabilities and definition of possible contributions that the individuals can make towards organisational performance can give rise to an integrated way to manage knowledge at all levels of the organisation. This will set the scene for part two of our study where we will reinvestigate HRD based on the findings derived from our study in the next chapters.

Defining capacity, capability, and competency Differentiating capacity As a construct, capability-based approaches extend how we manage knowledge to encompass how the attributes held by the individual can be targeted, developed, reported, integrated and analysed for their value contribution to an organisation’s overall Knowledge Capital and, what we will later define as, Current Productive Capacity and Potential Productive Capacity. Capacity is the general term for the pool containing the collected human capabilities that exist in a particular organisation (Bowles, 1999:20-23). It is more than the current capacity to perform. It encompasses future potential to perform. One might talk, for example, of the capacity of an organisation to respond in the event of a crisis or a new market opportunity. One might also identify areas in which the organisation’s capacity to respond to a particular crisis can be anticipated and built. Capability is a quality or ability that can be developed or deployed from the available pool of human resources (Bowles, 1999:140). Capabilities are strategic. They exist to drive organisational outcomes. As such capabilities are the deep competencies required by an organisation to attain its core purpose. When translated into workforce requirements they transcend occupations and roles, or technical and functional competence to encompass the human factors that underpin the strategic capacity of the workforce to achieve the organisation’s desire purpose; now and in the future. The terms capacity is ‘what can be done’ and capability is the ‘currency’ or ‘measure’ of qualities or attributes in the available in the pool of human resources (workforce). Ultimately, capabilities reside and are developed within individuals and only then find expression through the organisation. As depicted below the capacity of the organisation is across many cycles of current performance. It is about ensuring the potential is being cultivated to created sustained performance and the capacity to create and seize opportunities.


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3. From Competence to Capabilities

Figure 17 Capacity development spiral We can explore this concept in full chapter 4. However, now we need to appreciate that an employee’s value cannot be determined solely by focusing on the development of task competencies required for performance in a current job role. It requires an additional acknowledgement of how that individual’s knowledge base can be development or contribute to the organisation’s future needs. It is as much about future potential as it is about current performance.

Differentiating capabilities1 The movement to advance competencies was driven by the need to improve work processes, especially in the manufacturing sector. In the New Economy, however, organisations require more than process skills to remain competitive and adapt to change. In this situation, we need a broader measure of the factors that contribute to performance if we are to assess the ‘bottom-line’ value of knowledge to an organisation. This is where the concept of capabilities is useful. Capabilities define the range of performance that is possible, the potential capacity to perform. When individuals interact in teams, organisations and community groups, the context determines which capabilities an individual can apply to any given situation. The definition of capabilities therefore needs to encompass the human factors that shape performance capacity now and in the future. In 1999, Bowles presented a framework for defining the variables associated with competency and capability based on work with major Australian corporations from 1993 to 1998. This framework integrates a competencybased approach to learning and performance with an effort to analyse outcomes by accounting for knowledge, or what is now most commonly referred to as intellectual capital (Bowles 1999: 52). The framework begins by defining competence as the knowledge and skills that can be identified in an individual’s performance:

Competence = Skills + Knowledge But skills and knowledge related to task performance are only one aspect of overall organisational performance. Having the skills to perform does not guarantee successful deployment of those skills. Equally, a competency

1

This chapter is based on work by Dr Marcus Bowles published in a number of locations (Bowles & Baker, 1995; Bowles, 1999:Ch 4, Bowles, 2004:Ch 3)

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focus tends to emphasise skills and knowledge that are codified or explicit, while ignoring the bulk of a workforce’s knowledge, which is uncodified or tacit. A further aspect, identity, was therefore added to reinforce not only the individual’s cognition and behaviours but also the personal attributes contributing to the organisation’s culture:

Identity = Cultural values or beliefs + Roles + Behaviours or traits To establish the current performance capability in a given context, we must also take identity factors into account. The current performance capability therefore can be defined as:

Capability = Competence + Identity Competence is the sum of skills and knowledge, and identity is the sum of cultural attributes, roles and behaviours. The concept of identity encompasses both an individual’s inner sense of self and his or her relationship with the broader social and cultural environment.

Figure 18 Competencies and identity attributes and capability (Bowles, 2003:241)

Differentiating competency Competency is here defined as the knowledge and skills that establish a standard of performance required at a level of work. As used in this study competency relates to the Australian national approach and relates to performance and is not a descriptor tied to a specific person or place (context). Note There are two prevailing schools of thought on the use of ‘competence’. One approach strongly ties competency to behavioural descriptors. This approach is linked to psychometric and related fields of social studies and human resource management. It is common in US literature and related organisational development frameworks. In other countries with national training frameworks (i.e. UK, Australia, New Zealand, South Africa, Malaysia, etc), competencies are very clearly standards of performance, not behavioural descriptors. While behaviours may be linked or influences by these competency standards the framing of these competencies relates not to the person, context, or job, but to the standard required at a level of employment. Be aware of this difference as we move through this chapter as some authors may be using competence for quite different purposes. Both schools use competency-based approaches to training and HR because they set a single target for both learning outcomes, performance criteria and HR activities (i.e. job design, recruitment, etc). The value of the competency approach is the ability to use it at individual, team, transitional, industry or even national levels. The original intention of authors such as Mintzberg and Boyatzis when they respectively established contingency and competency frameworks was to examine how individuals performed specific work within functions or job roles (Mintzberg, 1973; Boyatzis, 1982). Classifying specific sets of competencies under different functions was the order of the day and measurement focussed on how different functions could be accurately described, and predicted. This ensured competency ‘sets’ could be allocated to functions and people undertaking those functions taught to undertake the discrete competencies (Boyatzis, 1982: 203).


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Boyatzis’ proposed a competency-based model of training, education and development where competencies would indicate: ...what sort of person will be effective in our organisation in specific jobs ... a template for decisions such as selection, promotion, firing and design of and assignment to management development activities...interpret responsibility for success or failure with respect to accomplishment of performance objectives ...communicate to all managers how they should act and what they should be doing ...basis for the design of management jobs and the organisational systems, policies, procedures and programs (Boyatzis 1982:13). Boyatzis’ approach to competency-based development did not effectively address some important considerations, including:    



The concept of generic was related to common functions and clusters of competencies within a level of performance not explicitly related to a function across an industry or nation; While functional clusters were described in a broad enough manner to be sufficiently predictive, discrete competencies were often too broadly defined to accurately frame training suitable for all individuals allocated these competencies; Analysis did not differentiate how skills may relate to either ‘functions’ or ‘roles’; Except where it was included as a competency cluster called ‘specialised knowledge’ the definition of competence excluded knowledge and concentrated on the individual’s socio-psychological characteristics, traits, motives and skills; and The model placed heavy emphasis on both conscious and unconscious behaviours inherent in a manager’s functioning but did not define them (Bowles, 1999:51).

The competence-based approach was however successfully deployed at an organisational level (Hodkinson & Issitt, 1995; Barrie & Pace, 1997). Spencer and Spencer reported four features emerged in terms of the early adoption of competency-based approaches being implemented by organisations (1993:15): 1. 2. 3. 4.

A competency is an underlying characteristic of an individual that is causally related to criterionreferenced effective and/or superior performance in a job situation. Underlying characteristic means the competency is a fairly deep and enduring part of a person's personality and can predict behaviour in a wide variety of situations and job tasks. Causally related means that a competency causes or predicts behaviour and performance. Criterion-referenced means the competency actually predicts who does something well or poorly, as measured on a specific criterion or standard.

The above features stresses both the behavioural and performance standard being part of the approaches. Other authors stress the role of competencies as the core technical skills, knowledge and technologies that enable organisations to maintain unique productive capacity. Such approaches extended the concept of competency. They argued that competencies had to be specific to the organisation and unique components of the overall competitive capabilities held by an organisation and its workforce (Prahalad & Hamel, 1990:79; Sanchez & Heene, 1997:5-6; Allee, 1997:21). These types of models forged the basis for early efforts to develop national approaches to competency frameworks (Bowles & Graham, 1994). Ultimately these approaches recognised that competitiveness cannot be generated from the same skills and knowledge available to everyone else in the marketplace. As an example of national approaches based on competency frameworks we can examine the Australian situation. In the early 1990s, Australia moved its national vocational education and training system to one based on competencies. The then National Training Board defined competency as: The specification of the knowledge and skills and the application of that knowledge and skill across industries or within an industry to the standard of performance required in employment. (NTB, 1992:10) In essence a competency is a standard specifying what a person does within a job or a task allocated to a job role. This involves more than just completing a range of tasks. It requires that performance be assessed to an agreed standard and can be completed in a range of different contexts considering variables (e.g. type of technology, time) that may impact performance. A competency standard is the actual specification or benchmark for the knowledge and skills in application. Under the national approach industries developed competency standards for occupations and job families at various defined levels of work or qualifications. These domains may also be customised and contextualised to a specific organisation.

Differentiating identity Identity is a useful term that may seem more obtuse. It relates to the capabilities acquired in a given performance situation and expressed based on an individual’s experience. Unlike competencies these attributes or qualities are less tied to task performance than to the person and place.

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In the organisational context the theoretical basis for the study of identity revolves around the establishment of meaning for individuals (Castells, 1997:6; Whetten & Godfrey, 1998:163). It is explored as part of a capability definition because possession of the competencies required to perform does not alone define the capacity of an individual, group or organisation to deploy their competencies. Individuals, groups and organisations may hold multiple identities that provide meaning. The components being combined to forge identity and meaning may therefore vary with any organisational or performance context. Still, organisational, group and self-identity were being forged by common components in different ways. Identity at all these levels was being forged by the need to ‘belong’ or possess a sense of not only ‘who am I?’ or ‘who are we?’, but also how people differentiate themselves to others. Presented in this manner identity is both a construct defining the characteristics for the ‘self’ and a basis for action that affirms and sustains identity (Gioia, 1998:19). Meaning on the other hand is more about the ‘symbolic identification’ by the individual with the purpose of the action (Castells, 1997:7). While the search for meaning and identity may be common, its construction differs. Diana Gioia identified three key elements research seemed to confirm as the factors influencing how individuals form a sense of organisational identity (1998:21):   

The purpose taken by organisational members to be central to the organisation; What distinguishes the organisation from others; and What is perceived by individuals and teams to be the enduring factors that guide current action, interaction and information, while building on the past and presumably informing future action.

Individual and collective identity may be refined and developed as individuals interact and associate within an organisation. The formative three elements shaping individual and collective organisational identity may occur through:     

Subscription to the core visual and symbolic iterations from the organisation (brand, documents, information, etc.); Individual needs and preferences (personal alignment with the organisation as it offers a pathway to satisfy future requirements); Expectations alignment (personal wishes and hopes satisfied through organisational actions); Endorsement (organisational support and validation of individual aspirations and purpose); and Reinforcement and recognition received as relationship evolves (Castells, 1997:22; Whetten & Godfrey, 1998; Kim, 2000:317–19).

Dis-identification may also occur. This is where the individual creates their own construct of self-identity because the above factors are not being delivered or satisfied by the organisation. Individual and collective rebuff of organisational meaning can consolidate identity in opposition to the organisation’s core purpose. As new information flows emerge and people de-couple from identities promoted by institutions or dominant organisations, identities can be deconstructed and individuals can generate new personal and collective identities (Castells, 1997:13). Whether a consumer or a staff member, an individual associating with an organisation may carry self-identity that is composed of elements that render it more inflexible and enduring that an organisation’s identity. For instance an individual may hold more deeply embedded influences such as language, culture, location, ethnicity, religion and so on. The drivers for the organisational identity may include more dynamic and specific factors that do not impact individuals until they associate with the organisation. These may include:     

Technology; Information and communication; Product and market placement; Competitiveness; and Organisational structure (Castells, 1997:31–32).

Capabilities: The interface between the individual and the organisation Capabilities help distinguish the parameters for an organisation's capacity and its purpose. Competencies are very much the physical embodiment of the actions required to deliver the organisations performance. In terms we have previously used to classify knowledge, competencies are explicit and are delivered through codified content or learning packages. Identity is very much about the relationship between the individual and the organisation. The relationship that develops will be culturally situated and develop meaning that is continually iterated. Identity is very much about tacit knowledge embedded in the person or their interactions. For organisations seeking to manage knowledge it is essential both explicit and tacit knowledge is addressed.


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There is then a distinction between the development of competencies and capabilities. KM and, as we will see, HRD has a focus on capability development. Each aspect of a capability requires different development approaches.

1.

Competency

2.

Cultural

3.

Roles

4.

Behaviours and Traits

Development of knowledge and skills related to performance (i.e. Training on or off the job) The ability to contextualise and prioritise activities appropriate to the beliefs, values, meaning and world view promoted by diverse interests (individual, societal, organisational, etc.) impacting a given performance context (i.e. Experiential learning, collaborative problem solving exercises, etc.) The individual's acquisition and application of capabilities required to perform or interact successfully with others in a given job role (i.e. Case studies, job rotations, etc.) Relates directly to observable attributes or actions which evidence how the job is to be done (i.e. Modelling, simulations, in-box exercises, etc.)

The identification, management and development of knowledge in individuals therefore requires different strategies. Knowledge that is routine or related to products and processes can be codified and transferred in a number of different ways. For instance:    

Manuals Training courses and related resources (content) Routines, procedures and systems (i.e. production flow or control charts) Documents and written communication

Non-specialised or identity-related knowledge will be much harder to transfer because of its very nature. Successful transfer of tacit knowledge lies in the individual or shared:     

Language; Cognitions; Beliefs and attitudes; Experiences; Shared vision and futures.

The ability to address both dimensions and ensure explicit knowledge is transferred cognisant of tacit factors present in the individuals involved will ultimately influence how the organisation creates competitive advantage.

Capabilities within an organisational setting Capabilities extend beyond the individual. An organisation may hold capabilities at three levels.   

Organisational level; Process or team level; and Individual level.

The fundamental value of capabilities for many organisations is their ability to use performance standards to remove variations between individual capabilities and those required for attainment of collective outcomes (group/ process, organisational and cross-organisational). In terms of KM within an organisation this ensures individual behaviours do not undermine the optimal performance being strived for at the process and at the organisational level. The diagram below represents the small leap in management perception and practice that is required to generate integration between individual performance outcomes and organisational strategic directions. This suggests that any attempt to finalise a capability development strategy that is intent upon integrating strategic goals with individual performance, cannot ignore the variations that will affect an individual within a specific context or job.

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Figure 19 Levels of capability  The Centre for Working Futures, 1994, with permission

Aligning capabilities to strategic direction Capabilities are not just the collection of competencies and identity attributes. The capabilities should reflect the current and future practices the organisation needs to excel and to constantly perform better than competitors. Capability requires development of both competencies and the distinct identity attributes an organisation wishes to portray to employees, strategic partners and customers. To the organisation capabilities fill the gap between utilising available resources to achieve strategic imperatives and competitive requirements. Capabilities are part of an organisation’s strategic tool kit. To be effective they must be aligned to the range of strategic options open to the company. Competing on capabilities as identified in the article below provides competitive advantage over organisations using traditionally process focused management systems. Note: Once again terminology in this area can be confusing. Often distinctive organisational capabilities are also described as an organisation’s core competencies. To make the matter worse the terms are often used interchangeably.

Organisational Strategy

Future potential Organisational capabilities

Organisational resources

Workforce Capabilities

Figure 20 Aligning organisational resources, capabilities and strategy As depicted above competing on organisational resources alone may have to be balanced by the workforce or human capabilities available to achieve strategic outcomes. As capabilities include human and knowledge assets the alignment of such capabilities with strategy and resources has become a central factor in the planning and designing organisations. Just as strategies, capabilities and resources will vary so will they be clustered and


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organised differently. This results in a wide array of organisational designs. As an organisation matures they will also develop different ways to harness capability strengths and overcome weaknesses. Capabilities and strategy form the basis for structure. Alignment of capabilities with strategy therefore often entails resolving organisational design and structural issues related to:     

Activities that are central to customer needs (customer facing); Activities that support priority activities (support); Activates that can be outsourced; Activities that require strategic partnerships to acquire the necessary capabilities (i.e. Supplier or distribution partners); and Reporting and authority relationships between activities.

As early as 1992, Stalk, Evans and Shulman (1992) established in their ‘Competing on Capabilities: The New Rules of Corporate Strategy’, a number of dimensions and categories under which Kmart and Wal-Mart had organised to deliver competitive strategies. These included four principles of capability-based competition and five dimensions. These are represented in the table below. Table 4 Competitiveness and capability matrix Principles

Business processes

Superior value to the customer

Dimensions

Strategic investments in support infrastructure that links units and functions

CEO is the champion of a capabilities-based strategy

Speed Consistency Acuity Agility Innovativeness (Note: See Chapter 10 on Agility capability for more in depth analysis in this area).

Capabilities, alliances, networks and partners The value of capabilities inside the organisation may be eroded if the capabilities across the supply or value chain are not present.

Figure 21 Capabilities across the value chain For many organisations competitiveness resides in satisfying a customer they may not be serving themselves. When considered as part of a value chain capabilities are not just applicable to the internal processes of an organisation. As depicted in a somewhat overly simplistic manner above, the internal capabilities can deliver optimal performance outcomes when operating with suppliers (input) that are operating at or above the capabilities required to meet customer expectations or strategic outcomes. Consistent with the chain analogy, if

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suppliers or buyers (customers serving the end customer) have capabilities inferior to that required to meet the value chain’s ultimate target then sub-optimal performance will affect the whole supply chain. In real terms this means capabilities internal to the organisation must be matched or exceeded by capabilities across all partners to achieve the required level of competitiveness. Interlocking capabilities across a supply chain is perhaps one way to progress capability development beyond the boundaries of an organisation. This may link competencies and other attributes into a framework that spans many organisations or operations (See Chapter 11 for more on this topic). Advantages from interlocking organisational capabilities can include:      

Mutual competencies and synergy in terms of not just how the job is done, but the standard to which it is completed. Cost reduction and shared focus on ways to reduce operating costs. Improve service including accelerated cycle time and responsiveness. Reduced inventory or wait times as accuracy and timeliness increases. Integration of reporting, technologies and processes to improve partner collaboration. Collaboration and cooperation in terms of learning and development activities.

Capability frameworks Many capability frameworks are not as comprehensive as discussed in this chapter. Many cover broad attributes. Capabilities in this sense are attributes not being covered by competency frameworks. Example The following is a capability framework developed for a leadership group within an organisation operating in the Australian transport sector (Bowles, 2004). This framework is used alongside competencies to recruit, select, train and develop middle to senior managers and leaders. The competencies are sourced from technical (in this case the relevant national Transport and Distribution Training Australia competency standards, http://www.tlisc.com.au), management (in this case Frontline Management generic competency standards, http://www.ibsa.org.au/content/business/index.html), and leadership areas (in this case specifically developed for the organisation). Purpose: To develop the knowledge and skills of participants in assessing the capability of others for doing the work required in the various roles in the organisation CAPABILITIES Creative: 

Anticipates, encourages and generates imaginative or innovative solutions appropriate for the given work context



Uses innovative ideas to replace existing methods. Is able to express innovative solutions effectively to others



Contributes ideas effectively

Results oriented: 

Sets goals and indicators that are outcome focused



Develops and monitors performance against planned outcomes



Adjusts plans to meet changing priorities



Anticipates and manages short and long-term needs



Influences and persuades others to ensure achievement against the plan

Commercial acumen: 

Uses product knowledge to gain competitive advantage and achieve goals



Appreciates company strategy and objectives and contributes towards them



Develops relationships to enhance sustainable commercial success


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Communication: 

Establishes rapport with other people



Tailors the message for other people



Prepares, communicates and interprets written and non-written communication to achieve personal and business outcomes



Deploys effective negotiation skills to secure personal and work outcomes



Presents themselves and information to optimise personal and work outcomes

Customer focus: 

Appreciates customer needs



Clarifies customer’s personal expectations



Collects, analyses and responds to competitor information

Technical and technological acumen: 

Completes activities in an efficient, effective, and timely manner using tools or processes



Communicates using advanced technologies to great effect



Identifies and applies the appropriate tools required to meet operational needs or proactively solve problems



Communicates and demonstrates compliance with relevant processes, procedures and policies

Leadership: 

Explains context to others



Encourages contributions for others



Inspires others through shared visions



Influences others to work towards goals



Gives appropriate feedback



Addresses issues of poor performance



Encourages people to collaborate and work together.

Personal application: 

Completes personal activities in an efficient, effective, and timely manner



Adapts own working style and behaviours to maximise effectiveness



Organises work priorities, time and resources



Sensitivity to levels of personal stress, negativity, anxiety, personal wellness and health and safety

Leadership component Capability

Leadership component

Shapes strategic thinking Inspires a sense of purpose and direction

Demonstrates and develops a vision and strategic direction for the branch/organisation

Focuses strategically

Understands the organisations role within government and society, including the whole of government agenda

Achieves Results Ensures closure & delivers on intended results

Strives to achieve, and encourage others to do the same

Cultivates Productive Working Relationships

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Values individual differences and diversity Guides, mentors and develops people

Capitalises on the positive benefits that can be gained from diversity and harnesses different viewpoints Offers support in times of high pressure and engages in activities to maintain morale

Technical component Capability


Shapes strategic thinking Harnesses information and opportunities

Identifies and sources relevant information, identifies information gaps and recognises opportunities

Shows judgement, intelligence and commonsense

Analyses and evaluates information to draw conclusions

Achieves Results Marshals professional expertise

Contributes individual expertise to the organisation, and encouraging others to draw upon the knowledge that is held

Managerial component Capability


Shapes strategic thinking Shows judgement, intelligence and commonsense

Undertakes objective, critical analysis and distils the core issues. Presents logical arguments and draws accurate conclusions.  Risk management

Achieves Results Builds organisational capability and responsiveness

Marshals professional expertise

Evaluates ongoing project performance and identifies critical success factors. Responds flexibly to changing demands.  Project management and risk management Manages contracts judiciously. Actively ensures relevant professional input is obtained from others.  Knowledge management and talent management

Steers and implements change and deals with uncertainty

Adopts a planned approach to the management of programs. Operates effectively in an environment of ongoing change and uncertainty.  Change management, project management, and resource management

Ensures closure and delivers on intended results

Monitors project progress and identifies risks that may impact on outcomes. Adjusts plans as required.  Project management, risk management, and resource management

Communicates with influence Negotiates persuasively

Approaches negotiations with a strong grasp of the key issues. Presents a convincing and balanced argument.  Negotiation management and relationship management

Communicates clearly

Confidently presents messages in a clear, concise and articulate manner. Focuses on key points for the audience and uses appropriate, unambiguous language.  Stakeholder management and relationship management


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The above APSC Integrated Leadership Framework also recognises complexity will vary with roles. As promotion occurs complexity will increase as roles change. The layers of complexity are detailed below.

Figure 22 Integrated Leadership Framework and layers of complexity

Individual capabilities and organisational knowledge capital Increasingly within organisations, individuals are seen as a capital resource. The move into the knowledge era has increased an emphasis on organisational agility and organisational knowledge. Both of these things are driven by individuals in the organisation and by the need to develop an individual's capabilities to achieve competitive advantage for the organisation. Where integrated tasks are being carried out competencies and capacity does not adequately describe the possible contribution individuals can make towards organisational performance. The identification of an individual's possible potential contribution to organisational performance has been encompassed by what is defined in this study as capability. Capabilities were seen as being composed from a combination of competency and identity attributes. This formed the ‘currency’ for determining the attributes resident in an individual, team and organisation. Capabilities are more than performance related attributes. They are also the cultural glue that orients individuals towards a common purpose while providing meaning. The following chapters will focus on tying our capability currency into knowledge capital and thence to human capital and the implementation of a KM strategy within an organisation.

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4. Leading Knowledge Management within an Organisation Introduction Knowledge management (KM) is far more than the application of information and communications technology (ICT). Rather KM requires an appreciation for the complex aspects of KM at the: 

Organisational level (Knowledge Framework);



The implementation level (Knowledge Management Strategy); and



The individual level (Capabilities and different dimension of knowledge).

This chapter will focus in on the first two levels where KM needs to be framed. Previous chapters should have by now reinforced the importance of KM as not only a process but an intensely human activity. Knowledge management within an organisation still has to address and manage knowledge as part of a social activity. Knowledge capture, transfer and generation is not simply a mechanistic process that can be switched on and off. Every human action involves knowledge. The knowledge humans consciously or unconsciously use may change as capabilities are acquired, transferred and deployed. This knowledge may be driven not only by what humans know and can do, but by how they interact and engage in social exchanges. So how do you frame knowledge management frameworks, strategies and audit knowledge in organisations given this complex set of interactions? This chapter will establish some conceptual and real world insights into this dilemma.

A Knowledge Management Framework This chapter outlines the fundamental parameters for our study of KM implementation in an organisational setting. Please do not consider these discussions and models as definitive or exclusive of other approaches that can be found. Our model is presented to orient both our understanding of approaches to KM and the later elements of our study. The KM framework presented below is therefore a reference model; a model to be used as a basis for tailoring KM to specific contexts and cultures.


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Leading Knowledge Management within an Organisation

Figure 23 Knowledge Management Framework © Bowles, 2005, with permission

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Stages in KM Cycle The following figure isolates the central element of the larger KM Framework. This refers to the four stage KM strategy cycle.

Figure 24 KM strategy cycle

Conceptualise The Conceptualise stage is the usual commencement point for KM implementation. This is where the process of KM has to be structured and linked as both a philosophy and framework to strategic imperatives. The objectives of the KM strategy have to be aligned and attuned with business objectives. Business strategies both determine the parameters of the KM framework and the outcomes it must achieve. It is within the parameters of strategic imperatives and goals that any measurement of value creation for knowledge must also reside. KM must also reside within or enhance existing business planning processes. The Conceptualise stage will be where the concept of KM in terms of the framework and underpinning theory will be extended into the analysis of knowledge requirements. This involves developing a robust concept of the measures that can be used to identify and value knowledge and the capabilities that exist or are required at all levels within the organisation. By the end of this stage the KM framework should become visible to all key stakeholders. This may come in the form of a vision of what and how this approach will hold mutual benefit. Best practice suggests this vision should occur before implementation of KM enters into a planning process that will actualise the concept.

Plan After determining why KM is occurring and linking reasons with strategic imperatives the Plan stage aligns KM with strategy and thence the organisation’s capabilities and resources. The Plan stage will translate the systemslevel KM framework ‘vision’ into a KM Strategy. The strategy has to encompass all aspects of knowledge from capture, transfer, and through to generation. At this stage organisations also start (if they have not already done so) to collect intelligence on key competitors, markets and such like to develop contingencies about future scenarios. Contingencies allow risks to be modelled and potential solutions, options and priority actions to emerge. Review of plans and supporting goals and measures permit collaboration and the function of KM to be advanced with growing purpose. Done with thought this stage can promote organisational and individual learning whereby purpose develops meaning and, in turn, 2 meaning translates into individual behaviours that support a culture of KM .

2

This is a complex relationship is unwrapped further in Part 2 of this study.


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Contextualise The Contextualise stage is where user access and the enabling infrastructure (i.e. Information technology – hardware, applications and software, networks, or communication technology) are activated. This stage is all about situated application. For the user this means the knowledge architecture exists to make knowledge:       

Easy to access; Personalised; Controllable; Current, relevant and accurate; Timely; Available in communities or collaborative systems; and Available on demand through search, discovery and retrieval processes (anywhere anytime).

All the above actions have to optimise the flow of knowledge to the individual and teams involved. This has to occur for the knowledge required to meet customer service or performance requirements and priorities the organisation has set. It also has to occur no matter what the knowledge structure or dimension (tacit-explicit, mobile-embedded, strategic-tactical, etc.).

Improve The improvement stage is where feedback occurs and KM execution cycles conclude. This final stage in this four stage cyclic model merge discussions and reports on outcomes from individuals, teams, business units, partners and organisational leaders. This stage is about triggering improvement; ensuring that current cycle positively achieves the goals and measures set in the KM strategy. The Improve stage is not only where goal attainment is measured but also where comparatively, by any measure used, perpetual improvements upon previous cycles are confirmed. This leads to a reconceptualising of KM and the setting of revised goals when the KM cycle is recommenced. The Improve stage has to capture knowledge on knowledge. While somewhat tautological, implementation of KM strategies may not be effective in terms of either the previous stages in the KM cycle or the tools, technologies and processes being deployed. Improvement should therefore seek to report on shortcomings. The following table gives some indications of the issues to be monitored and the possible indicators. Table 5 Monitoring effectiveness of the KM Strategy Issue

Indicator

Accuracy, accessibility and speed of knowledge flow to point of use

    

Accuracy and accessibility of Intelligence associated with problem avoidance, compliance or sales

     

Personalisation

 

Optimise access

   

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User satisfaction Errors Delays Problem or decision resolution (timed, frequency, duration, call-backs, etc) Usage levels on different communication mediums/ networks Error rates Product knowledge ‘Point of Truth’ for product or compliance information Timed use of knowledge sources (learning, quizzes, knowledge banks, etc.) Complaints Breaches Effectiveness self-help strategies User satisfaction and/or expectations measurement (self-efficacy in terms of pre and post learning or knowledge access by user) Frequency of access Numbers of users Duration of use Location of use





Demographics of use

The above table is a simple example of some issues and the types of measures that can be used. It is not meant to be an exhaustive list of possible issues or measures.

Dimensions to KM Strategy This chapter outlines in more detail the five dimensions that surround the KM Framework.

Leadership dimension to KM Ikujiro Nonaka (1991:22) suggested knowledge-based organisations able to ‘consistently create new knowledge, disseminate it widely throughout the organisation and quickly embody it in new technologies and products’. Achieving this outcome requires commitment from the most senior executives. Successful implementation of any major organisational strategy more often than not relies on the excellence of the leadership team. Sponsorship by leaders is a consistent factor in case studies and stories on the sustainable implementation of successful KM strategies (Grant, 1996; Nonaka, 1994, McElroy, 2003). Leadership in KM involves:      

Establishing a vision for KM in the organisation; Leading, modelling and sponsoring KM strategic actions and behaviours; Driving KM and related process improvements; Identifying organisational knowledge requirements; Confirming connections and relationships between knowledge; and Reinforcing the importance of knowledge as a platform for the organisation’s future success.

Research and practice tells us there is a very strong link between leadership and the successful integration of both KM and organisational learning with strategic imperatives (Güldenberg & Konrath, 2004; Sternberg, 2003: 387-88; & Crossan & Hulland, 2002: 721). Building capabilities at individual, group and organisational level requires strategy drive the formation of knowledge. However, the process also has to be oriented towards shared visions and purpose. Building infrastructure, content and opportunities for learning are simply insufficient to generate all forms of knowledge. Leaders are therefore essential in sponsoring KM while driving changes behaviour and performance.

Governance and policy dimension The centre of gravity in terms of ownership of different levels of implementation has to be established very clearly before a KM strategy can be rolled out. This includes establishing regulatory, strategic and policy compliance issues within a responsibility and authority structure that holds credibility within the organisation. Governance and policy in KM involves:       

Establishing governance and ownership structures; Fitting KM strategies within organisational policies, procedures and processes that deliver high performance and enhance future potential; Designing guidelines, policies and procedures for managing content; Designing KM projects with planning parameters and goals; Making employees, and especially knowledge workers, aware of organisational framework, strategies and goals; Harnessing intelligence and capabilities within frameworks that can align and engage an individual’s knowledge towards the organisation or mutual ends; and Identifying political or authority structures that create gaps and barriers to knowledge flow between users.

Architecture dimension Architectures for KM include the ICT architectures, technical procedures and rules, and applications required to enable KM. This goes beyond the traditional emphasis on knowledge being placed within a simple view of KM as a transaction process (knowledge production). It requires consideration of the workflows and systems that align KM to ‘social processes through which people in organisations create and integrate their knowledge’ (McElroy, 2003: 61): Architecture in KM involves: 

Supporting the development of knowledge in the organisation, at all levels and across all dimensions;


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

  

Designing user interfaces and architectures to enable knowledge to be: o Shared o Captured o Validated o Discovered o Searched o Distributed o Transferred o Valued Collaboration and communication architecture; Creating communities and relationships to exchange knowledge outside the organisations boundaries; and Retaining and generating knowledge (wisdom, corporate intelligence and intellectual capital).

Absorption dimension Like sponges can absorb liquid so brains can absorb knowledge. Unlike sponges brains can expand their knowledge absorption. With more conducive work and learning environments (i.e. collaborative structures), or through use of technology knowledge absorption can be improved at the individual and thence group or the organisational level. Absorption in KM involves:       

Enhancing the rate of knowledge transfer; Driving learning through individual commitment; Reusing existing knowledge through creativity and innovative practices; Generating new knowledge and solutions; Facilitating productive collaboration; Designing and enhance learning communities; and Fostering a learning culture.

Measurement dimension Measurement in KM involves:     

Setting and adjusting measures; Valuing knowledge assets; Monitoring and reporting knowledge creation and utilisation; Documenting success stories and confirm high ‘value activities’; and Systematic analysis and expansion of knowledge assets.

KM implementation Life cycle

Figure 25 Knowledge strategic life cycle curve

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The so-called ‘Nolan curve’ is commonly used to depict the evolution of computer use in organisations. While it first appeared in 1973, the Nolan curve became the basis of a seminal article published in 1974 (Gibson & Nolan, 1974). The Nolan curve depicted a relation between the budget for computing and time. Points on the Nolan curve were divided into four stages: initiation, contagion, control and integration. Through subsequent research and wider industry use, two more stages were added: data administration and maturity. The life cycle curve or ‘scurve’ is a simple schema used to depict change and the ‘growth stages’ through which any major intervention may progress (Christensen, 1997:44–47). The figure above is a modified ‘s-curve’. It depicts six basic stages of knowledge strategy implementation. The Nolan stages in the evolution of information and communication technology (ICT), or any major transformational intervention closely parallel KM strategy implementation. The stages illustrated above confirm how the life cycle can start with enthusiasm. Initial productivity often slump as the realities of trying to change behaviours and processes take hold (Point B, so-called ‘Valley of the damned’) (Bowles, 2003:4). This variant to the Nolan curve has been added because it is in this stage that many strategies and leaders face their toughest test. The mature, integrate apex of the implementation cycle (Point D) seems far away and the pressure is on from all stakeholders who believe Point D seems too far away. Hence the need for stakeholder involvement from Point A and very clear communication of the full life cycle and requirements to reach Point D. The slow growth after Point B is followed with increased integration and more rapid deployment. This may occur very fast or gradually over a longer period of time. At the point of maturity the life cycle moves into a plateau of administrative control and certainty before declining. Decline is usually very rapid in companies that face intense competition based on their knowledge assets. The competitiveness of any organisation in terms of KM is:    

The speed with which they can move from Point A to Point D The ability to avoid an early drop in performance (Point B) and the later decline stage (Points E and F) all together; The capacity to adopt new KM strategies and achieve the above two points (Point C1); and Migrating effort from existing KM strategies to new evolutions such that by the time to old strategy would be at Point D, the organisation is actually on a growth stage in the new strategy (Point E).

By avoiding discontinuities – the decline of an existing KM strategy before the new one is in place – the organisation can actually harness KM strategies to improve competitive capabilities. By this we mean that the actual gap between Point D and Point E can be widened. Assuming the new strategy is based on sound strategic imperatives and capacity determined by available capabilities and resources, a company can use knowledge to continually improve its competitive position. For organisations where knowledge is the core rationale for their organisational design and strategic planning the better they do this the greater their overall sustainable competitive advantage.

Figure 26 Accelerating knowledge life cycle Keep this model in your mind. As we will see in Part 2 of this course it explains why the most profound role HRD can play in support of a KM strategy or knowledge organisation is to affect the individual and organisation’s ability to learn, respond to new change imperatives (agility), and quickly absorb the capabilities required to evolve competitive capacity.


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Knowledge as the basis for organising Central to organising any business activity is the creation of sustainable ways to capture and transfer knowledge. Specifically four factors have been identified by research into effective and efficient knowledge transfer and absorption, they include: 1. 2. 3. 4.

Properties of knowledge being transferred. Characteristics of knowledge source. Characteristics of knowledge recipient. Context within which knowledge is being transferred (Emery, 2002:3; Szulanski, 1996).

Extensive research has also broken the above factors into more basic elements (Szulanski, et. al, 2002; Szulanski, 1996; Teece, 1977), Emery (2002) aligned the basic elements to properties. Table 6 Factors and elements inhibiting effective and efficient knowledge transfer Properties of knowledge being transferred

Characteristics of knowledge source

Characteristics of knowledge recipient

Context for knowledge transfer











Causal ambiguity (depth of knowledge) Provenness (conjecture on utility of knowledge)



Lack of motivation Not perceived as reliable

  

Lack of motivation Lack of absorptive capacity Lack of retentive capacity Intimacy with knowledge and Stickability*





Mechanisms (structure and systems) to support transfer Sources of coordination and experience with transfer practices Arduous relationships

* This basic element was added and expanded in Szulanski, et. al. (2002) Strategising to achieve the above outcomes requires a systems-level response. In fact it has been argued in the Knowledge Age knowledge organisations must organise to address these factors and elements. Knowledge at the organisational level can, therefore, provide the basis for determining systems, structures, roles, and processes. This approach is encapsulated in the knowledge-based view of the firm.

The Knowledge audit The starting point for most KM strategies is the knowledge audit. This is a stocktake of not only what knowledge is required, but also what exists. This will usually occur in the initial analysis stage or very early in the planning stage. As depicted below, knowledge audits can be conducted to determine a range of aspects. The key aim is to determine strengths and weaknesses of the existing knowledge assets and where gaps exist. This is depicted below in a model that depicts that in some cases the audit has to identify what we don’t know that we need to know! Audits therefore not only measure what exists but confirm what needs to exist to better leverage a KM strategy.

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Figure 27 Categorising enterprise knowledge in a Known-Unknown matrix (Frappaolo, 2004:2)

Conducting an knowledge audit It is said that we live in the ‘Knowledge Age’ and few would disagree with the proposition that we are bombarded with information on a daily basis. Knowledge Audits are therefore a key activity to ensuring that the knowledge gathering and management activities of the organisation are relevant and useful for the achievement of the organisation’s vision. A knowledge audit is defined as: A systematic examination and measurement of knowledge and the verification of infrastructural, human and social knowledge, its sources and the capital value of such resources as part of an organisation’s strategic purpose (Bowles, 2000:81) The key point to note here is that the aim of the audit is to find out how well the organisation is using knowledge to meet its objectives. The Knowledge Audit’s aim is to find out how big the gap is between what the organisation desires and what is actually happening. Knowledge audits examine:       

The knowledge the organisation already holds – including on paper, digital records, and the knowledge held by people within the organisation. Resources available for making knowledge accessible – e.g. libraries, internet access. How the company uses knowledge. The people involved in using knowledge. The tools used for manipulating knowledge – eg databases. Criteria used for cost/benefit analysis. What are the benefits of conducting an audit?

Knowledge audits can deliver both short term and long term benefits. The short-term benefits are:   

Draws attention to immediate threats to the business. Can provide cost savings from more rational management. Can make knowledge more readily available to those who need it.

Long term benefits include:   

A better understanding of the benefits that can be derived from knowledge management. Better communication between knowledge managers and operational areas. Development of better long term knowledge management strategies.


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

Better cost/benefit analysis of knowledge projects.

The Audit Process The key to the audit process is to understand that a Knowledge Audit is only useful when there is a clear understanding of what the overall company objectives are and how the management of knowledge relates to the achievement of these objectives. There is no point even beginning a Knowledge Audit until the answer to this question is clearly understood.

Step 1 Analyse knowledge implications of objectives



Step 10 Repeat the auditing cycle





Step 2

Step 9

Ensure support and resources from management

Monitor effects





Step 3

Step 8

Get support from the people in the organisation

Implement changes





Step 4

Step 7

Plan the audit

Present the results & recommend action





Step 5 Do the audit



Step 6 Interpret findings – ‘as is’ versus ‘to be’

Figure 28 The audit process (Adapted from Elisabeth Orna, 1999)

Step 1 Analyse knowledge implications of objectives     

Step one involves defining what it is that the organisation is seeking to do. Questions that need to be asked include: What is the organisation’s mission statement? What are the key business objectives? What knowledge needs to be sourced to achieve these aims? Ideally, how would people within the organisation be using knowledge?

The aim is to gain insights as to:  

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What knowledge to look for. Who to speak to.



  

What questions to ask. What technological support is needed. Where to start.

Step 2 Ensure support from management Successful completion of the audit necessitates senior management support. Without it the resources necessary to conduct the audit and the commitment to implement findings are unlikely to be present. Therefore senior management must give a clear commitment to the audit and to acting the findings. To attain this outcome the audit team must:        

Define the objectives of the audit – both short and long term. Define the benefits expected long term. Define the scope – e.g. companywide, one division, etc. Define the phases proposed. Define the benefits expected at each stage Define the timescale – start, duration and finish times. Define the deliverables – progress reports and final reports. Define the resources required

Top management must be clearly bought into the process and must be willing to provide:    

Support within the organisation. Access to key people and documents. Adequate time to complete the audit. Clear reporting lines to senior management.

Step 3 Get support from the people in the organisation The people within the organisation must be able to see the benefits in assisting in the completion of the audit. All employees and stakeholders must understand the purpose for which the audit is being conducted. To gain support you must:   

Determine what the benefits of the audit will be to the people within the organisation. Make a clearly defined request for specific support. Communicate this in a clear and understandable way.

Step 4 Planning the audit There are three questions that need to be answered:    

What to audit? Who should be involved? What method to use? What to audit?

The ideal is to begin with an area that is clearly defined and not too large to be daunting. It should be an area of strategic importance – that is, it should have clear links to the delivery of the company’s mission. It should also provide for the possibility of quick wins and involve people who are knowledge aware. Who should be involved? Who are the key people? Who should conduct the audit? The key people can be divided into: the information ‘guardians’ – those who have responsibility for the acquiring, updating or accessibility of information; and, the stakeholders – those who have a need for particular knowledge. The audit can be conducted by an internal staff member or an outside consultant. There are pros and cons in each approach including: level of objectivity; cost; confidentiality issues; and time concerns. Each situation will be different and should be treated on its merits. What method to use? A variety of methods can be used including:      

Analysis of documents and databases Observation Trial and error Structured interviews Informal meetings Questionnaires


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Step 5 Do the audit Make sure that all questionnaires have been pre-tested and that it is as easy as possible for people to participate in the audit and give unbiased responses. Step 6 Interpret the audit The key here is to determine the gaps. Comparison should be made between the ‘picture’ generated in Step 1 with the results of the actual audit generated in Step 5. Step 7 Present the results and recommend action See earlier two elements of our study. Step 8 to 10 Following up the audit        

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The action plan should include: Immediate changes needed to avoid threats Benefits in key areas A communication strategy for continuing the momentum from the audit A statement on the organisation’s knowledge policy A start on a knowledge strategy Criteria for monitoring and evaluating changes in key areas An assessment of the costs/benefits of various knowledge management initiatives



5. Generating Knowledge Capital Introduction Guthrie and Petty (2000:259) noted that the relationship between the study of overall Intellectual Capital (IC) in an organisation and knowledge management (KM) was often unclear. This chapter will seek to study how knowledge management extends to the construction of overall organisational Knowledge Capital. In this chapter we will consistently examine how organisations build total knowledge as the study of Knowledge Capital (KC) formation. In so doing we will also come to appreciate the constituent components that form KC. As we progress it will become clear from our review of research and experts the term KC is more commonly referred to as Intellectual Capital (IC). While Europeans tend to use IC, North Americans use both terms, key contributions elsewhere have often strongly support the abandonment of IC in favour of KC. Study in this chapter will therefore progress to cover all the dimensions to KC as outlined in the figure below. We will identify the key components of KC. We will then move on to disclose the relationship between KC and earlier work on capabilities. Having made the relationship between capabilities as a currency for describing and measuring the competences and other attributes individuals, teams, the organisation and others outside the organisation may hold we will posit a model on how to build pools of capital. The next logical step follows and we will examine how to manage structural, human and social capital. Structural capital is not covered in great depth in this text as it is covered extensively in training and educational related units or courses. Social capital will be covered when we examine the concept of pools of capital and capabilities. Human Capital, however, is very important to our study so it will have a chapter of its own. This is done to better appreciate the value of intangible knowledge assets as part of how we construct pools of capital and the importance of capabilities that stress intangible assets and go beyond position specific skills and knowledge (competencies). This study will naturally flow into our final chapter on how we can value knowledge assets as part of an organisation’s drive to build and manage KC.

Figure 29 Idealised set of component for a study of Knowledge Capital

Building an organisational Knowledge Capital framework IC and KC In this chapter evidence will be presented to establish how Knowledge Capital (KC) is composed by pools of knowledge that are composed by stocks of available capabilities. It will be shown that what we measure when determining KC and its components will revolve around knowledge assets and their capital value. Intellectual assets are a component of these knowledge assets. IC as presented by some authors only refers to intangible knowledge assets that hold value in relation to a ‘production function’ that contributes to organisational productivity and economic performance. Confusion is avoided by using KC where two attributes are present that give clear distinction to IC. Firstly, as we will see, KC is directly related to the Current Productive Capacity (economic performance) of the organisation across pools of knowledge assets (capital) in Structural (physical assets), Social (relationships), and Human (people). Secondly, KC also attributes value to the potential productive capacity of knowledge held by individual and the organisation that is not currently deployed for productive purposes. This relates to agility, absorptive capacity and other capabilities that may be deployed by the


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Generating Knowledge Capital

organisation to create or seize opportunities. As we will discover, this approach stresses how the capacity of the organisation as more than Current Productive Capacity or performance. It must include the ability to redeploy knowledge assets to meet future demands. KC is therefore central to current performance and also has value because it is an indicator of the organisation’s capacity to manage knowledge to seize future opportunities and create competitive advantage. You can make your own choice on this matter to use IC interchangeably with KC. But this should only occur where the authors are precious about IC being composed by more than just intangible knowledge assets tied to current performance outcomes (Keenan & Aggestam, 2001; Rastogi, 2002; D’Egidion & Caredda, 2002:116; Skaikh, 2004).

The value of knowledge Knowledge has value. Knowledge held by individuals or by the organisation has a capital value that can be managed, evaluated and manipulated. Knowledge has been variously described as contributing to ‘pools’ of capital value. There are many forms of capital. Financial capital deals with qualification of value of assets. Physical capital covers various resources which may be described as natural and environmental which have not been adequately valued but are on the agenda. Human capital is used to describe the knowledge owned and acquired by individuals for use to earn and produce, and cultural capital is the knowledge used by individuals in the course of daily life . . . social capital is different completely because it deals with the social links which create society and cannot therefore be owned or depleted by one. (Cox & Lewis, 1998:2–3) Knowledge also has a value that is not determined by its possession. The value is determined by the processes that impact the acquisition, transfer and expansion of the knowledge required by an organisation. This is both a knowledge management and a learning process that can promote an organisation’s agility and responsiveness to new and emerging customer demands. In other words, knowledge also has a social value. It is valued by colleagues as a possession — something that gives the 'owner' some respect and authority. It is valued by the organisation, however, for its strategic capacity to enhance productivity in the dollar value sense. Edvinsson and Malone (1997:44–45) studied intellectual capital as a means of building successful organisations. From experiences at Skandia they determined that: Intellectual Capital is the possession of the knowledge, applied experience, organisational technology, customer relationships and professional skills that provide Skandia with a competitive edge in the market. They devised a formula:

Human Capital + Structural Capital = Intellectual Capital

This formula reinforces human capital as the knowledge ‘owned’ by an individual and harnessed by a company to achieve strategic ends. It was tacit. It was structural capital that the authors viewed as explicit to the company. Besides the traditional financial capital they confirmed that management of structural and human capital requires a strategy to build intellectual capital. Structural capital refers to the knowledge possessed by the company or having only contextual value in the organisation (Edvinsson & Malone, 1997:46). Market value of an organisation and its success is tied to the management of more than just people and the management of knowledge and intellectual properties. It requires management of relationships, values and the technology within the workplace. This formula varied from an earlier version advanced by Edvinsson when working with Sullivan (1996). This formula had the additional dimension of relational capital. Relational capital was viewed as knowledge embedded in the relationships established with the outside environment. This included suppliers, customers, communities and so on. Into the equation of intellectual capital subsequent authors replaced relational capital with customer capital (Stewart, 1997:142–144). Leveraging human capital assets to improve customer capital (relationships; networks; value chains; sales, supply and service alliances; and customer loyalty) requires an understanding of how to specialise knowledge to maximise specific sets of capital. Stewart (1997:100–101) emphasised the need to manage all three dimensions of intellectual capital, or the so-called soft and hard knowledge — or tacit and explicit knowledge— to achieve specialisation. Human, structural, and customer capital work together. It’s not enough to invest in people, systems, and customers separately. They can support one another; they can detract from one another. (Stewart, 1997:165)

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Stewart reinforces the importance of knowing not only how the types of knowledge impact intellectual capital but also how different types of capital assets can then be managed to support each other. Table 7 Intellectual capital and mutually reinforcing roles Source

Reinforce each other by . . .

Human capital and structural capital

Shared sense of purpose Entrepreneurial spirit Managers’ value on agility

Human capital and customer capital

Individual feeling responsible for their part in the enterprise Direct contact with customers Clear sense of customer expectations Knowledge of internal customer relationships

Customer capital and structural capital

Customers and company learning from each other Ease of doing business so that formal processes become ‘second nature’ Customer loyalty

(Stewart, 1997:165) Annie Brooking in her book Corporate Memory: Strategies for Knowledge Management (1999:16) defines intellectual capital as having four main categories: 1.

Market assets;

2.

Intellectual property assets;

3.

Human-centred assets; and

4.

Infrastructural assets.

Market assets include brands, positioning, customer base, company name, responsiveness to customers, distribution channels, collaborative structures, franchise agreements, licensing arrangements, contracts and the like (Brooking, 1999:17). Intellectual property assets are knowledge able to be protected by law; this includes patents, copyright, design rights, trade secrets, trademarks and the like (Brooking, 1999:19). Human-centred assets comprise the ‘collective expertise, creative and problem-solving capability, leadership, entrepreneurial and managerial skills embodied by the employees of the organisation’ (Brooking, 1999:21). Infrastructural assets include the broad category of assets that contribute to how an organisation conducts business, such as processes, financial relationships, communication systems, information systems, philosophies and financial structures (Brooking, 1999:20). Brooking’s categories encompass very broad areas of knowledge. However, she goes on to determine that competent employees encompass more than the knowledge required to perform work. They require experience and the capabilities that enable proficiency. As such, knowledge management requires corporations to enhance not only competencies but also factors promoting proficiency. The Brooking formula states:

Organisational Capability = Competence + Proficiency (1999:46). Organisational capability also requires transfer of knowledge between individuals. Codification of knowledge is therefore viewed as essential to the construction of infrastructural assets (processes, management systems, etc.) and generation of intellectual capital. Managing knowledge as a corporate asset relies upon managers considering the tacit or explicit dimensions of knowledge (Brooking, 1999:51–52). Brooking elaborates, suggesting two critical rules for knowledge management: ‘making knowledge explicit generates infrastructural assets’ (Brooking, 1999:53) and ‘strive to make critical knowledge explicit’ (Brooking, 1999:60). Basically, Brooking argues that tacit and explicit knowledge in an organisation requires different management strategies and these directly impact both how intellectual capital is generated and the asset value of this knowledge to a corporation. In The Knowledge Evolution: Expanding Organisational Intelligence, Verna Allee differentiates knowledge, wisdom, data, information and meaning (1997:67–68). However, she also examines who controls, builds and maximises the value of knowledge assets within an organisation. She supports arguments that not all knowledge


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required by the organisation can be owned by the organisation. While intellectual and codified knowledge (brand names, patents, copyrights, products, formulas, images, processes, etc.) can be ‘owned’ by an organisation (Allee, 1997:33–34), Allee identifies that the largest body of knowledge assets often exist in ‘collective knowledge’. This latter includes knowledge that may not be owned by the organisation, including working solutions, webs of relationships, communities of practice, expertise and theoretical knowledge and databases (Allee, 1997:35). In her study of knowledge and learning, Allee stresses the importance of understanding how tacit and explicit knowledge require different approaches to learning. Equally some forms of learning require that knowledge be converted or codified to enhance learning and performance. For instance, converting tacit procedural knowledge into explicit shared knowledge can occur by codifying knowledge in documents, formulas, procedural manuals and so on (Allee, 1997:69). This is seen as a ‘relatively straightforward’ exercise that can often help focus learning and transformation of individual performance to agreed organisational outcomes. In defining organisational intelligence Karl Erik Sveiby (1997) defines two main types of knowledge: focal knowledge — ‘the knowledge about the object or phenomenon that is the focus’ — and tacit knowledge — ‘knowledge that is used as a tool to handle what is being focused on’ (1997:30). If knowledge is a combination of both types, all action requires both aspects of knowledge. Building on Polanyi’s work, Sveiby states: ‘Human knowledge is tacit, it is action-oriented, it is based on rules, it is individual, and it is constantly changing’ (1997:35). Defining knowledge as the ‘capacity to act’, Sveiby uses competence to differentiate tacit knowledge held by the individual from knowledge that is applied in a business context. Individual competence is defined as five mutually dependent elements (Sveiby, 1997:35): Explicit knowledge

The formal information acquired, or facts

Skill

‘Know how’ to achieve proficiency in physical or mental practices

Experience

Acquired by (having done something previously and) reflecting on past mistakes and successes

Value judgments

Perceptions of what the individual believes to be right

Social network

Individual’s relationships with other human beings in an environment and a culture that is transferred through tradition

While the early writers on the subject have strongly influenced works of authors right up to the present (see sources used in major compilation works such as Bontis, 2002; Dieng-Kuntz & Matta, 2002), it is worth noting that Jac Fitz-ens, in his work on human capital, identified that other ‘organisational knowledge artefacts’ include process and culture, relationships, and intellectual property (2000:11). All the authors who provide the foundations for the conceptualisation of intellectual capital and knowledge management note that the creation, transfer and utilisation of knowledge are all implicitly affected by the organisation’s capacity to learn (Choo & Bontis, 2002:16-17). It is important to note that learning is affected by the type of knowledge. Learning is also a major force enabling the flow of knowledge across and outside an organisation. This will be explored in later Part B, chapters. Table 8 indicates how tacit and explicit knowledge can be aligned against a range of definitions used by various authors. However, to construct a comparable table using migratory and embedded knowledge as the basis for cross-alignment would be at best arbitrary and almost certainly unreliable. Table 8 Comparison of knowledge typologies with authors IC/KC frameworks COMPARATIVE FRAMEWORKS BY AUTHOR Nonaka & Takeuchi (1995) Explicit

Tacit

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Edvinsson & Sullivan (1996)

Allee (1997)

Sveiby (1997)

Brooking (1999)

Fitz-ens (2000)

Structural capital

Intellectual and codified knowledge

(Focal) Structural Capital

Market assets Infrastructural assets

Human capital Intellectual property

Human capital

Collective knowledge

(Tacit) Relational Capital

Human-centred assets

Relationships



Either

Relational capital

Human Capital

Intellectual assets

Processes and Culture

(Bowles, 1999:41) Comparison of the above approaches can be extended further. Below we have established a matrix that classifies different dimensions to the study of IC or KC. The two key axis represent the level at which the author or researcher wish to study knowledge (individual, group or process, organisational or cross-organisation levels); and the perspective on value created by knowledge. For instance the main focus on an organisational knowledge level and valuing knowledge based on tangible current performance in a marketplace could be used to classify particular approaches to IC and KC (e.g. Fitz-ens, 2000; Daum, 2002; Hand & Baruch, 2003). Approaches focussing on organisational knowledge level from a future value perspective may classify different authors (e.g. Bowles, 1999; Skaikh, 2004). Many of the early authors would fall into the lower two quadrants dealing with how individuals contribute to team and organisational knowledge, predominantly tied to current position performance and market value (e.g. Brooking, 1999), with a few extending their models to cover future performance potential (e.g. Sveiby, 1997).

Figure 30 Dimensions that differentiate KC and IC approaches The nature of the value is not locked into one of the quadrants established in the diagram above. In fact, value may reside in moving knowledge across levels. The relationship between knowledge and whether value is tied to position performance is at the heart of earlier study on the structure and type of knowledge (See Chapter 2). Migratory knowledge has a less than tangible relationship to explicit knowledge. Certainly the more explicit the knowledge, the more the factors influencing the migration of that knowledge can be determined (accessibility of the packaged/codified knowledge, compatible capabilities, incentives, barriers). But tacit knowledge is far more dependent on the individual. It is given meaning by interaction with others in a social context. Tacit knowledge when built into the relationship between individuals and their work or social context can become embedded into a context that is difficult to replicate. Tacit knowledge where it is held by individuals in ‘pools’ of human capital cannot be owned by an organisation. One would therefore argue that generally tacit knowledge is likely to be more migratory than explicit knowledge. This, however, is the crux of the problem. Explicit and tacit knowledge may be either migratory or embedded. Making knowledge explicit can embed the knowledge into the processes and systems owned by the organisation and completed by individuals. However, this action also increases the factors influencing how knowledge can become migratory. Codified knowledge is easier to manage and convert within the organisation. It is also easier to absorb, transfer and generate outside that organisation into another organisation or context. Uncodified or tacit knowledge may be hard to transfer and can be embedded within a specific context. Take the individual out of the context and the knowledge can diminish in value, meaning or relevance.


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Table 9 Comparison of tacit, explicit, embedded and migratory knowledge

Tacit Knowledge

Explicit Knowledge

Embedded Tacit Knowledge

Embedded Knowledge

Embedded Explicit Knowledge

Non-transferable individual knowledge that impacts how people think, the way they do things and the way they interact.

Rules and beliefs that govern conduct and interaction within the workplace.

Examples

   

    

Shared commitment Mentoring relationships Shared purpose Alliances with suppliers (franchises) Sense of well-being

Examples

  

Migratory Tacit Knowledge The knowledge individuals hold but can take beyond the organisation. Examples

Migratory Knowledge

      

Professional skills Craftsmanship Social network Experience Working relationship with bodies/people external to the firm Individual commitment Individual customer/service relationships

Owned by the individual

Codes of conduct Value statements Participative planning processes Manual on how to build empowered teams Image Shared visions Service ethic Migratory Explicit Knowledge

The knowledge owned by the organisation; usually the codification of tacit knowledge into explicit forms. Examples         

Procedural manuals/templates Training courses/manuals Process flow charts Design specifications Technology Service strategies Systems architecture Strategic plans Market research

Owned by the organisation

(See Nonaka & Takeuchi, 1995:62–70) Tacit knowledge and embedded knowledge are closely related. How explicit knowledge is embedded may vary greatly. By definition and comparative analysis in the previous tables, the two seem to be mutually exclusive. The factors that make knowledge explicit also make it more vulnerable to migration. Embedding explicit knowledge is therefore conceptually very difficult to grasp. Migratory tacit knowledge is also difficult to achieve, albeit not impossible. Tacit knowledge could be held in groups or individuals who leave or are removed from an organisation and who can take advantage of their knowledge; for instance, traditional craftsmanship skills or relationships between individuals and groups that cease to be utilised by a company for various reasons (the company removes large components of its workforce, markets no longer exist for specific activities, or a company simply closes due to other factors). The pool of knowledge, however, still exists and can migrate to another user, assuming that the knowledge can be utilised. Migration of knowledge can occur directly or indirectly. One example could be workers in a unit of production who have been made redundant; they set themselves up as a spin-off company, keeping the shared knowledge that has evolved of corporate and production processes, working structures, common language, as well as skills and culture, even their hierarchy. Imagine, as another example, that a company specialising in manufacturing high-quality traditional wooden furniture goes bankrupt. The workforce is made redundant and the workers all live in one geographic region. The tacit knowledge held by this redundant workforce may migrate to another furniture manufacturing company that recruits the workforce because it wishes to expand its market presence into the ‘high-quality’ furniture marketplace. The new company can recruit the workforce into similar operations. The new company will ‘graft’ knowledge held by the individuals onto its existing capabilities or what Annie Brooking calls ‘infrastructural, market and intellectual property assets’ and Edvinsson and Malone list as ‘financial and structural capital assets’ (1997). The explicit knowledge that these individuals already possess is secured along with the tacit knowledge they have in terms of their craft, their working relationships and the relationships they have with their region or

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operational setting, such as suppliers and customers. The incentive to access this knowledge and the compatible capabilities required to utilise this knowledge can be evidenced in the value that the knowledge adds to the existing financial, market, strategic and cultural focus of the company recruiting these individuals. Alternatively a company may wish to specifically recruit the workforce for its tacit knowledge. The new company may not be in the furniture business. As an extreme example, imagine that the recruiting company manufactures handmade, high-quality boots. The advantages of recruiting furniture joiners and carpenters may not centre on explicit knowledge. It may be that the members of the former workforce and their extended social networks are committed to making a business work in the region. The workforce may represent individuals with a personal commitment to quality products, who possess knowledge of regional players able to assist the export of highquality merchandise and perhaps be attuned to a culture where craftspeople work alone within a highly effective communication network. Recruiting from a pool of labour with pre-existing tacit knowledge, but no explicit skills, may accelerate ‘start-up’ time for this new company and add knowledge assets that would be difficult to create or absorb. Yet another example may be more familiar. The absence of tacit knowledge may impact on a company’s performance. Call centres are increasingly centralising customer service functions across large geographic regions. In many cases, tacit knowledge is not adequately addressed. For instance recruiting people in the geographic region where the call centre is located can break down service relationships with customers from other regions. All the best service skills and knowledge required to provide even the most routinised service by the service assistant does not represent all the knowledge required to build a sustainable service relationship with a customer or customer base (Frenkel & Donoghue, 1996:12 & 15). For instance a caller from a specific region, with a pre-existing frame of reference, may deal with a service assistant with no empathy for or understanding of that frame of reference. The assistant may have no basis for shared meaning or social experiences that can align the communication occurring over the phone line. The service provider lacks not only the face-to-face context but also a basis for constructing shared experiences and an ‘identity’ with each customer (Bowles, 1997; Frenkel & Donoghue, 1996:26). The service provider can be taken out of the geographic region but the tacit knowledge that assists in building and sustaining a service relationship between individuals who share at least some sense of history, experience and context provided by their societal interactions may be lost.

Social capital The importance and functions of tacit knowledge can be reinforced by a deeper analysis of social capital. Social capital is the ‘social dimension to human activity and relationships that enables knowledge creation, transfer and generation processes’ (Bowles, 1999:44). In fact it is social capital that is required to multiply the effect of people working and interacting together. All relationships are enhanced by the quality of their interrelationships — trust, networks and shared values. That is what social capital is — the shared values, networks and trust that enhance the productivity of people’s interactivity. Social capital is the product of strategic learning, if that learning is for a shared and worthwhile purpose. Real lessons can be learnt from an analysis of social capital. In this chapter the study of social capital is not intended to cover the theoretical or empirical arguments surrounding social capital (Portes, 1998). Nor is this chapter intended to expand on selections of current thinking to provide a definitive statement on the value of social capital within an organisation (see Woolcock, 1998:193–196 for an extensive list of sources). This chapter simply seeks to illustrate the importance of maximum individual knowledge assets by drawing on resources that extend beyond the boundaries of an organisation, into wider societal sources. Social capital is the focus of many authors and managers because it deals with the management and quality of social relationships as both an asset and a critical factor effecting positive group, regional, community, social and organisational outcomes (Woolcock, 1998:170). Social capital has variously been defined. From a network perspective: The aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition. (Bourdieu, 1985:248) From a structural–functional perspective: A variety of entities with two elements in common: They all consist of some aspect of social structures, and they facilitate certain action of actors — whether persons or corporate actors – within structures. (Coleman, 1990:302) Robert Putnam, defining social capital, states that it:


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. . . refers to features of social organization, such as trust, norms, and networks, that can improve the efficiency of society by facilitating coordination of actions. (Putnam, 1992:167) Some core features of social capital are that it:       

‘Inheres in the structure of their [individual] relationships’ (Portes, 1998:7); Is mobile and cannot be embedded in structures or processes; Cannot be physically banked (Portes, 1998:7) or placed on a balance sheet; Is not easy to gauge by studying types of relationships because it is context specific (i.e. weak relationships may provide the information and links necessary to achieve a profound outcome where strong relationships may not have generated the same outcome); Resides in humans and in their ‘accumulated mutual obligations’ and the societal need for reciprocity (acquittal of obligations) (Portes, 1998:7); Is built as acts of reciprocity and relationships that promote group trust, norms and collective ‘rituals’ that govern behaviour and facilitate further interaction (Falk & Kilpatrick, 1999); and Is both the means that reside as individual property and the ends achieved through networks and relationships.

Some claim that social capital can generate negative influences (Portes & Landolt, 1996; Portes, 1998:13) such as:    

Exclusion of others not sharing purpose or mutual obligations (for instance, cliques and rhetorical communities); Competing claims for group membership and group direction; Restrictions on individual action through collective demands for converging behaviours rather than individual divergence; and Downward levelling norms (e.g. group think; bounded innovation and problem solving).

However, others claim that if the effects of interaction are negative, the interactions do not generate social capital (e.g. Falk & Kilpatrick, 1999; Falk, 1999). This is one of the debates in this field. Michael Woolcock (1998:164) distinguishes between two forms of social capital: Embedded — The integrative elements that assist structure relationships such as capacity, networks, credibility and procedures; and Autonomy — The linkages at a micro level that may refer to intra-community ties or, at a macro level, the state–society relationships. Networks across homogeneous cultures may encompass individual reason and social ties that dictate how individuals interact. Social capital picks up on earlier works that emphasise both relationships and customers as holding capital value. The value lay in the networks of interaction and the ability to hold a relationship with an individual. Bowles (Bowles, 1999; Bowles & Baker, 1998), reporting on the implementation of integrated learning and performance systems established in Woolworths Australia from 1994 to 1998, actually reported a three-tier approach to encompass the creation and management of knowledge capital within an organisation. The types or dimensions of knowledge assets include infrastructural, human and social capital.

Figure 31 Types of knowledge capital (© Bowles 1997 Bowles, 1999:24) Unlike some proponents of intellectual capital, Bowles (see figure above) suggests that social capital is an additional knowledge capital resource, not a subset of structural, or other categorisations such as customer,

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relational or human, capital (Edvinsson & Malone, 1997:52; Stewart, 1997). Writing on social capital, Woolcock (1998:179) warns: Forging and sustaining social relationships connecting top-down resources and bottom-up capacity building is not easily achieved. The warning generates fear in those wishing to add social capital to existing knowledge management equations that have social aspects tied to performance and its ‘asset value’ determined through attainment of set customer and market outcomes. The approach posited by Bowles sees human capital focusing on skills and knowledge associated with operational outcomes — the explicit knowledge. Social capital represents the stocks of tacit knowledge resident within individuals, networks of interaction, relationships and cultural attributes of people, the organisation and society (Bowles, 1999:23). The framework acknowledges that the stocks and flow of knowledge within an organisation may extend well beyond the boundaries of the organisation. Firstly, however, managers must acknowledge that the outcome of social capital is inconsequential in terms of its asset value. The ‘capital value’ resides in the potential to utilise social interactions or the capacity to source knowledge utilising social capital (Woolcock, 1998:157, 185; Portes, 1998:6). Secondly, different types of social relationships are directly related to the forms of interaction that add to the tacit knowledge held by individuals within the organisation. Social capital provides a mental construct that warns us, at the very least, to be aware that management of these individual relationships must occur beyond the organisation’s parameters if certain sources of knowledge assets that can affect outcomes of an organisation are to be managed. Thirdly, there is no predictive model that can sort social capital into means–ends, negative–positive and cost– benefit dimensions of organisational management. Social capital does, however, exist and is a positive factor that can be harnessed in the generation of knowledge capital. So, social capital reinforces the fear of the power of knowledge — that knowledge can reside not only in individuals but also in networks and relationships between individuals that cannot be owned by an organisation, and may well exist outside the organisation’s domain of operation and influence. The study of tacit and explicit knowledge, whether this knowledge is embedded or migratory, must also span interactions within and outside the organisation. The development of knowledge assets is about managing knowledge that is tacit or explicit, migratory or embedded; that is, knowledge found not just in pools of knowledge capital resources owned by the organisation, but in: 1.

Networks that orchestrate individual interaction, inside and outside the organisation (micro level — individual to group);

2.

Groups or communities within the organisations that have connections to other organisations and the wider society (meta level — group to organisation); and

3.

Policies and rules that govern company interaction with governments and society in general (macro level — organisational to ‘civil’ society) (Putnam, 1996:34–35; Putnam, 1992:165–69; Woolcock, 1998:186).

The very reason tacit or explicit knowledge is embedded or migratory may in fact be due to who ‘owns’ that knowledge, and where that knowledge is sourced. Harnessing existing social networks and relationships may accelerate communication between individuals and enhance organisational responsiveness, but can these relationships be sustained, and oriented towards sustainable strategic outcomes, and are they unique so that a competitor cannot replicate them with their existing capabilities? Capital value of managing knowledge as an asset is not complete if the aim is only to embed explicit knowledge. Maximisation of knowledge as an asset requires recognition that it is a volatile mix of explicit, tacit, embedded and migratory dimensions. Each varies with the specific context. Management based on the achievement of set actions or strategic outcomes may well deny the competitive advantage inherent in how individuals source knowledge. Ignoring the individual and social dimensions that promote tacit knowledge assets may restrict the sorts of knowledge an organisation requires, if it is to be responsive, agile and able to generate the capabilities necessary to meet potential market demands.

Pools of Knowledge Capital Knowledge Capital and capabilities In earlier chapters we introduced the concept of capabilities and their existence at cross-organisational, organisational, group and individual level. Tovstiga and Birchall sought to use key capabilities in a methodology that could also encompass:


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. . . the knowledge internalization trajectory that describes (1) the sourcing; (2) the internalization of new knowledge streams and, ultimately, (3) the reconfiguration of existing knowledge in the form of maximum impact. (Tovstiga & Birchall, 2002:105) By examining capabilities writers such as Quelin (1997) and later, Tovstiga and Birchall (2002), could classify different forms of capabilities within an organisation. Quelin separated out capabilities that were specialised (individual or task related), functional (specific to areas of operation), cross-functional, and organisational (1997:146). Tovstiga and Birchall organised knowledge into capabilities classified as relating to processes (e.g. quality systems), markets (delivering product and services) and functions (skills and technologies to perform) (2002:109). This classification enables the authors to then examine how different types of knowledge could be targeted to individuals, jobs and areas of activity. Bowles suggests that: Capabilities are the special elements in the pool of potential capacity held by individuals interacting in teams, organisations and community groups. These specified capabilities do not represent actual performance, but rather the potential capacity to perform (2003:209). This suggests capabilities represent not only current capability to do things, but also hold value because they have future potential. The differentiation of levels or classes of capability is devised to improve flexibility, resource allocation and the effective deployment of learning interventions.

Figure 32 Distinguishing knowledge within an organisation (Bowles, 2003: 208) As the figure above depicts earlier discussion on how knowledge may vary in both its type (tacit and explicit) and how it flows within an organisation. Concentrating only on building explicit skills and knowledge in an individual may not deliver the capabilities required by other levels within the organisation. Nor will concentration on only one area of knowledge generate the overall stock of knowledge capital required to perform and satisfy customers in a competitive manner. The capability-based approach supports other literature that views skills and knowledge related to task performance as one aspect to overall organisational performance. Having the skills to perform may be accounted as a human capital knowledge asset, but it does not guarantee successful deployment of these skills. As has been investigated when we examined competency approach to building skills and knowledge, competence/competency has been advanced as offering an effective means to define and measure individual and collective capacity to perform (Spencer & Spencer, 1993:105; Fitz-ens, 2000:15; Lapierre & MacKay, 2002:308). However, accounting for the other factors that contribute to performance is essential when organisations attempt to account for the overall ‘bottom-line’ value of knowledge. The bottom-line metrics for human capital and any mix of the constituent components such as learning, performance and knowledge have to encompass all the aspects that can contribute to potential performance capacity. Capabilities are the special elements in the pool of potential capacity held by individuals interacting in teams, organisations and community groups. These specified capabilities do not represent actual performance, but rather the potential capacity to perform. The context of application and the interaction generating performance determine which capabilities the individual is able to apply to that situation. The definition of capabilities, therefore, needs to extend beyond the traditional knowledge and skills required to predict performance and also encompass the human factors that shape performance capacity in a known current, and unknown future, context.

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Creating pools of capability to build knowledge capital Let us now look at those capital bases a little more closely. One way they can be represented, as suggested earlier, is three components; structural, human and social capital. Generating knowledge assets that form Knowledge Capital required to maximise productive capacity.

Figure 33 Knowledge Capital, Capabilities and Productive Capacity © Bowles, 1999, with permission

As depicted in figure above, capacity is the ability of an organisation to access knowledge assets that deliver the capabilities required to meet both current performance and future market demands. Knowledge targets not just capability enhancement but the sourcing and construction of knowledge assets within all three pools of knowledge capital resources.

Structural capital While we have not dealt with it in any great depth structural capital relates to the knowledge that exists in the organisations’ systems, processes and culture (Bowles, 1999:66). Bontis has been a very strong advocate for structural capital centring on the mechanisms and structures of the organisation that support the optimum deployment of knowledge resident in humans for the productive benefit of the organisation (Bontis, 1998:66; Bontis, 2002:631). This ties closely with Human Capital (HC) focussing on individual level knowledge (formed from position specific capabilities) and structural capital the means deployed by the organisation to harness HC (Winter, 1987; Bowman & Ambriosini, 2001; Bontis, 2002:632).


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Table 10 Comparing structural capital with other pools of knowledge across different levels

Structural capital

Individual knowledge for individual task performance

Group knowledge and adaptive improvement

Organisational knowledge for competitiveness and futures



Value placed on physical assets that deliver product and service:





Machinery, technology & land the province of owners & management

Links made with processes and people delivering product and service providers:

Links made with product and service providers and structures that realise improved value for:



Standardised processes



Customer goodwill



Tools & systems that removal variations



Intellectual property



Processes



Removal of non-conforming systems and practices



Systems





Philosophy

Philosophy and approach





Partnerships

Environmental responsibility discussed not fully accepted (eg, greenhouse emissions, Environmental Impact Studies etc);



Physical capital



Environmental ecology



Workforce health



Human capital

Social capital

Offices designed to reflect job roles



Economic rational value of individual linked to work outcomes



Contribution of individual respected and acknowledged

Reintegration of HRD, training, work and wellbeing to enhance:



Training for tasks



Training for jobs



Competencies



Training occurs off-thejob



Training increasingly onthe-job



Experience



Commitment



Hierarchical management structure



Flatter management structure



Craftsmanship







Service ethic

Work practices more Taylorist, production line

Team work



Work practices move to more team-based



Craft and skills are respected





Innate value of a 'skilled' workers

Peer and mentor systems to exchange knowledge within the organisation

Construction of partnerships and learning communities able to advance:



Talk OK if about work



Culture



Task efficiency





Networks



Crafts hold responsibility for training

Talk outside work frowned upon



Well-being



Community support



Political stability

(Bowles, 1997:141)

From the preceding table, it can be seen how the three basic approaches to learning and the organisations adopting these approaches differs from each other. Along the left hand axis is listed the three types of capital infrastructural, human and social. Readers are reminded that these pools of capital form the basis on which strategic Learning draws to enhance agility and productivity. That is, the three forms of capital are inputs, and flexibility and productivity are outputs:

Valuing forms of knowledge assets Value is a relative term. Value may be posited as involving the concepts of:     

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A fair return or equivalent in goods, services, or money for something exchanged The monetary worth of something: marketable price Relative worth, utility, or importance A numerical quantity that is assigned or is determined by calculation or measurement Something (as a principle or quality) intrinsically valuable or desirable (Ariely, 2003:3)



Sullivan suggested economist views value as the ‘sum of benefits (or income) stretching into the future, summed and discounted to a net present value in dollars’ (2000: xxii). Value is therefore determined by its market. Knowledge Capital has value because it can contribute to current performance and the potential for future contribution. To stakeholders in the production process and shareholders that may be investing in the organisation both dimensions hold a relative value. This relative value is only realized through proof of productivity and on-going strategic ability of the organisation to for instance, learn, innovate, and to seize or create new opportunities. The value of knowledge, where ever it resides in the organisation or its relationships, its structure or form is realised in terms of value only in the context of what the organisation’s ability to deploy KC (Sullivan, 2000:247). There are two fundamental forms of knowledge asset we will study; intellectual assets and intangible assets. As depicted below (Bowles, 2003:12) these assets can be framed to hold knowledge capital value in direct relation to the available pools of knowledge capital that form overall KC.

Figure 34 Relationship of knowledge assets to pools that form overall knowledge capital (Bowles, 2003:12)

Valuing Intellectual assets Intellectual assets are the ‘know how’ and the associated knowledge artefacts, solutions and methodologies that are developed by a company to perform, improve responsiveness, become more competent or innovate (Huang, 1998). In this sense intellectual assets are capital assets residing in the structural capital pool of assets. Thomas Davenport and Kevin Desouza (2003:2) noted that intellectual assets can be categorised into two main types: 

Product assets are the specific outputs or work products of knowledge work. When someone writes a legal brief, codes a software program or drafts a product design specification, she is creating a product asset. Product assets must generally be modified or adapted to some degree in reuse, because the objective of two work products is seldom identical. When a programmer borrows a software module from a code library and modifies it for a new purpose, he is reusing a product asset.



Process assets in an organization can be defined as the codified knowledge of how to perform a task. One form of process assets are "rule-based" assets "where following procedures yields the one correct answer to a specific problem."3 These rules can be automated, as in spell-checkers or software-producing circuitry design, or embodied in worker routines and guidelines.

Valuing intellectual assets largely revolves around how these assets contribute to commercial success of the organisation. This brings into play the importance of organisations being able to manage and value intellectual property (IP). As organisations move to compete on what they know, not just what they can do the value of strategic assets lies in intellectual knowledge capital not physical plant and other tangible assets. Intellectual property is where intangible assets – copyrights, patents, trademarks, etc – are managed and leveraged as a valuable asset.

Valuing knowledge as an intangible asset Approaches for measuring and therefore valuing intangible knowledge assets falls into at least four categories of measurement approaches (Sveiby, 2004). 

Direct Intellectual Capital methods (DIC). Estimate the $-value of intangible assets by identifying its various components. Once these components are identified, they can be directly evaluated, either individually or as an aggregated coefficient.


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

Market Capitalization Methods (MCM). Calculate the difference between a company's market capitalization and its stockholders' equity as the value of its intellectual capital or intangible assets.



Return on Assets methods (ROA). Average pre-tax earnings of a company for a period of time are divided by the average tangible assets of the company. The result is a company ROA that is then compared with its industry average. The difference is multiplied by the company's average tangible assets to calculate an average annual earnings from the Intangibles. Dividing the above-average earnings by the company's average cost of capital or an interest rate, one can derive an estimate of the value of its intangible assets or intellectual capital.



Scorecard Methods (SC). The various components of intangible assets or intellectual capital are identified and indicators and indices are generated and reported in scorecards or as graphs. SC methods are similar to DIS methods, expect that no estimate is made of the $-value of the Intangible assets. A composite index may or may not be produced.

The challenge facing knowledge managers is the fact that traditional accounting and economic measurement systems focus on tangible assets such as the cost of labour, plant, and materials, not intangibles like knowledge. Since the 1990s significant effort has been made to find ways to not only value intangible assets, but also specifically knowledge capital. Progress was initially promoted through work of companies such as Sweden's Skandia Insurance Company which publishes supplemental financial reports on its intangible assets. As such intangible assets make it into financial reports. It accounts for its intellectual capital by documenting assets not recognized by generally accepted accounting practices. This is accomplished by issuing a supplementary report unconnected with the official financial statement. The supplement includes a valuation of its technology, IT networks, procedures and manuals, trademarks, patents and customer lists, and employee competence (Strassmann, 1999). As reported by Paul Strassmann this approach had limitations. Unfortunately, the attempts to assign a valuation to software assets, trademarks, experience and employee know-how have run so far into the difficult problem of pricing such assets. It is now widely understood that the costs of acquiring knowledge and the profit-generation potentials of such knowledge are unrelated. The value of intellectual property is in its use, not in its costs. This means that they are only worth what a customer is willing to pay for. Two movies made with the identical actors, for the same $50 million budget, will have totally different valuations depending on whether the audiences like one but not the other. The same applies to software, new ventures, inventions and employee training. This is why numerous attempts that have been made to report the intellectual properties of a firm on its balance sheet have faltered. Knowledge assets become reflected in the financial accounts only after there is a merger or acquisition at substantial premiums over book value. (Strassmann, 1999)

Measuring KC The following table provides an overview of comparative features of the pools of KC and different aspects. The different aspects include scope (core focus of each pool); model (procedural dimension), measures (indicators and examples of how to measure this form of capital), and outcomes (deliverables that form value). Table 11 Comparative features and aspects to knowledge capital

Scope Model

Structural Systems, processes and IP Linear Financial  Total turnover  Speed of claims

Measures

Market  Customer satisfaction  Market position  Brand penetration Technology  IT expenses per employee  IT staff as percentage of overall staff

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Knowledge Capital Pools Human People Linear-Interactive

Relationships Relationships Interactive

Employee satisfaction Qualification levels of staff Total turnover percentage per person/ per salary Staff turnover Replacement costs Demographics (i.e. average age of employees) Talent and succession pools (especially leadership) Training days per person Spend on learning as percentage of overall turnover Competency gaps

Employee satisfaction (relationships and confidence in management) External organisational image Internal organisational image Brand awareness, perception and value Customer satisfaction/ Revenue per customer Scale of business relationships (turnover, commitments) New customers Retained customers Numbers involved in



  

IT spend as percentage of overall turnover Content under management Access and use of content

Cultural climate

communities

Increased competency (skills and knowledge that is position/domain specific) Increased identity alignment (cultural, values, behaviours, values, visions, traits, etc.)

Synergies Supply chain effectiveness Trust Cohesive relationships Good citizenship Business relationships

Processes  Speed of activities  Error rates  Volume of activity Innovation  Translation of R&D into realisable assets  R&D spend as percentage of turnover Intellectual property  Number of patents  Percentage turnover of products  Investment in R&D

Outcomes

Improved:  Income  Profit  Efficiencies  Process speed

(Model constructed from Bowles, 1999:86 & 141; D’Egidion & Caredda, 2002:123-124; & Leitner, et. al, 2002:27981)


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6. Managing Human Capital Introduction . . . we are in the midst of the transition to an economy in which human and social capital are of far greater importance than physical capital. (Plender, 2003:1) This is the final chapter in the first part of our study on Knowledge Management and Human Resource Development. As such this chapter will bridge from the last chapter on how to build an organisation’s Knowledge Capital to examine in more detail how to manage one of its components, human capital. It will be contended that HC is an asset vested in the individual. As part of the wider construct of knowledge management we have already canvassed this knowledge asset will be shown to hold value because it deploys the capacity vested in an individual and creates value in the organisations productive function. As an asset HC reinforces why people hold value and why management and development of human resources (HR) is a value creating function, not a cost. The theoretical basis for advancing the best methods for implementing human capital management (HCM) are still emerging. However, this chapter will outline some fundamental principles and give an indication of the factors that are contributing to successful implementation approaches. We will also extend out discussion to establish how HCM is not just about HC and current performance but also about human capacity and nurturing future potential. It is at this point that we will have established the foundations for entry into the second part of our study.

Human Capital Management defined Why is it that the value of Microsoft was considered superior to GM + Ford + Boeing + Lockheed-Martin + Deere + Caterpillar + USX + Weyerhauser + Union Pacific + Kodak + Sears + Marriot + Safeway + Kellogg? (Lermussiaux, 2002:14, as reported in Business Week, 1999). It simply comes down to the value of their employees. This was reinforced by Bill Gates, Microsoft’s co-founder and executive chairman, when he noted that while their company was dependant on innovation and technology advancement to compete in the New Economy they were still tied to their employees such that if 300 people left Microsoft at any one time the company could fail (Gates, 2004). In the New Economy where many companies compete on what they know, not what they own, capital resources of the organisation have shifted to emphasise the value of employees.

Capital resources for organisations Traditionally the delineation of capital resources in organisations has been between tangible and intangible resources. Tangible resources are made up of financial, physical human and organisational resources. Intangible resources are identified reputation, technological resources and innovation. Tangible resources also revolve around items that could be ascribed an accounting value; (a) Raw materials, (b) Plant (machines, tools and auxiliary materials), and (c) human labour. Unlike the first two components, human labour was not a finite resource. It can be enhanced, developed and so improve its value. Intangible assets such as knowledge in organisations have always been an essential part of successful organisations. The development and access to knowledge and capabilities is now being identified as a critical asset that can contribute towards an organisation’s success or failure. Savage stated ‘The basis of wealth (in the ‘knowledge age’) is shifting from that which is ‘possessed as a commodity’ to the value of human capability’ (1996:121). Attempts therefore have been made to develop systems to quantify and support how organisations can enhance the capital value of people through improved knowledge acquisition, transfer and generation. The problem was HC reporting had not neatly fitted into the prevailing approaches to accounting. As we noted in our previous chapter on Knowledge Capital organisations have addressed this issue in a range of different ways. More immediately executives have sought to change how accountants accommodate human capital. (Parker et al., 1989:147) also believed that developments in this area had previously been truncated because ‘research in this subject has primarily developed since the 1960s based on the human resource school management’. While people were a factor of production and recognized as having ‘value’ they were not able to accommodate HC reporting or human asset reporting (Stittle, 2004:314). It has been suggested that the breakthrough came when human resources were considered an organisational asset rather than a ‘cost’ (Stittles, 2004: 323). As such they could be meaningfully accounted for as a ‘human capital asset’. An asset is:


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Managing Human Capital

. . . rights or other access to future economic benefits controlled by an entity as a result of past transactions or events (Accounting Standards Board, 1996, cited in Stittles, 2004:321) Definitions of human capital tend to focus on knowledge as a capital asset vested in the individual that can be deployed to maximise organisational and industry competitiveness (Davenport & Prusak, 1998; Davenport, 1999; Bontis, 2002:630-631; Gimeno, et. al, 1997:750-1). This core focus in many ways can be traced back to the 1991 model from Skandia AFS where Edvinsson tied human capital to structural and relational capital to form Intellectual Capital (Edvinsson & Malone, 1997). This leads to our first HC principle we should note as part of our study in this chapter– Human Capital is vested in people. HC seems to hold more value when its specific relevance can be made tangible by tying its use to an organisation’s commercial outcome. Schematically, Fitz-ens represented the link between HC and enterprise profitability and goals as follows.

Figure 35 Fitz-enz Data-to-value cycle (Fitz-ez, 2000:9) Fitz-ens argues value is created in HC as part of the initial phase in the above value chain or cycle and, ultimately, its contribution to the attainment of the enterprise goals in Phase 3 (Fitz-ens, 2000:9 & 66-67). Over time the cycle time will accelerate and goal attainment improve. The components of HC were argued by some authors to have broader relevance. Composiiton of an individual’s capabilities included talents, knowledge and experience that could be deployed by the organisation (von Krogh, Ichijo & Nonaka, 2000:92; Edvinsson & Malone, 1997:34). Edvinsson did express that HC must be placed into a dynamic environment and constantly be upgraded (Edvinsson & Malone, 1997:34). This leads to second principle– HC can be developed. In fact the value of HC for the individual and the company may increase the more it can be developed. Some authors on HC stress not all HC is resident in the individual as a personal asset. HC may be resident in the systems and structure of the organisation that permit individual knowledge to be deployed (Nonaka & Takeuchi, 1995: 62–70). It may also be resident in relationships where knowledge flows between individuals in teams or in communities or networks that span boundaries outside the organisation (Wigg, 1997:71; Dixon, 2000:142-143). This leads to our third principle to note– HC may reside in relationships. To encompass all the above three principles our approach to HC will advance that: HC is not only about the availability of capabilities relevant to current performance, but also the potential for further developing capabilities and relationships the individual may hold that can be developed to the advantage of the organisation.

The individual as a capital resource The fact that humans have had a capacity to contribute knowledge that leads to organisational performance is certainly nothing new. However, only recently has effort extended to systematically manage individual capabilities as part of an overall organisational knowledge value equation. This does not mean effort had not previously occurred. Large salaries that executives are paid in companies are evidence that they as individuals are seen as a capital knowledge resource for the organisation. Management executives have always had the

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opportunity to sell not only their skills but also their ability to use acquired knowledge and experience. Those at top levels in the company are often employed not so much for specific skills, knowledge or expertise in the company's area of business but for their ability to see opportunities. Knowledge as an identifiable and measurable trait has been linked to education. It is true that Masters of Business Administration (MBAs) and postgraduate education has been seen to contribute a generalised knowledge component that has enhanced performance of managers within organisations. There has been identification that education does not supply the general and specific experiential knowledge that allows education to become applicable. The dynamic must therefore be to move beyond providing and measuring traditional educational achievement to specific enterprise contexts to actually identify education as a capital resource in a knowledge based organisation.

Ingredients to HCM In the New Economy, an employee’s capabilities (skills, knowledge, cultural ‘fit’ and mind set required to perform) have economic value to an organisation because these capabilities enable the organisation to perform and adapt to change. In this context, value has come to refocus on people as they constitute the organisation’s human capital. Organisational efficiency and effectiveness of KM strategies has become as much about building ‘human capital’ value as they are about transferring knowledge or generating learning outcomes. An equation has been proposed to summarise this:

KM + HRD + Performance = HC where KM is Knowledge Management, HRD is Human Resource Development, and with performance together equate to HC or Human Capital. This formula is a subset of Knowledge Capital formation whereby:

HC + SC + STC = KC where HC is Human Capital, SC is Social Capital, STC is Structural Capital and KC is the resulting Knowledge Capital. The measurement of HCM can not only be tied to different individuals in a variety of occupations, positions and contexts, but also to encompass how the knowledge assets resident in people can contribute to the overall Knowledge Capital value available to the organisation. HCM requires both the management of knowledge and the development of human resources to optimise value.

Figure 36 From capabilities to human capital (Bowles, 2003:204)


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Measuring HC In the Accenture Human Capital Development Framework was measured at four levels (Cantrell, et al, 2006::45) four levels are: 

Tier 1 Business unit results, consisting of measures of organisational performance.



Tier 2 Dealing with key performance drivers that directly contribute to business unit and/or enterprise results, often captured on a balanced scorecard.



Tier 3 Human capital capabilities, consisting of the most immediate and visible (though not always measured) people-related qualities needed for achieving critical business outcomes.



Tier 4 Human capital processes, consisting of granular measures of the processes that drive human capital capabilities. It focuses on process maturity rather than just budgetary allocations.

LeBlanc, Mulvey & Rich (2000) proposed a six-step process of developing and implementing a human capital investment decision. The process is driven by business needs. The process is as follows:      

Identify needed business improvements Locate people leverage points and sort by investment type Discover measures of key people leverage points Find relevant internal/external benchmarks and asset gaps Calculate human capital investment cost/return and break-even timeframe Make human capital investment decision

Human capacity and human capital There is a direct and well researched relationship between recruiting and managing HR, company performance and thence higher HC value indexes (Lermusiaux, 2002:14-15). In effect a skilled workforce has value because of what it can produce. But other HR factors also contribute value to the HC equation. Such HR factors that are known to relate directly to HC valuation include:       

Overall employee satisfaction; Recruiting effort and efficiency of ‘hires’; Psychological ‘fit’ of employees to the organisational culture; Employee recognition programs; Development programs and especially how the company deals with high performance people on a leadership pathway; Efficiency of succession planning (a crass analogy but this is akin to inventory management and factors such as ‘availability on demand’ and ‘wait time’ for fully capable people to gain promotion);and Are loyal to staff even during periods of layoffs and tight economic growth. (Lermusiaux, 2002:14).

HC is therefore critically influenced by mutual commitment to foster and harness future potential. While related to human capital that deals with domain or position specific competencies and identity attributes related to productive capacity of the labour force , human capacity is about the myriad of competencies and identity attributes that individuals hold that are not deployed in an immediate work context (Levinger, 1996;7; Bowles, 2004:55). Human capacity extends across multiple roles. This includes the knowledge acquired by being a parent, friend, member of a sports team, social group and so on. Individual build repositories of knowledge from many contexts. For the organisation human capacity is very much about improvement over time and future potential. This is represented by the spiral represented below.

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Figure 37 Capacity development spiral (Bowles, 1999:12, after Levinger, 1996:6) Human capital is therefore about Current Performance Capacity while Human Capacity is about extending performance capacity over time, or what we will term Potential Performance Capacity.

Developing human capacity It is argued human functioning has three primary aspects - mental, emotional and physical. The personality of a person and their performance in a given context can be identified and analysed against these dynamic aspects (Seagal & Horne, 1997:23). Seagal and Horne (1997), argue every individual balances what they do and what they prefer to do around these three aspects. What a person can do in an organisation is directly related to mental, emotional and physical aspects to their ‘functioning’ has been developed outside work life.      

Thinking Objectivity Vision Overview Structure Values

     

Feeling Subjectivity Relationship Communication Organisation Creative imagination

     

Making Doing Actualising Sensory Experience Practicality Systemic Experience

(Seagal & Horne, 1997)


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Individuals variables in deploying capabilities will vary with the dimensions to their personal character. Dimension

Description

Person (PE)

Variables unique to the individual such as personality type, decision making styles, etc.

Place (PA)

Variables in the given situation such as size of organisation, type of organisation, time, season, location, society, etc.

Process (PR)

Variables present in the direct operational context such as product, service, customer, market position, situation, environment, etc.

People (PL)

Variables work role such as level of employment, superiors, subordinate staff and their characteristics, culture, etc.

The following builds on the past chapters. All the information is indicative. It is presented to illustrate how individuals’ development can progress as they undertake different organisational roles at various levels of complexity In practical terms, individuals’ need different development programs at different points in their work life and personal development cycle. Just as leaders do not ‘suddenly’ emerge as middle managers and are immediately ready to be senior executives, no leadership development program can be framed as a generic strategy able to be delivered at a certain point in time and make all individuals suitable for all leadership roles. Any development program must be able to target people operating at all levels of employment and complexity.

Figure 38 Balancing Leadership development across dimensions and levels of employment The major challenge for those developing leadership development programs is to tie individual and organisational needs to each solution. Just as leadership is not about any pre-ordained set of capabilities we can transfer to an individual, nor can development programs ignore qualities and attributes each individual will possess in a unique mix. This is so for human resource development (HRD) across all levels of the organisation. The diagram above is indicative. It shows how typical leadership development for an individual will vary across the three dimensions and for different levels of employment. The above is not suggesting the ideal mix, nor a best practice balance. The diagram confirms the need for balanced development, with programs customised for

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the individual's needs. Organisational-wide programs should be structured for leaders at different operational levels and target specific aspects of their human, individual or task performance needs. What the above model also confirms is a focus only on education, to the exclusion of all other strategies, cannot possible address all the leadership development dimensions at any one level of employment. Developing Human Capacity requires HRD extend beyond the current job roles to embrace all the capabilities an individual can potentially contribute to current and future roles within the organisation. This is unlike Human Capital which views knowledge as the set of capabilities holding value because of what they can contribute to current productivity and commercial output. Developing Human Capacity requires HRD extend beyond the current job roles to embrace all the capabilities an individual can potentially contribute to current and future roles within the organisation.

Developing potential and talent Work and the management of labour to do work is undergoing dramatic shifts across the globe. As technology changes work processes and expand both markets and an organisation’s reach (in terms of both customers and business relationships) there is a change occurring in how human resource management is performed. Goods or services that are delivered through highly routinised processes by humans with standardised competencies have shifted to locations and organisations where the factors of production are lowest. Competing on price and quality in such markets is no longer sustainable as lower input costs (tangible costs such as plant and labour) become the major competitive advantage. This is fully consistent with how we have previously identified that explicit or codified knowledge (manuals, procedures, written training programs, etc.), are far more mobile across organisations and countries. On the other hand, organisations competing on more intangible assets such as knowledge can still leverage advantage through the key factors of production, people and knowledge that can be protected or embedded in the desired context. Sustaining competitive advantage requires leveraging these assets to maximise the capacity to adapt or change. Flatter organisational structures are produced by organisations seeking to be responsive. In professions such as medicine, usually knowledge and experience rather than differentiated positions provide some limited hierarchy. Self-directed work (managers are not needed if the knowledge component of work, the processes used are determined by the participants themselves) also has promoted knowledge and learning that results in reducing hierarchy. The reduced importance of organisational structures and the increasing need for organisational agility would seem to indicate that as long as participants were provided with some individual risk reduction strategies a much more dynamic range or working and reporting relationships can exist. In addition, geographic and cultural differences are less important than they were in traditional organisational structures and therefore participants have greater mobility than ever before. It would seem then that organisations leveraging knowledge are to be based upon individual capabilities rather than job skills for existing jobs, that they would have flatter organisational structures, provide greater mobility for participants and have more dynamic reporting and working relationships. The flatter structure has, however, often made jobs more complex and the nature of capability requirements more specialised to an organisation’s given context. From late 1990s a number of factors emerged that has placed pressure on how organisations competing on knowledge can acquire employees. C h a n g e d r i ve r s Major changes are impelling the transformation of the labour market for knowledge workers. The following changes (Bowles 2005) were noted for Australia. Shifting demographics: As with many first-world economies, the workforce is aging and the number of people retiring is rapidly increasing. As unemployment is lower than at any time in the previous decade, retirees are more difficult to replace. While replacing their skills and knowledge is a major economic concern (skill gaps), the retirees also take with them the experience and wisdom acquired over their working life (wisdom-drain). Replacing such attributes takes far more time, effort and cost than up-skilling or retraining exercises. Even worse, the social capital generated by their networks and relationships has to be completely re-crafted by the new employees who have neither experience nor the requisite skills. Shifting job design: Position requirements are moving from competencies aligned to occupational classifications toward smaller, more discrete clusters of competencies and attributes related to a specific context. These older models are more attuned to the industrial age and mechanistic paradigms of the organisation of work. These ‘jobs’ are becoming more complex and more often than not carry increased


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responsibilities. People have to not only ‘do things’ but also adapt and be responsive to new contingencies. This shift necessitates new ways to train and educate to develop the required competencies and context-specific behaviours and talents. Rapidly maturing occupations: In many industries, enterprises are still competing in the old economy; whole education and development systems are still oriented towards promoting jobs that are past their ‘use-by date’. Occupations move through a continuum, evolving from ‘emerging’ through ‘developing’, ‘maturing’ to a plateau, and then moving into ‘decline.’ Many jobs in industries crucial to the knowledge age—printing, media, library, education, human resources, etc—are composed of people filling positions within occupations that are very mature or already in decline. Whole educational systems, content and services are still oriented to these occupations. Such systems are too slow to address jobs that amalgamate competencies from many occupations across multiple industries or that are formed from completely new skills. Yet jobs or ‘competency clusters’ that fall into the emerging areas are usually in high demand because they are driving companies seeking to innovate or to lead the way into an expanding market within the New Economy. Because areas in this New Economy are the hardest for nations and industries to target with national strategies competitive businesses have had to develop people in-house. Yet for these progressive businesses the sheer volume of demand and the costs of these efforts have often meant it is easier to recruit individuals with the requisite competencies and graft them onto the organisation than it is to develop them internally. Demand for learning: Traditionally demand for education, training and development was initiated by organisations or governments. Yet in today’s labour force, knowledge workers often buy their own learning to increase their market value. (NB: Workers switch careers more often: A person commencing work in the 1960s would expect to switch jobs and employers 2 or 3 times, while people starting work in the 1990s in Australia can expect to change jobs and employers more than 10 times in their lifetime.) Individuals are now purchasers of learning and they expect higher relevance, immediacy and value for money. While educational institutions are still arguing education is a right and not a commodity, such customers are exiting traditional local educational market suppliers to demand services from global electronic learning suppliers, which are creating a whole new niche within the New Economy. Educating people for lifelong learning and work seems to have a market appeal eclipsing the paradigm of educating people to contribute to society. New technology: Gaining access to knowledge and learning has changed radically. While vendors and educators espouse and debate how best to add value to classroom–based activities, knowledge workers want services on-demand, in real time, accessed anywhere, using available computing devices, personalised for their immediate contextual needs. For the knowledge worker technology enables access to knowledge. Learning is about supporting transfer processes where the worker cannot immediately absorb the knowledge. Knowledge workers now demand access from a single-user entry point across silos of knowledge, across boundaries created by poor interoperability or integration of diverse technologies, and across networks and systems, and they insist on absolute guarantees that data or content is current. The more accurate the knowledge, the better the worker can apply it. The more they can perform to a standard, the more they reinforce their overall human capital value. Ultimately, the knowledge workers’ market value is directly tied to their commercial utility as determined by their current or next potential employer. Shifting the balance of control: With outsourcing and contracting of knowledge workers, the direct relationship between a manager responsible for a set of deliverables and the enabling human capital is becoming increasingly remote. How work has traditionally been organised and authority and decisionmaking responsibilities allocated often are meaningless and ineffective in these contexts. In the global workplace, where workers may be connected virtually or work in virtual ‘spaces’, the control structures have to be radically modified. This reinforces not only the importance of the workers’ competencies but also their attributes and talents, which enable them to perform and collaborate in such environments. Shifting purpose: The most effective and efficient workers see work as purposeful. The attainment of goals and collaborating towards shared visions motivate people to commit time and effort to excel. While organisations never could control all the factors of production, human capital is becoming an even more ‘slippery’ asset to manage. Knowledge workers recognise their value and often working for someone is part of a value equation that is increasingly attuned to personal meaning, rather than long-term visions that hold some mutual benefit.

The knowledge worker In knowledge organisations the value of what a human resource can do is determined through their contribution to productivity and performance. The commercial value of human capital is closely tied to the uniqueness of what the person can ‘graft’ onto the organisations available pool of human resources, and the affect the

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individual’s contribution will make to competitive advantage. This may include contributions that result in commercial gain, strategic success or even the well-being of others. The figure below gives a rudimentary overview of the relationship between human capital value and whether the capabilities possessed by an individual being engaged is generic and applicable across many occupations, locations, positions or levels of work; common to some occupations, locations, companies, or levels of work; or specific to a company, position and/or task.

Figure 39 Uniqueness of capabilities and potential value

Talent matters as much as skills 74% of organisations claim to be open about who is and who isn’t ‘talent’. 87% of participants have a definition of ‘talent’ which is used consistently across their organisation. None of the 32 companies surveyed used the same definition. (Towers Perrin, 2004:3) Talent is about the total potential an individual brings to an organisation. It is not just about their current capabilities but also their future potential. A person with potential or employable talent is not just about what they can ‘do’ today, it is their potential to contribute to the organisation in the longer term. Organisations need to be innovative and agile. To do this they need people who do more than just work on the jobs that deliver productive outcomes. They need to foster mental and personal dimensions that build a commitment to achieve these outcomes while performing to deliver improvements to everyday products and services. People with ‘talent’ are human resource assets with an ever increasing value in the marketplace. So valuable that organisations are competing to ‘buy’ talented leaders. As more organisations recognise the value of leadership talent, the pool of available talent from which to recruit becomes smaller. Hence an increasing effort is underway to not just identify and acquire talent, but to develop and retain such talent within an organisation (Michaels, et. al, 2001). Many organisations seemingly believe their competitive advantage resides in leadership development activities that build from within, rather than from buying talent (Tichy & Cohen, 1997; Fulmer & Wagner, 1999; Zenger, Ulrich & Smallgood, 2000). The option to develop leadership talent has become such that leaving it to chance in the complex, ever changing commercial world may mean a leader is not only not immediately available but also unable to operate at the level of operational complexity required (Bourdreau & Ramstad, 2002:17; Tichy & Cohen, 1997).


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Note In a study of the Australian transport and logistics industry the joint problem of increased need for recruits in specific jobs was matched by a shrinking labour market (Bowles, 2004:4). In some occupations over 15% of the workforce was going to exit the marketplace between 2002 and 2006. This was due to:    

Voluntary separations (predominantly due to aging) Other industries facing skill shortages ‘poaching’ existing employees or students destined to enter work within the industry. Changes in occupational structures that lead workers into other industry areas Movement out of professional areas into management

Unfortunately the ability to attract replacements was being hamstring by a record high in overall employment (fewer looking for work) and too few appropriately qualified graduates being produced to fill the expected vacancies. Many of the skill shortages were being experienced globally. This meant that new graduates were being ‘headhunted’ to work in other countries with companies that were prepared to pay more money and offer greater incentives than local employers (Bowles, 2004:5). In larger organisations this means a number of pools of potential candidates have to be established to ensure a pipeline can access the people with the capabilities required to fill gaps (Charan, Drotter, Noel, 2001). For the most part position-driven replacement planning is based on forecasts. This does little to change the readiness of the individual to take on a new position. In order to produce a change in results, decisions must be made and actions taken that alter the natural course of events. As in effective business strategy, effective talent-planning amounts to planning capability development today for the purpose of changing HR outcomes tomorrow.

A model for developing human capability Developing human capability and therefore, capacity to contribute to an organisation’s success, requires development of knowledge across multiple dimensions. The knowledge dimensions can be divided into four groups as introduce in Chapter 2 (Bowles, 1999:34): 1) Knowledge of what (declarative knowledge) 2) Knowledge how (procedural knowledge) 3) Knowledge that or why (conditional knowledge) 4) Acquired knowledge (self-regulated or situational knowledge) Capability related to current performance capacity (CPC) can be separated into Competencies and Identity attributes. Capabilities relating to responsiveness, ability to learn and deal with complexity and problems may be conceptually separated into Mental and Learning dimensions. Each of these dimensions has capability elements (Note: these may also be termed capability clusters). The identity and competency dimensions and associated capability elements have been covered in depth in Chapter 3. Capability elements relating to Mental and Learning dimensions need further explanation: Cognitive capabilities: The capacity to translate thinking, perception, reasoning, awareness and judgements into action by oneself or through interaction with others. Intelligence capabilities: The capacity to be aware of one’s own and others’ feelings while thinking and acting wisely in human relations. Agility capabilities: The capacity of an individual and, therefore, an organisation to acquire, integrate, and assimilate knowledge. Absorptive capabilities: The capacity to an individual and, therefore, an organisation to learn and the preparedness to acquire, hold and then exploit the resulting knowledge. Leadership can be variously defined. However, it is not just about a set of competencies, traits, roles or behaviours. Leadership is situated and will vary with followers. It centres on personal capabilities associated with influencing commitment and compliance in task performance to achieve goals and objectives. It also involves personal attributes that can convey, maintain and reconfigure the culture of an organisation.

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The definition of intelligence is a dynamic one. It is not a linear definition about intelligence quotients (IQ). It encompasses the concepts of social intelligence, multiple intelligence and emotional intelligence. It is fundamentally about the attributes held by an individual that can be used to enhance the acquisition and deployment of knowledge. This is closely tied to the psychological and psychometric dimensions that have been assessed to determine a person’s talent. The concepts of agility and absorptive capability will these elements will be more fully explored in the second part of this study.

Figure 40 A conceptual model for developing human capital and capabilities HC is not itself sufficiently extensive in how it can be managed to address future potential. Attaining full value for the available workforce capability requires the mental and learning aspects be fully acknowledged, managed and valued. Based on the above model:

Competency + Identity = Human Capital + HC + Mental + Learning = Human Capacity The above approach is not trying to separate out Human Capability from how HC is managed. In fact, it is desirable if it is integrated. HCM that addresses mental and learning dimensions can therefore better address the development of capital value present in knowledge an individual holds that has a potential to be developed for future productive use. Managing HC without a reference to learning or intellectual or mental capabilities of the person and the potential to create future value creation in terms responding to new opportunities is undesirable. Given the above it is now possible to posit a conceptual model for tying human capital and capacity development to the overall development of an organisation’s capabilities.


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Figure 41 A conceptual model for developing organisational capability

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PART B: HUMAN RESOURCE DEVELOPMENT


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Human Resource Development: A Theoretical Overview

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7. Human Resource Development: A Theoretical Overview Introduction Human Resource Development (HRD) focuses on developing people in a workplace setting to achieve business outcomes. It is not a new discipline. It has in fact been studied since the early scientific management theorists (early 1900s) and applied during the growth of organisational behavioural approaches to management in the 1960s. HRD’s role as a strategic function within an organisation has increasingly come into question especially in terms of its relationship with knowledge management (KM) and the development of human capital (HC). Mounting research suggests that it is impossible to develop capabilities and competitive advantage within a global business environment without incorporating the development of human capital while systematically managing organisational knowledge and learning. The contemporary problem for HRD specialists is to achieve a balance between traditional process driven training and skills development activities, and outcomes based on growing an organisation’s Knowledge Capital. The argument expounded in this and subsequent chapters will be for the development of a framework for the deployment of HRD within an organisation seeking to improve its Knowledge Capital (KC). This chapter is broken down into two parts 

The first part is a review of the concepts and ideas we will cover in this second half of our study. This is an attempt to synthesise what is HRD and why it is important to establish the foundational role of HRD in terms of individual and organisational learning.



The second part of this chapter will identify the implications for implementing HRD within organisations to maximise KC. This perspective will suggest we need to radically change our frame of reference towards what HRD will constitute in the future.

Perspectives on HRD It is the age where many enterprises view their competitiveness in terms of a global marketplace. Success may be locally achieved but local markets and long terms success is strongly influenced by events occurring in the global marketplace. Corporations, large and small, recognise that optimal performance and success requires a workforce possess the capabilities to meet all the strategic challenges present at the local and global marketplace level. It will be argued in this course that for organisations to develop these capabilities to ensure competitive advantage and success there needs to be balance between the following three approaches 1. 2. 3.

A structural functionalist approach tying training and development of personnel to job performance or occupationally-based career pathways. A strategic approach to HRD. A holistic approach to HRD that includes the management of knowledge.

Functional approaches to HRD focus on the development of skills or competencies within individuals in an enterprise, organisational design, and needs analysis that integrates these activities into a coherent process. Strategic approaches to HRD have been used to assist organisations cope with complexity and organisational change, while maintaining the organisation’s ability to customise products and services to clients' needs. Quality management systems and organisational learning principles focus on group and organisational behavioural and development. A number of arguments are put forward to promote both strategic and process (structural functionalist) HRD.

Strategic or Outcomes based approach Process driven or functional skills development programs, it can be argued, focus on operational issues. As such, they can fail to incorporate a strategic perspective of development requirements for both the individual and the organisation. Organising HRD along structural functional lines limits an organisation's ability to adapt to changes that impact specific job contexts. Rather non-strategic approaches stress job competencies that are core to occupations or are generic to occupations across all levels within an industry. Even organisationally specific job competencies


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may be too broad to provide the required responsiveness to change. Therefore, those promoting strategic HRD argue a more comprehensive and organisationally specific approach must be adopted. Strategic HRD as the name suggests, is linked to the strategic outcomes of the organisation. HRD becomes more outcomes focussed integrating organisational learning principles rather than at individual functional skills and competencies. Strategic HRD moves beyond the specific competencies of individuals to also identify and manage the capabilities required at group and organisational level to achieve competitive advantage. Advocates of strategic HRD argue it is too simplistic to suggest it is possible to deliver competent individuals without developing a unitary model for interpreting and managing the impact of learning on the organisation, individuals and teams (Harrison & Kessels, 2004: 35-36). In the same way an individual does not divest past experience when interpreting the present, organisations also hold 'experiences'. A frame of reference can be developed when studying HRD in organisations that we will call organisational learning. This organisational frame of reference is not fully described, nor enhanced by simply developing the competencies required by individual employees.

Structural functionalist HRD The opposing argument is an economic rationalist one, which in an increasingly global competitive business market there must be real measurable outcomes for any investment in training and development. HRD must be structurally organised and deliver functional outcomes, so that individual contributions are measurable against the bottom-line. Structural-functionalists promote HRD as a defined process within an enterprise. This process has its own goals and objectives that may be linked to organisation’s goals and objectives. However, this process approach focuses on the training of skills and knowledge (competencies) and measures success based on performance and productivity increases derived by individual skill acquisition. Strategic approaches to HRD, such as linking HRD to strategic outcomes and organisational capabilities, are seen by process oriented HRD practitioners as removing emphasis on individual and organisational development, training that achieves productive workers, and measures based on improvements to performance derived through formal training and development.

The study of HRD HRD programs in the past had been implemented as skills training with an operational management focus. Such an approach at best is very process driven. Improving processes to achieve enterprise goals and objectives does add a strategic dimension. However, this strategic link must break away from structural-functionalist approach before we achieve strategic HRD. For some HRD practitioners and those concerned with the development of human capital, strategic activities extend even further to the management of knowledge. This includes development of enterprise capabilities to better equip an organisation to compete in an environment marked by rapid change, global competition and complexity. However, this ushers in a far more holistic view of HRD. Such a view of HRD's role in underpinning both process improvement and strategic capabilities is a novel view of HRD. However, we will go even further and place this holistic, strategic view of HRD in to a relationship with KM and the development of KC.

HRD origins and current state of play Human Resource Development (HRD) is a derived term. As such, views on what it is and what it is about vary with who narrates the story. In this chapter it is worthwhile to examine why HRD may not be as definitive a concept as many believe and to explore how the relationship with wider management and education issues has shaped and defined HRD. In the late 1990s some writers and Human Resource Development (HRD) practitioners who espoused long-term membership of the discipline lauded the 'dawning' of an age where HRD formed the critical discipline linking business planning systems with the emerging quest to harness human competencies, build the Learning Organisation and manage knowledge. (Cherry, 1995:34-35; Gunzberg 1992:1 & 10; & Kalra 1997:176-177). Yet, in this 'new age' of HRD it is paradoxical to also find that definitions and constituent parts or HRD will vary with the practitioners and academics studying HRD.

Evolution of HRD - Structural Functionalism The traditional role of HRD can be described as "structural-functionalism" or process driven. Structured training for industrial skills paralleled the development of craft and guild systems. But it took off in the early 1900s with the push from scientific management principles for task and functional efficiency. Scientific management promoted the belief that simple labour oriented manufacturing tasks could be made more efficient through study

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and dissection into simple components, and identification of efficiencies in terms of skills. Training provided in relation to these defined skills or competencies could then be targeted to the performance of a job. Functional skills are provided for individuals to complete job tasks. When provided in a consistent manner for individuals within or across a range of jobs training becomes structured. It is possible for structured training to then use a single training program structured for a job to be used for all individuals in that job within an organisation, train for the same job across organisations, or training potential employees in job-related skills. Examples of HRD provided in a structural functionalist manner are apprenticeships or the training of tradespersons, eg. Builders, mechanics, bakers, etc. This sort of training is also provided to professionals eg. Lawyers, doctors, accountants, nurses, teachers, etc. Structured training became widely labelled 'vocational' because learning was so tightly linked to jobs. The term HRD did not really emerge as a field of study until after the Second World War. Even then, its application was limited mainly to training. Development was added some 20 years later with the emergence of the Human Relations School of management and the identification of the behavioural and developmental aspects of HRD. Aspects of HRD can be traced back to the guild system where apprentices were taken on, and when mastery was achieved, they were instituted as members of the guilds with rights to practice their trade. Early Apprenticeship Training Programs Origins of HRD can be traced directly to early apprenticeship training programs in the eighteenth century. This consisted of on-the-job training and frequently did not involve systematic plans for training. Craftsmen took on labour and in the form of apprentices, they provided training for employees, most of this was through observation and replication of the craftsman’s actions. The apprenticeship model was also used for the training of professional people eg, doctors lawyers etc. Early Vocational Education Programs 1809 first privately funded vocational school, from this beginning manual schools grew in popularity. Agriculture had become more complex than working the land and handing a farm from father to son trained people were needed for the increasingly complex agricultural machinery The need for trained mechanics to operate agricultural machinery necessitated the development of systemic, organised training. (Nadler, 1970) Early factory schools With the industrial revolution, machines began to replace skilled hands. Scientific management principles saw the significant role of machines in better and more efficient production systems. Specifically, the design of machines operated by semi-skilled workers could produce more than the products of skilled workers in a small craft shop. Factories made it possible to increase production by using machines and unskilled workers, but they also created demand for the engineers, machinists and skilled mechanic needed to design and build and repair the machines. Fuelled by the rapid increase in the number of factories, the demand for skilled workers soon outstripped the supply of vocational school graduates. In order to meet the demand, factories created mechanical and machinist training programs, which were referred to as “Factory schools”. Factory school concentrated on developing skills in new workers and preparing them for employment, once in the workforce there is little evidence of continued training. Factory schools differed from early programs in that they tended to be shorter in duration and had a narrower focus on the skills needed in a particular job. Early training programs for semi-skilled and unskilled workers There were few training programs in factory schools for semi- or unskilled workers. This changed with two significant historical events. The introduction of the model T Ford in 1913, was the first car to be mass produced using an assembly line, it required semi-skilled workers to perform several tasks. The assembly line cut production costs significantly and lower prices increased demand significantly requiring Ford to set up more production lines other companies followed these production techniques and this meant that there was a proliferation of semiskilled training courses. The outbreak of WW1 was also instrumental in the development of Semi and unskilled training courses factories had to retool to produce military equipment and this required workers to be retrained. The Four Step Method A training process was developed to train workers for production for the first world war by Charles Allen Director of Training for the US shipping board “Show, tell, do and check” this process was later named Job Instruction Training JIT (Steinmetz, 1976) The Human Relations Movement


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Human relations approach grew out of the appalling conditions of the factory system “Human Relations” espoused more humane working conditions for workers, and an understanding that people were more than just cogs in a machine Chester Barnard in the Functions of the Executive (1938) described the organisation as a social structure integrating traditional management and behavioural science applications. Maslow (1968, 1973) published his theory on human needs, stating that people can be motivated by non-economic objectives. The Human Capital Movement The emphasis on Human Capital has shifted the examination onto how HR can support the acquisition, deployment and development of capabilities held by employees. As such capabilities are the domain specific skills, knowledge and the identity attributes resident in cultural values, relationships and mental models of the individual.

Defining HRD Historically the most common activities of HRD have been education and training, however limiting HRD to training; education misses other activities concerned with employee and organisational development. From the following definition, we can see that as well as skills acquisition - training and development - HRD can be seen to encompass more aspects of the larger Human Resource Management Department … can be defined as a set of systematic and planned activities designed by an organisation to provide its members with the necessary skills to meet the current and future job demands. (Harris & DeSimone, 1994:2)

Nadler defined HRD as:   

A series of organised activities; Conducted within a specific time; and Designed to produce behavioural change. (Nadler, 1970:3)

The first definition limits HRD to providing skills for job whereas the second definition encompasses individual, group, and organisational learning. Examined together the definitions suggest a wider HRD role encompassing the identification of a knowledge base delivered to employees in a structured way, and the recognition that this delivery will bring about behavioural changes important to group and organisational outcomes. A series of organised activities: Indicates that chance learning that may take place in the workplace does not manage the acquisition of the skills and resulting performance demanded in workplace that currently experience rapid change and increased complexity. HRD must organise training and development through the provision of learning objectives, a process of learning, and provision for evaluation. Organised learning for an individual skill or knowledge outcomes also can be managed to enhance group or organisational learning (this will be explored in depth in this study). Conducted within a specific time: There must be parameters set to evaluate and review the performance of individual and organisational learning and the organisational knowledge base. Designed to produce behavioural change: As identified by the Human Relations school of management, people in a work environment are not cogs or robots and the provision of training, education and development must have some impact upon behaviour, however limited. The important factor is not just that HRD had been 'discovered' in the last twenty years of the twentieth century. Rather a well-known principles and disciplines had been repositioned on the agenda of managers and academics.

Post-World War Two Development of the HRD 'Discipline' It is not possible in this section to give an extensive literary synopsis of the development of the human resource discipline since World War Two (post-1945). Certainly, the distinct field of HRD grew out of the organisational behaviourist school of management thought in the 1960. HRD's emergence as a 'discipline' was tightly linked with the growth of training and development. World War II as with World War I was the impetus for the development of new training programs. Post WWII saw the development of professional training associations and a search for more structured and scientific means to link training with organisational management. In the 1983, the largest training and development association in the world, the American Society for Training and Development (ASTD), completed a study identifying

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competencies used by HRD practitioners. ASTD also approved use of the term Human Resource Development to encompass this area of expertise (1983). While not wishing to further bombard the reader with a series of people and dates, it is fair to state that HRD became a discipline sitting between the management and educational fields of academia. In simplistic terms, HRD grew proportionally with the increased focus by management writers on the value of developing personnel. The discipline and practice of HRD was at its most fundamental level concerned with activities associated with development of human resources (people) to enable organisational management to achieve business outcomes. However moving HRD into higher profile on the academic and enterprise agenda has resulted in the blurring of HRD. Firstly, HRD as a field of study has uncertain relationship with other management and educational agendas. Secondly the constituent part of what makes up the discipline of HRD have become less certain. As a field of study, HRD sits at the crossroads between the management field of study and the educational field interested in training and developing the individual. Both fields of study have experienced enormous expansion in terms of academic study and resulting interest in the workplace. If we were to take just two major agendas such as quality improvement and the learning organisation, they respectively span the management and education body of thought. As we will examine in later chapters these agendas critically, influence not only academic thinking but also management practices in an enterprise. Equally, both are related and can be integrated into one academic or applied management approach. The role and nature of HRD has been defined and redefined through its relationship with new theories of management and learning their implementation in organisations across the globe. Just as the nature of HRD has been oscillating between the waves of new theories and management practices so the component parts of HRD been questioned. The 1990s have been a decade of transient theories and expansion of theories that have survived the 'fad' label to evidence to enterprise managers the long-term benefits of implementing these 'new' practices. In the environment of scepticism and the myriad of new 'theories', many authors stressed the role of HRD as centring on training and development. Particularly in the United States professional bodies (Academy of Human Resource Development and ASTD) promoted a global agenda of HRD playing the pre-eminent role in developing individuals as part of a workplace training and adult learning agenda. While this role was certainly not seen as just a passive provider of ‘training’ (Noel & Dennehy, 1991) it certainly promoted HRD practitioners as promoters and providers of training and development under the Human Resource Management function (Garavan, 1991:17; McLagan, 1990:50; Swanson & Holton, 2001:19) The shifting role of HRD in a corporate setting is mapped below.

Figure 42 Evolution of HRD as an organisational activity


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As the suggested role of HRD was shifting, so was the debate over what constituted HRD. Once again what constituted HRD was being derived by how it was viewed in relation to other activities. During the 1990s HRD sat in a turbulent sea of terms, theories and practices surrounding change management, organisation design and organisational development, career planning and development, remuneration and reward systems. In 1990 Patricia McLagan painted a picture of HRD as part of a wider HRM setting that also depicted all the constituent components (1990:53). This model is still espoused by the American Society for Training & Development in 1998 to define HRD and training (ASTD www.astd.org/training/definehr/definehr.htm). The "HRD Wheel" (see below), developed by McLagan, clearly illustrates the first attempt to logically group activities into core HRD Areas and non-HRD but related HRM activities. As one moves around the wheel clockwise from the top activities move from the most related to HRD (Training and Development) to least related in this 'family' of activities delivering Human Resource results (HR Research and Information Systems).

Figure 43 The McLagan HRD Wheel

HRD and Knowledge Management By the early twenty first century any definition of HRD has not only to encompass the development of relevant learning to enhance individual performance; but also has to examine how that learning is retained and transferred in the changing world of work. This is increasingly occurring where HRD is being implemented with KM and forms part of an overall contribution to the sustainable (long-term) strategic success of the business (Harrison & Kessels, 2004:137-139). The problem with defining HRD is the diversity of activities it is supposed to encompass. It is quite inconceivable that anyone could design and manage all the potential activities that one could include under HRD's auspice.

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Equally, it is inconceivable that all the components could be orchestrated to provide an integrated set of 'solutions' to potential human, process and system variables that impact business success. Perhaps it is appropriate to answer two questions that dominate any study of HRD in the late twentieth century:  

What is the imperative to get our definition of HRD accurate? Why study HRD at all if it is only understood as a part of other agendas, such as quality, human resource management or the learning organisation?

These questions form themes throughout this half of our study. Answers are not as simple as perhaps many would like. For educators the answers often rely upon a much more in depth understanding of management and knowledge theory. For management theorists, it may be the educational examination of human learning and competency development that holds many answers. A brief response to the questions highlights why further study is both worthwhile and necessary. The imperatives to get a working definition of HRD impact beyond our study. They include: a.

Raising human capital capacity and value;

b.

Elevating the Knowledge Capital available to an organisation;

c.

The search for workforce productivity while reducing costs of production and improving the quality of products and services;

d.

Acceleration of cycles of change where the speed of production and the acquisition of new skills demarks the most competitive enterprises;

e.

Increase focus on customers and service quality necessitates enterprises change not only skills of employees, but the values and attitude they hold when completing work;

f.

Globalisation of markets has increased the parameters of business and made increasingly complex the relationship between a business and its external environment;

g.

Business strategies have shorter 'shelf lives' and are more dependent on the versatility of human resources that possess the required capacity and commitment; and

h.

Revisiting work structure and design to accommodate dynamic changes that require team collaboration and improved flow of knowledge across and between jobs, individuals, customers (internal and external), and business partners.

Changing how people work, the relationship between jobs and the development of competent employees all fall within the jurisdiction of an HRD practitioner. Any definition of HRD has to embrace these activities while recognising how these activities are completed, or what they may involve will always be a shifting.

Figure 44 Strategic HRD: A hub to many corporate activities


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HRD needs to be sized so its definitional parameters and relationship with other enterprise activities can be understood. HRD activity is defined in this course as follows HRD in the Knowledge Age requires a systematic approach to the enhancement of human capital through development of capabilities within and across individuals, teams, the organisation, and external relationships.

Impediments to HRD The constant endeavour is to formulate business systems that are totally cognisant of the fact that ultimate success will rely on how individuals in the organisation work within the systems. Business direction can be determined, customers can be identified and nurtured, and strategic frameworks implemented to meet changing imperatives, but none are ends in themselves. Businesses require systems and processes that orchestrate how people work to achieve business success. Integrating HRD into the strategic fabric of an organisation is an essential step in realising the end that ultimately resides in achieving sustainable business success. HRD plans and activities that occur in isolation from strategic frameworks reduce any likelihood of resulting HRD activities being measured through their contribution to business outcomes. Equally HRD that is well planned, strategically focussed and sensitive to individual and team needs requires a strong strategic framework to integrate success in HRD with business outcomes. The ability to integrate HRD into the strategic fabric of an organisation will therefore be diminished where HRD:   

 

Occurs in an enterprise devoid of business planning and measurement systems; Occurs in isolation from real efforts by management to evaluate business activities; Becomes a response action undertaken to solve issues arising from major change imperatives such as: o Downsizing or restructuring; o Skill shortages imposed by changes to technology, resource allocation, market needs, customer preferences, etc. o Cultural barriers to change; and o Introduction of new management approaches (eg. quality, reengineering, etc.). Is implemented as an internal solution to wider problems residing with existing management systems, process design or management practices; and Is seen as only training and development targeting the improvement of an individual's performance.

Ideally HRD cannot be a professional 'kit bag' brought out when solutions are required to problems arising from how changes have impacted people in an enterprise. That is HRD should be viewed as a strategic tool, not a set of diagnostic or remedial procedures. Expectations of what HRD can do need to focus on HRD practitioner's ability to:   

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Integrate human capabilities residing within the organisation systems with the business mission; Integrate and align performance of individuals against customer and market expectations; and Improve the speed with which the individual, team, and organisation as a total system can respond, absorb, apply, transfer and expand capabilities.



HRD, KM and Human Capital: A theory in progress

Figure 45 Refining the McLagan ‘HRD Wheel’ © 1996 Bowles, with permission

While our study will explore the modified HRD wheel this study has to be understood in the context of global changes impacting management of organisations in the Knowledge or Information Age. T Our study will also need to progress with a clear appreciation for HRD activities to be pursued in accordance with the push to manage knowledge or what will be developed into what this course will termed organisational capabilities. This management of knowledge has important foundations in how well, and how quickly companies can translate learning into outcomes.

Transforming HRD HRD has to develop intangible assets such as knowledge. It also has to reach into areas where embedded, tacit knowledge may reside which is not held by the individual per se, but expressed through their relationships and mind sets. A distinctive trend in HRD in light of knowledge management is the focus on advancing the formation of human capital. This does not ignore previous approaches discussed earlier. It dies, however, emphasise investment in HRD activity rather than being a cost centre activity and be linked to the formation of human assets. Development of human capital benefits not only the individual vested who are vested with the knowledge but also the organisation. The study of HRD is a derived discipline. It is a set of systematic activities existing in a rapidly evolving field of both academic analysis and workplace application. HRD is nevertheless a discipline with identifiable applications, spheres of influence and professional status. While HRD derives its definition amid an aggressive rethinking of how organisations are managed and how individuals learn, it continues to be an anchor for those wishing to integrate the even more complex activities enterprises undertake to develop personnel to achieve business success.


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Any study of HRD offers an anchor point for a detailed exposition of the broad strategic relationships between learning and performance at the individual, team, enterprise and wider community levels. Our study will explore strategic HRD and canvass HRD as much more than a structural functionalist approach where HRD is essentially developing people and organisations through effective training and development activities. In effect our study will unfold HRD from its traditional development role in the Industrial Age to discover its transformational role in organisations operating in the Knowledge Age.

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8. Transformative HRD Introduction We established in the previous chapter that an absolute definition of HRD remains a work in progress. In fact, our study should have served to illustrate that HRD as a field of study and discipline is evolving and adapting its raison d’être. Its very existence is based on its ability to address root issues that assist the organisation build sustainable competitive advantage. These issues are themselves changing. HRD is evolving to a new significance as the management of human resources and knowledge (HRM and KM) impel new directions that support how organisations compete in the New Economy. This shift has been encompassed in this study’s examination of how an organisation builds Knowledge Capital (KC) and manages Human Capital (HC). The intention of this chapter will be to elucidate further how organisations develop HC and human capacity. This will entail moving HRD from a transactional to transformative paradigms. Effective organisations are those that consistently:    

Have superior strategies for managing and developing people; Focus on both individual capability and organizational capability; Have learned to measure people as assets as well as costs; and Are able to resist the short-run pressures that cause chronic under-investment in people (Pickett, 2005).

All the above require an HRD approach that is holistic and intent on developing capabilities.

Transformative HRD Transactional versus transformative view of HRD The transactional view of HRD emphasises the management of processes and activities that result in the development of people. While stressing the mutual benefits derived from delivering outcomes transactional HRD generally is tied to the wider HR outcomes relating to improve job performance, process efficiencies and overall cost reduction through efficiencies in how HR deliverers services. Fundamentally transformative HRD is a paragon encapsulating the desire to move HRD towards the future potential a workforce can deliver to sustain an organisation’s competitive advantage. Beyond all other attributes the transformative HRD approach confirms the importance of moving the development of human capital beyond just developing people to fill positions or achieve processes efficiencies. It extends our models to address the mutual development of human capital (HC) assets for current and future outcomes that hold value for the individual and the organisation. To achieve both performance improvement and sustainable development of potential and talent HRD must encompass both the transactional and the transformative approach. If you like, a Full Range HRD approach (after Bass & Avolio, 1990; Avolio & Bass, 2002). Table 12 Comparison of transactional and transformative HRD Transactional HRD

Transformative HRD

Supports current job performance

Based on mutual development of capabilities and talent

Relies on human relations

Realises human potential

Preoccupied with processes and products and services

Is preoccupied with purposes and values, and meaning

Centres on the job

Centres on the person

The organisation owns the factors of production

The individual owns knowledge harnessed by organisation

Is short-term oriented

Is oriented towards long-term goals

Is about reducing the cost of production and HRD activities

Is an investment in assets that hold value

Jobs and designed for people to populate

Jobs are designed to accommodate capabilities required to deliver organisational outcomes


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Transformative HR

Structures and systems are static and efficiency focussed

Structures and relationships are dynamic and value focussed.

Link between HRD and KC Let’s revisit the concept of Knowledge Capital (KC) within an organisation. The overall concept is presented in the diagram below from chapter 5 in the first part of our study. KC is the total productive capacity (economic performance) of the organisation across pools of knowledge assets (capital) that have been classified as Structural (physical assets) + Social (relationships) + Human (people). It has previously been argued that KC value is gained not just because an organisation can deploy knowledge to satisfy Current Performance Capacity. Value can be ascribed to an asset because of its future contribute to Potential Productive Capacity. This relates to agility, absorptive capacity and other capabilities that may be deployed by the organisation to create or seize opportunities.

Figure 46 Types of knowledge capital (© Bowles 1997 Bowles, 1999:24) Knowledge also has a value that is not determined by its possession. The value is determined by the processes that impact the acquisition, transfer and expansion of the knowledge required by an organisation. This is at the heart of what HRD can enable.

HRD transforms HC HRD intersects KM simply because it centres on the development of HC. Organisations seeking to compete in the New Economy have to apply knowledge not only to existing situations but also be able to rapidly reconfigure knowledge to meet emerging needs. HRD’s role in developing HCM is about investing in activities that enhance the asset value of knowledge. While in reality somewhat blurred, KM can be distinguished to the role HRD plays because of its concern with the overall management of knowledge from capture through to accounting for value created. For our purposes in this second half of our study HRD’s role is very much delimited through its focus on developing knowledge. This is a focus on HRD as a transformational activity developing capabilities or improving access to stocks of knowledge. De Saá-Pérez and García-Falcón (2002:128) report on and confirm by their own research two hypothesis: H1:

Firms with an appropriate HR system will have a greater likelihood of facilitating the development and exploitation of managerial, input-based, transformational and output-based capabilities.

H2:

Firms with an HR system that properly combines their HR practices to create and develop strategic human capital will have better organizational performance.

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The direct link between HCM and process efficiencies and organisational performance was noted in our earlier chapter on Human Capital Management. The parallel of the outcomes created by HCM and HR is found when both target development of strategic human capital. HRD can support strategic human capital management (HCM) within organisations by completing four roles: 1.

Increasing performance and productivity by investing in education, training and development to increase the capabilities held by people and thence performance.

2.

Increasing commitment and meaning by investing in technology and processes that enhance the ability of people to collaborate and communicate in a manner that will enhance organisational goal attainment and the communication of shared visions.

3.

Accelerating the accumulation and integration of knowledge by investing in strategies that will increase the stock of capability available to the organisation, teams, individuals and members of collaborative communities.

4.

Accelerating the ability to hold and exploit knowledge by investing in technologies and processes that will increase the ability of the organisation to rapidly acquire, hold and exploit knowledge necessary to meet current and future needs.

Capabilities are the building blocks for HR and KM. HRD develops the capabilities resident in HC that are required to meet and sustain competitive advantage. By tying HRD to HC we are acknowledging how human development has a key role in the development of assets; whether as intangible knowledge assets, or as tacit or explicit knowledge; or whether it resides inside or outside the organisations operational structure. As they are developed to the stock of capabilities available in the pools of knowledge capital (Social, Human and Structural) grow. This relationship needs careful consideration. Just because HRD is developing HC this does not mean its activities will only create value in the HC pool of capital. This is indicated in the following figure that shows how even the basic transaction view of the HRD process (inputs, activities and outputs), can still be linked to different pools of KC.

Figure 47 Process view of HRD and the contribution of knowledge to different pools of capital


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Transformative HR

Table 13 Capability and the scope and impact of HRD Individual

Group

Organisational

Cross-organisation (community)

Scope

Personal

Team and interactions

Market

Partnerships and networks

Purpose

Build capabilities of the person

Build capabilities available to a team or group aligned by an agreed purpose

Enhance the availability of KC to sustain competitive advantage

Increase the reach of the organisation to share or access capabilities

HRD Measures

Productivity and commitment

Diversity of workgroup

Available pool of talent (bench strength)

Numbers involved in communities

Qualification level of employees

Commitment

Competency of individuals

Collaboration

Effectiveness of people sourcing and development strategies

Range and immediacy of access to capabilities

Quality systems and efficient processes

Service agreements

(Examples only)

Trust Problem solving

Identity alignment and commitment

Cycle time from research/ innovation to market

Employability and replacement cost

Volume of knowledge flow

Employee satisfaction

Cycle time to proficient performance of new appointees

Business customer satisfaction

Employee compensation to productivity equation Organisational image (internal and external) Employee retention rates Customer satisfaction

Paradoxically, placing HRD into a relationship with KM means every effort to develop knowledge will create more knowledge. Building learning experiences that increase the alignment and engagement of individuals to organisational goals and shared visions may grow HC. It also establishes the precondition for improving future learning and establishes know how the organisation can redeploy and improve future HRD activities. This may result in capital value captured in the pools of Structural Capital or Social Capital. Just as this transformative effect caused by HRD occurs at the level of individual capability improvement, so it exists at the organisational level. HRD’s four major roles support HCM enhancements that translate into deep capabilities of the organisation. Deep capabilities is a term used to indicate where a company’s competitiveness resided not just in acquiring the capabilities to do something, but on making the capability a central part of their purpose (Hamel, 2003). Elements of deep capabilities in an organisation may hold some or all of the following features: 

Embodied in the business model.



Embedded in the culture (guides how people think and act within the business environment).



Self-evident (shapes beliefs and assumptions which enable further learning and action).



Embodies how they do business.



Broad (spans all discontinuous change and/or business practices).



Durable (survives the test of time).



Extensive (encompasses all levels and all positions).



Pervasive (foundation for the core promise made by the organisation to employees, shareholders and customers).

Below is the model for developing human capital and capacity. This was fully articulated in our Part 1 chapter on Human Capital Management. Examine the dimensions as detailed.

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Figure 48 A conceptual model for developing human capabilities and capital HC is not itself sufficiently extensive in how it can be managed to address future potential. However, human capacity requires the mental and learning aspects be fully addressed. Based on the above model: Competency + Identity = Human Capital Mental + Learning = Human Capacity It is contended that Human capital is about Current Performance Capacity while Human Capacity is about extending performance capacity over time, or what we will term Potential Performance Capacity. This distinction is not trying to separate out Human Capacity from how HC is managed. In fact, it is desirable if it is integrated. HCM that addresses mental and learning dimensions can therefore better address the development of capital value present in knowledge an individual holds that may have potential future productive value. Managing HC without a reference to knowledge development and value creation in terms of potential or future opportunities is undesirable. The development of the workforce in an organisation requires all attributes defining capability be identified, measured and developed. As indicated in the simplistic figure below, Current Performance Capacity must be achieved to be competitive. However, Potential Performance Capacity must also be accommodated and reported to gain a full view of the human capacity resident in the organisation. This leads to a more complete valuation of an organisation’s KC.


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Transformative HR

Figure 49 The human capacity gauge To move beyond CPC the organisation must develop capabilities exceed a contribution only to job performance. Job performance is tied to the identity and competency dimensions and associated capability elements that have been covered in depth in Chapter 3. Capability elements relating to enduring and embedded capabilities include Mental and Learning dimensions. These dimensions are explained as follows. Cognitive capabilities: The capacity to translate thinking, perception, reasoning, awareness and judgements into action by oneself or through interaction with others. Intelligence capabilities: The capacity to be aware of one’s own and others’ feelings while thinking and acting wisely in human relations. Agility capabilities: The capacity of an individual and, therefore, an organisation to acquire, integrate, and assimilate knowledge. Absorptive capabilities: The capacity to an individual and, therefore, an organisation to learn and the preparedness to acquire, hold and then exploit the resulting knowledge. Now let us bring the earlier work in this chapter on the role of HRD in HC development into alignment with the above model. Table 14 Aligning the role of HRD in HCD with deep organisational capabilities Role of HRD

Deep capabilities enhanced by HRD

Increasing performance and productivity

 

Increasing commitment and meaning

 

Enhancing domain specific competencies (skills and knowledge); and Enhancing Identity capabilities (collaboration and cultural based). Enhancing identity capabilities (collaboration and cultural based); and Enhancing mental capabilities (Cognition and intelligences).

Accelerating the accumulation and integration of knowledge



Enhancing learning for agility capabilities

Accelerating the ability to hold and exploit knowledge



Enhancing learning for absorptive capabilities

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A framework for HC Development It is now possible to posit a reference model for the role of HRD in HCM within an organisation actively seeking to improve both performance and Knowledge Capital value. It is a reference model because it is a basis for others to interpret and modify to achieve their contextual outcomes. Nevertheless, it is advanced as a comprehensive basis for developing HC.

Figure 50 Human Capability Development reference model © Bowles, 2005, with permission. Learning is not isolated to any one stream or element in the reference model as it is considered to be omnipresent factor requiring intervention across all levels and dimension of the model. We depict the model under the circus tent, for this is a neat parallel to the noise, diversity, and range of experiences required to effect this model!

Designed in practices: HR activities, capabilities and competencies Organisational structures and their impact on job design As identified in the introduction, job design and job definition has taken on a process role in organisations. Within many Australian organisations the term “Industrial Relations” is used for the department that takes on the role of job design, the title alone without further analysis leads us to the conclusion that the focus is on processes. Job design therefore has been used as a tool to achieve operational efficiency as opposed to effectiveness. 

Efficiency focuses on functional activities to achieve process outcomes, while;



Effectiveness focuses on strategic objectives to achieve organisational performance and environmental fit.

Job design has had a focus on functional roles within the organisation rather than on the development of integrated outcomes towards organisational performance. This division between operational and strategic objectives can be seen in many other aspects of organisational activities.

The integration of strategic and operational activities Changing organisational structures identified in the introduction have led to an integration of strategic and operational activities, the middle management layer within organisations which separated operational and strategic activities now no longer exists in many organisations and job design must take this into account.


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Job design must identify the level of autonomy in a job, and as already stated how can we build knowledge and decision-making networks operate and be directed towards organisational objectives.

Figure 51 Variations in standard organisational designs Changes to organisational structure necessitate a change to the design of jobs; greater self-direction and autonomy needs to build into the design of jobs to reflect this.

Designing jobs for individual performance The flow chart below is a simplification of how job design takes place within an organisation. Job design simply put is the identification of performance measures that focus the individual efforts towards objectives that lead to organisational and individual development.

Figure 52 Performance management and development process

Organisational structures and job design We have identified then that job design, increasingly moves to integrate strategic and operational objectives within jobs. The range and scope of Job design therefore must relate to the organisational structures in place. An identification of organisational structures and how they relate to positions or job design is briefly outlined below. Functional organisational structure Functional organisational structures are based around roles within organisations, occupationally specialised groups are arranged together to achieve a great degree of efficiency in resource usage. Grouping functional specialties together minimises duplication and provides efficiencies through economies of scale. The major

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problems associated with functional organisational structures is that they limit individuals perspectives to functionally specific areas and expertise is developed along functional lines rather than on ability to produce outcomes. Outcomes in organisations are not limited to one function in the organisation. Jobs in this form of organisation will be based around functionally specific tasks and the level to which these have to be performed. Definition will be based around function within the organisation. Divisional organisational structure Divisional organisational structures attempt to build organisational units based upon areas of results, which will operate independently form each other, each having their own functionally specific areas. Divisional structures are common within automotive companies, eg. Separate divisions may be trucks, components, cars, etc. This structure provides a plethora of managers with generalist strategic knowledge, so provides a good stream of management development. The major problems experienced with divisional structures are duplication of effort and competition within the company may be debilitating. Functional job definition will still be the guiding principle for job design but a wider range of job content will exist. Simple organisational structure Centralised-flat organisational structures primarily exhibited by small businesses. Centralisation of decisionmaking and organic nature of the organisation tends to lead to information overload at the top, and limits strategic analytical capacity. In many organisations structured in this way role and job definition is not solidified, work is project and outcomes based. Matrix organisational structures Matrix structure have a dual chain of command, a functional structure is used to achieve economies of scale but overlaying this are managers responsible for specific products, projects and programs. Matrix organisation benefits are that it can facilitate coordination of a multiple set of complex and interdependent projects. The major disadvantage is that it creates confusion and promotes power struggles. Network organisational structures A network structure has a small core that relies on relationships both internal and external that provide skills and resources for particular projects. Because of the flexibility of network organisations, and the limited need for structure start-up costs for projects are low. The major problem associated with network organisations is the low levels of commitment developed to the core organisation by participants.

Developments in work design The design of jobs within organisations has mirrored the development of HRD. As the basis of job design is the identification of components of a job through analysis of existing jobs. From functional role to individuals capacity The focus for HRD and the design of jobs has changed, but these changes have been complimentary to each other rather than a replacement of traditional views with new ideas or concepts. Initially job design must follow an identification of functional components of jobs in the workplace. The following is a brief summary of the genealogy of job design. Rationalisation The basis for identification of jobs must be the identification of required functional components of jobs. Scientific management principles have been built upon since Fredrick Taylor produce efficiencies in production techniques through definition of tasks carried out by employee, however the idea that the identification that job components can be restructured to improve efficiency of processes still holds true. Job specialisation recognises the efficiencies that can be created using scientific management principles. Scientific management principles provide us with the idea that analysis of job tasks can be linked to more effective work towards outcomes. Job content In order to combat lack of motivation, commitment caused by the dehumanising aspects of work behavioural aspects were identified and an attempt was made to integrate them into job design. People doing repetitive job tasks isolated from real product outcomes did not achieve productive potential. Job content, job roles and job enrichment all recognise the behaviour aspects of individuals at work.


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The identification of job content is the recognition that people in organisations are not machines but that behavioural aspects of individuals affect individual performance in jobs. The content and structure of jobs has a significant impact on the performance of individuals. In the design of jobs there needs to be an understanding of behavioural principles to ensure that individuals are committed to organisational performance. In the design of jobs, improved performance was achieved by including a range of task within a job role. Role content Role content is the identification of individual jobs within organisational contexts, relationships or individuals to groups within the organisation are as important as the job content or the job definition in the contribution to performance. Job content describes the individual attributes of a particular job whereas role whereas role content describes the relationships between participants within the organisation. Empowerment Empowerment focuses providing some control over work practices and procedures. Alienation of jobs and tasks for individuals comes from two sources. Firstly the when individuals are separated from the satisfaction achieved in competing a product or the and when they have little control over their work. Incorporating self-direction in job design satisfies two purposes. Increased job satisfaction and reduced organisational resources are needed to manage staff. Quality management systems provide the best example of self-directed work for teams.

Structuring work within organisations Structuring work Work is structured in a number of ways reflecting organisational structures the balance between, specialisation and generalised integrated work tasks. Job specialisation Emerging from manufacturing making jobs as simple as possible meant that workers could be used to perform individual tasks in a process. Finding the most effective way to complete these tasks and having workers replicate these identified best way, achieved productive efficiency. Job specialisation is an effective way of performing routinised tasks. All jobs have a component of routinised tasks to be performed, however job specialisation does not recognise the human component of labour, alienation occurs Job rotation Job rotation is an attempt to reduce the detrimental effects of specialisation, job rotation moves employees between a number of jobs, usually on at the same level within the organisation, job rotation broadens employee's experiences, and reduces the likelihood of boredom with jobs. Job rotation has been used for management development to give junior managers an understanding of business by rotation them through operational jobs and developing executive managers by rotation them through operational management roles. Problems associated with job rotation include, increased training costs, individuals achievement of efficiency is wasted, the number of employees learning new tasks at any one point in time, and finally commitment to work group and organisation may be low because of constant changes in working relationships. Job enlargement Job enlargement is the reintegration of tasks in jobs in an attempt to provide meaning for individuals. Job enlargement involves performing the whole process instead of specialising in completing just parts of a process; job enlargement recognises the alienation that takes place by isolating individuals from the final product or service. Job Enrichment Job enrichment gives employees greater control over their work, greater control of work processes produces greater commitment from workers to work, employees are allowed to assess and correct their own performance. Work teams Teams are an attempt to reintegrate work while retaining the efficiencies produced by specialisation. Two basic types of teams exist, integrated work teams and autonomous work teams. Integrated work teams are assigned tasks and they can delegate and arrange task completion generally they will the members will be on the same level with an appointed supervisor. Autonomous work teams are more vertically integrated and have greater discretion to act.

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Approaches used when designing jobs Job design is initially must be a process of defining a range of organisational tasks for an individual to perform. Because in most cases it is not possible to match individuals with job roles within organisations, jobs in the past have been designed around generic skills; knowledge and abilities to deliver specified results for organisations. Jobs design may be based around processes, completion of specific tasks, around more generalised competencies and traits identified as generic to the job level and function or a list of performance criteria may be listed for the job or key results that the incumbent has to achieve. The diverse ways of analysing job content and job outcomes has in the past made it difficult to achieve any consistency in cross organisational or cross functional HRD activities. This approach to job design is most evident in the time it takes for new employees to adapt to new positions. Some time is taken to adapt to new organisational practices. The induction time for new employees can be identified as time taken to adapt to job roles produced by some form of job design. Studies in job design outlined in the article below have identified a myriad of approaches when designing jobs. Four basic concepts in job design have been identified, motivational needs, functional needs, psychological constraints and biological constraints The four components of job design have been placed on a graph below. It is possible to map jobs below in relation to the type of organisational structure the focus for particular jobs and to therefore design jobs that are consistent with environmental needs. As identified earlier in the chapter there are a range of options for integrating the individual and the job available. Job design must fit within the general principles of human behaviour, as was stated in the article job design that is outside an individual’s physiological, psycho-motor, or cognitive range will lead to dysfunctional outcomes. As has been identified within quality management principles 80% of problems lie with the processes used and this surely must apply to job design.

Figure 53 Components of job design The arrow in the diagram represents the general trend that jobs are taking, the reintegration of work increases the individual motivating factors within jobs while the emphasis on knowledge and intellectual capital places a focus on psychological aspects of work. Quality management systems have moved manufacturing jobs always from a focus on functional specificity through the development of team structures and have devolved cognitive processes downward and provided empowerment and self-direction to individuals in jobs. Knowledge based organisations then must emphasise motivational and psychological aspects in the design of jobs.


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Some examples of how jobs could be plotted on this chart in each quadrant areFunctional efficiency, biological constraints - traditional manufacturing uses this form of job design, a production worker needs to work to biological capacity and is provided with functionally specific tasks. Motivational needs biological constraints - traditionally trades take this approach to job design, the integration of tasks and the increasing independence as experience grows is all individual motivating factors. Functional efficiency, psychological constraints - traditional management roles have used this approach in job identification and job design. Motivational needs psychological constraints - Entrepreneurial roles and business consulting through informal development exhibit these traits. Understanding the above principles of job design can in the design of jobs and the analysis and redesign of existing jobs help to develop jobs consistent with organisational structures and generic traits previously seen in these types of jobs.

Profiling individuals within organisations Capability profiling requires the identification of the skills, knowledge and identity factors that support the ability of the organisation, team and individual to attain required outcomes. The outcomes indicate the standards for learning, performance and capabilities necessary when responding to future customer and market demands.

Functional job profiling Profiling of individuals within organisations has reflected traditional management principles; that is, jobs and components of jobs have been seen as functionally specific. Jobs therefore have been described in terms of the functions or tasks they fill without reference to the cultural or communications environment of the organisation. While treating jobs as cogs in the machine does produce structural efficiencies, it does not recognise the truly productive aspects of individuals, that is, the ability to adapt to changing circumstances and the individual ability to innovate and find solutions to problems. Having individuals fit into clearly defined roles reduces capabilities for performance and inhibits innovation.

Humans are not predictable, mechanistic cogs in the organisational machine as portrayed in Charlie Chaplin’s Modern Times, the famous satire of urban industrial working conditions in the first half of the 20th century, featuring Chaplin as the ‘Little Tramp’ working on the assembly line. See including video clip http://video.google.com/videoplay?docid=8936278790735 10155).

Profiling human capital Business profiling as it is currently undertaken provides an identification of the skills gap in performing current jobs within the organisation. Skills-based needs analyses have identified functional expectations of positions. These analyses are most successful where specific functional positions are based on job activities within processes that achieve defined process outcomes. A skills-based profiling of jobs is limited in identifying knowledge components of jobs. Skills-based descriptions of outcomes and jobs echo more mechanistic forms of organisational design and tend to lock in structural relationships and many different forms of central authority and control. Psychological testing of knowledge or non-skills components of a job has been limited to general traits gauged against existing office holders that are considered ‘proficient’. It has not focused on an individual’s capability or capacity to perform. Traits have been measured to determine behavioural compatibly between individuals and job roles; these have been retrospective judgments by researchers and managers in terms of individual traits that have been seen to relate to performance in particular jobs. The identification and delivery of knowledge components of jobs at least at the management level have been provided through educational streams; universities have provided functional job-related vocational education

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through post-graduate study. Management competencies have at least indirectly been identified in relation to general educational qualifications. Capability inventories are a dynamic business tool; they are the embodiment of the competencies, cognitive factors and experience required to achieve competitiveness as well as the basis for framing training and development, career development and organisational development. The following table identifies some of the differences between current skills profiling and capabilities within organisations. Table 15 Comparison between skills-based audits and capability inventories Skills-Based Approach

Capability Approach

Tasks can be described using a single descriptor

Tasks vary with time and situations and interpretation of data must consider these variables

Information is based on current performance data and projections

People’s perceptions are an important variable to measure

Reality can be quantified

Actions define current reality

Logic based

Value based

Performance is real and can be quantified if the correct instruments are used

Individuals can adapt to context to complete task

Training-embedded behaviour

Training continually redefines culture

Tasks define jobs

Tasks may define multiple purposes and futures

Individuals need job descriptions to define performance expectations

Job descriptions rarely reflect current performance reality but help to describe expectations and career pathways

Skills analyses define the portability of individual competencies between jobs

Capabilities define multiple futures

Defines current job roles within organisations

Identifies organisational performance needs

Provides efficiency

Provides adaptability

Focus is on job performance

Focus is on organisational outcomes

Skills-based profiling focuses on functional processes and as such produces task efficiencies that are, however, one step removed from organisational outcomes. Therefore, there is a focus on the processes involved and not the outcomes needed to be achieved; it also reduces the ability of the organisation to adapt to changes in the operating environment. Capability profiling, on the other hand, is linked to strategic outcomes for the organisation and the readiness to continually change and meet new challenges. Participants’ roles are directly related to key result areas for the organisation. Functional efficiency is reduced but innovation and agility are increased.

Linking individual and organisational capabilities Within the organisation, individual and organisational performance must be aligned to ensure that energy and effort are not wasted. As previously noted, one problem associated with using capabilities rather than functionally specific job roles is that it sacrifices efficiency for effectiveness or a focus on outcomes. The key to the process of aligning individual performance to shared outcomes is the ability to develop a 'shared mental model’ or 'shared frame of reference' that can drive activity within groups or within the organisation to provide a focus for individual efforts. The following table identifies the alignment that needs to take place between organisational and individual capability management.


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Table 16 Capabilities and the three levels of organisation application Performance Variables

Organisational Level

Group/Team/Process Level

Individual Level

Is the organisational purpose known and are strategic goals 'in tune' with the reality of economic, political and cultural forces?

Do the process goals enable people to work together to achieve both organisational and individual ends?

Are the professional and personal goals of individuals consistent with that of the organisation?

Performance

Does the enterprise system provide structure, policy and creative frameworks that support improved ways of attaining performance?

Are processes designed to permit individuals and groups to modify systems to ensure that they meet anticipated contingencies?

Are individual styles of learning and creative processes respected?

Expertise

Does the organisation select for capabilities (e.g. for cultural 'fit' as much as 'skills')?

Are processes and teams developing expertise to respond to change and new customer demands?

Do individuals have the applied competencies to master both task performance and work in a specific context?

Future Capacity

Does the enterprise manage human, infrastructure and social capital to achieve its mission/goals?

Are management systems and processes designed to encourage learning that improves current and future capacity?

Does the individual want to perform, learn and respond to customer demands?

Cultural Identity

Is there a sense of shared identity and convergence of values, beliefs and norms to support desired performance?

Are interrelationships identified and managed to encourage diversity, creativity and innovation while achieving team and process outcomes?

Is the individual committed to work and innovation while respecting divergent views and ideas?

Strategic Goals/ Purpose

(See also Ruona & Lyford-Nojima, 1997:791)

Individual development and job design The HRD function within organisations is to provide skills, knowledge and socialise people and to help individuals and groups become more effective. The poor linkages between recruitment, job design and desired organisational results require a range of options to be put in place within organisations. The HRD professional then closes the gap between these three variables through training and individual development strategies and in the redefinition of jobs. As we have identified in the last topic job design has as a core concept that individuals will adapt to the specifications of the job design. Job definition is based around organisational tasks able to be carried out by an individual. The range of job design is provided by the biological, psychological and functional tasks able to be carried out by an individual in the workplace. The last variable in job design motivation, in the form of job enlargement, job enrichment and linkages with team structures. In previous chapters, we defined individual capabilities as the combination within and individual of the following  

Competence (domain specific skills and knowledge); and Identity (situated cultural, values, behaviours, traits, roles, etc.)

The identification of skills in the workplace is a relatively easy process and indeed, for potential applicants, instead of the notoriously inaccurate interview process there is sometimes a skill exercise to determine compatibility of applicants with jobs within organisations. Past experience is the initial characteristic used to determine suitability for the interview process in recruitment. The cognitive ability of applicants against specific key result area of organisational performance and communication and cultural awareness criteria has received little attention.

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One of the primary concerns for HRD professionals then in an attempt to match individual and organisational development is correlating the relationship between individual capabilities and the way they can contribute towards organisational performance. The question asked of employees should not be how well do they do their jobs but what do their capabilities contribute towards organisational health and wellbeing.

Needs analysis and organisational performance The primary skills identification exercise carried out by HRD professionals within and organisation is a skill analysis. A skill analysis is an identification of existing skills within the organisation and how these skills relate to jobs generic definition of jobs. Conducting needs analysis in organisations provides critical strategic information for executive management; it provides a snapshot of the current skills base within and organisation and how this skill base can be advanced to promote process improvements. The traditional approach used in needs analysis can provide for HRD professional significant indications of skills gaps and the development of training to provide these skills can facilitate organisational, performance.

Building on core competencies and capacities HRD professional have been successful in determining core skills required in jobs at all levels, competency identification in Australia is substantial and profiles of skills required in functional jobs at all levels of the organisation are easily accessed. Refining skills or competencies within organisations can bring about process improvement for existing employees and this will continue to be an important part of HRD activity within an organisation. The argument that has been pursued in the course is not about process improvement but about the radical change in organisations taking place, the options are between the development of workplace communities and network organisations. If organisations are to retain control of knowledge and intellectual capital within the organisation then HRD professionals need to map individual capabilities against organisational key result areas. What do individuals contribute to core business and how can they extend organisational capabilities.

Changing needs of the workplace: innovative work design. The changing nature of organisations reduces the importance in defining job roles or for job design. Defining jobs in terms of functional roles that will change in a short period of time is less useful than defining individual contributions to organisational performance. Developing capability sets then is an activity that may replace the job design as the defining activity for individual action within organisations. With this in mind then capability sets will be developed around flatter less hierarchical structures and the devolution for completion of activities to a team specially blended with the individual competencies, traits knowledge and experience to achieve a result points to the development of networks of knowledge both within and outside the organisation. Another aspect of organisational design affected by the development of capability sets is definition of departments and functional areas within an organisations they only make sense when physical resources are present, a department guards budgets and tangible resources but intellectual capital cannot be captured in this way and it is difficult to stop an individual form sharing knowledge or intellectual capital. As has already been identified the challenge for HRD professionals is to match individual capabilities with organisational key result areas. If an individuals can work towards core business results with one team or group in the enterprise and add value to work with an entirely different knowledge network a functional job description will be an inhibitor.


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9. Developing Deep Organisational Capabilities Learning Introduction The challenge confronting current managers and those dealing with human capital in organisations has escalated dramatically during the commencement of the twenty first century. The term human resource development (HRD) indicates a process orientated towards identifying, organising, transferring and developing skills and knowledge required by an organisation to achieve productive outcomes. From the late 1990s the demand placed on HRD professionals shifted well beyond this narrow scope. As outlined in the previous chapter the drive to manage knowledge and continuously improve changed the way businesses sought to manage human capital. Market conditions and extended relationships with other businesses (i.e. in e-business business to business relationships or extended supply chain networks), necessitated a focus on people and the value of human capital in developing advantage for an organisation. As proposed in Chapter 8, Transformative HRD can target five deep capabilities. This chapter will address how HRD can target those shaded below. Table 17 Aligning the role of HRD in HCD with deep organisational capabilities Role of HRD



 


 










We will examine these deep capabilities from a combined viewpoint. Human capital within a learning organisation may be seen as a quantifiable capital resource built on the Knowledge Capital (or Intellectual Capital) held by groups and individuals. The old mind-set of viewing employees as a cost must be changed to valuing people possessing capabilities that enable organisational capacity. In this chapter, we examine how enterprises can orient and engage capabilities within its jurisdiction. This study will also refer to the skills and mind-set managers must possess in order to develop human capital effectively within a learning organisation. Our study will move from a study of individual engagement through to the distinct concepts of the learning organisation, and organisational learning. Both approaches demand that a focus is placed upon identification and development of capabilities of individuals and groups in order to sustain organisational competitive advantage. Our study will then move on in the second part of this chapter to examine the translation of how individuals learn into a systematic approach to how organisations learn. Mintzberg points out that the notion of organisational learning is one of the biggest breakthroughs in business and management thinking of the last few decades, and that it is one of the few current management ideas which are sustainable (Mintzberg, et. al., 1998). van der Bent, Paauwe and Williams nicely summarised how seemingly different fields of theoretical endeavour, individual and organisational level learning could be linked (1999). They reported that, based on work by Theorists such as Weick and Westley (1996:440), ‘linking processes’ and propose could be identified in three areas (Van der Bent, et al., 1999:379): 1.

Culture. Notwithstanding their view that culture is a complex and much debated concept, culture is an important process linking how individuals and organizations learn. This is because ‘it is embodied in


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Developing Deep Organisational Capabilities - Learning

specific, visible, tangible products of social systems' (such as artifacts, rules, procedures, etc.) (Weick and Westley, 1996, p. 442). 2.

Organisations as repositories of learning. This concept is vital for understanding and gaining evidence of organisational memory and memory tracers.

3.

Organisations as self designing systems. Following Purser and Pasmore (1992), organizational structures and systems that act as self-diagnosing devices can give rise to adaptations in the face of changing environmental conditions, and these systems thus act as a storage site for learning in the organizational rather than the individual sense.

Our study will explore the confluence of these areas in a comparative analysis of organisational learning and the learning organisation theoretical approaches. From this study we will cast light on how the introduction of learning in organisations – theory, practices and philosophies alike - have continued to redefine HRD’s relationship with knowledge management, organisational design, and learning at individual, team and organisational levels.

Individual learning and engagement In chapter 8 we presented a reference model for HC development. We also overviewed how strategic HRD can design-in practices. In this section we will extend this study to examine how organisations can build Structural Capital (STC) in the systems and processes used to engage employees.

Figure 54 Human Capability Development reference model © Bowles, 2005, with permission.

In undertaking the study in this section we will not only examine engagement we will examine the preconditions for building Human Capital dimensions of Leadership and Competence. We will examine these dimensions under headings associated with the two Deep Capabilities of: 

Enhancing identity capabilities (collaboration and cultural based); and



Enhancing mental capabilities (Cognition and intelligences).

While ‘Enhancing domain specific competencies (skills and knowledge)’ are an essential component we are not going to focus on these aspects as they have been well covered in general literature on training and skills development. This is not to reduce their importance or the emergence of new approaches. It is simply a matter of time and space in this course.

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Enhancing identity capabilities (collaboration and cultural based)

Identity, culture and convergence of action Fundamentally, identity is the source of meaning for individuals (Castells, 1997:6; Whetten & Godfrey, 1998:163). In the early 1990s researchers began in earnest to examine identity as a means to provide a metaapproach that could encompass many of the human elements required to explain how individuals and organisations perform and gain advantage within an organisational context (Dierickx & Cool, 1989; Dutton & Dukerich, 1991; Giddens, 1991; Dutton, Dukerich & Harquail, 1994; Abbinnett, 2003). The importance of these studies was to highlight:    

Many resources typically associated with individual or organisational performance were not ‘tangible’ or easy to transfer; Many tacit beliefs and attributes of a workforce were not considered as assets or collectively managed (i.e. individuals’ identification with an organisation’s goals, motivation and commitment); People defined themselves through work; and Organisations were not acknowledging how their identities were being shaped by individuals and their interaction.

In effect, identity was supplying a means to study and isolate the ‘meaning of events and even influences’ and the ‘criteria for deciding the success, failure, effectiveness, or value of actions and outcomes’ for staff and organisations (Gioia, 1998:23). Identity has also been viewed as: an individual, group and corporate capacity that stimulate the relay of visions, practices and decisions relevant to agreed outcomes. It is an essential component of building commitment, internally and externally, and orienting individual actions to collective purpose (Bowles, 1999:66). Individuals, groups and organisations may hold multiple identities that provide meaning. The components being combined to forge identity and meaning may therefore vary with any organisational or performance context. Still, organisational, group and self-identity were being forged by common components in different ways. Identity at all these levels was being forged by the need to ‘belong’ or possess a sense of not only ‘who am I?’ or ‘who are we?’, but also how people differentiate themselves to others. Presented in this manner identity is both a construct defining the characteristics for the ‘self’ and a basis for action that affirms and sustains identity (Gioia, 1998:19). Meaning on the other hand is more about the ‘symbolic identification’ by the individual with the purpose of the action (Castells, 1997:7). While the search for meaning and identity may be common, its construction differs. Diana Gioia identified three key elements research seemed to confirm as the factors influencing how individuals form a sense of organisational identity (1998:21):   

The purpose taken by organisational members to be central to the organisation; What distinguishes the organisation from others; and What is perceived by individuals and teams to be the enduring factors that guide current action, interaction and information, while building on the past and presumably informing future action.

Individual and collective identity may be refined and developed as individuals interact and associate within an organisation. The formative three elements shaping individual and collective organisational identity may occur through:     

Subscription to the core visual and symbolic iterations from the organisation (brand, documents, information, etc.); Individual needs and preferences (personal alignment with the organisation as it offers a pathway to satisfy future requirements); Expectations alignment (personal wishes and hopes satisfied through organisational actions); Endorsement (organisational support and validation of individual aspirations and purpose); and Reinforcement and recognition received as relationship evolves (Castells, 1997:22; Whetten & Godfrey, 1998; Kim, 2000:317–19).

Individual and collective identity influences organisational culture through the shaping of beliefs and values. These can vary depending on the individual’s level within the organisation and the types of networks or interpersonal relationships held. Beliefs and values may be simply defined as: Beliefs

Shared truth based on tradition, religion, emotion, a common guide for behaviour.

Values

Shared personal judgments/preferences about what is considered good/bad, likes/dislikes that serve as broad guidelines for social life.


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For many leaders the prevailing organisational culture is perceived to be directly linked to their own roles and responsibilities. Owner–operators or entrepreneurial leaders most often ‘imprint’ upon others and an organisational culture the beliefs and values they personally espouse. Some line managers may also feel a close affiliation for the link between organisational culture and individual beliefs and values. For instance, leaders responsible for external customer relationships may be particularly attuned to how individuals internal and external to the organisation perceive the organisation’s reputation, brand, promise or commitment to the customer. All these are identity factors that reinforce the value of the company and its ‘service culture’. Ernest Bormann (1983) argued organisational culture was built upon the expression of values and beliefs workers shared. He used the symbolic convergence and conceptualised shared purpose. A public consciousness is a crucial element in a group or an organization’s culture. Culture in the communicative context means the sum total ways of living, organizing, and communing built up in a group of human beings and transmitted to newcomers by means of verbal and non-verbal communication. Important elements of an organization’s culture include shared norms, reminiscences, stories, rites and rituals that provide the members with unique symbolic common ground (Bormann, 1983:100). Bormann contends that the symbolic constructs of reality shared within a group evolves new patterns of reality. He argues, for example, that technological change - the revolution in computers and information technology - is preceded by symbolic change. According to this argument, the preconditions for change are created symbolically before the technology is introduced. Therefore the basis for responding to organisational contingencies is built into how an organisation already understands its core purpose and how well individuals can collaborate to achieve these outcomes. Building communities (groups of individuals) with shared meaning may seem a very ephemeral concept, especially for those studying management (Pacanowski & O’Donnell-Trujillo, 1982:115-130). Nevertheless it is an illuminating study if we seek to build a basis for how we communicate and how our communication can build a culture of commitment that balances individual and collective outcomes. Identity building will be even more crucial as changed labour arrangements impact upon organisations of the future. The study of shared meaning has three components or steps (Bowles, 1999:142):   

co-orientation convergence shared meaning

The practice of co-orientation involves individuals bringing their unique orientations together to coordinate their meanings. It is a learning process in which people watch others and develop response patterns that co-orient them towards the practices and procedures used in the workplace (Johnson, 1977:68). Writing about how to build visions that create purpose and innovation two key factors must be addressed: Alignment: in which decision makers agree on and affirm a basic direction; and Engagement: involving the teamwork required to move in a particular direction. Both alignment and engagement are processes involving leadership interaction and co-ordination towards a vision and a purpose. Alignment may involve every organisational member or a particular group of participants. Either way, there is a communicative process to gain agreement. Engagement encompasses all organisational members involved with the implementation of the plan. Engagement involves the management of meaning towards symbolic convergence. Alignment to purpose is critical. However without engagement two different realities may exist within an organisation. One may be the leadership view of what the organisation is and will be, and the other may entail an individual employee’s vision of what is and will be. Purpose can change but building visions for the future is a far more powerful tool for orienting individual and collective purpose. To build shared meaning an organisation must first view itself as a community of individuals with values and beliefs they may hold individually or share. Co-orientation needs to occur across different sub-sets of the organisation and external contributors to ensure collective actions can deliver strategic outcomes. Organisations seeking to build shared futures need to promote a holistic approach to the communication of vision and purpose. Convergence is typified by individuals converging towards agreed outcomes while individually they may hold outcomes appropriate for other networks, groups or situations. For instance, a worker may attune and converge towards outcomes agreed at the place of work, but this does not deny other important outcomes they may hold as a member of the school’s parents and friends association, a labour union, or as a coach of the local football team. The task for leaders is to shake out the restrictive practices caused by different purposes, values, beliefs or meanings that individuals ascribe to work practices and get individuals or teams to communicate holistically

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across the organisation. Attempts to achieve this by relocating work units, job rotation and other practices, eventually fail because cliques exist across the functional divides constructed by organisations. Shared meaning refers to the construction of an agreed purpose that is underpinned by well-established values and beliefs. It has to be more enduring than goals and objectives and it has to reinforce the prevailing organisational culture. For transformational leaders this may mean determining a comfort zone for staff both to operate within and to develop convergence of purpose. Such a comfort zone is predicated upon conveying meaning to all members that the organisation's desired outcomes may not necessarily be of collective benefit all of the time. However, individuals need to know how to contribute to plans and actions that are important to them and how what is important to them is instilled in the meaning being reinforced by all communication. The figure below gives a simplistic representation of the orientation of individual and group purpose towards what has to be achieved to deliver performance. Communication in this setting is about task outcomes and compliance. The figure below depicts the convergence between the individual and the organisation of work. The development of shared meaning and creation of an identity between what an individual is expected to do (performance) and their motivations to achieve this outcome within an organisation is fundamental to the attainment of purpose. A community of individuals with shared meaning can meet multiple purposes while not having to rediscover why they interact or the individual’s role in the networks of interaction. This permits communication to extend well beyond performance matters and create commitment beyond goals and objectives. Performance today can be attained while requirements for tomorrow are already built into the communication processes, identity and culture.

Figure 55 Where meaning is split between individual and group

Figure 56 Where meaning is shared Leaders of the future must accept that the value of human resources does not solely reside in the individual's contribution to processes that result in productive outcomes. Rather transformational leadership extends beyond the task of communicating to enhance links between productive capacity (means) and strategic objectives (ends). It also encompasses the processes that enable individuals, groups (inside and outside the organisation) and the organisation itself to achieve agreed outcomes, respond to new demands and redefine purpose that underpins everyone’s actions.


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Potential of any organisation relates to the ability to harness all the capabilities an individual may hold. This extends beyond the skills required to perform to also include those capabilities they may hold that are not directly employed. All the capabilities an individual holds must be respected if an individual’s potential is to be harnessed to meet the organisation’s purposes; now and in the future.

Figure 57 Building identity through convergence towards shared futures © Bowles, 1997, by permission.

The above figure depicts the model advanced where leadership is aimed at stimulating co-orientation towards an enduring purpose. However, immediate engagement is achieved through convergence of action towards immediate performance outcomes. This approach not only involves the leader identifying goals and ensuring the competencies and identity attributes (behaviours, roles and traits) required to achieve performance are present in their direct reports, it also suggests there is a much wider imperative to construct a vision of the future everyone can share. This vision does not have to replace individual aspirations, but it has to be one staff can attune to and commit to achieve through purposeful performance.

Enhancing mental capabilities (Cognition and intelligences)

Cognition The study of cognition is extremely complex. It is dominated by diverse viewpoints of cognitive scientists, psychologists, educationalists and the like. The emphasis of this short section is to draw attention to research that: Links individual cognition, mental models and thinking with learning and performance; Ties individual learning to a social context for the activity (situated); and Shows that knowledge is more than stored and transferable facts and experiences or codified skills, it also must include the construct of knowledge that occurs through everyday interactions between individuals and their environment and non-prescriptive processes that reconceptualise what is ‘known’.

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Figure 58 Cognition and confusion of its study (Clancey, 1995:12)

Clancey (1995) re-emphasised that in terms of cognition individual learning and doing are not the same activity. Knowing how to do something is not the same as transferring that knowledge into an actionable outcome, the ‘know what’ as opposed to the ‘know how’ (Brown, Collins & Duguid, 1989:32). In addition, what one perceives to be true may not align with what is experienced. Beliefs developed through learning that are conceptual, abstract and isolated from practice, no matter how well formulated and understood, may still be inconsistent with the ‘realities’ of a situation. Building on Lave’s earlier work (1988), Brown, Collins and Duguid stressed that ‘authentic activity’ was planned, completed and reviewed in conjunction with the environment and was quite distinct from a thinking or learning process that may have been embodied in an education or training process (1989). Every person possesses cognitive capabilities which vary and each individual may possess knowledge that cannot be codified or placed into rules. Yet individual cognitive capabilities may also hold value to the organisation. Research on the cognitive aspects of learning moved in the late 1980s beyond descriptive mechanisms that mapped individual learning and its transfer into performance outcomes (Lave, 1988:70), which all sat within objectively described and studied parameters (Clancey, 1995:12). Study on ‘cognition’ evolved towards models that distinguished between knowledge and skills to ‘do things’ and cognitive or intellectual capabilities. Further research completed from the mid- to late 1990s indicated that there may in fact be no important physical aspect to conceptualisation. In effect, knowledge is socially embedded, and learning occurs from socially mediated collaborative transaction. Each transaction is conceptually integrated with the person's identity, either as part of the wider society, as part of their personal activities or as a member of a group. Fundamentals such as the person’s language influence identity and shape learning processes that involve knowledge transfer. During the learning transaction, individual perceptions, beliefs and behaviours are modified and coordinated. Pre-formulation of what an individual may think and do ultimately promotes linear responses but hinders cognitive growth and flexibility. More effective means to build cognitive capacity is now seen to involve an individual deliberately and purposefully accessing learning, processing information and making judgments, choices and evaluating consequences of their actions or choices. Making choices, aligning the personal identity with the required tasks and conscious reflection all build purpose and hold meaning. In this way, cognition and the study of cognitive processes are moved away from the prescriptive studies to a point where an individual is not an instrument of the environment or an organisation, but an active player. They are what Bandura termed social theorists. Their experiences, social networks and beliefs can be directed and drawn upon to guide actions and interactions (Bandura, 2001:3). As agents of their own future, people can choose or undertake actions that are intentional, planned and reflective of personal judgments and beliefs and regulate effort (Bandura, 2001:5–9). Just as individuals hold beliefs and experiences that guide action, so do groups. One approach, social cognitive theory, incorporates the previous study of dispositional perspective and self-efficacy. Unlike some behavioural


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and cognitive theories, social cognitive theory encompasses beliefs and factors that individuals hold prior to learning that might influence behaviour, independent of desired learning and performance outcomes. Group attainments may extend beyond the individual beliefs and self-efficacy. As Bandura (2001:12) succinctly states: Because the collective performance of a social system involves transactional dynamics, perceived collective efficacy is an emergent group-level property, not simply the sum of the efficacy beliefs of individual members. Social cognitive theory encompasses that self-efficacy and an individual’s beliefs about their ability to learn and expectations of positive personal or organisational performance outcomes hold greater meaning if the individual can identify positive affect before commencing learning. People’s beliefs about their capabilities to perform successfully are related to their decisions about whether and how much perform, and the degree to which they are able to learn and transfer resulting capabilities into the required standard of performance.

Emotional intelligence (EQ) The concept of emotional intelligence (EQ) can be traced back to Gardner’s (1983) work on multiple intelligences, where he introduced intra- and interpersonal intelligences. The term emotional intelligence appeared in an unpublished dissertation (Payne, 1986) and was next seen in the work of Salovey and Mayer (1990), who developed a systematic theoretical account of the construct, described as a combination of Gardner’s interpersonal and intrapersonal intelligences. Salovey and Mayer (1990:189) define emotional intelligence as: The subset of social intelligence that involves the ability to monitor one’s own and others’ feelings and emotions to discriminate among them, and to use this information to guide one’s thinking and actions. Emotional intelligence has five characteristics: 1. 2. 3. 4. 5.

The ability to understand and integrate emotions with cognitions; The ability to manage such emotions; The ability to appropriately control and regulate emotions; The ability to recognise, understand and empathise with the emotions of others; The ability to manage relationships (Slaski & Cartwright, 2002:64).

Emotional intelligence according to Mayer and Salovey (1997) is a composite of emotional reasoning abilities: perceiving, understanding and regulating emotions. Perceiving emotions consists of recognising and interpreting the meaning of emotional states and their relation to other sensory experiences. Understanding emotions involves understanding how basic emotions are blended to form complex emotions, how experience affects emotions and whether particular social settings produce emotions, specific to the setting. Regulating emotions is about the control of one’s own emotions and the emotions of others. Goleman (1995) popularised emotional intelligence in his best-selling book, Emotional intelligence: why can it matter more than IQ?, which describes the skills involved in emotional and social competence. These include monitoring and controlling emotions and behaviours, coping with frustration and stress, social problem solving and decision making, communicating effectively both verbally and non-verbally, controlling impulses and delaying gratification, working cooperatively with others and initiating and maintaining friendships and other significant relationships. Ross, Powell and Elias (2002) suggest that although Goleman popularised these ideas, research into these types of skills ‘is nothing new’. For example, a critical component of social and emotional competence that had received considerable attention in the literature involves social problem solving and decision making. Success in these areas requires the skills of noticing and understanding feelings, determining and selecting goals, generating alternative solutions, selecting appropriate solutions and reflecting on the process (Ross et al., 2002:43). Coping with stress, an aspect of emotional intelligence described by Goleman (1995), is also a much researched area (see for example, Forman, 1993). Effective coping skills improve one’s ability to handle stress and increase one’s sense of personal competence (Ross et al., 2002). Slaski and Cartwright (2002) note that while environmental factors impact on moderating stress, experiences of stress or negative emotions are also moderated by the way in which individuals appraise and perceive their relationship with their environment. Their study of 320 middle managers at a major UK retailer found a significant link between emotional intelligence and health and performance, suggesting that emotional intelligence may play an important role in moderating the stress process and increasing individual resilience. This is significant as emotional intelligence can be developed through training and experience. Their study also suggests a link between physical exercise, good diet and emotional intelligence as exercising can provide a sense of achievement and a positive outlook (Slaski & Cartwright, 67). Using skills sets that include emotional intelligence has become an increasingly popular consulting tool. According to popular opinion and anecdotal evidence, emotional intelligence can increase performance and productivity

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(Thi Lam & Kirby, 2002). The competitive advantage of using emotional intelligence was confirmed by Goleman (1998:76): Emotional intelligence gives you a competitive edge . . . Having great intellectual abilities may make you a superb fiscal analyst or legal scholar, but a highly developed emotional intelligence will make you a candidate for CEO or a brilliant trial lawyer. A growing number of writers suggest that emotional intelligence is an equal or a more powerful predictor of success than IQ (see for example, Goleman, 1995). Ross, Powell and Elias (2002) suggest that the study of the effect of emotions on performance in the classroom, workplace and personal relationships has been gaining credibility since the mid-1980s. They state that the evidence suggests that emotional and social intelligence is not fixed at birth, and can be developed through learning and experience. Note: Bliss (2001/2004) makes some very important points that readers should note. Emotional intelligence promoted by Goleman and colleagues has been narrowed to a set of competencies (Goleman, 1995, 1998, 1998b; Goleman,, McKee & Boyatzis, 2002). However, in countries with national systems of competency-based management regimes in place (see chapter 2) the competencies presented by Goleman are really a set of behavioural attributes. When applied to leaders Bliss noted these attributes are expressed as follows. 1.

Self-awareness is the ability to recognize a feeling as it happens, to accurately perform self-assessments and have self-confidence. It is the keystone of emotional intelligence (Goleman, 1995).

2.

Self-management or self-regulation is the ability to keep disruptive emotions and impulses in check (self-control), maintain standards of honesty and integrity (trustworthiness), take responsibility for one’s performance (conscientiousness), handle change (adaptability), and be comfortable with novel ideas and approaches (innovation).

3.

Motivation is the emotional tendency guiding or facilitating the attainment of goals. It consists of achievement drive (meeting a standard of excellence), commitment (alignment of goals with the group or organization), initiative (acting on opportunities), and optimism (persistence reaching goals despite setbacks).

4.

Empathy is the understanding of others by being aware of their needs, perspectives, feelings, concerns, sensing the developmental needs of others.

5.

Social skills are fundamental to emotional intelligence. They include the ability to induce desirable responses in others by using effective diplomacy to persuade (influence); listen openly and send convincing messages (communicate); inspire and guide groups and individuals (leadership); nurture instrumental relationships (building bonds); work with others toward a shared goal (collaboration, cooperation); and create group synergy in pursuing collective goals.

There has been debate about whether emotional intelligence is an independent factor of intelligence or a cluster of personality traits (Slaski & Cartwright, 2002:64). The original Salovey and Mayer (1990) model included variables that traditionally belonged in areas outside intelligence such as flexibility and motivation (Petrides & Furnham, 2001:425). Salovey and Mayer’s 1990 model redefined emotional intelligence in cognitive–emotional terms. The model consisted solely of abilities such as perceiving, appraising and expressing emotions (1990:426). Goleman’s (1995) popularised version includes personality variables such as impulsiveness, assertiveness and optimism, which are attributes outside of intelligence. To address this issue Petrides and Furnham (2001) propose a differentiation between trait emotional intelligence and ability. Trait emotional intelligence includes behavioural dispositions and self-perceived abilities and is measured through self-report conducted within a personality framework. Ability emotional intelligence refers to actual abilities, measured preferably by maximum performance rather than self-report tests (Petrides & Furnham, 426). Van der Zee, Thijs and Schakel (2002) explain that the concept of intelligence is a general ability to transform information into new concepts and skills. The ability is inherited. What analytical and emotional intelligence have in common, they explain, is that they both use declarative (understanding the nature of specific situations) and procedural (understanding what to do in specific situations) knowledge and apply this knowledge in a flexible manner (Van der Zee et al., 105). They argue that flexible application of declarative and procedural knowledge


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means ‘understanding what is going on in new and unknown situations and knowing what to do in such situations’. The use and application of knowledge marks the major difference between the two types of intelligence. Analytical intelligence, they argue, concerns problems for which there is one best solution available whereas emotional intelligence concerns problems which can be interpreted in multiple ways and for which there is no one best solution. Van der Zee et al. (2002) also point out that emotional intelligence is situated and will vary based on the environment; there are no absolute standard linking emotional intelligence to organisational outcomes. Emotional intelligence is also believed to influence job satisfaction (Abraham, 2000), play a factor in mentor relationships (Bennetts, 2002), moderate job insecurity (Jordan, Ashkanasy & Härtel, 2002) and imbue eavesdropping with positive and negative emotion (Elfenbein & Ambady, 2002). Emotionally intelligent individuals are capable of setting priorities. When priorities are not imposed externally, the power resides with the individual to redirect effort towards new goals. This leads to increased job satisfaction and commitment (Abraham, 2000). Cooper and Sawaf (1997), in a study of emotional intelligence within an organisation, refer to the need to listen to feelings of ‘inner truth’ that arise from the link between emotional intelligence and intuition. Abraham’s (2000) study of customer service representatives from a diverse range of industries, and a second study of health professionals from the health care, insurance and telecommunications industries in the U.S., found that emotional intelligence has a stronger relationship with organisational commitment than does job satisfaction. The social skill component of emotional intelligence ‘led to the building of strong networks with the work group and possibly with supervisors’ (Abraham, 2000). Thi Lam and Kirby (2002) investigated the link between emotional intelligence and cognitive-based performance using U.S. university graduates. They found that, overall, emotional intelligence — perceiving emotions and regulating emotions — contributed positively to individual cognitive-based performance. There was considerable variance in individual cognitive-based performance over and above the level attributable to general intelligence. However, understanding emotions did not contribute to cognitive-based performance over and above the level attributable to general intelligence.

Multiple intelligences and how individuals learn Gardner (1999:34) defines intelligence as: A biopsychological potential to process information that can be activated in a cultural setting to solve problems or create products that are of value in a culture. He explains that intelligence is not necessarily exhibited in its raw state; rather, individuals prepare to use their intelligence by passing through a developmental process (Plucker, 2002). Intelligence is presumed to be a universal, probably innate, capacity where linguistic and logical use of symbols is privileged in specific cultural settings. Gardner, the founding author on multiple intelligences, challenged the assumptions of specific cultural settings and the emphasis on the linguistic and logical (1999). He developed a set of relatively autonomous human intelligences. These are logical-mathematical, linguistic, musical, spatial, bodily-kinaesthetic, interpersonal and intrapersonal (see also the following figure), as explained below. 1.

Logical mathematical intelligence is the capacity and sensitivity to discern patterns. These learners have the capacity to work with numbers and engage in higher-order thinking. People with this type of intelligence like to complete experiments, solve puzzles/problems, work with numbers, ask cosmic questions and explore patterns and relationships.

2.

Linguistic intelligence is the most well known in the Western world. This intelligence involves sensitivity to the sounds, rhythms and meanings of words and different functions of language. It is the capacity to communicate effectively in writing or orally. Linguistic people like to read, write and tell stories. They may be good at memorising names, places, dates and other detailed information.

3.

Musical intelligence from a neurological perspective is the first of the intelligences to develop. Some suggest this intelligence should be called the ‘auditory/vibrational intelligence’ as it is more than music and rhythm. It deals with the whole realm of sound and vibration — from the natural and/or human environment, from machines, from musical instruments and from voice. The consciousness-altering effects of music, rhythm, sound and vibration are probably more powerful than any of the other intelligences.

4.

Bodily/kinaesthetic intelligence is probably the type most taken for granted. This intelligence is about the ability to control one’s body movements to handle objects skilfully. People with good bodily/kinaesthetic intelligence do well at physical activities and crafts.

5.

Spatial intelligence deals with the relationships and placement of objects in the space-time continuum; that is, where one object is in relation to another. It includes directionality and everything people see: all conceivable shapes, specific patterns and designs, both regular and irregular, concrete and abstract images

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and the entire spectrum of colour and texture. It also includes the capacity to visualise and dream about the possible. 6.

Interpersonal intelligence is the capacity to discern and respond appropriately to the moods, temperaments, motivation and desires of other people. Interpersonal intelligence is about human relationships, collaboration with others and learning from and about people; it is often taken for granted. These people like to have lots of friends, talk to people and join groups. They are good at understanding people, leading others, organising, communicating, manipulating and mediating conflicts.

7.

Intrapersonal intelligence reflects humans’ capacity for self-consciousness, the ability to step back from oneself, reflect on oneself and learn from one’s reflection. People with strong intrapersonal intelligence have access to their feelings and the ability to discriminate among them and draw upon them to guide their behaviour. They have a good knowledge of their strengths and weakness (Gardner & Hatch, 1993; Vincent & Ross, 2001; Gardner, 2002).

Gardner recently added the naturalist category (Vincent & Ross, 2001) to these intelligences. Naturalistic intelligence is related to one’s recognition, appreciation and understanding of the natural world. It involves the capacity to discern and discriminate among species, to recognise and classify flora and fauna and knowledge of and communion with the natural world. Gardner has also added spiritual and existential intelligence, but has not yet clearly defined these two intelligences (Plucker, 2002). Critics of multiple intelligences believe that the eight multiple intelligences are a cognitive style rather than a stand-alone construct (Plucker, 2002). Gardner’s response to the belief that an intelligence is the same as a domain or a discipline was to distinguish it from a domain, which he described as a culturally relevant, organised set of activities characterised by a symbol system and a set of operation. For example, dance performance is a domain that relies on the use of bodily-kinaesthetic and musical intelligence (Plucker, 2002). In his own studies Gardner became convinced that separate psychological processes are involved in dealing with linguistic, numerical, pictorial, gestural and other symbolic systems (Gardner & Hatch, 1993:65). Gardner found that individuals may be more talented with one form of symbol use than with others, and that there was not necessarily any carry-over to other forms of symbol use. This finding convinced Gardner that the Piagetian view of intellect was flawed. Piaget had conceptualised all aspects of symbol use as a single semiotic function, quite contrary to Gardner’s findings (Gardner & Hatch, 1993:65). Gardner’s conceptualisation of human intelligence took into account a wide variety of cultural and historical settings. This stretched the concept of intelligence beyond its usual application in educational psychology, leading him to propose a number of relatively autonomous human intelligences. Taking Gardner’s research at face value his intelligences suggest organisations and whole educational systems are overwhelming emphasising linguistic and logical capacities in the construction of items on intelligence, aptitude and achievement tests. He proposed that if different kinds of assessment instruments were used, then a different view of the human intellect might emerge (Gardner & Hatch, 1993:65). In these settings, problem solving is raised ‘on high’ for HRD but the ability to design a product — to write a manual, produce a conceptual layout, stage a meeting and manage an organisation — is not considered. Gardner also noted that each culture emphasises particular intelligences. For example he described the high spatial abilities of the Puluwat people of the Caroline Islands, who use these skills to navigate their canoes across the ocean, and the balance of personal intelligences required in Japanese society (Gardner, 2002). The eight multiple intelligences develop differently depending on the cultural and personal contacts of individuals as they grow. The intelligences rarely operate independently of each other, but rather are used together and complement each other (Vincent and Ross, 2001). Vincent and Ross (2001) provide a set of strategies that can be used by HRD professionals to broaden how they devise strategies which draw on the theory of multiple intelligences. They include: Linguistic: learners learn best by saying, hearing and seeing words. Have them debate issues, write instructions for others to follow, explain how to work a problem and solve problems with partners. Logical-mathematical: students learn best by categorising, classifying and working with abstract patterns and relationships, so have them compare and contrast situations, find patterns in problems, create outlines, create time-sequence charts and show cause-and-effect relations. Let them play logic games and perform investigations of complex cases. They need to learn from concepts before they deal with details. Visual-spatial: learners learn best by visualising, dreaming, using the mind’s eye and working with colours and pictures. Have them make visual diagrams and flowcharts of facts, create graphs of information, create mind maps as a note-taking exercise and imagine and draw what they think about a situation.


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Musical: students learn best by rhythm, melody and music. They learn better with music in the background. Use music to reduce stress, create jingles/songs/rap to learn information, use multimedia tools. Bodily-kinaesthetic: these people learn best by touching, moving, interacting with space and processing knowledge through bodily sensations. Have them learn by performing the job, acting out a situation, demonstrating to others and simulating real situations. Interpersonal: these learners learn best by sharing, comparing, relating, cooperating and interviewing. Have them role play, conduct interviews and seminars, play games, lead discussions, describe everything they do when solving a problem and interacting with the instructor. Intrapersonal: these learners prefer to work alone on individualised projects, using self-paced instruction and having their own space. Have them keep a journal, reflect on their learning, use guided imagery to solve problems and write about what they have learned. In appealing to multiple intelligences Veenema and Gardner (2000) offer the example of using a CD-ROM to tell a story through eye-witness accounts using close-up views of sites and artefacts. The advantage of a technology such as CD-ROM is that it is capable of presenting pictorial, aural and textual renderings from different perspectives, assisting students ‘to form rich representations of an event and cultivate deeper understandings’. Students then display their understandings in many different ways: some might use language to argue, question and make connections; others might work out a narrative of events; still others might create a play, make a series of sketches, a video, compose music. The theory of multiple intelligences explains why online learning, which often requires students to work alone and interface only with the computer, suits only a small number of students. Multiple intelligences explain the advantages derived through collaboration and the use of multiple strategies and mediums in designing learning experiences, whether in a classroom, electronic environment, or experiential. The following two activities are provided to give you some more depth of understanding in learning styles, multiple intelligences and how it can influence an individual’s acquisition of knowledge and their learning preferences.

Developing a systematic approach to organisational learning As canvassed in the last chapter, HRD is a derived function. Its activities and parameters are determined through an organisation’s wider management systems and structure. On a global scale the introduction of the learning organisation is one of the most significant reforms that impact how learning is defined and implemented within an organisation. This section will identify some of the characteristics of a learning organisation. Subsequently a distinction will be drawn between organisational learning and the learning organisation. The distinction has relevance to how knowledge is managed and human capital developed. This builds on the earlier study in this chapter on how capital value of knowledge to an organisation will be shaped by not only the ability to manage individual and group learning, but by the ability to provide learning experiences that expand mental models possessed by the learner. The value to an enterprise adopting organisational learning principles will be examined and extend our focus beyond just the desire to do job training, but to enhance the capital value of human resources. This will be show to occur when the focus is shifted onto how learning may enhance organisational responsiveness to market needs through development of individual and group learning. Such observations place HRD professionals at the centre of any effort to develop knowledge capital within organisations.

Distinguishing learning organisation and organisation learning The ‘Learning Organisation’, is it the radical systems approach to organisational management so many purport, or is it just another name promoted by practitioners and theorists seeking a higher profile for learning? Without doubt, the quest for the learning organisation has caused a search for practices and principles that have blurred the role of learning. This section will illustrate what the learning organisation is, the principles they are based around, its distinction to organisational learning, and finally the importance of these findings for HRD professionals. Organisational learning, as opposed to the learning organisation, has a focus on application and on identifying the factors that facilitate individual and organisational learning. Organisational learning is essential in a learning

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organisation. However, by itself, organisational learning does not make a learning organisation. Nor, can it be argued, that individual and organisational learning are preconditions for a learning organisation (Lessem, 1993: viii). Organisational learning focuses on structures, systems, the environment that learning takes place and the processes of interaction between individuals that can enable learning. Studies on learning organisations primarily focus on the systemic implementation of learning strategies that develop capabilities at the individual and group level. Unlike organisational learning, such studies are less likely to emphasise the individual and group capabilities born and generated through the networks of interaction. The challenge then is to ensure enterprises building a learning organisation recognise the requirements when setting strategies targeted at individual learning and personal development. In effect, strategies must deliver or be tied to organisational development. In presenting how an organisation achieves learning organisation status, many viewpoints prevail. We do not intend to conduct an exhaustive study of writers on the learning organisation, but more tightly define where this field of study ends and the study of organisational learning begins. Our study will then examine popular myths that surround attainment of learning organisation status. Finally, we will study organisational learning as a distinct term with an often-confused relationship with those seeking to build and advance learning organisations. The distinction between organisational learning and learning organisation is subtle, but important. An organisation can pursue strategies to achieve organisational learning that can underpin much of the learning organisational principles and practices. However, excellence in organisational learning does not necessarily occur only in a learning organisation. In fact, many practitioners of organisational learning would not see any value in building a learning organisation if organisational learning was correctly managed as part of wide management systems. For many seeking to focus on knowledge, not learning, the systems approach to building a learning organisation has yielded to the implementation of organisational learning that can complement knowledge management and the development of human capital.

Enabling organisational learning: Back to basics As we examined in the early chapters of this second part of our study contributions to the field of HRD have come from a range of areas including education, psychology, management theory and sociology. A major problem in drawing information about such broad range of academic fields is the difficulty in integrating the range of ideas and the specific terms drawn from each field. As such, the topic specifically covered in this chapter - securing enterprise commitment to building a learning organisation - must be taken in this perspective. This is not to suggest an ideal type of organisational learning approach exists. Organisational learning has a focus then on application and on identifying the factors that facilitate learning organisational principles. Organisational learning is essential in a learning organisation. However, by itself, organisational learning does not make a learning organisation. Organisational learning focuses on structures, systems, the environment that learning takes place and the processes of interaction between individuals that can enable learning. Studies on learning organisations primarily focus on the systemic implementation of learning strategies that develop capabilities at the individual and group level. The challenge then is to ensure enterprises building a learning organisation recognise the requirements when setting strategies targeted at individual learning and personal development. In effect, strategies must deliver or be tied to development of mental models and how individual not only perform, but learn. To build an organisation that learns, organisations must link learning and knowledge with human capital development. It was not until recently that Asian scholars began to interest themselves in the material sciences, Asian thinkers were chiefly occupied with the search for life’s meaning and for ways of utilising that vital knowledge for selfcultivation and self-conquest (Blofeld, 1965:20). The thirst for self-knowledge and self-cultivation within individuals described above can be seen to be similar to the development of organisational knowledge and organisational capabilities. We have come full circle in terms of human capital management within organisations. Traditional guilds and crafts were based on the skills of the individual, the craft content, the attitudes and behaviour of the individuals, and knowledge of their craft. Initiation into a guild meant that the individuals were recognised not only for their skills, but their access to shared knowledge. There was a reliance on passing down skills from a master to their apprentice. Traditionally this occurred due to lack of structured training, limited literacy skills, and the absence of mass circulation of books. Because of the geographic base to community a strong sense of identity (self) and a holistic perception of work existed (i.e. Beyond an economic view of work).


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Industrialisation meant that products and services could be produced with fragmented work tasks where an individual's knowledge, behaviour and skills were viewed as separate. However increasing complexity and the need for adaptive work and organisational practices have caused the re-integration of work. The learning organisation consists of individuals and groups who form knowledge and capability that underpinned organisational capacity for current performance or future potential. The division of labour caused by the industrial revolution saw the separation of processes from the products and services produced in the workplace. This ‘anomie’ as the sociologist Emille Durkhiem described it, saw labour being divided into two separate fields, intellectual and physical capital. Managers provided the intellectual labour (the processes) and workers provided physical capital (the labour). This disintegration of organisational aspects into functions and the increasing demand for simplification were caused by the desire to understand and control complexity. Structural efficiency was achieved through process control. The learning organisation and organisational learning approaches challenge traditional views of people development as a simple input function. Rather, it is a strategic activity that closely aligns with previous views we have studied on how competitive advantage in organisations can reside in the capabilities held and capacity generated by people. The two opposing views seen in literature seem to be that learning and knowledge can be defined as: Inclusive in organisational structures: that is knowledge and Human Capability Development occurs as part of the functioning of an organisation. The organisation adopts a systematic approach to learning. Individual participants working in this environment derive meaning through structures, systems and interactions occurring in the organisation. Supporting this concept is the development of learning organisations where knowledge and learning are meaningful on an organisational level and able to be managed by the organisation to achieve specific strategic outcomes. Exclusive to organisational structures: this typically involves debate on organisational learning where knowledge development grows out of individuals and communities of individuals that are not limited by organisational structure or specific environment. This view is supported by the idea that knowledge and learning cannot be confined to a given situation and may be developed and reside in networks that are not tied down by organisational rules, practices or boundaries. Such an approach also argues individuals can choose paths to learning and knowledge that provide greater strategic benefit to an organisation when freed from imposed structures.

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10. Developing Deep Organisational Capabilities - Agility Introduction No complex organization can remain healthy and viable for long without the capacity to anticipate, execute and adapt to change (Ellingsworth, 1976:299). As proposed in Chapter 8, Transformative HRD can target five deep capabilities. This chapter will address how HRD can Enhance learning for agility capabilities. Table 18 Aligning the role of HRD in HCD with deep organisational capabilities Role of HRD



 


 










This Chapter will focus on how the need for organisations to change and adapt has promoted individual and organisational agility. In an operating environment where the acquisition, development and retention of human and overall knowledge capital is an important organisational tool to achieving organisational survival and success, traditional notions of organisational design and mechanisms for controlling individual learning need to be discarded. Previously we defined agility capabilities as: The capacity of an individual and, therefore, an organisation to acquire, integrate, and assimilate knowledge Study of agility must encompass both internal and external forces for change. Organisational agility rests on the capacity to rapidly realign internal processes and systems to accommodate external (environmental) changes. The need for organisations to develop agility will depend upon the level of change in the environment and the speed with which it takes place. Agility or responsiveness is the constant process of realigning internal systems and processes to meet environmental turbulence. The ability to do this at speed requires the capacity to not only change, but to do so while maintaining performance targets and customer satisfaction. However, the adoption of systems and practices reflecting the need for organisational responsiveness has itself been slow: Unfortunately, most organizations, and their management, control and strategic planning systems seem relevant to the passing era which rewarded efficiency-driven optimization and prediction of future based on the past trends… As the traditional paradigms of concepts such as organizations, industry, and product / service definitions become increasingly blurred, one would see new models of business that defy traditional boundaries of organization structure, industry structure and product / service definitions. Characteristics such as innovation and creativity will be at a premium. There will be increasing realization that sustainable organizational competence depends upon the organization's capacity for creating new knowledge through an ongoing and continuous process of learning and unlearning. Dr. Yogesh Malhotra, Chairman of @Brint.com L.L.C. (October 1997) In the context of organisational agility, the argument centres on transformative HRD being able to continuously evolve and refine not just capabilities, but the systems and networks utilised to capture, transfer, and generate knowledge.


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Developing Deep Organisational Capabilities - Agility

Organising human capital for agility In chapter 8 we presented a reference model for HC development. We also overviewed how strategic HRD can promote designed-in practices (not reactive but part of how the organisation does business). In this section we will extend this study to examine how organisations can build Social Capital (STC) in the how people, networks and innovative practices can enhance individual agility.

Figure 59 Human Capability Development reference model © Bowles, 2005, with permission.

In undertaking the study in this chapter we will not only examine engagement we will examine the preconditions for building Human Capital dimensions of agility

What is organisational agility? Agility in organisations centres on the capabilities resident at individual and organisational level to adapt or to change (Dove, 1996, Kidd, 1995). According to Agility International (2002) organisational agility was developed in the USA under the aegis of a Federal Government program intent upon addressing the declining profitability of American industry. The program represented: A comprehensive, integrated set of agility business strategies, models, best practices and case studies was developed over six years of strategic research by The Agility Forum at the Iacocca Institute, Pennsylvania (affiliated with Lehigh University). Between 1991 and 1998 the Agility Forum, led by an industry leadership committee, ran research programs, training and awareness events, a yearly national conference and regular nation-wide meetings of interest groups. Over 150 leading enterprises created agility programs, including Boeing, Goodyear, IBM, Kodak, Pitney Bowes, Texas Instruments and Xerox. The program spawned an international interest that was advanced in the academic literature by the work from Goldman, Nagel and Preiss (1995). Agility International (2002), suggests agile organisations strategically address a range of activities and processes, including:     

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Adaptive infrastructures Business intelligence Business process management Collaborative working Customer relationship management



 Data mobility  E-learning  Employee empowerment  Enterprise integration  Enterprise modelling  Flexible working  Information management  IP convergence  Knowledge management  Mobile working  Outsourcing  Organisational resilience  Rapid application development  Supply chain integration  System security  Unified messaging  Web services and XML. As we will see, agile organisations require agile learners. The key principles to explore are:      

As with human capital the capabilities for organisational agility reside in the individual. Organisational agility and the deployment of individual capabilities is most often enabled by networks and systems developed by the organisation. Organisational agility is a strategy aimed at developing the capabilities organisations require to succeed in the New Economy. As a strategy, organisational agility is concerned with HRD and the development of human capital activities that build Potential Performance Capacity not just job specific or point in time solutions focused solely on Current Performance Capacity. Organisational agility suggests some current systems, processes, and technologies hold value because of their role in enabling human capital and overall Knowledge Capital to be deployed to meet future contingencies. Organisational agility emphasises the use of technology and networks to support jobs and processes deliberately designed to package capabilities related to current and future job performance needs.

Organisational agility and the art of rapid change The company that can identify what technologies are needed, introduce them quickly, and commercialize them will succeed. Hiroshi Okuda, President, Toyota Motor Corporation (Business Week, June 15, 1998) Organisations can use their capacity to change and respond to customers as a competitive advantage. This has been broadly categorised and studied as organisational agility. Currently, the four major platforms for any organisation seeking to achieve agility are: Mass customisation: where the organisation can develop specialist products and services and map, manage and respond to an individual customer's changing expectations and needs within a quality framework; Built-in organisational design and development: where the organisation is able to rapidly transform itself by reconfiguring its structure, systems, business processes and supply chain in response to opportunities or threats; Generative or transformational learning: in which an organisation instils behaviours and a culture where learning is embraced as part of the continuous search for improvement; Accelerated change rate: where the speed of responsiveness and change is actually embraced as a means to achieve unique competitive advantage (see Canter, 2000). While the US government’s efforts may have spawned organisational agility, it was not a concept new to international theorists. George Stalk and Thomas M. Hout (1990) first advanced the concept of time and responsiveness as being at the forefront of any organisation’s quest for competitiveness. However, the adoption of systems and practices reflecting the need for organisational responsiveness has itself been slow: Unfortunately, most organizations, and their management, control and strategic planning systems seem relevant to the passing era which rewarded efficiency-driven optimization and prediction of future based on


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the past trends . . . As the traditional paradigms of concepts such as organizations, industry, and product/service definitions become increasingly blurred, one would see new models of business that defy traditional boundaries of organization structure, industry structure and product/service definitions. Characteristics such as innovation and creativity will be at a premium. There will be increasing realization that sustainable organizational competence depends upon the organization's capacity for creating new knowledge through an ongoing and continuous process of learning and unlearning. (Dr Yogesh Malhotra, chairman of @Brint.com, L.L.C. October 1997)

Transformation and organisational design Organisational design, which refers to the way roles are defined within organisations, has a large impact upon organisational agility. Solidified organisational structures and procedures reduce organisational agility but produce certainty of outcomes for participants and efficiencies in processes. Organising usually occurs through jobs or roles, with the clustering of organisational tasks into groups within the organisation, for instance, into divisional structures. Coordination is through the decision-making process, or where knowledge and authority can be applied up through the organisational hierarchy. A manager coordinates the work of subordinates through manipulation of the work process, or allocation of information within work activities. The examination of organisational structures in the last chapter showed some of the dominant organisational forms:     

Functional; Divisional; Simple; Matrix; Network.

Traditional organisational structures have shown poor capacity to produce innovation and sponsor agility. This is especially so with the increasing use of technology to perform routinised tasks and knowledge workers being contracted from external sources or non-routine tasks being contracted out. Some organisational structures promote innovation and provide greater agility than others. Innovation and organisational agility are stifled by stratified organisational structures defined in functional terms, where procedures and processes define work, and where positions are defined in terms of reporting roles and job tasks are linked to processes. Network organisations provide the most dynamic and adaptable of organisational structures and have been replacing traditional organisational structures. At its extreme, the dynamic network consists of a number of market relationships brokered by a ‘core’ unit. In such a case, conventional notions of organisational boundaries must be discarded. Network forms not only are far more flexible and innovative than traditional structural relationships, they also are more responsive to changing product–market conditions. Network organisational structures have the capacity to source skills to promote the development of capability sets and take advantage of a wide range of environmental opportunities. The main concern in the development of network organisations, in comparison to traditional organisational types, is the lack of stability and commitment from individual participants.

Agility and environmental attunement Agility cannot be separated into internal factors and external — environmental — factors. Research into the relationship between the internal and external spheres of planning is still very new; nevertheless, research is confirming that organisational boundaries are an insufficient basis to limit study of agility (Rigby, Day, Forrester & Burnett, 2001:178). Business relationships, individual and team networks with the community and other organisations, and actions by government and other organisations, all shape the transfer of knowledge and the response an organisation makes (Rigby et al., 2001:180–184). As such, agility must be conceptualised beyond the 'walls' of the organisation itself. Environmental attunement refers to the fit between the organisation and the environment. For an organisation to survive it must be compatible with its environment. Environmental factors such as increased competitiveness, interdependence both within organisations and externally, and increasing complexity of products and services, lead to a need for organisations to have the ability to change. Changes in the operating environment require realignment of the organisation, and organisation agility generates this capacity to adapt and realign. The extent of the need for organisations to develop agility depends on the level of change in the environment and the speed at which it takes place.

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The implications of a changing organisational environment, where knowledge, complexity and speed of change have increased, do not apply solely to organisations with inflexible, solidified organisational structures or procedures. Environmental turbulence argues for the development of individual and organisational capabilities that permit most, if not all, organisations to have some capacity for re-alignment while maintaining performance. For organisations to achieve environmental fit through alignment with the environment, the values, norms, processes, reward systems and performance must inculcate the importance of a people. Agility is achieved through capability development in the individual. Agile processes are denoted by individuals able to acquire new frames of reference while still achieving current performance outcomes. Agility leads organisations invariably towards one of the two models identified as emerging organisational structures, which are: 1.

Network organisations, where changing a frame of reference to meet environmental needs is developed through enhancing staff capabilities or sourcing knowledge outside the organisation; or

2.

Disaggregation of a more holistic concept of an organisation into a workplace community where the values are community based and therefore can change with organisational needs (See chapter 11) (Bowles, 2001:161).

A balance between these two options is achieved where networks of knowledge are created. Such knowledge is sourced under strategies that acknowledge the importance of knowledge development within individual employees, or individuals outside the organisation. Note Gartner noted in a research report that while change was accelerating, organisations’ capacity to adapt had not kept pace: The rapid rate of change is exposing weaknesses in every part of the organization: policy, strategy, operations, relationships and infrastructure. Today, transformation is driven by computers, standardized networks and new technologies, such as wireless. They fuel the dissemination of best practices worldwide, aiding the ability of enterprises to execute a business process over the past quarter century. These technology enablers have also made it possible to shorten the lifecycle of new products, speed up product improvements and change the competitive landscape in the process. By comparison, the ability of an organisation to reinvent itself, then build and execute a new business process or new business model, has not improved much over the past quarter century.

Figure 60 Business model change relative to product and process change (GartnerG2 2002:9)

KM Lifecycle and agility In chapter 4 of this course we introduced the concept of a knowledge management lifecycle. This lifecycle is depicted below. The figure also shows how to improve innovation and avoiding discontinuities in the management of knowledge. This suggests KM strategies can improve competitive capabilities when they occur faster and with greater continuity. For organisations where knowledge is the core rationale for their organisational design and strategic planning the better they do this, the greater their overall sustainable competitive advantage.


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Figure 61 Knowledge strategic life cycle curve In previously discussed terms agility in this case is represented by:   

the avoidance of discontinuities (not reaching point D but evolving at C1 to Point E); Accelerating the movement from A to C1 while; Avoiding or limiting the depth of the trough at Point B.

Achieving this end requires a response that is not just limited to the organisational level, but extends to addresses how people become agile learners.

Learning, strategic readiness and agility Transformation in any organisation, whether a simple change process or a major re-engineering of core purpose, requires learning. Learning must encompass all levels of the organisation to enhance overall learning capacity. This capacity is not just about acquiring the competence to perform in new ways. It is also about changing organisational culture or identity factors that have to be unlearnt, changed or acquired before the new behaviours and roles can be effectively deployed (Schein, 1993). Learning within an organisational setting must encompass and be viewed across a number of subsystems and levels. The three core subsystems include:   

Levels of learning and performance; Types of learning; and Learning capacity (see Marquardt & Alexander, 1999:137–138).

Levels of learning and performance Levels of performance and learning can be represented as: 1. 2. 3.

Corporate level; Process or group level; Individual level.

It is essential that the development of capabilities and learning occur at all three levels (See figure 62 below). Individual learning concentrates upon individual experience and the development of competency (skills, knowledge, attitudes) and what has previously been classified as identity (behaviours, roles and values held within the organisation’s culture) capabilities. Collective or team learning concentrates upon capabilities developed, deployed and exchanged between groups. Organisational learning is not simply the sum of individual and group learning. It also includes the mental models and institutional capacity to engage in learning and the management of knowledge for current and future needs.

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Figure 62 Levels of learning and performance

Learning capacity Without joining the wider debate on organisational learning approaches versus the learning organisation approach, which is covered in the previous chapter on organisational learning, it can be stated that the capacity of organisations to learn varies. Four key areas are needed to establish, implement and optimise organisational learning capacity. Cognitive thinking The capacity to translate thinking, perception, reasoning, awareness and judgements into action by oneself or through interaction with other. More deeply ingrained than simple perceptions, this aspect to our HC and capability model (as below) suggests mental models also build on ingrained values and attitudes that influence how people interact, act and interpret the world. Intelligences The capacity to be aware of one’s own and others’ feelings while thinking and acting wisely in human relations. This dimension concentrates on the personal search for expertise and includes lifelong learning and the individual’s commitment to interact with others in a two-way exchange. Competency The skills and knowledge required to perform in a position or to achieve a career pathway between jobs and occupations. Competency is domain specific but can transverse tasks, common processes, jobs, occupations and functions. Identity The cultural, values, traits roles and other attributes that build situated purpose. This includes the ability to build an identity and shared meaning that help the individual and others collectively identify with the organisation’s core purpose (co-orientation and engagement). Marquardt & Alexander propose this form of dialogue is about creating a medium and relationship able to build individual and collective identity (1999:138). It is about building a dialogue based on purpose whereby interaction and patterns of visual and symbolic communication are used to shape identification or indeed dis-identification with the organisation. The above dimensions were presented in a framework for confirming how agility was part of a wider model for development of human capital and capacity.


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Figure 63 A conceptual model for developing human capacity and capital While agility is on the learning dimension to the above model, learning will subsequently occur across all components of the model. An organisation can no longer be considered a collection of homogeneous groups or individuals all sharing a common identity, and with competencies required to meaningfully perform jobs within a single organisation. Every organisation has a different mix of variables which influence learning. Nevertheless, the largest influence on the learning capacity is the evolution of the organisation’s business systems and its own comparative progress (to its benchmarked competitors) down what may be termed a change continuum. Human capital and capacity of the organisation is therefore very much tied to agility in learning and the capacity of individuals to learn. As suggested in the figure below people learn by doing and by interacting in a social context. Humans do not have to be conscious of learning to learn. For instance a child may fall of a bicycle many times before they ‘learn’ how to ride the bike. Falling off is an experience that accumulates into a mental model and applies capacity to ride the bike. This does not mean the child has learnt about gravity or bike mechanics. However, such learning can have a positive and negative affect on the learner. Some may fall off and not wish to ride again. Or they may perceive other unknown tasks similar to learning to riding a bike as best avoided (i.e. learning to drive). Other may build off the experience and use it to positively inform later activities.

Figure 64 How mental models and experience inform current actions and learning

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The model above suggests mental models and capabilities relating to competency and identity influence learning capacity. Some learners will avoid the quadrant where a task is unknown or unproven. Most will seek to use existing knowledge and experience to undertake a similar task. The aim for an organisation seeking to encourage agility is to promote mental models where even new situations or contexts (unproven) draw positively on past applied capabilities. In these circumstances people want to learn and increase their repertoire of experience and cognitive skills. Note Systems theorist Paul Wilson (2005, after Johnson, 2001) makes the following observation about the futurist Ray Kurzweil: Kurzwell notes that “Humans are far more skilled at recognising patterns than in thinking through logical combinations, so we rely on this aptitude for almost all of our mental processes. Indeed, pattern recognition comprises the bulk of our neural circuitry. These faculties make up for the extremely slow speed of neurons”. The human mind is poorly equipped to deal with problems that need to be solved serially – one calculation after another – given that neurons require a “reset time” of about five milliseconds, meaning that neurons are capable of only two hundred calculations per second. (A modern PC can do millions calculations per second, which is why we let them do the heavy lifting for anything that requires math skills.) But unlike most computers, the brain is a massively parallel system, with 100 billion neurons all working away at the same time. That parallelism allows the brain to perform amazing feats of pattern recognition, feats that continue to confound digital computers – such as remembering faces or creating metaphors. Because each individual neuron is so slow, Kurzweil explains, “we don’t have time … the think too many new thoughts when we are pressed to make a decision. The human brain relies on precomputing its analyses and storing them for future reference. We then use our pattern-recognition capability to recognise a situation as compatible to one we have thought about and then draw upon our previously considered conclusions”. (Johnson, 2001:126-7) The point raised by Wilson reconfirms the relevance of distinguishing between the concepts of existing capabilities in the workforce and capability development. Learning is often done by reflection (forward and back), even in known contexts unexpected actions and situations may have to be addressed. In terms of agility capability development requires active, up-front investment to ensure humans possess the capability to respond to new activities and situations. Waiting until a critical situation arises and then developing specific skills and knowledge is probably too slow in an organisational context, just as it is likely to lock in undesirable cognitions and mental modes at the human level.

Learning, agility and competitiveness Transferring information into knowledge to improve productive outcomes is a critical organisational endeavour. The ability to transfer knowledge and manage knowledge acquisition requires an integration of knowledge management with learning. The capacity to learn in order to meet immediate performance deficiencies is no longer a sufficient base to build unique competitive advantage. Learning can be conducted in a manner that reinforces meaning. This results in an accelerated capacity to transfer knowledge (Slocum & Lei, 1993:18–21). How well and how quickly companies can translate learning into outcomes ultimately influences their strategic success. This is ultimately a capability that requires a strategic solution able to engender capabilities at individual and group levels, within and outside the organisation. This solution must be framed in terms of both current and future requirements. In The Fifth Discipline, Peter Senge (1992) links the capacity of an enterprise to become a ‘learning organisation’ with its ability to obtain and hold competitive advantage. This publication consolidates earlier work on the learning company and exploration by educators and management theorists on the link between the ability to learn and competitive advantage. Senge depicts an organisation in which individuals continually seek to expand their capacity to create desired results, new patterns of thinking are nurtured and people are continually ‘learning how to learn’ together. In 1992, Doron Gunzburg identified four characteristics of learning organisations. He isolated these characteristics after returning from an international study of management development where he evidenced organisations and managers 'hotly' debating the virtue of building learning organisations. According to Gunzburg (1992:29) a learning organisation:   

Has a climate in which individual workers are encouraged to learn and to develop their full potential; Extends this learning culture to include customers and other significant stakeholders wherever possible; Makes human resource development strategy central to business policy; and


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

Is a continuous process of organisational transformation, based on individual learning, and consequential learning assumptions, goals, norms, etc.

Senge (1992) stated: Organisations only learn through individuals who learn. Individual learning does not guarantee organizational learning but without it no organizational learning occurs. (Senge, 1992:139) This perspective and subsequent research reinforced the need for generative learning, as encapsulated in Argyris's ‘double-loop learning’ (Argyris & Schon, 1978), to translate individual learning into organisational learning.

Figure 65 Single-loop, double-loop learning (Argyris, 1990, cited in Morrison, 1994:26)

Generative learning emphasises continuous, double-loop experimentation and feedback. Double-loop learning enhances the continual search for solutions while instilling behaviours and a culture where learning is embraced. Unlike adaptive learning, generative learning requires a new mind-set and the capacity to create new visions for future realities. Senge (1992) suggested that generative learning is composed of: 1.

Systemic thinking;

2.

Shared vision;

3.

Personal mastery;

4.

Team learning; and

5.

Creative tension between the vision and changing the current reality.

Essentially, generative learning builds in a redesign process based on optimal problem solving. This is in contrast to adaptive learning or single-loop learning where the focus is on solving current problems without examining the root causes of the problem or the learning behaviours that underpin the problem-solving process. As such, adaptive learning reinforces improvement by incremental steps more common to the managerial approach to leadership and problem solving. Given the need for rapid change or the ability to respond to new operational realities, adaptive organisations are viewed as much less able to use learning to sustain and generate competitive processes, structures, people or systems. The learning organisation and organisational learning have at their core the translation of information (or data) into business success through individual, team, organisational and wider learning processes. The cycle of learning is addressed by a number of authors. After more than a decade two of the more influential approaches are those of Redding and Catalanello (1994) and Dixon (1994). Nancy Dixon builds this organisational learning cycle on previous studies detailing how individuals learn. Dixon suggests the organisational learning cycle has four steps as shown in the following diagram.

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(Redding & Catalanello, 1994:36)

(Dixon, 1994:45)

Figure 66 Learning cycle These learning cycles of Redding and Catalanello, Dixon, or other variations (for example, see Argyris & Schon's double-loop learning, 1978:18–23; Kolb, 1984; Garrat, 1987; Revans, 1982) reinforce the need to view learning as a cycle that extends beyond the benign absorption of information for applied purposes. It can be viewed as a cycle that needs to have components managed to maximise its total impact. This process is never static. It varies with context, the individual and the content of learning. Enhancing an organisation’s learning capability entails accelerating both individual and collective learning cycles. This requires learning to be much more than a contrived response to immediate needs. It must be managed as part of the long-term imperative to be competitive and responsive to changing social and market demands. McGill, Slocum and Lei (1992:5–17) illustrate this point by suggesting it is important to understand the difference between the organisation's ability to adapt (adaptive) and the organisations ability to learn (generative). The ability to learn gives the generative organisation a competitive advantage over the adaptive organisation, which is said to be 'learning disadvantaged' because while adaptive organisations may be able to transfer skills they cannot do so in a manner that enhances their sustainable capacity to change.

Figure 67 Managing learning to promote generate or adaptive change The figure above illustrates how organisational learning can be used to generate enhanced depth, speed and breadth of learning (Redding, 1997:485). Adaptive learning (McGill et al., 1992) does provide opportunities for greater focus on process improvement. While McGill, Slocum and Lei illustrate how quality management systems provide for individual, group and organisational learning they also argue such organisations are still 'learning disadvantaged' when responding to environmental factors. Generative learning can be used to enhance strategic organisational readiness. In more stable environments organisations might promote adaptive learning in areas where they undertake a ‘controlled’ change process or need to fill skills gaps across multiple people or jobs. These approaches can still promote continuous process improvement and meet incremental changes. However, this type of learning is more appropriate to change


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interventions than transformation. As represented in the figure above adaptive learning causes ‘spurts of improvement’ or targeted change. Learning does not transform the capabilities and identity resources required to respond to rapid and sustained change. Generative learning, characterised by ‘double-loop learning’, requires capabilities that go beyond what management theorists have described and categorised as competencies. It needs capabilities associated with aspects central to identity and tacit knowledge that support innovation, openness, responsiveness to new contingencies and creativity (McGill et al., 1992). Put more simply, agile organisations learn in a generative manner. Research suggests generative learning is more able to assist organisations to develop through a sustainable capacity to learn and to change. Such learning can be focused at a process or systems level (Redding, 1997:485). However, learning becomes much more than an intervention controlled and targeted towards adapting actions to meet performance ends; it becomes a strategic capability. For capabilities held by individuals, groups and the organisation, there is a need to identify and reinforce the factors that enhance not only adaptive learning but also generative learning. But it is ‘strategic learning’ that can build the capabilities required to undertake generative learning. It is on this base that greater competitive advantage can be built for those organisations seeking to be agile and responsive. It is the unique ability of individuals to interact and transfer knowledge — within and outside the organisation's domain of operation — that enhances the capital value of knowledge. It is within the identity factors that promote an individual's commitment to transfer knowledge into productive outcomes that the organisation also embeds meaning and continually redefines shared futures. Transformation is not achieved through interventions that cause spurts of improvement; rather it is embedded in how people think, act and view their contribution to the organisation. Generative learning is cross-process and strategic and addresses not just how 'things are done’, but how people and systems can adapt to change and improve the speed, depth and breadth of learning.

Agility and innovation Types of change solutions and their impact The following section revisits the cornerstones that hold together the diverse fields of study associated with innovation and change within an organisational context. This will help us place into perspective how capabilities associated with agility have to support real activities that enable innovation and change. As depicted below change can be managed using a mix of approaches dependent on considerations revolving around the rate and type of change. In each of the quadrants are placed broad styles of how innovation can be approached by a manager.

Figure 68 Matrix of change solutions Each approach has a requirement for different capabilities, especially in the leadership team.

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Table 19 Alignment of change typologies to specific leadership approaches Type

Specific approaches

Rapid-Top down

Business process re-engineering Re-engineering Rapid development

Rapid-participatory

Reinventing Participative team Mutual gains

Incremental-Top down

Project management Decision modelling Organizational redesign Benchmarking SPC or Quality Control

Incrementalparticipatory

Continuous improvement and quality management approaches in their many forms for both processes and services (TQM, CI, CQI, TCS, TQC), Sigma-six, Kaizan, …. Learning organisation Organisational learning

It is interesting to note the move to organisational agility cuts across all dimensions of the matrix. Agility can be any mix of rapid, incremental, top-down or participatory. Agility has evolved as a management focus because it emphasises the need to design innovative practices into all levels and aspects of an organisation. Let us now extend our study to the component terminologies surrounding the world of innovation. The following definitions cover the ‘everyday’ concept of innovation and related terms.

Innovation Innovation is classically defined as the "process that begins with an inventor's insight and ends with a new product or technique" being created (Lundstedt & Colglazier, 1982:xiii). Innovation is not just the practical improvement of hardware. It is also the reshaping of concepts or ideas. The innovation process forms the basis for individuals to inject ideas, insights, pure and applied research, scientific knowledge, and technical "knowhow". Innovation is not held within this topic to be the same as discovery or invention where a new technical entity unlike any known previous technology, is produced. Discovery is the production of new technical or scientific knowledge. This is distinct from invention which is usually the result of pure research discovery, or the unique combination of established knowledge, to produce a novel technical entity. Innovation involves the substantial change and development to identified technology, ideas or techniques. On a continuum of change or search for superior outcomes, innovation may be considered to sit below the high risk, uncertain efforts of those seeking inventions or discoveries, and above those undertaking improvements.

Improvement Improvement is herein limited to focussed change undertaken on an existing or known entity, component, technique or idea that incrementally generates superior outcomes. A process may undergo cumulative evolution where the end process or product adds value, relative to its immediate predecessors and constitutes a major change from the starting point (Dawkins, 1986: 43). The completed innovation or improvement produces a complex source of change that does not stop with the alteration of an existing technical entity. It may also provide a conceptual basis for addressing problems that have a cumulative impact on both an organisation and even a society. Thus the wider technological environment - social, political, economic or organisational factors - may be influenced by technology change and in turn produce secondary effects that are far from apparent immediately after the original innovation's introduction (Kranzberg, 1986:545). The impact of change may therefore be spread over an extended period of time with only minor incremental improvements to existing processes, technology or ideas (Lundstedt & Colglazier, 1982:xxiii). The impact and


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course of change may also be complicated by technical drift of the introduction of innovations from other countries or other organisations. The incremental change to technology can be overtaken on occasions by radical or dynamic 'breakthroughs' in technology that quickly alter existing products or processes and may swiftly alter existing environmental conditions within which future technological innovation occurs (Hughes, 1982: 32 and Landau, 1982:54). The more radical a 'breakthrough', the wider is the base for new or novel innovative effort to accelerate technology change. Because significant discoveries and technological change cannot be ordered or pre-ordained, the innovation that changes technology may be derived only long after the original 'breakthrough'. Hence great periods of innovation can then be followed by stagnation. However, as organisations recognise the competitive advantage in quickly identifying and adopting conceptual breakthroughs, cross-fertilisation of ideas and practical usage have seen a quantum leap in improvement and innovation at an organisational level. Unlike the late Industrial Age, in the Information or Knowledge Age the impact of a final innovation is occurring sooner as organisations realise that the speed of converting conceptual ideas into applied realities is in fact an area of competitive advantage. The search for a better product, procedure or idea is on-going. As correctly identified by Foster (1986:102) “... rarely does a single technology meet all customer needs”. In the area of competitive advantage in the Information Economy it is an organisation’s capacity to search for, and apply innovations and improvements made by others to their own processes, that can accelerate effective change. Management of such incremental change has become a far more complex practice as not only the hardware (equipment), but the advancement of processes and practices have profoundly impacted how organisations are structured and controlled.

Re-engineering Process re-engineering is fundamentally the analysis of all activities associated with a process that results in the radical changing of that process to achieve breakthrough outcomes for the enterprise (Bowles, 1994:14). The change will generate results that are usually marked by a higher risk factor due to their aim to achieve ‘breakthrough’ results. In the late 1990s re-engineering texts and literature were as popular and as numerous as Total Quality Management texts were in the late 1980s. Our study in this section revolves around what re-engineering is about, why it is seen as a valuable change management approach, and what this means for frontline managers. What we must appreciate is the belief held by those advocating process re-engineering that organisations are failing to change rapidly enough. Note: Marshall Romney (1995:3) reported the following seven principles for successful reengineering. They are derived from Michael Hammer, co-author of Reengineering the Corporation: A Manifesto for Business Revolution. Principle

Detail

Organize around processes and outcomes, not tasks

Companies often divide business processes into individual tasks and assign them to different people. The documents used in the business process often wait for hours or days at each desktop as they are passed between the people involved in the process. Delphi Consulting Group estimates that up to 90 percent of the time needed to complete typical office tasks is a result of gathering and transferring paper documents.

Centralize and disperse data

Some companies centralize operations to achieve economies of scale. Others decentralize operations to be more responsive to their customers and to provide better service. With current technology, companies can have the advantages of both approaches: corporatewide data bases centralize data, and telecommunications technology disburses it.

Capture data once, at its source

Many organizations have a number of separate information systems, such as an accounting system, a management information system, a marketing system, a production system, and so on. Each of these systems collects, enters, and processes some of the same information. Not only is this inefficient and expensive, but redundant data exists that all too often contains discrepancies. These problems can be solved by capturing data once, at its source, storing it in data bases, and making the data accessible to all authorized users.

Information producers process information

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Most organizations process their acquisition/payment information like Ford Motor used to do. Ford prepared multicopy purchase orders and receiving reports. Fourteen different data



items on these two documents had to be matched to a vendor's invoice before a payment could be made. Accounts payable had more than 500 people who spent most of their time trying to reconcile all the mismatches. The process was time consuming and frustrating, and vendors were unhappy because payments were delayed.

Output users perform the processes

Most organizations are split into separate departments and each specializes in a specific task. Each department completes its particular task and passes its "product" off to another department. This principle states that the people who use information from the system should be those who perform the process that produces that information.

Empower workers

Most organizations have a hierarchical structure with one or more levels of management to supervise, direct, and control those below them. Many organizations have found that empowering workers with decision-making responsibilities leads to a higher quality product and service, faster responses to problems, and fewer levels of management. Expert systems and other newly developed information technology helps workers make correct decisions and avoid mistakes.

Integrate parallel activities

Many business processes are so complex that they are divided up and assigned to independent teams. These teams work in parallel with each other and then integrate their tasks when they are done. For example, when Chrysler designed a new car, they had different teams designing the body, the interior, the engine, the transmission. and other elements. When they began assembling the cars, they often found that the components did not fit together properly and had to be redesigned.

Keep the ideas covered in the above activities fresh in your mind. They lead into the next chapter where we will examine absorption and the importance of working across communities or networks to gain and hold knowledge.


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11. Developing Deep Organisational Capabilities Absorptive Capacity Introduction The organization’s ability to learn faster than the competition is a significant source of competitive advantage (Stata 1989; McGill and Slocum 1993). As proposed in Chapter 8, Transformative HRD can target five deep organisational capabilities. This chapter will address how HRD can enhance learning for absorptive capabilities. Table 20 Aligning the role of HRD in HCD with deep organisational capabilities Role of HRD



 


 










Our study of knowledge management and HRD has confirmed from many perspective that organisations can undertake many strategies to not only capture, transfer and generate knowledge, they can do this with strategies able to target capabilities at individual, team, and organisational levels. However, this does not assume that organisations have established the preconditions apply the new knowledge even if learning has been effective. In this chapter we will examine absorptive capacity. In the first half of this study we proposed that Absorptive capabilities were: The capacity to an individual and, therefore, an organisation to learn and the preparedness to acquire, hold and then exploit the resulting knowledge. This theory describes the ability of the organisation to not only go beyond just acquiring knowledge but also investigating the preconditions for successful assimilation of knowledge (Cohen and Levinthal, 1990; McGill, Slocum & Lei, 1992). The speed of the process from capture and acquisition of new knowledge through to effective exploitation has the dual advantage of ensuring individuals can perform their jobs better and sooner (the concept of cycle time to performance proficiency) but has the additional advantage of adding to the organisation’s responsiveness. Absorptive capacity can, therefore, directly contribute to performance, overall knowledge capital generation and bottom line value of the organisation. Internal structures, information technology systems and architecture and policies and procedures, especially in HR, all ‘could give additional evidence on the potential to assimilate external ideas, further characterizing what could generate absorptive capacity’ (Veugelers, 1997:314). This aspect will be explored further when we examine how absorptive capabilities relate to generative organisational learning and overcoming ‘learning disadvantage’. The importance of knowledge and learning networks will be extended to encompass the supply chain, business relationships and communities (Prahaland & Ramaswamy, 2000; Teece, et. al, 1997). This aspect of absorptive capacity will be explored in the chapter on Networks, relationships, communities and absorptive capacity.

Maximising absorptive capacity of human capital A range of definitional basis exists to absorptive capacity in organisations. Cohen and Leventhal (1990) suggested it simply centres on the ‘ability to exploit knowledge’. Preconditions affecting absorptive capacity included such factors as the relationships held by the organisation, characteristics of the individual involved (experience and expertise) and the relationship the new knowledge has with pre-existing knowledge (NB: This ties back to


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Developing Deep Organisational Capabilities - Absorptive Capacity

concepts dealt with in the last chapter on Agility). Hong, Lehtonen and Ståhle give a definition appropriate to our field of study by suggesting absorptive capacity is the ability to: …recognise the value of new, external information, assimilate it, and apply it to commercial ends. The ability is critical to its innovative capabilities, and is largely a function of the firm’s level of prior related knowledge (Hong, 2004:9).

Dimensions of absorptive capacity Emerging from the field of absorptive capacity is the importance of how learning across levels within the organisation can not only increase the stock and flow of knowledge, but in so doing, directly contribute to greater general business performance (Bontis, Crossan & Hulland, 2002; Toiviainen, 2003).

Moving beyond being learning disadvantaged One of the major advantages of promoting organisational learning strategies is the resulting capabilities associated with adapting to changing environmental conditions. Organisations and managers utilise a range of strategies to achieve performance. Some organisations are operating in stable developed markets with little threat of new competition. It seems, therefore, they have everything to loose and little to gain by implementing new structures or practices. In such conditions routines dominate tasks, job design, processes, skills and knowledge descriptions, and therefore learning strategies. However, while knowledge organisations or those organisations competing in the New Economy know they cannot stay static for long, traditional organisational structures have given little reward for challenging the order of things. This paradox has seen the more structured, routinised organisations become classified as ‘learning disadvantaged’. (McGill, et. al, 1992:6) Absorptive capacity is linked with organisational agility. Absorption centres on assimilation of knowledge and capabilities necessary to move the organisation from an adaptive approach (adaptive) to one where the organisations ability to learn is a competitive advantage (generative). The ability to learn ensures the generative organisation sustains improvement. The adaptive approach is typically associated with the 'learning disadvantaged'.

Figure 69 Managing learning to promote generate change Organisations, whose core business is in the area of information technology and those operating across a range of environmental conditions and market places, have had to become more adaptive than those in traditional manufacturing and closed markets. For instance Kodak, Amazon, Australia Post, BHP Biliton may respectively look like photographic, publishing distributors, mail service, and mining companies but all have deployed technology and systems able to promote responsiveness. All have to support these processes with learning that enable people to not only operate the technology and deliver process outcomes, but also generate new knowledge and solutions. Adaptive learning is seen to provide opportunities for process control. Quality management systems provide for individual, group and organisational learning however, they may be seen as developing a 'learning disadvantaged' response to environmental conditions. In more stable environments, this type of organisational learning might be appropriate and will provide process improvements and adaptive strategies for incremental changes to the environment. This type of organisational learning is not enough to cope with rapid and sustained change.

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However, generative learning, characterised by ‘double loop learning’, is less easy to define. It contains the more behavioural and knowledge based traits that management theorists have been less keen to attempt to describe and categorise. These include aspects central to a learning organisation including innovation, openness, responsiveness to new contingencies, and creativity. These factors all are influenced by the capacity of people and organisations to assimilate and use knowledge and capabilities: absorptive capacity. Warner (2003:399) reported that Lack of investment in absorptive capacity in prior periods makes it ‘more costly to develop a given level of it in a subsequent period’ (Cohen & Levinthal, 1990). While firms can overcome this to some extent through accelerated investment (Kim, 1997), “compression diseconomies” can restrict the return to investment in learning (Dierickx & Cool, 1989). This is exacerbated by the fact that the less firms know about a particular technology at the outset, the more difficult it is to add relevant knowledge due to inadequate knowledge stocks and context specificity (Cohen & Levinthal, 1990; Dierickx & Cool, 1989; Zahra & George, 2002).

Cycle time to proficiency In the New Economy, speed is a critical sustainable competitive advantage. Generative learning can not only enable performance improvement but overall competitive advantage for the organisation may reside in how quickly they can develop the capabilities of their staff. Measuring the cycle time to proficiency is a good indicator of performance capacity. The concept reinforces the importance of moving learning beyond skills transfer for performance to generative learning where capabilities can be rapidly assimilated to also enable and sustain rapid change (Meyer & Davis, 1998; Lemberg, 2000; Fred, 2002). As stated by Charles Fred (2002:36), a new metric has emerged; this centres on the cycle time to achieve performance proficiency, which: . . . helps redefine the development of people in the context of the delivery of value and of time — in this case the time it takes for individuals to prepare themselves to perform.

Figure 70 S-curve of learning and improvement to performance capacity (after Bowles, 2004: 152) As depicted above, speed and competitiveness are realised by advancing individuals rapidly along the learning curve to the point of proficiency (Fred, 2002:95). The figure also emphasises how the learning curve extends beyond the point where proficiency is achieved (what we have previously labelled Current Performance Capacity), to build the mental models that promote continuous learning and assimilation of capabilities and experience necessary to meet future contingencies (Potential Performance Capacity) (Bowles, 2004:152-3; Fred, 2002:67). The acceleration of learning and improving absorption capacity is not just a ‘speed’-based issue. However, it may well be the main focus for an organisation seeking to improve efficiency and effectiveness of learning interventions or the deployment of enabling technologies (Bowles, 2004: 152-153). Electronic learning (elearning) may, for instance, be adopted as a means to shorten the total time to reach threshold proficiency. This can be achieved by permitting learning to occur in an electronic mode that removes the restrictions imposed by classroom or instructor-led training. As illustrated in the figure below real value to the organisation and its


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direct capacity to achieve performance proficiency can occur by deploying technology to accelerate learning and reduce cycle times.

Figure 71 Reducing cycle time in traditional training and development (Fred, 2002:81; Bowles, 2003:292)

Networks, relationships, communities and absorptive capacity To operate and survive organisations need to enter into relationships. Relationships may be forged internal or external to the organisation’s structure. In previous sections we have examined the different ways organisations can be structured and jobs designed to assist with knowledge flow and the deployment of capabilities. One such form of organisational structure was the more organic, network structure. The feature of these types of structures was the search to make jobs and processes more dynamic and less locked into highly routinised processes with very specific competencies (skills and knowledge). Implicit in the network style of organisation was the role knowledge creation played in individual, team and organisational performance (Nonaka and Takeuchi, 1995). Network design was therefore particularly attractive to organisations competing in creative, innovative’ or dynamic marketplaces (Robertson, Scarbrough &Swan, 2000). Just as organisational structures reflect the logic and purpose of business (i.e. you don’t create rigid structures if you want to be responsive because it is too hard to change the structures to achieve a response) (Greenwood & Hinings, 1993), so relationships can be structured to better achieve business outcomes. The characteristics of network structures can extend beyond the organisation. Cohen and Levinthal (1990) argued that identifying absorptive capacity meant examining structures of communication both within the organization and also between the organisation and its environment. Collaborative networks that extend across a number of organisations are a very effective strategy for businesses to extend their access to new knowledge and capabilities. Assimilation of knowledge and capabilities can also be accelerated as evidence of use by collaborating partners removes some of the ‘unknown’ or ‘unproven’ elements that may inhibit acceptance. The implicit tension in networks or communities is the fear of sharing knowledge with organisations that may become competitors (von Hippel, 1987).

Why absorption and communities matter The characteristics of change waves and the progress of transformation need to be reconfirmed to illustrate why absorption rates matter and building communities with pools of aligned knowledge and capabilities are essential. Leveraging off Bouldings works over 36 years before (1964), Drucker on discontinuities (1969), Nolan on development of IT (Gibson & Nolan 1974; & Mustsaers, et.al., 1998) and recent works such as Newt Gingrich’s (June, 2002:48-52) we can articulate 18 characteristics of profound change shaping business relationships and supply chains of the future: 1.

Costs will crash

2.

Systems will be customer-centres and personalised

3.

Anywhere, anytime access, 24-7 will be the reality not the variation

4.

Convenience will be a high value

5.

Purchasing power will increase as converged technologies expand capabilities and lower distribution costs

6.

Processes will be expert-systems and empower the user

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7.

Distribution systems will move away from business to business to business to consumer (direct without the middleperson)

8.

Change will come from everywhere (chaotic not targetted)

9.

Resources will shift rapidly to new opportunities

10. Rapid introduction of better, less expensive products will lead to continual replacement 11. The focus will be on success as entrepreneurs, venture capitalists and early adopters seek innovations based on the known 12. Tolerance for failure will be embraced in innovation and thinking, but not customer satisfaction 13. Real breakthroughs will create new products and new expectations 14. Speed matters – including responding to market needs with great agility and moving new products and services from inspiration to sale with great rapidity 15. Start small but think big (Convey visions other can understand and engage in) 16. Business to business and improvement of existing business processes is the first profit opportunity 17. Applying quality to existing lean thinking and process efficiency be profitable and secure sustainable competitive advantage 18. Partnering with others and embracing collaboration between individuals is essential.

Confirming the knowledge vested in relationships Social capital Building shared vision and identity between individuals, even if they are employed in different organisations has value in knowledge capital terms. Resistance to interactions or the slow process of having to continually reexplore why people are working together (non-convergence of identity or so-called cognitive dissonance) (Dutton & Dukerich, 1991; Barr, Stimert, & Huff, 1992; Elsbach & Kramer, 1996; Gioia and Thomas, 1996) can harm business outcomes. Alternatively convergence of identity and desire to interact can accelerate strategic outcomes or change.

Extracting tacit knowledge across personal relationships Organisations and individuals often have poor memories when it comes to recalling what they know (Othman & Hashim, 2002: 7). This is especially so where knowledge resides at the cognitive or relationship level to the extent the tacit components cannot be codified or conveyed in content-based learning programs (van der Bent, et. al, 1999). The following section outlines three basic techniques for extracting tacit knowledge held by individuals in relation to their personal interactions and relationships.

Extracting knowledge and capabilities from relationships One of the ways to extract tacit knowledge from relationships is to map relationships and what they contribute to the process of action. Common approaches are ‘cognitive maps’ or ‘mind maps’. Another technique is Causal maps (Ambrosini & Bowman, 2001). Unlike other forms of cognitive or mind maps, causal maps focus on cause and effect relationships. The person is at the centre of the map. They then use arrows to indicate a cause (problem, process or action). At the end of the arrow is the effect. More sophisticated causal maps can emerge as more people become involved in the relationship undertake this exercise. More experienced operators may see deeper effects than a novice. All involved are however able to map causes and effects and compare their understandings with that of other participants. It is often a very successful step to then have all players list the critical success factors that make the causes and effects positively reinforce mutual reasons for engaging in the relationship.

What do I need to know, who knows what I need to know? Another form of flowcharting or building a ‘wisdom map’ of relationships can be achieved by simply asking what don’t I know to do my job and who do I ask to get assistance. This map identifies the individual in the centre then extends arrows labelled as per the task, activity or action that triggers interaction. The person contacted is listed in the box. More than one arrow may lead to the same box/ person. This exercise is not driven by skills and knowledge but the simple identification of sources of ‘wisdom’ within the workgroup. Often very complex maps appear. It is very common for single individuals with superior coaching


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skills, extensive experience or particular attributes to reappear on one individual’s map. Indeed the same individual may appear on many people’s maps. This technique seeks to make over where the tacit wisdom resides in a workgroup. It may not be the supervisor or senior managers. Why is this important to know? It is not trying to codify tacit knowledge, it is identifying where the sources that influence everyday operations may reside. As an example an organisation removed a number of individuals in its employment because it had to reduce staff numbers. Unfortunately they chose to retrench employees closest to retirement age. The business unit involved was responsible for processing accident insurance claims. Over the subsequent year to the retrenchment claims processing times lengthened from 10 days to 3 months. The root cause was identified as the experienced staff being the ones who had assisted more recent employees find critical precedents, resolve procedural problems, and liaise with critical external personnel. They lost the sources of corporate wisdom that directly made the business unit competitive!

What have I learnt in the past What we have learnt from the past influences future actions. The aim in the recall of past experiences is to remove distortion and focus on what is significant. This form of tacit knowledge is often tricky. It is about balancing memory recall with self-efficacy. The aim is to give mental models that add confidence to the individual and a commitment to apply past experiences to future complex or uncertain situations. This exercise should be completed in a one-to-one coaching session or, in controlled circumstances, within a facilitated group session. The map can be completed by focussing on the task or the person. Similar to causal maps if we place a tasks at the centre of the exercise we can then place arrows that we label as causes (activities, situations or actions that have in the past resulted in failure or success). From each arrow we should place a box that lists the critical effect resulting from this dimension (arrow). Reflection is an important part of individual learning. In this case we are attuning the individual to tacit knowledge they hold. The boxes should be positive statements on what was learnt. The experiences may have been negative but critical lessons may have emerged.

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12. Future Trends in the Management and Development of Human Capability Introduction This chapter is the final in our study on HCD. As such it will recover and consolidate our study into an overall perspective. In so doing this chapter will also challenge the reader to re-examine what the majority of authors presented on each component in our study. This study has an implicit theme that KM and HRD can make more sense when studied together than when they are studied in isolation. The major fields of contemporary analysis covered by Knowledge Capital or the parallel concept of Intellectual Capital, and research and writing on Human Capital Management all find a place in the mosaic our study has created. While often complex and ‘noisy’ our study has illustrated that the sum of many ‘evolving’ academic and professional disciplines is not only an improved perspective on KM and HRD, but an early insight into the theory in progress we have called Human Capability Development .

Knowledge Management In this unit is study our view of knowledge KM has very much been from a human perspective. Our focus did not dwell on the information technology (IT) dominant view whereby KM is about capture, organisation, search, transfer and reporting knowledge. A view where data mining, knowledge clusters, and content or documents are management to maximise operational efficiency and effectiveness. Nor did we limit our study to KM as a process. To study KM we established a strategic framework that outlined what KM is, and then progressed to drill down on:    

The structure of knowledge; Using capabilities as a ‘currency’ to measure knowledge at all levels (individual, team, organisational and in networks), in all forms (tacit-explicit, embedded-mobile, etc.), and whether it related to learning or performance; Implementing knowledge management strategies within an organisation; and Managing and valuing human capital.

This approach enables us to branch out our study in the second part of this unit to look at HRD and KM related aspects of how people and capabilities can be developed. From the many options and variations we presented the following definition of KM to underpin our study: Knowledge management is the creation of an environment where knowledge is not only captured, transferred and generated, it is the creation of systems of thinking and dynamic action whereby meaning is created for the individuals involved, the organisation, and the organisations’ customers (Bowles, 1999:5).

The structure of purposeful knowledge in an organisation Study in the early chapters confirmed our understanding and appreciation that knowledge had a variety of structures and forms. To Joseph Badaracco (1991) two types of knowledge could be identified; migratory and embedded knowledge. Migratory knowledge was seen as knowledge that can be accessed by another individual or firm, or moved away from one firm to another. Basically it is knowledge that once identified becomes hard to control and protect (Badaracco, 1991:34). Embedded knowledge was differentiated from migratory knowledge because this knowledge ‘moves very slowly, even when its commercial value is high and firms have strong incentives to gain access to it’ (Badaracco, 1991:79). Badaracco defines firms as ‘vast repositories of embedded knowledge’ (1991:80). How they manage embedded knowledge across its absorption, transfer and expansion can determine a company’s competitive success. An examination of Nonaka and Tageuchi (1995) extend our understanding. They argued for knowledge structure being considered within its social context and how it flows. They saw the process of knowledge conversion to include not only individual, group or the organisational levels, but also inter-organisational or levels beyond the organisation. Nonaka and Tageuchi also viewed knowledge as holding two primary forms: Tacit knowledge may include subjective knowledge such as experience, simultaneous knowledge use in a specific context, and analogue knowledge relating to practice or application; and Explicit knowledge may include objective knowledge such as rationality (mind), sequential knowledge (procedures and rules), and digital knowledge (theory) (1995:61-65).


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Future Trends in the Management and Development of Human Capability

Further study also confirmed how knowledge can also reside in the person (the concept of embodied, embrained, and encultured knowledge) (Collins, 1997:146-147), but also in the technology that enabled information flow, cultures that create meaning and co-orient mental models and shared understandings, learning capacity, and in the interactions between people.

Differentiating capacity, capability and capacity As a construct, we have used capability-based approaches to extend how KM can target, develop, report, and in an integrated manner analyse the capabilities held by an individual and value their contribution to an organisation’s overall Knowledge Capital (KC). Capacity was defined as the general term for the pool containing the collected human capabilities that exist in a particular organisation (Bowles, 1999:20-23). We differentiated two forms of capacity, Current Performance Capacity (CPC) and Potential Performance Capacity (PPC). Capability was differentiated by limiting its use to a quality or ability that can be developed or deployed once collected in the available pools of capital resources (Bowles, 1999:140). We isolated capability components to both domain specific skills and knowledge (competencies), and the situated culture, roles or behaviours, traits and such like identity attributes.

Figure 72 Competencies, identity and capabilities (Bowles, 2003:241)

The terms capacity denotes ‘what can be done’ and capability was limited to refer to the ‘currency’ or ‘measure’ of qualities or attributes available in the pool of human resources. The available pool of capital identified included Social Capital, Structural Capital and Human Capital. Collectively these pools contributed to the formation of an organisations Knowledge Capital and both CPC and PPC.

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Figure 73 Pools of capital, capabilities and productive capacity As depicted in figure above, capacity is the ability of an organisation to access knowledge assets that deliver the capabilities required to meet both current performance and future market demands. Knowledge targets not just capability enhancement but the sourcing and construction of knowledge assets within all three pools of knowledge capital resources.

Figure 74 Capacity development spiral Capabilities related to both an organisation’s KC and the HC resident within individuals. Ultimately value is expressed not just through their use by the organisation, but also through the availability and ability of the organisation to manage and draw on capabilities in future situations. As depicted above the capacity of the organisation extends across many cycles of current performance. Value creation and the core role of KM is about


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ensuring the potential is being cultivated to created sustained performance and the capacity to create and seize opportunities. The key point to be made here is that an employee’s value cannot be determined solely by focusing on the development of task competencies required for performance in a current job role. It requires an acknowledgement of how that individual’s knowledge base can be development or contribute to the organisation’s future needs. It is as much about developing future potential as it is about current performance.

Measuring Knowledge Capital The following table summarises from different aspects how the pools of capital contribute towards the formation of KC. The different aspects include scope (core focus of each pool); model (procedural dimension), measures (indicators and examples of how to measure this form of capital), and outcomes (deliverables that form value). Table 21 Comparative features and aspects to knowledge capital Knowledge Capital Pools

Scope Model

Structural Systems, processes and IP Linear

Human People Linear-Interactive

Relationships Relationships Interactive

Employee satisfaction Qualification levels of staff Total turnover percentage per person/ per salary Staff turnover Replacement costs Demographics (i.e. average age of employees) Talent and succession pools (especially leadership) Training days per person Spend on learning as percentage of overall turnover Competency gaps Cultural climate

External organisational image Internal organisational image Brand awareness, perception and value Customer satisfaction Revenue per customer Scale of business relationships (turnover, commitments) New customers Retained customers Numbers involved in communities

Increased competency (skills and knowledge that is position/domain specific) Increased identity alignment (cultural, values, behaviours, values, visions, traits, etc.)

Synergies Supply chain effectiveness Trust Cohesive relationships Good citizenship Business relationships

Financial  Total turnover  Speed of claims Market  Customer satisfaction  Market position  Brand penetration

Measures

Technology  IT expenses per employee  IT staff as percentage of overall staff  IT spend as percentage of overall turnover  Content under management  Access and use of content Processes  Speed of activities  Error rates  Volume of activity Innovation  Translation of R&D into realisable assets  R&D spend as percentage of turnover Intellectual property  Number of patents  Percentage turnover of products  Investment in R&D

Outcomes

Improved:  Income  Profit  Efficiencies  Process speed

(Model constructed from Bowles, 1999:86 & 141; D’Egidion & Caredda, 2002:123-124; & Leitner, et. al, 2002:27981)

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A Knowledge Management Framework In chapter 4 a KM framework and strategic process was posited. Our model oriented both our understanding of approaches to KM and our later study on the elements required to build a KM strategy. The KM framework was posited as a reference model; a model to be used as a basis for tailoring KM to specific contexts and cultures.

Figure 75 Knowledge Management Framework © Bowles, 2005, with permission

The following figure isolates the central element of the larger KM Framework. This refers to the four stage KM strategy cycle.


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Figure 76 KM strategy cycle

Knowledge as the basis for organising Central to organising the organisation based on knowledge is the creation of sustainable ways to create, capture and transfer knowledge. Specifically four factors have been identified by research into effective and efficient knowledge transfer and absorption, they include:     

Properties of knowledge being transferred. Characteristics of knowledge source. Characteristics of knowledge recipient. Context within which knowledge is being transferred. (Emery, 2002:3; Szulanski, 1996) Extensive research has also broken the above factors into more basic elements (Szulanski, et. al, 2002; Szulanski, 1996; Teece, 1977), Emery (2002) aligned the basic elements to properties.

Table 22 Factors and elements inhibiting effective and efficient knowledge transfer Properties of knowledge being transferred

Characteristics of knowledge source

Characteristics of knowledge recipient

Context for knowledge transfer











Causal ambiguity (depth of knowledge) Provenness (conjecture on utility of knowledge)



Lack of motivation Not perceived as reliable

  

Lack of motivation Lack of absorptive capacity Lack of retentive capacity Intimacy with knowledge and Stickability*





Mechanisms (structure and systems) to support transfer Sources of coordination and experience with transfer practices Arduous relationships

* This basic element was added and expanded in Szulanski, et. al. (2002) Strategising to achieve the above outcomes requires a systems-level response. In fact it has been argued in the Knowledge Age knowledge organisations must organise to address these factors and elements. Knowledge at the organisational level can, therefore, provide the basis for determining systems, structures, roles, and processes. This approach is encapsulated in the knowledge-based view of the firm. This approach was further explored in later chapters on organisational agility and absorption (Chapters 10 and 11).

Developing Human Capital and Capacity HC reinforces why people hold value and why management and development of human resources (HR) is a value creating function, not a cost. It has been contended that HC is an asset vested in the individual. As part of the wider construct KM is responsible for ensuring the capacity vested in an individual can be deployed to create value in the organisation’s productive function. This makes people holders of important organisational knowledge assets.

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Consistent with earlier study our study also confirmed why HCM is not just about managing HC to achieve CPC. It also has to be about developing human capacity and nurturing capabilities that can contribute to PPC. Organisational efficiency and effectiveness necessitate building ‘human capital’ in a systematic manner. This requires alignment of organisational approaches to KM, learning and performance improvement. An equation was presented to summarise HC in this context: KM + HRD + Performance = HC where KM is Knowledge Management, HRD is Human Resource Development, and with performance together equate to HC or Human Capital. This formula is a subset of Knowledge Capital formation whereby, HC + SC + STC = KC where HC is Human Capital, SC is Social Capital, STC is Structural Capital and KC is the resulting Knowledge Capital. A conceptual model was advanced to explain the management and development of HC and Human Capacity. This model had dimensions that had previously been explained, i.e. Competency and Identity capabilities. These capabilities resided in both tacit and explicit knowledge structures. It also introduced the wider sense of capabilities relating to mental models and organisational learning. Based on earlier work it was apparent much of these capabilities included knowledge that was primarily embedded and tacit. This often made it hard to tie these capabilities to immediate performance outcomes. As a basis for moving into a study of HRD it was contended that HC is not itself sufficiently extensive in how it can be managed to address future potential. Human capacity requires the mental and learning aspects be fully addressed. Based on the above model the following formulas were presented: Competency + Identity = Human Capital + HC + Mental + Learning = Human Capacity

Figure 77 A conceptual model for developing human capacity and capital

Transformative Human Resource Development Our early analysis of HRD illustrated just how much the profession and discipline is continuing to evolve. We also confirmed how HRD’s role as a strategic function within an organisation competing in the New Economy has had to increasingly resolve its relationship with KM and the development of HC. The development of capabilities and competitive advantage within a global business environment confirmed the need for HRD to at least align its activities with the development of C and adherence to the management of organisational knowledge and learning.


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By advancing a model for Transformative HRD we were able to show how the traditional transactional approach, based on structural-functional, process driven training and skills development view of HRD, needs to be balanced with the need to build an organisation’s future potential and overall Knowledge Capital. The cross-over point between transactional and transformational HRD was seen to be the imperative to develop knowledge and capabilities. Organisations seeking to compete in the New Economy have to apply knowledge not only to existing situations but also be able to rapidly reconfigure knowledge to meet emerging needs. HRD’s role in developing HC is about investing in activities that enhance the asset value of knowledge. This is a focus on HRD as a transformational activity developing existing knowledge or improving access to stocks of knowledge. This added-value to traditional transactional approaches in many ways, as we can see in the table below. Table 23 Comparison of transactional and transformative HRD Transactional HRD

Transformative HRD

Supports current job performance

Based on mutual development of capabilities and talent

Relies on human relations

Realises human potential

Preoccupied with processes and products and services

Is preoccupied with purposes and values, and meaning

Centres on the job

Centres on the person

The organisation owns the factors of production

The individual owns knowledge harnessed by organisation

Is short-term oriented

Is oriented towards long-term goals

Is about reducing the cost of production and HRD activities

Is an investment in assets that hold value

Jobs and designed for people to populate

Jobs are designed to accommodate capabilities required to deliver organisational outcomes

Structures and systems are static and efficiency focussed

Structures and relationships are dynamic and value focussed.

We advanced four ways HRD support strategic human capital management (HCM) within organisations: 1.

Increasing performance and productivity by investing in education, training and development to increase people’s capabilities and thence productivity.

2.

Increasing commitment and meaning by investing in technology and processes that enhance the ability of people to collaborate and communicate in a manner that will enhance organisational goal attainment and the communication of shared visions.

3.

Accelerating the accumulation and integration of knowledge by investing in strategies that will increase the stock of capability available to the organisation, teams, individuals and members of collaborative communities.

4.

Accelerating the ability to hold and exploit knowledge by investing in technologies and processes that will increase the ability of the organisation to rapidly acquire, hold and exploit knowledge necessary to meet current and future needs.

This was complimented by HRD’s role in developing four deep capabilities an organisation will require to compete in the New Economy. The four core roles of HRD were aligned to deep capabilities derived from our earlier conceptual model for developing human capacity and capital (See figure above).

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Table 24 Aligning the role of HRD in HCD with deep organisational capabilities Role of HRD



 


 










A framework for HC Development By Chapter 8 in part 2 of our study we finally were able to posit a reference model for the role of HRD in relation to KM and HCM. Learning was not isolated to any one stream or element in the reference model as it is considered to be omnipresent factor and intervention across all levels and dimension of the model.

Figure 78 Human Capability Development reference model © Bowles, 2005, with permission. Each aspect of the model not previously studied (Employee engagement, Designed in practices, agility and absorption) were then respectively explored. Chapter 8 reviewed how to ‘design in practices’ and raise employee ‘engagement’ (STC dimensions). Chapter 9 examined aspects of employee engagement but predominantly examined the creation of organisational learning and learning organisation approaches that could support the systematic approaches to identifying, capturing, transferring, assimilating and generating capabilities. A particular emphasis was made to the cognitive and intelligences aspects to the Mental models dimension in our human


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capacity and capital conceptual model. Study explored and confirmed how an organisation could use HRD to develop deep capabilities relating to:   

Enhancing domain specific competencies (skills and knowledge) Enhancing Identity capabilities (collaboration and cultural based) Enhancing mental capabilities (Cognition and intelligences)

The subsequent chapter respectively considered how to develop deep capabilities closely aligned to tacit knowledge and Social Capital. They included:  

Enhancing learning for agility capabilities Enhancing learning for absorptive capabilities

Within our human capacity and capital conceptual model and the subsequent Human Capability Development reference model we had differentiated two types of capabilities: Agility capabilities: The capacity of an individual and, therefore, an organisation to acquire, integrate, and assimilate knowledge; and Absorptive capabilities: The capacity to an individual and, therefore, an organisation to learn and the preparedness to acquire, hold and then exploit the resulting knowledge. Our study of agility in chapter 10 required an extensive analysis of the terms of the concept of agility and how it spanned not only how individuals learn and perform, but how this translates to an organisational level. The importance of learning was followed through from the previous chapter. The importance of individual learning (learning cycles) and generative learning to enhanced responsiveness and organisational competitiveness was detailed (See figure below). The value in terms of KM and capability development beyond an adaptive, process and training-centric approach to HRD were confirmed.

Figure 79 Managing learning to promote generate or adaptive change Absorptive capacity extended our study to examine how an organisation needs to not only recognise the value of new, external information, but also hold and apply it to productive ends. This introduced the concept of knowledge being resident in networks, relationships and communities. We explored how Supply Chain Management had direct relevance to development of HC and KC. The structure of relationships in communities such as communities-of-practice or learning communities confirmed how organisations could structure relationships to maximise knowledge absorption. Equally, it was confirmed how divergence in focus could result in knowledge flowing out from the organisation without any real value being captured in return from the relationship and interactions. Resulting from our study it was possible to see that organisations able to address both agility and absorptive capabilities could accelerate their ability to create, transfer and deploy knowledge to meet current and future performance capacity. Accelerating the cycle time relating to individual and team acquisition of new job specific capabilities reduced costs and improved immediate performance. Doing this in a systematic manner - in effect strategically merging KM and HRD activities - produced value because this process could be repeated in the future. Not for the first time evidence existed of how the act of managing and developing knowledge produced knowledge and value.

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Figure 80 S-curve of learning and improvement to performance capacity (after Bowles, 2004: 152)

Where to next? As with any educational exercise the aim is to stimulate and expand your capabilities. You may be left with two pressing questions. Where has all our study taken us? What does this mean for my leadership role or for the organisation? Study of human capability development and the associated KM and HCM aspects should have raised many questions for you regarding learning, leadership and many other aspects of work and life. The development of domain specific knowledge and skills in this case is subservient to our aim to expand your mental modes and the ability to deal with a complex subject. We have provided a series of chapters that stand-alone in their importance. We have also sorted these chapters into two main parts; a study of KM and an analysis of HRD in light of our study on KM. From this analysis we have seen an emerging connecting between KM and HRD that will hold profound implications for all industries. Most of all this connection will be relevant for organisations and clusters of businesses seeking to compete in the Information Age or Digital Economy. Such competition will require: 

Collaboration within increasingly more complex across virtual and physical networks where companies do not share a culture or even a geographic location; and



Reconfirmation that explicit knowledge that is highly mobile may be required to perform, but sustainable competitive advantage will increasingly reside in how well we develop human capital in the area of tacit, highly situated and embedded knowledge (identity and social capital),and foster an expanded drive to learn and absorb skills and knowledge beyond that employed when performing in our current job role.

—END—


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Chapter 12 Badaracco, J. (1991). The Knowledge Link: How Firms Compete through Strategic Alliances. Boston: Harvard Business School Press. Bowles, M. (1999). Learning the True Value of Strategic Knowledge: Valuing capabilities and knowledge assets in the Knowledge Based Economy. (Major White Paper), Melbourne: Huon Institute. Bowles, M. (April 2003). Investigative Research Report into Learning to Elearning. Sydney: Unitas Knowledge Centre and Commonwealth Bank of Australia. Sourced March 2009 at http://marcbowles.com/ifwf/Downloads/tabid/59/Default.aspx. Collins, H. (1997). Humans, machines, and the structure of knowledge, Chapter 8 in R. Ruggles, III (Ed.), Knowledge Management Tools (pp. 145–163). Boston: Butterworth-Heinemann. D’Egidion, F. & Caredda, S.G. (2002). The first Italian Intellectual Capital measurement project, in Phillips, J & Phillips, PP (Eds.), Measuring Intellectual Capital (pp. 113-128). USA: American Society for Training and Development. Emery, J.D. (2002). ‘Designing Firm Integrating Processes from the Knowledge-based View’, Graduate Student Best Paper Award, CASOS 2002 Conference. Seven pages. Sourced March 2004, at http://www.casos.ece.cmu.edu/conference2003/student_paper/Emery6.27.02.pdf. Leitner, K.H., Boremann, M. & Schneider, U. (2002). Development and implementation of intellectual capital report for a research technology organisation, in Bontis, N (Ed.), World Congress on Intellectual Capital — Readings (pp. 266-286). Boston: Butterworth Heinemann. Nonaka, I. & Takeuchi, H. (1995). The Knowledge Creating Company: How Japanese Companies Create The Dynamics of Innovation. New York: Oxford University Press. Szulanski, G. (1996). Exploring internal stickiness: Impediments to the transfer of best practice within the firm, Strategic Management Journal. vol.17, pp.27-43. Szulanski, G. & Winter, S.G., Cappetta, R., & Van den Bulte, C. (January, 2002). Opening the black box of knowledge transfer: the role of replication accuracy, 33 pages. Sourced March 2005, at http://wwwmarketing.wharton.upenn.edu/ideas/pdf/Van%20den%20Bulte/blackbox.pdf. Teece, D. (1977). Technology transfer by multinational corporations: The resource cost of transferring technological know-how, Economic Journal. vol. 87, pp. 242-261.


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