THE RISE OF THE KNOWLEDGE ORGANIZATION
by David and Alex Bennet
The progress of humanity over the past 30,000 years has been predominantly due to the effectiveness of the organizations used to achieve human goals. For example, religious goals have been achieved through organizational structures developed by the world’s major religions. Economic progress throughout history has been driven by commerce and business organizations. Political organizations have both provided stability and been the catalyst for change.
Organizational systems have internal structures that mediate roles and relationships among people working toward some identifiable objective. These internal structures, together with cultural, leadership, and management characteristics, provide the ability to effectively interact with their environment and achieve desired goals.
Organizations have a much longer history than is usually understood. While a study of evolution demonstrates the ubiquitous role of interactions and relationships among all life, the beginnings of structure, function, and dedicated efforts to meet objectives through intention, planned action, and individual roles had to wait until homo sapiens reached the hunter gatherer/agriculture transition.
Since the early hunter gatherer, circa 35,000 B.C., the success of small bands of humans gathering berries, leaves, and grubs and occasionally hunting larger animals is clear from the world-wide distribution of archeological sites where human colonies lived. Environmental forces demanded specific actions for survival, leading to the development of culture via the need and propensity to cooperate. Thus began the first attempts at structure and organization, driven by the same forces that drive organizations 37,000 years later: threats and opportunities in the environment and a strong desire to survive and achieve goals.
As demonstrated in this early human activity, organizations usually existed through a successful balance between the forces in their environment and their own creativity and adaptivity. The boundary between the organization and its environment is almost always porous, flexible, and foggy. This frequently unpredictable external environment is driven by physical, political, sociological, economic, natural, and technological forces.
Organizations, a product of homo sapiens’ superb cognitive and linguistic capabilities, have always made use of knowledge and one of its offspring, technology, to survive during their hour on the stage of history. An early example of this occurs during the eighteenth through twenieth Egyptian dynasties (1550 to 1069 B.C.). The Overseer of All the King’s Works – a man of science, an architect, and the authority figure –
directed the massive labor force required to build a pyramid. “His palette and papyrus
scrolls were the symbols of the authority of knowledge, and bureaucratic lists and
1registers were the tools of political and economic power.” Knowledge, demonstrated by
writing, provided the authority, and the use of technology (in the form of pulleys, levers and wheels) provided the means.
The success of the Taizong dynasty (626-49 A.D.) was a direct result of Taizong’s strong leadership and management approaches built on a solid cultural and military base. While building and stocking the latest instruments of war, Taizong used literature to spread manners and guide customs. He instituted a system of state schools and colleges (one reserved for children of the Imperial family) and gave the highest positions in the government to those who passed literary exams. Thus, Taizong not only recognized the value of learning and knowledge, but used it to expand the Imperial family’s influence throughout the empire.
Throughout history, the environment has become increasingly complex, dynamic, and technologically sophisticated. In response, organizations have become more complex, more flexible, and more egalitarian, with success very much dependent on making optimum use of all available information, experience and insight.
The technology revolution of the late 1700s began with the invention of the steam engine and ultimately brought about factories and mass production. With the emergence of the tycoons of oil, railroads, steel, and automobiles came the rise of the modern bureaucracy and the great test of its precepts of specialists and rigid rules. While economically successful, it took a large toll on human freedom. Specialization, limited learning and initiative, and assembly lines made mechanical robots out of workers. As new technology was developed, it was frequently misunderstood or misapplied and ended up restricting employees rather than liberating their potential.
THE BUREAUCRATIC ORGANIZATION
Max Weber (1864-1920) developed the formal theory recognized today as the bureaucratic model. Weber, a lawyer familiar with power politics, economics, and religion, migrated to sociology through his attempt to understand how capitalism came into existence. His world of ideas was multidimensional.
The bureaucratic framework created by Max Weber in the late 1800s called for a hierarchical structure, clear division of labor, rule and process orientation, impersonal administration, rewards based on merit, decisions and rules in writing, and management separated from ownership. The bureaucratic model was built on management power over workers in what Weber called “imperative control.” The key success factors of Weber’s bureaucracy rested on authority and its acceptance by workers, and on the design and management of processes and rigid rules and procedures.
Weber linked knowledge with power. He believed that “Every bureaucracy seeks to increase the superiority of the professionally informed by keeping their knowledge and 2intentions secret.” Because the pure interest of the bureaucracy is power, secrecy would grow with the increase of bureaucracy. We still live with the legacy of this intent.
With the rise of large corporations in the early twentieth century came a strong interest in research in fields such as leadership, management, organizational theory, and capitalism. Frederick Taylor, Henri Fayol, Mary Parker Follet, Chester Bernard, Adam Smith, Herbert Simon, Abraham Maslow, etc. (the list goes on and on), all contributed to the foundational research and set of organizational concepts of the early twentieth century. This era created the formal foundation of management and organizational theory. Although the origins lay in Weber’s bureaucracy, church and state autocracy and military leadership, these were all modified by the social, political, and capitalistic drives in the free world after World War II. The new theories and concepts such as Theory X, Theory Y, Theory Z, Charismatic and Transformational Leadership, General Systems Theory, and Organizational Linking Pins, became popular and a noticeable shift occurred from bureaucracy toward a more benign and malleable organizational structure. Tools such as Management by Exception, Span of Control, Kurt Lewin’s Force Field Analysis, and Taichi Ohno’s Toyota Production Line techniques helped both managers and workers
implement change throughout their organizations. While some changes occurred, most organizations continued to be hierarchical. Knowledge and information were held close by supervisors and managers and protected as knowledge and information represented personal power and authority. Economic progress was relatively steady and, until the 1970s, fairly predictable. During this post-bureaucratic era, the key factors were a combination of Tayloristic time and motion management and participative management, slowly bringing some of the workforce into the arena of worker responsibility and empowerment.
As the affluence, mobility, and expectations of the workforce in developed countries continued to rise, coupled with the explosive growth of information and communication technologies, and the creation of knowledge, organizations found themselves in situations of restructure or collapse. The old mechanical metaphor would no longer serve in the nonlinear, dynamic, complex global web of the mid 1990s. Many organizations failed, some were acquired, and the best set about seeking the popular vision of the “world-class” corporation. The stage was now set for the rise of information and knowledge organizations, with the information organizations taking the lead via computers and communications technology in the early 1980s and 1990s and the knowledge organizations, currently in their embryonic form, focusing on networking and knowledge creation, sharing, and application.
Because we will use three terms extensively in describing the current and future organization, it is important to communicate what we mean by data, information, and knowledge. Data are discrete, objective facts about events, including numbers, letters, and images without context. Information is data with some level of meaning. It is usually presented to describe a situation or condition and, therefore, has added value over data. Knowledge is built on data and information and created within the individual. Knowledge of course has many levels and is usually related to a given domain of interest. In its strongest form, knowledge represents understanding of the context, insights into the relationships within a system, and the ability to identify leverage points and weaknesses and to understand future implications of actions taken to resolve problems. Thus knowledge represents a richer and more meaningful awareness and understanding that
resonates with how the “knower” views the world. Knowledge is frequently considered
ORGANIZATIONS OF THE YEAR 2000
Time accelerates. Distance shrinks. Networks expand. Interdependencies grow geometrically. Uncertainty dominates. Complexity overwhelms. Such is the environment and the context within which current organizations must survive and thrive.
This situation is a result of many years of evolution driven by a number of major factors. Of significance is the increasing economic affluence of the worker in the developed countries coupled with their increased education level, resulting in a strong demand by workers to be recognized, respected, and allowed to participate and have determination in their work. Economics and technology provide both the means and pressures for mobility, thereby giving workers the freedom to leave their jobs for other, more challenging positions. While the last 50 years have seen many ups and downs in terms of employment, productivity, interest rates, investments, etc., the recent decades have provided increasing wealth and economic success.
Consistent with this history, every organization lives at the pleasure of its environment – economic, sociological, scientific, technological, and political. For example, state charters legitimize corporations, Occupational Safety and Health Administration (OSHA) and the Department of Labor mandate tight restrictions on both safety and personnel regulations, the Environmental Protection Agency (EPA) regulates organizational behavior relative to environmental impact, and the business media heavily influence corporate stock values depending upon local and temporal events. Technology plays a dominant role in determining both the landscape of competition and the cultural and educational needs of the workforce. It is arguably true that technology has played the strongest role in creating the present environment within which organizations must adapt and learn how to excel compared to their competitors. For example, tremendous increases in processing speed, communication bandwidth, miniaturization of technology (nanotechnology), and the development of complex algorithms and application programs have spawned the rapidly changing pace of society and the increasing need and capability for communication, collaboration, and networking, both virtual and real. The phenomenal rise of the Internet, coupled with the spin-offs of intranets, extranets, and portals, has created a networking potential that drives all of society and corporations in terms of speed, interdependencies, global markets, and the creation and spread of memes instantaneously throughout the world. Memes are ideas that become a part of the culture. Those organizations that have found ways to compete successfully within this nonlinear, complex, and dynamic environment may dominate their competitors by as much as twenty-five percent in growth rate and profitability relative to the average in their industry.
Specific characteristics of these “world class” organizations are key to their success. Consider the distribution of all organizations within the United States versus their normalized performance (i.e., the number of organizations having a specific level of performance plotted along the vertical axis and performance along the horizontal axis).
This graph would likely be represented by the commonly known bell curve, with the high performing organizations represented at the far right of that bell curve. While most of today’s organizations are far from this world class region, many are working hard to improve their performance, that is, efficiency, effectiveness and sustained competitive advantage, in order to improve their competitive status and in some cases prevent being acquired or going into bankruptcy.
Often the tools, methods, structures, and principles that the best organizations have found to drive high performance are neither new nor, in many cases, unique. For example, many of the ideas that Toyota created in the late 1940s and early 1950s relative to lean manufacturing in the automobile industry (although refined and improved) are still considered world class, and, in fact, Toyota is considered by many to be the leader 3throughout the world in automobile manufacturing. Taichi Ohno created the Toyota
production system just after World War II as a response to potential bankruptcy and 4changing consumer demands. The system eventually included just-in-time supply parts delivery, floor workers in the factory taking responsibility for product quality and having authority to stop the production line, and teams of workers solving problems on the factory floor and learning cross-functional jobs to insure continuous production line flows. Recognize that it took Toyota more than twenty years to create its present system, and it is still being improved. Approximately fifty years later many of these early ideas are still considered best practices and used by manufacturing organizations worldwide. They represent a significant departure from the bureaucratic hierarchy chain of command and minimum freedom of the worker.
In Built to Last, Collins and Porras did a six-year study of eighteen companies that had outstanding performance over time periods between fifty and two hundred years. Reviewing their results, together with other research on long-lived world-class companies, we offer the following factors as representative of long-term, highly successful organizations:
; Continuous striving to improve themselves and doing better tomorrow than
what they did today, always remaining sensitive to their customers and their
; Not focusing on profitability alone, but balancing their efforts to include
employee quality of life, community relations, environmental concerns,
customer satisfaction and stakeholder return.
; A willingness to take risks with an insistence that they be prudent and have an
overall balanced risk portfolio. In general, they were financially conservative.
; A strong feeling about their core ideology, changing it seldom, if ever. Their
core values form a solid foundation and, while each company’s individual
values were unique, once created, they were not allowed to drift with the
fashions of the day. This core value molded their culture, and created a strong
sense of identity.
; Relative to their employees, these companies demanded a strong “fit” with
their culture and their standards. Thus, employees either felt the organization
was a great place to work and flourished or they were likely short-term. At
the same time, they were tolerant of individuals on the margins who
experimented and tested for possibilities.
Many current top organizations have made significant changes in the way they do business in the past decade and have been able to create performance through change management and deliberately develop the fundamental characteristics needed for success. These characteristics must provide those responses necessary to excel in today’s environment. For example, time to market or the ability to quickly develop new products is a key factor in many industries because of the decreased production time created through technology, concurrent engineering, and agile manufacturing techniques. The use of simulation, integrated product teams, and world-wide subject matter experts operating virtually have been instrumental in bringing new knowledge and ideas together to rapidly produce products desired by a sophisticated and demanding market. Examples of this capability are: (1) mass customization where economic order quantities of one are being pursued and (2) agility, the ability of an organization to move rapidly in response to changing and unique customer needs. Creativity and innovation have come to the forefront as key success factors with organizations striving to develop and unleash these capacities throughout their workforce, using a combination of management, workers, customers, and the ability to pull collaborative teams together as a situation or problem dictates.
Employee involvement has now been accepted and understood by world class organizations and many “hope to be’s.” Examples are Wal-Mart, Hewlett-Packard, IBM,
Texas Instruments, Motorola, and the Chaparral Steel Company. These world-class organizational structures have moved significantly away from bureaucratic decision- making, and have modified their hierarchies to include team-based organizations and horizontal structures with minimum “white space.” These firms encourage cross-
communication by all employees, supported by technology such as e-Mail and 5groupware, and reward employees who play a strong role in influencing organizational direction and decision-making.
These same organizations, working predominantly in the fast-moving world of information and knowledge application, recognize the value of decisions made at the lowest qualified level and the payoff from smart workers who know their jobs. However, for employees at all levels to use their knowledge to make effective decisions, they must understand the context within which those decisions are made. This context is provided through shared vision, clear values, and strong organizational direction and purpose, combined with open communication. As described by Peter Senge in the Fifth Discipline,
smart companies put significant effort into transferring their vision, purpose, and goals to all employees. Good employee decision-making stems from understanding their work in terms of its impact on adjacent areas of the organization, as well as its direct impact on the customer. This requires effective empowerment and systems thinking, and comes 6from customer orientation and focus. Note how far we have departed from Weber’s
description of bureaucracy and its relative impotency in the current world context.
Nurtured by Total Quality Management (TQM) and Total Quality Leadership, the transfer of better business practices has recently become a hallmark of high-performing organizations. Many tools are continuing to be developed to help organizations create environments that make maximum use of employee knowledge and creativity. These practices include benchmarking, business process reengineering, lean production, value chain analysis, agility, integrated product teams, balanced score card, and, most recently, knowledge management.
The birth of knowledge management (KM), occurring in the early 1990s, grew from a recognition of the difficulty of dealing with complexity and with ever increasing competition spurred by technology and the demands of sophisticated customers. First came an awareness of the importance of information and knowledge, followed by a constant search for ways to create, store, integrate, tailor, share, and make available the right knowledge to the right people at the right time. Fundamental to this picture was a growing appreciation for the knowledge level of the employees. Although still in its infancy, as indicated by the large number of meanings and uses of the words knowledge and KM, the field has pushed many organizations far from the classical Weberian bureaucracy. For example:
; The knowledge organization’s focus on flexibility and customer response
compared to bureaucracy’s focus on organizational stability and the accuracy
and repetitiveness of internal processes.
; Current practices that emphasize using the ideas and capabilities of employees
to improve decision-making and organizational effectiveness. Bureaucracies
utilize autocratic decision making by senior leadership with unquestioned
execution by the workforce.
; Current efforts to bring technology into the organization to support and
liberate employee involvement and effectiveness. Classical bureaucracies use
technology to improve efficiency and expect employees to adapt.
; Current actions to eliminate waste and unnecessary processes while
maximizing value added. Bureaucracy seeks to establish fixed processes to
ensure precision and stability with little concern for value.
; Current organizational emphasis on the use of teams to achieve better and
more balanced decision-making and to share knowledge and learning. The
axiom is “knowledge shared is power.” Bureaucracies minimize the use of
teams to maintain strong control and ensure knowledge is kept at the
managerial and senior levels. The axiom is “personal knowledge is power.”
As valuable as the above ideas are, their implementation continues to be a challenge to all organizations. Although many of these tools were originally touted as silver bullets, after they become popular, and as companies try them without fully understanding the difficulties of their implementation, they frequently achieve less than anticipated results. Michael Hammer, co-creator of Business Process Reengineering, has defined business process reengineering (BPR) as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical 7contemporary measures of performance.” We find that ten years later, BPR is just now
being understood well enough to provide a good chance of success, if applied to the right
situation by experienced professionals. The unproven perception was that as many as seventy percent of BPR implementations failed to meet expectations. Many feel TQM suffered the same difficulties. As time progresses and more organizations learn how to successfully implement these tools, they are becoming more and more useful and contributing significantly to organizational improvement.
From the authors’ personal experience, major reasons for the difficulty in applying these tools comes more from the lack of infrastructure support, and the inability to change culture than it does from the individual workforce and leadership. Research has indicated that the resistance from cultural inertia causes great difficulty in transferring 8the knowledge to effectively implement better business practices. Thus, we expect the
road to a highly effective and efficient knowledge organization to be filled with bumps and potholes. Every change in the basic beliefs of the workforce, or of “the way the work gets done” is slow, erratic and painful. The move to a knowledge organization is no exception. But the move is occurring and will continue. There appears to be no other viable alternative.
For any new ideas to provide long-term value, they must be better understood and continuously improved through a process of ongoing learning. As our environment changes, our organizations must be molded, and sometimes even reinvented, into something that better fulfils an important need. Thus we see that in today’s environment, no solutions can be independent of either time or context. This also applies to organizational structures. To the extent that this is true, there is not – and likely may
never be – any single form of organizational structure that provides maximum overall effectiveness or that can even be offered as a model for reference. However, they all must be able to move quickly and make knowledgeable decisions coupled with effective follow through.
A significant challenge continuously facing the modern knowledge organization is how to harness the benefits of information technology. While the rapid growth and widespread influence of information technology has resulted in huge investments by many corporations, there has been some disillusionment with its hoped for increase in productivity. However, those companies that have recognized the close relationship between information technology and culture, using technology to support people in achieving corporate objectives, have found information technology highly effective in creating a competitive advantage. To achieve this not only requires selecting and adapting technology to an individual organization’s needs, but also a carefully designed
process that brings technology into the culture in a manner that the workforce finds acceptable and motivates them to make the necessary cultural changes to successfully imbed workflow adaptations.
In addition to the aforementioned challenges in applying information technology and the requisite culture change, there are a number of fundamental barriers that “to-be”
knowledge organizations face as they attempt to become world class and to develop and maintain continuous competitive advantage. It is widely known that change management is a broad and challenging field that offers many theories and processes to consider, but
no guaranteed solutions. Fundamentally, the process of change is highly situational and dependent not only on the environment, goals, and objectives of the organization, but on its specific history, culture and leadership. Each year finds a number of new books and journal articles offering the latest and greatest solutions to implementing change. To the authors’ knowledge, there is no “solution” to implementing change because each situation offers its own set of unique challenges, pitfalls, and potentially successful tactics.
A major source of opposition to creating a knowledge organization is likely to come from middle management’s unwillingness to give up its prerogatives of decision-
making and authority. Because most of the workforce gets their direct information from, and usually develops trust in, their immediate supervisors, they are heavily influenced by the attitudes and actions of these middle managers. This barrier has occasionally been overcome when senior management has circumvented the mid-level and worked directly 9with the workforce.
Although communication is essential in stable times, it becomes critical and extremely important during times of change and uncertainty. Rumors, informal networks, official organizational policies, and rules, as well as personalities and fear of job loss or power changes, all heavily influence the accuracy, noise level and usefulness of communication. The classic solution seems to be to communicate as much as possible, as accurately as possible and as often as possible, keeping all of the workforce informed on events and changes in the organization. Although theoretically sound and occasionally successful, this practice may be difficult under conditions where major changes are needed, but the rationale for these changes is difficult for employees to understand and accept. Thus, building a knowledge organization under conditions less than life threatening is challenging at best.
Before the workforce will accept new practices, they must be willing to recognize and admit that their current efforts are inadequate. This usually requires a paradigm shift and a willingness to adapt new assumptions in terms of how the business works and what must be done. The resistance to this paradigm shift is usually high and often unrecognized by management. The historic paradigm that produced past success is so ingrained in the belief systems of most middle and upper managers, and the risk of adapting totally new assumptions about the business is so large, that the “double loop” 10learning required, as discovered and explained so eloquently by Argyris and Schon in
their book Organizational Learning: A Theory of Action Perspective, is a major challenge.
Still another challenge faced by leadership is the willingness to give up some of its own authority and decision-making and to empower the workforce (including teams) to make decisions based upon local circumstances. This diffusion of information and knowledge from upper and middle management throughout the workforce means that they give up authority while maintaining responsibility – something very few people
want to do. Yet, to successfully release the worker’s knowledge and experience for organizational improvement, the context, direction, and authority to make local decisions must be made available to all personnel, and those same personnel must be qualified to accept the challenge of empowerment.
A knowledge organization must, of necessity, become a learning organization so that the entire firm will learn while it works and be able to adapt quickly to market changes and other environmental perturbations. Except for a few professional firms, most workers are not in the habit of continuous learning as part of their job. Unfortunately, many supervisors and managers believe that learning on the job is not appropriate. It is no surprise then that individuals who have worked for years without learning or even the expectation of having to learn on the job find it highly challenging and difficult to “learn how to learn” and to continuously keep updated in their area of expertise. Creating the emergent characteristic represented by a learning organization will take much more effort than simply offering courses and training to the workforce.
Another challenging final barrier particularly relevant to those firms seeking to become knowledge organizations is that of creating a culture in which knowledge and knowledge sharing are valued and encouraged. As discussed earlier, many workers consider knowledge as power and job security, and are frequently unwilling to share ideas and experience with their colleagues. The solution to this barrier is an area of current research and ideas are being offered and tested. As always, they are situation dependent and represent another step toward complexity.
The evolution of organizations has passed from cooperative hunting bands to farming groups to towns/cities to bureaucracies. These changes took almost ten thousand 11years, or about five hundred generations. Yet during the past fifty years (two
generations), organizations have moved from enlightened bureaucracies to employee-centered, team-based, networked, information, and knowledge intense structures struggling to keep pace with change. Recall that we are speaking primarily of those firms at the right side of our bell curve. In one sense, we are moving back to small bands of people working together to solve their common and immediate problems. In another, everyone lives, works, and relates in a totally new and strange world.
At the forefront of organizational performance are the knowledge-based organizations that have successfully adopted several or many of the practices discussed above while concomitantly taking advantage of the new technological advances such as knowledge portals, intelligent search engines and agents, and knowledge repositories. These organizations have achieved high levels of efficiency and effectiveness, sustained competitive advantage and, above all, achieved an effective balance that satisfies stakeholders, customers, the workforce, the environment, and local community needs. While there is still much experimentation with organizational design and trial and error is on the daily menu, general patterns of success seem to be emerging. These patterns are creating new metaphors for organizations such as: agile production systems, living organisms, complex adaptive systems, self-organizing systems, virtual organizations, the spiritual workplace, and of course, the knowledge organization. Which of these metaphors, or new ones to be generated in the future, will become the successes of the year, fifteen to twenty years ahead, cannot be predicted. In all likelihood, the future organization will contain parts of all of them. One can certainly be confident that information, knowledge, and their intelligent application will be an essential factor in