The Knowledge-Based Approach to Organizational Measurement: Exploring the Future of Organizational Assessment

The Knowledge-Based Approach to Organizational Measurement: Exploring the Future of Organizational Assessment

Aino Kianto (Lappeenranta University of Technology, Finland) and Jianzhong Hong (Lappeenranta University of Technology, Finland)
Copyright: © 2009 |Pages: 20
DOI: 10.4018/978-1-60566-176-6.ch016
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Nowadays knowledge and competencies are the key productive factors, and the organizational capability for continuous learning, development and renewal has become the main driver of competitiveness. In this chapter the authors explore how organizational measurement should change in order to remain relevant in the face of the recent increase in the knowledge-intensiveness of work, organizing and value creation. First they argue that, while traditionally measurement has mostly been used for control purposes, recent changes in the nature of work have brought on new challenges which can no longer be met with old mindsets and measures. Then they focus on two novel approaches, intellectual capital and competence development, and examine the current state of the art. Finally, the authors construct foundations for a knowledge-based approach to organizational measurement and set some future directions in which measures should be developed in order to portray and enable knowledge work and knowledge-based value creation.
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It is widely agreed that nowadays knowledge and competencies are the key productive factors, and the organizational capability for continuous learning, development and renewal has become the main driver of competitiveness (Drucker, 1988; Prahalad & Hamel, 1990; Kogut & Zander, 1992; Grant, 1996b; Teece et al., 1997). Thus, organizations are increasingly interested in assessing, managing and developing what they know and can do. This chapter explores how organizational measurement should change in order to remain relevant in the face of the recent increase in the knowledge-intensiveness of work, organizing and value creation. Traditionally measurement has mostly been used for hierarchical control purposes with regard to material and financial stocks and flows, but we argue that recent changes in the nature of work have brought on new challenges which can no longer be met with old mindsets and measures.

“You can only manage what you can measure.” Undoubtedly one of the oldest clichés of management science, it embodies an assumption that once something can be measured, it can also be managed. This type of an assumption is based on the idea that optimal performance can be totally standardized. It is also connected with the view that the expertise about the nature of optimal performance is located at the top of the organizational hierarchy. Thus, management is reduced to giving orders and enforcing control, and the role of employees is that of obedient implementers.

Even though this may have been a justified view in the Fordist era of mass production, current changes in the nature of work have created new challenges. Knowledge work implies different performance criteria and a different type of management than other types of work (e.g., Blackler, 1995; Davenport, 2001; Snowden, 2002). This entails changes for measurement on two levels. First, the actual measures themselves have to change. For example, knowledge worker productivity is more related to the quality than the quantity of output (Drucker, 1999), which makes most traditional performance measures inadequate. Second, the whole goal of measurement has to be seen differently: not as to control but to foster continuous learning and renewal of the whole organization.

In this chapter, we first examine the nature of knowledge work and knowledge-based organizing in the light of recent management science literature. We argue that as organizations have changed, so should the measures used in them. Performance measurement was developed for the needs of organizations in the pre-knowledge era and cannot adequately capture the essential characteristics of knowledge work and knowledge-based value creation.

We also shed light on the novel approaches brought about by scholars working in the fields of intellectual capital (e.g., Edvinsson & Malone, 1997; Sveiby, 1997; Roos et al., 1998; Stewart, 1997; Bontis, 1999) and competence development (e.g. Snow & Hrebiniak, 1980; Henderson & Cockburn, 1994; McGrath et al., 1995; Riiter et al., 2002), and examine the current state of the art. These two modern schools of thought are mindful of the special qualities of knowledge as opposed to other types of resources. Interestingly, in these postulations there is also a different kind of twist when compared to the traditional measures: traditionally measurement was mostly aimed at controlling, whereas these new approaches are, more or less explicitly, aiming to measure learning. So, rather than control the intangible resources and competencies, the novel metrics are meant to foster development and learning.

Even though these new branches of management have set to expand the scope of measurement to knowledge-related issues, there is however still room for improvement in the measurement frameworks as well as the specific indicators. Finally, based on the knowledge-based view of work and organizing, we propose criteria for more adequate measurement of knowledge and competence. We set some future directions in which measures should be developed in order to better reflect the change towards knowledge work and knowledge-based value creation in organizations.

Key Terms in this Chapter

Competence Development: Competence is more like an asset, while competence development is a more practical or at least action-oriented approach which aims to develop these assets or competences. Competence development has set out to expand organizational measurement from command and control purposes towards enabling learning and self-renewal.

Competence Matrix: The competence matrix is sometimes also called competence mapping or competence analysis. It is the most common tool used in work organizations for competence measurement and development of individual skills, knowledge and competences including technical or professional skills, human competence (e.g., interpersonal communication skills) and business know-how.

Measurement: In traditional management, the role of measurement is to provide the management with information about whether the set goals are being met and the standardized operating methods being followed, and thereby to enable timely and just monitoring of execution. The measurement objects are tangible, namely, financial or material resources and liabilities of the organization. In contrast, from the knowledge-based view, the role of organizational measurement is to enable knowledge workers to develop their own working methods and conditions, and to inform the management of how to support employees better in creating, sharing and integrating knowledge for productive ends. The focus of measurement shifts from material or tangible resources to knowledge.

Knowledge Workers: Knowledge workers are highly educated employees who apply theoretical and analytical knowledge to developing new products, services, processes and procedures. As knowledge workers by definition are the experts of their own jobs, much of the decision-making and job design has to be relocated where the expertise lies.

Competence: Competence can be either individual one that focuses on the personal and cognitive traits of so-called competent managers or employees in relation to their job performance, or organizational one that focuses on corporation wide strategic competence and collective practices. It can also be a comprehensive one that integrates both individual and organizational strategic competences together.

Intellectual Capital: Intellectual capital is a set of knowledge-based resources and processes that contribute to the sustained competitive advantage of the firm. The most commonly shared view is that intellectual capital consists of three basic elements: human capital (skills and know-how of the people in the organization), structural capital (organizational infrastructures and processes) and relational capital (relationships with clients, suppliers and other significant stakeholders, image, brand).

Knowledge-Based View: According to the knowledge-based view, organizations are communities of knowledge and innovation that constantly create, transfer and transform knowledge into sustainable competitive advantage, and performance differences between firms derive from their differing stocks of knowledge and capabilities in using and developing knowledge.

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Editorial Advisory Board
Table of Contents
Dariusz Jemielniak, Jerzy Kociatkiewicz
Dariusz Jemielniak, Jerzy Kociatkiewicz
Chapter 1
Davydd J. Greenwood
This chapter questions the clarity of the concepts of “knowledge society” and “knowledge-intensive organization”. In particular, the author asserts... Sample PDF
Are Research Universities Knowledge-Intensive Learning Organizations?
Chapter 2
Juha Kettunen
The aims of knowledge management are to create knowledge and stimulate innovation. Knowledge management allows the knowledge of an organization to... Sample PDF
Construction of Knowledge-Intensive organizations in Higher Education
Chapter 3
Jeff Gold, Richard Thorpe
Continuing Professional Development (CPD) is usually conceived as a planned and formulated process for individual members of professional... Sample PDF
Collective CPD: Professional Learning in a Law Firm
Chapter 4
Paul Trott, Andreas Hoecht
The United States and European economies have witnessed an enormous increase in the amount of specialized business services, which now provide... Sample PDF
Innovation Risks of Outsourcing within Knowledge Intensive Business Services (KIBS)
Chapter 5
Lars Steiner
A new knowledge management perspective and tool, ANT/AUTOPOIESIS, for analysis of knowledge management in knowledge-intensive organizations is... Sample PDF
Actor-Network Theory and Autopoiesis: A New Perspective on Knowledge Management
Chapter 6
Jo A. Tyler, David M. Boje
This chapter fits the theme, the interplay between creativity and control in organizations. Story is often claimed to be a way to elicit tacit... Sample PDF
Sorting the Relationship of Tacit Knowledge to Story and Narrative Knowing
Chapter 7
Louise Grisoni
The central discussion in this chapter is that poetry can be used to provide a bridge between tangible, rational and explicit knowledge and tacit or... Sample PDF
Exploring Organizational Learning and Knowledge Exchange through Poetry
Chapter 8
Ester Barinaga
“How do we define our project goal?” “How are we going to coordinate our independent national studies?” “Who is responsible for what?” “How are... Sample PDF
Vagueness: The Role of Language in the Organizing Process of Knowledge Intensive Work
Chapter 9
Stephen Sheard
In this chapter the author offers an argument towards the resurgence of a proto-alphabetic imagination in electronic and mobile communications. It... Sample PDF
Tyranny of the Eye? The Resurgence of the Proto-Alphabetic Sensibility in Contemporary Electronic Modes of Media (PC/Mobile Telephony); and its Significance for the Status of Knowledge
Chapter 10
Krzysztof Klincewicz
The chapter discusses the role of IT Research & Analysis firms in the diffusion of knowledge management. The research is based on content analysis... Sample PDF
Knowledge Management and IT Research and Analysis Firms: Agenda-Setters, Oracles and Judges
Chapter 11
Fatima Guadamillas-Gomez, Mario J. Donate-Manzanares
This chapter analyses the implementation of knowledge management strategies (KMS) in technologyintensive firms. Firstly, a review of KMS in the... Sample PDF
Knowledge Management Strategies Implementation in Innovation Intensive Firms
Chapter 12
Arla Juntunen
This chapter focuses on the development of the Knowledge Management (KM) platform, and, more generally, the knowledge- and resource based view (RBV)... Sample PDF
Developing a Corporate Knowledge Management Platform in a Multibusiness Company
Chapter 13
Jonathan D. Owens
Success in new product development (NPD) can be considered a general aim for any company wishing to survive in the 21st Century. It has been found... Sample PDF
Modeling the New Product Development Process: The Value of a Product Development Process Model Approach as a Means for Business Survival in the 21st Century
Chapter 14
Anders Örtenblad
The ambition of this chapter is to pay some attention to more obvious, as well as more subtle, methods for organizations to become independent of... Sample PDF
Achieving Organizational Independence of Employees' Knowledge Using Knowledge Management, Organizational Learning, and the Learning Organization
Chapter 15
Angelo Ditillo
Knowledge-intensive firms are composed of various communities, each characterized by specialized knowledge. These communities operate as critical... Sample PDF
Balancing Stability and Innovation in Knowledge-Intensive Firms: The Role of Management Control Mechanisms
Chapter 16
Aino Kianto, Jianzhong Hong
Nowadays knowledge and competencies are the key productive factors, and the organizational capability for continuous learning, development and... Sample PDF
The Knowledge-Based Approach to Organizational Measurement: Exploring the Future of Organizational Assessment
Chapter 17
Vidar Hepsø
In knowledge management literature, common information spaces (CIS) are believed to be instrumental in the development and sharing of knowledge.... Sample PDF
Common Information Spaces in Knowledge-Intensive Work: Representation and Negotiation of Meaning in Computer-Supported Collaboration Rooms
Chapter 18
Agnieszka Postula
This chapter presents and discusses two factors – creativity and control – which correspond to every organizational reality. IT specialists’... Sample PDF
Creativitiy and Control in IT Professionals' Communities
Chapter 19
Patrocinio Zaragoza-Saez, Enrique Claver-Cortes, Diego Quer-Ramon
Knowledge is one of the basic production factors owned by enterprises, and knowledge management is one of the main dynamic capabilities on which... Sample PDF
A Qualitative Study of Knowledge Management: The Multinational Firm Point of View
Chapter 20
Cliff Bowan, Pauline Gleadle
The chapter addresses a central dilemma from the viewpoint of dynamic capabilities and the resource based view of the firm: how to manage creativity... Sample PDF
Culture as a Dynamic Capability: The Case of 3M in the United Kingdom
Chapter 21
Maria E. Burke
The purpose of this chapter is to consider an original way of improving Knowledge Management relationships. This is done within the context of an... Sample PDF
Cultural Issues, Organizations and Information Fulfillment: An Exploration Towards Improved Knowledge Management Relationships
Chapter 22
Darius Mehri
The author worked in the research and design department at a large Toyota company in the late 1990s and experienced an innovative process where... Sample PDF
Engineering Design at a Toyota Company: Knowledge Management and the Innovative Process
Chapter 23
Federica Ricceri, James Guthrie
The shift towards a knowledge based economy is at the core of the debate of contemporary management and accounting literature and organisations are... Sample PDF
Critical Analysis of International Guidelines for the Management of Knowledge Resources
Chapter 24
Christiane Prange
Internationalization has accelerated the speed of knowledge generation and innovation. Thus, companies increasingly need to pool and create new... Sample PDF
Strategic Alliance Capability: Bridging the Individual Back into Inter-Organizational Collaboration
Chapter 25
Meryem Sevinc, Lawrence Locker, John D. Murray
In the contemporary context of knowledge discovery, the amount of information and the process itself has increased in complexity. Relevant to the... Sample PDF
Automation vs. Human Intervention: Is There any Room Left for the Analyst in the Data Mining Process?
Chapter 26
Joanna Shih
The hi-tech firms that predominate in Silicon Valley contain a large proportion of knowledge workers—employees with high levels of education and... Sample PDF
Temporality and Knowledge Work
Chapter 27
Alice MacGilivray
Knowledge management is often associated with the need for change and related shifts in ontologies, ways of knowing and ways of working. Combine the... Sample PDF
Knowledge Intensive Work in a Network of Counter-Terrorism Communities
Chapter 28
Tatiana Andreeva
Contemporary literature usually views knowledge creation and knowledge sharing as either independent or positively related processes. However, based... Sample PDF
Tensions between Knowledge Creation and Knowledge Sharing: Individual Preferences of Employees in Knowledge-Intensive Organizations
Chapter 29
Steffen Boehm, Chris Land
Knowledge is implicitly assumed to form an increasingly important, or even the dominant source of values for today’s knowledge based organizations.... Sample PDF
The 'Value' of Knowledge: Reappraising Labour in the Post-Industrial Economy
Chapter 30
Alexander Styhre
This chapter discusses the use of media in knowledge-intensive organizations. Media is defined here as the integration of technologies, practices... Sample PDF
New Media and Knowledge Work
Chapter 31
Ben Tran
This chapter examines knowledge and innovation as invaluable factors affecting the longevity of large organizations. It presents the history and... Sample PDF
Knowledge Management: The Construction of Knowledge in Organizations
Chapter 32
Premilla D’Cruz, Ernesto Noronha
Scholars researching the area of the sociology of professions had earlier predicted that as occupations seek to improve their public image... Sample PDF
Redefining Professional: The Case of India's Call Center Agents
Chapter 33
Dariusz Jemielniak, Jerzy Kociatkiewicz
Knowledge management and knowledge-intensive work are two of today’s hot buzzwords, though both already have a history of managerial usage. While... Sample PDF
Knowledge Management: Fad or Enduring Organizational Concept?
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