13 Creating Value by Managing Knowledge Patrick Callioni I am enough of an artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world. —Albert Einstein People always know more than they can say and always say more than they write down. —Dave Snowden Introduction The theme for this Chapter originated from the need to understand how organisations produce value by managing knowledge. The focus is on managing knowledge about and within an organisation. Organisations in the public sector and in the private sector are being challenged by the volume of data and information they are required to manage and it is becoming obvious that in the modern economy value is created by the wise use of data and information, by managing and exploiting knowledge. As discussed elsewhere in this book, there is growing recognition of the value of knowledge management as a strategic and organisation design tool (see Chapter 14). This is not a new phenomenon. As early as 1964, Peter Drucker wrote, Creating Value by adding Knowledge 401 Other resources, money or physical equipment, for instance, do not confer any distinction. What does make a business distinct and what is its peculiar resource is its ability to use knowledge of all kinds – from scientific and technical knowledge to social, economic and managerial knowledge. It is only in respect to knowledge that a business can be distinct, can therefore produce something that has a value in the market place (Drucker 1993). To date, the application of knowledge management remains relatively narrow, often confined to the management of records. Alternatively, it is hijacked by the marketing departments – with encouragement from external consultants – and implemented in the shape of customer relationship management systems (Robinson 2000). This may be because it is not easy to measure the impacts of applying knowledge management principles in everyday management practice. The discussion of measurement issues in Chapter 11 may help the reader to fill this gap. Additionally, the apparent failure of knowledge management to live up to its touted potential may be due to the lack of a persuasive intellectual model that links knowledge management to organisation theory and to the practice of management. This Chapter will deal with this latter issue, seeking to anchor knowledge management principles to modern expositions of the theory of organisations and to the practice of management. It will also suggest means to show how value created by applying knowledge management principles can be captured and measured. The reader will notice that, to avoid needless repetition, references to the history, development and form of knowledge management have been kept to a minimum in this Chapter. For a reader new to knowledge management, it may be helpful to read Part 1 of this book before venturing into this Chapter. 402 Callioni Models and metaphors This Chapter is written on the assumption that no single theory or paradigm will provide a complete or all-purpose point of view (Morgan 1998; Fernandez-Armesto 1998; Wilson 1999); and that metaphors are useful means of dealing with complex information in a complex field (Morgan 1998; Ramsey 1998). We will use imagination as a tool for extracting wisdom from knowledge (see Figure 13.3 and Figure 13.7). This is not an exercise in inductive or deductive thinking, but an example of reasoning by analogy (Holyoak and Thagard 1996). Think of this Chapter as a story that ties together the elements needed to understand organisations and how they create value from knowledge. Starting with the end in mind There is substantial evidence to support the assumption that successful change programs in organisations begin by focusing on the desired result (Schaffer and Thomson 1992). This empirical evidence is supported by influential frameworks for thinking and acting, such as Stephen Covey’s seven habits of highly successful people (1990), or the use of hypotheses in science, discussed below. In this Chapter, the reader will be provided with models to manage knowledge about and within the organisation. The scholar will be afforded the opportunity to test the assumptions that underpin the models, thus advancing the collective understanding of the subject matter. The discussion will take place within a process model of organisations developed by the author after an exhaustive review of the literature. This model will be accompanied by a discussion of organisational metaphors (following Morgan 1998). In addition, the reader will be provided with other models developed by the author: a value creation matrix; models of knowledge management; and a model of organisational alignment (based on an approach from Mink et al. 1994). Creating Value by adding Knowledge 403 Lastly, a model useful for planning and managing an intervention in an organisation will be suggested. The model is predicated on knowledge management principles, developed and applied in the ninth metaphor or image of the organisation (see below). The models will be presented sequentially, as the discussion unfolds, but Figure 13.1 shows how the various models fit together. Figure 13.1: a KM model of organisations The hypothetico-deductive process The hypothetico-deductive method starts from the assumption that humans are strangers in the universe, making guesses about its workings. Sometimes these guesses turn out to be useful, to work in the real world, and sometimes they do not. Whatever these guesses are, they are not statements of 404 Callioni essential truth (Popper 1968). The method relies on the formulation of an opinion or a view or a guess that might explain the phenomenon or problem under examination. That view is informed by “intuition” or “creative imagination”, a process that is “non-logical, ie outside logic” (Medawar 1969). That opinion, view or guess is followed by the formulation of a hypothesis, which is then exposed to a process of “falsification”, whereby the capacity of that hypothesis to predict the real world will be rigorously tested. As Medawar and then Tarnas explain: If our predictions are borne out (logical, not temporal predictions) then we are justified in ‘extending a certain confidence to the hypothesis’ (Peirce again). If not, there must be something wrong, perhaps so wrong as to oblige us to abandon our hypothesis altogether (1969, 46). With Popper the problem of scientific knowledge left by Hume and Kant was brilliantly explicated. For Popper, as for the modern mind, man approaches the world as a stranger – but a stranger who has a thirst for explanation, and an ability to invent myths, stories, theories, and a willingness to test these (1993, 436). It is time to leave the realm of theory for now. Let us start our journey into the world of organisations. When traversing difficult territory, it is always safer to get one’s bearings first. So, let us begin with a brief description of the global context. Setting the scene part 1: The global context The global economy is developing beyond the range of international governance structures (Thurow 1999). Globalisation is challenging the raison d’être that has supported nation states over the last couple of centuries. The nature of the nation-state is changing through economic pressure, while the emergence of truly global companies is leading to ever-greater capacity to challenge national governments (Hames and Creating Value by adding Knowledge 405 Callanan 1997). Let us accept that it is beyond the scope of this work to debate whether globalisation is a blight or a boon or merely a feature of the environment, like the weather (Friedman 1999). For our purposes it is sufficient to note that we live in a globalised economy. This may be a cliché, but it is nonetheless a useful descriptor of the current state of the world, economically, socially and culturally. Globalisation is often characterised as an economic phenomenon, involving the increasing interaction, or integration, of national economic systems, especially by means of international trade and capital flows (Soros 1998). However, it is not just money that moves freely and quickly across increasingly porous borders. As recognised by the European Union charter, people and cultural values also are increasingly free to move around the world and to set up home wherever a welcoming environment is found. Globalisation and modern communication technologies enable capital, knowledge and culture to be shared around the world almost simultaneously, with dramatic effects for all of us (Handy 1995). The information and data explosion A concomitant of globalisation is that information and data are growing at ever accelerating rates. The material presented in this book focuses on one approach that is emerging as a valid response to the information and data explosion, knowledge management. This Chapter, as observed earlier, serves to link knowledge management with a broader body of literature and practice. This is not an exercise in taxonomy. It is an attempt to place knowledge management in context, to save it from being seen as yet another management fad. 406 Callioni Setting the scene part 2: Defining knowledge management As is evident from the literature and from a quick perusal of the pages of this book, there is no definitive view of the place knowledge management occupies in the ontology of knowledge and in the taxonomy of science. This is true of other emerging disciplines, such as the study of complexity, for example, and it is not an inherent shortcoming of the discipline itself. This state of relative uncertainty is problematic for those who wish to examine the discipline of knowledge management, just as the absence of agreed, fixed reference points used to be problematic for cartographers and for those who used charts to navigate the seas. Mercator, a 16th century Flemish geographer, devised a form of map known as “Mercator's Projection”. In this form of map the meridians of longitude are shown at right angles to the parallels of latitude, enabling the navigator to plot the correct compass bearing for a direct course from one point to another. Mercator’s map and the development of sophisticated instruments to determine one’s position in relation to a spinning planet Earth gave cartographers, geographers and sailors alike the tools needed to do their respective jobs. Understanding one’s place in the world gives one both perspective and the opportunity to understand and to define one’s relationship with the world. A pictorial representation may assist the reader in understanding this author’s perspective. Figure 13.2 puts forward a model of knowledge management that builds on the notions advanced by Boisot (1998). The chief characteristic of the model is that it assumes a nested relationship connecting data, information and knowledge, extending to wisdom, as shown in Figure 13.3. The model in Figure 13.1 is an application of the model in Figure 13.3, as wisdom is the process of learning from the translation of knowledge into action. Creating Value by adding Knowledge Figure 13.2: Knowledge management model Figure 13.3: Model of wisdom 407 408 Callioni The reader will soon observe that within these models knowledge is recorded as either information or data – it is not recorded as knowledge. That is because the models are predicated on the assumption that knowledge is a phenomenon that occurs in people’s minds and cannot be observed or recorded directly, though its impact may indeed be both observable and recordable. Recording knowledge unavoidably strips it of much of the context that had originally transmuted it from mere information. Let us consider an example of these models at work. How do I know it is going to storm? J is provided with the information that clouds are gathering over the city. J believes that sizeable cloud formations lead to storm with lots of thunder and lightning. In J’s mind, having verified that clouds are gathering, the knowledge is formed that a storm is brewing and J decides to stay indoors, to avoid the impending storm. Parenthetically, this example makes it obvious that there is indeed a fine line between knowledge and belief. Let us say that knowledge has an external origin, while belief is purely internal to the mind or, alternatively, that belief is endogenous to the mind, while knowledge is at least partly exogenous to the mind, though both knowledge and belief are formed in the mind. For present purposes, let us proceed on the assumption that knowledge is predicated on the presence of information about the world external to the mind that is mediated through a person’s belief system. Returning to our example, J now knows that a storm is brewing, because there is verifiable information that leads J to form that conclusion. If K were provided with the same information, a different conclusion may result, because K’s belief system may be quite different from J’s. Indeed, if J were to say to K that J knows that a storm is brewing, K would not accept that as knowledge of the world, but as information about J’s state of mind or as a statement of belief by J. Creating Value by adding Knowledge 409 If K’s belief system were to hold that storms do not happen on Thursdays and if the day in question were a Thursday, then the information about the cloud formation would not lead K to conclude, as J had done, that a storm was brewing. Provided with the same information, J and K would know quite different things. This ambiguity is not restricted to the social sciences, by the way. The “hardest” science of all, physics, is confronted with a very similar problem of uncertainty. As classical physics gave way to quantum physics, it also conceded that the world is not as solid as it may seem (Koestler 1989; Davies and Gribbin 1992). Modern physics is not really concerned with ‘things’ but with the mathematical relations between certain abstractions which are the residue of the vanished things (Koestler 1989, 544). Interpreting the weather, organisations, human behaviour or the microworld of quantum particles is about mapping patterns, rather that objective quantification or mere description. The importance of patterns Pattern recognition is perhaps the aspect of human cognitive skills that most distinguishes us from other animals (de Bono 1990; Calvin 1997; Pinker 1999). Also we have seen that pattern recognition is integral to the scientific method. In fact, pattern recognition is what marks an expert in any particular field. Patterns capture knowledge that experts apply in solving recurring problems. What's reused when a pattern is applied is the knowledge of many experienced designers (Rising 2002). 410 Callioni A particular and significant type of pattern is captured by the notion of belief. The importance of belief The models in Figures 13.2 and 13.3 are based on the premiss that while information has meaning (information = data + meaning), it is akin to an inert substance, with no inherent power of action, motion, or resistance. One must add something to make it useful and that something is belief (in the form of expectations), derived from experience (or knowledge = information + belief). What does all this mean? There are differing views on what science is, be it soft or hard, and what it can do. The traditional (or realist) view holds that science is about discovering hitherto unknown reality; realists maintain that scientific theories are (or can be) true descriptions of an independent reality. On the other hand, instrumentalists claim that scientific theories are not true descriptions of reality, but are useful instruments that enable us to structure and order our environment (Cole 1995; Golinski 1998). Somewhere in the metaphorical middle are relativists like Thomas Kuhn (1970). Kuhn put forward the view that science is the application of a body of beliefs (a paradigm) to observed events - scientific theories are a representation of the best judgment that can be made within a given paradigm. Paradigms are impermanent phenomena, according to this school of thought, and scientists will shift from an existing paradigm into a new paradigm - a process described as “scientific revolution”. The astute reader will observe that, for Kuhn, science is the outcome of the application of a framework of beliefs to patterns of observed events. This is not far away at all from the definition of knowledge represented in Figure 13.2 and discussed in this Chapter. This is a comforting occurrence of triangulation, where two different approaches lead to a similar conclusion; for what is Creating Value by adding Knowledge 411 science about, if not knowledge? There is a linguistic addendum that reinforces the triangulation effect as the etymology of the word science is from the Latin word scientia, which translates as knowledge in English. If one is managing knowledge, one is managing an end to end process that links data, through information and knowledge, to action. In practice, this means that to understand knowledge we must first come to grips with the meaning of belief and with the concept of meaning. Beliefs are shaped by expectations. In turn, expectations are constructed by interpreting experience, by attributing meaning to events. Thus, it is possible to affect or shape belief systems held by people in organisations by managing their behaviour and by providing common cognitive and interpretive tools. This is not a new challenge for humanity; thinkers have been grappling with such issues for thousands of years. Buddhism has a time-tested formulation of these concepts, drawn from a sophisticated analysis of the human mind. It is called mindfulness. Understanding and practising mindfulness Mindfulness is the continual application of presence of mind, echoed in Kuhn’s discussion of reflexivity and in double loop learning. Mindfulness means being aware of one’s belief systems, emotions and thinking processes, and then acting on the basis of that understanding, fully prepared to reap the consequences of our beliefs being externalised as actions. Mindfulness is the opposite of conditioned thinking; it helps us to avoid simplistic interpretations of reality and ritualised responses to the world (Tart 1994). This is as relevant for organisations as it is for people. As we will see when we explore the nine metaphors of organisations, much of what organisations do (and the people in them) is conditioned by the past and by an unreflexive view of the 412 Callioni organisation’s reasons for acting (including failure to act within the rubric of action). Because organisations are not mindless machines, operating in a predictable and stable world, this unreflexive approach is fraught with danger, for the organisation, its members and anyone who is within its sphere of influence. This is how knowledge management differs from information management and data management. Managing knowledge involves mindfulness, it requires people to manage behaviour and the context within which beliefs are actuated and given meaning. By way of contrast, managing data or information is primarily about managing objects, be they physical or digital – a machine can do that. The issue now is how does this assist us to form a better understanding of organisations? Developing the plot: Understanding organisations Just as with knowledge management, it is difficult to capture a universally agreed view of what constitutes an organisation. The more recent literature suggests that an organisation is actually more than a mere collection of people, machines and processes, more than the sum of its parts. The paradigm that is assuming dominant status holds that an organisation is a self-organising system. We will come back to this concept after we have examined the full range of beliefs that are applied in organisation theory, by discussing various metaphors or images of organisation. The plot unfolds: The many guises an organisation may take Gareth Morgan has produced a considerable body of work about organisations. In his book Images of organisations he put forward the hypothesis that management theory and practice are shaped by metaphors, by images of organisation that are pervasive. Morgan put forward eight such metaphors. The reader will Creating Value by adding Knowledge 413 observe that a ninth image has been added, as the author’s contribution to the menagerie of imagery. The ninth image is a knowledge management metaphor of organisations. In reading, what follows it is important to remember that understanding how the various actors view their stage, their role and the roles of others is crucial to understanding the meaning of what one is observing, but one ought not confuse the script with reality. The organisation as a machine This is the classical, FW Taylor (1911) meets Max Weber (1947), view of the world. An organisation is an instrument that has definable goals and objectives. It is a closed system, which can be designed as a rational structure of jobs and activities, with its blueprint as the organisation chart. People can be selected, trained and managed or operated as components of a larger machine; their behaviour can and should be expected to follow predetermined rules. In this sense, management and organisation design are an engineering exercise. The environment is assumed to be predictable, if not stable; and solidity, reliability and predictability are fundamental. The whole is the sum of its parts and each part is dispensable and replaceable. The organisation can be broken down to its component parts and then reassembled to its original state. The strengths of this view are many. This is an efficient and effective way of managing the world, reducing even the largest and most complex to a set of manageable, measurable and scalable problems, amenable to predetermined solutions. There is a right way to do everything and anything and it can be taught. Everyone’s performance can be observed, measured and improved. Nothing is impossible if one has the right tools and the right command structure. The weaknesses of this model are also many. If the world is not predictable, predetermined solutions are likely to be found 414 Callioni wanting or, alternatively, sudden shifts will cause much stress and expense. Levels of creativity and initiative will be low and the upper layers of the organisation risk becoming separated from the reality of the shop floor and of the outside world. The organisation as an organism This metaphor has been gaining favour through most of the 20th century, at least since the famous Hawthorne studies (Mayo 1933) and an increasing focus on relationships and on the significance of leadership as the means to provide people with meaning and purpose (Barnard 1938). The intellectual roots of this metaphor are in social Darwinism and in the corporate state philosophy embodied in Italian Fascism. The chief characteristic differentiating this view from the preceding metaphor is that Taylor saw people as cogs in a machine, but nevertheless as individuals. At the Ford Motor Company, often thought of as the epitome of Taylorism, each worker was a rational individual, motivated by material rewards and controlled by the system. This is not so in Chester Barnard’s ideal organisation. Management theory of the 1930s assumed that people were hive creatures - many worker bees to hew wood and draw water and a few “queens” to provide guidance and meaning to all. The motivation for the worker bees was provided by social incentives, rather than material rewards, and control was effected by internalised moral precepts (Barnard 1938). The modern manifestation of this metaphor has shed its totalitarian guise and requires us to accept that organisations are (or behave as if they were) living systems, and asks us to believe that congruence with the environment is crucial. Fit with the environment determines survival and success and shapes the organisation and its relationships with its ecology. This image takes us away from the world of engineering, where closed systems dominate, and into the world of biology, where systems are open to the outside world. An organisation is Creating Value by adding Knowledge 415 a set of interrelated sub-systems, where the whole is something other than the mere sum of the parts. Unlike a machine, an organism, such as a frog or a human, cannot be taken apart and reassembled, at least not with the expectation that it will retain its functionality. Within this metaphor, Maslow (1943) and Hertzberg’s (1959; 1966) models can be accommodated, as well as Trist and Bamforth’s (1951) classical study of longwall coal mining. These are all studies of the organisation as a sociotechnical system, leading us into systems theory and the study of open systems. The body of literature known as contingency theory fits within this realm, showing us that there is no single best way of organising people and activities and that the role of management is to enable the organisation to integrate successfully with its environment. Many typologies of organisations were produced by authors such as Burns and Stalker (1966), Lawrence and Lorsch (1967), Thompson (1967), Miles and Snow (1984) and Henry Mintzberg (1989). This is a dynamic view of organisations, which allows for a multiplicity of approaches to design and management and that highlights the shortcomings of strategic planning models and mechanisms. It is the world within which Michael Porter has perfected his analysis of competitiveness (1980, 1985). It is also the world within which the most modern forms of organisations, often labelled as the virtual or network organisations, may be found (for example, see Savage 1996; de Geus 1997). More recently, the focus has moved from studying the organisation as an organism to the application of ecological principles, to develop a population ecology view of organisations (Robèrt 1997). This metaphor resonates well with the experience of life we have as organic beings in an ever-changing social environment and it also offers a flexible and rich source of concepts and ideas that appear to fit that experience. The wealth of literature that belongs in this realm is staggering and is a good indicator of the 416 Callioni usefulness of this image of organisations. On the other hand, as Morgan emphasises, organisations are not organisms and the environment in which organisations operate is socially constructed to a greater degree than the biological environment in which biology developed its analytical and descriptive tools. Moreover, there is an unreal and unrealistic level of passivity embedded in this metaphor, which ignores that organisations, unlike most organisms, have choices and can exercise great influence over their circumstances. The legacy from the 1930s is still there, under the surface. In the end it is safe to say that while organisations are probably not organisms, understanding organisations is as much an exercise in ethology or psychology as it is a problem of engineering. The organisation as a brain This metaphor takes us into the world of complexity theory, where complexity arises from the interaction of a few simple components and where the digital age comes into its own. Within this world, the organisation, like the human brain, is a networked intelligence, whose success depends on the number of active connections it has and is capable of managing and on its information processing capacity. Organisations, like human brains, are communication and decision-making systems that rely on both single loop and double loop learning. We are told that organisations are holographic. This means that the whole can be encoded in all the parts and each part can represent the whole. Morgan discusses at length the literature supporting the view that the human brain is itself holographic, though this view is by no means dominant (McFadden 2000). Concepts drawn from cybernetics dominate the thinking here, as manifested in the quality movement and the writings of Juran (1995), among others. There are strong links with the flux and transformation metaphor (below)- particularly in regard Creating Value by adding Knowledge 417 to self-organisation and self-generation (or emergence). The four underpinning principles are: 1. Build the whole into all the parts, focusing on corporate culture, information systems, structure and roles. 2. Design a degree of redundancy, “excess capacity that can create room for innovation and development to occur” (Morgan 1998, 101). 3. Requisite variety, “the internal diversity of any selfregulating system must match the variety and complexity of its environment if it is to deal with the challenges posed by that environment” (Morgan 1998, 103). 4. Minimum specs, a “degree of ‘space’ or autonomy that allows appropriate innovation to occur” (Morgan 1998, 105). Despite the physiological language and context, this view of organisations comes from the more developed reaches of systems theory, and its limitations are of a kind similar to those that afflict the organisation as a machine metaphor, paradoxically. Just as Taylor saw man as an extension or a component of a great machine, an extreme view of the organisation as a brain takes us to artificial intelligence (“AI”), in its soft and hard forms (Minsky 1988; Calvin 1990). The organisation as a culture This is another holographic approach. Within an organisation, one will find versions of the same values, rituals, ideologies and beliefs as are found within the dominant culture, and an organisation is an enactment of shared cultural values. 418 Callioni …the organisational culture perspective puts on a different set of ‘lenses’ through which to ‘see’ an organisation. When we look through these special organisational culture lenses, we see a mini-society made up of social constructions (Ott 1989, vii). An organisation, if transplanted to a different society, is likely to take on a different cultural identity. Dealing with a branch of a transnational in New York will be quite different from dealing with a branch of the same organisation in Berlin or New Delhi or Moscow. This will be so, regardless of established procedures that organisations may have mandated across the continents (Hampden-Turner and Trompenaars 2000). Moreover, within an organisation, one is likely to find subcultures or parallel cultures. This may be a reflection of fragmentation visible in the broader society; certain classes of people may be more likely to end up in a certain type of occupation. Subcultures may also result from processes and characteristics endogenous to the organisation. Organisations generate their own values or belief systems. For example, in a jail or in an asylum, inmates and their custodians will share a substantial portion of their lives, but not their values, beliefs or expectations (Goffman 1968; Braginsky et al. 1969). In a large enterprise, the sales staff may be pursuing a different set of values and will enjoy different rituals from the production staff and both may diverge from the cultural practices of senior management. Bringing about change in an organisation is seen as a process of cultural change, with all the risks and difficulties that implies. Culture is semiotic, webs of significance people have created. The study of culture is not an experimental science, where we search for laws. Rather, it is a search for meaning (Geertz 1973) or an attempt to make sense from a multiplicity of inputs by assigning patterns of meaning and significance to the world (Weick 1996). Creating Value by adding Knowledge 419 While we may believe that we are changing a business process or a procedure, we may actually be challenging how the people in the organisation understand themselves and how they value themselves. A change in procedure may invalidate a person’s self-perception. This may seem like an extreme view, but both the literature and the reader’s own experiences will add validity to this assertion. Sometimes the term organisational climate is used as a synonym for culture. Organisational effectiveness, climate and cultures are dynamic constructs, which interact with each other. The literature on gender and gender differences is also significant here, as a juxtaposition is created between masculine and feminine values and organisational methods (Game and Pringle 1983; Scutt 1994). The strengths of the culture metaphor are its focus on shared meaning and symbolism. It encourages deep reflection and facilitates a better understanding of the reasons people in organisations do what they do. It takes us below the surface of visible behaviour and of explicit knowledge and gives us a range of tools to understand and to manage change and its impacts. The weaknesses derive in part from the false security that may follow upon the acquisition of a little knowledge or understanding. The metaphor can be used for malicious manipulation or “values engineering”, as Morgan terms it. Then, this view of the world allows for extreme forms of postmodernism to take root, encouraging us all to believe that the world is only what we make of it. Thus, all values, beliefs and norms have meaning only in their context and may not be compared. All reality is socially constructed and truth itself is a relative concept. Lastly, culture in and by itself does not explain or account for the fact that individuals are more takers than givers in human society. There is a power dimension that culture does not deal with adequately, but is dealt with by the next metaphor. 420 Callioni The organisation as a political system Just as the cultural metaphor asks us to accept that organisations are miniature exemplars of the broader societal culture, this metaphor asks us to accept that an organisation is a polity, a form or process of government. This view has been around for a long time, as typified by Machiavelli’s The Prince, perhaps more easily approached through the modern reinterpretation by Jay (1987). In this metaphor, conflict and conflict resolution are key concerns for management, and often provide the raison d’être for the organisation itself or for a significant component of the organisation (professional mediators, human relations advisers and so on). This metaphor sits between the cultural and machine metaphors, as it is about power, authority and control, just as it is about the values and norms that bind us together. The most modern aspects of this image are reflected in the literature on governance. Within this metaphor, a taxonomy of organisations may be constructed, reflecting the broader taxonomy of politics. An organisation may be autocratic, where one individual holds most or all of the power. This is common in small businesses and in some cultures. A variation on this theme is an oligarchy, where a group of partners runs the organisation; this is a model common in professional services organisations. Another variation is feudalism, where the CEO is king, but only as long as the barons, the senior managers, allow him or her to continue in that role. In a bureaucracy, such as a government agency, power is defined as legitimate authority, where the rules are the source of power. In technocracies, such as some Silicon Valley companies, power flows from technical knowledge and expertise. In democracies, were rare creatures are found only in the realm of cooperative community organisations, power is exercised by codetermination or by consensus. In most organisations, as in most societies, these forms of Creating Value by adding Knowledge 421 rule do not exist in pure forms; they are usually hybridised and sometimes exist side by side, much as subcultures develop within the culture metaphor. The strengths of this metaphor derive from its analytical sharpness. This metaphor challenges the myth of rationality embedded in traditional analyses of organisations and focuses on building a stable and effective amalgam of processes that balance competing interests, including interests external to the organisation (external stakeholders). The greatest weakness of the metaphor is its self-fulfilling character. If you approach life in organisations as an exercise of politics, you will breed more politics. If you assume that everyone’s motives are suspect, that will be reflected in your behaviour, which in turn will affect the behaviour of others. If one is not careful, the Mafia boss syndrome will strike and conspiracies will be plentiful, at least in one’s own mind. Also, accepting a plurality of interests may lead to an assumption that those interests are supported by a more or less equal power relationship. This is reflected in the writings of Ayn Rand (1992, 1996), among others, who assumed that each of us is equal and capable of pursuing personal objectives rationally and systematically. The Marxists (for example Marcuse 1972), as well as our own experience of life, will always be there to remind us that power is not distributed equally, but the illusion of the rational man is powerful; it is powerful enough to have captured the hearts and minds of most economists. The organisation as a psychic prison This is where Plato, Feud and Jung join forces to provide an image of organisation that reflects the significance of psychic forces in shaping collective, as well as individual behaviours (Jaworski 1996). This is the place where psychoanalytic insights emerge to illuminate (and sometimes further obfuscate) otherwise dark and unseen aspects of organisational life. We have already touched on Plato and the allegory of the 422 Callioni cave, within which the captive humans can see and interpret only shadows of reality, rather than reality itself. This metaphor suggests that this allegory can manifest itself in organisational life, leading members of the organisation to believe that their construction of reality is indeed real. This is where groupthink (Janis 1972) emerges as an issue, together with a clutch of other dysfunctional behaviours and clusters of behaviours. We can start with Argyris and Schon's work (1978, 1985) on communication, culture and relationship. Here we find a powerful analysis of the impact of dissonance between espoused beliefs and observable behaviour, which lead to confused and sometimes destructive behaviour and to the development of “defensive routines”. An interesting and relatively benign example of this is provided by the Abilene paradox. In 1974, Jerry Harvey published a paper titled “The Abilene paradox: The Management of agreement”. Harvey used an example from his own life, a trip to Abilene, to set the scene for his thesis. Harvey saw the management of agreement as a greater problem than the management of conflict, partly because the existence of the former problem was not recognised. Harvey postulated that this seeming paradox resulted from a failure of communication - members of organisations fail to communicate to each other their perceptions of reality and their desires. They do this because of a range of factors, including: (1) action anxiety; (2) negative fantasies; (3) real risk; (4) separation anxiety; and (5) the psychological reversal of risk and certainty. The strength of this metaphor is drawn from its capacity to challenge our most powerful assumptions about our own selves, as well as assumptions about organisations and society in general. The metaphor helps us to balance our rational tendencies with an understanding of the power and worth of the so-called irrational (or non-rational) side of the human psyche. It helps us to find better ways to balance often competing Creating Value by adding Knowledge 423 desires and aspirations and it sharpens the focus on what constitutes ethical behaviour in organisations. However, this metaphor may lead us to assume that all we need do is to understand ourselves and behave ethically and all will be well. Alas, it is not so, as the previous metaphors have shown us. There are many forces at play within an organisation, as there are within each of us, and good intentions may not suffice to overcome vested interests or inertia or the dead hand of runaway bureaucracy. The organisation as flux and transformation This metaphor asks us to consider organisations as physical manifestations of basic forces that are not in themselves physical or even visible. Four forces are considered: Autopoiesis or the logic of self-reference. Chaos and complexity theory. “The strains and tensions of circular relations” – drawn from cybernetics. Dialectics or the struggle between opposites. This is not the place to dissect in detail four quite complex views of the world, remembering that our purpose here is to convey meaning by the telling of a story. We will use the first of the four forces discussed by Morgan to set the scene for this element of the story; it captures the essence of this metaphor. The logic of self-reference As Morgan explains, this image of organisations was borne from work by Maturana and Varela (1987). Their fundamental insight was that living systems are characterised by three features: autonomy, circularity and self-reference. The brain is not an information or data processing system, as we have seen earlier, but an emergent function of the interaction of constructed experience of reality and of memory of previous experience. The brain organises its environment as an 424 Callioni extension of itself. This does not deny the existence of a separate reality, as extreme post-modernists might argue. Rather, our lives are the product of the interaction of objective reality with the brain’s image of that reality. This approach is not that dissimilar in effect from Weick’s views, as discussed above. Within this metaphor, organisations are self-referential and autopoietic. An organisation renews itself in such a way as to retain its integrity (Jantsch 1979). Its adaptation to the environment is shaped by its existing identity: “whatever future form it takes will be consistent with its already established identity” (Wheatley 1994, 94). For example, a birch sapling will grow into a birch tree, although its height, thickness, physical shape and life span may vary significantly depending on its specific environment. A human embryo will develop into a human being, while a chimpanzee embryo, despite overwhelming genetic similarities with a human embryo, will develop into a chimpanzee, regardless of the environment. An organisation will develop and change as it interacts with its environment, but it will retain its fundamental character, unless it undergoes a process of transformation so radical as to cause the birth of a new organisational personality. Nature forms patterns and those patterns arise and develop according to universal laws, driven by the logic that simple systems can give rise to complex behaviour. It can be argued that this holds true for social as well as physical systems and for the human brain itself. Chaos theory is relevant to all adaptive systems, to all systems that are self-organising and selfreferential. This is not to say that the progression from simple to complex is inevitable. Nature has no plan, and diversity is the product of chance. However, it is likely that there is a certain evolutionary advantage in complexity that drives some systems to evolve to ever more complex forms. This is so, just as there is a certain evolutionary advantage that keeps some systems very simple, Creating Value by adding Knowledge 425 even down to one cell and no more. Again, that is so in the world of organisations. Some companies grow ever larger, until some external force intervenes – as with Bell or Microsoft – or until corporate senility sets in and the company disintegrates or is sometimes reborn in a different guise or guises. On the other hand, the world of business is full of small and micro businesses that will never grow any larger. The strength of this view is that it accepts complexity and tries to work with it. This metaphor does not attempt to control reality, as with the machine metaphor, or to compute it, as with the brain metaphor, or to interpret it, as with the culture metaphor. Rather, it seeks to understand complexity in its unbounded form, so as to develop the means to shape events by shaping the context within which those events unfold. The organisation as an instrument of domination No story would be complete without a villain and here we find our villain or do we? This metaphor portrays organisations as unmitigated exploiters of their employees, of society and of the physical environment. The seeds of control sown in the time of the machine bureaucracy have sprouted a world devouring creation that would have made John Wyndham proud. In Davos, Genoa and Melbourne, we see a complex alliance of deep ecologists, anarchists, nihilists, revanchists and the remnants of the far left portray the corporation as the instrument capitalism has created to enslave the poor, oppress the Third World and ravage Gaia. This anti-globalisation movement is a naïve reaction, lacking a coherent ideology and likely to fragment, just like the far left did in the 1960s and 1970s when faced by the continuing failure of capitalism to crumble. Marxism in the 19th century developed a coherent ideology of the organisation as an instrument of class domination. In the 21st century a more moderate, neo-Marxist position is adopted by those who see the corporation as a sophisticated, uncaring 426 Callioni exploiter of the workforce. The evidence cited is mounting hours of work, injuries and deaths in the workplace, environmental damage and the relentless process of replacing people with technology. The desire of this movement is not to destroy capitalism, but to humanise it, to democratise it, much as the nation-state was humanised and democratised in the 20th century. The strengths of this metaphor derive from its capacity to show us that rationality can be, or provide the opportunity for, a form of domination. By doing so, greater attention is paid to ethical concerns within and about corporations and organisations in general, and new or deeper insights can be developed into the responsibilities and accountabilities of management. As with the political metaphor, the risk is that this image of organisations will focus too much attention on conflict and on individuals and their motivations. This may cloud the fundamental, systemic issues that allow patterns of domination to emerge. Towards the climax: A knowledge management metaphor At this point, our story takes a turn away from the known and moves into unknown territory. The images of organisation provided by Morgan are powerful and useful tools, but they lack an overarching framework, a unifying paradigm. The ninth and last metaphor has been developed to provide that framework, within the paradigm of knowledge management. It also provides the climax for our story. The mindful organisation This metaphor, as shown in Figure 13.4, recognises that an organisation is many things; indeed, an organisation can be all things and, sometimes, all at once. When one analyses how an organisation acts, how it produces value, it is hard to escape the machine-like reality of a production line or the cybernetic characteristics of the network. Creating Value by adding Knowledge 427 An organisation in action is both brain and brawn. The process of organisational and personal self-actualisation is driven by a complex set of beliefs, borne from and shaped by the exercise of power, in its many guises. The environment within which the organisation operates is organic and in constant flux, constantly transformed by the interaction of complexity and chaos. Within and without the organisation, people live and breathe its reality as each of them interprets it, in a web of meaning that shapes and colours the landscape where personal, group and organisational dramas emerge and unfold. To understand all of these realities and to manage the components that make up the holarchy that is an organisation, one requires the capacity to manage knowledge, to develop frameworks that enable us to manage patterns of meaning, which in turn shape, drive and characterise the organisation. Figure 13.4: The knowledge management metaphor of the organisation 428 Callioni Metaphors of organisations: a caveat What is crucially important is to know where one stands, to be aware of the beliefs that shape one’s own understanding and then to be consistent in the application of those beliefs to the information and data one gathers. To do otherwise will result in poor judgments being reached, as differing parameters are applied to compare and contrast, while assuming that the compass remains pointed to true north. In using this information, it is important to remember that what is being described is not the organisation itself, but the paradigm or point of view of the observer or commentator. That includes a commentator who resides within the organisation. A CEO may look upon their domain as a machinelike extension of their mental powers or a crusading change agent may see the same organisation as an open system, poorly served by a deterministic and reductionist model of leadership. It may also be the case that an organisation sees itself differently from how others perceive it. A machine-like organisation may perceive itself as an organic creation or viceversa, for example. A degree of incongruence is not necessarily problematic, but an extreme lack of congruence may cause the organisation to become dysfunctional. Analysing this in detail would take us well beyond the scope of this book, but for those who have an interest there is a substantial body of literature (for example, see Kets de Vries and Miller 1984). First understand what position you have, or create your own, as the categories are by no means fixed. Then, understand how the organisation perceives itself and how the chief stakeholders perceive it. At that point, having formed a view of what an organisation is, you may be in a position to move on to the next step, which is about understanding how organisations work. We will do that with a model (Figure 13.5) that assumes that organisations have a common set of generic processes. These processes may take different guises, may be occasionally mixed up or incomplete or missing, but are generally present in organisations that survive for a significant period. P lan nin g P ro cess Identify C urrent Position Identify D esired F uture Position Strategic Intent P1 D ep lo ym en t P ro cess U pdate Scorecard C ap ab ility D evelo p m en t P ro cess Build C apability P latform C1 Perform Environm ental Analysis E1 P3 D evelop O perational P lans D evelop Strategies D1 Perform G ap A nalysis P2 D2 Perform G ap Analysis C2 Identify Lik ely F uture O perating Environm ent E2 P erform Projects & A ctivities D3 D4 D evelop W ork force D ev't, Asset M ngt, & IT &T Plans C3 D evelop T eam & Individual C ontracts Assess F uture R isk C4 D evelop R isk M anagem ent P lan E3 E4 E valu atio n (L earn in g ) P ro cess Action: Review Strategic Intent D evelop Perform ance Inform ation F ram ew ork EA G ather D ata on C urrent Perform ance EB Perform G ap A nalysis EC Figure 13.5: A process model of the organisation D evelop R eporting F ram ework ED 430 Callioni The components of the model The driver of the model is the organisation’s strategic intent, which will change from time to time to reflect shifts in policy or politics. The planning process The planning process contains an analysis of the current position, a method to form an understanding of the desired future position and an analysis of the gaps between the desired future position and the current position. The deployment process This process describes how things actually get done. The capability development process This process involves understanding the current skills and assets the organisation has, understanding what the future is likely to demand, plans to develop existing skills and assets so that they can meet likely future demands, and development plans for teams and for individuals. The evaluation (learning) process There are two parallel sub-processes here. The first subprocess starts with an understanding of the current operating environment, an understanding of the likely future operating environment, an assessment of the risk that future environment presents that are not dealt with in the current environment, and a plan to manage that risk. Double-loop learning The processes covered thus far involved single-loop learning they enable the organisation to learn how to perform better. For example, having defined a desired future position, the organisation develops strategies to secure that position. How does the model work? The model can be used to diagnose where an organisation or a significant component of an organisation is deficient. For Creating Value by adding Knowledge 431 example, the organisation may not have developed one or more key elements of various processes. Having identified what is missing, an analysis of the linkages, of the organisation’s strategic intent and of the current operating environment can inform a process of prioritisation. For example, if the organisation is operating in a high-risk environment, preparing a risk management plan should take priority over developing a workforce development plan. Alternatively, where an organisation is intent on change that affects working conditions for staff, the workforce development plan may be accorded the highest priority. Using the model, it is possible to change the strategic intent of an organisation or its leadership without altering significantly the structure of the organisation. That is because the processes described in the model can deliver any output that is typical of a public sector organisation. If these processes work, the organisation’s structure can aid or impede the effectiveness or efficiency of the processes, but it will not stop them delivering the right results. Lastly, returning to our core interest in knowledge management, the model can be used to identify where and how an organisation creates and manages knowledge or to help design processes that are congruent with knowledge management principles. Creating value: Cui bono? Now that we have tools to understand what an organisation is (or is perceived to be) and how it does what it needs to do, it is time to consider whom the organisation serves (or otherwise affects significantly). The matrix model of value creation (below) is a tool that may be used for that purpose. Callioni 432 Customer/clien t Shareholder/ owner Regulator(s) Surrogates (lobby groups et al) Organisation is accountable for ... quality service Measured how? Personal satisfaction; return custom By whom? The customer ... return on investment Size of return on investment Complaints, legal action The shareholder ... meeting policy objectives, delivering services according to prescribed minimum standards ... satisfying policy interests Community ... being a good corporate citizen Partner (supplier) ... meeting agreed (mutual) obligations Satisfaction of own clients/customers Amount of tax paid, management of the environment, how employees are treated Personal satisfaction Table 13.1: value creation matrix The regulator(s), the Minister, the Government, Parliament Its clients/customers The community, opinion leaders The supplier ef or expectation of actor Organisation exists to meet my needs Organisation exists to provide me with a financial return The system is more important than the organisation Success metric Extent to which recipient perceives needs are met Quantum of return Organisation stays within the rules We understand and can represent the interests of affected persons better than they can The organisation has a duty to the community Organisation legitimises role The organisation provides me with an opportunity to sell my products/services Own organisational objectives realised Organisation is perceived as a (net?) contributor to the community Creating Value by adding Knowledge 433 Note that the matrix has been populated with actors chosen only as an example, as an illustration of the uses to which the model may be put. You will want – indeed need – to generate your own list of dramatis personae, which can be produced by a process of stakeholder analysis. Having now formed a view of who, what and how (and perhaps why, also), what is one meant to do with that information? Aligning values, expectations and behaviour At this point we can introduce another model, which will assist in shaping any necessary intervention. The model is intended to align values, expectations and behaviour within the organisation, as a whole, within sub-sets, and within processes. The model is predicated on the assumption that an organisation is made up of holons (Koestler 1989; Wilber 1994) and is holographic (see above). A holon is something that is complete in itself, but has properties that are not present in its component holons. For example, water is a holon, made up of two hydrogen atoms and one oxygen atom. Each of the atoms is a holon, but each atom does not separately have the characteristics of water. The characteristics of water are in the holarchy that is water. A holarchy is the architecture of arrangement of successively more complex holons. This is true of physics (eg from subatomic particles to complex molecules), of living creatures (eg atoms to molecules to cells to organs to the organism or creature), of organisations and of society. Holon is not synonymous with fractal. Like a holon, a fractal is complete in itself and it is infinitely scalable. However, a fractal construct, unlike a holarchy, is not necessarily more than the sum of its parts. So, in this model each component of the organisation reflects the characteristics of the organisation and vice-versa, but the organisation is more than the mere sum of its parts; the Callioni 434 organisation has a separate identity and a separate existence from its component parts. Strategic Process Component (Eg division or team) Organisation Tactical 1 Sustainable 2 In line with business plan 4 Shared purpose 5 Quality relationships 7 Shared world-view Operational 3 Cost-efficient 6 Collaboration 8 Alignment 9 Focus External environment Figure 13.6: Organisational alignment model The denouement: Turning knowledge into wisdom This is the end of our story, where the reader returns to reality, hopefully having learnt something of value and having been entertained on the way – or at least not so bored by the writer’s efforts as to leave half way through. What can a conscientious reader take away from this particular story? Creating Value by adding Knowledge Figure 13.7: Planning and managing an intervention 435 436 Callioni We have seen how applying knowledge to action mindfully can produce wisdom and we now have a great deal of knowledge about organisations and tools we can use to effect meaningful change in organisations. However, how does one use this knowledge and these tools wisely? The process shown in Figure 13.7 is intended to guide the user towards this end. Do not be fooled by the linear logic inherent to a static, twodimensional representation of a dynamic, multi-dimensioned reality. Indeed, in formulating an intervention (which may be limited to a process of analysis), one may start at any point; the beginning is where one chooses to begin, the point where one enters the representation. So, one may start by analysing patterns of action, rather than patterns of belief or meaning, for example. However, it is crucial that all aspects be analysed and understood and that, at the end at least, all aspects are brought together, using the model as a template. Having said that, it is suggested that, whatever point of access is chosen, that choice ought to be made with a hypothesis in mind, in the sense Popper and Medawar intended (see above), but with TS Eliot’s words in your heart. 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