Organizational Knowledge 

Knowledge is the most important asset for organizations today. Translating knowledge into innovation for the purposes of achieving economic growth and social well-being has become the principal focus for many organizations.  Additionally there has been an ever-increasing demand on organizations to use information to meet customer requirements.

Successful organizations in today’s business environment are knowledge-generating entities—“learning organizations” in the language of Peter Senge’s Fifth Discipline. Being a learning organization offers a tremendous competitive advantage because while it is often not difficult for new products and services to be copied, it is much more difficult for competitors to duplicate the management systems, knowledge base and organizational environments that consistently generate innovative products and services. As a result companies and institutions have developed management functions to establish and maintain organizational capabilities intended to effectively position themselves to compete effectively in this new information age.

These management functions focus on expertise relating to business strategy, vision and mission, training programs, information technology (IT) systems, leadership development programs, documentation process and a host of other functions which constitute the internal knowledge structure of an organization.  The internal knowledge structure belongs to the organization and remains with the organization when people go home or leave the organization entirely.  It is the organizational knowledge that while created by people, resides within an organization When new people enter an organization, the internal knowledge structure provides the resources for helping to get them up to speed and for providing job support for the benefit of other people long after the original creators have moved on.

Employee competencies on the other hand, are knowledge and skills exhibited by the individual workers within an organization, either acquired through the internal structure of the organization, through interaction with others employees. These are capabilities that exist solely within the individual worker and go with the worker when he or she leaves either for the day or permanently.  Examples of employee competencies include, accounting skills, legal expertise, sales and marketing skills, technical skills and subject matter expertise.

An organization's inherent knowledge or intellectual assets are often characterized as its intellectual capital. Intellectual capital is knowledge that an organization can exploit for business purposes. Proprietary technology, patents, trademarks, copyrights, research capability and other specialized knowledge are usually characterized as intellectual capital and are usually administered within some form of knowledge management program. These assets are often called intangible assets because they have no physical existence, unlike buildings, equipment and product inventories which do.

While intangible assets have value, some may be more difficult to evaluate than others. Assets such as proprietary technology, patents, copyrights and trademarks are assets to which it is generally pretty easy to attach a monetary value because there usually is industry-wide agreement as to their business value, and as a result, they are actively protected and managed. Intangible assets associated with employee competencies such as sales and marketing expertise, training and development abilities, research capability, management skills and the knowledge and skills individual workers exhibit during the daily execution of their job responsibilities are much more difficult to value or even to recognize for that matter, and consequently are not often aggressively managed as knowledge assets.  Such assets are often referred to as human capital.

Tacit vs. Explicit Knowledge 

An important concept in knowledge management is the distinction between tacit knowledge and explicit knowledge.  Explicit knowledge is formal knowledge that can be put into words and written down, stored on a database and easily shared with others.  It is knowledge that transmitted in face-to-face communication, through manuals and through electronic media. It is hard and fast with little room for nuances or personal interpretation.  A selling skills training program based on a specific sales model is an example of explicit knowledge.  Each component or step in the selling process is clearly defined and described and it would be fairly easy for a learner to adopt and apply the elements of the program.  The training program could be implemented throughout an organization and it would be reasonable to believe that the training content would be adopted in a uniform and consistent manner by all learners who were exposed to it.

Tacit (implicit) knowledge is informal knowledge that one acquires on the job or in everyday situations rather than through formal instruction. It is practical know-how that one gains on his or her own and is difficult to put into words or define even by those who possess and exhibit such knowledge.  It is usually unspoken and conveyed in an indirect manner and does not easily lend itself to be shared through traditional training programs. A selling skills program for example, cannot teach a salesperson the correct way to respond to a particular customer’s demeanor or attitude, or convey the most appropriate time or manner for closing the sale for each customer the salesperson encounters.

These elements are examples of skills that are gained non-consciously over time through observation and trial and error, and the possessor of such knowledge is usually not aware of exactly what the knowledge consists of or how to explain it. We would, therefore, characterize such an individual as being  non-consciously competent.  We could contrast this with the knowledge and skill of a surgeon who knows exactly the specific steps that must be employed in a particular surgical procedure and can clearly explain and demonstrate them to a medical student.  We would say the surgeon is consciously competent because he is acutely aware of what he knows and can explain it. 

 See Training & Development for more about levels of competency

Every worker in an organization possesses tacit knowledge the application of which is usually of significant benefit to the organization.  In many if not most organizations, tacit knowledge is not captured and shared within the organization precisely because it can be so elusive.  It remains with those who possess and use it, and essentially walks out the door when these people leave the organization.  Knowledge management initiatives such as teams, mentoring, partnering, knowledge mapping and others are knowledge management techniques that can be employed to help capture, translate and transfer tacit knowledge within an organization.

Organizational effectiveness grows when people within an organization know more that is useful to the organization and are able to put the knowledge into action.

The Value of Knowledge Management

Among the primary drivers for organizations to effectively manage their knowledge are the following: 

• facilitating employee access to a proliferation of data and information available within organizations
• leveraging the expertise of people across an organization
• achieving shorter new product or service development cycles
• faster and more efficient learning and skill development

Such factors are key elements for gaining a competitive advantage, and as such present strong motivations for implementing knowledge management initiatives.  Additionally, knowledge management initiatives can also lead to greater innovation, improved customer interaction outcomes, consistency in organization-wide practices and procedures and knowledge uniformity across a global organization.  

The principles of knowledge management can be especially useful during down business cycles and during periods of rapid business growth.  When an organization downsizes, much critical knowledge and intellectual property are lost with the workers.  When a business expands, it often does so quickly, and it is extremely very difficult to hire enough people with the right expertise (knowledge and skills) to get the internal structure to where it needs to be for maximum effectiveness.  If effective knowledge management systems for capturing and using organizational knowledge are put into place during good times, organizations can much more successful in dealing with economic fluctuations.  Because well designed knowledge management initiatives can help organizations better retain and re-use both explicit and tacit knowledge, organizations can ramp up much more quickly and cost-efficiently.

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