Industrial Management & Data SystemsCritical success factors for implementing knowledge management in small and mediumenterprisesKuan Yew Wong

Article information:To cite this document:Kuan Yew Wong, (2005),"Critical success factors for implementing knowledge management in small andmedium enterprises", Industrial Management & Data Systems, Vol. 105 Iss 3 pp. 261 - 279Permanent link to this document:http://dx.doi.org/10.1108/02635570510590101

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Users who downloaded this article also downloaded:Kuan Yew Wong, Elaine Aspinwall, (2005),"An empirical study of the important factors for knowledge-management adoption in the SME sector", Journal of Knowledge Management, Vol. 9 Iss 3 pp. 64-82 http://dx.doi.org/10.1108/13673270510602773Ganesh D. Bhatt, (2001),"Knowledge management in organizations: examining the interaction betweentechnologies, techniques, and people", Journal of Knowledge Management, Vol. 5 Iss 1 pp. 68-75 http://dx.doi.org/10.1108/13673270110384419Peyman Akhavan, Mostafa Jafari, Mohammad Fathian, (2006),"Critical success factors of knowledgemanagement systems: a multi-case analysis", European Business Review, Vol. 18 Iss 2 pp. 97-113 http://dx.doi.org/10.1108/09555340610651820

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Critical success factors forimplementing knowledge

management in small and mediumenterprises

Kuan Yew WongDepartment of Manufacturing and Industrial Engineering, Universiti Teknologi

Malaysia (UTM), Johor, Malaysia

Abstract

Purpose – To date, critical success factors (CSFs) for implementing knowledge management (KM) insmall and medium enterprises (SMEs) have not been systematically investigated. Existing studieshave derived their CSFs from large companies’ perspectives and have not considered the needs ofsmaller businesses. This paper is aimed to bridge this gap.

Design/methodology/approach – Existing studies on CSFs were reviewed and their limitationswere identified. By integrating insights drawn from these studies as well as adding some new factors,the author proposed a set of 11 CSFs which is believed to be more suitable for SMEs. The importanceof the proposed CSFs was theoretically discussed and justified. In addition, an empirical assessmentwas conducted to evaluate the extent of success of this proposition.

Findings – The overall results from the empirical assessment were positive, thus reflecting theappropriateness of the proposed CSFs.

Practical implications – The set of CSFs can act as a list of items for SMEs to address whenadopting KM. This helps to ensure that the essential issues and factors are covered duringimplementation. For academics, it provides a common language for them to discuss and study thefactors crucial for the success of KM in SMEs.

Originality/value – This study is probably the first to provide an integrative perspective of CSFsfor implementing KM in the SME sector. It gives valuable information, which hopefully will help thisbusiness sector to accomplish KM.

Keywords Critical success factors, Knowledge management, Small to medium-sized enterprises

Paper type Literature review

IntroductionKnowledge has become one of the critical driving forces for business success.Organisations are becoming more knowledge intensive, they are hiring “minds” morethan “hands”, and the needs for leveraging the value of knowledge are increasing. As aresult, knowledge has been treated systematically much like other tangible resourcesand many organisations are exploring the field of knowledge management (KM) inorder to improve and sustain their competitiveness. The need for a more systematicand deliberate study on the critical success factors (CSFs) for implementing KM iscrucial. Organisations need to be cognizant and aware of the factors that will influencethe success of a KM initiative. Ignorance and oversight of the necessary importantfactors will likely hinder an organisation’s effort to realise its full benefit.

Initially, KM appeared to be adopted only in large, multinational and internationalcompanies and hence, research work on CSFs has been largely centred on them. Most

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Critical successfactors

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Industrial Management & DataSystems

Vol. 105 No. 3, 2005pp. 261-279

q Emerald Group Publishing Limited0263-5577

DOI 10.1108/02635570510590101

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of these studies have not considered the differences of company size as well as thespecific features of small and medium enterprises (SMEs) that could affect KM.However, as it has now become a widely spread business discipline, it is no longer theconcern of just large organisations. As asserted by Frey (2001), although majorcorporations have led the way in introducing and implementing KM, it is increasinglyimportant for small businesses to manage their collective intellect. Okunoye andKarsten (2002) stated that KM has indeed become the underlying sources for successfulorganisations regardless of their size and geographical locations. Therefore, a betterunderstanding of the CSFs for implementing it in SMEs is needed in order to ensure thesuccess of their efforts.

This paper compares and reviews the existing CSFs proposed by various authors inthe literature. An analysis is conducted to identify their possible weaknesses anddeficiencies, which could be further improved. By combining these factors, the authorthen proposes a set of CSFs for KM implementation, which is believed to be moresuitable for SMEs. Each of the proposed CSFs is discussed and the results of anempirical assessment employed to evaluate them are then reported.

Review of critical factors for KM implementationA broad range of factors that can influence the success of KM implementation has beenmentioned in the literature. For example, much has been stated about culture,information technology (IT) and leadership as important considerations for itsaccomplishment. However, no systematic work exists on characterising a collective setof CSFs for implementing KM in the SME sector. An appropriate set of CSFs which arerelevant for SMEs will help them to keep in mind the important issues that should bedealt with when designing and implementing a KM initiative.

CSFs can be defined as “areas in which results, if they are satisfactory, will ensuresuccessful competitive performance for the organisation” (Rockart, 1979). Saraph et al.(1989) viewed them as those critical areas of managerial planning and action that mustbe practised in order to achieve effectiveness. In terms of KM, they can be viewed asthose activities and practices that should be addressed in order to ensure its successfulimplementation. These practices would either need to be nurtured if they alreadyexisted or be developed if they were still not in place. Based on the above definition,CSFs in this study are treated as those internal factors which are controllable by anorganisation. External factors such as environmental influences are not taken intoaccount since organisations have little control over them when implementing KM.Some of the pertinent studies on CSFs for KM will now be reviewed and their possibleweaknesses highlighted.

Based on the insights gleaned from the study of practices and experiences of leadingcompanies in the KM field, Skyrme and Amidon (1997) highlighted seven key successfactors. These include a strong link to a business imperative, a compelling vision andarchitecture, knowledge leadership, a knowledge creating and sharing culture,continuous learning, a well-developed technology infrastructure and systematicorganisational knowledge processes. It was stated that not all of these factors would beimportant for small scale pilot projects. However, they would certainly need to beconsidered for those organisations that were formalising KM or transformingthemselves into true knowledge-based enterprises.

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A study to investigate the factors which can influence the management ofknowledge in organisations was carried out by Holsapple and Joshi (2000). First, theyderived a set of factors from various literature sources. Then, they conducted a Delphistudy, comprising an international panel of KM academics and practitioners to furtherexplore and evaluate the factors that they had developed earlier. They proposed threemajor classes of influences (managerial, resource and environmental), with differentfactors in each. Managerial influences comprised four main factors, coordination,control, measurement and leadership; resource influences consisted of knowledge,human, material and financial resources; whereas environmental influences includedfactors such as competition, markets, time pressure, governmental and economicclimates, etc.

From the evaluation of their Delphi study (final round), it was reported that therewas a lack of detailed inclusion of technology and culture as critical factors. Forexample, culture was not explicitly presented but was only included as a sub-conceptunder the knowledge resource factor. This representation is somewhat insignificant.In the author’s opinion, culture is a very important consideration for KM and it shouldbe represented as a factor, rather than as a sub-element of another. Certain factors werealso perceived to be missing such as knowledge infrastructure, communication,training, education, organisational planning, strategy setting, and reward issues. Inaddition, it was argued by one of the panels that the process of implementing KMwould entail the need for sponsorship, support and understanding, not merelyleadership as proposed by them. Nevertheless, all these concerns should be consideredin an effort to further develop and refine the critical factors.

Davenport et al. (1998) conducted an exploratory study on 31 KM projects in 24companies, one of the aims being to determine the factors associated with theireffectiveness. Before doing so, they evaluated the performance of the projects usingindicators analogous to those for assessing the success of other business changeinitiatives. As a result, 18 projects were classified as successful, from which eightcommon success factors were identified. They were linking KM to economicperformance or industry value, a clear purpose and language, a standard and flexibleknowledge structure, multiple channels for knowledge transfer, a knowledge-friendlyculture, a technical and organisational infrastructure, change in motivational practices,and senior management support. It was further stated that while the last four factorswere the hardest to develop, they were also the ones that mattered most. However,since this was an exploratory study, it was agreed by Davenport et al. (1998) thatlinking the identified factors to the success of KM should be viewed as hypothesised,not proven.

Chourides et al. (2003) identified various critical factors for successful KMimplementation in five organisational functional areas: strategy, human resourcemanagement (HRM), IT, quality and marketing. Their work was built upon an earlierquestionnaire survey of the financial times stock exchange (FTSE) 100 companies aswell as a review of existing literature to identify key practices and factors for adoptingKM. Subsequently, they conducted a longitudinal study in eight case organisations,which were at various stages of implementing KM programmes to further compare andassess their critical factors. In particular, interviews with key staff of theseorganisations were conducted for this purpose.

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The way in which their critical factors are presented are like “a list of things to do”rather than a set of CSFs as suggested by other authors such as Skyrme and Amidon(1997) and Davenport et al. (1998). An in-depth scrutiny of their critical factors unveilsome emerging concerns and issues. The author feels that some of their factors are toospecific which might be hard to generalise across organisations. For example, theysuggested monitoring the “KM people portfolio matrix” as a critical factor for KM inthe HRM area. This matrix is merely one of the many techniques that can be utilised tofacilitate the conduct of a people audit. Arguably, organisations can also employ otheralternatives to monitor their people in order to be successful in KM.

Besides this, certain critical factors such as “improve time to market skills” and“improve organisation velocity to respond to customer needs” are less appropriate. Itcan be argued that these are the things that organisations should do to improve theirefficiency and customer satisfaction. They can be interpreted as the objectives orpurposes of KM, not those that are vital for making KM a success. Clearly, they are notin line with the definition of CSFs as provided earlier in the paper. Another factor,which is “innovation through research” is also less relevant for SMEs. This is becausenot all of them are involved in a research activity and thus, calling for a critical need toconduct this activity can be misleading.

Liebowitz (1999) proposed six key ingredients in order to make KM successful inorganisations. He suggested the need for a KM strategy with support from seniorleadership, a chief knowledge officer (CKO) or equivalent and a KM infrastructure,knowledge ontologies and repositories, KM systems and tools, incentives to encourageknowledge sharing and a supportive culture. Specifically, important lessons learntfrom firms who were early adopters of KM were used to support his propositions. In thefirst ingredient, he advocated the creation of a centre of expertise for every knowledgediscipline or subject matter, as a KM strategy which could be undertaken byorganisations. The resource requirement for such an activity could be tremendous andthis reflects a focus towards those organisations that have the necessary expertise,human and financial resources.

According to Hasanali (2002), the success of a KM effort depends on many factors.He highlighted five categories of factors namely leadership, culture, structure, rolesand responsibilities, IT infrastructures, and measurement. Likewise, the APQC (1999)included strategy and leadership, culture, technology and measurement in theirframework as enablers which can support the operation of KM. Although these factorsare eminently sensible, it is believed that the success of KM is dependent on moreaspects. A comprehensive set of factors is needed to give a more complete view of thosethat are necessary. Table I provides a comparative summary of some of the mainissues of these studies.

Analysis of the critical factorsPrevious studies of CSFs for KM implementation have been heavily focused on largecompanies. This is because most of the early adopters and superior performers of KMwere in fact large and multinational corporations. As such, existing factors are mainlylarge companies oriented, thereby reflecting their situations and needs. Directlyapplying these factors into the SMEs environment may not be sufficient without anunderstanding of their very own and specific conditions. Previous studies fall short ofstudying and identifying the CSFs from the SMEs perspective. They have not

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Table I.Comparisons of studies

on critical factors for KM

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considered the features, characteristics and situations of smaller firms. Nor have theyexplored other factors, which could potentially be more important for SMEs whenaccomplishing KM.

The availability of resources in an organisation is crucial because it can govern thequantity and quality of efforts which can be expended on KM. If there is an obstacle toachieving effective KM in SMEs, it is very probably due to their resources. SMEs arenot like “little large businesses”. In general, they have a scarcity of resources (Welshand White, 1981; Lee and Oakes, 1995; Motwani et al., 1998; OECD, 2002; Jun and Cai,2003) i.e. lack of time, financial and human resources, which differentiates them fromtheir larger counterparts. Resource is therefore inevitably an important factor to beconsidered when implementing KM in the SME sector. However, this is an aspectwhich has been overlooked by most of the studies reviewed. Aside from Holsapple andJoshi (2000), no other authors have included it as an essential factor.

No mention is made of the need to provide training to employees when embarkingon a KM journey. While large organisations may have long grasped the underlyingconcept of KM and have advanced knowledge on various related technologies, this isnot necessarily true for SMEs. Jeffcoate et al. (2000) stated that SMEs have limitedknowledge on technology and lack technical expertise. Similarly, Lim and Klobas(2000) pointed out that small businesses lack an understanding of KM processes. Thus,it appears that there is a greater need for SMEs to provide appropriate trainingassociated with KM, to their employees.

Another central KM issue in SMEs is the occurrence of knowledge loss, through keyemployees leaving the companies (Wong and Radcliffe, 2000; Wickert and Herschel,2001; Finn and Phillips, 2002). SMEs are prone to this phenomenon, since individualsare constantly seeking better careers and job prospects, and higher salaries in largerorganisations. Without doubt, when employees leave a company, they will take withthem all the knowledge that is embedded in their mind. Retaining employees in anorganisation is highly dependent on effective people management strategies. In fact,people management plays a much wider role and it lies at the heart of KM. Based on theabove review, it has not been explicitly addressed as a critical factor for KM.

Proposed critical factors for SMEsAs is evident, different sets of CSFs have been put forward by different authors. Inspite of this, they can possibly be grouped into a number of generic factors such asmanagement leadership and support, culture, technology, strategy, measurement, rolesand responsibilities, etc. These are common in KM efforts and therefore, they are alsobelieved to be applicable to SMEs.

However, one should also consider the needs and situations of SMEs whendeveloping CSFs for them. As mentioned earlier, there are some distinctive issues thatrequire considerable attention in the SME sector. In order to address these issues and tocompensate for the drawbacks of previous studies, new factors should be introduced.By integrating the common factors and introducing some new ones, the authorproposes a more comprehensive model of 11 factors for implementing KM in SMEs.They are:

. management leadership and support;

. culture;

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. IT;

. strategy and purpose;

. measurement;

. organisational infrastructure;

. processes and activities;

. motivational aids;

. resources;

. training and education; and

. HRM.

This proposition is the result of a systematic effort that identifies the factors in aholistic, integrative and comprehensive manner. Although there are some similaritieswith previous studies, two new factors have been added. A comparison between theauthor’s proposed factors with those of other authors is given in Table II. Havingproposed the CSFs for implementing KM in SMEs, the next section will discuss each ofthem in detail.

DiscussionManagement leadership and supportManagement leadership plays a key role in influencing the success of KM (Horak, 2001;Pan and Scarbrough, 1998; Holsapple and Joshi, 2000; Ribiere and Sitar, 2003). Leadersare important in acting as role models to exemplify the desired behaviour for KM. Theyshould for example, exhibit a willingness to share and offer their knowledge freely withothers in the organisation, to continuously learn, and to search for new knowledge andideas. It is vital that they model their behaviours and actions through deeds, not justwords. By doing so, they can further influence other employees to imitate them andincrease the propensity of employees to participate in KM. Other leadershipcompetencies that would be important include steering the change effort, conveyingthe importance of KM to employees, maintaining their morale, and creating a culturethat promotes knowledge sharing and creation. In essence, leaders establish thenecessary conditions for effective KM (Holsapple and Joshi, 2000).

As with all change and improvement programmes, support and commitment fromsenior management is critical to a KM initiative (Martensson, 2000; Manasco, 1996;Truch, 2001; Jarrar, 2002; Sharp, 2003; Davenport et al., 1998). Storey and Barnett(2000) added that support from top management should be ongoing and be delivered ina practical manner. Such support could then be transformed into concerted efforts thatwould contribute to the success of KM.

CultureOrganisational culture is another imperative factor for successful KM (Davenport et al.,1998; Pan and Scarbrough, 1998; Martensson, 2000). It defines the core beliefs, values,norms and social customs that govern the way individuals act and behave in anorganisation. In general, a culture supportive of KM is one that highly valuesknowledge and encourages its creation, sharing and application. The biggest challengefor most KM efforts actually lies in developing such a culture. A survey result reported

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Table II.Comparisons between theauthor’s proposed CSFsand those of other studies

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by Chase (1997) affirmed that culture was the largest obstacle faced by organisations increating a successful knowledge-based enterprise.

Since culture is a wide concept, it comprises many facets. One cultural aspect whichis crucial for KM is collaboration. Goh (2002) asserted that a collaborative culture is animportant condition for knowledge transfer to happen between individuals and groups.This is because knowledge transfer requires individuals to come together to interact,exchange ideas and share knowledge with one another. Not only this, collaboration hasbeen empirically shown to be a significant contributor to knowledge creation (Lee andChoi, 2003). Trust is also another fundamental aspect of a knowledge friendly culture(Stonehouse and Pemberton, 1999; DeTienne and Jackson, 2001; Lee and Choi, 2003).Without a high degree of mutual trust, people will be sceptical about the intentions andbehaviours of others and thus, they will likely withhold their knowledge. Building arelationship of trust between individuals and groups will help to facilitate a moreproactive and open knowledge sharing process.

Besides this, there is a need to foster an innovative culture in which individuals areconstantly encouraged to generate new ideas, knowledge and solutions. Likewise, Goh(2002) suggested a culture which emphasises problem seeking and solving. Individualsshould also be permitted to query existing practice and to take actions throughempowerment (Stonehouse and Pemberton, 1999). By empowering individuals, theywill have more freedom and opportunities to explore new possibilities and approaches.Equally important is the element of openness whereby mistakes are openly sharedwithout the fear of punishment. In this respect, reasonable mistakes and failures arenot only tolerated but allowed and forgiven. Making mistakes should be viewed as aninvestment process in individuals because it can be a key source of learning.

Owing to the highly influential nature of a culture to the success of KM, Davenportet al. (1998) asserted that companies should ensure that their KM initiatives fit intotheir organisational culture, or else they should be prepared to change it. Theimportance of matching a KM initiative with the culture, style and core value of anorganisation was also highlighted by McDermott and O’Dell (2001).

Information technologyIt is indisputable that one of the key enablers for implementing KM is IT. Its capabilityhas evolved from merely being a static archive of information to being a connector of ahuman to information and of one human to another. IT can enable rapid search, accessand retrieval of information, and can support collaboration and communicationbetween organisational members. In essence, it can certainly play a variety of roles tosupport an organisation’s KM processes (Alavi and Leidner, 2001; Lee and Hong, 2002).However, it is noteworthy to recognise that IT is only a tool not an ultimate solution(Wong and Aspinwall, 2003).

There is a broad collection of information technologies that supports KM which canbe applied and integrated into an organisation’s technological platform. According toLuan and Serban (2002) they can be grouped into one or more of the followingcategories: business intelligence, knowledge base, collaboration, content and documentmanagement, portals, customer relationship management, data mining, workflow,search, and e-learning. Important factors that need to be considered in the developmentof a KM system include simplicity of technology, ease of use, suitability to users’ needs,

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relevancy of knowledge content, and standardisation of a knowledge structure orontology.

Strategy and purposeOne of the means for driving the success of KM is to have a clear and well-plannedstrategy (Liebowitz, 1999). This provides the foundation for how an organisation candeploy its capabilities and resources to achieve its KM goals. While several strategiesfor implementing KM have been suggested in the literature (O’Dell et al., 1999;Liebowitz, 1999; Soliman and Spooner, 2000), a suitable one should be well adjusted tothe situation and context of the organisation in hand. In order to attach moresignificance to a KM strategy, it should support an imperative business issue of anorganisation. There seems to be common agreement in the literature that it has to belinked or integrated with the enterprise business strategy (Zack, 1999; Cook, 1999;Maier and Remus, 2002).

Closely related to the notion of strategy, is the development of a compelling andshared vision for pursuing KM. It is essential that employees support this vision andbelieve that it will work. In addition, clear objectives, purposes and goals need to be setand understood by everyone involved. To further expand this, the value proposition ofKM has to be clearly laid down in order to create a passion among management andemployees to accomplish it. In short, all the above elements need to be carefullydeveloped before a substantial investment is made to initiate a KM effort.

MeasurementMeasurement acts like a data collection system that gives useful information about aparticular situation or activity. An initiative like KM will suffer the risk of becomingjust another management fad, if it is left unmeasured. Sayings like “you cannotmanage what you cannot measure” and “what is measured is what gets done” certainlyhold true for KM. According to Arora (2002) and Ahmed et al. (1999), measuring KM isnecessary in order to ensure that its envisioned objectives are being attained.Measurement enables organisations to track the progress of KM and to determine itsbenefits and effectiveness. Essentially, it provides a basis for organisations to evaluate,compare, control and improve upon the performance of KM (Ahmed et al., 1999).

Measurement is also needed to demonstrate the value and worthiness of a KMinitiative to management and stakeholders. Without such evidence, support andconfidence from top management to sustain it will diminish. Since it is difficult, if notimpossible to quantify the benefits of KM in the short term, providing narrativeindicators to reflect its success at its early stage is important. Another key aspect ofmeasurement is to evaluate the impact that KM has on bottom line financial results.However, linking KM activities directly to financial results can be tough, since manyintertwining variables can affect the financial performance of a company at the sametime. While it is important to correlate them, care must be taken not to claim a purecausal relationship (Hasanali, 2002).

It is important that traditional hard measures are supplemented by soft,nonfinancial measures in order to provide a more holistic approach to measuringKM (Ahmed et al., 1999). Some of the methods being used include intellectual capitalmetrics (Sveiby, 1997; Liebowitz and Suen, 2000; Bontis, 2001) and the balancedscorecard (Kaplan and Norton, 1992; Arora, 2002). Nevertheless, there is still no

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absolute method for measuring KM in an organisation (Gupta et al., 2000), and this isan area which is still being explored by academics and practitioners (de Gooijer, 2000).

Organisational infrastructureAnother central aspect for implementing KM is the development of an appropriateorganisational infrastructure. This implies establishing a set of roles and teams toperform knowledge-related tasks (Davenport et al., 1998). Despite the fact that someexisting functions within an organisation such as HRM and IT have already beenworking with knowledge issues, establishing a group of people with specific andformal responsibilities for KM is crucial. Roles within this team can either be devolvedto existing positions or to new ones.

One of the more commonly mentioned roles in the literature is the CKO orequivalent. He/she takes the leading role to coordinate, manage and set the course forKM (Earl and Scott (1999), Abell and Oxbrow (1999), Herschel and Nemati (2000),Davenport and Volpel (2001), and Grover and Davenport (2001) for a more detailedelaboration of a CKO). While large companies may have the resources to establish ateam with multiple layers of roles for KM, SMEs will need to take a smaller scaleapproach.

Processes and activitiesA KM process refers to something that can be done with knowledge in the organisation( Johannsen, 2000). Processes that can possibly characterise the KM discipline arenumerous. Many authors have suggested a number of activities or processesassociated with KM (Alavi and Leidner, 2001; Nissen et al., 2000; Wong and Aspinwall,2003; Bhatt, 2000; Despres and Chauvel, 1999; Marshall et al., 1997; Demarest, 1997).For example, four main processes were discerned by Alavi and Leidner (2001): creation,storage/retrieval, transfer and application. The execution of KM processes lies at theheart of creating a successful knowledge-based enterprise. Thus, it is important thatorganisations adopt a process-based view to KM.

Appropriate interventions and mechanisms need to be in place in order to ensurethat KM processes are addressed in a systematic and structured manner. For instance,in knowledge sharing, technological networking tools should be supplemented withface-to-face discussion because the latter can provide a richer medium for transferringknowledge. Coordination of the KM processes to be performed is also crucial(Holsapple and Joshi, 2000). In addition, they can be incorporated into employees’ dailywork activities so that they become common practices in an organisation.

Motivational aidsThere is a saying that “you can lead a horse to water, but you cannot make it drink”.Successful KM requires the development of a “grass root desire among employees totap into their company’s intellectual resources” (Hauschild et al., 2001). If individualsare not motivated to practise KM, no amount of investment, infrastructure andtechnological intervention will make it effective. Hence, one of the important factors isto establish the right incentives, rewards or motivational aids to encourage people toshare and apply knowledge. Giving incentives to employees helps to stimulate andreinforce the positive behaviours and culture needed for effective KM.

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In order to build a knowledge-based enterprise, incentive systems should be focusedon criteria such as knowledge sharing and contribution, teamwork, creativity andinnovative solutions. Yahya and Goh (2002) stated that such systems should rewardrisk-taking attitudes and emphasise group-based compensation. In particular,rewarding employees with a focus on group performance will instigate a higherlevel of knowledge exchange between them. Hauschild et al. (2001) extended this notionby stating that employees will be more inclined to seek and contribute knowledge, iftheir incentives are based on goals that they can influence, but not achieve on theirown. Linking rewards solely to individual performance or outcome which can result incompetition will certainly be detrimental to a knowledge sharing culture.

The provision of both monetary and nonmonetary benefits could be incorporatedinto a reward system that supports KM. In addition, approaches to motivate employeesand recognise their contributions could also be tied to their annual job performancereview. This implies treating KM practices as important criteria in an employee’sperformance evaluation and assessment system (Trussler, 1998; Buckman, 1998).

ResourcesSuccessful KM implementation is dependent upon resources. Financial support isinevitably required if an investment in a technological system is to be made. Humanresources are needed to coordinate and manage the implementation process as well asto take up knowledge-related roles. Time is also a consideration; organisations have tofree up time for their employees to perform KM activities such as knowledge sharing.Similarly, providing time and opportunities for people to learn is important(Martensson, 2000). Besides this, attention, according to Davenport and Volpel (2001) isone of the scarcest resources in many companies. They called for a need to focus onattention management as a key to successful KM.

Since resources availability is a primary concern in SMEs, it has to be properlyconsidered when implementing a KM initiative. For example, the programme scopemust not be too substantial for their available resources. Investment decisions in KMshould be based on a sound consideration of resources, and not on the belief that it is “anice to have” business programme. In addition, proper budgeting of resources is crucialfor KM. Arguably, one of the key issues for SMEs in achieving effective KM is to dealwith their resources. This implies understanding how they can be better acquired,allocated and managed for its success.

Training and educationTraining and education is another important consideration for successful KM. In abasic sense, organisational members need to be aware of the needs to manageknowledge and to recognise it as a key resource for the viability of a company. Thisissue can be addressed if proper basic training is provided to the employees. Throughsuch training, they will have a better understanding of the concept of KM. It also helpsto frame a common language and perception of how they define and think aboutknowledge.

Besides this, employees could be trained and educated in using the KM system andother technological tools for managing knowledge. This helps to ensure that they canutilise the full potential and capabilities offered by these tools. In addition, training forindividuals to understand their new roles for performing knowledge-oriented tasks

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might be needed. Equally important is to equip them with the skills to foster creativity,innovation, and knowledge sharing. Horak (2001) suggested that for effective KM,skills development should occur in the following areas: communication, softnetworking, peer learning, team building, collaboration and creative thinking.Likewise, Yahya and Goh (2002) showed that training related to creativity, teambuilding, documentation skills and problem solving had a positive impact on theoverall KM process.

Human resource managementCertainly, KM practitioners cannot afford to ignore the value that can be gained fromHRM. After all, people are the sole originators of knowledge. As stated by Davenportand Volpel (2001), “managing knowledge is managing people; managing people ismanaging knowledge”. The significance and roles of HRM in KM have been discussedby a number of authors (e.g. Soliman and Spooner, 2000; Garavan et al., 2000; Breladeand Harman, 2000; Robertson and Hammersley, 2000). While it is vital to KM for manyreasons, the main focus here is on the issues of employee recruitment, development andretention.

Effective recruitment of employees is crucial because it is through this process thatknowledge and competences are brought into the organisation. Employees with therequired knowledge and desired skills to fill knowledge gaps should be recruited.Furthermore, it is essential that companies enlist those who have the tendency andinclination for creating and sharing knowledge. Additionally, Robertson andHammersley (2000) highlighted the significance of recruitment to focus on theability of candidates to fit into the firm’s culture or distinctive way of working ratherthan just matching them to a job specification.

Employee development is seen as a way to improve and enhance the personal valueof individuals. The skills and competences of knowledge workers need to becontinuously developed in order for them to produce valuable contributions to acompany. If not, as with other tangible assets, their value will depreciate. Hence,companies have to provide appropriate professional development activities to theiremployees.

Another central issue in KM is how to retain knowledge from being lost. This iswhere the function of employee retention gains its significance in KM, particularly forthe SME sector. In order to retain employees to work for a company, it is important toprovide opportunities for them to grow and to advance their career. HR policies andpractices need to be designed to allow them to meet their personal aspirations (Breladeand Harman, 2000). Equally important is to offer a conducive working environment inwhich employees feel comfortable and to foster job satisfaction among them.

Empirical assessment of the CSFsAside from the theoretical justification of the proposed CSFs, an empirical evaluationprovided further support. Based on the comprehensive discussion above, all the factorsand their underlying issues and elements were carefully shaped into a surveyinstrument. This was then used to empirically investigate the importance of the CSFs.A group of academics, consultants and practitioners who had contributed to the KMliterature was randomly selected from pertinent KM journals to participate in thesurvey. It is worth pointing out that all of the participants did not have a close

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connection with the author. As part of the survey, they were asked to assess the extentof the instrument’s success in characterising those factors crucial for implementing KMin the SME sector. Their perceptions were captured using a six-point Likert scale,ranging from “not successful at all” to “extremely successful”. This scale was thengrouped into three levels – poor, satisfactory, good. Poor comprised the “not successfulat all” and “slightly successful” scales; “moderately successful” and “successful” weredenoted satisfactory; and “very successful” and “extremely successful” were taken asgood.

The survey instruments were administered to 100 addressees, with follow-up lettersforwarded to those who had not replied within the given deadline. In total, 18 useablereplies were received (18 percent response rate), which was considered to be normaland reasonable (Antony et al., 2002). Ten of the respondents identified themselves asacademics, six as consultants and five as practitioners (the total exceeds 18 becausesome of them fitted into more than one category). All the respondents have been veryactive in the KM discipline, for instance, writing articles for journals (100 percent),giving presentations at conferences (88.9 percent), giving lectures on related topics(83.3 percent), providing consultancy services (72.2 percent), conducting research (66.7percent) and writing books (66.7 percent). As can be seen in Table III, all of them haveat least five years experience in the field and 50 percent of them have been involved forat least 16 years. With these backgrounds and experience, it was felt that this group ofrespondents certainly had the capability to assess the CSFs.

The distribution of responses from the participants is shown in Figure 1. Forty fourpercent of the respondents rated the extent to which the proposed CSFs weresuccessful, as satisfactory. The corresponding result for good was 33 percent. Hence,more than three quarters of the respondents endorsed the proposed CSFs as being atleast satisfactory for their intended purpose. The mean of the ratings revealed a valueclose to the successful domain. This shows that on the average, the respondentsregarded the CSFs to have been successfully developed to reflect those aspects crucialfor adopting KM in the SME sector.

ConclusionsThe effective implementation of KM is governed and facilitated by certain factors.Organisations can certainly benefit from a more thorough understanding of the factorsthat are critical to the success of KM. However, the adoption of factors which are notsuitable can impede the achievement of the desired performance. As such, considerablecare must be exerted in the development of CSFs for KM.

Range Number of respondents Percent

5 or less – –6-10 6 33.311-15 3 16.716-20 4 22.221-25 4 22.226 or more 1 5.6Total 18 100.0

Table III.Years of involvementin KM

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To date, CSFs for implementing KM in the SME sector have not been systematicallyexamined and investigated. Many of the existing studies have derived their set from alarge company perspective. Thus, they have not really been designed to meet the needsof smaller companies. This study has proposed a set of 11 CSFs which is believed to bemore appropriate for SMEs. It has improved on initial studies by integrating insightsand ideas drawn from them as well as adding some new factors. In addition, anempirical assessment was conducted to evaluate the extent of success of thisproposition. On the whole, the results were supportive, thus providing a preliminaryindication of the appropriateness of the proposed CSFs. In essence, this study isprobably the first to provide an integrative perspective of CSFs for implementing KMin the SME sector.

The set of CSFs proposed is in itself important because it can act as a list of items forSMEs to address and deal with when accomplishing KM. This helps to ensure thatessential issues and factors are covered when they are planning and developing KM.At a later stage, it can also provide a basis for them to evaluate their KM practices. Foracademics, it provides a common language for the discussion and study of the factorsunderpinning the success of KM in SMEs. Essentially, this study can be employed as a“springboard” for further empirical research. A survey which involved the group ofacademics, consultants and practitioners as mentioned earlier, and a sample of SMEs,was already conducted to further investigate and validate the CSFs. The findings andresults of this survey will be the subject of discussion in a future paper.

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Figure 1.Extent of success of the

CSFs

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