Hr Min the Knowledge Economy Wh Icker Andrews

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HRM in the Knowledge Economy: Realising the Potential

Whicker, L.M and Andrews, K. M. Asia Pacific Journal of Human Resources (2004), 42, 2, 156 165.

HRM in the Knowledge Economy: Realising the Potential

Abstract

In the knowledge economy, knowledge-based capabilities are the key tocompetitive advantage. At the firm level, this places the enterprises people,their knowledge and innovative capacity at the heart of strategic potential, andorganisations that excel in attracting, creating, managing and sustainingknowledge capabilities are advantaged. Human Resource Management(HRM) has over recent years been exhorted to demonstrate its position as astrategic partner to executive management: this promise has been onlypartially realised.

In this article, we explore the knowledge economy and the management ofknowledge from an HRM perspective. Commanding a central position inrealising value from knowledge assets is proposed as a strategic role forHRM. Specifically, HRM must respond to the key challenges presented bythe knowledge economy. We identify four HRM priorities: becoming expertin identifying and defining strategic knowledge capabilities; developing andmanaging knowledge workers by leveraging the knowing-learning-doingnexus; building knowledge value as an organisational as well as an individual

asset; and minimising enterprise knowledge risk.Keywords:Knowledge economy, knowledge management, knowledge workers,knowledge value, knowledge risk, knowledge worker productivity

Dr Kate Andrews is now Principal, KNOWABLE, and an Adjunct SerniorLecturer at Australias Griffith University.

+61 7 3356 [email protected]

www.knowable.com.au


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The opportunity for HR new rules of the knowledge economyIf the role of management is to preserve and build the assets of theorganisation, what are the implications of this when the knowledge ofemployees is an asset and increasingly the prime asset? Manyorganisations have turned to explicit and systematic knowledge management

processes to develop the firms knowledge assets. With this, has come asharpened focus on the practices that build, apply and deploy knowledge.HRM has the opportunity to make a fundamental contribution to buildingintellectual capital at the firm level. In this paper we propose fouropportunities for HRM to contribute to enterprise achievement in theknowledge economy.

What is the knowledge economy?Knowledge creation, use, sharing and retention has always been important.What is new is the significant shift towards a systematic and strategicapproach to managing the primary assets of the knowledge economy:people, knowledge processes, and knowledge products. Globally, knowledgehas become the most important factor in economic development andknowledge assets are considered essential for economic growth, competitiveadvantage, human development and quality of human life (Malhotra 2003).Research conducted by the OECD has found that the quality of workers skillsand knowledge has a significant impact on the economic and social future ofdeveloped nations such as Australia (OECD 2003).

Four key points distinguish the knowledge economy:

Knowledge is recognised as important to organisations and isacknowledged as critical to organisational success. Globalisation,rapid change, and competition in a global market of increasinglysophisticated consumers have led organisations to seek a sustainableadvantage that distinguishes them in their business environments(Davenport and Prusak 1998).

Relationships amongst employees are more complex (Klemp 2001).New types of business-to-business relationships require everyone todevelop skills that emphasise interdependence, communication, andthe ability to build and maintain strong work relationships. Virtualisationhas changed the ways that humans interact, and the need for physicalcontact has been reduced or in some cases eliminated.

Information and communication technology is embedded in mosthuman interactions and business transactions. People are moretechnologically savvy than at any other time in history (Prusak 2001;Raven and Stephenson 2001). Fundamental IT skills are requisite forall employees but in addition, the speed with which employees canlearn new software and technology is critical.

Time span of discretion . Speed has become the key tocompetitiveness, but paradoxically, people need to plan over a longertime span. There is a stronger need for efficiency, analytic thinking,and planning skills (Raven and Stephenson 2001).


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Taken together, these characteristics change the landscape in which HRMoperates and herald the opportunity for new contributions. Further impetus fora revised role is provided by knowledge-related changes at the firm level.

Knowledge at the firm Level

For organisations, capability based on knowledge-based resources is criticalto sustained competitive advantage. However, simply possessing knowledgebased resources will not itself achieve competitive advantage theseresources must be managed in ways that allow the organisation to leveragethem for strategic advantage (DeNisi, Hitt and Jackson 2003).

Knowledge management is the discipline that formalises approaches tounderstanding and benefiting from knowledge assets at the firm level. Theintellectual antecedents of knowledge management include economics,sociology, philosophy and psychology (Prusak 2001). Reflecting this,knowledge management is best thought of as a framework rather than as asingle approach a collection of elements that work together in varyingcombinations to accomplish the goal of leveraging an organisationsknowledge capital (Saint-Onge and Wallace 2003).

Knowledge management has been described as involving the design, reviewand implementation of both social and technological processes to improve theapplication of knowledge, in the collective interest of stakeholders (StandardsAustralia 2003, 3). Following from this, whilst information technologycontributes to effective knowledge management, it alone does not fulfil thepromises of knowledge management. Attention to four elements - People,Process, Technology and Content - is essential to optimise results fromknowledge (Standards Australia 2003). Nevertheless, it is our experience thatin practice Information Technology takes a stronger leadership role in KM thandoes HRM. The potential for HRM to bolster its contribution to the knowledgeagenda is the focus of this paper.

HRM in the knowledge economyThe nature and characteristics of work in the knowledge economy herald newopportunities for HRM. To maximise benefit from knowledge assets, afourfold contribution from HRM is proposed. In the knowledge economy, HRMmust:

Provide expertise in understanding and defining firm-levelstrategic knowledge capabilities;

Develop and manage knowledge workers by leveraging theknowing-learning-doing nexus;

Build knowledge value as an organisational as well as anindividual asset; and

Minimise the organisations knowledge risk (Andrews 2003a)associated with loss of requisite capability and knowledge.

Strategic knowledge capabilities

The most significant contribution that HRM can make is strategic. We haveseen that knowledge capabilities underpin strategy in the knowledge


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economy, and HRM practitioners are well placed to understand and define theorganisations strategic knowledge capabilities. Strategic knowledgecapabilities comprise the core competence (Ulrich and Smallwood 2003) ofthe organisation (i.e. what it is good at now) and emerging capabilities tosustain future performance. As such they comprise knowledge and skill areas

that contribute value to the organisation, offer real or potential competitiveadvantage, and are hard to replace.

Understanding strategic knowledge capabilities is at the hub of HRM in theknowledge era. For example, the aim of recruitment and selection in theknowledge economy is to source high calibre talent possessing a range ofskills and capabilities related to the strategic knowledge areas. A keychallenge is selecting employees who are capable of contributing to theorganisation in a variety of ways now and in the future, rather than simplyfilling the current vacancy. This requires long-term planning with seniormanagement and the flexibility to hire when the talent is available. The focusis a flexible and agile workforce. Partnering with external organisations forspecialist knowledge when required will become more commonplace.

The knowing-learning-doing nexusGiven that the competitive advantage of an organisation resides in the abilitiesof its employees, knowledge workers and the capacity they contribute arefundamental to success. Peter Drucker introduced the terms knowledgework and knowledge worker in the early 1960s (see Drucker 1993).However, what would have then been described as a rare type of work is nowincreasing in prevalence and economic significance (Andrews 2000; Andrewsand Delahaye 2000). According to the Australian Bureau of Statistics,knowledge workers now represent 38% of all employed persons in theAustralian labour force, and the fastest-growing occupations are in knowledgework (ABS website 2003).

Knowledge workers identify and solve challenging and complex problems,relying on imagination and creativity and high levels of education and skills.Importantly, they move beyond applying existing codified knowledge toworking with inferences from the body of knowledge (Lockett and Legge1993). Knowledge work is characterised by ambiguity, complexity, and longfeedback cycles. Thus, knowledge workers are employed for their ability tothink for themselves and their work involves a high degree of autonomy.Collaboration is also a key element of knowledge work and involves buildingand maintaining relationships both inside and outside the organisation.

The characteristics of knowledge work throw the spotlight on HRM and itsmanagement of the knowledge workforce. The autonomy of knowledgeworkers, their interdependencies with others, and the long feedback cyclestypical of their work pose clear challenges for traditional approaches toperformance management. Traditional performance management focuses onnarrowly-defined tasks or job roles and observable outputs rather than long-term and diffuse contributions. In todays economy, performance

management must be re-conceptualised with knowledge work in mind. Theprocess by which people obtain results becomes much less significant and the


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focus shifts to managing outcomes, many of which are long-term and difficultto attribute to individuals. For HRM professionals, the key switch is from oneof performance management to performance support or performancefacilitation .

In addition, HRM must tap into the intrinsic motivations of knowledge workers.Knowledge workers are self-motivated, curious and passionate aboutlearning, and have a strong desire for exposure to new ideas andperspectives from both inside and outside their primary knowledge discipline.HRM has a key role to play in creating rich work opportunities. A specificexample relevant here is provided by Sveiby and Simons (2002) who notedthat after 15 years working in the same field for the same company,professionals experience anger, frustration and burnout. The career plateau(Sveiby 2002) transcends professions and creative workers are thought to beparticularly vulnerable. Obviating or minimising the impact of professionalburnout is a worthwhile area of focus for HRM.

It is noteworthy that whilst technical discipline based knowledge hastraditionally defined professional work, additional generic capabilities(abilities to adapt, learn, collaborate and share knowledge) are essentialattributes of knowledge work. For knowledge workers, learning and work areintimately connected. Current approaches to training and development thatview professional development as on-top-of, or supplementing anemployees work are challenged. Learning and professional development isrelevant to knowledge workers to the extent that it is intimately connected withthe context of their ongoing work. Further, knowledge workers self-motivationto learn suggests that the control over the diagnosis and design ofprofessional development activities are best given to the knowledge workersthemselves. Learning and development that is just-in-time to support thecurrent context of the knowledge work will be more common. HRMprofessionals have a key role to play in supporting the ongoing developmentof knowledge workers, but many of the current ways in which that support isprovided may be revised.

Build knowledge valueThe essence of managing knowledge is to build knowledge value for theorganisation and leverage that value for competitive advantage. The value for

the organisation is not derived from simply providing access to information.People create value from information by doing something with it (Andrews2003b). Specifically, applying knowledge to real life opportunities is thesource of value creation: leverage comes from making knowledge andexpertise available firm wide. For example, an emphasis on sharingknowledge and expertise across the enterprise is likely to improve bothefficiency and innovation.

Thus, the important shift for HRM is to build knowledge value as anorganisational as well as an individual asset. The focus for HRM is the wholeorganisation as a system, rather than the sum of its parts. In addition to

supporting the management of knowledge, HRM practitioners as knowledgebrokers have a vital role in terms of knowing what the strategic knowledge


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capabilities of the organisation are and where the pockets of skill andexpertise lie (both inside and outside the organisation). HRM is uniquelypositioned as the facilitator of knowledge and value creation.

Building knowledge value spans the breadth of HRM activities. A primary

function is the rapid deployment of skill and knowledge. For example,currently the emphasis in training and professional development programs ison the provision, coordination and monitoring of training opportunities forindividual employees. This emphasis must shift to developing the strategicknowledge capabilities of the organisation in such a way that they may berapidly developed and deployed. The challenge for HRM is to offerpersonalised development opportunities to underpin the organisations needsfor responsiveness and agility.

Facilitating knowledge transfer between individuals, groups, and from outsideto inside the organisation (and vice versa) becomes critical to buildingorganisational capability. Ideally, HRM has established relationships acrossthe organisation based on understanding of business needs. This pivotal rolewill assist HR to anticipate and plan for emerging knowledge needs.

Knowledge riskIn addition to leveraging organisational knowledge, a new focus for HRM is tominimise knowledge risk. Knowledge risk refers to the real or potential lossof knowledge either through under-utilisation or loss of valuable hard toreplace knowledge when people leave the firm (Andrews 2003a). A topicalexample of knowledge risk is associated with the aging workforce. A recentinvestigation (APS Commission 2003) by the Australian Public Service (APS)Management Advisory Committee (MAC) (APS Commission 2003) found thatthe APS has an ageing profile with an increasing proportion of mature-agedworkers, particularly at senior management levels, and declining youthemployment. Approximately 30% of APS employees are aged between 45and 54, compared with 19% a decade ago, and this age group is clustered athigher classification levels. The report also indicates a likely departure of asignificant proportion of its current workforce, estimated at 23%, by 2008.

Management of this risk begins with an assessment and the development ofstrategies to mitigate the impact of potential knowledge risk. Traditional

approaches to workforce planning in many organisations tend to addresscurrent and short-term resource needs for organisational units individually, bydeveloping employees skills and knowledge through training anddevelopment, or acquiring skills and knowledge with recruitment. The currentapproach emphasises head count. From a knowledge managementperspective, HRM must focus on head contents instead. In the knowledgeeconomy forecasting future knowledge requirements for the wholeorganisation in the medium and long-term is of primary importance. Inparticular, the focus becomes one of identifying where the knowledge risk is.Workforce planning involves mitigating this risk. This requires an intimateknowledge of the strategic knowledge capabilities and how they are

supported.


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Transforming HRM in the knowledge economyThe idea that people and the knowledge they possess is the organisationsmost valuable asset is not new. The shift in the terminology from over 20years ago from Personnel Management to Human Resources Managementsignalled what some claimed was a metamorphosis for the profession. This

altered the conceptualisation and practice of HR from a series of ad hocfunctions, and evolved it into its role of corporate strategist (Kramar, McGrawand Schuler 1997). The transition was a significant one for the profession ofHRM, because it was different from personnel management: it promisedstrategic contribution through integrated activities that confirmed employeesas assets to be nurtured and developed. Today, the central role of individualand organisational capabilities is significantly amplified with the advent of theknowledge economy. Commanding a central role in realising value fromknowledge assets is proposed as the new strategic role for HRM.

What is the nature of the transition proposed for HRM? How does thistranslate to the functional areas of HRM? Table 1 presents a summary of thetraditional approaches to HRM and the shift required in the knowledgeeconomy. The areas represent the elements of HRM that offer the greatestopportunity to acquire, build and retain organisational capability.

Knowledge management presents HRM with the opportunity to becomepivotal to the strategic management of the organisation and a catalyst forknowledge creation and building value. This involves more than just re-labelling Human Resources - it is a fundamental paradigmatic shift for HRMand senior management. The transformation begins with viewing HRMthrough a knowledge lens and repositioning the functions in relation tostrategic knowledge capabilities. Managing knowledge workers, buildingvalue from knowledge, and assessing knowledge risk are also newrequirements of HRM in the knowledge economy. We propose that HRMmust respond to the key challenges presented by the knowledge economyand command a central position in realising value from knowledge assets as astrategic role for HRM.


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Table 1. HRM in the Knowledge Economy

HRMFocus

Traditional HRM HRM in theKnowledge Economy

Strategy Develops HR strategy to align withbusiness strategy

HRM contributes to business strategydevelopment as the expert onstrategic knowledge capabilities

Knowledge acquisition, creation,and utilisation is definitional tobusiness strategy

Recruitmentand Selection

Seek and select resources Describe job requirements and

fill vacancies Select from pool of applicants

available at the time thevacancy is identified

Identify, attract and sustain talent Seek out high calibre talent Focus is on a flexible, agile

workforce Partner with external providers

of knowledge Identify alternative forms of

remunerationTraining andDevelopment

Develop individual skills andcompetencies

Plan and coordinate trainingprograms

Provide and monitorprofessional developmentprograms

Focus is on individual skillacquisition

Develop individual and organisationalcapability

Recognise the nexus betweenlearning, knowing and doing

Focus is on personalisedcapability developmentembedded in work

Build time-to-capability byaccelerating learning

Identify and share excellentpractices

Facilitate knowledge networks Build organisational capability

by facilitating knowledgetransfer

WorkforcePlanning

A focus on head count - addresscurrent and short-term resourceneeds by organisational unit

Identify current and short-termresource needs

Develop skills to meet needs viatraining and development

A focus on head contents manageknowledge value and risk for thewhole organisation

Forecast knowledge required instrategic knowledge domains forthe medium and long term

Rapidly develop and deployknowledge sets of employees(individuals and teams)

PerformanceManagement

Monitor and modify individualperformance

Reduce or eliminate undesirablebehaviours and set desiredbehaviours to enhanceindividual performance

Reinforce organisational culture Monitor adequate compliance

with policies and procedures

Knowledge worker productivity Manage outcomes

characterised by long feedbackcycles (rather than managinginputs and processes)

Retain skilled knowledgeworkers and key knowledge instrategic knowledge domains

Tap into knowledge workerintrinsic motivations

Enhance team/business unitperformance


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