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Ed Konczal

Ed Konczal

What are you doing about Knowledge Management?

In Foresight 2020, a report from the Economist Intelligence Unit on Corporate trends, Knowledge Management was singled out as a critical corporate issue.

Knowledge management. Running an efficient organisation is no easy task but it is unlikely on its own to offer lasting competitive advantage. Products are too easily commoditised; automation of simple processes is increasingly widespread. Instead, the focus of management attention will be on the areas of the business, from innovation to customer service, where personal chemistry or creative insight matter more than rules and processes. Improving the productivity of knowledge workers through technology, training and organisational change will be the major boardroom challenge of the next 15 years.

So what is Knowledge Management (KM). Simply put, there are two types of knowledge. Tacit knowledge is often known as “expert knowledge”, (this is what is stored in our brains), which is often difficult to explain and intangible. Then there is “explicit knowledge,” which is tangible and can be codified in books, manuals and specifications. Tacit knowledge is vital to the success of any organization. Knowledge Management is the process of capturing, organizing and distributing this knowledge from many stakeholders in a manner that yields competitive advantage and value for the organization.

KM has a major business issue in the past few years as millions of baby boomers are planning to retire over the coming decade. Millions of baby boomers turned 60 in 2005, those who haven’t already retired are certainly planning to do so soon. When they leave, the knowledge they acquired over the course of their long careers leaves with them – unless companies take the initiative to capture the knowledge stored in their brains.

Here’s what some organizations are doing —

COMPANY

INITIATIVE

Procter & Gamble and Eli LillyFormed YourEncore, creating a pool of retired employees that each company could call upon for temporary help
John DeereRegularly hires back retirees to teach, lead projects and participate in product development.
Quest InternationalTo transfer knowledge to younger employees, senior experts are given responsibility for two or three junior application specialists. Quest uses this “buddy approach” to make sure veteran specialists guide younger colleagues and help them gain experience
Northrop Grumman, Aerotek, Inc., Hewlett-Packard Consulting and Integration JapanHave integrated communities of practice (CoPs) into their knowledge management repertoire. These CoPs meet regularly in person and on-line. Older and younger workers share current information, best practices, and personal stories of success and failure. And they ensure the survival of tacit knowledge – knowledge that cannot be codified but is based on years of experience on the job and can be transmitted only from person to person.
Jet Propulsion Laboratory (JPL)Uses storytelling for a different type of knowledge retention. Since early 1999, monthly storytelling sessions have been held in JPL’s library. These sessions, which usually are videotaped, often bring NASA veterans back to recount what it was like being part of old missions. This effort is intended to help socialize newer employees into the JPL culture and to connect them with the lab’s history and mission of “doing what no one has done before.”

Adapted from “The Boomer Exodus: Ready to Pass the Torch?”, Alice Graves

While these forward looking companies both recognize the coming knowledge loss and are taking action, they are too many who are not.

Many U.S. organizations are failing to capture critical workforce knowledge and experience from older employees facing retirement, and few organizations are transferring that knowledge to newer employees, according to the results of a survey released by Accenture.

The survey of more than 500 full-time U.S. workers between 40 and 50 years of age found that nearly half (45 percent) of respondents’ organizations do not have formal workforce planning processes and/or tools in place to capture their workplace knowledge.

For those companies in the 45% … it is time to get those geezers and millennials collaborating.

Piercing The Corporate Veil

Publicly traded companies are extremely careful about what information they release to the public. There is an obvious need to protect proprietary information. However there are a number of sites that help peer past the “corporate veil”. Yes, big companies like to show their good side, but some have misused the extensive power they have to do downright nasty deeds.

I just found a new site Glassdoor that permits employees and former employees to post comments about their companies. Registration is free and permits you to post your views.

You get top management ratings, salary information for positions in the company and company reviews. This is an unusual peek inside of the company. One caution there is always the possibility that disgruntled employees may do a dump. While I haven’t done an extensive analysis, the CEO ratings seem to be in line with the companies ratings on “Best Of” lists.

Another interesting site is Crocodyl.org (Collaborative Research On Corporations). Free registration is required. The input pool is larger than the Glassdoor, “Our aim is to stimulate collaborative research among NGOs, journalists, activists, whistleblowers and academics from both the global South and North in order to develop publicly-available profiles of the world’s most powerful corporations.”

The site has rich content and detailed reports on companies. It also has research tools and a whistleblower section. Another example of the Internet providing an information source for exposure of good and bad company practices.

Seems that the new David just got his cyber sling to battle with corporate Goliaths.

Use Your Website to Promote Your Culture

Some of my posts touched on the importance of Corporate Cultures. Culture affects how employees behave. It also has an influence on how the company is perceived by external stakeholders. So making your Culture visible is imperative and an effective method is to simply use your website.

Some of the “Best Companies” lists published by magazines, consultants and other sources are useful sources of competitive intelligence to get started. However, “Best Company Cultures” ratings are virtually non-existent. I was able to find one in Canada. It is Waterstone Human Capital’s Canada‘s 10 Most Admired Corporate CulturesTM . The 2007 winners are —

1. WESTJET AIRLINES LTD. www.westjet.com
2. FOUR SEASONS HOTELS INC. www.fourseasons.com
3. BOSTON PIZZA INTERNATIONAL. www.bostonpizza.com
4. ROYAL BANK OF CANADA. www.royalbank.com
5. YELLOW PAGES GROUP CO. www.ypg.com
6. MAPLE LEAF FOODS INC. www.mapleleaf.ca
7. MANULIFE FINANCIAL CO. www.manulife.com
8. PUROLATOR COURIER LTD. www.purolator.com
9. TIM HORTONS INC. www.timhortons.com
10.TORONTO DOMINION BANK FINANCIAL GROUP www.td.com

Step one would be to visit the websites of the top rated companies to get some ideas on how to organize your Culture section. Visit the top company, WESTJET and you will see the essential ingredients –

You need to post a short description of the Culture statement, mission vision and values. You could stop here but anything that reinforces these items should be included.

If you visit Toyota Motors, a company that appears on various “Best Company” lists, you find a more glitzy and subtle approach. TOYOTA MOTORS

There are some issues with the Toyota approach, the essential ingredients not as explicit as WESTJET. You have to search to find any mention of culture. I finally found a culture statement buried in Environment Section . Toyota has a good story to tell, they just need to flaunt it.

The lesson learned is that if you want to display your Corporate Culture, keep it focused and make it easily visible.

Good Governance Needs an Ethical Culture

The Concepts of Ethics/integrity are not as difficult to grasp as quantum physics and yet corporate leaders just don’t seem to get it when in comes to Corporate Governance.

“… that since Enron, businesses are focusing more on compliance with the law than on building cultures where lying isn’t tolerated.” Patricia Harned, president Ethics Resource Center December 2007

This must be reversed, Boards and C-suite management must now go beyond compliance and build a culture in which ethics is the norm.

Open Compliance and Ethics Group

While employees generally can be expected to be honest, corporate governance matters can be involved and must be provided with the context and motivation to do their work with the highest ethical standards. This falls to the Board and C-suite management.

An organization’s culture includes the formal and informal norms that guide how people behave at work. The Board and senior management set the “tone at the top” regarding establishing an ethical culture. This is more that crafting a credible code of ethics. An essential starting point is that Directors and the C-suite need to focus on good ethical practices not as a cost of business but as an investment in building the firm’s reputation that in turn will lead to enhanced financial performance.

The Board and the C-suite, through their words and actions, establish the expectations that provide guidance for crafting and maintaining an effective ethical culture. This is an example of what can be done to promote ethical cultures.

Finally, here is an Ethics Quiz that may be useful to highlight areas that should be considered.

Once Again It’s Leadership Integrity

Despite Sarbanes/Oxley, business schools ramping up Business Ethics courses and lofty Corporate Codes Of Ethics, the Mortgage Market crisis indicates that we still have problems with integrity and ethics. While the mortgage crisis focuses on financial services companies, it is yet another wake-up call.

Leadership integrity and ethics continue to be lacking. For example in The 2007 ETHICS RESOURCE CENTER’S NATIONAL BUSINESS ETHICS SURVEY® (registration needed but worth it) indicates —

  • Ethical misconduct in general is very high and back at pre-Enron levels – during the past year, more than half of employees saw ethical misconduct of some kind.
  • The number of companies that are successful in incorporating a strong enterprisewide ethical culture into their business has declined since 2005. Only nine percent of companies have strong ethical cultures.
  • Many employees do not report what they observe – they are fearful about retaliation and skeptical that their reporting will make a difference. In fact, one in eight employees experiences some form of retaliation for reporting misconduct.

In the report the Center indicates “The Ethics Landscape Is Treacherous – Corporate America Is at Great Risk.” This is very sobering, however since 2002 and Sarbanes-Oxley, there have been similar cautionary tales apparently with little effect. Some may indicate a need for more regulation. But this is not the answer since rogues will always find ways to get around these. The solution must be a serious effort from senior leadership tobuild an organization wide ethical culture.

The Ethics Resource Center offers some useful suggestions.

Consider these additional suggestions as you build integrity within your leadership team. They are aimed at integrating Integrity within the organizational culture. You must address “the way we do things here in company x”, or the norms governing how people make decisions each day.

  • Integrity starts with the Board of Directors who develops an ethical practices statement and demand adherence. Violators must be publicly admonished similar to what Jack Welch did at GE
  • Ensure these practices flow easily throughout the culture and embedded in the formal and informal company practices
  • Stop the scoundrels at the gate – when recruiting leadership positions, use new approaches to reviews and assessments designed to surface integrity issues. Bristol-Myers, Pfizer and smaller companies such as Spartan Stores are using innovative approaches to filter out candidates with Integrity issues. Yes it is possible to interview for integrity see “Can You Interview For Integrity?”
  • Put Integrity components in compensation/incentives programs for all not just executives.
  • Communication between leaders and people in the organization deteriorated despite polished multimedia techniques. Your message may be lost in the technology. Tell stories about authentic leaders at company meetings, publish them in company newsletters. Tell them about company performance. Avoid fancy slides, just tell them the facts.
  • Leader development programs must include a first course/seminar in Integrity.
  • Be seen by your people. Let them see and talk with you in a relaxed place. If you “hide” in your office, it’s difficult to build Integrity.
  • Turn bureaucracy on its head.
  • Tough decisions always challenge Integrity. Such times require courage to do the right things. Don’t waste time over analyzing. Embrace integrity and you’ll know what to do.
  • No more “yes men/women”. Surround yourself with trusted people with diverse viewpoints who tell you what they really think about your ideas. Building Integrity takes time and continuous vigilance to maintain.

I will be interested to see what, if anything, will happen to improve corporate ethics after this latest scandal.

Missing Links in Corporate Governance

My recent post on Corporate Governance ratings highlighted a recent study that questioned the relevance of rating agencies scores to corporate performance. Seems that the agencies are missing something.

Some observers feel that ethics may be the most important business leadership issue of this decade.
Alan Lane Ethics The Global Challenge Communication World I November-December 2005

When in December 2006 the Gallup organization asked Americans who they trusted to act honestly and ethically, only 18 percent rated the ethical standards of business executives as “high” or “very high.”
The Board’s Role In Ending Investor Skepticism By Harlan R. Teller JANUARY/FEBRUARY 2008 THE CORPORATE BOARD

Seems that the rating agencies overlook that good corporate governance consists of “hard” quantitative criteria (board structures, compensation, options) which they monitor and “soft” more qualitative criteria (code of ethics, corporate culture of the organisation, and the ethical behavior of employees and senior management) which are sparsely covered.

There is some hard performance evidence on the importance of soft criteria —


Corpedia has identified a basket of stocks whose ethical practices have resulted in a competitive advantage versus their peers. We call it the Ethics Index. Ethics Index companies have outperformed The S&P 500 by more than 370% over the past five years.

Hmmm looks like the soft stuff really matters.

While regulations touch on ethical matters, the problem is that it is a external mandate. Matters of ethics and integrity must be motivated and enforced internally. Ethics must start with the Board and be continuously cultivated, encouraged and enforced through all levels of management. A culture stimulating ethical behavior must be established internally.

As Tom Tierney, former managing partner of Bain Consultancy remarked, “Corporate culture is what determines how people behave when they are not being watched. ”
Narayana N. R. Murthy Chairman of the Board Infosys Technologies Limited

Corporate Governance rating agencies would well to consider looking at the following items that at least give some good indications of internal ethical practices–

  • Integrity hotline available on public website
  • Corporate Values include ethics/integrity
  • Corporate Policy on Corporate Governance available
  • Company has Chief Ethics Officer
  • All documents relating to how ethics are integrated with Corporate Governance are viewable

This is a partial list, but it is an example of what must be done to find those missing links.