T3-1: Showing a Concrete Benefit of KM to the Knowledge Worker

A tendency when KM is introduced to an organization for the first time is that knowledge workers tend to look at KM as “extra work.” If this is how they view KM, regular work will win over any extra work, particularly if the periodic personnel evaluation system measures his/her performance only in regular work.

I use this simple slide to convey to individual knowledge workers a benefit KM can give them: they can finish their work faster. Most knowledge workers like this. This slide mentions five typical factors that affect speed of completion of work.
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I use the above figure to drive home some points to clarify the meaning of intellectual capital and its three recognized components: human capital, structural capital and stakeholder capital.

1. I include the third factor “support from boss and teammates” to show that effective action (the goal of KM) is affected not only by knowledge assets or cognitive factors, but also by motivational or affective factors. Therefore, these cannot be ignored in actual KM practice.
2. The third factor is actually internal relationship capital, in contrast to stakeholder capital which is external relationship capital. I use this example to show that stakeholder capital – the usual third component of intellectual capital – is externally looking and miss out on an important internal factor that also affects productivity and effective action. Why do you think companies spend money on team building workshops?
3. Notice, too, that the fourth factor “decision rules are clear” is both within the purview of quality management as well as knowledge management. I use this fourth factor to illustrate the fact that KM and QM overlap.
4. The first, second and fourth factors are examples of structural capital while the last factor is an example of human capital.

You can use the above chart and ideas; if you do, please acknowledge me as its source. Thanks!

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Listening Where Mental Models of People Conflict

Two people with conflicting or incompatible mental models will likely:

• See different slices of the real world (read blog post “Q7- We Found the Enemy: Our Own Concepts!”);
• May be looking at the same thing but will interpret what they see differently;
• Use different language, or use the same words but with different meanings; and
• Will not be aware of all the above and will not know why they are unable to communicate productively (unless they practice internal listening and the rest of the discipline of “Mental Models” in Learning Organizations).

If they harbour mental models of each other that the other does not agree with (“On Michael Jackson, or Our Mental Models of People We Know”) then listening stops and the erosion of goodwill starts; further communication is unworkable.

What are the options in such a case?

1. Option 1: Stop communication. To preserve goodwill, an agreement to acknowledge the fact that they have basic differences and to respect each other’s mental models instead of -
2. Option 2: Use force so that the mental model of the more powerful will prevail or
3. Option 3: Agree to obey the authority and judgment of a third party or
4. Option 4: Use universally-accepted protocols for validating, eliminating or selecting mental models.

Unfortunately, protocols for Option 4 are not yet fully developed. The scientific method is a rather well-developed and tested set of protocols for validating mental models, but applied only to empirical validation or only on “what is” and “what works” (in figure below, only right side of Ken Wilber’s quadrants). Knowledge management is engaged in seeking, innovating, developing and re-using “what works”. Sustainable development criteria falls on the lower right quadrant.

Parallel protocols for validation and selection of mental models for the left side of Ken Wilber’s quadrants (see figure below) are not yet fully developed. Protocols for application to validation of experiential data (upper left quadrant) are still being developed in the discipines of transpersonal and paranormal psychology and in phenomenological research. There is no consensus on how “individual benefit” (upper left quadrant) is to be defined and assessed. What does it consist of? Money? Social opportunities? Learning and realizing human potential? Security? Maslow’s Hierarchy of Needs is a step in clarifying this area. The Universal Declaration of Human Rights and the slew of accessory protocols on other aspects and varieties of human rights is a notable contribution on the lower left quadrant. Surprisingly, the Rotary Club’s “Four-Way Test” fits very well with Ken Wilber’s framework and provides commonly-understandable or laymen criteria for the four quadrants:

I have written about Ken Wilber’s framework and applied it in many ways in past blogs:

• Comparing the expanded KM framework and Wilber’s framework: “Tacit-Group Processes in KM” and “Practical Exercise #15: Ingredients of Effective Group Action”
• Applied to estimation of global stocks of human capital, relationship capital, tangible assets, structural capital and natural capital: “Towards a Global Balance Sheet”
• Applied to understanding learning organizations: “Knowledge Pathways in a Learning Organization”
• Applied to classification of memory: “Four Types of Memory”
• Applied to understand societal megatrends: “Combining Megatrends #1 and #2: the Next Societal Innovations?”
• Applied to evolution of institutions: “Evolving Forms of Governance”
• On the scientific method’s bias for the external world: “A Paradox of 20th Century Scientific Practice”

Cheers!

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Four Types of Memory

Ken Wilber pointed out that there are four fundamentally distinct types of knowledge, which he calls the “Four Faces of Truth”. Based on his framework (see previous blog on “KM and Trans-Societal Megatrend #1 and “Tacit-Group Processes in KM”), we therefore see four types of memory:

Transactive memory is what a team informally develops among themselves after working closely together over time. The team informally develops a group tacit knowledge of “who knows what,” “who knows who,” “who does what best,” “who cannot do what,” “how team member A thinks,” etc. This transactive memory is lost to a team member who leaves and joins a new team.

Collective unconscious is Carl Jung’s term to refer to the accumulated experiences and memories of mankind. The collective “national pain body” and “racial pain body,” according to Eckhart Tolle, are accumulated memories of violence and suffering that underlie the consciousness and behavior of a group.

I have written about the “Organizational Brain” in my Overview chapter in the book “Knowledge Management in Asia: Experience and Lessons” published in 2008 by the Asian Productivity Organization, Tokyo, Japan. If you wish to receive a copy of this chapter, send me an email. In this book I used the descriptors “embodied knowledge,” “embedded knowledge” and introduced the new term “enculturated knowledge” for human capital, structural capital and relationship capital, respectively. In parallel, we can use the descriptors “embodied memory,” “embedded memory,” and “enculturated memory.”

In the next blog, I will use Ken Wilber’s framework to delineate important knowledge pathways in a learning organization, and provide a way to understand the specific knowledge pathway called the SECI model of Nonaka.

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Towards a Global Balance Sheet

I compiled various estimates of entries in the expanded KM framework towards a global balance sheet.

Negative side (see diagram below):

• Annual cost of corruption = $1 trillion in 2001-2002 according to the World Bank Institute, when GWP = $30 trillion. Now that GWP is 62 trillion, this estimate may be approximately $2 trillion.
• Losses from the global financial crisis had been reported in my previous blog post: $8.3 trillion in Wall Street and $50 trillion worldwide according to the Asian Development Bank
• US federal obligations by end-2008 = $65.5 trillion according to Shadow Government Statistics
• Losses from global climate change = 5-20% of GWP (or at least $3 trillion in 2008) according to a study by the Government Economic Service, U.K. headed by Sir Nicholas Stern
• Annual forest loss = $2-5 trillion according to an EU-commissioned study The Economics of Ecosystems and Biodiversity; the losses from other forms of natural capital are currently being estimated.
• Depletion of oil in Gulf countries up to 2020 = Gulf countries’ cumulative oil earnings up to 2020 = $4.7 trillion according to Ernst & Young
• About $2 trillion worth of minerals are extracted yearly, according to Dr. Philip Brown of the University of Wisconsin
• My estimate of annual cost of risk from global nuclear war = $591 billion per year, or NPV of $11.8 trillion (see my previous blog post)

Positive side (see diagram below):

• US GDP in 2008 = $14.33 trillion according to CIA World Factbook
• China’s GDP in 2008 = $4.4216 trillion, according to its National Bureau of Statistics and China’s forex reserves by end-2008 = $2 trillion according to Christopher Barker
• GWP in 2008 = $62.25 trillion according to the CIA World Factbook
• Human and social capital in US in 2006 = $153 trillion according to Dr. Gary Becker and Kevin Murphy of the University of Chicago. If this is growing at 2.14% per year, then it would be about $163 trillion in 2009.
• Gulf countries’ cumulative oil earnings up to 2020 = $4.7 trillion according to Ernst & Young
• My estimate of global knowledge assets = $871.5 trillion. According to the World Bank’s World Development Report 2009, 69% of GWP is from services which is knowledge-intensive, while 28% is from industry which is technology-intensive. In the US, human and social capital constitute 74% of total assets, while the remaining 26% is financial assets. If we assume that 70% of GWP is contributed by knowledge assets over the next decades, the NPV is $871.5 trillion at 5% discount rate.

What do we notice?

• Total US federal debt exceeds the wealth (GWP) created by the world economy in one year.
• The world is drawing from its natural capital at an annual rate about equal to the 2008 Wall Street meltdown.
• Knowledge is our biggest and growing asset for creating wealth.

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Q21- Rediscovering a Core(?) of Human Capital: “Sophia”

1
In July 2006 one of the modules in a KM workshop CCLFI facilitated for top executives of a mining company in Mongolia was on “Mining Tacit Knowledge.” The workshop participants were the two senior VPs, all the VPs and senior directors.

We invited three managers who are known in the company to be excellent motivators. One of the them was the CEO. We arranged an informal setting where the three, sitting comfortably in sofas facing the participants, were asked to tell their stories on “How I motivate my people.” A Mongolian lady served as my interpreter in the course.

As their stories unfolded, I could see how interested and engaged were all the participants. The stories showed vignettes of their difficulties and victories in motivating their subordinates. From the faces of the participants and their responses (interpreted for me) the process was obviously a moving experience for everyone. At some point I asked my lady interpreter to stop and we just listened and allowed the interaction to proceed without the interruptions when she interprets for me. It was such a solemn deeply-felt group experience that the CEO later asked, “Has my management team changed so much after one workshop?”

2
In January 2007 I personally met Prof. Ikujiro Nonaka. I served as Conference Rapporteur and Editor of conference proceedings for the International Productivity Conference 2007: From Brain to Business sponsored by the Asian Productivity Organization. He read a paper on “Strategy as Distributed Phronesis: Knowledge Creation for the Common Good.” He introduced a new term “phronesis” and defined it as “the virtuous habit of making decisions and taking action that serves the common good, the capability to find a “right answer in a particular context.” He added that phronesis is “practical wisdom or prudence” or the experiential knowledge to make context-specific decisions based on one’s own value or ethics (high-quality tacit knowledge).”

3
In 2002, CCLFI documented best practices for UNDP in sustainable community development. Our first intention was to produce a manual or “How To” booklets (structural capital), but we discovered that manualization is not enough. The success of a sustainable community development project is also attributable to a talents of the community leader who ran the project. Now, how do one capture those talents in a document? We produced “vignettes” to accompany the “How To” manuals. A vignette consists quotations and pictures of the community leader as he or she tells stories about the project. The vignette shows glimpses or snipets of the leader’s character (human capital) that contributed to project success. We also shot videos. We invited ten of the best practitioners to a face-to-face Lessons Learned Meeting (LLM) where together they shared their stories, compared notes and learned from each other.

When you meet a best practitioner-leader of a successful sustainable community development project you notice immediately that he or she has “it” — that mix of qualities I can describe as a compelling sense of purpose, quietly inspirational, a “can do” attitude that is infectious, humble but strong in will, a deep kind of reflectiveness that shows in how he or she views the world and the people in it and a persona that naturally motivates people. It is a mix of intrapersonal and interpersonal qualities. We at CCLFI chose the term “sophia” to denote this mix of core personal qualities of a successful community leader.

From our expanded KM framework, I believe that the above stories are touching on a core of human capital and relationship capital where these two forms of capital intersect motivational factors. It consists of an inner drive or enthusiasm (an intrapersonal quality) and an ability to lead or motivate (an interpersonal quality).

Have you encountered a similar experience with exceptional leaders? Tell us about it.

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Metacapital

Have you heard of the term “positive psychological capital”? There is a discourse among a group of researchers and practitioners who find a need to use this term. My Indonesian counterpart, Prof. Dr. Jann Hidajat Tjakraatmadja uses this term. He also uses the term “integrity capital.”

Other discourses revolve around other concepts such as spiritual capital, emotional capital, cultural capital, social network capital, political capital, and so on. I have written about social capital in this blog. There is a wider discourse and broader usage of the term social capital, and much wider on human capital.

The meanings of these terms are still evolving, but the common theme across these concepts is that these forms of “X capital” are creators of value. For example, Claridge spent three years examining the meanings of the term “social capital” in more than 500 peer-reviewed articles. He concluded that the common theme across them is “social relations that have productive benefits.”

To complicate the picture, researchers and practitioners from the life sciences are beginning to use terms such as biological capital, natural capital, ecological capital, biodiversity capital, environmental capital, etc. Ecologists clearly distinguish between “natural capital” and the annual stream of “natural income” that the former produces. A mango tree is natural capital, and the mango fruits it produces yearly constitute natural income. Again, the common theme across these concepts is that these forms of capital are such because they are creators of value. They produce annual income streams, just like the more traditional factors of production, namely, land, labor and capital.

Knowledge management researchers and practitioners added more terms: intellectual capital, structural capital (or process capital), relationship capital (or stakeholder capital or customer capital). The consistent underlying meaning among KM researchers and practitioners is that these “things” are all creators of value. They produce wealth. Customer capital contributes to a corporation’s annual income stream just as much as a mango tree produces an annual income stream for the farmer-owner.

It is becoming clear that the factors of production is not just land, labor and capital. There are many more factors that can create wealth other than the traditional ones taught in Economics 101. Psychologists, biologists, ecologists, sociologists, etc. are showing us these many other forms of capital.

Last March 2008, at the conference on “Knowledge Architectures for Development” sponsored by the Singapore Management University, we proposed the cross-disciplinal term “metacapital” to encompass all the various forms of capital. Here is a slide in my PowerPoint presentation:

What do you think?

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Q17- Losses in Community Assets: the Mother is Suckling(?) from the Baby!

In Q16 I quoted Gregory Bateson,

“The major problems in the world are the result of the difference between the way nature works and the way man thinks.”

Accordingly, the next six blog posts Q17 to Q22 will apply the expanded KM framework to several major world problems:

— Underdevelopment of communities and countries
— Corruption
— Threat of nuclear war
— Sustainable development in local communities
— Israel versus Hamas and Hezbollah
— Global financial crisis.

Before we address our first problem of underdevelopment of communities and countries, let us apply the expanded KM framework to communities:

Assets of Communities

At the conference on “Knowledge Architectures for Development” sponsored by the Singapore Management University last March 2008, we presented a paper on “Knowledge for Poverty Alleviation” or KPA framework. This framework uses the expanded KM framework. We showed that successful anti-poverty projects can be explained better using this framework. We also showed how the KPA framework can be used in looking at the flow of assets to/from a typical rural town in the Philippines:

• The brightest secondary school graduates, their valedictorians and salutatorians, migrate to Manila (loss of human capital);
• Mineral and timber resources are harvested mostly by Manila-based or companies based in developed countries (loss of natural capital) but little of the economic proceeds return back to the community. The Regalian Doctrine (state ownership of public natural resources) continues to support and perpetuate this sucking of natural resources from small rural towns to Manila or to developed countries abroad;
• A small fraction of taxes collected by the national government returns back to the community in terms of public services and infrastructures (drain in fiscal resources);
• Local branches of Manila-based banks are more deposit-takers than business lenders (net flow of private savings to Manila);
• Scientists and researchers from outside come in to study the geological, biological, sociological, cultural and other assets of the community, and publish the results outside or bring the geological, biological and cultural specimens for personal or commercial uses outside the community often without the knowledge and permission of local people (biopiracy, siphoning of sociological knowledge, stealing cultural artifacts, geological exploration without FPIC or “free, prior and informed consent”).
• Manila residents who are more knowledgeable of government procedures obtain titles/patents to local land ahead of unwitting local people who had been in traditional possession of land for decades (“land grabbing”).

All these are happening all the time and in most rural Philippine communities, yet most people hardly notice it! (because they do not have the mental model, the expanded KM framework, which enables seeing). How fantastic and unbelievable that so many people cannot see!

Galtung is right. Manila is draining assets from rural Philippine communities! The mother is suckling from the baby!

What do you think?

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Practical Hint #16: Knowledge Transfer from Retiring Senior Staff

Let us apply to a practical situation the expanded KM framework presented in the previous blog post.

Suppose that many experienced senior staff will be retiring from your organization within 12 months. Much knowledge will soon be lost from the organization. As a result, the quality of strategic decision making would deteriorate. Some risks, less visible to junior staff, could materialize to actual loses. Opportunities could be missed. Productivity and revenues would likely suffer.

To minimize loses in this situation, you can transfer knowledge from senior retiring staff. The expanded KM framework suggests that we must pay attention to five areas:

1. Human capital: Mentoring of understudy (over several months) on —

• How important decisions are made
• Practice in performing critical phases of a business process, problem solving
• “Tricks of the trade”
• “War stories” e.g. about how past crises were successfully handled

The understudy must be selected considering non-technical skills required of the job such as ability to communicate, people skills, team player, etc.

2. Structural capital: Turnover of records such as —

• Work folders and work files, emails archive, Internet bookmarks
• Manuals, work templates and tools, problem-solution logbook
• Important information sources, etc.

3. Relationship capital:

• The senior retiring staff introduces the junior understudy to important external business contacts and internal stakeholders especially through informal or social occasions; this process can be repeated over several months until the external or internal stakeholders accept and trust the junior understudy to an extent that the senior retiring staff judges as sufficient for the junior understudy to take over the performance of relevant functions.
• Turnover of telephone directory
• Confidential briefing of understudy on personalities, strengths/weaknesses and relationship styles of key business, network and internal contacts
• Membership in knowledge and other networks; log-in and password to company-owned subscriptions, networks, etc.

4. Tangible assets:

• Company laptop or work station
• Books
• Company communication devices: mobile telephone, etc.

5. Motivational factors:

• The understudy must be selected considering not only technical qualification factors but also personal interest or enthusiasm in the job, whether the job is along his chosen career path, whether the new boss and colleagues in the job are likely to support the understudy, and presence of a personal talent that will be better utilized in the new job.

The above formula must be adapted to the nature of the job. In marketing or sales, relationship capital is more important. In jobs requiring very specialized skills, human capital is important. Motivational factors are always important. In high-tech services, technology (which is part of tangible assets) is important.

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F1- KM is Not Enough!

A simple exercise useful to introduce KM concepts to a workshop
group is to ask each one the question:

Shop this charming range of newborn boys’ baby clothing. Shop online for a wide range of Baby boy gift sets at the Extoboo Baby shop. Browse all of our fantastic deals and choose to either reserve or buy online.

“What helps you do your job well?” (KM gurus such as Sveiby, Drucker, Nonaka and O’Dell say essentially the same thing: that ”knowledge” is capacity for effective action, including information to support effective action). Each participant is provided with metacards or Post-Its to write down their answers. Answers are then collected, clustered and posted in front for everyone to study.

Among dozens of workshop groups for which we facilitated this exercise, the result is almost always the same four clusters below:

1. Skills, experiences, training, education,

attitudes

, leadership skills,

self-motivation

, health, etc.: we call this cluster HUMAN CAPITAL

2. Support systems, access to information, manuals, guidelines,

vision/mission

,

empowering policies

, learning procedures, business processes, etc.: we call this cluster STRUCTURAL CAPITAL (or some KM practitioners call this cluster PROCESS CAPITAL)

3. External linkages/networks, relationships with customers and suppliers, teamwork and

trust

within the organization, trust/reputation of the organization,

support from peers, inspiration and recognition of bosses

, etc.: we call this cluster RELATIONSHIP CAPITAL (or sometimes called STAKEHOLDER CAPITAL or more narrowly as CUSTOMER CAPITAL)

4. Technology/equipment, building and office space, facilities/furniture, financial resources,

conducive workplace,

physical accessibility,

good pay and incentives

, etc.: we call this cluster TANGIBLE ASSETS (meaning, they are included in the accounting system)

In 30 minutes, the group examines the clusters they made and is able to:

• See the 3 components of INTELLECTUAL CAPITAL, namely, Human, Structural and Relationship Capital;
• Learn that KNOWLEDGE ASSETS is almost synonymous with Intellectual Capital;
• Grasp how the meaning of “knowledge assets” differs from the many meanings of “knowledge” among laymen;
• Realize that Intellectual Capital is mostly INTANGIBLE (non-physical but generates value for the organization; not always entered in accounting systems or given money value);
• See that both tangible and especially intangible assets contribute to performance and value creation;
• Realize that accountants are seeing and measuring only one cluster: tangible assets;
• Recognize the link between KM and performance or value creation;
• See that improvement of performance is the result of good KM, and a basis for measuring KM impact;
• Learn about KM terminologies;
• Recognize that many areas of management overlap with KM (HR is about managing Human Capital; ICT is about managing some of the Structural Capital; and CRM is about managing some of the Relationship Capital).

We also discover that good relationships (both within and outside the organization) are important for effective performance. Yet arguably, relationship is not exactly “knowledge” isn’t it? That is why a minority of KM practitioners refuse to acknowledge or agree with St. Onge that Customer Capital is part of Intellectual Capital, or at least claim that Stakeholder Capital is not a “Knowledge Asset” (please allow me to interchangeably use the economic term “capital” with the accounting term “asset” here). Despite this debate, it is clear that to achieve effective action, or to improve individual or organizational performance, we must manage relationships — whichever way we scope or define “knowledge”.

One way I say it, is that human capital is EMBODIED knowledge, structural capital is EMBEDDED knowledge and relationship capital is ENCULTURATED knowledge — or am I stretching the meaning of “knowledge” too much here?

Another issue crops up: “knowledge” is not entirely intangible because technology is embedded knowledge, and technology is NOT intangible. This is the reason that some KM practitioners use the popular People-Process-Technology model of KM. I am not comfortable with this KM model; I prefer the more complete People-Process-Relationship-Technology model. In any case, this is another debatable point.

Motivation or Energy or what?

But what is more interesting is that the workshop groups also notice a fifth cluster (examine the entries in bold italics above) that cuts across the four clusters. What the groups cannot agree on is how to label this cluster. Is it Motivational Factors? Is it Energy? What do we call it? (my CCLFI colleagues prefer the latter neutral term). This leads to another realization, which is really self-evident: that a knowledge worker may know HOW to do a job, but he or she may not WANT or be WILLING to do it. Managing knowledge assets is not enough; we also need to manage motivational factors. We need to pay attention to both the Head and the Heart to achieve more effective action.

My bottom line is this: we can accept, reject or change terminologies including the term “knowledge management” as long as we adequately cover all the pertinent factors that affect or contribute to good performance of a knowledge worker or to value creation by a private or public organization. Accordingly, it appears from the above data that “managing intangible assets” is more comprehensive than “managing knowledge assets” or “knowledge management”.

What do you think?

(I read a conference paper last July in Kuala Lumpur on this topic which you can download from http://www.cclfi.org/downloads. It is entitled “Some Stories about How Personality and Culture Come into Our Knowledge Management Practice”)

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