What special management challenges and problems do organisations face in knowledge intensive sectors? How might these be tackled? I. Introduction The aim of this essay is to discuss the special management challenges and problems within knowledge intensive sectors, and how they might be tackled. The first section of the essay will begin by exploring some of the management challenges and problems faced by organisations in knowledge intensive sectors, with the following section based on how some of these have been tackled.
The so-called knowledge-intensive firm (KIF) has gained considerable interest in the past few years. Winch et al (1993), state that one of the most distinctive characteristics of what they call a knowledge-based organisation is that they only have the expertise of their staff as assets with which to trade. Similarly, Starbuck (1992) claims that unlike traditional notions of firms that assumes financial or physical capital dominate labour, human capital dominates in KIF’s.
Good examples of KIFs are those firms that are reliant on professional bodies of knowledge, such as law and accountancy practises, alongside other firms reliant on more embodied or encultured knowledge (Blackler, 1995), for example management consultancies, software publishers and advertising agencies (Robertson and Hammersley, 2000). Essentially, it is an organisation
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II. Management challenges and problems in KIFs With their high levels of expertise and skill, employees in KIFs are both valuable and a scare resource within the labour market. In some literature, they have been referred to as ‘gold collar workers’ (Kelley, 1990), in that they are able to demand and receive particularly good terms and working conditions. Furthermore, the nature of the work they do often requires and allows them to work relatively autonomously (Robertson and Hammersley, 2000).
Therefore, a key challenge for management is how to “manage” the considerable levels of autonomy particular to knowledge workers, while at the same time maintaining a suitable level of control. Robertson and Hammersley (2000) point out that any attempt by management to curtail individual autonomy or directly control work is most likely to result in employees leaving the firm; as most experts want autonomy, recognition of their individuality and their firms to have an egalitarian structure (Starbuck, 1992).
However the managerial tension between autonomy and control also exists where too much autonomy is given without appropriate control measures. Robertson and Hammersley (2000) highlight a case in their research on a KIF called ‘Expert Consulting’ where the high levels of autonomy afforded to consultants had actually led to a situation whereby the e-mail system was starting to break down. While management recognised this as problematic, they were at loss as to how to improve the system as imposing rules and procedures regarding the use of email would have been counter-cultural in an environment characterised by autonomy and informality. Therefore, while workers in KIFs resist regimentation and require a high level of autonomy, a lack of appropriate control measures can often result in chaos.
A particular problem for KIFs is the retention of their key personnel. While this is a standard problem for all companies, Alvesson (2000) highlights that this issue becomes amplified for a KIF as a result of two consequences. First of all ‘personnel’ is the most significant and sometimes the only significant resource for a KIF, especially since capital and equipment are normally of less importance. Second, an established KIF may risk loosing groups of employees, who go on to establish a company of their own. This is extremely threatening for employers, posing the loss of not only its personnel but also its clients.
In addition, apart from personnel, a vital resource for many KIFs is the organisation-specific knowledge of an informal nature, which is often embedded, in the organisational culture and style of working. While this may be difficult for a competitor to imitate from a distance, an employee leaving an organisation and joining another poses an opportunity for their new companies to exploit the organisation-specific tacit knowledge of the former employing company (Alvesson 2000). Furthermore, where specific knowledge remains solely with the individual there is the worry that the organisation will not be able to continue appropriating this knowledge if the employee leaves the company; the individual will take the value with them. This can have a detrimental effect on a firm’s competitive advantage, since it may not be able to exploit this knowledge and it may come in to the hands of a competitor.
Stinchcombe and Heimer (1988) outline further issues of employee retention in the way that software firm’s relations with computer manufacturers repeatedly expose their experts to job offers. To sell their services to clients, software firms have to publicise the talents of their key experts, and this publicity creates job opportunities for experts making retention a challenge for the employing firm. In addition Starbuck (1992), notes that experts at the forefront of social and technological change usually have many job opportunities. Therefore where a firm has to continuously replace experts solely to update expertise, this not only weakens loyalty to the firm but also adds variance to organisational culture.
While the issues of employee retention and loyalty are interlinked, Alvesson (2000) highlights the issue of employee loyalty and the potential conflict in much knowledge-intensive work as being between belongingness and identification with the employer or the client. This tends to be a particular problem for many KIFs who deal with complex problems involving lasting and multifaceted interaction with clients.
There is evidence of this being common in computer consultancy work where the consultant performs their task at the client’s workplace on a daily basis over a long period of time. Here the risk maybe that a consultant begins to establish a rapport with the client. This highlights the issue of there being a greater level of loyalty between the consultant and the client instead of the consultant and its employer. For instance a consultant may be inclined to reduce costs more than would be optimal from a top management perspective out of some sense of loyalty to the client (Alvesson, 2000).
Echoing this, Deetz (1995) mentions a group of professionals who underreported their actual hours of working time to management, thus reducing income to the company out of some loyalty to the client. However, similar to the managerial tensions of balancing autonomy with control, KIFs face a similar dilemma with loyalty. A high level of loyalty can also pose as a problem. For example, older employees may not be perceived as very efficient and profitable as well as a number of junior consultants, therefore it may be desirable to lose some of these staff so that an optimal ratio between seniors and juniors is maintained (Maister, 1982, 1993).
KIFs can also have difficulty with growth. Starbuck (1992) points out that while they are prone to grow by using experts more efficiently by adding support staff, or increasing products and services by extracting the existing in-house expertise the end result is that KIFs tend to grow by becoming less specialised and where support staff greatly out number experts, the firm can claim expertise in too may domains thus losing their “halos of expertise and their credibility” (Starbuck, 1992).