Improving Knowledge Management Through Organizational Structure
Improving Knowledge Management Through Structure
In today’s information-rich and competitive business environment, successful knowledge management is vital to an organization’s performance. Firms must find effective ways to manage the large amount of available information and get it in the right hands so it can be utilized for the company’s benefit. The efficiency of knowledge is creation and employment is affected by many factors, including technology, leadership, and culture. One avenue to improving knowledge management performance is through the manipulation of organizational structure.
Knowledge has become a core resource for businesses. Knowledge in this context “is defined as any data, skill, context, or information that enables high quality decision making and problem solving to occur” (Walczak, 2005, p. 330). This includes individuals’ experiences, beliefs, and skills, as well as organizational learning (Barratt-Pugh, Kennett, & Bahn, 2011). Knowledge management (KM) refers to the strategies used by an organization to effectively control the information it uses to carry out its operations. Knowledge must be created either internally or gathered externally, stored, communicated to the necessary areas, and used to make decisions. All of these processes need to be working efficiently or information vital to the success of the business may be lost.
Knowledge management is generally considered to have three distinct aspects: knowledge generation, knowledge sharing, and knowledge application (Chechen L., Shu-Hui C., & Pui-Lai T., 2011). New information needs to be stored in a way that is easily accessible in a form that makes sense, so the appropriate technology must be available and usable. But this knowledge is useless to the organization if it is not shared with the right people at the right time. Finally, the knowledge needs to inform the company’s strategies and actions, and so must be available to the decision makers in a timely manner (Chechen L., et al., 2011).
Organizational Structure
The structure of the organization determines “the formal allocation of work roles and administrative mechanism to control and integrate work activities” (Chechen L., et al, 2011, p. 730). Structure defines how the organization makes decisions and how employees do their jobs and work together. Structure also facilitates internal communication and the movement of information through the organization (Claver-Cortés, E., Zaragoza-Sáez, P., & Pertusa-Ortega, E., 2007). Although there are many theories about organizational structure, the most commonly used model considers four characteristics of structure: formalization, centralization, complexity, and integration.
Formalization refers to the extent to which the organization uses rules and standards to manage employees’ tasks and activities (Pertusa-Ortega, E.M., Zaragoza-Saez, P., & Claver-Cortes, E., 2010). Businesses with high formalization have explicit procedures that control employees’ action and impede their flexibility and innovation. Employees tend not to have discussions about how the work is done. On the other hand, employees in companies with low formalization have less structured jobs and more freedom in determining the way the job is completed (Pertusa-Ortega, E.M., et al., 2010). This encourages more interactions among the members.
Centralization refers to the extent to which decision making is concentrated at the upper levels of the hierarchy. Highly centralized structures limit participative leadership and reduce employees’ communication and motivation for innovation (Pertusa-Ortega, E.M., et al., 2010). However, members of companies with low centralization have more responsibility along with more freedom and autonomy. Employees are more likely to communicate and interact socially with others in the organization and can generate a greater variety of ideas.
Complexity refers to the extent to which different functions are concentrated in different areas of the hierarchy (Pertusa-Ortega, E.M., et al., 2010). There are three dimensions of complexity: vertical, geographical, and horizontal. Vertical complexity refers to the number of levels in a hierarchy, while geographical complexity is concerned with where various functions of an organization are located (Pertusa-Ortega, E.M., et al., 2010). Horizontal complexity is the level of differentiation in the tasks of the members and is the most relevant to this discussion. Companies with high horizontal complexity have units with specialized functions and expertise in specific areas. A broad range of ideas can be generated when these units work together.
The final element integration refers to the extent to which different areas of the organization are coordinated and have formal processes for working together (Mahmoudsalehi, M., Moradkhannejad, R., & Safari, K., 2012). High integration supports more communication and opportunities for members to learn from one another. Businesses with low integration have information silos and disconnected employees.
Knowledge Management’s Relationship to Structure
Studies show that each of the four aspects of organizational structure impact knowledge management in different ways. In general, the less formalized and centralized the structure, the greater the knowledge management performance. Conversely, companies with low complexity and integration generally do not perform well in knowledge management (Mahmoudsalehi, M., et al., 2012).
The effect of formalization on the creation, sharing, and use of knowledge is less than the degree to which the other aspects of organizational structure influence knowledge management. Studies have shown both positive and negative relationships between formalization and a company’s knowledge management performance (Pertusa-Ortega, E.M., et al., 2010). On one hand, specific rules and procedures keep communication networks open, which increases the sharing of knowledge. However, the same defined procedures limit informal communication and the ability of employees to looks for ways to improve the way their tasks are completed (Pertusa-Ortega, E.M., et al., 2010).
The degree of centralization in an organization has a more defined influence on knowledge management. High centralization means that decision making is concentrated at the higher levels of the organization (Pertusa-Ortega, E.M., et al., 2010). This lessens the participation of lower level members in the operation of the business, thus lowering their motivation for creating knowledge and sharing information. If employees feel a greater responsibility for their activities and have the autonomy to make decisions that impact their areas, they will be more likely to use information to find ways of improving their effectiveness and share that knowledge with others (Pertusa-Ortega, E.M., et al., 2010; Zheng, W., Yang, B., & McLean, GN., 2010).
Organizations with high complexity group units by the tasks for which they are responsible. Since these units are limited in their activities, they gain expertise in those specific activities. Thus, they are likely to create deeper knowledge about their areas. Also, because these units are so differentiated, they must work together to complete entire processes (Pertusa-Ortega, E.M., et al., 2010). For example, a unit responsible for production has a great amount of information on how the product is made. Production must then work closely with the sales department to share that knowledge so the product can be appropriately marketed.
Companies in which units and employees routinely work together are said to be highly integrated. Regardless of the level of complexity, members communicate across units and share knowledge. Having pooled information, they can then generate more ideas based on that combined knowledge (Mahmoudsalehi, M., et al., 2012). Knowledge management performance is impaired in companies with low integration because information tends to stay in one area and sharing it with other departments is limited.
Conclusion
The business world is becoming more and more knowledge based. The amount of available information is rising exponentially, and companies must find ways to harness the power of that knowledge. One way to help increase knowledge management is through the organization’s structure. The traditional top-down, highly centralized hierarchies are no longer efficient. Organizations that are flatter, flexible, more participative, and better integrated will gain the competitive advantage by raising their knowledge management performance.
Bibliography
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