The main aim of the project is to show that through creating, accumulating, organising and utilising knowledge, oraganisation can enhance organisational performance.
Trang 1THE IMPACT OF KNOWLEDGE MANAGEMENT ON ORGANISATIONAL
PERFORMANCE
Dr M.A Shakila Banu
Assistant Professor, Jamal Institute of Management, Jamal Mohamed College, Trichy 20
K Kalaivani
Research Scholar, Jamal Institute of Management, Jamal Mohamed College, Trichy 20
ABSTRACT
Knowledge Management is a process that transforms individual knowledge into organisational knowledge The main aim of the project is to show that through creating, accumulating, organising and utilising knowledge, oraganisation can enhance organisational performance The impact of knowledge Management practices on performance was emprically tested through structural equation modelling The sample included 52 employees from HCL The result shows that knowledge management practices measured through information technology, organisation and knowledge positively affect organisational performance
Key words: Knowledge Management, Organisational Performance, Impact of Knowledge
Management
Cite this Article: Dr M.A Shakila Banu and K Kalaivani The Impact of Knowledge
Management on Organisational Performance International Journal of Management, 7(2),
2016, pp 191-199, http://www.iaeme.com/ijm/index.asp
1 BACKGROUND
For many companies, the time of rapid technological change is also the time of incessant struggle for maintaining a competitive advantage It is obvious that knowledge is slowly becoming the most important factor of production, next to labour, land and capital
KM is a process that through creating, accumulating, organising and utilising knowledge helps achieve objectives and enhance organisational performance KM also consists of strategy, cultural values and workflow In order to maximize its value a change in strategies, processes, organisational structures and technologies needs to be made
The literature review shows there is a great number of critical success factors for KM This paper contributes to the knowledge management research field through understanding those factors, their interrelation and the role of information technology in achieving a better business performance Researchers often imply this positive effect of knowledge management on organisational performance However, the researches that empirically prove the existing link are very rare The aim
of this paper is to present a different knowledge management maturity model and to explain and
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Volume 7, Issue 2, February (2016), pp 191-199
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Trang 2test the hypothesis about impact of knowledge management practices on organisational performance The model was empirically tested through structural equation modelling on a sample
of 52 employees from HCL
2 INTRODUCTION
For many companies, the time of rapid technological change is also the time of incessant struggle for maintaining a competitive advantage It is obvious that knowledge is slowly becoming the most important factor of production, next to labour, land and capital Even though some forms of intellectual capital are transferable, internal knowledge is not easily copied This means that the knowledge anchored in employees’ minds can get lost if they decide to leave the organisation Therefore, the key objective of management is to improve the processes of acquisition, integration and usage of knowledge, which is exactly what knowledge management (KM) is all about
KM is a process that through creating, accumulating, organising and utilising knowl-edge helps achieve objectives and enhance organisational performance KM also consists of strategy, cultural values and workflow In order to maximise its value a change in strategies, processes, organisational structures and technologies needs to be made One of the key benefits of introducing KM practices in organisations is its positive impact on organisational performance
The research conducted in Croatia suggests that KM positively affects organisational outcomes of company innovation, product improvement and employee improvement According to Fugate et al., results collected in a logistics operations context prove the existence of a strong positive relationship between a KM process and operational and organisational performance Still, it is not well understood how different KM strategies affect organisational performance Choi et al show that combining the tacit-internal-oriented and explicit-external-oriented KM strategies indicates a complementary relationship, which implies synergistic effects of KM strategies on performance The results of the study conducted by Zheng et al suggest that KM fully mediates the impact of organisational culture on organisational effectiveness, and partially mediates the impact of organisational structure and strategy
on organisational effectiveness Finally, the results of numerous researches show that KM affects organisational performance in a positive manner, but this relationship is very difficult to prove
Researchers often imply this positive effect of knowledge management on organisational performance However, the researches that empirically prove the existing link are very rare The aim of this paper is to present a different knowledge management maturity model and to explain and test the hypothesis about impact of knowledge management practices on organisational performance The literature review shows there is a great number of critical success factors for KM This paper contributes to the knowledge management research field through understanding those factors, their interrelation and the role of information technology in achieving a better business performance
3 LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
The methodology of measuring knowledge management maturity is complex By combining a set of critical success factors with a set of measurable knowledge management factors, an intersection was made to define a new set of measurable key elements of KM Those elements were united into three categories:
1 Information technology (the ability of technology to capture knowledge and usage of information systems),
2 Organisation (people, organisational climate and processes) and
3 Knowledge (knowledge accumulation, utilisation, sharing practices and knowledge ownership identification)
The understanding of these knowledge management factors, acts as a basis in determining the type
of knowledge management strategies and initiatives for an organisation The review of literature used
to develop the questionnaire is stated below:
4 INFORMATION TECHNOLOGY
The value that knowledge management adds lies in increasing individual, team and or-ganisational efficiency through the use of knowledge management tools (information technology)
Trang 3 Capturing Knowledge: the higher the level of capturing knowledge (explicit or tacit) with
information technology tools, the better the KM result;
Usage of IT Tools: the higher the quality of tools, quality of information, user satisfaction,
usage and accessibility, the greater the KM effect on organisational performance
5 ORGANISATION
Organizational culture has a great contribution to knowledge management due to the fact that culture determines the basic beliefs, values, and norms regarding the why and how of knowledge generation, sharing, and utilization in an organisation An organization can achieve a competitive edge by creating and using knowledge about its’ processes and by integrating its’ knowledge into business processes
People and Organisational Climate: the KM success relies heavily upon the trust, creativity,
team work and collaboration among employees
Processes: the integration of the KM activities into organisational processes has a positive
effect on KM results
6 KNOWLEDGE
Successful knowledge management applies a set of approaches to organisational knowledge including its accumulation, utilisation, sharing and ownership
Accumulation: the higher the effectiveness of knowledge accumulation (internal, external;
through internalisation or externalisation) in an organisation, the greater the KM effect
Utilisation: the higher the effectiveness of utilising the (existing) knowledge in an
organisation, the better the KM result;
Sharing: the improvement of sharing of knowledge (formal or informal) effects the KM
positively;
Ownership: the better the accessibility of knowledge, the greater the KM success
7 ELEMENTS OF ORGANISATIONAL PERFORMANCE
When assessing the relationship between knowledge management and organisational performance, it is important to know that the results depend on the used research methodology Organisational performance alone could be gauged in many different ways, with financial or non-financial indicators There are several approaches to organisational performance measurement which include different stakeholders’ perspectives The Balanced Scorecard (BSC) is a performance management tool for measuring whether small-scale operational activities of a company are aligned with its large-scale objectives in terms of vision and strategy and includes four perspectives: financial, customer, internal process and innovation and learning perspective
The financial perspective examines if company’s implementation and execution of its strategy contributes to bottom-line improvement Some of the commonly used financial measures are economic value added, revenue growth, costs, profit margins, cash flow, net operating income etc The customer perspective defines the value proposition that an organisation will apply to satisfy customers and generate more sales to the most desired customer groups
The measures should cover both the value that is de-livered to the customer which may involve time, quality, performance and service, and the outcomes that arise as a result of this value proposition, such as customer satisfaction and market share The internal process perspective focuses on all the activities and key processes required in order for the company to excel at providing the value expected
by the customers The clusters for the internal process perspective are operations management (by improving asset utilisation, supply chain management), customer management (by expanding and deepening relations), innovation (by new products and services) and regulatory & social (by establishing good relations with external stakeholders) The innovation and learning perspective focuses on the intangible assets of an organisation, mainly on the internal skills and capabilities that are required to support the value-creating internal processes In addition to these four perspectives, some researchers include the supplier perspective, which is also important in assessing non-financial performance
Trang 48 RESEARCH PROBLEM
The Problem of the study is to ascertain the advantages obtained by implementing KM and to study the effectiveness of KM implemented Further the study tries to measure any bottlenecks that may exists and suggest measures for improvement
8.1 Research Objectives
To investigate and prove the existence of a positive impact of knowledge management on organisational performance
To critically evaluate the impact of KM implementation in selected organization
To identify the benefits obtained after implementation of KM
To identify any specific areas of concerns and suggest solutions for the same
Conceptual Research Model
9 RESEARCH HYPOTHESIS
According to literature and our experience from business practice, we believe that strong relations between organisational elements, information technology and knowledge management can be established Findings from literature and our assumptions are systemized and structured
in a form of hypotheses and examined by the empirical research
Therefore, we propose the following hypothesis
H1: Higher the External information more will be the knowledge management
H2: More in relay of information price more will be the knowledge management
H3: Higher t he s h a r e of information more will be the k no w le d g e management
H4: Higher t he s t o r e of information more will be the in fo r ma t io n technology
H5: Higher t he support of information mo r e will be the in fo r mat io n technology
H6: Higher t he in n o v a t io n and reward mo r e will be the organizational performance
H7: Higher the motivation for formal an informal education more will be the organizational performance
H8: Higher the unit of organization more will be the organizational performance
H9: Higher the knowledge management more will be the information technology
H10: Higher the information technology more will be the organizational performance
H11: Higher the knowledge management more will be the organizational performance
Trang 510 RESEARCH METHODOLGY
10.1 Research Design
A research design is considered as the framework or plan for the study that guides as well as helps the data collection and analysis of data The research design may exploratory, descriptive and experimental for the view of the consumer were collected so as to some strategies A descriptive study is to obtain a complete and accurate description of the situation Descriptive research for the study was based on
clear cut objectives and formal questionnaire
10.2 Nature of Data
The sources of primary and secondary data were used for the collection of information for the study Primary data was collected through questionnaire and secondary data from Articles have been sourced from magazines and journals dealing with current issues in KM Internet resources, research publications & text books related to KM have been a major secondary source for the extraction of the expert’s opinion
10.3 Research Instrument
The questionnaire was based on previous findings reported in literature that is reviewed in section
2 It included 23 questions on knowledge management and 16 questions on organisational performance Questions about knowledge management are divided into 3 parts knowledge, information technology and organisation
10.4 Variables Measured
The methodology of measuring knowledge management maturity is complex By combining a set of critical success factors with a set of measurable knowledge management factors, an intersection was made to define a new set of measurable key elements of KM Those elements were united into three categories:
1 Information technology (the ability of technology to capture knowledge and usage of
information systems),
2 Organisation (people, organisational climate and processes)
3 Knowledge (knowledge accumulation, utilisation, sharing practices and knowledge
ownership identification)
4 Organisational Performance When assessing the relationship between knowledge
management and organisational performance, it is important to know that the results depend
on the used research Organisational performance alone could be gauged in many different
ways, with financial or non-financial indicators
10.5 Population and Sample Size
The total populations of the study in the selected organisation are the 200 A Sample of 52 employees was drawn Simple random sampling was adopted Besides, the study had employed Partial Least Square – Path Modelling (PLS-PM)
10.6 Limitations
It is possible that this research may not have captured all those factors even though an extensive literature review was conducted and experts in the area were consulted for inputs This study is limited
to the users of ERP in selected organisation Some of the benefits of KM implementation cannot be directly measured and are visible only in the long run
10.7 Model Construction
Four constructs were formed in the research: First, information techno logy (IT), which determines the usage, qualit y and benefits of IT tools for knowledge management Second, organisation (OR) that represents a human perspective of organisation and processes Third, knowledge (KN) that covers accumulation, utilisation, sharing practices, and knowledge
Trang 6ownership identification Fourth, organisational performance (OP) is defined as a construct composed of financial and non-financial indicators
11 DATA ANALYSIS AND RESULTS
Table 1: Reliability
From the above table it is found that the collected sample have achieved reliability and cronbach Alpha
at 5% significant level and more respectively
Table 3: Construct Level correlation of Research Model
Km external Relay Shar
e It
supp ort Store Org
Inno vate motive Unit
External 0.113 1.000
Relay 0.323 0.165 1.000
Share 0.303 0.175 0.240 1.000
It 0.928 0.076 0.100 0.022 1.000
Support 0.365 0.172 0.067 0.235 0.468 1.000
Store 0.496 0.047 0.284 0.602 0.335 0.041 1.000
Org 0.792 0.063 0.017 0.158 0.915 0.299 0.005 1.000
Innovate 0.675 0.184 0.034 0.126 0.809 0.467 0.224 0.736 1.00
0 Motive 0.527 0.144 0.140 0.258 0.627 0.380 0.029 0.626 0.44
6 1.000 Unit 0.277 0.183 0.078 0.029 0.279 0.236 0.268 0.501 0.11
From the above table, it is very clear that the selected company had shown the highly positive correlation between the Knowledge Management with Information technology, Organitational Unit, Innovation and Motives and share of information with store of information It shows moderate positive correlation between Knowledge Management with relay, share, and support, store of Information and Information technology with support of Information It also shows low positive correlation between
Construct Composite Reliability Cronbach Alpha
Trang 7external of information with relay, knowledge management, share, Information technology, support, store of information, organitational unit, innovation, motivation and organitational unit with knowledge management, motivation
Structural Model - Bootstrap
Entire Sample estimate
Mean
of Subsamples
Standard error T-Statistic
12 HYPOTHESIS RESULTS
Since the path linking external information to Knowledge Management was found to be significant at 0.05 level (beta=0.125, t=1.291), external information has significant effect on Knowledge Management (km) This provided support for H1 Also, this finding did support literature review Since the path linking relay to Knowledge Management was found to be significant at 0.05 level (beta=0.293, t=2.786), relay on information has significant effect on Knowledge Management (km) This provided support for H2 Also, this finding did support literature review
Since the path linking share to Knowledge Management was found to be significant at 0.05 level (beta=0.211, t=1.849), indicating share has significant effect on Knowledge Management (km) This provided support for H3 Also, this finding did support literature review
Since the path linking support to IT was found to be significant at 0.05 level (beta=0.115, t=2.328), support of information has significant effect on Information Technology (IT) This provided support for H4 Also, this finding did support literature review
Trang 8Figure 2: PLS-Path Analysis of Research Model
Since the path linking store to IT was found to be significant at 0.05 level (beta=-0.133, t=-2.786), indicating store of information has no significant effect on Information Technology) This provided support for H5 Also, this finding did support literature review
Since the path linking Innovation to organitional performance was found to be significant at 0.05 level (beta=0.643, t=2.223), indicating Organitional Performance (org) has significant effect on Innovation This provided support for H6 Also, this finding did support literature review
Since the path linking Motive to education to Organizational Performance was found to be significant at 0.05 level (beta=0.366, t=3.326), indicating Organizational Performance has significant effect on Motive to education This provided support for H7 Also, this finding did support literature review
Since the path linking Organizational unit to Organizational performance was found to be significant at 0.05 level (beta=0.593, t=0.561), indicating Organizational unit has significant effect on Organizational performance This provided support for H8 Also, this finding did support literature review
Since the path linking Knowledge Management to Information Technology was found to be significant at 0.05 level (beta=0.952, t=0.472), Knowledge Management (km) has significant effect on Information Technology (IT) This provided support for H9 Also, this finding did support literature review
Since the path linking Information Technology to organitional performance was found to be significant at 0.05 level (beta=0.001, t=3.477), indicating Information Technology has significant effect
on organitional performance This provided support for H10 Also, this finding did support literature review
Since the path linking Knowledge Management to organitional performance was found to be significant at 0.05 level (beta=-0.001, t=3.493), indicating Knowledge Management has significant effect on organitional performance This provided support for H11 Also, this finding did support literature review
13 FINDINGS
A direct result of this research is also a newly defined knowledge management maturity model that consists of three empirically tested constructs The new conceptual model consists of information technology, organisational elements and knowledge.Second, this empirical research proved that KM heavily relies on technology However, business practice shows that many organisations have experienced difficulties in effectively using KM technologies In order to have a positive impact on elements of knowledge, information technology needs to be introduced through a set of organisational changes In practice it means that introducing information technology is successful and
Trang 9has a positive impact on knowledge management practices only if it is backed up by changes in people, organisational climate and organisational processes
Organisational change helps an organisation to optimise processes and define process oriented struc- ture; in that case KM can be adopted correctly within the organisation Effective KM cannot
be implemented without a significant behavioural and cultural change There should be a strong culture, trust and transparency in all areas of the organisation Besides, the cultural elements, which distinguish organisations from each other, are found to be related to KM efficiency It was also discovered that knowledge management practices have a positive impact on organisational performance
14 CONCLUSION
We conclude that this paper presents three main components important lights some of the issues raised by IT implementation to improve KM The codification of knowledge in information systems, databases and knowledge repositories does not guarantee efficient KM, but has a potential to influence it in a positive way It is important to notice that IT does not have a direct influence on knowledge, but an indirect one through organisational elements as an enabler of a better collaboration among people in the organisation, motivation of people in the organisation and the process view of the organisation
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