Thursday, March 25, 2004
Introduction:
Data. At first we had too little. We asked for more and we got it. Now we have more than we want. Data led to information, but what we were looking for in the first place was knowledge. As an increasing number of companies now realize that knowledge is their key asset, they want to turn to managing this asset to deliver business results.
But where and how do you begin?
What is behind the buzz?
What is KM’s value proposition?
What types of companies can actually begin KM?
Is it a technology problem or a management problem?
What happens to the millions that a company invests in IT if it is replaced by yet another hyped “fix-it-all” technology?
Can you build upon existing IT investments?
What kinds of people, skills, and organizational structures are necessary to pull it off?
How can KM be aligned with your business’s strategy?
Is there an architecture that you can use?
How can one deploy KM in a company?
Are there any business metrics for it?
How can you maximize your payoff if you implement KM?
What’s knowledge management?
“Knowledge is information that changes something or somebody-either by becoming grounds for actions or by making an individual (or an institution) capable of different or more effective action.”
In the simplest terms knowledge management is “management of knowledge”. In the context of our discussion, it can be extended to “management of organizational knowledge for creating business value and generating a competitive advantage”. It enables the creation, communication, and application of knowledge of all kinds to achieve business goals.
KM’s Value Proposition
The ability of companies to exploit their intangible assets has become far more decisive than their ability to invest and manage their physical assets. As markets shift, uncertainty dominates, technologies proliferate, competitors multiply, and products and services become obsolete rapidly, successful companies are characterized by their ability to consistently create new knowledge, quickly disseminate it, and embody it in their new products and services. In the post industrial era, the success of a corporation lies deeply embedded in its intellectual systems, as knowledge based activities of developing new products, services, and processes become the primary internal function of firms attempting to crate the greatest promise for a long term competitive advantage.
KM can help a company deal with market pressures; avoid the infinite, expensive loop of work duplication; and deal with the threat of job mobility of employees holding critical parts of a firm’s tacit knowledge drivers.
Why all this noise about KM and why now?
1. Companies are becoming knowledge intensive, and not capital intensive
2. Unstable markets necessitate “organized abandonment”
3. Km lets you lead change so change does not lead you
4. Only the knowledgeable survive
5. Cross industry amalgamation is breeding complexity
6. Knowledge can drive decision support like no other
7. Tacit knowledge is mobile
8. Your competitors are no longer just on the west coast
Why now?
Having exhausted all other sources of competitive advantage such as technology and market dominance-none of which have sustained their promises-companies are befittingly placing all hopes in knowledge and its effective management. The value proposition for knowledge management is now stronger than ever, as it is no longer a rare competitor differentiator but the only differentiator.
Who should be pursuing KM?
Two types of companies should be pursuing KM. The first type is one that has realized the need to keep up with its competitors and remain a legitimate player through the process of maintaining knowledge that is core to its line of business. The second type is one step ahead; it already has the core knowledge necessary. This company realizes that what is innovative knowledge today will be commonplace tomorrow.
What KM is not about?
KM is not solely a technology problem; it is partly a management problem. Only by aligning the two can you build KM technology that will truly enable effective KM. A few clarifications:
1. KM is not K engineering.
2. KM is about process, not just digital networks
3. KM is not about building a “smarter” intranet
4. KM is not about a one time investment
5. KM is not about enterprise –wide “infobahns”
6. KM is not about capture
Critical success factors
Before devising a blueprint for a KM system, one must identify the critical success factors that must be supported. The following are the 24 points that if incorporated will most definitely help in creating a sustainable competitive advantage.
1) There is no one right way: there is no silver bullet for KM. In spite of all what the consultants and other research might say there is no one right way to do it. What works for one company may not work for another.
2) Reach a working definition of knowledge: agreeing on a working definition ensures that everyone involved in the initiative is exactly on the same wavelength and understands what is being talked about. The distinction between data, information and knowledge is essential
3) Focus on processes, not just technology: the focus should be on the process of adding, searching, filtering, validating, retrieving and maintaining information and knowledge- both tacit and explicit. The effectuating process of knowledge sharing and transfer is quintessential to the success of a KM system. The systems design must account for the people who will actually use the system, harmonize with their work processes, and be simple and easy to use. Process focus is required and not a technology focus
4) Vague knowledge measures: successful projects begin with the acceptance that there are no perfect measures or metrics for knowledge work. However some metrics, even if vague, are needed to gauge the effectiveness of KM. There is no one good way of measuring the benefits that result from effective management of knowledge within a company. In fact, no correct and complete way exists yet.
5) Demonstration of short term impact essential: continuing support for KM projects in the real world often depends on the demonstration of some tangible and short term results in order to sell KM to both managers and end users.
6) Count in Tacit Knowledge: dubbing mundane databases and object depositories as KM tools, and search engines as human brain-power does little justice to the complexity and completeness of corporate knowledge. This ignores a very critical component of knowledge: knowledge that lies in the heads of employees. To truly support management and reuse of knowledge, tacit components too need to be counted in strongly. Such tacit knowledge includes things like perspectives, perceptions, values, beliefs and experience.
7) Create a shared context: in the absence of a shared context, people coming from different backgrounds, with different values, beliefs, assumptions and views, are most likely to collide and immobilize the possibilities of reaching consensus or making decisions. There is need for some mechanism that allows open, supportive, critical, and reflective conversations between participants to allow them to challenge, align, and establish a shared context. Without this context there would be no difference between the knowledge that flows within a company and its information flows along disjointed points.
8) Begin with what you have: it is essential to know what is out there before you even begin to manage it. Without knowing what the company already knows it will be hard, if not impossible, to identify critical gaps in knowledge and competencies.
9) Accommodate reasoning with assumptions: Managers have some deeply held, extensively shared, often believed, but rarely tested assumptions about the key decisions they make and the basis on which they make them. Like many other things in a dynamic environment the firms operate in, these assumptions can, and often do, change.
10) Think future: knowledge-centric initiatives and projects must look to the future and not the past or present, except to see how past decisions, experience, successes, and failures can help make better decisions in the future.
11) Minimize routing retransmission: as actionable information moves from one recipient to the next, two things get added to it: noise and value. It is often safer to assume that the distortion is more than the value, especially when rerouting is nonessential. The design of a KM system should therefore minimize the number of transmissions of knowledge between individuals to achieve the least distortion of knowledge.
12) Give incentives, not faster computers: what employees need are incentives and not faster computer. Technology provides many enablers, except the biggest one of them all: an incentive to share knowledge.
13) Allow everyone to access and contribute: everyone in an organization should be able to access most, if not all, sources of knowledge that exist within a company. Confidential information can be controlled or restricted within the same system. Also allow everyone to help solve a problem at hand. As pieces of knowledge begin to fit together, the most insightful part might come from the most unexpected source or employee.
14) Allow confidentiality: allow users to contribute to the system without the fear of being reprimanded for their words. As important as it is to be able to trace back to the contributors of knowledge, allowing free expression under anonymity is also essential.
15) Access anytime, anywhere: most successful KM systems to access, to read and to contribute from anywhere and at any time. Remote connectivity therefore becomes necessary.
16) Update automatically: if the system is used extensively, its technical design should be such that its users can see updates and additions in real time without having to manually refresh content. This is a trivial technical problem that is often overlooked-with disastrous results.
17) Supply resource maps to ease navigation: as explicated content and tacit knowledge pointers within a knowledge management system grow, resource maps must be provided to help users navigate through them.
18) Use other databases in addition to corporate best practices databases: processes should be supplemented by implementation of knowledge. The repository should be available but more importantly should be accessed regularly and the culture should be promoted.
19) Provide management support: top managements active support and understanding the role that knowledge has to play are critical for KM’s success. Establish top management sponsorship with ongoing involvement during the design, development, and implementation stages of your knowledge management system.
20) Focus on technology and internal consulting group: effective KM systems must support collaborative work and internal consulting. KM must also focus on product and service development process.
21) Support informality: KM systems need to be informal and communicatively rich. Effective KM systems are easy to use. Extensive features that make the system cumbersome to use or less intuitive can discourage its use.
22) Art of packaging knowledge: packaging knowledge is a goal that must be supported by KM systems right from the outset. Remember that less (volume) is more when it comes to knowledge and its effective management.
23) Provide logical business sense: KM technology should provide a logical extension for business units, and its choice should create a win-win situation primarily for its users, not the company’s technologists.
24) Determine your knowledge delivery Weltanschuung: the design philosophy—Weltanscluung (German term for “world view” or philosophy) of your KM system dictates how actionable information or knowledge is delivered. Different users prefer different delivery mechanisms. This distinction implies that users of a KM system should be able to choose whether they will pull content or it will be pushed to them. Similarly, users must not be bombarded by all-inclusive content.
What a KM must have /must do?
· Needs to support innovation, generation of new ideas, and exploitation of a firm’s intellectual prowess.
· Must support collaboration. Knowledge sharing, learning, and continuous improvement.
· Free, unrestricted, and easy conversation must be supported.
· Must make it easy to find sources of know how and not just know how itself, locate people and expertise, and reuse what exists either in tangible form, or in someone’s head.
· Must build systems around people instead of molding people to work with systems.
· Decision making quality and accuracy should be enhanced.
· It should be flexible enough to change with the business that it supports.
· Must be pragmatic before it aims at being perfectionist.
· It should be user friendly.
The 10 step KM road map
Nothing- no technology, no market share, no product, and no monopoly- can ever provide a competitive advantage that is anything but temporary: they can all be copied, sometimes easily and sometimes with a little effort. K is the only source that cannot be easily copied. K is much like copy protection: even if your competitors get to it, they cannot apply it; for knowledge is protected by context as in copy protected software is protected by encryption.
KM is a complex activity, and like anything else that cannot deliver business impact without a concrete plan, it needs a perfect plan. The 10 step KM road map guides you through the entire process of creating a business-driven KM strategy, designing, developing, and implementing a KM system and effecting the soft changes that are required to make them work. The road map can be looked upon under 4 phases for better understanding
Phase 1: Infrastructural Evaluation
1. Analyzing the existing infrastructure.
· Several steps need to be taken to leverage the existing infrastructure and enabling technology components
· Tie in what already exists, integrate it, and begin there.
· Understand the roles that your existing networks play in KM.
· Examine your needs and determine the processes that most need KM support, and identify existing infrastructure can or cannot meet those needs.
· Identify extant explicit knowledge, take stock of what information and k already exists beginning with explicit k sources.
· The people who will USE km systems, their work practices, and the company culture should govern choice of technology.
· Go beyond the intranet. Provide process support for collaborative synergy, real k, informal conversation, intelligent decision support, and visual team thinking.
· Plan for flexibility and scalability
2. Aligning KM and business strategy.
We can categorize knowledge into 3 classification “buckets”
· Core knowledge: core knowledge is just the basic knowledge required to play the game. This is the type of knowledge that creates a barrier for entry of new competitors.
· Advanced knowledge: advanced knowledge is what makes your company viable. It allows your company to differentiate your product from your competitors, arguably, through the application of superior knowledge.
· Innovative knowledge: it allows a company to lead its entire industry to an extent that clearly differentiates it from competition. It allows the company to completely change the rules of the game.
Knowledge is not static. What is innovative knowledge today will become core knowledge of tomorrow. The company must continually monitor where it stands in comparison to its competitors.
The gap between what a company is doing and what it should be doing represents its strategic gap. Similarly your company’s knowledge gap is represented by what your company should know and what it does know in order to support the competitive position that it has adopted. These two gaps must be aligned and must feed into each other to bridge existing gaps.
The process of creating a well articulated link between business strategy and knowledge strategy:
· Articulate intended business strategy
· Articulate business strategy –knowledge link
· Create an internal k map to identify what you need to know
· Choose either codification/personalization or personalization/codification as your KM focus
· Create a knowledge map for each key competitor
· Create a knowledge map for your industry
· Assess your and your competitors learning capabilities
· Assess your internal/external knowledge gap influences your current and future business strategy
· Determine the balance between exploitation and exploration that you want your knowledge strategy and KMS to support
· Feedback
Phase 2: KM system analysis, design, and development
3. Designing the KM architecture and integrating existing infrastructure.
Most technology needed for knowledge management already exists. The most critical part is determining the best mix of available tools and integrating them in your projects KM architecture. The following points must be kept in mind:
· Choose IT components to find, create, assemble, and apply knowledge. Since content comes from a variety of sources both within a company and from outside, the optimal components must let you create, assemble, find, and apply knowledge in a cost-effective and timely manner.
· Pick one: Web or Notes. Customised implementations of proprietary technology might seem easier to implement than web based intranets with equivalent functionality; using open standards such as intranets holds more long term promise both in terms of cost containment and incremental development. Choosing the web over other options can potentially lead to a tighter integration of commercially available complements such as CBR systems and push delivery mechanisms.
· Identify and understand components of the collaborative intelligence layer. Artificial intelligence, data warehouses, genetic algorithms, neutral networks, expert reasoning systems, rule systems, and case-based reasoning are some of the technologies that provide intelligence to the KM system. Understand how these tools and technologies work and when their use is appropriate.
· Optimize knowledge object granularity. Granularity of knowledge (represented in terms of knowledge objects or elements that are specified in descending order as knowledge domains, regions, sections, segments, elements, fragments and atoms) objects refers to the level of detail in which they are stored in the knowledge management system. Avoid overpopulating your company’s repositories. At the same time, too little detail might make content useless or unactionable. The key lies in striking the right balance between too much and too little detail.
· Create knowledge tags and attributes. Domain, form, type, product/service, time, and location tags allows for uniformity in retrieval and storage of content. Defining such tags up front also helps you determine the right mix of components for searching, indexing, and retrieval.
4. Auditing and analyzing existing knowledge.
The knowledge audit process begins with a clear understanding of its purpose, its short term and long term goals, and identification of its constraints. Knowledge of knowledge assets is critical to the proper planning of a knowledge management system and is a rich source of information about where the strengths of a company lie. In this process it is important to have foresight (hindsight+ insight =foresight). Extrapolation from the past cannot, by itself, predict the future course of events such as project success. However if hindsight is combined with insight into past processes, the combination can provide a robust, partial-indicator for the future.
The knowledge audit consists of six steps as described below:
· Define the goals: the Km audit team agrees upon the reasons for the audit, decides on the goals, and identifies the key financial, organizational, privacy-related, and strategic constraints that influence it. Define specific goals that both the audit process and knowledge management are targeting.
· Determine the ideal state: this need not be all encompassing during the initial stages of the audit process. Begin with a few variables that are equivocally considered critical and that can scope your knowledge management project.
· Select the audit method: use the company specific instantiation of the generic method to perform the audit. So it should account for employee know-how, reputation and market goodwill, and organizational culture as they apply to a company.
· Perform the knowledge audit and document existing knowledge assets: this provides an internal benchmark to evaluate the effects of knowledge management initiatives after they have been put into place.
· Track knowledge growth over time: progression from the initial stage (when the knowledge audit process is performed for the very first time) to later stages allows for easy comparison with the ideal state.
· Determine a company’s strategic position within the technological framework: as cells in the strategic technology framework are populated after the audit, one can decide on the direction in which KM and technology support should focus and where support is least needed.
5. Designing the KM team.
The ultimate goal, after the KM enabling technology and culture are in place, is to encourage every employee to become a manager of knowledge. Employees shouldn’t have to think twice before they contribute, use, validate, update, or apply knowledge explicated within and outside the firm. The following points need to be kept in mind before designing KM team:
· Identify a few key core stakeholders: select a group of people representing IT, management, and the end-user group that will form a core part of the team on a relatively long term basis. Other team members can serve temporarily.
· Identify sources of requisite expertise: sources of expertise representing all divisions or departments that will use the KM system are best drawn from those organizational units. Managerial participants with sufficient knowledge of the company and clear big picture provide strategic direction for the project.
· Select a visionary and experienced project leader: the KM leader helps members of the team understand the projects mission and align their company’s overall goals and objectives.
· Identify critical failure points: there are some high risk areas where the knowledge champion has little control. Its important to keep these areas in mind and give them attention
6. Creating the KM blueprint.
A knowledge management system built without a well-defined architecture will lead only to chaos at later stages. Make sure the architecture is clearly defined, since this part of the infrastructure can be very expensive to fix at a later stage. The following points must be kept in mind:
· Understand the architectural components of the knowledge management system: It’s important to pay close attention to integrate repositories, content centres, knowledge aggregation and mining tools, the collaborative platform, knowledge directories, the user interface options, push delivery mechanisms and integrative elements.
· Design for both interactive and integrative content aggression: Both these needs must be met simultaneously.
· Optimize for performance, scalability and flexibility: Make sure that your KM system works as well for 600 people as it does for 60. Pay close attention to short delays in processing transactions-this will amplify by orders of magnitude as you begin to scale the system upwards
· Plan for interoperability: Plan for higher levels of inter-operability with existing protocols and implementation.
· Decide whether to build or buy: One option is not necessarily better than the other. Examine the pros and cons in each.
· Pay attention to the user interface and its design: The user interface provides an excellent opportunity for ensuring by-in by the user community. A user interface that is built in synchrony with user community helps create a perception that the KM system is an asset and not a liability.
· Position and scope of the KM system: externalise only that tacit knowledge that has the potential for maximising opportunity and returns.
· Future-proof your KM system: Ensure that your KMS does not become obsolete as technologies and business environment evolve.
7. Developing the KM system
Once the blue print has been created for a KM System, the next step is that of actually putting together a working version of the system.
The seven layers within the KMS architecture provides a guideline for the choice of technology components that enable effective sharing of knowledge across a distributed enterprise.
1. Interface Layer: The top layer moves information in and out of the knowledge management system. When this information is relevant, timely and actionable, it represents knowledge. The top layer, the Interface Layer, connects to the people who use this IT infrastructure to create, explicate, use, retrieve, and share knowledge.
2. The Access and Authentication Layer: This is the layer that authenticates valid users. Security and restricted access for the remaining layers are maintained at this level. The strength of security provided by this layer has increased largely because of the penetration of intranets into many companies and vulnerabilities thus arising.
3. The Collaborative Filtering and Intelligence Layer: It constitutes intelligence within a KM system. The process of adding tags and Meta tags to knowledge elements, either through automated mechanisms or manual procedures, is done at this level.
4. The Application Layer: Applications such as skills, directories, yellow pages, collaborative tools and conventional decision support tools are placed at this level.
5. The Transport Layer: Assuming that a company at least has a network in place, the transport layer already exists. This consists of various connectivity modules like TCP/IP, POP3/SMTP or mail server, etc.
6. The Middleware and Legacy Integration Layer: The Legacy Integration Layer provides connections between legacy data and existing and new systems. The Middleware Layer, similarly, provides connectivity between old and new data formats, often through a web front end.
7. The Repositories Layer: This layer consists of operational databases, discussion databases, web forum archives, legacy data, digital or digitised document archives and objective repositories.
Phase 3: Deployment
8. Deploying with RDI methodology.
The deployment stage is the point where the Knowledge Management actually meets the road. Keeping the following key points about the deployment stage in mind:
· Select and test-fire the knowledge management system using the pilot deployment: Select the pilot project that is representative, and that will help identify and isolate failure points in the deployment stages. Select a project that has high visibility and has tangible outcomes. Prevent independent or specialised knowledge “silos” from arising.
· Use prototypes to involve end users: Iteratively improving a system with incremental prototypes lets the system’s potential users see, touch, and feel a system even before a system is completed. Many flawed assumptions in the system’s design can be corrected inexpensively at this stage.
· Focus on results driven incrementalism of the RDI methodology: Use the Results driven Incremental (RDI) methodology to deploy the system. RDI methodology specifies that the project be broken into a series of short, fast-paced development cycles coupled with intensive implementation cycles, each of which delivers a measurable business benefit. Convert factors to processes. Eliminate information packaging methodology, SDLC orientation, and traditional big-bang methodological variants. The RDI methodology lets your team capitalize on insights provided by preceding increments. The methodology works best in the technology component of knowledge management itself is divisible.
· Create effective business releases: Create cumulative results driven business releases. Select and initialise releases with the highest payoffs first. Well-crafted business releases will help you identify and avoid the tarps inherent in the RDI methodology.
· Budget for non technology costs in RDI business releases: Besides training costs and work processes integration, budget for costs related t deployment and implementation of your knowledge management system with business processes.
· Develop a clear communication process with users: Develop a clear communication process that explains the expectation s and the reasoning behind the introduction and integration of the knowledge management system with business processes.
· Strive for iterative perfection: A healthy KM system needs iterative improvements as the business environment and accompanying processes evolve over time. The deployment process should not come to a halt once step 10 of KM “methodology” is completed.
9. Change management, culture, reward structure design, and choice of CKO
For a successful KM System, change management must occur and reward structures must be modified. The following points must be considered :
· You might or might not need a CKO.
· Understand exactly a CKO’s role.
· KM is only about 30% technical. Its success depends on the cultural changes that take place after the technical implementation.
· KM needs strong reward structures.
Phase 4: Performance Evaluation
10. Measuring results of KM, devising ROI metrics, and evaluating system performance.
There are no perfect metrics for knowledge work, but these six approaches mentioned here, the balanced scorecard and the QFD/House of Quality approach seem to be the most promising. To be able to truly understand them and apply them well, measuring the performance of the knowledge management system and its contribution to a company's financial and competence bottom line is absolutely critical. After all, measuring where KM is taking you and demonstrating it well, might be critical for the next round of funding that the project must receive from the CFO. Keep the following tips in mind while devising knowledge management metrics for a company:
· Metrics define knowledge management success: Robust metrics help measure the business impact of knowledge management. Well-chosen metrics serve as the indicators, tools, and guidelines that can help shape both your company's knowledge management system design and its knowledge management strategy. Knowledge work and knowledge management system performance must be one of your core metrics if any knowledge management initiative is to succeed. A few robust metrics with immediate reward ties for knowledge workers are better than many weak ones that cannot be controlled. Focus on knowledge that is valuable, rare, hard to copy, and hard to substitute when you are trying to decide on metric variables. Reward both internal and external knowledge integration through metrics that can be measured today, with impact on future outcomes.
· Benchmarking is a starter, not a strategic metric: Benchmarking is a good comparative tool that lets you judge how high you stand in comparison to other firms both within and outside your industry. Beyond that it provides little to guide knowledge management at a strategic at a micro strategic film level. Select an appropriate company as a role model before you begin the process externally. Remember that benchmarks do tell you what to do next, but not how to do it.
· QFD’s relate high-level goals to discrete actions: QFD’s let you link goals, relationships, perceived significance, and outcomes for each strategic step that you take with your knowledge management system. QFD’s integrate inputs from all stakeholders and provide explicit direction for enhancing your company's knowledge management strategy. QFD’s can be automated to a fairly high degree with readily available soft-ware. You can translate high-level goals to specific tasks, and these tasks can further be decomposed into measurable and manageable actions.
· The balanced scorecard links strategy, technology, competitiveness, and knowledge management: The KM BSC method helps you translate the knowledge management vision into action, communicate the KM strategy bottom up, validate your choice of metrics, and analyze results of knowledge management in the long run. It will provide a robust direct link between knowledge management, the system, your company's clients, markets, people, results, and profitability".
· Do not ignore the soft stuff: Metrics must take both hard and soft results into account to present a true picture of your firm's intellectual health.
· Metrics in the rear view mirror appear more significant than they are: Ask yourself: Do we have metrics that can serve as early warning signals for future problems and those that signal future opportunities?
KNOWLEDGE MANAGEMENT during Mergers and Acquisitions
Over the last twenty years, mergers and acquisitions activity has been one of the chief methods for organizational growth. But some of the all-too-common negative consequences of mergers and acquisitions are:
1. Billions of dollars of shareholder wealth disappear when the integration process fails.
2. Stockholders desert when the claims of 'synergy gains' that used to justify complex mergers fail to materialize.
3. After being told, "Together, we will be stronger," key employees are demoralized when downsizing begins a few months later without a clear strategic rationale.
4. An attractive acquisition becomes a 'spin off,' sold for a fraction of its original cost.
What happens to M&A adventures after the executive ego trip of the deal making? Will the integration period reveal management's folly, or can it reliably produce shareholder value? A model for rapid integration of the merged entities using Knowledge Management may help executives who are engaged in making acquisitions and making them work. Speed is essential to successful M&A integration, but so is strategic planning. Only 25 to 50% of deals create shareholder value, often because those managing the integration process don't know how to make trade-offs between speed and careful planning. To keep the value of a merger from evaporating, leaders need to manage the integration process actively, and steer a course that leads the new organization to its stated strategic goals as swiftly as possible.
A Case on Cisco Systems
When Internet equipment maker Cisco Systems completes an acquisition; it aims to assimilate the technical know-how of the new company under its corporate umbrella within a hundred days. Cisco aggressively seeks to keep the highly skilled people that made the target attractive and to incorporate new products into Cisco's development pipeline. With that strategic goal, Cisco has developed a comprehensive approach to integration that works. And although the company's market value has shrunk in the 2001 technology downturn, its track record for merger integration stands strong. Cisco integrated more than 60 acquisitions from 1996 to 2000. During this period Cisco's stock price rose by an average of more than 50% per year.
Consistent with Cisco's approach, acquirers need to have a clear strategic rationale for a merger in order to set integration priorities. Some companies merge to increase market share and to improve efficiency through increased scale. Others use acquisitions to gain access to customers, products, or markets that complement their existing business. Some companies choose a more strategically complex path, broadening the scope of their business by buying entirely new capabilities-on occasion fundamentally altering the rules of competition in their industries.
In the future, where mergers and acquisitions would be a common phenomenon, not just the CEO but all managers have to ensure a smooth flow of information between their divisions through them. In fact the Chief executives face few challenges more risky than integrating two businesses, and employees face few situations more stressful than mergers. Meeting this challenge requires leaders map a path to integration that aligns with strategic intent. This way, leaders can guide their companies through the inevitable uncertainty of merging as swiftly as possible, and capture the value that prompted the deal.
Thus while mergers-acquisitions take place it is quite necessary for every company to consider sharing of knowledge factor as well as the KNOWLEDGE MANAGEMENT
KM: A Strategic tool for Competitive Advantage
Organisations are persistently striving to create mechanisms for differentiating themselves from their competitors within given markets. Knowledge of their employees is their most valuable asset. It’s being viewed as their most valuable and strategic resource. Most organizations today have a better understanding of Knowledge Management and its associated benefits. They also view it as the ability of knowledge to focus on problems and opportunities as their most important capability. Thereby many organizations have initiated a range of knowledge management initiatives. It’s about how an organization puts the generic strategies into practice. Effective generation of knowledge to form a part of the database can be formed through MIS Reports, Ability to support problem solving and decision making and Collaboration and Communication within the organisation.
How does a firm gain a sustainable cost advantage? How can it differentiate itself from its competitors?
A broader outlook about KM as a Strategic Resource.
There are three broad types of inter-relationships among business units, which have, important but different impacts on Competitive Advantage. Tangible, Intangible and Competitive are some of the types of Interrelationships that do exist within the organisation
Tangible Interrelationship arises from opportunities to share activities in value chain among related business units, due to the presence of common buyers, channels and other factors. For example, common retailers in the FMCG segment. Thereby if sharing lowers cost or enhances differentiation such that to exceed the cost of sharing, then this relationship leads to Competitive advantage
Intangible Interrelationships involves transference of generic skills or know-how about how to manage a particular type of activity from one business unit to another. The basic advantage is lowering of cost of the activity or makes it more unique and outweighs any cost of transferring of know-how. For example, In software companies you have people who are specialists in solving critical issues
Competitor Interrelationships stems from the existence of rivals who actually or potentially compete with a firm in more than one industry. As Tangible and Intangible interrelationships can provide the base for diversification, the competitor interrelationship often co-exists between them.
Knowledge: A Strategic Resource
Companies possess superior knowledge. A proper coordination, combination of traditional resources and capabilities in new distinctive ways is desired. How to exploit and develop these traditional resources better than competitors in a unique manner is the key to the success story. Thus enhancing the organizations fundamental ability to acquire, integrate, store, share and its application becomes the most important capability for building and sustaining Competitive Advantage. But, building a defensible competitive knowledge position internally is a long-term effort and requires foresight and planning.
Knowledge: Strategic Competence
Competence is the ability of an organization to sustain coordinated deployment of assets and capabilities in ways that help in organization achieve its goals. Competitive strategy aims to establish a profitable and sustainable position against the forces that determine the industry competition.
Competence is a property of an organization that depends on three essential inputs from managers’ i. e. Articulating / Drafting the general goals, defining specific action plan and coordinating the use of resources in an effective and efficient manner.
Knowledge: Managing Knowledge to gain Strategic Competence.
The challenges facing this arena are formidable. Globalisation, Information Technology and Shareholders’ Values are transforming the world. To meet these challenges is to become a knowledge-creating or knowledge-intensive organization. But, how do you create K? What are the sources to it? Some of these include:
· Customer Knowledge: Customer is the most important resource. Ultimately he is being provided the service. Its he who has to be satisfied. Therefore, his knowledge and suggestion forms an integral part for framing strategies and sorting out past difficulties.
· Processes Knowledge: In the course of an activity one always comes across situations which are all alien to him. A record of such situations along with the solution to the problem forms part of the database.
· Knowledge in people: Individuals collectively form a group. Individually one possesses a huge databank. Buy, unless its known to the group it stands redundant. Organisations have therefore to explore this individual knowledge to create the database.
· Organisational Memory: Past experience is a resource for future success. An organisation should learn from its past, analyse the same and use it as a significant tool to manage future.
· Knowledge in Relationships: Organisations relationship with stakeholders taken as a whole forms a large data warehouse. Using each of these resources to produce the best can create knowledge.
Once the knowledge is created its now the different processes to gain knowledge competence both at the individual and group level and ultimately organizational levels.
CASE STUDIES:
I. I-Flex Solutions
II. TISCO
III. McKinsey & Co
IV. The Indian pharma sector-Ranbaxy Labs
I. I-Flex Solutions
KM is a Business Process in i-flex
Enterprise-Wide Strategic Initiatives
Along with the decision to adopt the CMM as its guiding framework for process improvement, way back in 1994, the organisation recognised the fact that process adherence and improvement becomes easier when it is supported and streamlined by appropriate levels of process knowledge automation. i-flex has internally developed and deployed a suite of process automation tools, which includes QuBase, Promotr and i-CLeaR. These tools enable the organisation to effectively manage and disseminate the process-related knowledge that is generated through the implementation and practice of the defined quality processes.
QuBase is the ever-growing Intranet-based repository of methodologies, processes, standards, templates, checklists, guides, tutorials and other useful information which practitioners use in their day-to-day work.
Promotr, the other automation component, is designed as an environment that addresses the monitoring and tracking needs of projects along parameters such as size, effort, schedule and quality. It also facilitates the capture and analysis of data generated from the projects executed by the organisation, to assess its process capability at any point of time.
This capability, on parameters such as productivity, defect density, defect leakage, effort slippage and schedule slippage, is published annually in the form of the i-flex Baseline Report. The knowledge that is inherent in this data is then used by the firm to achieve greater levels of accuracy in estimating and planning for future projects, as well as to refine the processes to achieve higher levels of performance.
i-flex also has an institutionalised mechanism of capturing the experiences and learnings of projects that the organisation executes. These are captured at the end of each project, in the form of the Project Closure Document ( PCD ), which is deployed through the organisation’s learning repository, i-CLeaR, which documents management lessons learnt during the project as well as process recommendations. These are used by relevant projects as inputs to enable better planning and management of ongoing projects.
Creating a Centralised Knowledge Repository
As a first step towards the creation of a centralised i-flex knowledge repository, we created a technology platform called i-CLeaR (i-flex Corporate Learning Repository). i-CLeaR is a tool tailored to meet our requirements and is being constantly upgraded based on user feedback and requirements. Using this tool, documents can be categorised using a logical relationship. The actual relationship depends on the specific categorisation scheme that is employed. Documents uploaded into i-CLeaR can be classified under various categories: ownership (e.g. sales, product groups), location (e.g. New York office), type of document ( e.g. confidential). Comprehensive search facilities and reporting, high security control and access rights and strict audit trails are other features of this tool-making it i-flex’s centralised knowledge repository.
Enterprise Performance Initiatives in the Process and Quality Areas
The self-learning process infrastructure described above is supported by organisational initiatives which contribute to greater institutionalisation of processes, as described below:
QPati is a centrally-administered quiz program on processes and related topics that serves the purpose of generating interest in the employees for understanding and appreciating organisational processes. This quiz is conducted on a weekly basis, culminating in quarterly finals that result in individual as well as location winners. The location dimension helps create a healthy competition among the different offices of the company to achieve the objective of the program. Winners are recognised through appropriate awards.
i-Suggest is a theme-based process improvement suggestion scheme that runs on a monthly basis. A theme is announced for the month and suggestions on the theme are invited form employees. A panel of internal experts evaluates the suggestions received, and those that are accepted by the panel are taken up for implementation. Exceptional suggestions are awarded each month. All relevant details pertaining to the suggestions received under i-Suggest are available on the Intranet for the benefit of employees. The teams that run this monitor the progress in implementation of the suggestions and reports back to the organisation.
K-Champion Role is an institutionalized role mandatory in all development projects undertaken at i-flex. This mandatory role is expected to ensure that every project collects re-usable collateral from the project, codifies it and publishes such information (including tacit information) in the central repository for further reuse.
INITIATIVES ADDING VALUE TO STRATEGIC BUSINESS
Effective leverage of intellectual assets is increasingly important in an enterprise's competitiveness and market value. In today’s dynamic and competitive environment, key business market data are being increasingly considered as mission critical intellectual capital, competitive advantage is gained when these 'knowledge assets' are enriched with employee insight and applied within the context of an enterprise business, past experiences and strategic directions.
To address this requirement, I-flex launched a Business Intelligence program that continuously monitors the business technology and market environment, captures the relevant information with its i-flex's context and creates knowledge alerts on an ongoing basis. By applying employee insights, knowledge alerts are transformed into mission-critical strata inputs to the key i-flex decision-makers, thereby helping i-flex to become a more responsive and innovative organization, giving it a sustainable competitive advantage. This has become an invaluable management tool today.
CREATING A NEW ORGANIZATIONAL CULTURE
Creating a collaborative culture in an organization is critical to the success of any KM program. By allowing a wider range of employees to take advantage of knowledge that had previously been available only to limited groups, I-flex is introducing a culture of collaborative participation and making the knowledge creation process more effective by leveraging multiple skills across projects and geographical locations in I-flex. I-flex introduced several programs that could create a new organizational culture, furthering collaboration, sharing of knowledge and effectively leveraging the intellectual assets of the company. K-Forum is a web-based platform for employees to collaborate and seek solutions on unresolved issues facing them in their day-to-day work environment. The members of K-forum seek solutions from experts outside their project groups and geographical locations. This forum helps in leveraging i-flex's intellectual capital and expertise and applying the right solutions to critical issues in a structured and optimal manner. Mentors are selected for mission-critical technology and business areas, who in turn act as proactive facilitators in their areas of specialization. This initiative has been a great success and has helped in introducing a culture of virtual collaboration and knowledge sharing. The K-Forum today has over 370 registered users with an equal number of unregistered users who visit this forum for published solutions to problems. Since its inception in October 2001, K-Forum has posted over 1,300 queries on various areas of specialization with an average of two responses from experts to each issue posed. The archives are also a popular destination amongst the employees searching for ready solutions to known problems. K-Webcast is another initiative that has been well received by the employees. K-Webcast is a highly informative and inter-active audio conference with I-flex experts through a weekly webcast program of 30 minutes duration consisting of a 20 minute audio presentation followed by a 10 minute Q&A series on popular topics of interest. Many have found this manner of presentation better than classroom sessions. Archived webcasts are also popular amongst the employees. I-Share is I-flex’s knowledge management portal on the intranet (i-Opener) with content columns such as Thought Center, Technology Corner, Ideas at Work and Lessons Learnt, i-share is updated once a month with contributions from employees who would like to share their experience through any of these columns. I-Contribute is another collaborative program (currently undergoing a pilot implementation) that attempts to maximize the utilization of resources across projects. In this initiative, a project manager may decide to auction non-critical tasks using this platform, depending on his requirement and on constraints like overstretch. The task is then open for bid from the participating groups.
METRICS:
Measurement plays a critical role in any Knowledge Management program, and is achieved through periodic organization wide employee surveys. The objectives of the survey are to assess the acceptance and effectiveness of the individual programs, create a benchmark to compare the success of the programs, understand the current environment and identity areas for improvement. The output from the surveys arc analyzed to draw up specific KM initiatives and identify critical business issues that need to be mapped to future KM initiatives Organization-wide knowledge sharing programs require significant investments and entail major management effort as well as behavioral changes across the organization over a period of time. Without measurement, there is an ever-present danger of premature abandonment of successful efforts, or alternatively, of complacent continuation of unsuccessful efforts when course correction is needed.)
Knowledge is a difficult thing to manage. It does not do well in captivity and it does not survive for long outside its natural habitat. It is under these circumstances that I-flex would like to echo the famous words of management guru Peter Drucker, “Leveraging knowledge is not only important, but it may be the most important job management has”. I-flex solutions have taken a major step towards making KM a reality so as to stay ahead of competition as keep churning out better results year after year.
II. TISCO
Knowledge Management at TATA STEEL
Tata Steel pioneered “Knowledge Management” to shift the basis of growth from natural resources and physical assets to intellectual capital, which has become the source of innovation, growth and value in modern competitive scenario. The essence of knowledge management is to create and capture the abundant knowledge assets available either tacit (experience, thumb rules etc) or explicit (Literature, reports, failures analysis etc) and then share and utilize it again at right place and in right time.
Since there is no accepted standard framework for KM, Tata Steel has evolved a framework in accordance with its needs, to achieve its business vision. Tata Steel has conceived, developed and deployed internally, an elaborate architecture for KM that aims to take the company to a Learn Once, Use Anywhere paradigm. It was initiated with building up of a “Knowledge Repository” with all the officers actively participating in it. There are basically two broad strategies that are being followed
KM strategies at Tata Steel
1) Codification Strategy (Unsolicited):
Knowledge database includes best practices, learning from failures, improved and new practices adopted, competitive intelligence, customer and supplier knowledge, and benchmarks of different parameters etc. These captured knowledge assets are being deployed and used instantaneously in respective work area to give benefits.
The challenge in knowledge repository process is to keep database updated and useful. With increasing number and size of knowledge database, it will be more challenging to store and offer a range of contents to a variety of users.
The following diagram explains the knowledge repository process that how the knowledge is being captured evaluated by experts and then used by users.
This year, we have included some new features in this codification strategy.
· Ask Expert (solicited) - In today’s economy, the most challenging job is to initiate conversation especially between knowledge seeker and knowledge provider i.e. expert. The fact that the organization is big, actually makes this more difficult because an individual actually does not know that there may be others in the organization, whom he does not know, who can provide solutions to his problems. We are trying to do it through our “Ask Expert” feature. In our “Ask Expert” system, employees are free to log on their work related problem online and there are more than 100 experts involved in providing instant solution to them. These solutions are stored for future use.
· Integration of different databases and product catalogue- Detailed analysis of the failures of our products at the customer end is also made available on the KM portal. Customer’s knowledge is also available on the KM portal. Indian standard (IS) are also made available on the KM portal.
· Our treasured jewels: Details of our retired employees is also available with complete profile (Name, Phone No., Address, e-mail id, expertise).
2) Personalization Strategy:
To encourage knowledge transfer across divisions and departments, few Knowledge Communities have been formed, which are actually groups of like – minded people who came together to share what they know, and to learn from one another regarding some aspects of their work. They are an investment towards the future of organization and not expected to yield a short-term gain. It is more of a knowledge creating and sharing platform rather than a task force to solve a problem.
The following diagram shows complexity of Knowledge Communities. Four Knowledge Communities are being shown with participation from various divisions.
Communities play a very important role in capturing experts’ tacit knowledge, improving the quality of knowledge repository and encourage usage of the repository. In our company, the knowledge community comprises of distinct roles viz Champions, Convener, Practice Leader, lead experts and practitioners. These communities exist not only on core business but also on functions like HR, Town, Community development.
Beside the responsibility of keeping the knowledge repository current, communities have various Knowledge deliverables as follows:
• Innovation: Plan, Conduct and learn from New Experiments.
• Identify Best Practices, Update regularly.
• Identify new Bench Marks, Update regularly.
Deployment:
An index called “KM Index” has been also developed to measure the performance of KM system. This KM Index is an item in the Balanced Scorecard of CEO, which has been cascaded down at lower levels. Both the above strategies are in place at almost all the locations of Tata Steel. Almost 80% of our officers are involved in the above-explained KM system.
Rewards and Recognition:
Knowledge Management forms a part of the Performance Management system. Rewards and Recognition are given to those who perform well in the Knowledge Management systems.
Involvement of supervisors and Workmen:
A formal training programme for Supervisors has begun from August and Supervisors and some workmen have actively and voluntarily started participating in the KM systems. At present around 20% of supervisors have started participating in the KM systems.
III. McKinsey Consultancy
Knowledge Management Model
It takes an enormous effort to create an integrated network of interdependent specialized operations linked by the flows of information and resources. A series of practical changes which maybe less clear is that the organizations ability to link knowledge and embed learning often does not begin until there is a more profound shift in the thought flow of the top management. In many cases these changes occur only after there is a basic re-conceptualization of the company’s business.
McKinsey came to such a major crossroad in the mid 1970’s when it’s unimpeded growth of the previous half century began to slow and it’s reputation as a premium management-consulting firm was challenged .At that time a group of highly focused competitors such as the Boston Consulting Group began to make strong inroads into McKinsey’s markets. On the basis of some simple but powerful tools like the experience curve and the growth-share matrix, BCG developed an approach described as “thought leadership” to win clients and young recruits away from McKinsey which in contrast founded its practice on a commitment to building client relationships. McKinsey’s partners recognized that the firm could no longer succeed simply by building strong relationships and assigning intelligent generalists in increasingly specialized problems. It would have to develop what they referred to as “T- shape consultants” - individuals who supplemented their broad generalist perspective with an in-depth “spike” of specific industry or function expertise.
Despite the fact that knowledge is the stock in trade of this industry, McKinsey had increasingly become compartmentalized into local offices focused on developing deep and enduring relationship clients rather than exploiting the firm’s substantial knowledge assets. Only when a few senior partners recognized that McKinsey had to compete on the basis of thought leadership as well as ‘client relationships’ did the firm launch it’s two decade long efforts to build an integrated and independent organization and be able to develop and diffuse knowledge rapidly and make organizational learning a source for competitive advantage. By the mid 1990’s nearly 20% of the work was performed by consultants on short or long term transfer to another office, moves that were invariably designed to develop or deploy individual consultant’s specialized knowledge or expertise.
McKinsey has created a knowledge organisation based on framework that can be described as an integrated network. This is an organisation model that allows companies to develop distributed capabilities and expertise, link those capabilities through rich horizontal flows of information, knowledge and other resources, and develop the trust that is required as an adhesive to hold together their distributed, integrated firms worldwide. An organisation is built on principles that are vital to the development of an embedded learning capability- a structural configuration based on distributed specialized activities and a set of relationships based more on interdependence than on dependence or independence. This is in contrast to the traditional framework in which the core organization decision are generally based and focused on a few key structural choices, for e.g.: should we structure for efficiency or flexibility, should we be centralized or decentralized. Behind the managerial glamour dilemmas was an organization that has framed by the classic divisionalised hierarchy that required managers to make such either/ or choices. Irrespective of the specific choices a company makes on any of these dimensions, it cannot create the integrated organisational learning capability.
McKinsey views knowledge as a Strategic Asset. Knowledge is got into the organisation in three ways:
a) Through prior learning or experience
b) Through client interaction
c) Through interaction with colleagues.
McKinsey segments itself on the basis of geography, functionality or specialization in a specific industry. The diagram below depicts the same:
Source: Individualized Corporations by Sumantra Ghoshal and Christopher A Bartlet
McKinsey uses the Apprenticeship Model for knowledge management wherein the new recruits acquire knowledge through interaction with their seniors and learn from their past knowledge.
The old model for knowledge management in McKinsey was chaotic and not highly structured. So instead of a big, visible knowledge management department, there was a department in the firm’s New York office that looked after knowledge behind the scenes. They developed sort of internal yellow pages called Knowledge Resource Directory, which is now common in many firms. A call can be made to a central number to get a copy of a specific document that is required within the time frame of an hour. Another thing McKinsey did was to create an enormous cross -reference database on a mainframe in the U.S.A that could be accessed worldwide. A list of a dozen documents could be produced after keying in a word or a topic at the click of a mouse. If an employee worked with a client and the client had some success with the employee’s recommendation then the consultant was encouraged to write a practice bulletin, which was shared with other consultants and a contact was given for further information.
New Model :-
Taxonomy of Different kinds of knowledge used in McKinsey
K0: -Knowledge that is difficult to access because of the cost of gathering it is high. This is explicit knowledge. Today there is an enormous amount of data floating around; for e.g. the government has made a lot of public data available. You can observe the number of windows on house fronts –this is freely available information, but there is a high cost to collect it. Such information is like public goods.
K1: -This is explicit knowledge that you can copyright. For e.g. books
K2: -This knowledge is private because it can be delivered only through people. Certain people who have a particular expertise in a particular area are hired to get access to this knowledge and expertise .One of the problems investment banks face today is that K2 holders sometimes might leave the organization as a result of which even the knowledge and the expertise goes to another organization with them.
K3: -This is tacit knowledge embedded in an organization rather than individual .The individual needs the company to access the knowledge. This knowledge belongs to the firm. It is a part of the culture or the social network, no on can away when they depart from the organization
McKinsey has created a Knowledge Resource Directory, which retains in the organisation most of the important processes and procedures that do not leave the organisation with the human resources. This enhances corporate memory. The aim of this directory is to make more and more tacit knowledge explicit so that people are convinced that they are drawing from a knowledge base of the collective. McKinsey has a robust infrastructure in place which helps the knowledge management system to work efficiently, leading to the effective utilisation of the technical systems. For e.g. when one of the managers of McKinsey in India received a phone call from a team in Singapore whom had used the knowledge directory to source his name. He helped them even though he did not know them and they were able to capitilse on the resources of the organisation. This way the company leverages and disperses the tacit knowledge available within the organisation
CHARACTERISTICS of McKinsey that lay at the heart of their success:
1) They have been investing in very substantial resources to develop the expertise of their people. They have gone to great lengths to recruit the very best, have created structures and mechanisms that allow their employees to continuously enhance, upgrade and broaden their capabilities.
2) They have established tools, processes and relationships necessary to support horizontal flow of information throughout their worldwide organization to link and leverage individual knowledge and embed it in a collective process of shared learning.
3) Finally through supporting lateral sharing of knowledge and also as a product of sharing, each of them has built a strong sense of trust both among colleagues and between superiors and sub-ordinates.
The overall effect of these three characteristics is that their organization was built on a framework that appeared much more like an integrated network rather than a classical divisional hierarchy. It was this network structure that prevented the horizontal flows of information and knowledge from being swamped by the vertical ones thereby saving as the anchor of their organisation learning capability.
McKinsey’s 7-S framework
The diagram below depicts organisation setup has been structure in a manner so as to facilitate the inter-linking and networking of not only the tangible departments but also pervading the geographical territories along with the intangible strategy systems, values, styles and skills. This has enabled McKinsey to leverage and optimally utilize their knowledge resources.
Source: Competitive Knowledge Management by Nicholas Bahra.
The security for access to the knowledge database in McKinsey is ensured by a good and vigilant control system. The number of documents downloaded by an employee in a single day is restricted. Also before downloading any document or information from the database the employee number and code, firm code, study code and project code etc. have to be entered. The knowledge database is also upgraded in every few years – in which a knowledge audit takes place and also the redundant data is removed from the database regularly.
IV. THE INDIAN PHARMA SECTOR-RANBAXY LABS
Case Study: Ranbaxy
At Ranbaxy, EIP has brought together structured and unstructured information and knowledge all in a single, easy to- use environment.
Business Profile
Ranbaxy Laboratories Limited,
New Delhi, India
Industry
Pharmaceuticals, Diagnostics
Geographies
New Delhi, India.
Applications
Back-end: SQL Server 2000
Application Languages: ASP, VB
Front-end: Web Browser (IE 5.0)
Architecture: Microsoft DNA
About the Company
Ranbaxy Laboratories Limited is India’s largest pharmaceutical company with a global turnover of US$ 600 million. It is the 9th largest generic drug company worldwide. The Company exports its products to over 100 countries with ground operations in 25 and manufacturing facilities in 7 countries. Ranbaxy kicked-off the EIP project to facilitate e-Business within the organization by providing employees with a single point of access to external and internal information. The mandate for the EIP application is to optimize business processes in the company and greatly increase user productivity by providing easy access to relevant information enabling better and faster decision making.
Company Requirements
To meet its corporate objectives, Ranbaxy required the following from its EIP development and implementation partner
• Strong consulting skills for product conceptualization, design, development, and implementation to meet Ranbaxy users’ needs
• Ability to architect complex, scalable systems.
• Proven expertise in management of software product development.
• Cost effective and rapid high quality implementation to meet challenging time-to-market constraints.
Enterprise Information Portal
An Enterprise Information Portal is a window into the information systems and processes of the enterprise. EIP acts as a single point of access to internal and external information enabling users to access disparate information sources throughout the enterprise. In Ranbaxy, the EIP functions as a unified corporate desktop that provides a personalized view of organizational information. In addition to being intuitive, informative, and compatible with other applications – including SAP, this product is also workflow enabled to automate most of the process flows within the organization. The EIP application features a host of Corporate Communications related functionalities accessible via the Home Page and also the following additional functionalities
• Detailed User profiles
• Workflows – Corporate Travel, CAPEX, Leave, Stationery, Loans, Expenses, Claims, Training, and Office Supplies requests.
• Extensive access rights on each functionality based on Ranbaxy organization hierarchy.
• Interface to Payroll and SAP applications
• Application parameters configuration features.
WWW.RTRAINING.COM
A comprehensive web based online training and knowledge management system that is also capable of measuring skills / performance of all its personnel.
The solution, which has to its credit, many accolades from all Ranbaxians, was based on the following:
· 24 / 7 Accessibility, that provides user-friendly multi-optional referral / refresher system. The system had been designed to provide ease of use to users, who are not at all computer / internet savvy.
· The system is capable of gauging the grasp of users especially for a specific marketing objective, prior to the implementation of that strategy.
· The system, based on its variety of content, is in a position to ensure consistently good knowledge levels in the sales force post-induction. This is because of the large repository of study/ referral material that is available to all the users.
· The system, ensures that there is no feeling of getting penalized on poor performance, but ensures that the users are encouraged to take online tests at their convenience, after thorough preparation, but within the divisions' specified time frame in an easy to understand multiple choice format.
· The system further augments the learning process by providing instant results, as well as correct answers for the wrongly answered questions.
· Cohesiveness and ownership are the key factors of a successful system in any organization, and this system promotes the same in terms of its usage, not only by the users, but also the administrators who run the entire show. At the same time, this system enhances competitiveness amongst all users, to outperform others in a healthy manner.
Data. At first we had too little. We asked for more and we got it. Now we have more than we want. Data led to information, but what we were looking for in the first place was knowledge. As an increasing number of companies now realize that knowledge is their key asset, they want to turn to managing this asset to deliver business results.
But where and how do you begin?
What is behind the buzz?
What is KM’s value proposition?
What types of companies can actually begin KM?
Is it a technology problem or a management problem?
What happens to the millions that a company invests in IT if it is replaced by yet another hyped “fix-it-all” technology?
Can you build upon existing IT investments?
What kinds of people, skills, and organizational structures are necessary to pull it off?
How can KM be aligned with your business’s strategy?
Is there an architecture that you can use?
How can one deploy KM in a company?
Are there any business metrics for it?
How can you maximize your payoff if you implement KM?
What’s knowledge management?
“Knowledge is information that changes something or somebody-either by becoming grounds for actions or by making an individual (or an institution) capable of different or more effective action.”
In the simplest terms knowledge management is “management of knowledge”. In the context of our discussion, it can be extended to “management of organizational knowledge for creating business value and generating a competitive advantage”. It enables the creation, communication, and application of knowledge of all kinds to achieve business goals.
KM’s Value Proposition
The ability of companies to exploit their intangible assets has become far more decisive than their ability to invest and manage their physical assets. As markets shift, uncertainty dominates, technologies proliferate, competitors multiply, and products and services become obsolete rapidly, successful companies are characterized by their ability to consistently create new knowledge, quickly disseminate it, and embody it in their new products and services. In the post industrial era, the success of a corporation lies deeply embedded in its intellectual systems, as knowledge based activities of developing new products, services, and processes become the primary internal function of firms attempting to crate the greatest promise for a long term competitive advantage.
KM can help a company deal with market pressures; avoid the infinite, expensive loop of work duplication; and deal with the threat of job mobility of employees holding critical parts of a firm’s tacit knowledge drivers.
Why all this noise about KM and why now?
1. Companies are becoming knowledge intensive, and not capital intensive
2. Unstable markets necessitate “organized abandonment”
3. Km lets you lead change so change does not lead you
4. Only the knowledgeable survive
5. Cross industry amalgamation is breeding complexity
6. Knowledge can drive decision support like no other
7. Tacit knowledge is mobile
8. Your competitors are no longer just on the west coast
Why now?
Having exhausted all other sources of competitive advantage such as technology and market dominance-none of which have sustained their promises-companies are befittingly placing all hopes in knowledge and its effective management. The value proposition for knowledge management is now stronger than ever, as it is no longer a rare competitor differentiator but the only differentiator.
Who should be pursuing KM?
Two types of companies should be pursuing KM. The first type is one that has realized the need to keep up with its competitors and remain a legitimate player through the process of maintaining knowledge that is core to its line of business. The second type is one step ahead; it already has the core knowledge necessary. This company realizes that what is innovative knowledge today will be commonplace tomorrow.
What KM is not about?
KM is not solely a technology problem; it is partly a management problem. Only by aligning the two can you build KM technology that will truly enable effective KM. A few clarifications:
1. KM is not K engineering.
2. KM is about process, not just digital networks
3. KM is not about building a “smarter” intranet
4. KM is not about a one time investment
5. KM is not about enterprise –wide “infobahns”
6. KM is not about capture
Critical success factors
Before devising a blueprint for a KM system, one must identify the critical success factors that must be supported. The following are the 24 points that if incorporated will most definitely help in creating a sustainable competitive advantage.
1) There is no one right way: there is no silver bullet for KM. In spite of all what the consultants and other research might say there is no one right way to do it. What works for one company may not work for another.
2) Reach a working definition of knowledge: agreeing on a working definition ensures that everyone involved in the initiative is exactly on the same wavelength and understands what is being talked about. The distinction between data, information and knowledge is essential
3) Focus on processes, not just technology: the focus should be on the process of adding, searching, filtering, validating, retrieving and maintaining information and knowledge- both tacit and explicit. The effectuating process of knowledge sharing and transfer is quintessential to the success of a KM system. The systems design must account for the people who will actually use the system, harmonize with their work processes, and be simple and easy to use. Process focus is required and not a technology focus
4) Vague knowledge measures: successful projects begin with the acceptance that there are no perfect measures or metrics for knowledge work. However some metrics, even if vague, are needed to gauge the effectiveness of KM. There is no one good way of measuring the benefits that result from effective management of knowledge within a company. In fact, no correct and complete way exists yet.
5) Demonstration of short term impact essential: continuing support for KM projects in the real world often depends on the demonstration of some tangible and short term results in order to sell KM to both managers and end users.
6) Count in Tacit Knowledge: dubbing mundane databases and object depositories as KM tools, and search engines as human brain-power does little justice to the complexity and completeness of corporate knowledge. This ignores a very critical component of knowledge: knowledge that lies in the heads of employees. To truly support management and reuse of knowledge, tacit components too need to be counted in strongly. Such tacit knowledge includes things like perspectives, perceptions, values, beliefs and experience.
7) Create a shared context: in the absence of a shared context, people coming from different backgrounds, with different values, beliefs, assumptions and views, are most likely to collide and immobilize the possibilities of reaching consensus or making decisions. There is need for some mechanism that allows open, supportive, critical, and reflective conversations between participants to allow them to challenge, align, and establish a shared context. Without this context there would be no difference between the knowledge that flows within a company and its information flows along disjointed points.
8) Begin with what you have: it is essential to know what is out there before you even begin to manage it. Without knowing what the company already knows it will be hard, if not impossible, to identify critical gaps in knowledge and competencies.
9) Accommodate reasoning with assumptions: Managers have some deeply held, extensively shared, often believed, but rarely tested assumptions about the key decisions they make and the basis on which they make them. Like many other things in a dynamic environment the firms operate in, these assumptions can, and often do, change.
10) Think future: knowledge-centric initiatives and projects must look to the future and not the past or present, except to see how past decisions, experience, successes, and failures can help make better decisions in the future.
11) Minimize routing retransmission: as actionable information moves from one recipient to the next, two things get added to it: noise and value. It is often safer to assume that the distortion is more than the value, especially when rerouting is nonessential. The design of a KM system should therefore minimize the number of transmissions of knowledge between individuals to achieve the least distortion of knowledge.
12) Give incentives, not faster computers: what employees need are incentives and not faster computer. Technology provides many enablers, except the biggest one of them all: an incentive to share knowledge.
13) Allow everyone to access and contribute: everyone in an organization should be able to access most, if not all, sources of knowledge that exist within a company. Confidential information can be controlled or restricted within the same system. Also allow everyone to help solve a problem at hand. As pieces of knowledge begin to fit together, the most insightful part might come from the most unexpected source or employee.
14) Allow confidentiality: allow users to contribute to the system without the fear of being reprimanded for their words. As important as it is to be able to trace back to the contributors of knowledge, allowing free expression under anonymity is also essential.
15) Access anytime, anywhere: most successful KM systems to access, to read and to contribute from anywhere and at any time. Remote connectivity therefore becomes necessary.
16) Update automatically: if the system is used extensively, its technical design should be such that its users can see updates and additions in real time without having to manually refresh content. This is a trivial technical problem that is often overlooked-with disastrous results.
17) Supply resource maps to ease navigation: as explicated content and tacit knowledge pointers within a knowledge management system grow, resource maps must be provided to help users navigate through them.
18) Use other databases in addition to corporate best practices databases: processes should be supplemented by implementation of knowledge. The repository should be available but more importantly should be accessed regularly and the culture should be promoted.
19) Provide management support: top managements active support and understanding the role that knowledge has to play are critical for KM’s success. Establish top management sponsorship with ongoing involvement during the design, development, and implementation stages of your knowledge management system.
20) Focus on technology and internal consulting group: effective KM systems must support collaborative work and internal consulting. KM must also focus on product and service development process.
21) Support informality: KM systems need to be informal and communicatively rich. Effective KM systems are easy to use. Extensive features that make the system cumbersome to use or less intuitive can discourage its use.
22) Art of packaging knowledge: packaging knowledge is a goal that must be supported by KM systems right from the outset. Remember that less (volume) is more when it comes to knowledge and its effective management.
23) Provide logical business sense: KM technology should provide a logical extension for business units, and its choice should create a win-win situation primarily for its users, not the company’s technologists.
24) Determine your knowledge delivery Weltanschuung: the design philosophy—Weltanscluung (German term for “world view” or philosophy) of your KM system dictates how actionable information or knowledge is delivered. Different users prefer different delivery mechanisms. This distinction implies that users of a KM system should be able to choose whether they will pull content or it will be pushed to them. Similarly, users must not be bombarded by all-inclusive content.
What a KM must have /must do?
· Needs to support innovation, generation of new ideas, and exploitation of a firm’s intellectual prowess.
· Must support collaboration. Knowledge sharing, learning, and continuous improvement.
· Free, unrestricted, and easy conversation must be supported.
· Must make it easy to find sources of know how and not just know how itself, locate people and expertise, and reuse what exists either in tangible form, or in someone’s head.
· Must build systems around people instead of molding people to work with systems.
· Decision making quality and accuracy should be enhanced.
· It should be flexible enough to change with the business that it supports.
· Must be pragmatic before it aims at being perfectionist.
· It should be user friendly.
The 10 step KM road map
Nothing- no technology, no market share, no product, and no monopoly- can ever provide a competitive advantage that is anything but temporary: they can all be copied, sometimes easily and sometimes with a little effort. K is the only source that cannot be easily copied. K is much like copy protection: even if your competitors get to it, they cannot apply it; for knowledge is protected by context as in copy protected software is protected by encryption.
KM is a complex activity, and like anything else that cannot deliver business impact without a concrete plan, it needs a perfect plan. The 10 step KM road map guides you through the entire process of creating a business-driven KM strategy, designing, developing, and implementing a KM system and effecting the soft changes that are required to make them work. The road map can be looked upon under 4 phases for better understanding
Phase 1: Infrastructural Evaluation
1. Analyzing the existing infrastructure.
· Several steps need to be taken to leverage the existing infrastructure and enabling technology components
· Tie in what already exists, integrate it, and begin there.
· Understand the roles that your existing networks play in KM.
· Examine your needs and determine the processes that most need KM support, and identify existing infrastructure can or cannot meet those needs.
· Identify extant explicit knowledge, take stock of what information and k already exists beginning with explicit k sources.
· The people who will USE km systems, their work practices, and the company culture should govern choice of technology.
· Go beyond the intranet. Provide process support for collaborative synergy, real k, informal conversation, intelligent decision support, and visual team thinking.
· Plan for flexibility and scalability
2. Aligning KM and business strategy.
We can categorize knowledge into 3 classification “buckets”
· Core knowledge: core knowledge is just the basic knowledge required to play the game. This is the type of knowledge that creates a barrier for entry of new competitors.
· Advanced knowledge: advanced knowledge is what makes your company viable. It allows your company to differentiate your product from your competitors, arguably, through the application of superior knowledge.
· Innovative knowledge: it allows a company to lead its entire industry to an extent that clearly differentiates it from competition. It allows the company to completely change the rules of the game.
Knowledge is not static. What is innovative knowledge today will become core knowledge of tomorrow. The company must continually monitor where it stands in comparison to its competitors.
The gap between what a company is doing and what it should be doing represents its strategic gap. Similarly your company’s knowledge gap is represented by what your company should know and what it does know in order to support the competitive position that it has adopted. These two gaps must be aligned and must feed into each other to bridge existing gaps.
The process of creating a well articulated link between business strategy and knowledge strategy:
· Articulate intended business strategy
· Articulate business strategy –knowledge link
· Create an internal k map to identify what you need to know
· Choose either codification/personalization or personalization/codification as your KM focus
· Create a knowledge map for each key competitor
· Create a knowledge map for your industry
· Assess your and your competitors learning capabilities
· Assess your internal/external knowledge gap influences your current and future business strategy
· Determine the balance between exploitation and exploration that you want your knowledge strategy and KMS to support
· Feedback
Phase 2: KM system analysis, design, and development
3. Designing the KM architecture and integrating existing infrastructure.
Most technology needed for knowledge management already exists. The most critical part is determining the best mix of available tools and integrating them in your projects KM architecture. The following points must be kept in mind:
· Choose IT components to find, create, assemble, and apply knowledge. Since content comes from a variety of sources both within a company and from outside, the optimal components must let you create, assemble, find, and apply knowledge in a cost-effective and timely manner.
· Pick one: Web or Notes. Customised implementations of proprietary technology might seem easier to implement than web based intranets with equivalent functionality; using open standards such as intranets holds more long term promise both in terms of cost containment and incremental development. Choosing the web over other options can potentially lead to a tighter integration of commercially available complements such as CBR systems and push delivery mechanisms.
· Identify and understand components of the collaborative intelligence layer. Artificial intelligence, data warehouses, genetic algorithms, neutral networks, expert reasoning systems, rule systems, and case-based reasoning are some of the technologies that provide intelligence to the KM system. Understand how these tools and technologies work and when their use is appropriate.
· Optimize knowledge object granularity. Granularity of knowledge (represented in terms of knowledge objects or elements that are specified in descending order as knowledge domains, regions, sections, segments, elements, fragments and atoms) objects refers to the level of detail in which they are stored in the knowledge management system. Avoid overpopulating your company’s repositories. At the same time, too little detail might make content useless or unactionable. The key lies in striking the right balance between too much and too little detail.
· Create knowledge tags and attributes. Domain, form, type, product/service, time, and location tags allows for uniformity in retrieval and storage of content. Defining such tags up front also helps you determine the right mix of components for searching, indexing, and retrieval.
4. Auditing and analyzing existing knowledge.
The knowledge audit process begins with a clear understanding of its purpose, its short term and long term goals, and identification of its constraints. Knowledge of knowledge assets is critical to the proper planning of a knowledge management system and is a rich source of information about where the strengths of a company lie. In this process it is important to have foresight (hindsight+ insight =foresight). Extrapolation from the past cannot, by itself, predict the future course of events such as project success. However if hindsight is combined with insight into past processes, the combination can provide a robust, partial-indicator for the future.
The knowledge audit consists of six steps as described below:
· Define the goals: the Km audit team agrees upon the reasons for the audit, decides on the goals, and identifies the key financial, organizational, privacy-related, and strategic constraints that influence it. Define specific goals that both the audit process and knowledge management are targeting.
· Determine the ideal state: this need not be all encompassing during the initial stages of the audit process. Begin with a few variables that are equivocally considered critical and that can scope your knowledge management project.
· Select the audit method: use the company specific instantiation of the generic method to perform the audit. So it should account for employee know-how, reputation and market goodwill, and organizational culture as they apply to a company.
· Perform the knowledge audit and document existing knowledge assets: this provides an internal benchmark to evaluate the effects of knowledge management initiatives after they have been put into place.
· Track knowledge growth over time: progression from the initial stage (when the knowledge audit process is performed for the very first time) to later stages allows for easy comparison with the ideal state.
· Determine a company’s strategic position within the technological framework: as cells in the strategic technology framework are populated after the audit, one can decide on the direction in which KM and technology support should focus and where support is least needed.
5. Designing the KM team.
The ultimate goal, after the KM enabling technology and culture are in place, is to encourage every employee to become a manager of knowledge. Employees shouldn’t have to think twice before they contribute, use, validate, update, or apply knowledge explicated within and outside the firm. The following points need to be kept in mind before designing KM team:
· Identify a few key core stakeholders: select a group of people representing IT, management, and the end-user group that will form a core part of the team on a relatively long term basis. Other team members can serve temporarily.
· Identify sources of requisite expertise: sources of expertise representing all divisions or departments that will use the KM system are best drawn from those organizational units. Managerial participants with sufficient knowledge of the company and clear big picture provide strategic direction for the project.
· Select a visionary and experienced project leader: the KM leader helps members of the team understand the projects mission and align their company’s overall goals and objectives.
· Identify critical failure points: there are some high risk areas where the knowledge champion has little control. Its important to keep these areas in mind and give them attention
6. Creating the KM blueprint.
A knowledge management system built without a well-defined architecture will lead only to chaos at later stages. Make sure the architecture is clearly defined, since this part of the infrastructure can be very expensive to fix at a later stage. The following points must be kept in mind:
· Understand the architectural components of the knowledge management system: It’s important to pay close attention to integrate repositories, content centres, knowledge aggregation and mining tools, the collaborative platform, knowledge directories, the user interface options, push delivery mechanisms and integrative elements.
· Design for both interactive and integrative content aggression: Both these needs must be met simultaneously.
· Optimize for performance, scalability and flexibility: Make sure that your KM system works as well for 600 people as it does for 60. Pay close attention to short delays in processing transactions-this will amplify by orders of magnitude as you begin to scale the system upwards
· Plan for interoperability: Plan for higher levels of inter-operability with existing protocols and implementation.
· Decide whether to build or buy: One option is not necessarily better than the other. Examine the pros and cons in each.
· Pay attention to the user interface and its design: The user interface provides an excellent opportunity for ensuring by-in by the user community. A user interface that is built in synchrony with user community helps create a perception that the KM system is an asset and not a liability.
· Position and scope of the KM system: externalise only that tacit knowledge that has the potential for maximising opportunity and returns.
· Future-proof your KM system: Ensure that your KMS does not become obsolete as technologies and business environment evolve.
7. Developing the KM system
Once the blue print has been created for a KM System, the next step is that of actually putting together a working version of the system.
The seven layers within the KMS architecture provides a guideline for the choice of technology components that enable effective sharing of knowledge across a distributed enterprise.
1. Interface Layer: The top layer moves information in and out of the knowledge management system. When this information is relevant, timely and actionable, it represents knowledge. The top layer, the Interface Layer, connects to the people who use this IT infrastructure to create, explicate, use, retrieve, and share knowledge.
2. The Access and Authentication Layer: This is the layer that authenticates valid users. Security and restricted access for the remaining layers are maintained at this level. The strength of security provided by this layer has increased largely because of the penetration of intranets into many companies and vulnerabilities thus arising.
3. The Collaborative Filtering and Intelligence Layer: It constitutes intelligence within a KM system. The process of adding tags and Meta tags to knowledge elements, either through automated mechanisms or manual procedures, is done at this level.
4. The Application Layer: Applications such as skills, directories, yellow pages, collaborative tools and conventional decision support tools are placed at this level.
5. The Transport Layer: Assuming that a company at least has a network in place, the transport layer already exists. This consists of various connectivity modules like TCP/IP, POP3/SMTP or mail server, etc.
6. The Middleware and Legacy Integration Layer: The Legacy Integration Layer provides connections between legacy data and existing and new systems. The Middleware Layer, similarly, provides connectivity between old and new data formats, often through a web front end.
7. The Repositories Layer: This layer consists of operational databases, discussion databases, web forum archives, legacy data, digital or digitised document archives and objective repositories.
Phase 3: Deployment
8. Deploying with RDI methodology.
The deployment stage is the point where the Knowledge Management actually meets the road. Keeping the following key points about the deployment stage in mind:
· Select and test-fire the knowledge management system using the pilot deployment: Select the pilot project that is representative, and that will help identify and isolate failure points in the deployment stages. Select a project that has high visibility and has tangible outcomes. Prevent independent or specialised knowledge “silos” from arising.
· Use prototypes to involve end users: Iteratively improving a system with incremental prototypes lets the system’s potential users see, touch, and feel a system even before a system is completed. Many flawed assumptions in the system’s design can be corrected inexpensively at this stage.
· Focus on results driven incrementalism of the RDI methodology: Use the Results driven Incremental (RDI) methodology to deploy the system. RDI methodology specifies that the project be broken into a series of short, fast-paced development cycles coupled with intensive implementation cycles, each of which delivers a measurable business benefit. Convert factors to processes. Eliminate information packaging methodology, SDLC orientation, and traditional big-bang methodological variants. The RDI methodology lets your team capitalize on insights provided by preceding increments. The methodology works best in the technology component of knowledge management itself is divisible.
· Create effective business releases: Create cumulative results driven business releases. Select and initialise releases with the highest payoffs first. Well-crafted business releases will help you identify and avoid the tarps inherent in the RDI methodology.
· Budget for non technology costs in RDI business releases: Besides training costs and work processes integration, budget for costs related t deployment and implementation of your knowledge management system with business processes.
· Develop a clear communication process with users: Develop a clear communication process that explains the expectation s and the reasoning behind the introduction and integration of the knowledge management system with business processes.
· Strive for iterative perfection: A healthy KM system needs iterative improvements as the business environment and accompanying processes evolve over time. The deployment process should not come to a halt once step 10 of KM “methodology” is completed.
9. Change management, culture, reward structure design, and choice of CKO
For a successful KM System, change management must occur and reward structures must be modified. The following points must be considered :
· You might or might not need a CKO.
· Understand exactly a CKO’s role.
· KM is only about 30% technical. Its success depends on the cultural changes that take place after the technical implementation.
· KM needs strong reward structures.
Phase 4: Performance Evaluation
10. Measuring results of KM, devising ROI metrics, and evaluating system performance.
There are no perfect metrics for knowledge work, but these six approaches mentioned here, the balanced scorecard and the QFD/House of Quality approach seem to be the most promising. To be able to truly understand them and apply them well, measuring the performance of the knowledge management system and its contribution to a company's financial and competence bottom line is absolutely critical. After all, measuring where KM is taking you and demonstrating it well, might be critical for the next round of funding that the project must receive from the CFO. Keep the following tips in mind while devising knowledge management metrics for a company:
· Metrics define knowledge management success: Robust metrics help measure the business impact of knowledge management. Well-chosen metrics serve as the indicators, tools, and guidelines that can help shape both your company's knowledge management system design and its knowledge management strategy. Knowledge work and knowledge management system performance must be one of your core metrics if any knowledge management initiative is to succeed. A few robust metrics with immediate reward ties for knowledge workers are better than many weak ones that cannot be controlled. Focus on knowledge that is valuable, rare, hard to copy, and hard to substitute when you are trying to decide on metric variables. Reward both internal and external knowledge integration through metrics that can be measured today, with impact on future outcomes.
· Benchmarking is a starter, not a strategic metric: Benchmarking is a good comparative tool that lets you judge how high you stand in comparison to other firms both within and outside your industry. Beyond that it provides little to guide knowledge management at a strategic at a micro strategic film level. Select an appropriate company as a role model before you begin the process externally. Remember that benchmarks do tell you what to do next, but not how to do it.
· QFD’s relate high-level goals to discrete actions: QFD’s let you link goals, relationships, perceived significance, and outcomes for each strategic step that you take with your knowledge management system. QFD’s integrate inputs from all stakeholders and provide explicit direction for enhancing your company's knowledge management strategy. QFD’s can be automated to a fairly high degree with readily available soft-ware. You can translate high-level goals to specific tasks, and these tasks can further be decomposed into measurable and manageable actions.
· The balanced scorecard links strategy, technology, competitiveness, and knowledge management: The KM BSC method helps you translate the knowledge management vision into action, communicate the KM strategy bottom up, validate your choice of metrics, and analyze results of knowledge management in the long run. It will provide a robust direct link between knowledge management, the system, your company's clients, markets, people, results, and profitability".
· Do not ignore the soft stuff: Metrics must take both hard and soft results into account to present a true picture of your firm's intellectual health.
· Metrics in the rear view mirror appear more significant than they are: Ask yourself: Do we have metrics that can serve as early warning signals for future problems and those that signal future opportunities?
KNOWLEDGE MANAGEMENT during Mergers and Acquisitions
Over the last twenty years, mergers and acquisitions activity has been one of the chief methods for organizational growth. But some of the all-too-common negative consequences of mergers and acquisitions are:
1. Billions of dollars of shareholder wealth disappear when the integration process fails.
2. Stockholders desert when the claims of 'synergy gains' that used to justify complex mergers fail to materialize.
3. After being told, "Together, we will be stronger," key employees are demoralized when downsizing begins a few months later without a clear strategic rationale.
4. An attractive acquisition becomes a 'spin off,' sold for a fraction of its original cost.
What happens to M&A adventures after the executive ego trip of the deal making? Will the integration period reveal management's folly, or can it reliably produce shareholder value? A model for rapid integration of the merged entities using Knowledge Management may help executives who are engaged in making acquisitions and making them work. Speed is essential to successful M&A integration, but so is strategic planning. Only 25 to 50% of deals create shareholder value, often because those managing the integration process don't know how to make trade-offs between speed and careful planning. To keep the value of a merger from evaporating, leaders need to manage the integration process actively, and steer a course that leads the new organization to its stated strategic goals as swiftly as possible.
A Case on Cisco Systems
When Internet equipment maker Cisco Systems completes an acquisition; it aims to assimilate the technical know-how of the new company under its corporate umbrella within a hundred days. Cisco aggressively seeks to keep the highly skilled people that made the target attractive and to incorporate new products into Cisco's development pipeline. With that strategic goal, Cisco has developed a comprehensive approach to integration that works. And although the company's market value has shrunk in the 2001 technology downturn, its track record for merger integration stands strong. Cisco integrated more than 60 acquisitions from 1996 to 2000. During this period Cisco's stock price rose by an average of more than 50% per year.
Consistent with Cisco's approach, acquirers need to have a clear strategic rationale for a merger in order to set integration priorities. Some companies merge to increase market share and to improve efficiency through increased scale. Others use acquisitions to gain access to customers, products, or markets that complement their existing business. Some companies choose a more strategically complex path, broadening the scope of their business by buying entirely new capabilities-on occasion fundamentally altering the rules of competition in their industries.
In the future, where mergers and acquisitions would be a common phenomenon, not just the CEO but all managers have to ensure a smooth flow of information between their divisions through them. In fact the Chief executives face few challenges more risky than integrating two businesses, and employees face few situations more stressful than mergers. Meeting this challenge requires leaders map a path to integration that aligns with strategic intent. This way, leaders can guide their companies through the inevitable uncertainty of merging as swiftly as possible, and capture the value that prompted the deal.
Thus while mergers-acquisitions take place it is quite necessary for every company to consider sharing of knowledge factor as well as the KNOWLEDGE MANAGEMENT
KM: A Strategic tool for Competitive Advantage
Organisations are persistently striving to create mechanisms for differentiating themselves from their competitors within given markets. Knowledge of their employees is their most valuable asset. It’s being viewed as their most valuable and strategic resource. Most organizations today have a better understanding of Knowledge Management and its associated benefits. They also view it as the ability of knowledge to focus on problems and opportunities as their most important capability. Thereby many organizations have initiated a range of knowledge management initiatives. It’s about how an organization puts the generic strategies into practice. Effective generation of knowledge to form a part of the database can be formed through MIS Reports, Ability to support problem solving and decision making and Collaboration and Communication within the organisation.
How does a firm gain a sustainable cost advantage? How can it differentiate itself from its competitors?
A broader outlook about KM as a Strategic Resource.
There are three broad types of inter-relationships among business units, which have, important but different impacts on Competitive Advantage. Tangible, Intangible and Competitive are some of the types of Interrelationships that do exist within the organisation
Tangible Interrelationship arises from opportunities to share activities in value chain among related business units, due to the presence of common buyers, channels and other factors. For example, common retailers in the FMCG segment. Thereby if sharing lowers cost or enhances differentiation such that to exceed the cost of sharing, then this relationship leads to Competitive advantage
Intangible Interrelationships involves transference of generic skills or know-how about how to manage a particular type of activity from one business unit to another. The basic advantage is lowering of cost of the activity or makes it more unique and outweighs any cost of transferring of know-how. For example, In software companies you have people who are specialists in solving critical issues
Competitor Interrelationships stems from the existence of rivals who actually or potentially compete with a firm in more than one industry. As Tangible and Intangible interrelationships can provide the base for diversification, the competitor interrelationship often co-exists between them.
Knowledge: A Strategic Resource
Companies possess superior knowledge. A proper coordination, combination of traditional resources and capabilities in new distinctive ways is desired. How to exploit and develop these traditional resources better than competitors in a unique manner is the key to the success story. Thus enhancing the organizations fundamental ability to acquire, integrate, store, share and its application becomes the most important capability for building and sustaining Competitive Advantage. But, building a defensible competitive knowledge position internally is a long-term effort and requires foresight and planning.
Knowledge: Strategic Competence
Competence is the ability of an organization to sustain coordinated deployment of assets and capabilities in ways that help in organization achieve its goals. Competitive strategy aims to establish a profitable and sustainable position against the forces that determine the industry competition.
Competence is a property of an organization that depends on three essential inputs from managers’ i. e. Articulating / Drafting the general goals, defining specific action plan and coordinating the use of resources in an effective and efficient manner.
Knowledge: Managing Knowledge to gain Strategic Competence.
The challenges facing this arena are formidable. Globalisation, Information Technology and Shareholders’ Values are transforming the world. To meet these challenges is to become a knowledge-creating or knowledge-intensive organization. But, how do you create K? What are the sources to it? Some of these include:
· Customer Knowledge: Customer is the most important resource. Ultimately he is being provided the service. Its he who has to be satisfied. Therefore, his knowledge and suggestion forms an integral part for framing strategies and sorting out past difficulties.
· Processes Knowledge: In the course of an activity one always comes across situations which are all alien to him. A record of such situations along with the solution to the problem forms part of the database.
· Knowledge in people: Individuals collectively form a group. Individually one possesses a huge databank. Buy, unless its known to the group it stands redundant. Organisations have therefore to explore this individual knowledge to create the database.
· Organisational Memory: Past experience is a resource for future success. An organisation should learn from its past, analyse the same and use it as a significant tool to manage future.
· Knowledge in Relationships: Organisations relationship with stakeholders taken as a whole forms a large data warehouse. Using each of these resources to produce the best can create knowledge.
Once the knowledge is created its now the different processes to gain knowledge competence both at the individual and group level and ultimately organizational levels.
CASE STUDIES:
I. I-Flex Solutions
II. TISCO
III. McKinsey & Co
IV. The Indian pharma sector-Ranbaxy Labs
I. I-Flex Solutions
KM is a Business Process in i-flex
Enterprise-Wide Strategic Initiatives
Along with the decision to adopt the CMM as its guiding framework for process improvement, way back in 1994, the organisation recognised the fact that process adherence and improvement becomes easier when it is supported and streamlined by appropriate levels of process knowledge automation. i-flex has internally developed and deployed a suite of process automation tools, which includes QuBase, Promotr and i-CLeaR. These tools enable the organisation to effectively manage and disseminate the process-related knowledge that is generated through the implementation and practice of the defined quality processes.
QuBase is the ever-growing Intranet-based repository of methodologies, processes, standards, templates, checklists, guides, tutorials and other useful information which practitioners use in their day-to-day work.
Promotr, the other automation component, is designed as an environment that addresses the monitoring and tracking needs of projects along parameters such as size, effort, schedule and quality. It also facilitates the capture and analysis of data generated from the projects executed by the organisation, to assess its process capability at any point of time.
This capability, on parameters such as productivity, defect density, defect leakage, effort slippage and schedule slippage, is published annually in the form of the i-flex Baseline Report. The knowledge that is inherent in this data is then used by the firm to achieve greater levels of accuracy in estimating and planning for future projects, as well as to refine the processes to achieve higher levels of performance.
i-flex also has an institutionalised mechanism of capturing the experiences and learnings of projects that the organisation executes. These are captured at the end of each project, in the form of the Project Closure Document ( PCD ), which is deployed through the organisation’s learning repository, i-CLeaR, which documents management lessons learnt during the project as well as process recommendations. These are used by relevant projects as inputs to enable better planning and management of ongoing projects.
Creating a Centralised Knowledge Repository
As a first step towards the creation of a centralised i-flex knowledge repository, we created a technology platform called i-CLeaR (i-flex Corporate Learning Repository). i-CLeaR is a tool tailored to meet our requirements and is being constantly upgraded based on user feedback and requirements. Using this tool, documents can be categorised using a logical relationship. The actual relationship depends on the specific categorisation scheme that is employed. Documents uploaded into i-CLeaR can be classified under various categories: ownership (e.g. sales, product groups), location (e.g. New York office), type of document ( e.g. confidential). Comprehensive search facilities and reporting, high security control and access rights and strict audit trails are other features of this tool-making it i-flex’s centralised knowledge repository.
Enterprise Performance Initiatives in the Process and Quality Areas
The self-learning process infrastructure described above is supported by organisational initiatives which contribute to greater institutionalisation of processes, as described below:
QPati is a centrally-administered quiz program on processes and related topics that serves the purpose of generating interest in the employees for understanding and appreciating organisational processes. This quiz is conducted on a weekly basis, culminating in quarterly finals that result in individual as well as location winners. The location dimension helps create a healthy competition among the different offices of the company to achieve the objective of the program. Winners are recognised through appropriate awards.
i-Suggest is a theme-based process improvement suggestion scheme that runs on a monthly basis. A theme is announced for the month and suggestions on the theme are invited form employees. A panel of internal experts evaluates the suggestions received, and those that are accepted by the panel are taken up for implementation. Exceptional suggestions are awarded each month. All relevant details pertaining to the suggestions received under i-Suggest are available on the Intranet for the benefit of employees. The teams that run this monitor the progress in implementation of the suggestions and reports back to the organisation.
K-Champion Role is an institutionalized role mandatory in all development projects undertaken at i-flex. This mandatory role is expected to ensure that every project collects re-usable collateral from the project, codifies it and publishes such information (including tacit information) in the central repository for further reuse.
INITIATIVES ADDING VALUE TO STRATEGIC BUSINESS
Effective leverage of intellectual assets is increasingly important in an enterprise's competitiveness and market value. In today’s dynamic and competitive environment, key business market data are being increasingly considered as mission critical intellectual capital, competitive advantage is gained when these 'knowledge assets' are enriched with employee insight and applied within the context of an enterprise business, past experiences and strategic directions.
To address this requirement, I-flex launched a Business Intelligence program that continuously monitors the business technology and market environment, captures the relevant information with its i-flex's context and creates knowledge alerts on an ongoing basis. By applying employee insights, knowledge alerts are transformed into mission-critical strata inputs to the key i-flex decision-makers, thereby helping i-flex to become a more responsive and innovative organization, giving it a sustainable competitive advantage. This has become an invaluable management tool today.
CREATING A NEW ORGANIZATIONAL CULTURE
Creating a collaborative culture in an organization is critical to the success of any KM program. By allowing a wider range of employees to take advantage of knowledge that had previously been available only to limited groups, I-flex is introducing a culture of collaborative participation and making the knowledge creation process more effective by leveraging multiple skills across projects and geographical locations in I-flex. I-flex introduced several programs that could create a new organizational culture, furthering collaboration, sharing of knowledge and effectively leveraging the intellectual assets of the company. K-Forum is a web-based platform for employees to collaborate and seek solutions on unresolved issues facing them in their day-to-day work environment. The members of K-forum seek solutions from experts outside their project groups and geographical locations. This forum helps in leveraging i-flex's intellectual capital and expertise and applying the right solutions to critical issues in a structured and optimal manner. Mentors are selected for mission-critical technology and business areas, who in turn act as proactive facilitators in their areas of specialization. This initiative has been a great success and has helped in introducing a culture of virtual collaboration and knowledge sharing. The K-Forum today has over 370 registered users with an equal number of unregistered users who visit this forum for published solutions to problems. Since its inception in October 2001, K-Forum has posted over 1,300 queries on various areas of specialization with an average of two responses from experts to each issue posed. The archives are also a popular destination amongst the employees searching for ready solutions to known problems. K-Webcast is another initiative that has been well received by the employees. K-Webcast is a highly informative and inter-active audio conference with I-flex experts through a weekly webcast program of 30 minutes duration consisting of a 20 minute audio presentation followed by a 10 minute Q&A series on popular topics of interest. Many have found this manner of presentation better than classroom sessions. Archived webcasts are also popular amongst the employees. I-Share is I-flex’s knowledge management portal on the intranet (i-Opener) with content columns such as Thought Center, Technology Corner, Ideas at Work and Lessons Learnt, i-share is updated once a month with contributions from employees who would like to share their experience through any of these columns. I-Contribute is another collaborative program (currently undergoing a pilot implementation) that attempts to maximize the utilization of resources across projects. In this initiative, a project manager may decide to auction non-critical tasks using this platform, depending on his requirement and on constraints like overstretch. The task is then open for bid from the participating groups.
METRICS:
Measurement plays a critical role in any Knowledge Management program, and is achieved through periodic organization wide employee surveys. The objectives of the survey are to assess the acceptance and effectiveness of the individual programs, create a benchmark to compare the success of the programs, understand the current environment and identity areas for improvement. The output from the surveys arc analyzed to draw up specific KM initiatives and identify critical business issues that need to be mapped to future KM initiatives Organization-wide knowledge sharing programs require significant investments and entail major management effort as well as behavioral changes across the organization over a period of time. Without measurement, there is an ever-present danger of premature abandonment of successful efforts, or alternatively, of complacent continuation of unsuccessful efforts when course correction is needed.)
Knowledge is a difficult thing to manage. It does not do well in captivity and it does not survive for long outside its natural habitat. It is under these circumstances that I-flex would like to echo the famous words of management guru Peter Drucker, “Leveraging knowledge is not only important, but it may be the most important job management has”. I-flex solutions have taken a major step towards making KM a reality so as to stay ahead of competition as keep churning out better results year after year.
II. TISCO
Knowledge Management at TATA STEEL
Tata Steel pioneered “Knowledge Management” to shift the basis of growth from natural resources and physical assets to intellectual capital, which has become the source of innovation, growth and value in modern competitive scenario. The essence of knowledge management is to create and capture the abundant knowledge assets available either tacit (experience, thumb rules etc) or explicit (Literature, reports, failures analysis etc) and then share and utilize it again at right place and in right time.
Since there is no accepted standard framework for KM, Tata Steel has evolved a framework in accordance with its needs, to achieve its business vision. Tata Steel has conceived, developed and deployed internally, an elaborate architecture for KM that aims to take the company to a Learn Once, Use Anywhere paradigm. It was initiated with building up of a “Knowledge Repository” with all the officers actively participating in it. There are basically two broad strategies that are being followed
KM strategies at Tata Steel
1) Codification Strategy (Unsolicited):
Knowledge database includes best practices, learning from failures, improved and new practices adopted, competitive intelligence, customer and supplier knowledge, and benchmarks of different parameters etc. These captured knowledge assets are being deployed and used instantaneously in respective work area to give benefits.
The challenge in knowledge repository process is to keep database updated and useful. With increasing number and size of knowledge database, it will be more challenging to store and offer a range of contents to a variety of users.
The following diagram explains the knowledge repository process that how the knowledge is being captured evaluated by experts and then used by users.
This year, we have included some new features in this codification strategy.
· Ask Expert (solicited) - In today’s economy, the most challenging job is to initiate conversation especially between knowledge seeker and knowledge provider i.e. expert. The fact that the organization is big, actually makes this more difficult because an individual actually does not know that there may be others in the organization, whom he does not know, who can provide solutions to his problems. We are trying to do it through our “Ask Expert” feature. In our “Ask Expert” system, employees are free to log on their work related problem online and there are more than 100 experts involved in providing instant solution to them. These solutions are stored for future use.
· Integration of different databases and product catalogue- Detailed analysis of the failures of our products at the customer end is also made available on the KM portal. Customer’s knowledge is also available on the KM portal. Indian standard (IS) are also made available on the KM portal.
· Our treasured jewels: Details of our retired employees is also available with complete profile (Name, Phone No., Address, e-mail id, expertise).
2) Personalization Strategy:
To encourage knowledge transfer across divisions and departments, few Knowledge Communities have been formed, which are actually groups of like – minded people who came together to share what they know, and to learn from one another regarding some aspects of their work. They are an investment towards the future of organization and not expected to yield a short-term gain. It is more of a knowledge creating and sharing platform rather than a task force to solve a problem.
The following diagram shows complexity of Knowledge Communities. Four Knowledge Communities are being shown with participation from various divisions.
Communities play a very important role in capturing experts’ tacit knowledge, improving the quality of knowledge repository and encourage usage of the repository. In our company, the knowledge community comprises of distinct roles viz Champions, Convener, Practice Leader, lead experts and practitioners. These communities exist not only on core business but also on functions like HR, Town, Community development.
Beside the responsibility of keeping the knowledge repository current, communities have various Knowledge deliverables as follows:
• Innovation: Plan, Conduct and learn from New Experiments.
• Identify Best Practices, Update regularly.
• Identify new Bench Marks, Update regularly.
Deployment:
An index called “KM Index” has been also developed to measure the performance of KM system. This KM Index is an item in the Balanced Scorecard of CEO, which has been cascaded down at lower levels. Both the above strategies are in place at almost all the locations of Tata Steel. Almost 80% of our officers are involved in the above-explained KM system.
Rewards and Recognition:
Knowledge Management forms a part of the Performance Management system. Rewards and Recognition are given to those who perform well in the Knowledge Management systems.
Involvement of supervisors and Workmen:
A formal training programme for Supervisors has begun from August and Supervisors and some workmen have actively and voluntarily started participating in the KM systems. At present around 20% of supervisors have started participating in the KM systems.
III. McKinsey Consultancy
Knowledge Management Model
It takes an enormous effort to create an integrated network of interdependent specialized operations linked by the flows of information and resources. A series of practical changes which maybe less clear is that the organizations ability to link knowledge and embed learning often does not begin until there is a more profound shift in the thought flow of the top management. In many cases these changes occur only after there is a basic re-conceptualization of the company’s business.
McKinsey came to such a major crossroad in the mid 1970’s when it’s unimpeded growth of the previous half century began to slow and it’s reputation as a premium management-consulting firm was challenged .At that time a group of highly focused competitors such as the Boston Consulting Group began to make strong inroads into McKinsey’s markets. On the basis of some simple but powerful tools like the experience curve and the growth-share matrix, BCG developed an approach described as “thought leadership” to win clients and young recruits away from McKinsey which in contrast founded its practice on a commitment to building client relationships. McKinsey’s partners recognized that the firm could no longer succeed simply by building strong relationships and assigning intelligent generalists in increasingly specialized problems. It would have to develop what they referred to as “T- shape consultants” - individuals who supplemented their broad generalist perspective with an in-depth “spike” of specific industry or function expertise.
Despite the fact that knowledge is the stock in trade of this industry, McKinsey had increasingly become compartmentalized into local offices focused on developing deep and enduring relationship clients rather than exploiting the firm’s substantial knowledge assets. Only when a few senior partners recognized that McKinsey had to compete on the basis of thought leadership as well as ‘client relationships’ did the firm launch it’s two decade long efforts to build an integrated and independent organization and be able to develop and diffuse knowledge rapidly and make organizational learning a source for competitive advantage. By the mid 1990’s nearly 20% of the work was performed by consultants on short or long term transfer to another office, moves that were invariably designed to develop or deploy individual consultant’s specialized knowledge or expertise.
McKinsey has created a knowledge organisation based on framework that can be described as an integrated network. This is an organisation model that allows companies to develop distributed capabilities and expertise, link those capabilities through rich horizontal flows of information, knowledge and other resources, and develop the trust that is required as an adhesive to hold together their distributed, integrated firms worldwide. An organisation is built on principles that are vital to the development of an embedded learning capability- a structural configuration based on distributed specialized activities and a set of relationships based more on interdependence than on dependence or independence. This is in contrast to the traditional framework in which the core organization decision are generally based and focused on a few key structural choices, for e.g.: should we structure for efficiency or flexibility, should we be centralized or decentralized. Behind the managerial glamour dilemmas was an organization that has framed by the classic divisionalised hierarchy that required managers to make such either/ or choices. Irrespective of the specific choices a company makes on any of these dimensions, it cannot create the integrated organisational learning capability.
McKinsey views knowledge as a Strategic Asset. Knowledge is got into the organisation in three ways:
a) Through prior learning or experience
b) Through client interaction
c) Through interaction with colleagues.
McKinsey segments itself on the basis of geography, functionality or specialization in a specific industry. The diagram below depicts the same:
Source: Individualized Corporations by Sumantra Ghoshal and Christopher A Bartlet
McKinsey uses the Apprenticeship Model for knowledge management wherein the new recruits acquire knowledge through interaction with their seniors and learn from their past knowledge.
The old model for knowledge management in McKinsey was chaotic and not highly structured. So instead of a big, visible knowledge management department, there was a department in the firm’s New York office that looked after knowledge behind the scenes. They developed sort of internal yellow pages called Knowledge Resource Directory, which is now common in many firms. A call can be made to a central number to get a copy of a specific document that is required within the time frame of an hour. Another thing McKinsey did was to create an enormous cross -reference database on a mainframe in the U.S.A that could be accessed worldwide. A list of a dozen documents could be produced after keying in a word or a topic at the click of a mouse. If an employee worked with a client and the client had some success with the employee’s recommendation then the consultant was encouraged to write a practice bulletin, which was shared with other consultants and a contact was given for further information.
New Model :-
Taxonomy of Different kinds of knowledge used in McKinsey
K0: -Knowledge that is difficult to access because of the cost of gathering it is high. This is explicit knowledge. Today there is an enormous amount of data floating around; for e.g. the government has made a lot of public data available. You can observe the number of windows on house fronts –this is freely available information, but there is a high cost to collect it. Such information is like public goods.
K1: -This is explicit knowledge that you can copyright. For e.g. books
K2: -This knowledge is private because it can be delivered only through people. Certain people who have a particular expertise in a particular area are hired to get access to this knowledge and expertise .One of the problems investment banks face today is that K2 holders sometimes might leave the organization as a result of which even the knowledge and the expertise goes to another organization with them.
K3: -This is tacit knowledge embedded in an organization rather than individual .The individual needs the company to access the knowledge. This knowledge belongs to the firm. It is a part of the culture or the social network, no on can away when they depart from the organization
McKinsey has created a Knowledge Resource Directory, which retains in the organisation most of the important processes and procedures that do not leave the organisation with the human resources. This enhances corporate memory. The aim of this directory is to make more and more tacit knowledge explicit so that people are convinced that they are drawing from a knowledge base of the collective. McKinsey has a robust infrastructure in place which helps the knowledge management system to work efficiently, leading to the effective utilisation of the technical systems. For e.g. when one of the managers of McKinsey in India received a phone call from a team in Singapore whom had used the knowledge directory to source his name. He helped them even though he did not know them and they were able to capitilse on the resources of the organisation. This way the company leverages and disperses the tacit knowledge available within the organisation
CHARACTERISTICS of McKinsey that lay at the heart of their success:
1) They have been investing in very substantial resources to develop the expertise of their people. They have gone to great lengths to recruit the very best, have created structures and mechanisms that allow their employees to continuously enhance, upgrade and broaden their capabilities.
2) They have established tools, processes and relationships necessary to support horizontal flow of information throughout their worldwide organization to link and leverage individual knowledge and embed it in a collective process of shared learning.
3) Finally through supporting lateral sharing of knowledge and also as a product of sharing, each of them has built a strong sense of trust both among colleagues and between superiors and sub-ordinates.
The overall effect of these three characteristics is that their organization was built on a framework that appeared much more like an integrated network rather than a classical divisional hierarchy. It was this network structure that prevented the horizontal flows of information and knowledge from being swamped by the vertical ones thereby saving as the anchor of their organisation learning capability.
McKinsey’s 7-S framework
The diagram below depicts organisation setup has been structure in a manner so as to facilitate the inter-linking and networking of not only the tangible departments but also pervading the geographical territories along with the intangible strategy systems, values, styles and skills. This has enabled McKinsey to leverage and optimally utilize their knowledge resources.
Source: Competitive Knowledge Management by Nicholas Bahra.
The security for access to the knowledge database in McKinsey is ensured by a good and vigilant control system. The number of documents downloaded by an employee in a single day is restricted. Also before downloading any document or information from the database the employee number and code, firm code, study code and project code etc. have to be entered. The knowledge database is also upgraded in every few years – in which a knowledge audit takes place and also the redundant data is removed from the database regularly.
IV. THE INDIAN PHARMA SECTOR-RANBAXY LABS
Case Study: Ranbaxy
At Ranbaxy, EIP has brought together structured and unstructured information and knowledge all in a single, easy to- use environment.
Business Profile
Ranbaxy Laboratories Limited,
New Delhi, India
Industry
Pharmaceuticals, Diagnostics
Geographies
New Delhi, India.
Applications
Back-end: SQL Server 2000
Application Languages: ASP, VB
Front-end: Web Browser (IE 5.0)
Architecture: Microsoft DNA
About the Company
Ranbaxy Laboratories Limited is India’s largest pharmaceutical company with a global turnover of US$ 600 million. It is the 9th largest generic drug company worldwide. The Company exports its products to over 100 countries with ground operations in 25 and manufacturing facilities in 7 countries. Ranbaxy kicked-off the EIP project to facilitate e-Business within the organization by providing employees with a single point of access to external and internal information. The mandate for the EIP application is to optimize business processes in the company and greatly increase user productivity by providing easy access to relevant information enabling better and faster decision making.
Company Requirements
To meet its corporate objectives, Ranbaxy required the following from its EIP development and implementation partner
• Strong consulting skills for product conceptualization, design, development, and implementation to meet Ranbaxy users’ needs
• Ability to architect complex, scalable systems.
• Proven expertise in management of software product development.
• Cost effective and rapid high quality implementation to meet challenging time-to-market constraints.
Enterprise Information Portal
An Enterprise Information Portal is a window into the information systems and processes of the enterprise. EIP acts as a single point of access to internal and external information enabling users to access disparate information sources throughout the enterprise. In Ranbaxy, the EIP functions as a unified corporate desktop that provides a personalized view of organizational information. In addition to being intuitive, informative, and compatible with other applications – including SAP, this product is also workflow enabled to automate most of the process flows within the organization. The EIP application features a host of Corporate Communications related functionalities accessible via the Home Page and also the following additional functionalities
• Detailed User profiles
• Workflows – Corporate Travel, CAPEX, Leave, Stationery, Loans, Expenses, Claims, Training, and Office Supplies requests.
• Extensive access rights on each functionality based on Ranbaxy organization hierarchy.
• Interface to Payroll and SAP applications
• Application parameters configuration features.
WWW.RTRAINING.COM
A comprehensive web based online training and knowledge management system that is also capable of measuring skills / performance of all its personnel.
The solution, which has to its credit, many accolades from all Ranbaxians, was based on the following:
· 24 / 7 Accessibility, that provides user-friendly multi-optional referral / refresher system. The system had been designed to provide ease of use to users, who are not at all computer / internet savvy.
· The system is capable of gauging the grasp of users especially for a specific marketing objective, prior to the implementation of that strategy.
· The system, based on its variety of content, is in a position to ensure consistently good knowledge levels in the sales force post-induction. This is because of the large repository of study/ referral material that is available to all the users.
· The system, ensures that there is no feeling of getting penalized on poor performance, but ensures that the users are encouraged to take online tests at their convenience, after thorough preparation, but within the divisions' specified time frame in an easy to understand multiple choice format.
· The system further augments the learning process by providing instant results, as well as correct answers for the wrongly answered questions.
· Cohesiveness and ownership are the key factors of a successful system in any organization, and this system promotes the same in terms of its usage, not only by the users, but also the administrators who run the entire show. At the same time, this system enhances competitiveness amongst all users, to outperform others in a healthy manner.
Thursday, March 11, 2004
Porter's Five Forces model :A case study of Tata Motors
The Indian automobile industry is one of the biggest in India and like its counterparts in the rest of the world is rightly termed as the “Industry of Industries”. The success or the condition of the automobile industry is often an indication of the state of the economy. Unlike in the pre-liberalization age, India is now the hot-bed of competition amongst the biggest automakers in the world.
I have attempted to study the case of Tata Motors in its entirety.
Tata Motors is the sixth largest manufacturer of commercial vehicles in the world and plans to export nearly 1 lac Indicas this year. It emerged from one of the biggest losses in 2001 of nearly 500 crores and is probably one of the most profitable automobile company in the country. It has recently bought out the truck division of the bankrupt Korean automobile giant Daewoo.
Telco performed better than the industry average and increased it’s market share in the M/HCV segment by around 360 basis points. The Light commercial vehicles businesses segment reported healthy growth in the first nine months of the current fiscal, after registering a decline of 12.5% in the year 2001-2002. Utility Vehicles Businesses: The multi utility vehicle (MUV) segment reported a declined of 3.2% in 2001-2002 after a 2.8% growth in 2000-2001. The demands for Sumo appears to have saturated in most target segments .New variants have not been able to stop this downfall. A real push would possibly come only with the introduction of a new platform. The overall passenger car segment reported a 5% growth in 2001-2002. Telco’s passenger car segment increased by over 3% in 2001-2002.After Indica Telco launched a model in the C segment of the passenger car industry the “Indigo”. Tata Motors invests around 1.3% of its annual turnover on research & development. Tata Motors also has the biggest private sector Research and Development in the country.
Tata Motors Five Forces Model applied to the Indian Automobile Industry
a) Inter-Industry Competition: The company faces very severe competition in the country in the automobile i.e. car sector. Competitors like Hyundai and Maruti Udyog are well entrenched in the market and have substantial shares in the market. Hyundai came to India in the late 1990’s and within no time managed to garner a significant share of the market. It is also the only Indian car company with major presence in all the segments of the car market. Its Hyundai accent and sonata models rule their respective segments. Maruti Udyog has a very strong presence in the small car segment. Also the Maruti 800 is one of the oldest models today and the model’s equipment is completely depreciated which gives Maruti a definite advantage as it can afford to cut prices on the car considerably without affecting profitability. The Maruti 800 still remains the choice of many families who want to make the jump from a world of two wheelers to the world of four wheelers. In the HCV and LCV market the Tata 407 continues to do very well. Tata has a near monopoly in this market with a near 76% stake in the market. The company's 1210 and 1610 models are still performing very well. Its only competitors are Ashok Leyland and Eicher Motors, which are considerably small players. Ashok Leyland is very strong in the south of the country and holds a very strong grasp on the major public transport services like the BEST in Mumbai.
b) Threat of new entrants: Most of the world’s big names in automobile are already in India. However a considerable threat looms over Tata Motors in the form of Toyota, which already has a very successful model in the Qualis, and Japanese companies like Nissan and Mazda. Mazda’s considerable expertise in the rotary engine technology and the considerable fuel advantage derived from such a technology can create serious challenge to Tata Motors in a price sensitive market like India. Toyota entered the Malaysian market five years late and within a short span of three years became the market leader. The outdated and dreary looking Qualis had a similar kind of experience in India where it has a near 31 % stake in the market. Other competitors could be the GM subsidiary Opel and its alliance partner Fiat. Ford on the other hand seems to be content playing in the C segment. In the HCV and LCV market, GM and the Fiat subsidiary IVECO can pose a threat to Tata motors. Laws restricting usage of cars like those in place in Singapore can also affect demand for cars. Another factor that can affect Tata motors is the size of the vehicle. Tata’s high end HCV’ capacities or sizes are actually lower end vehicles in developed countries. As India's logistics market develops, Tata’s incapability to develop bigger trucks could work against it.
c) Threats of new substitutes. A number of revolutionary car technologies can challenge Tata in this business. The electric car is fast proving to be a good substitute for conventional petrol fired automobiles. Other advantages like hybrid cars, which use a combination of fuel cells, and petrol is overcoming the shortcoming of poor power in the electric car. Maini Motors, Reva electric car has been rather well received and it has a considerable export order. Efficient public transport like the Skybus and the Metro could pose a threat to demand for Tata vehicles.
d) Bargaining Power Of Buyers: Buyers' Price Sensitivity: Car buyers in India are extremely price-sensitive especially in the economy segment. Since the price competition is expected to intensify and consumers are more willing to switch, companies like Tatas will have to make money on volumes. The entry of global players has re-defined the dealer-customer relationship in India. The entry of numerous car companies has brought along with it a massive increase in the availability of cheap finance for the Indian consumer.
e) Bargaining power of suppliers: India’s supplier architecture is very fragmented and a company like Tata motors often has several companies supplying the same component to it. For example like FAG and SKF both supply bearings. The suppliers do little or no research of their own. This is in sharp contrast to global standards where suppliers are clearly segmented into tier 1 and tier 2 companies. Tier 1 companies have considerable research abilities like Delphi Auto components whose sales of 30 billion $ make it extremely powerful wheeler dealer in the automobile sector. India is seeing the emergence of similar auto-components manufacturers like Motor Industries Company, Sona Koyo Steering, Bharat Forge, Anand Group and Sundaram who are investing in R&D and develop their own facilities. So the power of the suppliers will increase. Tata can only join hands with them and work together with them in the development of new automobiles in alliances that are similar to those in existence in developed nations. The tier 1 companies can in turn work closely with tier 2 suppliers to develop and manufacture components that auto manufactures like Tata desire.
The Indian automobile industry is one of the biggest in India and like its counterparts in the rest of the world is rightly termed as the “Industry of Industries”. The success or the condition of the automobile industry is often an indication of the state of the economy. Unlike in the pre-liberalization age, India is now the hot-bed of competition amongst the biggest automakers in the world.
I have attempted to study the case of Tata Motors in its entirety.
Tata Motors is the sixth largest manufacturer of commercial vehicles in the world and plans to export nearly 1 lac Indicas this year. It emerged from one of the biggest losses in 2001 of nearly 500 crores and is probably one of the most profitable automobile company in the country. It has recently bought out the truck division of the bankrupt Korean automobile giant Daewoo.
Telco performed better than the industry average and increased it’s market share in the M/HCV segment by around 360 basis points. The Light commercial vehicles businesses segment reported healthy growth in the first nine months of the current fiscal, after registering a decline of 12.5% in the year 2001-2002. Utility Vehicles Businesses: The multi utility vehicle (MUV) segment reported a declined of 3.2% in 2001-2002 after a 2.8% growth in 2000-2001. The demands for Sumo appears to have saturated in most target segments .New variants have not been able to stop this downfall. A real push would possibly come only with the introduction of a new platform. The overall passenger car segment reported a 5% growth in 2001-2002. Telco’s passenger car segment increased by over 3% in 2001-2002.After Indica Telco launched a model in the C segment of the passenger car industry the “Indigo”. Tata Motors invests around 1.3% of its annual turnover on research & development. Tata Motors also has the biggest private sector Research and Development in the country.
Tata Motors Five Forces Model applied to the Indian Automobile Industry
a) Inter-Industry Competition: The company faces very severe competition in the country in the automobile i.e. car sector. Competitors like Hyundai and Maruti Udyog are well entrenched in the market and have substantial shares in the market. Hyundai came to India in the late 1990’s and within no time managed to garner a significant share of the market. It is also the only Indian car company with major presence in all the segments of the car market. Its Hyundai accent and sonata models rule their respective segments. Maruti Udyog has a very strong presence in the small car segment. Also the Maruti 800 is one of the oldest models today and the model’s equipment is completely depreciated which gives Maruti a definite advantage as it can afford to cut prices on the car considerably without affecting profitability. The Maruti 800 still remains the choice of many families who want to make the jump from a world of two wheelers to the world of four wheelers. In the HCV and LCV market the Tata 407 continues to do very well. Tata has a near monopoly in this market with a near 76% stake in the market. The company's 1210 and 1610 models are still performing very well. Its only competitors are Ashok Leyland and Eicher Motors, which are considerably small players. Ashok Leyland is very strong in the south of the country and holds a very strong grasp on the major public transport services like the BEST in Mumbai.
b) Threat of new entrants: Most of the world’s big names in automobile are already in India. However a considerable threat looms over Tata Motors in the form of Toyota, which already has a very successful model in the Qualis, and Japanese companies like Nissan and Mazda. Mazda’s considerable expertise in the rotary engine technology and the considerable fuel advantage derived from such a technology can create serious challenge to Tata Motors in a price sensitive market like India. Toyota entered the Malaysian market five years late and within a short span of three years became the market leader. The outdated and dreary looking Qualis had a similar kind of experience in India where it has a near 31 % stake in the market. Other competitors could be the GM subsidiary Opel and its alliance partner Fiat. Ford on the other hand seems to be content playing in the C segment. In the HCV and LCV market, GM and the Fiat subsidiary IVECO can pose a threat to Tata motors. Laws restricting usage of cars like those in place in Singapore can also affect demand for cars. Another factor that can affect Tata motors is the size of the vehicle. Tata’s high end HCV’ capacities or sizes are actually lower end vehicles in developed countries. As India's logistics market develops, Tata’s incapability to develop bigger trucks could work against it.
c) Threats of new substitutes. A number of revolutionary car technologies can challenge Tata in this business. The electric car is fast proving to be a good substitute for conventional petrol fired automobiles. Other advantages like hybrid cars, which use a combination of fuel cells, and petrol is overcoming the shortcoming of poor power in the electric car. Maini Motors, Reva electric car has been rather well received and it has a considerable export order. Efficient public transport like the Skybus and the Metro could pose a threat to demand for Tata vehicles.
d) Bargaining Power Of Buyers: Buyers' Price Sensitivity: Car buyers in India are extremely price-sensitive especially in the economy segment. Since the price competition is expected to intensify and consumers are more willing to switch, companies like Tatas will have to make money on volumes. The entry of global players has re-defined the dealer-customer relationship in India. The entry of numerous car companies has brought along with it a massive increase in the availability of cheap finance for the Indian consumer.
e) Bargaining power of suppliers: India’s supplier architecture is very fragmented and a company like Tata motors often has several companies supplying the same component to it. For example like FAG and SKF both supply bearings. The suppliers do little or no research of their own. This is in sharp contrast to global standards where suppliers are clearly segmented into tier 1 and tier 2 companies. Tier 1 companies have considerable research abilities like Delphi Auto components whose sales of 30 billion $ make it extremely powerful wheeler dealer in the automobile sector. India is seeing the emergence of similar auto-components manufacturers like Motor Industries Company, Sona Koyo Steering, Bharat Forge, Anand Group and Sundaram who are investing in R&D and develop their own facilities. So the power of the suppliers will increase. Tata can only join hands with them and work together with them in the development of new automobiles in alliances that are similar to those in existence in developed nations. The tier 1 companies can in turn work closely with tier 2 suppliers to develop and manufacture components that auto manufactures like Tata desire.
Thursday, March 04, 2004
HR Case Study with Amit Pandit, Rajeev Mishra,Piyush Mishra,Varun Behl, Abhay Utturkar and Myself Anand Krishnan
Manpower Planning – Premium Fans Ltd.
Introduction to Human Resource Management
Faced with rapid change organizations need to develop a more focused and coherent approach to managing people. In just the same way a business requires a marketing or information technology strategy it also requires a human resource or people strategy.
The people, programs and initiatives that must be designed and implemented to attract, develop and retain staff to compete effectively are:
· Culture: the beliefs, values, norms and management style of the organization
· Organization: the structure, job roles and reporting lines of the organization
· People: the skill levels, staff potential and management capability
· Human resources systems: the people focused mechanisms which deliver the strategy - employee selection, communications, training, rewards, career development, etc.
Frequently in managing the people element of their business senior managers will only focus on one or two dimensions and neglect to deal with the others. Typically, companies reorganize their structures to free managers from bureaucracy and drive for more entrepreneurial flair but then fail to adjust their training or reward systems.
Manpower Planning
Human resource (or personnel) management, in the sense of getting things done through people, is an essential part of every manager's responsibilities, but many organizations find it advantageous to establish a specialist division to provide an expert service dedicated to ensuring that the human resource function is performed efficiently.
The market place for talented, skilled people is competitive and expensive. Taking on new staff can be disruptive to existing employees. Also, it takes time to develop 'cultural awareness', product / process / organization knowledge and experience for new staff members.
The penalties for not being correctly staffed are costly. Understaffing loses the business economies of scale and specialization, orders, customers and profits. Overstaffing is wasteful and expensive, if sustained, and it is costly to eliminate because of modern legislation in respect of redundancy payments, consultation, minimum periods of notice, etc.
Very importantly, overstaffing reduces the competitive efficiency of the business. Staffing level planning requires that an assessment of present and future needs of the organization be compared with present resources and future predicted resources. Appropriate steps then be planned to bring demand and supply into balance.
Thus the first step is to take a 'satellite picture' of the existing workforce profile (numbers, skills, ages, flexibility, sex, experience, forecast capabilities, character, potential, etc. of existing employees) and then to adjust this for 1, 3 and 10 years ahead by amendments for normal turnover, planned staff movements, retirements, etc, in line with the business plan for the corresponding time frames. What future demands will be is only influenced in part by the forecast of the personnel manager, whose main task may be to scrutinize and modify the crude predictions of other managers.
Future staffing needs will derive from:
· Sales and production forecasts
· The effects of technological change on task needs
· Variations in the efficiency, productivity, flexibility of labor as a result of training, work study, organizational change, new motivations, etc.
· Changes in employment practices (e.g. use of subcontractors or agency staffs, hiving-off tasks, buying in, substitution, etc.)
· Variations, which respond to new legislation, e.g. payroll taxes or their abolition, new health and safety requirements
· Changes in Government policies (investment incentives, regional or trade grants, etc.)
What should emerge from this 'blue sky gazing' is a 'thought out' and logical staffing demand schedule for varying dates in the future which can then be compared with the crude supply schedules. The comparisons will then indicate what steps must be taken to achieve a balance.
That, in turn, will involve the further planning of such recruitment, training, retraining, labor reductions (early retirement/redundancy) or changes in workforce utilization as will bring supply and demand into equilibrium, not just as a one–off but as a continuing workforce planning exercise the inputs to which will need constant varying to reflect 'actual' as against predicted experience on the supply side and changes in production actually achieved as against forecast on the demand side.
Organizational Structure
Looking at the number of employees we analyze that it is a medium - large-scale industry. (Ortem Fans has about 550 employees). So taking into consideration the industry size we have come up with the following organizational structure.
Although the following assumptions have been made while creating the above manpower plan, we find that these are quite acceptable and required for the same.
The assumptions for the short-term plan are:
· Fill immediate vacancies, as these positions cannot be kept vacant for long.
· No other recruitments to be done during this period.
· No changes to the organizational structure to be done in the short-term.
· Slight changes to the reporting hierarchy in some cases may be proposed.
The assumptions for the long-term plan are:
· Premium Fans Ltd. is a Small – Medium enterprise.
· 165:300 ratio of management: workers is too high for a company of this size.
· Removal of unnecessary positions is acceptable to the management and the need is conveyed to the workforce.
· Age limits / ranges defined are flexible and not rigidly enforced during recruitment procedures.
· Average age of the employees in the firm is 40 years.
· Of the number of shop floor employees, 1/4th are temporary and 3/4th are permanent.
· Company growth rate is assumed to be around 5%.
The average age, qualifications, job profile of each executive is given along with. We will be looking at reducing the size of the management from the current 165 to 107 the breakup of which is given below. However the number of blue collared workers will not be affected in any way.
The five GM’s vise Production, Marketing, Finance, HR, Purchase and an Administrative Supervisor report to the COO who in turn reports to the CEO. We look at each department separately.
CEO
· Average Age: 45+
· Work Experience: More than 20 years in the electrical goods or alike industries.
· Qualification: MBA, preferably Mechanical/Production Engineer
· Job Responsibility: Formulate the overall strategy to achieve the vision and mission, of the company. He is responsible to the directors and the shareholders of the company.
COO
· Average Age: 40+
· Qualification: MBA (General Management/Operations), preferably Mechanical/Production Engineer
· Work Experience: More than 15 years in the electrical goods or alike industries.
· Job Responsibility: He is responsible for all the functional activities of the company.
Production Department
GM (Production)
· Average Age: 35+
· Qualification: Mechanical/Production Engineer
· Work Experience: 8-10 years in the manufacturing sector.
· Job Responsibility: In charge of the production, assembly, maintenance and all other in-house activities related to production.
He will have the following people reporting under him. We assume that the plant is operated in 2 shifts. So we have 3 engineers in each department, 1 for each shift and 1 as a reliever.
Electrical Engineers
· No. Of posts: 3
· Qualification: BE (Electrical/Power)
· Job Responsibility: In charge of winding and electrical circuit of the fans.
Assembly
· No. Of posts: 3
· Qualification: BE (Production)
· Job Responsibility: In charge of assembling all the components of the fan.
Maintenance Engineer
· No. Of posts: 2
· Qualification: BE (Mechanical, with Maintenance as one of the electives)
· Job Responsibility: The periodic, preventive, breakdown maintenance of all the machinery.
Production
· No. Of posts: 3
· Qualification: BE (Production)
· Job Responsibility: In charge of production of chassis, blades and all other components that are manufactured in-house.
Quality Assurance and Quality Control:
· No. Of posts: 3
· Qualification: BE (Mechanical/Production with QC as an elective)
· Job Responsibility: In charge of all the quality related aspects, safety features, and implementing ISI/BIS standards.
For all the above posts the average age would be 22 to 30 years and a work experience in the related field ranging from 0 to 5 years.
Purchase and Logistics
GM (Purchase)
· Average Age: 35+
· Qualification: Mechanical/Production Engineer
· Work Experience: 8-10 years in industrial purchasing.
· Job Responsibility: In charge of the purchases, inbound logistics, inventory control.
He will have 2 purchase executives and 2 stores executives reporting to him.
Purchase Executives
· No. Of posts: 2
· Qualification: BE (Mechanical/Production with sound knowledge of the market)
· Job Responsibility: Purchasing of raw materials for all components manufactured in house and purchase of finished components.
Stores Executives:
· No. Of posts: 2
· Qualification: Graduate with a diploma in inventory management.
· Job Responsibility: Inventory control.
Finance
GM (Finance)
· Average Age: 35+
· Qualification: MBA (Finance)
· Work Experience: 8-10 years.
· Job Responsibility: In charge of the complete financial functions of the company.
He will have under him accounts, treasury, legal and audit executives.
Accounts Executive
· No. Of posts: 1
· Qualification: B. COM
· Job Responsibility: Handling the accounting function, banking operations etc.
Treasury Executive
· No. Of posts: 1
· Qualification: CA
· Job Responsibility: Handling the investments of the company.
Legal Affairs
· No. Of posts: 1
· Qualification: LLB, CS
· Job Responsibility: All the legal matters of the company.
Audit Executives
· No. Of posts: 1
· Qualification: CA
· Job Responsibility: Maintain and upgrade and auditing of company accounts
The average age of all these will be 25+ with work experience of 2-3 years. Except for legal executive who will be 35+ with an experience of 10 or more years.
Marketing
GM (Marketing)
· No. Of posts: 1
· Qualification: MBA (Marketing),
· Age: 35 to 45 years
· Work Experience: at least 10 years in marketing of electrical appliances.
· Job Responsibility: Marketing, brand management, sales and distribution.
He will have under him all regional managers.
Regional Managers
· No. Of posts: 6
· Qualification: MBA (Marketing) + Engineer preferred,
· Age: 30 to 40 years
· Work Experience: 5-10years in marketing of electrical appliances.
· Job Responsibility: Overall responsible for the Marketing of his region.
Each Regional Manager will have two marketing managers reporting to him.
Marketing Managers
· No. Of posts: 12
· Qualification: MBA (Marketing) + Engineer preferred,
· Age: 27 to 34 years
· Work Experience: 3-7 years in marketing of electrical appliances.
· Job Responsibility: responsible for the sales and distribution of products in his specified area. Will be responsible for training and motivation of the sales executives under him.
Each marketing managers will have five sales executives under him.
Sales Executives
· No. Of posts: 60
· Qualification: MBA (Marketing)
· Age: 22 to 30 years
· Work Experience: 0-5 years in marketing of electrical appliances.
· Job Responsibility: responsible for the sales to distributors and retailers.
Human Resource
GM (Human Resource)
· Average Age: 35+
· Qualification: MBA (HR)
· Work Experience: 10+ years.
· Job Responsibility: In charge of manpower planning, labour relations, wages and employee satisfaction.
He will have 2 HR executives reporting to him.
HR Executive
· No. Of posts: 2
· Qualification: MBA (HR)
· Job Responsibility: Labor relations, helping In training, HR audits etc.
Administrative Department
Administrative supervisor
· No. Of posts: 1
· Qualification: 12th pass
· Job Responsibility: Administering the security, housekeeping and maintenance functions. All these will be outsourced.
Recruitment and selection of employees
Recruitment of staff should be preceded by:
· An analysis of the job to be done (i.e. an analytical study of the tasks to be performed to determine their essential factors) written into a job description so that the selectors know what physical and mental characteristics applicants must possess, what qualities and attitudes are desirable and what characteristics are a decided disadvantage;
· In the case of replacement staff a critical questioning of the need to recruit at all (replacement should rarely be an automatic process).
The main sources of recruitment are:
· Internal promotion and internal introductions (at times desirable for morale purposes);
· Careers officers (and careers masters at schools);
· University appointment boards;
· Agencies for the unemployed;
· Advertising (often via agents for specialist posts) or the use of other local media (e.g. commercial radio).
Recruitment Policy
Assumptions
· Out of the 300 employees on the shop floor, 1/4th (i.e. 75) are temporary and the rest (3/4th, i.e. 225) are permanent.
· The average age in a manufacturing concern is around 40 (which is the case across all companies in the A V Birla Group). This also holds true for Premium Fans Ltd.
· The growth rate of the company, looking at the scenario of the fan industry, can be assumed to be around 5%.
Short-term Recruitment Policy
· In the short-term, no new recruitments will be done and only immediate vacancies will be filled. Housekeeping and Security will be outsourced.
· Since the two Regional Marketing Managers are promoted to Joint General Managers, the vacancies will be filled either by promoting Marketing Managers (if found adequately qualified) or by new recruitment.
· For the 3 Marketing Managers who are likely to leave the company, manpower planning in terms of new recruitment depending on the job profile and skills, should be done.
· We also propose removal of the Joint General Manager post, as it unnecessarily stretches the hierarchy.
· The vacancies in the Accounts department shall be filled by recruiting a new Head clerk and 2 clerks who will report to him. The Accounts Manager should report to the Chief Operating Officer.
· A new HR Manager should be recruited to fill the vacancy. However, he should report to the Chief Operating Officer.
· Finally, a Production Engineer will be recruited to fill the void created by the resignation of the Mechanical resignation.
Long-term Recruitment Policy
Based on the aforementioned assumptions, the salient features of the recruitment policy can be described as under:
· The ratio of management: workers is 300:165, almost 1:3, which is too high as compared to other manufacturing firms, which typically survive on a 1:5 (or lower) ratio. Hence, the number of employees in the office needs to be reduced to somewhere around 100, which would result in significant cost reduction as well as higher productivity. This can be carried out in one of the following two manners:
1) Retrench employees and immediately bring down the number to 100. However, this option is not viable because –
o Labour is a major factor of production and unionization is widespread. The Union would not permit such a draconian action by the management and even the management would do well not to indulge in a duel with the Union lest it may affect the morale and motivation of the employees who have managed to stay in.
o A Voluntary Retirement Scheme (VRS), which is generally adopted to avoid offending the employees to be laid-off, cannot quite be used here. This is because of the small number of people involved and the costs involved considering the size of the company.
2) Be conservative in the recruitment policy for office employees for the next two years. This would mean that little or no recruitment would be made and regular employee turnover would ensure that quite a few of them leave the company and the figure comes down as desired.
Owing to the infeasibility of the first alternative, we will be considering the second one, i.e. maintaining a conservative recruitment policy for the next two years. The policy to be followed when the employee strength has been brought down satisfactorily is described later.
· The average age of the employees being 40 years, we are assuming that 8% of the factory workers and 3% of the office staff will retire every year and new recruitments will need to be made to fill the gaps. These recruitments will be made based on the retirement dates of various employees available from the HR database.
· Assuming that the company grows at 5% p.a., the number of manpower requirement will increase by 8% and 4% for the factory and office respectively. This will mean recruitment of new people in order to satisfy the requirements, to the tune of the mentioned percentages. However, unlike retirement, these recruitments will be made on a quarterly basis, such that the annual supply equals the demand.
Summarizing the above-mentioned policies, we have the following picture, depicting the annual recruitment policy of the company in the long term:
Reason for recruitment Top Mgmt. Middle Mgmt. Lower & Op. Mgmt. Shop Floor Total
Retirement 1 1 3 15 20
Growth 1 2 4 20 27
Total 2 3 7 35 47
Performance Appraisal
PA refers to evaluating how successful an employee has been in a particular time period in achieving goals, against predetermined standards of performance.
The objectives of the this activity are to:
· Provide employees with a sense of their work accomplishments relative to expectations and predefined performance indicators.
· Support employee development through discussion of assigned opportunities and training.
· Emphasize the Institute's commitment to continuous improvement and learning.
· Encourage an appropriate relationship between pay levels and work performance.
· Avoid surprises; keep lines of communication open.
· Provide the option to document performance in a narrative format relative to specific accomplishments during the review period.
This exercise is conducted every six months. The performance appraisal system for managerial positions and non-managerial positions is carried out on different basis. While for managers, both tangible and intangible parameters are used; the performance appraisal of non-managerial staff is essentially carried out on tangible parameters.
We recommend 360-degree appraisal approach to be employed for managerial positions. 360-degree appraisal is based upon performance feedback from multiple sources. The term 360 degree refers to feedback from all directions, rather than dependence on an employee's supervisor or other single source. In a 360-degree appraisal, feedback may come from peers, staff, internal customers, external customers, supervisors, consultants and the individual. Initially, 360-degree appraisals were conducted in writing and required complex and time consuming procedures for the assessments to be successful but these days many software are available for the same.
The non-managerial staff is sub-divided into contractual workers and workers on the pay roll. For the former we suggest the check list method while for the latter a combination of check list method and critical incident method maybe employed, so as to keep them motivated.
· Checklist method - A list of specific statements describing the performance and behavior of employees is prepared and the rater is asked to tick those statements, which correctly describe the actual behavior of each employee. Each statement is given a scale value or weight. The total of these gives the merit of an employee.
· Critical Incident Method - A critical incident is a significant act by an employee exceeding or failing any of the requirements of his job. The examples of each incident are: helped in implementing a new work method or refused to help a fellow worker etc. This method requires every supervisor to record all of such significant incidents in each employee’s behavior, which indicate effective action and those, which indicate inefficient behavior.
Parameters of Performance Appraisal
· Problem Solving & Decision Making - How effectively does the employee confront and resolve problems and take action?
· Planning, Organizing & Controlling - How effectively does the employee perform advance preparation for and carry out assignments?
· Job Knowledge - How well does the employee demonstrate sufficient understanding of the technical, managerial and organizational aspect of the job?
· Communications - How well does the employee present ideas, concepts and plans for courses of action? Does the employee communicate in a clear and concise manner? Does the employee listen well and ask appropriate questions?
· Productivity - To what degree do the employee’s work efforts result in desired outcomes to include quality, quantity and timeliness?
· Discipline - How consistently does the employee report for work on schedule and prepared?
· Teamwork - How well does the employee work effectively with others and display an appropriate balance between individual and group efforts?
Performance appraisal activity may result in any of the following three actions:
· Promotion - Incase vacancies exist in the organization an employee meeting or exceeding expectations would be considered for promotion. The most important parameter to be considered for promotion is merit but in case of two employees having same merit ratings the one with greater length of service (seniority) in the organization will be preferred over the other. Another important parameter that is considered for promotion is the potential in the employee for advancement in the organization.
· Upgrading - Upgrading refers to increasing the salary of an employee without a corresponding change in his job grade. This method is to be used if an employee is performing well but there are no vacancies available for higher posts in the organization. It helps to retain the employees performing well and stimulates them for greater effort.
· Dismissal - This involves separating an employee from the pay roll either for inadequate performance or for violation of organization rules. We recommend that a notice of one month be given to the concerned employee at least in the first case. This step should be resorted to as the last safeguard and must have the approval of the top management.
Conclusion
Although several assumptions have been made in the case study due to the lack of information (which might not be actually acceptable in the actual scenario), these are made keeping in mind the industry and the size of the firm. This manpower plan aims to reduce the number of operating levels, thereby reducing the bureaucracy and increasing speed of the communication channels within the company. Also the span of control has been kept at an optimum number for the same reasons mentioned above.
Manpower Planning – Premium Fans Ltd.
Introduction to Human Resource Management
Faced with rapid change organizations need to develop a more focused and coherent approach to managing people. In just the same way a business requires a marketing or information technology strategy it also requires a human resource or people strategy.
The people, programs and initiatives that must be designed and implemented to attract, develop and retain staff to compete effectively are:
· Culture: the beliefs, values, norms and management style of the organization
· Organization: the structure, job roles and reporting lines of the organization
· People: the skill levels, staff potential and management capability
· Human resources systems: the people focused mechanisms which deliver the strategy - employee selection, communications, training, rewards, career development, etc.
Frequently in managing the people element of their business senior managers will only focus on one or two dimensions and neglect to deal with the others. Typically, companies reorganize their structures to free managers from bureaucracy and drive for more entrepreneurial flair but then fail to adjust their training or reward systems.
Manpower Planning
Human resource (or personnel) management, in the sense of getting things done through people, is an essential part of every manager's responsibilities, but many organizations find it advantageous to establish a specialist division to provide an expert service dedicated to ensuring that the human resource function is performed efficiently.
The market place for talented, skilled people is competitive and expensive. Taking on new staff can be disruptive to existing employees. Also, it takes time to develop 'cultural awareness', product / process / organization knowledge and experience for new staff members.
The penalties for not being correctly staffed are costly. Understaffing loses the business economies of scale and specialization, orders, customers and profits. Overstaffing is wasteful and expensive, if sustained, and it is costly to eliminate because of modern legislation in respect of redundancy payments, consultation, minimum periods of notice, etc.
Very importantly, overstaffing reduces the competitive efficiency of the business. Staffing level planning requires that an assessment of present and future needs of the organization be compared with present resources and future predicted resources. Appropriate steps then be planned to bring demand and supply into balance.
Thus the first step is to take a 'satellite picture' of the existing workforce profile (numbers, skills, ages, flexibility, sex, experience, forecast capabilities, character, potential, etc. of existing employees) and then to adjust this for 1, 3 and 10 years ahead by amendments for normal turnover, planned staff movements, retirements, etc, in line with the business plan for the corresponding time frames. What future demands will be is only influenced in part by the forecast of the personnel manager, whose main task may be to scrutinize and modify the crude predictions of other managers.
Future staffing needs will derive from:
· Sales and production forecasts
· The effects of technological change on task needs
· Variations in the efficiency, productivity, flexibility of labor as a result of training, work study, organizational change, new motivations, etc.
· Changes in employment practices (e.g. use of subcontractors or agency staffs, hiving-off tasks, buying in, substitution, etc.)
· Variations, which respond to new legislation, e.g. payroll taxes or their abolition, new health and safety requirements
· Changes in Government policies (investment incentives, regional or trade grants, etc.)
What should emerge from this 'blue sky gazing' is a 'thought out' and logical staffing demand schedule for varying dates in the future which can then be compared with the crude supply schedules. The comparisons will then indicate what steps must be taken to achieve a balance.
That, in turn, will involve the further planning of such recruitment, training, retraining, labor reductions (early retirement/redundancy) or changes in workforce utilization as will bring supply and demand into equilibrium, not just as a one–off but as a continuing workforce planning exercise the inputs to which will need constant varying to reflect 'actual' as against predicted experience on the supply side and changes in production actually achieved as against forecast on the demand side.
Organizational Structure
Looking at the number of employees we analyze that it is a medium - large-scale industry. (Ortem Fans has about 550 employees). So taking into consideration the industry size we have come up with the following organizational structure.
Although the following assumptions have been made while creating the above manpower plan, we find that these are quite acceptable and required for the same.
The assumptions for the short-term plan are:
· Fill immediate vacancies, as these positions cannot be kept vacant for long.
· No other recruitments to be done during this period.
· No changes to the organizational structure to be done in the short-term.
· Slight changes to the reporting hierarchy in some cases may be proposed.
The assumptions for the long-term plan are:
· Premium Fans Ltd. is a Small – Medium enterprise.
· 165:300 ratio of management: workers is too high for a company of this size.
· Removal of unnecessary positions is acceptable to the management and the need is conveyed to the workforce.
· Age limits / ranges defined are flexible and not rigidly enforced during recruitment procedures.
· Average age of the employees in the firm is 40 years.
· Of the number of shop floor employees, 1/4th are temporary and 3/4th are permanent.
· Company growth rate is assumed to be around 5%.
The average age, qualifications, job profile of each executive is given along with. We will be looking at reducing the size of the management from the current 165 to 107 the breakup of which is given below. However the number of blue collared workers will not be affected in any way.
The five GM’s vise Production, Marketing, Finance, HR, Purchase and an Administrative Supervisor report to the COO who in turn reports to the CEO. We look at each department separately.
CEO
· Average Age: 45+
· Work Experience: More than 20 years in the electrical goods or alike industries.
· Qualification: MBA, preferably Mechanical/Production Engineer
· Job Responsibility: Formulate the overall strategy to achieve the vision and mission, of the company. He is responsible to the directors and the shareholders of the company.
COO
· Average Age: 40+
· Qualification: MBA (General Management/Operations), preferably Mechanical/Production Engineer
· Work Experience: More than 15 years in the electrical goods or alike industries.
· Job Responsibility: He is responsible for all the functional activities of the company.
Production Department
GM (Production)
· Average Age: 35+
· Qualification: Mechanical/Production Engineer
· Work Experience: 8-10 years in the manufacturing sector.
· Job Responsibility: In charge of the production, assembly, maintenance and all other in-house activities related to production.
He will have the following people reporting under him. We assume that the plant is operated in 2 shifts. So we have 3 engineers in each department, 1 for each shift and 1 as a reliever.
Electrical Engineers
· No. Of posts: 3
· Qualification: BE (Electrical/Power)
· Job Responsibility: In charge of winding and electrical circuit of the fans.
Assembly
· No. Of posts: 3
· Qualification: BE (Production)
· Job Responsibility: In charge of assembling all the components of the fan.
Maintenance Engineer
· No. Of posts: 2
· Qualification: BE (Mechanical, with Maintenance as one of the electives)
· Job Responsibility: The periodic, preventive, breakdown maintenance of all the machinery.
Production
· No. Of posts: 3
· Qualification: BE (Production)
· Job Responsibility: In charge of production of chassis, blades and all other components that are manufactured in-house.
Quality Assurance and Quality Control:
· No. Of posts: 3
· Qualification: BE (Mechanical/Production with QC as an elective)
· Job Responsibility: In charge of all the quality related aspects, safety features, and implementing ISI/BIS standards.
For all the above posts the average age would be 22 to 30 years and a work experience in the related field ranging from 0 to 5 years.
Purchase and Logistics
GM (Purchase)
· Average Age: 35+
· Qualification: Mechanical/Production Engineer
· Work Experience: 8-10 years in industrial purchasing.
· Job Responsibility: In charge of the purchases, inbound logistics, inventory control.
He will have 2 purchase executives and 2 stores executives reporting to him.
Purchase Executives
· No. Of posts: 2
· Qualification: BE (Mechanical/Production with sound knowledge of the market)
· Job Responsibility: Purchasing of raw materials for all components manufactured in house and purchase of finished components.
Stores Executives:
· No. Of posts: 2
· Qualification: Graduate with a diploma in inventory management.
· Job Responsibility: Inventory control.
Finance
GM (Finance)
· Average Age: 35+
· Qualification: MBA (Finance)
· Work Experience: 8-10 years.
· Job Responsibility: In charge of the complete financial functions of the company.
He will have under him accounts, treasury, legal and audit executives.
Accounts Executive
· No. Of posts: 1
· Qualification: B. COM
· Job Responsibility: Handling the accounting function, banking operations etc.
Treasury Executive
· No. Of posts: 1
· Qualification: CA
· Job Responsibility: Handling the investments of the company.
Legal Affairs
· No. Of posts: 1
· Qualification: LLB, CS
· Job Responsibility: All the legal matters of the company.
Audit Executives
· No. Of posts: 1
· Qualification: CA
· Job Responsibility: Maintain and upgrade and auditing of company accounts
The average age of all these will be 25+ with work experience of 2-3 years. Except for legal executive who will be 35+ with an experience of 10 or more years.
Marketing
GM (Marketing)
· No. Of posts: 1
· Qualification: MBA (Marketing),
· Age: 35 to 45 years
· Work Experience: at least 10 years in marketing of electrical appliances.
· Job Responsibility: Marketing, brand management, sales and distribution.
He will have under him all regional managers.
Regional Managers
· No. Of posts: 6
· Qualification: MBA (Marketing) + Engineer preferred,
· Age: 30 to 40 years
· Work Experience: 5-10years in marketing of electrical appliances.
· Job Responsibility: Overall responsible for the Marketing of his region.
Each Regional Manager will have two marketing managers reporting to him.
Marketing Managers
· No. Of posts: 12
· Qualification: MBA (Marketing) + Engineer preferred,
· Age: 27 to 34 years
· Work Experience: 3-7 years in marketing of electrical appliances.
· Job Responsibility: responsible for the sales and distribution of products in his specified area. Will be responsible for training and motivation of the sales executives under him.
Each marketing managers will have five sales executives under him.
Sales Executives
· No. Of posts: 60
· Qualification: MBA (Marketing)
· Age: 22 to 30 years
· Work Experience: 0-5 years in marketing of electrical appliances.
· Job Responsibility: responsible for the sales to distributors and retailers.
Human Resource
GM (Human Resource)
· Average Age: 35+
· Qualification: MBA (HR)
· Work Experience: 10+ years.
· Job Responsibility: In charge of manpower planning, labour relations, wages and employee satisfaction.
He will have 2 HR executives reporting to him.
HR Executive
· No. Of posts: 2
· Qualification: MBA (HR)
· Job Responsibility: Labor relations, helping In training, HR audits etc.
Administrative Department
Administrative supervisor
· No. Of posts: 1
· Qualification: 12th pass
· Job Responsibility: Administering the security, housekeeping and maintenance functions. All these will be outsourced.
Recruitment and selection of employees
Recruitment of staff should be preceded by:
· An analysis of the job to be done (i.e. an analytical study of the tasks to be performed to determine their essential factors) written into a job description so that the selectors know what physical and mental characteristics applicants must possess, what qualities and attitudes are desirable and what characteristics are a decided disadvantage;
· In the case of replacement staff a critical questioning of the need to recruit at all (replacement should rarely be an automatic process).
The main sources of recruitment are:
· Internal promotion and internal introductions (at times desirable for morale purposes);
· Careers officers (and careers masters at schools);
· University appointment boards;
· Agencies for the unemployed;
· Advertising (often via agents for specialist posts) or the use of other local media (e.g. commercial radio).
Recruitment Policy
Assumptions
· Out of the 300 employees on the shop floor, 1/4th (i.e. 75) are temporary and the rest (3/4th, i.e. 225) are permanent.
· The average age in a manufacturing concern is around 40 (which is the case across all companies in the A V Birla Group). This also holds true for Premium Fans Ltd.
· The growth rate of the company, looking at the scenario of the fan industry, can be assumed to be around 5%.
Short-term Recruitment Policy
· In the short-term, no new recruitments will be done and only immediate vacancies will be filled. Housekeeping and Security will be outsourced.
· Since the two Regional Marketing Managers are promoted to Joint General Managers, the vacancies will be filled either by promoting Marketing Managers (if found adequately qualified) or by new recruitment.
· For the 3 Marketing Managers who are likely to leave the company, manpower planning in terms of new recruitment depending on the job profile and skills, should be done.
· We also propose removal of the Joint General Manager post, as it unnecessarily stretches the hierarchy.
· The vacancies in the Accounts department shall be filled by recruiting a new Head clerk and 2 clerks who will report to him. The Accounts Manager should report to the Chief Operating Officer.
· A new HR Manager should be recruited to fill the vacancy. However, he should report to the Chief Operating Officer.
· Finally, a Production Engineer will be recruited to fill the void created by the resignation of the Mechanical resignation.
Long-term Recruitment Policy
Based on the aforementioned assumptions, the salient features of the recruitment policy can be described as under:
· The ratio of management: workers is 300:165, almost 1:3, which is too high as compared to other manufacturing firms, which typically survive on a 1:5 (or lower) ratio. Hence, the number of employees in the office needs to be reduced to somewhere around 100, which would result in significant cost reduction as well as higher productivity. This can be carried out in one of the following two manners:
1) Retrench employees and immediately bring down the number to 100. However, this option is not viable because –
o Labour is a major factor of production and unionization is widespread. The Union would not permit such a draconian action by the management and even the management would do well not to indulge in a duel with the Union lest it may affect the morale and motivation of the employees who have managed to stay in.
o A Voluntary Retirement Scheme (VRS), which is generally adopted to avoid offending the employees to be laid-off, cannot quite be used here. This is because of the small number of people involved and the costs involved considering the size of the company.
2) Be conservative in the recruitment policy for office employees for the next two years. This would mean that little or no recruitment would be made and regular employee turnover would ensure that quite a few of them leave the company and the figure comes down as desired.
Owing to the infeasibility of the first alternative, we will be considering the second one, i.e. maintaining a conservative recruitment policy for the next two years. The policy to be followed when the employee strength has been brought down satisfactorily is described later.
· The average age of the employees being 40 years, we are assuming that 8% of the factory workers and 3% of the office staff will retire every year and new recruitments will need to be made to fill the gaps. These recruitments will be made based on the retirement dates of various employees available from the HR database.
· Assuming that the company grows at 5% p.a., the number of manpower requirement will increase by 8% and 4% for the factory and office respectively. This will mean recruitment of new people in order to satisfy the requirements, to the tune of the mentioned percentages. However, unlike retirement, these recruitments will be made on a quarterly basis, such that the annual supply equals the demand.
Summarizing the above-mentioned policies, we have the following picture, depicting the annual recruitment policy of the company in the long term:
Reason for recruitment Top Mgmt. Middle Mgmt. Lower & Op. Mgmt. Shop Floor Total
Retirement 1 1 3 15 20
Growth 1 2 4 20 27
Total 2 3 7 35 47
Performance Appraisal
PA refers to evaluating how successful an employee has been in a particular time period in achieving goals, against predetermined standards of performance.
The objectives of the this activity are to:
· Provide employees with a sense of their work accomplishments relative to expectations and predefined performance indicators.
· Support employee development through discussion of assigned opportunities and training.
· Emphasize the Institute's commitment to continuous improvement and learning.
· Encourage an appropriate relationship between pay levels and work performance.
· Avoid surprises; keep lines of communication open.
· Provide the option to document performance in a narrative format relative to specific accomplishments during the review period.
This exercise is conducted every six months. The performance appraisal system for managerial positions and non-managerial positions is carried out on different basis. While for managers, both tangible and intangible parameters are used; the performance appraisal of non-managerial staff is essentially carried out on tangible parameters.
We recommend 360-degree appraisal approach to be employed for managerial positions. 360-degree appraisal is based upon performance feedback from multiple sources. The term 360 degree refers to feedback from all directions, rather than dependence on an employee's supervisor or other single source. In a 360-degree appraisal, feedback may come from peers, staff, internal customers, external customers, supervisors, consultants and the individual. Initially, 360-degree appraisals were conducted in writing and required complex and time consuming procedures for the assessments to be successful but these days many software are available for the same.
The non-managerial staff is sub-divided into contractual workers and workers on the pay roll. For the former we suggest the check list method while for the latter a combination of check list method and critical incident method maybe employed, so as to keep them motivated.
· Checklist method - A list of specific statements describing the performance and behavior of employees is prepared and the rater is asked to tick those statements, which correctly describe the actual behavior of each employee. Each statement is given a scale value or weight. The total of these gives the merit of an employee.
· Critical Incident Method - A critical incident is a significant act by an employee exceeding or failing any of the requirements of his job. The examples of each incident are: helped in implementing a new work method or refused to help a fellow worker etc. This method requires every supervisor to record all of such significant incidents in each employee’s behavior, which indicate effective action and those, which indicate inefficient behavior.
Parameters of Performance Appraisal
· Problem Solving & Decision Making - How effectively does the employee confront and resolve problems and take action?
· Planning, Organizing & Controlling - How effectively does the employee perform advance preparation for and carry out assignments?
· Job Knowledge - How well does the employee demonstrate sufficient understanding of the technical, managerial and organizational aspect of the job?
· Communications - How well does the employee present ideas, concepts and plans for courses of action? Does the employee communicate in a clear and concise manner? Does the employee listen well and ask appropriate questions?
· Productivity - To what degree do the employee’s work efforts result in desired outcomes to include quality, quantity and timeliness?
· Discipline - How consistently does the employee report for work on schedule and prepared?
· Teamwork - How well does the employee work effectively with others and display an appropriate balance between individual and group efforts?
Performance appraisal activity may result in any of the following three actions:
· Promotion - Incase vacancies exist in the organization an employee meeting or exceeding expectations would be considered for promotion. The most important parameter to be considered for promotion is merit but in case of two employees having same merit ratings the one with greater length of service (seniority) in the organization will be preferred over the other. Another important parameter that is considered for promotion is the potential in the employee for advancement in the organization.
· Upgrading - Upgrading refers to increasing the salary of an employee without a corresponding change in his job grade. This method is to be used if an employee is performing well but there are no vacancies available for higher posts in the organization. It helps to retain the employees performing well and stimulates them for greater effort.
· Dismissal - This involves separating an employee from the pay roll either for inadequate performance or for violation of organization rules. We recommend that a notice of one month be given to the concerned employee at least in the first case. This step should be resorted to as the last safeguard and must have the approval of the top management.
Conclusion
Although several assumptions have been made in the case study due to the lack of information (which might not be actually acceptable in the actual scenario), these are made keeping in mind the industry and the size of the firm. This manpower plan aims to reduce the number of operating levels, thereby reducing the bureaucracy and increasing speed of the communication channels within the company. Also the span of control has been kept at an optimum number for the same reasons mentioned above.
