Knowledge-Management in the
Professional Service Industry
The Impact of the Digital Revolution
on Existing Business Models
Master’s Thesis
MSc International Business and Management
Tolga Dahmen
S3449033
June, 2018
Supervisor: Dr. Miriam M. Wilhelm
2 ABSTRACT
The focus of this study is on information technology and its impact on professional service firms’ existing business models with regards to knowledge-management. Although there is multiple organizational learning and strategic management literature, the impact of the digital revolution on existing business models remains widely understudied. This study aims at filling this gap by analyzing the traditional way of professional service firms to share explicit an implicit knowledge. Additionally, this paper is going to analyze the traditional top-to-bottom method of advisory firms to share knowledge. I provide evidence that this method is outdated and that that model has become a more horizontal knowledge-sharing procedure due to the emergence of new technologies that have a direct impact on the regarding knowledge-receiver as well as the increasing interconnectedness of industries and markets. This interconnectedness requires departments within an organization to work closer together in order to consider multiple insights and perspectives to develop innovative knowledge-sharing practices. This study proves that especially when talking about implicit knowledge, other factors than just information technology play a major role. Such factors are, for instance, the people factor which is decisive when sharing implicit knowledge. Furthermore it is essential to understand that information technology is helpful when acquiring and storing knowledge, but it has its limitations when synthesizing knowledge.
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ACKNOWLEDGEMENTS
In this section, I would like to take the opportunity and express my appreciation to my supervisor Professor Doctor Miriam Wilhelm for her support and effort throughout the research procedure. Her effort and support throughout the whole study were of great value and improved the quality of this study. Her guidance helped me to conduct this research and gave me a sophisticated insight on how to conduct research and develop a robust analysis.
4 TABLE OF CONTENT Acknowledgements ...3 Abstract ...2 Introduction ...5 Literature review ...9
The Importance of Knowledge-Management Systems within Organizations ...9
Knowledge-Management and its Challenges in the Consulting Industry ... 12
The Impact of New Technologies on Knowledge-Management Practices ... 16
Methodolgy... 20
Research Objective... 20
Research Design ... 20
Data Collection and –Analysis... 21
Findings... 22
Knowledge-Management in Company A and Company B... 22
Knowledge-Sharing Routines for Explicit- and Implicit-Knowledge ... 24
Revised Knowledge-Sharing Routines for Explicit- and Implicit-Knowledge ... 26
Discussion ... 28
Limitations and Future Research ... 32
Conclusion ... 33
References ... 34
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INTRODUCTION
The world has been moving from a production-based economy to a knowledge-based one (Drucker, 1993; Powell & Snellman, 2004). Hence, organizations across the world are becoming more knowledge-intensive (Alvesson, 1995) and increasingly dependent on new knowledge in order to be able to create value (Kim&Mauborgne, 1997). Since professiona l service firms are regarded as the pinnacle of knowledge-based organizations, this study will focus on a specific type of professional service firm, i.e. the consulting industry. The main asset of professional service firms is knowledge as well as the competencies they utilize (Engwall & Kipping, 2002), when providing their services to their clients.
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trends in information technology in order to remain competitive and, in the best case, gain competitive advantages. One of these new technologies is IBM’s “Lotus Notes”, which is a groupware application that enables companies to develop communication- and database-oriented applications to exchange knowledge. Nowadays, the vast majority of professional service firms uses Lotus Notes in order to share files, keep track of development schedules, guidelines, projects, procedures, and plans (Rosen, 2013). New technological advancements such as Cloud Computing had a significant impact on numerous applications such as Lotus Notes. Thus, with the integration of Cloud Computing into existing business models, Lotus Notes became able to track changes and make updates to replications of all databases in use at any site. The impact of such innovations as well as their impact on how professional service firms implement these and adjust their business models will be the main focus of this study. Additionally, technologies that have been used before the digital revolution, technologies that emerged due to the digital revolution as well as how companies adjusted existing business models have not been considered by previous literature and will therefore be investigated in this study.
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industry, clients do not only seek the best educated people, but rather like to access the knowledge-base of consulting which have acquired knowledge over a long period of time in multiple industries from numerous client assignments. As a result, consulting firms need to be capable of storing the knowledge they acquired from different industries and firms, share it within their organization and synthesize it in a way that engagement teams of the company ca n use the acquired knowledge for solving business problems emerging in other industries. Especially the synthesizing part of knowledge-management became more crucial over the past decades (Powell & Ambrosini, 2012). This is, one the one hand, due to the increased amount of knowledge available in markets and, on the other hand, a result of the more complex interconnectedness of markets and economies in general. Consequently, in contrast to the old requirements, firms are required to synthesize new knowledge as quick as possible and in the most effective way to solve cross-industrial business problems (Powell & Ambrosini, 2012).
Both practitioners as well as scholars have found that organizational learning might be the key aspect in achieving competitive advantage and therewith outperforming competitors (Dyer & Noboeka, 2000). The unprecedented expansion in literature on the interplay between organizational learning and achieving competitive advantage seems to verify what business managers and Dyer and Noboeka (2000) found. One of the most important aspects in achieving competitive advantage is for firms to be able to manage existent capabilities well, be able to adapt to new business environments, and by being able to learn and acquire new knowledge and capabilities (Grant, 1996). Although multiple scholars such as Grant (1996), Andrews and Delahaye (2000) and Argote (2013) investigated the topic of organizational learning, further progress and insights are needed in order to understand the different processes how professional service firms share explicit and implicit knowledge. How new technological advancements and innovations impact the existing explicit and implicit knowledge-sharing routines of professional service firms. To answer this question, an empirical research is needed to understand the underlying mechanisms behind the explicit and implicit knowledge sharing routines of advisory firms. The professional service industry offers an interesting opportunity to examine organizational learning processes in a knowledge-intensive setting where the main asset is intellectual property (Bechina & Bommen, 2006).
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LITERATURE REVIEW
The Importance of Knowledge-Management Systems within Organizations
Knowledge-Management deals with the systematic and organized utilization of the brain power of an organization and gave birth to the knowledge-based perspective of firms. The goal of Knowledge-Management is to achieve competitive advantage, increase efficiency, and boost innovation (Serban & Luan, 2002). Nowadays, Knowledge-Management is a very popular field and journals such as the Knowledge Management Magazine or the Knowledge Management World Magazine exist in order to discuss current trends in this area and further increase the awareness of economists, scholars, and societies as a whole towards this field (Serban & Luan, 2002).
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knowledge-intensive firms (Schulz & Jobe, 2001). Accordingly, since knowledge is socially complex, numerous practitioners as well as academics hold the opinion that knowledge may lead to sustainable competitive advantage. Knowledge management appears to be inevitable and thus, decisive for a firm`s success (Van den Bosch et. al., 2005). As the world is moving from a production-based economy to a knowledge-based one, firms all over the world are becoming more knowledge-intensive as well. Hence, in order to remain relevant and create value, firms are dependent on innovative knowledge helping them to create value (Drucker, 1993; Alvesson, 1995; Kim & Mauborgne, 1997; Powell & Snellman, 2004). Thus, the question of how firms establish and maintain successful knowledge-sharing processes helping them to create value is very important.
Knowledge Management is concerned with capturing, distributing and using knowledge and Sarvary (1990) argues that information technology (IT) plays a major role in the emergence of the necessity for KM. Knowledge Management touches upon the following dimensions:
• Organizational Learning – The procedure of creating, storing, and sharing knowledge, • Knowledge Production – The procedure where information is transformed into valuable
knowledge which, eventually, will help the organization to tackle issues,
• Knowledge Distribution – The procedure where the organization’s collective knowledge is distributed across business units within the firm.
KM is a widespread instrument which the vast majority of organizations in the business world make use of. These entities make increasing investments in order to establish a successful KM infrastructure. The KM infrastructure incorporates internal process which enable a smooth and effective flow of knowledge (Sarvary, 19900. Furthermore, it refers to IT structures established within firms leading to KM systems which help firms building a knowledge base in order to be able to ensure a common level of knowledge across functions within organizations. The underlying KM systems are a result of a fruitful KM infrastructure enabling KM systems to be built (Tiwana, 2000) .
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production as well as knowledge distribution (Wickramasinghe, 2007). Knowledge is inevitable for businesses and is often referred to as “intellectual capital” of the entity (Agrawal, 2009). Apart from non-intellectual capital, also called physical capital (e.g. Warehouses), the intellectual capital of a firm is critical. This non-physical capital is dependent on the firm’s history on the one hand and its employees experience on the other hand (Teece, 2008). The firm’s history, so the industries and businesses they have been involved in, increases its knowledge in areas such as production and sales. The employees and the board of directors of the firm, contribute to the firms cumulative knowledge by bringing in their knowledge regarding certain business practices and industries they have allocated over a longer period of time. This is why knowledge production, knowledge distribution, and organizational learning is crucial for firms (Sarvary, 1990).
Boer (2005) addresses the significance of knowledge distribution – often referred to as “Knowledge Sharing”- within organizations and argues that the main purpose of organizations to exist, is to usually reach a common goal and work towards that collective outcome together, for example offering physical and/or non-physical goods and services. Especially in such settings, knowledge sharing across departments and amongst disciplines becomes vital for an organization. These departments have distinct expertise and different specializations as well as different roles in achieving the overall goal and this is why establishing a common knowledge ground and complementing each other by sharing knowledge is inevitable (Grant, 1996). Many academics stress the importance of effective knowledge-management and argue that an effective knowledge-management is expected to lead to competitive advantage (Connor & Prahalad, 1996), but also improved financial performance (Teece, 1998), better organizationa l learning (Buckley & Carter, 2000), being more innovative (Antonelli, 1999), enhanced usage of information (Carneiro, 2000), and being able to anticipate problems (Carneiro, 2000). However, many companies experience that establishing successful knowledge-flows within an organization can be very problematic (Hansen et. al., 1999). In order to achieve efficient knowledge flows, organizations need to identify the nature of the regarding knowledge. As different kinds of knowledge require different ways of management, it is essential to distingu ish between implicit knowledge and explicit knowledge (Boisot, 1998):
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create value (Bijker, 2011). Consequently, implicit knowledge is regarded to be automatic and cannot be transferred by simply writing it down or verbalizing it (Smith, 2001). Dyer and Noboeka (2000) argue that the transfer of implicit knowledge requires a dense network and high level of interconnectedness to ensure a smooth transfer of implicit knowledge without sacrificing any value or changing the regarding implicit knowledge. On the other hand, there is explicit knowledge which can be transferred to other parties easily (Dyer & Noboeka, 2000). Explicit knowledge can be written down, can be verbalized (Beccera et. al., 2008) and does not require a high level of interconnectedness (Dyer & Noboeka, 2000) between, for example, function within an organization or network. Mayer et. al. (1995) confirm that transferring implicit or explicit knowledge has different implications for the level of trust between the knowledge exchanging partners or the organizational environment which can be categorized as knowledge related characteristics (Boisot, 1998):
The transfer of implicit knowledge requires a high level of trust whereas when transferring explicit knowledge, the level of trust is expected to be lower. This is due to the fact that the transfer of implicit knowledge incorporates exposing the way a company uses the regarding resource or knowledge in order to create value for its customers. Different from explicit knowledge, implicit knowledge is unique and not available to a large number of players in the market (Dyer & Noboeka, 2000) and this is why trustworthiness is very important when sharing implicit knowledge. This is not as valid as it is for implicit knowledge, as explicit knowledge is available for a larger amount of players within an industry (Dyer & Noboeka, 2000).
Knowledge-Management and its Challenges in the Consulting Industry
Knowledge Management is the major key for management consultants as knowledge itself and business solutions are their core business and what they ultimately offer their clients (Robertson & O’Malley Hammersley, 2000). Other than traditional firms, which acquire their knowledge through internal processes (e.g. production, sales etc.) consultants act as “outsiders” and have insights on several players from the same industry which help them to increase their knowledge and thus, be able to provide business solutions for their clients (Anand et. al., 2007 ; Robinson & Dowell, 1982).
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is also a partner who owns the mandate and is ultimately responsible for the whole proposal (Werr & Stjernberg, 2003). The partner would communicate the structure and the aim of the proposal with the manager and the senior manager would then schedule a meeting with the senior- and the junior consultants. The knowledge-sharing procedure in this case is a top-to-bottom method which enables junior consultants to learn from more experienced colleagues . This process is very common in project management teams as higher-level employees such as senior managers and partners are usually concerned with attracting new clients (Werr et. al., 1997). Hidding et. al., (2012) argue that this top-to-bottom method might be outdated in today’s world and that a new approach towards organizational learning in consultancies might be needed. This is one of the biggest challenges for consultancies to tackle. The following figure depicts the traditional, centralized way of consultancies sharing knowledge from the top, the partner, to the bottom, the junior consultant.
Figure 1
Top-To-Bottom Knowledge-Sharing Process with a Junior Consultant
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Figure 1 depicts the knowledge-sharing process in a professional service firm. The main methods and technologies with which firms have been sharing knowledge are depicted on the left-hand side of the graphic. The red arrows on the right show the knowledge-exchange between the regarding organization, the partner, the managers, the consultants, and the junior consultants. This part of the figure represents the organizational learning process. The black arrows connecting the organization to the partner, the partner to the manager and so forth shows the actual top-to-bottom learning process where, for instance, the organization passes on all the knowledge acquired. This knowledge can also be outside of the regarding partner’s department and field of expertise. Then, the partner passes his knowledge, explicit or implicit, to the manager and so forth. The colorful arrows depict how the company (Green Arrow), a partner (Yellow Arrow), a manager (Purple Arrow), and a consultant (Blue Arrow) contribute to the junior consultant’s knowledge stock. One can see that the knowledge-sharing party with the most experience, the partner in this case, has more methods and mediums to share knowledge with the junior consultant. Due to the fact that a partner is closer to the operational tasks of a junior consultant, the partner has a bigger influence than the organization as a whole. Ultimately, the partner is responsible for the junior consultant and has therefore the power to place the junior consultant in other projects to initiate a learning process. Since implic it-knowledge usually contains some explicit-it-knowledge (Puusa & Eerikäinen, 2010) as well , the knowledge-sharing methods a partner uses to increase the implicit-knowledge-stock of a junior consultant are the same methods that have also been listed on the explicit-knowledge-shar ing site.
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After having discussed the importance of knowledge-management within consulting firms and the traditional way of consultancies to share knowledge within their organizations, I would like to refer to the following graphic, Figure 2, which will help to understand the role of a consultant.
Figure 2
The Consultant as a Knowledge-Broker who Transfers Business-Knowledge across Industries
Source: Own Illustration
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Consulting firms have a unique positioning due to their high interaction and interconnection with clients from different industries. In order to benefit from this and to be able to offer new insights and new approaches to business problems, consultancies have to be able to combine and adjust the knowledge so that a sophisticated and targeted solution to a business problem can be created.
The Impact of New Technologies on Knowledge-Management Practices
17 Figure 3
Information Technology Functionalities Enabling Knowledge-Management
Functionalities Technologies
Communication Email, Video Conferencing
Coordination Email, Scheduling Software
Storage and Retrieval Database Management, Information
Retrieval. Hypertext, Internet and Intranet
Browsing Graphical User Interface, Web Browser
Presentation Presentation Software
Numerical Computation Statistical Analysis Packages, Computational Algorithms
Location, Filtering Intelligent Agents
Symbolic Processing and Reasoning Artificial Intelligence, Expert Systems Source: Mahapatra & Sarkar, 2000.
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Professional service firms have to be innovative in these fields and stay up-to-date with new technologies in order to help their clients to create and implement the right strategy (Nissen, 2018). Moreover, professional service firms are all about knowledge on the one side, but people on the other side. In order to ensure efficient knowledge-flows within their organization and amongst their people respectively employees, consultancies need to rethink their existent business models and modify some of their approaches where necessary (Dudenhausen et. al., 2017). For instance, existing knowledge-management technologies such as the Intranet need to be updated and improved in order to keep up with the newest technological changes. Additionally, new technologies that might arise as well as finding new ways of acquiring or synthesizing knowledge is essential to become more effective with regards to knowledge -management. Information technology has led to new opportunities such the concept of “Peer2Peer Consulting”. In order to make sure that well-established consultancies don’t suffer market-share losses, consultancies need to be aware of such new models and respond accordingly. The underlying business model of “Peer2Peer Consulting” is that on a virtual platform, managers can interact with each other by discussing current trends in their industries and possible upcoming challenges (Vajda & Czernin, 2017). Some experts argue that such “virtual consultancies” might lead to the emergence of numerous little informal consultancies causing losses for traditional consultancies. This business model is one of many novels that IT gave birth to. Consultancies try to tackle this problem with their own group networks and yellow pages (Mahapatra & Sarkar, 2000) where more experienced employees of a firm can interact with each other and rather share their knowledge with their colleagues than with other professionals who might even be a competitor.
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investing in such a virtual knowledge-base, managers will have it easier when assembling project teams as a detailed report about ones working-steps in past projects increases the transparency to his/her work and thus, making it easier for managers to find the best personnel for the regarding client-assignment. When talking about operational excellence, academics and experts agree that the large part of a consulting-project can be handled virtually. Even though direct contact with clients will not be fully substituted by virtual mediums such as video conferences, the large part can be handled via telephone calls, video conferences or digital documents which are filled and worked on by both, the consultant as well as the client simultaneously (Greff et. al, 2018). Analyses or trainings can be done virtually which will increase the efficiency for both parties as both, the consultancy and the client are saving costs (Hambley et. al., 2009). The most important aspect in this regard is to find a healthy mix between virtual processes and direct communication.
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METHODOLGY
Research Objective
The main research objective of this study is to provide an understanding of the linkage between knowledge-sharing practices in professional service firms and how these companies respond to radical innovations of business models that influence their existing KM-Systems and knowledge-sharing operations. Thus, the research question that is going to be addressed is:
RQ: How does the Digital Revolution force professional service firms to adjust their existing business models with regards to knowledge-management?
Research Design
This paper follows an explanatory research design and aims at analyzing the relationships and causal links of the research topic in a sophisticated manner. In order to be able to conduct theoretical sampling, a thorough literature review is necessary. This will help to identify radical innovations regarding business models used for sharing knowledge. This data is supported by interviews conducted with consultants, managers, and partners/principals of two large professional service firms such as KPMG, PricewaterhouseCoopers, Ernst & Young (EY), Deloitte, and Accenture contributing to the theoretical part of this study. Telephone- and personal interviews will be conducted to gather data regarding the research topic, answer the research question, and draw valuable conclusions.
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DAX30-Companies, these two service-firms have been chosen in order to analyze the knowledge-sharing processes of these organizations with regards to explicit and implic it knowledge as well as the impact of new technologies on existing knowledge-sharing routines and systems of Company A and Company B. I believe that these two firms serve as a very good basis in order to analyze the matter on-hand and derive implications which are applicable and representative for the vast majority of professional-service firms which conduct business and offer their services in similar industries as well as similar fields such auditing and consulting.
Data Collection and –Analysis
Data was mainly collected by the help of semi-structured interviews which allowed the interviewees not just to answer the actual questions, but also to talk about aspects that might have not been asked for specifically, but still might of relevance to the optic on-hand (Drever, 2003). The interview partners chosen are employees who are less experienced such as junior consultants and consultants and more experienced employees such as partners and managers in order to be able to analyze knowledge-management practices thoroughly and have representatives of both ends of the career ladder, the beginning (junior consultant, consultant) and the end (manager, partner). Following a qualitative research logic and in order to corroborate the data gathered through the interviews, this research, as mentioned before, consist of theoretical sampling as well as primary and secondary data in order to be able to validate the interview-findings and grasp the interplay between knowledge-management practices in consultancies and disruptive technologies which emerged recently and have an impact on existing business models to share knowledge. Primary data has been collected in the form of interviews with Company A and Company B. Whereas secondary data consists of company reports, newspaper articles, websites, and statistics to increase the robustness of some arguments in this study.
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To ensure that this study is free from any ethical or moral issues, the regarding company names are not mentioned and all interviewees are being kept anonymous. Furthermore, all interviewees have been asked if they wanted to do the interviews before starting with the actual interviews. All interview participants have been briefed regarding the interview structure and all interviewees agreed to the questions that have been asked. Additionally, all interviewees have been asked if they were available for follow-up questions after the actual interviews if something remained unclear for the interviewer.
All interviewees have been noticed that neither their names nor their company names will be shared when the study is published, however, the interviewees are also aware of the fact that the supervisors know the two companies that have been interviewed. In order to prevent further confidentiality issues, the interviewees are aware of that fact that they have been recorded to simplify the process of transcribing the interviews.
The information gathered have been categorized to each question that has been asked and additional information, which was welcomed by the interviewer, has been put in the context in a way that it suits the research topic. Additionally, in order to establish a common ground to compare Company A and Company B, differences such as job titles have been unitized. For example: The job title in Company A for a job starter is “Junior Associate” whereas Company B labels them “Junior Consultant”. This served the purpose of minimizing possible confusions to a minimum and increasing the ease and fluency of the study. All interviews have been transcribed, so that the researcher can put the data in context draw conclusions.
FINDINGS
Knowledge-Management in Company A and Company B
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Knowledge-Sharing Routines for Explicit- and Implicit-Knowledge
The information gathered through the interviews with the partner and a junior consultant of Company A reveal that there are several ways how professional service firms share knowledge. One of these methods are detailed project reports. Each project team creates a detailed project report at the end of each project. These reports have detailed information regarding all steps that have been taken in order to successfully finish the regarding project. Furthermore, the partner stated that each report is signed by him or the regarding senior manager overseeing the project in order to ensure that the right knowledge is shared without any mistakes. The partner pointed out that that these reports proved to be of great value in the past and that this type of documentation is appreciated by the whole team.. These reports depict all the knowledge that have been used throughout the project. All interviewees referred to the importance of these reports and pointed out that these reports are very helpful for all team members. Additiona lly , the junior consultant and the consultant view these reports as “briefing material” that one reads when starting a new project. In case that some information remains unclear, formal and informal meetings help to talk about what is unclear. The aforementioned project reports are expected to give the regarding employee an idea on how to approach the project. Usually, when starting a new project, employees would have a look at these reports of projects that are similar to the one they are about to approach in order to have a brief understanding of what needs to be done. However, since projects are not repetitive and fully similar to each other, one cannot just apply each project step and milestone as well as knowledge to the new project. Furthermore, formal trainings that are scheduled monthly, help to share knowledge with less experienced employees and accelerate the process of them adopting to the organization’s culture. These formal trainings where employees are trained with regards to soft skills such as how to deal with clients and colleagues as well as presentation skills and hard skills such as Excel-related and PowerPoint-related skills are also one way of sharing explicit-knowledge. The more experienced interviewees of both companies, the partner of Company A and the manager of Company B, state generally ever interaction via meetings, video-conferencing, emails or small coffee breaks with colleagues trigger some sort of information and knowledge and thus, also facilitate the exchange of explicit-knowledge.
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formal meetings where project details are discussed, but also informal exchange regarding, for instance, project documents such as PowerPoint presentations and any other feedback one gets on any work presented to more experienced colleagues.
Revised Knowledge-Sharing Routines for Explicit- and Implicit-Knowledge
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28 DISCUSSION
This study has multiple implications for theory as well as practice. First, this work supports theory by empirically proving that knowledge-management in terms of being able to acquire, share, and synthesize knowledge is essential in today’s knowledge-intensive economies. Organizations that are successful in synthesizing knowledge are more likely to gain competitive advantages and therewith outperform their competitors. The vast majority of practitioners hold the opinion that information technology is the solution for knowledge-management. However, this study shows that information technology is a very complex and sophisticated topic that can help organizations to overcome certain obstacles. Especially with regards to knowledge -management, information technology seems to be inevitable however, implementing new technologies and adjusting existing business models accordingly is a very complex process which requires experts from this field. Especially when acquiring and storing knowledge, information technology, is perceived to be a helpful dimension that should be considered. Due to new technologies that have been analyzed in the previous sections of this study such as Data Mining, Cloud Computing etc., companies are able to simplify the acquiring and storing process of knowledge. However, one of the biggest challenges in this regard is that information technology is limited to the acquisition and storing process. There are several algorithms and statistical computation packages that can put data together, nevertheless, the interpreting and synthesizing part in knowledge-management is according to the manager of Company B the most important part in knowledge-management. He further says that collecting data having information is one thing, but drawing the right and valuable conclusions is usually more important than acquiring information. This is why I propose the following hypothesis:
Hypothesis 1: Information technology is a complex and important component in knowledge-management which can be a solution for improving existing business models , but has its limitations especially with regards to synthesizing knowledge.
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individuals than explicit knowledge. Sanchez (2004) found that sharing implicit-knowledge is more complex than sharing explicit-knowledge due to the fact that the people aspect being much more present. The findings of the interviews confirm that the people aspect is a decisive factor for the efficiency of sharing implicit-knowledge. Interviewee one of Company A, the partner, introduced a whole new rewarding system due to the fact that even in project teams there is competition between colleagues. This competition results from promotion and bonuses systems rewarding the employees with the highest performance. Consequently, employees are competing against each other to advance in their careers and get the highest bonus. The new procedure introduced by the partner says that in case employees do extraordinarily good in a project, the partner will make sure that the regarding employee gets credit and rewarded. This in turn will lead to a higher willingness of that employee to share the regarding knowledge with the whole team. Both, business men and scholars agree that when it comes to sharing implic it-knowledge, one’s willingness to share knowledge is one of the most important factors influencing the knowledge-flow in a team, department, or organization. Additionally, the first interviewee of Company B, the manager, pointed out that usually employees of a professional-service firm stay three to five years with the organization and then continue their careers with a different firm. This also means that knowledge stays usually three to five years with a professional-service firm before leaving elsewhere. In order to ensure that knowledge is passed on in the most effective way, different departments and organizations use different methods to share implicitknowledge. One example of such methods is the aforementioned knowledge -sharing procedure by the partner of Company A. Another method to ensure that implic it knowledge is shared is to offer cross-functional project placements. The interviewees agree that this offer is a result of the increasing interconnectedness of industries and markets. Companies have realized the importance of close communication and relationships of departments within an organizations and subsidiaries independent from nations and markets. The subsidiaries of Company A and Company B are today working closer than ever with each other and such cross-functional project placements are a result of that aiming at training their employees on an international level. All this information together brings me to the following hypothesis:
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Third, this study shows that the traditional way of professional service firms sharing knowledge seems to be outdated. The top-to-bottom method that consultancies have been using in the past decades seems to be changing to a more horizontal method where knowledge is not centralized, but decentralized. This means that knowledge is not held by a small number of experienced employees such as managers, but rather shared and available for every employee. This results in a wider spread of knowledge and, as mentioned by the interviewees, is one way, consultancies tackle the problem of having a high fluctuation of employees.
Hypothesis3: The top-to-bottom knowledge-sharing method is changing to a more horizontal knowledge-sharing method where knowledge is decentralized.
As a result of all findings from the interviews conducted, the literature review and supporting statistics and literature the following conceptual framework is proposed:
Figure 4
Horizontal Knowledge-Sharing Process with a Junior Consultant
Source: Own Illustration
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discussed in detail in previous sections. The red arrows connecting Social Media, Mobile Technology, and Enterprise Collaboration as well as KM External Integration with the Junior Consultant show that these technologies and technological novelties have a direct impact on the junior consultant. Instead of only receiving knowledge from partners, managers, and consultants, the junior consultant is receiving knowledge from such mediums. Each party, Company X (Green Arrow), the partner (Yellow Arrow), the manager (Purple Arrow), and the consultant (Blue Arrow) contribute to the junior consultant’s knowledge stock. Due to new technical advancements such as new databases as in Lotus Notes, knowledge is more decentralized and thus available on a larger scale than before. This is on the one hand due to new technologies and the emergence of the aforementioned databases, but also due to the increasing interconnectedness of markets as well as the high fluctuation rates in employees in the consulting industry. All these three reasons play their part in forcing professional service firms to share knowledge fast and effectively and thus, make knowledge more decentralized than centralized.
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LIMITATIONS AND FUTURE RESEARCH
There are some limitation to this research, one of them being that this research is limited to the professional-service firm industry, the auditing industry that provides consulting-related advisory services in particular. Further research should try to look at different kinds of professional-service firms such as Strategic Consultancies like McKinsey & Company and The Boston Consulting Group as well as the In-house Consulting industry like Siemens Management Consulting and the legal consulting industry like Ebner & Stolz in order to have a greater scope of professional-service firms which will then increase the degree to which the findings are representative.
Second, more interviews as well as surveys can be conducted in order to have a larger set of data and draw conclusion which are, again, more representative. Researcher could try to interview more employees from a company and, more importantly, different departments of a company. Especially when investigating the impact of new technologies on existing knowledge-sharing routines of firms, scholars should interview the departments of the regarding company that are specialized in that field in order to collect more specific and valuable data in this regard. Interviewing such experts will give the researcher a better understanding of the matter on-hand. Furthermore, the experts that consult the professional-service firms that are being investigated, can be interviewed as well in order to grasp how these experts observe the technology market, the latest trends, and eventually train their clients.
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CONCLUSION
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42 APPENDICES
Figure 1
Top-To-Bottom Knowledge-Sharing Process with a Junior Consultant
Source: Own Illustration
Figure 2
The Consultant as a Knowledge-Broker who Transfers Business-Knowledge across Industries
43 Figure 3
Information Technology Functionalities Enabling Knowledge-Management
Functionalities Technologies
Communication Email, Video Conferencing
Coordination Email, Scheduling Software
Storage and Retrieval Database Management, Information
Retrieval. Hypertext, Internet and Intranet
Browsing Graphical User Interface, Web Browser
Presentation Presentation Software
Numerical Computation Statistical Analysis Packages, Computational Algorithms
Location, Filtering Intelligent Agents
Symbolic Processing and Reasoning Artificial Intelligence, Expert Systems Source: Mahapatra & Sarkar, 2000.
Figure 4
Horizontal Knowledge-Sharing Process with a Junior Consultant
44 Size of the global Consulting Industry
Source: ConsultancyUK (2017)
Example Interview: Interview 3
Q1: How long have you been with the company?
I started working for KPMG in 2015 and have been with the company ever since.
Q2:What is your position and area of responsibility?
I am an assistant manager and I have my own projects and project teams that I’m fully in charge of.
Q3:What does that mean that you are fully in charge of? What are traditional duties that come with this responsibility?
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manager and soon becoming a manager, I am also responsible for selecting the staff that I need in order to do the regarding project.
Q3:How does such a process look like? Can you please walk me through a regular process where decide on whom to pick for the project? What aspects matter to you?
Sure, we have a pool of employees from all different kinds of career levels. We have a system where I can see which employees are available and which are already assigned to other projects. From the pool of colleagues which are available, I choose the ones that are the best fit for the project.
Q4:And how do you choose those colleagues? Based on what criteria?
First of all, I try to make sure that I have a good mixture of colleagues from all career levels. Depending on the budget that is given to me the client, and depending on the project’s complexity, I form a project team. If the complexity is very high, I tend to assign more experienced colleagues than juniors. This does not mean that I don’t choose juniors at all, since we are very dedicated to train our juniors as soon as possible in order to ensure that they increase their knowledge regarding our area of business and increase their level of experience.
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Q6:Why did you choose junior 1 and 2 and senior consultant 1 and 2, and not junior 3 and 4 and senior 3 and 4?
Okay, you want a very concrete example, don’t you? But its fine. The scenario was the following: Within the pool of available employees, there were 4 juniors and 3 seniors. I decided on picking junior 1 and 2 because they had for one, less experience than junior 3 and 4. 3 and 4 had done some internships in the past and already had 2 very interesting and demanding projects with two DAX30 companies. On the other hand, juniors 1 and 2, each of the only did one internship in the consulting and auditing area, and, more importantly, only had 1 one project in the last months. So it’s not about one junior being better than the other, but it’s also about how, for example, constellations regarding projects are or have been. So a big criteria for me to choose junior 1 and 2 was that they only had one project, and that the last project was a perfect opportunity for them to increase their level of knowledge by working together with two senior consultants who are also in the advanced stage of being senior consultants. There are different levels within the overall career levels: junior consultant, consultant, senior consultant, etc. So I tried to have a good mixture of less experienced juniors and more experienced seniors so that the seniors can help the juniors whenever needed, and on top of that, I was there, too in order to support both parties.
Q7:Okay, thank you very much for the very detailed answer and it just makes it easier for me to understand underlying processes. You mentioned ‘’knowledge’’ a couple of times and this is the key field that I am researching, so can you please tell me how your company defines KM? To be honest, I don’t think that we have an official definition for KM. What we have is the sensitivity for this matter. It is very important for us that knowledge is shared. Usually, in our business, colleagues stay with us for 3-5 years and leave us after that period because they got a good offer from one of our clients. So keeping in mind the high fluctuation of employees and this short cycle of employees staying with us, it is very important that knowledge is shared effectively and immediately. Usually after 3-5 years, colleagues have a very stable and good level of knowledge and instead of training our employees and let them leave with all the knowledge they gained, we make sure that these colleagues pass their knowledge on to our younger, and less experienced colleagues as soon as possible and in the most effective way.
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The most effective way in my opinion is to do it while working on a project. The juniors get first-hand experience on a real case and can learn from more experienced colleagues right away. And this goes for both, explicit and implicit knowledge. However, sometimes you try to share cross-project knowledge while meaning that you want to share knowledge with colleagues who are not currently at the project. This is where, for example, our detailed project documents which we call reports come into play. There colleagues can see what we have done in a project and those reports are eventually signed and approved by the regarding project leader or partner. I think that this is a very good way to share explicit knowledge. Additionally, there are several technologies such as Lotus Notes which has various functionalities such as a databases, one can communicate there, work on files simultaneously etc. Every employee gets a phone here and those phones are pre-programmed with applications that we usually use – one of them being Lotus Notes. For the implicit knowledge part, I have to say that this is more difficult. Sharing that knowledge while being on projects is still the most effective way, because one interacts with each other. Implicit knowledge is more the way we do our projects and is less tangible than explicit knowledge, this is why it is probably the best way to have good mixtures of less experienced and more experienced colleagues so that the less experienced can learn from the more experienced colleagues. Additionally, cross-functional projects help our employees to gain insights and experience in various departments and industries helping them to mature and increase their knowledge -stock.
Q9:In your last project, do you have a specific moment or process where implicit knowledge has been shared that you can walk me through?
In my last project, the project we talked about earlier, the seniors familiarized the juniors with our way of approaching the project. This incorporates some financial modellin g practices, where we have our way of analysing financial statements and the current state our client is in as well as an analysis of budget-forecasting. The way we share this information , the results of our analyses, are depicted in a very specific way and can therefor also be regarded as implicit knowledge since we want to achieve something when showing our final results to our clients. In general, there are colleagues who have more professional experience than others, but if you did not do an internship in our department, it will take some time to adjust to our way of working.
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business problems meaning that implicit knowledge was there shared by seniors walking juniors through the process of preparing a final PowerPoint presentation which will then be presented to the client?
Yes, exactly. I can’t really go into detail, but I will say this: There are certain ways and approaches that distinguishes us from our competitors. And our competitive advantage lies in our implicit, but also explicit knowledge. Let me think of a concrete example where implicit knowledge is transferred: We are very strong in the financial and accounting sector meaning that we have decades of experience in this industry. This experience which is one kind of implicit knowledge, allows us….or….lead to the way we are operating and interacting with our clients in this industry. Also, the way we prepare our sales pitches and the way we pitch in general is unique to us and the past shows that we are doing good since we are able to win almost all projects that we pitch for.
Q11:Think about your last project, how can you effectively share explicit/implicit knowledge? Explicit knowledge is shared via, for instance, documents which we call “reports”. There we write down everything we are doing or did in a project. Whenever we are starting a new project, the first thing that we do is to have a look at older project’s documents/reports that are similar to the one we are about to do. This way, everybody gets an impression of how we approach the regarding, so it basically also covers the sharing of implicit knowledge. This is the basic way we share explicit knowledge accompanied with trainings and meetings where certain knowledge is discussed. Further aspect that helps to share implicit knowledge is that we make sure that the project leader, me or a senior manager, closely monitors what is done by juniors or consultants and intervene where needed. But also before starting a project, we give a thorough briefing to all project members in order to discuss the way we are going to approach the regarding project. Apart from the actual project plan and milestones within a project, we are setting milestones for our team that enables us to closely monitor what is being done in a project.
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As mentioned before, we put responsibility on our juniors as soon as they enter our team. So we do not treat juniors differently than consultants or senior consultants. This is definitely one aspect that sets us apart from our competitors. Other than that, specifically related to KM, we make sure that we have very close relationships with our colleagues. I think that team bonding events are very helpful when it comes to sharing knowledge, especially implicit knowledge. The people aspect is essential when it comes to sharing knowledge that is not easy to understand. A lot of times, the real problem when sharing implicit knowledge is that people are not willing to share their knowledge, because they don’t want to give away what they know as they see themselves as competitors to some extent. When it comes to career advancements and promotions, people try show that they are better than their colleagues/competitors. This is why I mentioned that team bonding events and initiatives are inevitable. We try to keep that competitive attitude to a minimum which in return favours the sharing of implicit knowledge.
Q13:Is there anything you would change about the processes of sharing implicit and/or explicit knowledge if you had the power to do so?
