Organisational Learning and Knowledge Management at General Electric - Essay Example

Organisational Learning and Knowledge Management at General Electric “An organisation’s ability to learn and translate that learning into action is the ultimate competitive advantage” (Welsh 2004: 3). Introduction In order to sustain competitive advantage, build a positive organisational culture, and ensure that knowledge is disseminated effectively throughout the organisation, General Electric has been benchmarked as a leader in knowledge management. GE operates as a multi-national enterprise investing significant capital into technological innovations in diverse portfolios of business practice. The company produces aircraft engines, plastics, appliances, medical systems and lighting (to name only a few divisions) with pre-tax profitability, company-wide, at 31.6 percent (Grant 2003). This is much higher than industry average, due largely to the knowledge management systems in place at this multi-national enterprise. General Electric is a top-down, centralized management hierarchy with divisional management reporting to executive leadership at company headquarters, led by Chairman Jeffrey Immelt. In order to establish appropriate cost control and generalized leadership controls, the company requires this centralized organizational structure due to the inter-dependence between all divisions and the high volume of employees at GE. The centralized nature of General Electric somewhat confounds the traditionalist viewpoint of knowledge management systems, as it is generally recognised that in order to effectively manage knowledge, employees must be more interactive in decision-making through autonomous learning and job role functioning (Davenport, Jarvenpaa and Beers, 1996; Swan, Scarbrough and Robertson, 2002). The centralized structure of General Electric is what prompted analysis of this particular business case as it defies the argument that a decentralized structure ensures more efficient knowledge management processes. In order to manage knowledge and promote organisational learning, GE relies on technology, experiential learning processes, the SECI model promoted by Nonaka, and bounded rationality as key approaches to facilitate KM practices. GE is governed by leadership that understands the complexities of multi-national business operations. Offers Jack Welch, previous CEO of GE, “you can’t manage what you can’t measure” (Seymour 2008: 28). Time constraints, the practical market environment and its unpredictability in certain markets, and the differing cultural dimensions of diverse employee populations create difficulty in creating concrete and time-sensitive decisions without recognising the boundaries associated with rational decision-making. Thus, GE’s approach to knowledge management is based on practicality rather than ideology which drives aspects of its cultural development focus and short-term business objective planning. This report highlights the knowledge management and learning practices at GE with a focus on the systems in place to promote such activities. GE cultures, systems, structure and practices General Electric follows the SECI model which focuses on the relationship between socialization, externalization, combination and internalization. Despite its centralized hierarchy, General Electric prides itself on its commitment to building positive interpersonal relationships between management and employees, building a culture of innovation, cooperation, team work and loyalty. Thus, against the SECI model, GE is most closely focused on socialization in order to effectively manage knowledge and promote organisational learning. The knowledge that resides within GE is largely tacit, this being knowledge that is largely intangible and attached closely to individual implicit expertise (Dinur 2011). In each division, specialized human talent maintains specific skills related to production, engineering, service or management that is not easily disseminated throughout the organisation without direct exposure and interaction with other knowledge experts. Thus, in order to promote learning, GE must focus on cultural development to build trust and cooperation among divisional leaders and employees to facilitate knowledge exchange and learning. To accomplish this, General Electric relies strongly on experiential learning, a process of learning by doing. Experiential learning is a cyclical process of experience where knowledge construction occurs through direct experience with concrete and tangible elements of the environment or the social reality that drives culture at the organisation (McCarthy 2010). One method of experiential learning at GE that is linked with culture is use of role playing and simulations in which learning by doing becomes part of the training norm. This is used when learning trainees are involved in executive scenarios and forced to come up with creative solutions on how to effectively manage the scenario to achieve positive outcomes (Fragoulis, Valkanos and Florou 2008). These experiential learning sessions are conducted in group environments that include taking on the identify of a partner within the business in order to role play; a form of emotional intelligence building. By allowing peers or managers to critique solutions, they come to form group membership ideals and offer feedback through knowledge sharing on their own experiences to offer more positive solutions than those generated during the role play exercises. Thus, under the SECI model, these simulations and role play scenarios fit under socialization, where individuals share experiences and tacit knowledge via direct interventions at a personal level (Nold 2011). Cultural inter-dependency is created in this knowledge sharing format and also teaching how individuals can perceive a scenario and rely on analytical solutions rather than forming symbolic responses to real-life business scenarios that occur regularly at GE. These activities also promote externalization under the SECI model by drawing in elements of the outside environment so that solutions can be shared with others who are outside of the internal group performing these exercises in the long-term. General Electric builds its culture based on the theory of communities of practice, whereby shared understandings about the company’s goals and mission are understood congruently by all members of the organisational culture. “They are united in both action and in the meaning that action has for themselves and for the larger collective” (Swan, Scarbrough and Robertson 2002: 482). The notion of communities of practice is that it creates autonomous workers that are capable of handling multiple business scenarios through shared exchanges of tacit and explicit knowledge. However, it has been identified that many researchers do not believe that communities can be created in centralized hierarchies which is why GE stands alone in its approaches to socialization and cultural development amidst a very controlled management structure. The organisation is able to maintain its control systems and also devote considerable management investment into human resources development that promote healthy community development and shared understandings. How does GE develop its culture and ensure learning and knowledge exchange outside of experiential learning? The business recognises the real-life issues associated with multi-national operations in terms of always finding concrete and rational solutions to real-world business problems. Because of this realistic view rather than ideologic, the organisation uses a bounded rationality approach to business development and operations. Under bounded rationality theory, there is a process known as satisficing in which decision-making stops when a “good enough” solution is found rather than optimal course of action in a given scenario (Mansourian and Ford 2007: 681). In an organisation where there is less demands stemming from market conditions, international finance, and competitive rivalry, there is more time for search persistence in order to find rational and optimal business solutions. Nevertheless, GE is bounded by the realities of international business practice and must therefore disseminate to managers and employees that there are times when a “good enough” solution will suffice the short-term scenario. This, in a way, is a form of employee empowerment that allows them to be more interactive in the decision-making process even under a centralized hierarchy of control and top-down leadership. By promoting the acceptability of satisficing, employees are able to develop solutions to real-world problems without undergoing arduous search activities to find mutually-acceptable, optimal solutions with executive approvals in every business scenario. Thus, giving employees license to satisfice as a means to deal with limited time or other computational capacity issues, employees are engaged as decision-makers. This, in turn, builds self-confidence and motivation as autonomous decision-makers. Culture is an embedded concept, a form of collective knowledge, which is both tangible and intangible and difficult to quantify. GE recognises the complexities of working with diverse employees with different values, attitudes and ethnic backgrounds that can impede or improve progress toward change. GE operates in a very dynamic environment where change and innovation are constantly present, thus requiring adjustments to procedure and organisational structure at the mid-level management tier. In most businesses, change agents are described as “the undeserving victims of the irrational and dysfunctional responses of change recipients” (Ford, Ford and D’Amelio 2008: 362). Resistance to change stems from inherent beliefs and values that conflict with the objective or the cultural norms at the business and can impede progress internally. Because GE recognises these differences at the individual level, cultural development occurs through experiential learning and empowerment through bounded rationality principles of governance. This not only avoids change resistance by appealing to employee psychology related to needs fulfilment, but also promotes internal learning by sharing tactic and explicit knowledge from one division to the next. GE also relies on technology as a means to facilitate knowledge exchanges. The company utilizes expertise from Interwoven, a software package the promotes efficiency in content distribution and collaboration. All enterprise software, including Excel, Word, video systems, and HTML content, are under Interwoven software which tags and ensures more effective distribution of materials from one division to another (PR Newswire 2002). Interwoven links the extranet with the intranet, as well as Internet sites, with an internal database that makes knowledge exchanges user friendly and broadens the learning disciplines of employees and managers through its convenience and ability to promote knowledge collaboration. GE also utilises instant messaging tools, video conferencing, web based document repositories, and web-based survey tools as a means to create a more efficient workflow and disseminate knowledge more effectively (Johannessen 2006). Because the business operates as a multi-national, many divisions that are inter-dependent on one another are distanced through geographic constraints and thus a system must be in place to ensure positive socialization as well as knowledge transfer. These electronic tools work as auditing of effectiveness (such as the web-based survey) and also create a more efficient inter-divisional workflow. Knowledge is exchanged, in real-time, from one tacit source to another through conferencing tools and instant messaging systems that promote efficiency and effective knowledge transfer. These tools also service as technological enhancements to the bounded rationality approach at GE as a means to create fast, collaborative solutions (that might not be optimal) to tackle real-world issues that are unpredictable but ever-present as a multi-national entity. What these technological tools provide is the ability to take tacit knowledge and convert it to explicit knowledge through direct socialization and dynamic knowledge exchanges. This is part of internalization in the SECI model, whereby “individuals absorb new recombined knowledge with their own tactic knowledge to broaden, extend and create a new nugget of knowledge” (Nold 2011: 471). The recombination process occurs in real-time with the tacit knowledge leaders providing solutions, brainstorming potential solutions collaboratively, and then divesting a new type of knowledge gleaned through real-time technology-supported discussions. The knowledge combination process falls under the SECI model whereby explicit knowledge is served through tacit knowledge discussion. Critical assessment of GE KM practices According to Swan, Scarbrough and Robertson (2002) it is difficult to create communities of practice when there are power inequalities that exist between tacit knowledge holders. One thing that is unique and beneficial about GE’s approach to knowledge management and learning promotion is the tendency to instil a sense of adversity between tactic knowledge holders during their interactions. “A system of adversity enables strong leaders to emerge” (Weinberger 2007: 3). Welch, when the Chief Executive of General Electric, actually built adversity into the knowledge management framework at the business in order to promote cultural development and leadership development. The ongoing exchanges between very diverse tacit knowledge holders were not without conflict and power struggles, however by utilising the SECI framework to create more emphasis on socialization and also abstract conceptualization of knowledge, adversity helped to create more quality solutions that combined to form a new type of collaborative knowledge. Thus, in critical view of diverse socialization practices as a means to find collaborative solutions, GE should be applauded for inviting adversity since it creates more optimal solutions and allows for better experiential learning. Differing viewpoints in an environment that demands innovation as a key competitive strategy, when interactive, identifies new solutions that would not have been reached if the entire culture was 100 percent unified according to the driving social norms at GE. Adversity promotes abstract reasoning, whether in bounded rationality or in less time-sensitive scenarios, to improve collaboration. The transformation of tacit knowledge to explicit knowledge that can be exchanged throughout the organisation is another strength of GE’s approach to knowledge management and learning. Utilising technological systems to combine knowledge internalizes external data so that learning continues effectively throughout the organisation. Under the SECI cycle, groups are supposed to challenge one another in order to create knowledge , even if they have to repeat earlier steps in solution generation until they find unity, trust and comfort working with one another under socialization (Nold). As an innovator, GE is put under pressure to consistently identify new innovations not only for profit purposes, but to ensure competitive longevity in key operating markets. Adversity seems to be demanded by the SECI model of knowledge sharing and learning and thus GE excels in combining and internalizing knowledge through adverse interventions between different tacit knowledge holders. According to Bratianu and Orzea (2010) internalization is highly individual, accomplished through learning-by-doing, and is meant to reframe existing tactic knowledge to create explicit knowledge as an outcome of learning and exchange. GE excels in the conversion process to internalize knowledge from positive social interactions that are built strongly on the existing culture of teamwork and cooperation that already resides there. GE leadership builds on existing core competencies when grouping tactic knowledge holders in collaborative discussions, thereby creating a better system of knowledge transfer and learning acquisition. Dinur (2011) offers that problems arise in knowledge sharing when individuals take knowledge for granted and rely on collectively-embedded knowledge rather than seeking new learning. GE’s structure and organisational culture of cooperation do not allow for such activities to occur, this being taking knowledge for granted, since the operating environment does not allow for individualized knowledge hoarding. It must be shared as a dynamic of inter-dependency at General Electric based largely on its foundational values of collaboration, thus knowledge is more easily accepted by employees and managers which improves socialization efficiencies in the process. In this industry, one cannot learn without doing because of the specialized nature of tactic knowledge holders and their key areas of expertise. As an example, “one can only learn to drive a car or fly an aeroplane through direct experience” (Matsuo and Easterby-Smith 2008: 32). The complexities of General Electric knowledge and job role expertise prevents an individual from escaping experiential learning if they are to gain any positive learning from interactions with different tacit knowledge holders. Know-how is created only through direct explanation of critical knowledge to those who lack such tactic knowledge. Experience builds this understanding that can be externalized, combined and then internalized for the rest of the culture to understand using systems in place such as Interwoven or the role-playing scenarios in place. GE has created its own inter-woven web of knowledge exchange that is built on a foundational culture of unity and team work philosophy that facilitates a more effective absorption and understanding of tacit knowledge so that it can be disseminated as explicit understandings to those who lack this expertise. This unifies the culture and promotes more efficiency in the process. Conclusion It is clear why General Electric is a benchmark for best practice in knowledge management and learning that is founded on organisational culture and also by focusing on the social dimensions of collaboration that build more motivation to share knowledge. Culture contributes to the combination of knowledge and the transfer of this combined learning to explicit dissemination as a means to promote understanding to the entire organisation. It is an inter-dependent structure, despite being centralized with many executive-level controls, that promotes autonomous learning whilst also demanding collaboration. Perhaps it is the market environment, an external force, that dictates the need for sharing knowledge or a process of governance related to KM best practice, however GE is a leader in both learning and knowledge management. General Electric should be recognised for effectively using technology, culture and experiential learning as a means to create competitive advantage and ensure knowledge transfer when required. References Bratianu, C. and Orzea, I. (2010) Organizational knowledge creation, Management & Marketing 5(3), 41-62. Davenport, T., Jarvenpaa, S. and Beers, M. (1996) Improving knowledge work processes, Sloan Management Review 37(4), 53. Dinur, A. (2011) Tacit knowledge taxonomy and transfer: case-based research, Journal of Behavioral and Applied Management 12(3), 246-281. Ford, J., Ford, L. and D’Amelio. (2008) The key to organizational performance improvement: a perspective of organizational knowledge creation, Performance Improvement Quarterly 21(2), 87-102. 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