Organizational performance; the role of knowledge management and performance measurement

To cite this, reference to: Agbedzavu, E., Markou, C (2020); An Organizational Performance; The
Mediation Role of Knowledge Management and Performance Measurement: USW, MBA Q & A
FACULTY OF BUSINESS AND SOCIETY
Master of Business Administration (MBA)
University of South Wale, UK
Tutor’s Name: Dr. Chrystalla Markou
Student’s Name: Agbedzavu Emmanuel
Module Code: ST4S39 Module Title: Strategic System Thinking
Work Tittle:
An organizational performance; the mediation Role of
Knowledge Management and Performance Measurement
Submitted by,
Agbedzavu Emmanuel
Enrollment ID: R1708D3236685 / 74113619
Date: 25/10/2020; 3:11 pm

Introduction
Organizations inject lot of resources into its operations, and it is critically important to weigh or
measure performance of its operations to infer either it is strategically tuned or running into ditch
and take corrective measures. Performance measurement of an entity is necessary as it informs
management or managers what needs to be improved, sustained and reviewed in line with
strategic goal. Performance measurement is a multi-dimensional, and different models and
frameworks are developed by practitioners and scholars (Kaplan, Norton 2001; Kueng 2000;
Neely et al. 2000) to measure organizational activities. Initially, measurement is limited to
traditional control model which takes into account only financial performance, but there have
been paradigm shift of more balance and integrated approach to measurement. One of these
approaches is balance scorecard model developed by Kaplan, Norton (2001; 1996), and applies
to business areas of customer, financial, processes, growth and learning. To achieve this, metric
aids to transform balance scorecard to operational performance marks in relation to strategic
objective and target for each areas to be weighed (customer, financial, process, learning and
growth) in organization.
As organization is a chain of activities connecting to achieve a desired goal, this paper explores
areas of knowledge management, communities of practice, challenges of performance
measurement, and intellectual capital and social networks. And Secondary data are employed to
construct above areas of organizational operations and their contributions to organizational
performance, and with illustration of practices at both Chevron Texaco and Skandia.
Knowledge Management / Environment
Knowledge management is the process of identifying, creating and retaining, diffusing and the
application of knowledge to solving practical situations or to achieve organizational goal.
Knowledge is a product of both tacit and explicit knowledge (Theriou, Chatzoglou, 2008;
Kaplan, Norton 2001). According to Lee, Sukoco (2007), organizations are relying on
knowledge management utilization and other resources to prosecute its superior performance. As
a necessary tool for organizations, knowledge management promotes flow of knowledge within
entities (Hislop 2013).
Knowledge management impacts on organizational is achieved through the integration and
implementation of knowledge strategy within an organization by incorporating and developing
policies and values in support of knowledge creation and sharing for competitive advantage
(Metaxiotis et al. 2005; Meyer et al. 2002).
Knowledge management Infrastructures and processing
Just like cars need good road networks to help owner’s movement to places, same as enabling
system of organization (structure, culture, process and technology) promote knowledge
management within an organization.
Structure here refers to hierarchical layers, working relationship among the employees and
management team, and communication structure can play a salient role in inculcating culture of
knowledge production, sharing and application. The flexibility of organizational structure or
flattened layers help flow of communication among workers with its accompanied sharing of
knowledge (Gold et al. 2001; Rezgui, Y. 2007.). The effective communication with a trusting

relationship among workers and external stakeholders spurs knowledge sharing to organizational
benefit (Huang, N.T., el al, 2007)
Organizational culture is set of values, belief, symbols and behavior that shape knowledge
production within entities (Ho, 2009). The extent to which culture accommodates knowledge
sharing affects the success or failure of knowledge management within an organization (Mills,
Smith, 2011). According to Sin, Tse (2000), they assert that organizational culture that
encourages consumer centric, product quality and innovation achieve superior performance. As
demonstrated at Skandia, management recognizes the importance of knowledge management and
incorporate into organizational structure.
However, some companies’ culture are influenced by despotic tendencies belief which may
be static, rigid and unaccommodating of change will be a barrier to knowledge creation and
transfer, therefore, disallowed the practice of knowledge management.
Information technology forms a vital structural elements of propagating knowledge in
organizations. Technology helps in businesses intelligent gathering, distribution of learning and
knowledge, discovering, knowledge mapping and integrate into existing knowledge flow to bring
about new knowledge (Gold et al. 2001).
Equally important in knowledge management is knowledge processing, thus acquisition, sharing
and applying same within organization. Knowledge management is a continuous process which
resides within individuals, groups and organizations that involve in knowledge processing
(Pirkkalainen, Pawlowski, 2014).
According to knowledge management framework; SECI, Nonaka (1994) asserts that knowledge
generation is systemic, changing, ongoing processes which happens and repeat over time. SECI
model of knowledge emphasis on knowledge conversion from one type to another ( tacit and
explicit) and manifested through interaction of individual, groups and to organization .SECI
means Socialization, Externalization, Combination and Internalization of knowledge process
from one type of knowledge to another ( Nonaka,1994). Tacit knowledge is transferred amongst
individuals through daily experiences as they interact and socialize. This knowledge is difficult
to codify for learning, except through direct work experiences over time (Nonaka, Toyama,
2003). This tacit knowledge is converted to explicit type through externalization process in form
of concept and in the written documents. This conversion is framed with dialogue and team
discussion in order to codify hidden knowledge residing in individuals for easy accessing,
learning, use and share within an organization. This knowledge codification creates
organizational memories as employees resigns or retires from work, and this knowledge
continues to serve the interest of entity (Nonaka et al., 2006). As tacit asset converted to explicit,
it can be combined with existing ones to form a complex stock of knowledge available to
organization in order to internalize and apply same to practical situations in organizational areas
of competitiveness, stakeholders’ satisfaction, incremental or radical innovations.
Leadership in Knowledge management
It is easy to see a well-designed strategy unfulfilled due to lack of senior management’s
commitment, therefore, a strong and quality leadership support for generating knowledge,
learning and applying same to organizational challenges is imperative and highly anticipated in
changing and dynamic environment of businesses. Setting system rewards, promotion of workers

who exhibit innovation and problem solving capacity be encouraged within organizations.
According to Basadur, M. (2004), capable leaders will encourage workers to devise innovative
ways of solving organizational challenges and this goes on long way to produce capacity base
and leads to superior performance within organization. According to Gilmore, el al (2013),
leader stimulates employees’ interest in innovation when a challenging responsibility is
given with autonomy for execution of assigned works or duties. At Skandia, leadership
supports knowledge base building strategy by appointing Leif Edvinsson to develop,
nurture, train and diffuse knowledge within Skandia and outside.
However, a bad leadership with no clear vision for future will not value knowledge
management as a competitive advantage to an organizational operation. This style of
leadership have a little room for integrating new knowledge into company’s operations.
Communities of Practice
Community of Practice (CoP) is approach to comprehend learning and its strategic impacts in
different professions as members come together to form a learning communities through which
people or practitioners interact for knowledge sharing and problem solving (Lave, Wenger
1991). Generally, this practice is an informal and membership is seen through the lens of
professional domains, forming communities where members learn, share and solve problems
concerning the field of interest. The informal nature of the practice enables members to freely
learn from others, sharing experiences, easy flow of communication and grooming of new
entrants in same fields for more knowledge acquisition and application to their situated
problems. According to Wenger, el al (2002); Wenger (1998), communities of practice is a group
of people who share common interest or passion for a field and interact with one another in order
to increase their knowledge base and expertise. As organizations grow with emerging issues and
are gradually relying on knowledge generation, retention and its applications to solving
organizational problems, practitioners find communities of practice as a strategic tool for
developing capabilities in operational areas of production, customer management, marketing,
and IT, and business intelligence in whole of supply chain management. Community of practice
can be seen as an intra and inter-organizational context of interdependence of shared ideas,
workflows, social interaction, objective driven (Kozlowski and Bell (2003, P334) and self-
controlled and independent (Hollenbeck et al. 2012). It can serve as consulting group within the
companies (Devine, 2002) or to external entities. It becomes a strategic and synergic force or
bloc assembling and developing a mental power for innovation and superior performance in
organization. The network within the group can be likened to a flattened layer or structure of
organization where flow of information is fastly disseminated among members which can be
utilized to solving customers’ problems through shared experiences and approach to similar issue
elsewhere. Not only resolving customers’ concerns, but a whole of supply chain value ,thus
procurement, production processes, quality and risk management, distribution channels and
market knowledge which give organization competitive edge and superior performance.
Chevron Texaco applies this model as it expands its operations geographically, and with
communities of practices, workers can be cross-fertilized with needed competencies and uphold
the best practice across the world just like host country where it is incorporated.
The effectiveness and implementation of communities of practice depends largely on the
organizational infrastructures (culture, technology information, process and structure) which are

to be framed and aligned to accommodate communities of practice for a robust inculcation of
knowledge production, diffusion and application within organization.
Chevron Texaco for instance, sponsors knowledge sharing networks in areas of safety,
exploration and production, information technology and other areas as it seeks to integrate
culture, process and business. For Chevron Texaco to deliver its strategic goal, it hosts or stores
its culture, process and others on web-based platform which are accessible by its multi-national
branches, fostering social interactions and learning, knowledge diffusion and performance.
According to Rockland et al., (2010), capabilities of employees are important to meet an
organizational challenges, however, it is difficult to predict skill of worker capable of giving a
competitive edge (Caprile, el al,.2015), therefore, requiring the assemblage of practitioners and
pool of diverse knowledge and experiences through Communities of Practice for day to day
challenges face by organizations.
However, communities of practice is conceptually flawed as a strategy in sense that it is linked
to organizational structure from different companies and societies (Hayes, N., Walsham, G.
2000) as members are drawn from organizations with effective hierarchical layers which are
influenced by the norm. Again, it lacks a measureable result and possibly develops its own
policies to govern communities. According to Czarniawska, B.(2003), organizations have
competing goals to achieve within a certain time frame, therefore, aligning individualized needs
and goal emerging from communities of practice may have a dire consequence on delivery of
organizational goal and serve as counterproductive. Adding to above, informal communities of
practice with a high degree of free thinking, self-organizing and autonomous can lead entities
into chaos through its influence.
Despite the above contradictory accounts, communities of practice is considered as a hybrid
force capable of transforming tacit knowledge to explicit and makes available organizational
memories of stock of knowledge for superior performance.
Performance measurement
Organizations deploy theirs resources of tangible and non-tangible in return for satisfactory
outcome. Therefore, performance alone cannot be equated to an organizational growth and
successes, but every activities leading to outputs need to be measured in order to trace
interrelated actions to a sustained growth and improvement. As posit by Hauser, Katz (1998),
organization is what it is measured of and Cocca, Alberti, (2010); Kaplan, Norton, (1992) also
add that what one measures is what one gets. This proves reason why financial institutions
demand for organizational value by quantifying its wealth (financial and competence
measurement) before granting loans because that is what the company is, with security assurance
to Banks, except it is manipulated.
According to (Neely et al. (2000); neely (1992), the core elements of performance and
improvement management system are metrics which are used to quantify efficiency and
effectiveness of organization. Some of these metrics are balance scorecard, dashboards, quality
improvement system et cetera. However, Franco-Santos et al. (2007), suggest three practical
stages; information gathering, measure design and selection and capturing of data which
emphasizes that organizations should construct metrics anchored on performance measurement
and improvement system, implement, and evaluate in order to improve on processes based on

feedback generated. According to Franco-Santos, et al (2012), performance measurement should
influence the character of employees, promotes organizational abilities and performance.
To do what Franco-Santos el al (2007) asserted above, it is imperative to have a clear strategic
objective, and when it is achieved leads to solving performance problem in an organization.
Closely related to identifying objective are the critical success factors (CSFs) in the areas need to
be improved (sub-objective) which serves as guiding path to attaining set objective (Robertson,
2008) . And employment of indicators for tracking progress and performance gauging, and are
meant to infer how performance is, in relation to strategic aims. They are developed and tailored
according to contextual needs by ensuring alignment between strategy and operation (Kaplan,
Norton 2001).
Asking of key performance questions (KPQs) such as; are we were we supposed to be? If not so,
why? which seek answers of cause-effect and narrow down the focus to establish gap and create
nexus (links) designed to address the performance pitfall.
This can be assisted by relying on data and compare analytically between data and actual desired
goal in order to establish gap, and communicate strategic goal to workers. The gap reveals what
needs to be done to address pitfalls by aligning performance to strategic purpose, and to ensure
input-output and outcome process implementation. These become guiding tools and steps for
performance delivery where progress is being evaluated, monitored, and reviewed in line with
goal.
Challenges of performance measurement
Organizations are operating in a fast changing trend of social and economic environments where
their stake is high, and as a result of this, they are making tirelessly effort to measure their
performances in every area of supply chain value. This leads organizations to adopt frameworks
such as dashboard, balance scorecard, quality improvement management and the rest, relying on
available data, process it, and transform them into useful reports for decision making in an
organization. With the final report, organizations utilize it in taking decision on which company
is driven towards its strategic goal attainment (Kennerley, Neely, 2003). It is highly duty bond to
monitor and assess performance levels towards strategic goal and delivery of stakeholders’ value
(Kennerley, Neely, 2003).
However, with all these fine-tuned wordings attributed to importance of measuring
performance, it is rather characterized with pocket of challenges of top-down approach in
deciding what elements to use, framework and identification of cause-effect (Neely, et al, 2001;
Kaplan, Norton, 1992). Adoption of top-down perspective denies the contributions from other
stakeholders in framing the measurement tools and components, therefore, the suppression of
needed skills, innovation, competencies and derivative competitive advantage is inevitable
(Neely, et al, 2001).
Organizational culture influences and shapes the behaviour of employees, principles and rules
and other values. In this sense, it is argued that culture that is rigid, structurally blinded, and
static in nature cannot cope and accommodate changes which are inevitable in fast changing
open space, as a result influences under-performance (Magee, K. C. (2002). Paradoxically,

Kandula (2006) observed that a strong culture promotes high performance and influences
strategic ways towards targets.
The developed indicators or metrics are considered to be prescriptive and normative in nature
which may not be suitable in some contexts in an organization. This heightened the errors and
unreliability of generated reports, thus potential to mislead. In attempt to address above, Franco-
Santos et al (2007); Suwignjo et al. (2000) opine that the development and construction of
metrics should be carefully guided through the lens of practical approach (organization specific)
in areas of concern through their proposed framework, but their views are parallel to Kaplan’s
submission (Kaplan, 2012), who emphasized on generic school of thought (structured and
codified approach) in order to enable practitioners to learn and apply same.
In addition to above, businesses operate in open-space environment which influences activities
within the organization, but difficult to measure and figure out all these in external environment.
Lack of qualified personnel who can gather, process and transform data appropriately adds more
challenges to performance management bottlenecks.
Intellectual Capital and Social networks
Intellectual capital is organization’s prowess housed within the company to create values even in
the face of social and economic upheavals. Knowledge becomes a strategic and economic
resources for firm’s competitive advantage (Ramezan, 2011), and organizations realize that its
performance depends on its resources such as tangible assets, financial and intellectual resources
(Wall, 2005; Andriessen, 2004). Intellectual assets become a mechanism use by firms to obtain
competitive edge over rivals, initiation of novel products and modification, organizational
success performance, and value creation (Ramezan, 2011; Wall, 2005). The application of skill
competencies and know-how is paramount when marshalling other resources for competitive
advantage, performance and navigation of firm in the turbulent time. An implicit and hidden
resources housed in organizations is its intellectual capital which becomes an imperative tool for
its survival, efficiency and high performance in face of milieu. Intellectual capital has been
named differently such as intangible asset, invisible asset, capital or resources by scholars (Marr,
B., Chatzkel, J. 2004; Kaufmann, Schneider, 2004).
Despite the different approach and ways researchers view components of intangible resource,
large number of them aligned with Sveiby (1997) ,who categorizes intellectual capital as human
capital, structure capital and relational capital( customer) (Marr, B., Adams, C. (2004; Bontis, N.
(2002). Human capital comprises of competences, aptitudes and attitudes of workers as
employees apply their skill sets to affect positive change in organizations (Garcia-Meca, E.,
2006). The structure or organizational capital, as averred by Marr el al., (2003) constitutes
organizational culture, process and innovation. This represents a complex system and needs
flexibility to adapt, therefore, designing stage of structures needs attention of incorporating
culture and other components capable of accommodating change as an effective tool to respond
to environment. And while the relational capital refers to organizational networks with
stakeholders. The relationship organization keeps with its employees, customers and other bodies
generates useful feedbacks on improvement process, performance and promotes knowledge
sharing among members, and if managed well, catapults competitive edge and widen its market
space.

Channels to cultivate Intellectual resources
Nothing works in vacuum and in same vein, intellectual capital needs roads (soft infrastructures)
on which its cargoes (usefulness and impacts) can be felt in an organization’s value chain
creation. Owing to above assertion, Rostogi (2003, p.230); Daun (2002); Lev (2001) concord
that intellectual capital enhancement and sustenance needs connectivity efforts of company’s
human capital, relational capital, organization’s enabling channels and knowledge management.
On human capital aspect of intellectual capital, employees should avail themselves for skill
acquisition, share it with others, transform acquired skills into production of goods and
processes, and document same in order to create an organizational memories even if manager
resigns or retires from work, entity can still utilize it for competitive advantage.
According to Ho, (2009), organizational culture is set of values, belief, symbols and behavior
that shape activities within the company. The extent to which culture accommodates knowledge
production, sharing and application of same affects the success or failure of knowledge
management within an organization (Mills, Smith, 2011). According to Sin, Tse (2000), they
assert that organizational culture that encourages consumer centric, product quality and
innovation promotes a superior performance and therefore, creates enabling environment for
building intellectual capital to thrive.
However, companies’ culture which is rigid, static and driven on despotic and dictatorship
style of leadership will find it uneasy to allow intellectual resources to emerge among workers.
The relational capital as a nexus to build intellectual capital emphasizes the relationship of entity
with internal and external stakeholders, which Huang, N.T., el al, (2007) observed that
relationship and trust among workers and external stakeholders spurs knowledge sharing,
learning, and enhance customers’ service improvement and satisfaction. Contrary to above,
customers especially can easily desert organizations that do not value customers and to some
extent, causes disaffection and resignation among workers which can affect knowledge base of
an organization.
Above all channels through which intellectual capital is manifested, knowledge management is
crucial of maintaining and sustaining of intellectual assets. According to Lee, Sukoco (2007),
organizations depend on knowledge management practice and other resources to realize its
superior performance, and as a necessary tool for organization which allows acquisition, and
sharing of knowledge within its operations (Hislop 2013).
Measurement of intangible resource
Much time and attention is being paid to intellectual capital by watchers and practitioners, and
so, they are curious to know what it contributes to the survival and growth of the
organiszations.This leads to development of different school of thought on models to measure
intellectual capital (Kaufmann, L., Schneider, Y.2004). Some of the models are Intangible Asset
Monitor(Sveiby,1997), which involve data gathering about growth, renewal, efficiency, stability

and risk connecting to each of classified elements of intellectual capital, thus employee’s
competence, internal and external structures. Other models such as Balance scorecard (Kaplan,
Norton, 2004; 2000; 1996) which considers processes, customers, financial, learning and growth.
This model is applicable to both tangible and intangible elements as approach to measure whole
operation. Even though there are more models, but these are widely used in many companies,
and all of them are viewed as qualitative, generalize and unclear (Kaufmann, L., Schneider,
Y.2004).
To evaluate and measure an intellectual capital, entities rely on a derived value chain from
intangible resources and present it in texts or figures. According to (Garcia-Meca, E., 2006),
value chain derivation of intangible resources is encouraged owing to the fact that financial
report captures intellectual capital as incomplete variables in the statement because of its
measurement problem. As stated in the work of Lev (2002b, 2001), intellectual capital is an
invisible resource which binds (organizes) the whole system effectively and efficiently in the
productive processes, technology, innovative process and therefore, its value creation should be
seen as an implicit value in the ongoing value chain processes. For instance, manager’s
competency can only be valued through output to which his skill is applied to. According to
(Nielsen, C., el al., (2006), organizations should develop rules that will contain the report on
intellectual capital on the statement in manner that it can be independently verified
However, despite the significance attached to intellectual capital, it is observed that it comes at
cost where the acquisition of new technologies, training, and technicalities of incorporating
architectural design are expensive, bureaucratic and cumbersome.
In conclusion, many enterprises remain stagnant, under-performed and eventually collapse,
largely depends on lack of or inappropriate use of its intangible assets, networking, and a porous
handling of knowledge management which supposed to help organization to remain competitive
and technologically driven to impact on their operations and respond to its environment. Moreso,
performance in organization is critical to its success and growth, and it is important to cultivate
and encourage performance measurement which guides organizations on a strategic path to
achieving objectives.

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