EFFECT OF KNOWLEDGE MANAGEMENT ON ORGANIZATIONAL PERFORMANCE OF MANUFACTURING INDUSTRY IN ENUGU STATE NIGERIA

ABSTRACT

The purpose of this work is to highlight The Effect of Knowledge Management on Organizational Performance specifically  the study aimed to pursue the following objectives  to  determine  the  relationship  between  knowledge  management  and organizational   performance;    to   evaluate   the    importance   of   training   and development  in  the  Nigerian  manufacturing  sector;  to  ascertain  the  impact  of motivation  on  employees  level  of  commitment  in  knowledge  sharing  and  to evaluate how E-learning tools affect knowledge sharing in Nigerian manufacturing sector.  The  study  had   a   population   of  948  employees   drawn   from   three manufacturing firms in Enugu State. The sample size of 284 was drawn using Taro Yamane formular at 5% error of tolerance and 95% level of confidence. Instrument used for data collection was the questionnaire. A total of 284 questionnaires were distributed  while 246 were returned.  A descriptive  survey research design was adopted  for  the  study.  Four  hypotheses  were  tested  using  Pearson  statistical package for social sciences. The findings indicates that knowledge  management had  positive  impact  on  performance  organization;  training  and  development affected  employee  performance  positively;  employee  motivation  has  positive impact on the ability to share knowledge, and  E-learning tools affect knowledge sharing positively  in Nigerian  manufacturing  industry.  The study conclude  that organizations needs to improve existing skills and acquire new ones via knowledge management so as to have competitive advantages over organizations that do not practice knowledge management. The study recommends that Nigerian managers should fashioned out ways of implementing knowledge management that is most suitable  for  the  organizations   in  order  to  enhance  performance   taking  into consideration the nature of the organization and culture of the community where the organization is located and the prevailing situations facing the organization at a time.

CHAPTER ONE INTRODUCTION

1.1      Background of the Study

Knowledge  has become a corporate asset that may be the principal  competitive advantage in the global economy. The potential for success of  the  companies is closely tied to their ability to innovate and to develop their ways of production; all this is based on the knowledge  assets possessed by the company [Davenport & Prusak, 1998]. The current focus and study of knowledge management is not for the sake academics only, but a realization that knowing about knowledge is critical to business growth and business survival.

Knowledge, if properly utilized and leveraged, can drive organizations to become more  competitive,  innovative  and  sustainable.  The  interest  in  organizational sustainability  and  growth  has  created  much  disclosure  on   the  methods  of improving  and developing  organizational  performance,  for  example  process re- engineering,    innovation,    and    providing    and    superior   customer    service. Furthermore, several strategies appeared to tackle these improvement, among them was the concept of downsizing, a prevalent strategy in the 80’s, and was created under the pressure to reduce expenditure and to increase profitability. The effect of this strategy was the loss of vital knowledge workers, who had accumulated years of  experience  and  knowledge, and  who  were  forced  to  leave  the  organization because of the downsizing policy. By leaving the organization, they took valuable knowledge with them. Knowledge dispersed across organizations is an important source   of  organizational   advantage  (Teece  1998;  Tsai  and  Ghoshal  1999). Knowledge is often defined in relation to action, e.g. information transformed into capability for effective action. However, together with ability to act, knowledge is also  just  what  we  know.  Consequences  of knowledge  include,  for  example,  a capacity  to  perform  a  particular  task,  or  a  productive  resource  or  factor  in providing competitive  advantage. Experience,  intuition and judgement belong to knowledge,  which  is  hence  a  product  of  information,  experience,  skills  and attitude. All knowledge is local and belief related. It may be defined as patterns of meaning that can promote a theoretical or practical understanding that enables the recognition of variety in complexity. These patterns are often developed through a coalescing of information.  If  information  is seen as a set of coded events, then

consistency occurs with the definition that explicit knowledge is codified  (Wise,

2002).

Knowledge management is complex and multifaceted; it encompasses everything the  organisation  does  to  make  knowledge  available  to  the  business,  such  as embedding  key  information  in  systems  and  processes,  applying  incentives  to motivate  employees  and  forging  alliances  to  infuse   the  business  with  new knowledge.  Effective  knowledge  management  requires  a combination  of many organisational  elements-  technology,  human  resource  practices,  organisational structure and culture- in order to ensure that the right knowledge is brought to bear at   the   right   time.   Knowledge   management   initiatives   in   organization   are consequently  increasingly becoming important and firms are making significant information technology investments in deploying knowledge management systems (KMS).

Weber (2007) agree that in order for organizations to stay in the competitive race knowledge has to be up dated continuously. Knowledge management attempts to secure and replenish the learning experiences, as well as the work products, of the individuals who comprise an organization.  Today’s  volatile  business demands a new  attitude  and  approach  within  organizations  actions  must  be  anticipatory, adaptive, and based on a faster cycle of knowledge creation.

Knowledge management can play an important role to make companies compete productively.  Knowledge  is a fluid mix of framed experience,  value, contextual information,  and  expert  insight  that  provides  a  framework  for  evaluating  and incorporating new experiences and information. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms.

An emerging knowledge-centric view of the firm describes firms as organizations that  know  how  to  do  things.  This  implies  that  a  firm  can  best  be  seen  as  a coordinated  collection of capabilities,  somewhat  bound by  its own history,  and limited in effectiveness by its current cognitive and social skills. The main building

block of these capabilities (or unit of analysis, if you prefer) is tacit and specific to the firm (Winter, 1993).

Knowledge is a philosophical concept defined by Plato as a belief that is supported by  an  account  or  explanation  (Blair,  2002).  In  this  context  of  view  of  an organization’s knowledge, the definition indicates the knowledge that comes from increasing the company’s ability to utilize and a sense of information available to create values for shareholders (Leiponen, 2006).  There has been much significant growth in knowledge-based  school of  thought,  which shows that the yield and retention of knowledge can have a positive effect on a firm’s performance (Maltia

& Scott, 1999). To manage the company’s intangible assets with leverage for the benefits are considered a core capability. Knowledge management (KM) has aimed at   capturing,   integrating   and   using   existing   organization   knowledge   and subsequently  creating  a  knowledge  asset  that  can  be  source  of  sustainable competitive advantage in the long run (Brooking, 1999; Havens & Knapp, 1999). Knowledge  management  has  been  recognized  as  an  essential  component  of  a proactively  managed  organization.  The  key  concepts  include  converting  data, organizational   insight,   experience   and   expertise   into   reusable   and   useful knowledge that is distributed and shared within the people who need it. Knowledge management addresses business challenges and enhances customer responsiveness by creating and delivering innovative products or services, managing or enhancing relationships  with  existing  and  new  customers,   partners  and  suppliers,  and administering  or  improving  more  efficient  and  effective  work  practices  and processes.  Knowledge management  is about getting knowledge  from those who have  it  to  those  who  need  it  in order  to  improve  organizational  effectiveness (Armstrong,  2005).  Knowledge  management  has  become  a  direct  competitive advantage for companies selling ideas and relationship (Ulrich, 1998).

Knowledge management (KM) refers to range of practices used by organizations to identify,  create,  represent,  and  distribute  knowledge  for  reuse,  awareness,  and learning across the organization. Knowledge  management programs are typically tied to organizational objectives and are  intended to lead to the achievement  of specific   business   outcomes   such  as   shared   business   intelligence,   improved performance, competitive advantage, or high levels of innovation.

Knowledge management is popularized and has been spread across the industrial and  information  research  world.  Organizations  understand  the  significance  of intellectual  capital  that  is  managed  efficiently  in  order  to  improve  the  entire organizational  performance  by aligning  the ability of  employees  in accordance with  the  overall  business  strategy.  The   knowledge   management  focuses  on merging people, processes, and technology together by combining the ability with the  objective  of  providing  corporate  knowledge  at  an  organizational  standard. Knowledge   management   is  also   about   identifying   and   compiling   business information   within   the   business   with  a  competitive   advantage   over   other companies.  The  information  that  is  gathered  will  be  comprised  of  employee knowledge  that makes up their experience  in the field, as well as  technological knowledge  that  various  people  may  have.  Knowledge  management  is  about ensuring that this information  is accessible  to anyone  within the company who needs it.

An  organization  that  wants  to  create  a  knowledge  sharing  culture  needs  to encourage its staff to work together more effectively, to collaborate and to share lastly to make organizational knowledge more productive. Davenport and Prusak (1998, 2000) explain that sharing must be initiated at a human level and once it is working   its   application   on   technology   will   produce   positive   results.   The responsibility  of  effective  management  is  to  ensure  that  prompt  and  effective decisions  are taken. Management  and employees  are not only to increase  their knowledge, but share it for the benefit of the organization and themselves as well. Without  motivation,  sense  of  security,  healthy  reward  system,  this  cannot  be achieved.  However, direct and indirect rewards must be put in place to encourage knowledge sharing.

1.2      Statement of the Problem

Due  to  the  rapid  changes  in  a  business  environment,   sustainability  of   an organization is possible only if the knowledge management trademark is utilized. As a result of this fact the foundation of industrialized economies has shifted from natural resources to intellectual assets. Executives have been compelled to examine the knowledge underlying their business and how that  knowledge is used. Many organizations are not aware of this. The issue of ignoring knowledge management

is mostly seen in organizations that are not concerned with influencing the ways in which people store and share their wisdom and understanding; and organizations that do not get involved in increasing the capabilities and potential of employees by providing  learning  and continuous  development  opportunities  for enhancing knowledge sharing. Notably public sector organizations usually undermine the act of training and developing their personnel. They are also not able to identify the driving forces of knowledge management which influence the way knowledge is shared in these organizations. These organizations do not motivate their employees commensurately in order to share their knowledge and improve productivity and competitiveness. This however presents negative impact on such organizations and such organization ends up performing poorly.

The capacity to manage human intellect and transform intellectual output  into  a service or a group of services embodied in a product is fast becoming the critical executive  skill of  this  era.  Despite  its  importance,  knowledge  management  in organizations has remained a black box for both scholars and practitioners.

Many  organizations  are  reasonably  good  at  acquiring  knowledge  but  end  up

wasting this resource by not effectively disseminating it. Recent studies report that knowledge sharing is usually the weakest link in knowledge management. How do organizations share knowledge? Many corporate executives believe that training is the main element of knowledge management. Formal training is useful, but most knowledge  sharing  occurs  through  communication  processes  that  quickly  and fluidly  share  meaningful  information  across  organization  boundaries.  All these problems which hinder the performance of organizations in manufacturing sector have necessitated studying the impact of knowledge management in the Nigerian manufacturing sector.

1.3      Objectives of the Study

The specific objectives of the study are as follows:

1.   To  determine   the  relationship   between   knowledge   management   and organizational performance.

2.   To evaluate the effect of training gathered through knowledge management on performance of Nigerian manufacturing firms.

3.   To ascertain the impact of motivation on employees’ level of commitment in knowledge sharing.

4.   To evaluate how e-learning tools affect knowledge sharing in the Nigerian manufacturing sector.

1.4  Research Questions

To enable the researcher assume a better ground on the topic of discussion; this work seeks to answer the following questions.

1.   To what extent is there a relationship between knowledge management and organizational performance?

2.   How far does training gathered through knowledge management affect the performance of Nigerian manufacturing firms?

3.   To  what  extent  does  motivation  of  employees’  enhances  the  level  of commitment in knowledge sharing?

4.   To what extent do e-learning tools affect knowledge sharing in the Nigerian manufacturing sector?

1.5      Research Hypotheses

To guide this study in achieving its objectives; the following research hypotheses are formulated:

Ho1:    There  is  no  positive  relationship  between  knowledge  management  and organizational performance in Nigerian Manufacturing firms

Ho2:    Training gathered through knowledge management does not enhance  the performance of Nigerian manufacturing firms

Ho3:    Motivation  of  employees’  does  not  enhance  level  of  commitment   in knowledge sharing in Nigerian Manufacturing firms

Ho4:    E-learning tools do not have positive effect on knowledge sharing in  the

Nigerian manufacturing sector

1.6      Significance of the Study

This research work is significant to manufacturing organizations because as goods and services become more sophisticated in content and production, the foundation of competition  becomes  intensively  knowledge  based, the focus  on developing

valuable   and   hard-to-imitate   knowledge   that   yields   sustainable   competitive advantage.

This research work is beneficial to managers who are interested in leveraging the knowledge of their organizations in order to improve innovative output and also financial performance. Not only does it provide solid information against which to benchmark a firm’s performance, it also guides managers towards the key factors that affect the process of knowledge creation and innovation.

This study is relevant to business organization,  scholars and research fellows  in such  areas  as  strategic  management,  human  resource  management,   business strategy,  computer  science,  information  technology,  general  management,  and other related  areas. This is because of the fact that  strategic management  level scans environment  and reports from within the  organization  in making decision and adapting to change. The environmental scanning and quality decision making are enhanced by knowledge management. This study is significant because it seeks to  improve  the  performance  of  individuals  and  organizations  by maintain  and leveraging the present and future value of knowledge assets. The findings of this study  will contribute  will contribute  to the enrichment  of the literature  on the impact  of  knowledge  management  in  the  Nigerian  manufacturing  sector.  This study will serve as a body of reserved knowledge to be referred to researchers.

1.7      Scope of the Study

This study is designed  to analyse the impact of knowledge management  on  the three selected organisations in food, beverages, and tobacco sector of the Nigerian manufacturing sector. The selected organisations are: British  American Tobacco (Nig) Ltd, Enugu State, Nigerian Breweries Plc, 9th Mile Corner, Enugu State, May

& Baker Nigerian Plc, Enugu State.

1.8      Limitations of the Study

The main limitations of the study are uncooperative attitude of some of the staff of the  organisations  under  study,  inadequacy  of  time,  financial  constraints  and inadequate power supply. Some of those approached for information declined and

refused  to cooperate.  This affected  the volume  of information  available for  the study. However,  the researcher  used persuasiveness  to obtain some  information from them.

1.9      Definition of Terms

For the purpose of clarity, it is important to provide operational definitions of some of the terms used in this study.

Competitive Advantage:

Competitive  advantage  is an advantage  that a firm has over  its competitors,  it enables a firm generate greater sales or margins and / or retain more  customers than its competitors.

Knowledge Sharing:

Knowledge  sharing  is  an  activity  through  which  knowledge  (i.e.  information, skills, or expertise) is exchanged among people, friends, or members of a family, a community (e.g. wikipedia) or an organisation.

Grafting:

Grafting is the process of acquiring knowledge by hiring individuals or by buying entire company because of new ideas.

Knowledge:

Knowledge  is expertise,  and skills acquired  by a person through experience  or education;  the theoretical  or practical  understanding  of a subject,  it is  what  is known in a particular field or in total; facts and information or the awareness or familiarity gained by experience of a fact or situation.

Knowledge Acquisition:

Knowledge  acquisition  includes the organization’s  ability to extract  information and ideas from its environment as well as through insight.

Knowledge Creation:

Knowledge   creation  comprises   activities   associated   with  the  entry  of   new knowledge into the system, and includes knowledge development, discovery and capture.

Knowledge Management:

Knowledge management is the process of critically managing knowledge to meet exiting needs, to identify and exploit existing and acquired knowledge assets and to develop new opportunities.

Tacit Knowledge:

Tacit knowledge is knowledge that is in people’s heads and it is hard to explain or communicate with other people.

Explicit Knowledge:

Explicit knowledge is codified knowledge, that is, knowledge written down like e.g. a handbook. It is knowledge that has been codified formally using a system of symbols, and can therefore be easily communicated or diffused.

Human Resource:

This represents the human factor in an organisation;  the combined  intelligence, skills and expertise that gives the organisation its distinctive character.

Knowledge Retention:

This includes all activities that preserve knowledge and allow it to remain in the system once introduced. It also includes those activities that maintain the viability of knowledge within the system.

Knowledge Transfer:

Knowledge transfer refers to activities associated with the flow of knowledge from one  party  to  another.  This  includes  communication,   translation,   conversion, filtering and rendering.

Knowledge Utilization:

This includes the activities and events connected with the application of knowledge to business processes

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