THE PROCESSES OF KNOWLEDGE MANAGEMENT IN PROFESSIONAL SERVICES FIRMS: A CASE OF MANAGEMENT CONSULTANCY FIRMS IN KENYA

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the study

Professional services play an important role in the functioning of modern economies and are

among the fastest growing services sectors in many developed and developing economies.

Professional services contribute directly and indirectly to economic growth, including by

lowering transactions costs and by creating spillovers of knowledge to other industries. (Dihel

N.,el at. 2010). Globally, professional service firms are a rapidly-growing service industry today.

A typical characteristic of this industry, which includes, for example, management and technical

consulting, is that the services are innovated and delivered in ongoing close cooperation with the

client. Knowledge intensiveness is another distinguishing characteristic of this business, where

knowledge has a role both as a resource and as a service sold to clients. (Smedlund 2008) In

terms of growth, employment in professional services has been growing at a faster pace

compared with other sectors of the economy. For example, in Kenya it exceeded by 0.4 per cent

economy-wide employment creation where employment in professional services reached 40 per

cent by the end of the 1990s, up from 27 per cent in the 1970s. Leading services sectors were in

the traditional areas of the medical, teaching, accounting and management, consultancy

professions. However, ICT-related services, including data processing, have exhibited the most

remarkable growth. (UNCTAD 2005)

In Kenya, professions have their own professional associations, the status of which ranges from

that of pure voluntary association with no impact on market entry (as in medical services) to

mandatory registration for practice (as in the case of law). Apart from meeting non

discriminatory criteria of having professional qualifications from recognized institutions and

proven experience, registration with the relevant board and sitting an examination are usually

required for being able to practise an accredited profession in Kenya. The Government regulates

through these boards the quality of services and protection of consumers, and ensures public

health and safety. Some professions are not represented on the board (medical) and members are

mainly government-appointed, but in some cases boards are independent (law), include

associations (architects) or work together with them (law or engineering). (Ikiara. 2000).

Professional Services account for approximately $2.2bn (est.) 2010 (excluding Tourism and

Remittances) The professional services sub-sectors (excluding tourism, telecommunications and

transport ) is dominated by the banking and insurance services sectors accounting for

approximately 75% of revenues and 35% of employment. The Sector is dominated by a few

large firms with international affiliations.(EPC 2011). (EPC 2011)Exports of professional

services alone accounted for 3.7 per cent of the total service sector amounting to Sh7.12 billion

($92.5 billion) in 2008 which is still relatively low when benchmarked against competing

countries such as Egypt, South Africa, India and the UK and thus lacks the economies of scale to

compete effectively.

Management consulting in Kenya has experienced a rather slow growth in comparison with

some other professional services such as accounting, architecture and engineering. Foreign firms

such as PriceWaterhouse Coopers, Deloitte and Touche, Hawkins and Associates account for a

large proportion of management consulting services in the country. Like in the case of

accounting and auditing services, these multinational firms heavily dominate management

consulting services, with indigenous firms accounting for a small share. Kenya’s domestic

capacity in the supply of consultancy services is constrained by the existing unfair competition in

which foreign consulting firms receive preference in the award of government contracts, lack of

effective policy support, negative government attitude, inability of the small firms to attract and

retain sufficient qualified staff due to cash-flow problems, inadequate experience in consultancy

work, low managerial skills and a low level of professionalism (Ikiara et al., 1994).

Dunford (2000) notes that Large consulting firms have been increasing their information

technology expenditure, developing intranets and data warehousing, and using the Internet in an

effort to create knowledge management systems . The personal networks that had sustained

knowledge sharing across consultants and engagements were increasingly seen as insufficient

This view is also influenced by a recognition that where much of the key knowledge is held by

individuals, unless there is some structure to retain it within the organizational memory, when a

person leaves the organization ``a mass of knowledge goes right out the door with that person''.

1.2 Statement of the problem

Knowledge is increasingly regarded as a survival tool in a dynamic and competitive

environment. Drucker (1993) notes ‘‘the basic economic resource is no longer capita natural

resources, nor labor. It is and will be knowledge’’. KM and related strategy concepts are

promoted as important and necessary components for organisations to survive and maintain their

competitive keenness. KM is considered a prerequisite for higher productivity and flexibility in

both the private and the public sectors. (MaÊrtensson 2000) . Sandhawalia B. and Dalcher D.

(2011) further support this by stating that Efficient knowledge use enhances competitive

advantage and improves organizational success. Knowledge management (KM) has become

increasingly important as organizations realise that effective use of their vast and varied

knowledge assets and resources provides them with the ability to innovate and respond to fast

changing customer expectations. Therefore, there is a pressing need in every knowledge-

intensive organization for knowledge to be well managed in order to cope with the shortcomings

arising from the common uneven distribution of knowledge in these organizations. This is

echoed by Nissen (2004, p. 186), who emphasizes that ‘‘efficient knowledge flow is critical to

enterprise performance’’. The awareness of the importance of organization knowledge (in the

form of the company’s core capabilities and resources), has also been reflected, recognized and

investigated in the strategic management field.

The resource-based view (RBV) regards knowledge as a basic source of competitive advantage.

It argues that a company’s competitive strength is derived from the uniqueness of its internally

accumulated capabilities (Kalpicˇ and Bernus 2006), Further, the Knowledge based theory of

the firm postulates that knowledge is the only resource that provides sustainable competitive

advantage, and, therefore, the firm's attention and decision making should focus primarily on

knowledge and the competitive capabilities derived from it (Roberts, 1998). The firm is

considered being a knowledge integrating institution. Its role is neither the acquisition nor the

creation of organizational knowledge; this is the role and prerequisite of the individual.

Knowledge resides in and with individual people, the firm merely integrates the individually

owned knowledge by providing structural arrangements of co-ordination and cooperation of

specialised knowledge workers. That is, the firm focuses on the organizational processes flowing

through these structural arrangements, through which individuals engage in knowledge creation,

storage, and deployment. There is a high level of interest in knowledge management amongst

consulting firms as they see the capacity to compete on the basis of accumulated knowledge as

being a defining feature of their industry and consider knowledge management to be a core

capability for achieving competitive advantage( Dunford2000). Donnelly (2008) supports this by

stating, “consultancy firms are perceived to represent archetypal knowledge-intensive firms and

their success is considered to heavily depend upon the effective management of intellectual

capital”. In spite of its inherently crucial role, knowledge is often not managed in a systematic

manner, and its contribution to firm success is commonly overlooked. These firms may hold the

belief that investment in knowledge processes is unlikely to lead to competitive advantage.

1.3 Objectives

1. To explore characteristics of professional firms.

2. To determine knowledge management processes.

3. To investigate knowledge management processes adopted in professional firms .

1.4 Research questions

i. What are characteristics of professional firms?

ii. What are knowledge management processes?

iii. How knowledge management processes adopted in professional firms?

1.5 Significance of the study

The study will benefit professional service firms especially management consultants

manage knowledge

1.6 Scope of the study

The study focuses Management Consulting firms that are locate within Nairobi.

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

Different authors have presented different definitions of KM. Davenport and Prusak (1998)

suggest that KM is the process of capturing, distributing and effectively utilising knowledge.

This is closely reflected by the definition given by Scarbrough et al. (1999), who describe KM as

the process of creating, acquiring, capturing, sharing and using knowledge to enhance

organisational learning and performance. Robinson et al. (2005) define KM as a method of

exploiting, or transforming knowledge as an asset for organisational use to facilitate continuous

improvement.

Similarly, the American Productivity & Quality Center (APQC), a nonprofit education and

research organization which fostered the creation of the Malcolm Baldridge National Quality

Award, defines knowledge management as ``the strategies and processes of identifying,

capturing and leveraging knowledge'' to enhance competitiveness (McCampbell et al., 1999).

For this study, we are going to adopt Scarbrough et al. (1999) definition of KM as the process of

creating, acquiring, capturing, sharing and using knowledge to enhance organizational learning

and performance because it captures all the process of KM and its end results being to enhance

Organization learning and Performance.

A commonly accepted definition of professional services does not seem to exist (Conchar, 1998).

However UNCTAD (2005) have described professional services as services that have come to

represent services, which require large amount of training and expertise and are usually

associated with accredited professions, such as lawyers, doctors, accountants, architects and

engineers, and non-accredited or free exercise professions.

NAFTA explains professional services means services, the provision of which requires

specialized post-secondary education, or equivalent training or experience, and for which the

right to practice is granted or restricted by a Party, but does not include services provided by

tradespersons or vessel and aircraft crew members. (UNCTAD 2005)

Similarly, General Agreement on Trade in Services (GATS) the category of services termed

“professional services” is restricted to services produced by skilled personnel and typically

subject to licensing. In general, professional services are those covered under the following

broad categories: Legal services; Accounting, Auditing and Bookkeeping services; Taxation

services; Architectural services; Engineering services; Integrated engineering services; Urban

planning and landscape architectural services; Medical and Dental services; Veterinary services;

services provided by midwives, nurses, physiotherapists; and other services. Accredited

professional services include architectural and engineering services, accountancy, and legal

services while non-accredited professional services include such business services as marketing,

advertising and consultancy (WTO 1998).

Professional services firms (PSFs) are knowledge-intensive organizations that provide expert

advice and professional knowledge to clients. The organizational assets reside in the experience

and knowledge of staff, rather than in plant and equipment (Løwendahl, 2000).

The researcher agrees with all the definations of the profesionarl firms since they are similar. Further, the definition of professional service firms by Løwendahl (2000) is appropriate for this study

2.2 Characteristics of Professional firms or Organizations of professional firms

A typical characteristic of this industry, which includes, for example, management and technical

consulting, is that the services are innovated and delivered in ongoing close cooperation with the

client. Knowledge intensiveness is another distinguishing characteristic of this business, where

knowledge has a role both as a resource and as a service sold to clients (Smedlund 2008).

2.2.1 Knowledge-intensive nature

A higher educational qualification is an element of professions (Løwendahl, 2000; Blau and

Scott, 1962; Hughes, 1958; Vollmer and Mills, 1966). This is reflected in the common belief in

the industry that a body of knowledge originates from academic study and practical training

in professional services firms.

2.2.2 Advisory nature

It is claimed that altruistic and specialized services to clients are the core services of

professionals (Becher, 1999; Monopolies Commission, 1970).

2.2.3 Competence governed by institutions

It is essential to a professional service that a governing professional body is established to

maintain the competence and control the standards of conduct of the profession (Bennion,

1969)

2.2.4 Code of conduct

In addition to the grades of membership established in the Institutions, every member

receives a copy of the Code of Conduct and Professional Ethics. (Fong &. Choi 2009)

Scholars Propositions of the characteristics of ‘‘professional

organizations/firms’’

Characteristics of a professional

organization

(Bots and Bruijn, 2002)

Characteristics of professional

organizations(firms) (Løwendahl,

2000)

Indivisibility of projects/services

Highly situation-specific decisions

More than 50 percent professional employees

High priority for professional goals

High degree of respect for professional norms

Emphasis on creation as well as application of knowledge

Professionals in charge of key decisions and activities

(Fong & Choi 2009)

Characteristics of professional service Propositions of the characteristics of

‘‘professional service’’

(Løwendahl, 2000) Highly knowledge-intensive, delivered by people

with higher education

High degree of customization

High degree of discretionary effort and personal

judgment by expert(s)

Substantial interaction with client firm

representatives

Within the constraints of professional norms of

conduct

2.3 PROCESSES OF KNOWLEDGE MANAGEMENT

Within the field of KM knowledge is often regarded as an information handling problem. It deals

with the creation, management and exploitation of knowledge. Some of the literature fits into a

definition of KM that consists of separate but related stages. The first two stages are invariably

linked, both on abstract theoretical grounds and in practice. As the first step in the process, there

is acquisition of information. In the second stage, the information is entered into a storage system

and organised logically. Almost every definition of knowledge management includes the storage

of knowledge KM is about acquisition and storage of workers' knowledge and making

information accessible to other employees within the organisation. This is often achieved by

using various technologies such as Internet and databases, and is a conversion of tacit knowledge

to explicit knowledge (Papows, 1998). Once the information is stored in the various databases,

the third stage is initiated. In this stage, the stored information is made accessible to as many

employees as possible within the organisation (LaPlante, 1997). It is about distributing it into the

hands of the right end users at the right time (Ostro, 1997) and where it can be of best use

(Nerney, 1997). The final stage is about utilisation of information. This process begins with

people sharing knowledge by talking and socializing with one another or by exchanging

information in digital or analogue form

Nonaka and Takeuchi (1995) defines four processes:

1. Internalization is the process in which an individual internalizes explicit knowledge to create

tacit knowledge. In Figure 1 this corresponds to turning externalized knowledge into internalized

– Nonaka does not differentiate between formal and not-formal awareness.

2. Externalization is the process in which the person turns their tacit knowledge into explicit

knowledge through documentation, verbalization, etc. In Figure 1 this process corresponds to

turning internalized, formalizable knowledge into externalized knowledge and subsequently

communicating it (internal ! externalized).

3. Combination is the process where new explicit knowledge is created through the combination

of other explicit knowledge.

4. Socialization is the process of transferring tacit knowledge between individuals through

observations and working with a mentor or a more skilled/knowledgeable individual. In Figure 1

this corresponds to tacit knowledge ! observable actions,

Alavi and Marwick (1997) define six KM activities:

1. Acquisition.

2. Indexing.

3. Filtering.

4. Classification, cataloguing, and integrating.

5. Distributing.

6. Application or knowledge usage.

Holsapple and Whinston (1987) identify more comprehensive KM processes, composed of the

following activities:

procure;

organize;

store;

maintain;

analyze;

create;

present;

distribute; and

apply.

Holsapple and Joshi (2002) present four major categories of knowledge manipulation activities:

1. Acquiring activity, which identifies knowledge in the external environment (form external

sources) and transforms it into a representation that can be internalized and used.

2. Selecting activity identifying needed knowledge within an organization’s existing resources;

this activity is analogous to acquisition, except that it manipulates resources already available in

the organization.

3. Internalizing involves incorporating or making the knowledge part of the organization.

4. Using, which represents an umbrella phrase for generation of new knowledge by processing of

existing knowledge, and externalizing knowledge that makes knowledge available to the outside

of the organization.

The practice is dynamic, but often starts by creating, finding and collecting internal knowledge

and best practices. Sharing and understanding those practices so they can be used. Adapting and

applying those practices to new situations. (McCampbell et al., 1999)

3.1.1 Knowledge Acquisition

Is the process of obtaining and introducing new external knowledge (whether tacit or explicit)

into the organization, and includes knowledge identification or selection processes for

acquisition. Identification involves a process where external knowledge for analyzing and

describing the company’s knowledge environment is recognized. Refers to what forms of

expertise the company can acquire from outside through relationship with customers, suppliers,

competitors and partners in co-operative ventures (Aramburu, 2006).

2.3.1.1.1 3.1.2 Knowledge Transfer

Is the exchange of knowledge within the organization (directly or indirectly) and includes

knowledge sharing or distribution. It is the process of sharing and spreading knowledge which is

already present within the organization (Meckler, 2001).

2.3.1.1.2 3.1.3 Knowledge Creation

Is the generation of new knowledge or knowledge development, and may also include

knowledge identification and selection processes when associated with internal knowledge

generation. Knowledge Development includes all management efforts consciously aimed at

producing capabilities. It forms a building block which complements Knowledge Acquisition. Its

focus is on generating new skills, new products, better ideas and more efficient processes

(Heinrichs, 2001).

2.3.1.1.3 3.1.4 Knowledge Retention

Is the process of keeping knowledge whether tacit of explicit within the organization and

maintaining its availability. It incorporates the related concepts of knowledge capture,

preservation, storage, retrieval, accessibility, identification and protection in the context of

knowledge retention. It involves a process where the selective preservation of information,

documents and experience required by management takes place (Young, 2006).

2.3.1.1.4 3.1.5 Knowledge Utilization

Defined as the process of knowledge application or use. It consists of carrying out activities to

make sure that the knowledge present in the organization is applied productively for its benefit

(Koskinen, 2003).

2.4 Knowledge management processes adopted in professional firms

An examination of the characteristics of knowledge process capabilities enable them to be

grouped into the four broad dimensions of knowledge creation, conversion, transfer and

application.

Knowledge creation is enabled by the processes and activities of interaction, feedback,

innovation, brainstorming, and benchmarking. Knowledge conversion is made possible through

the processes and activities of synthesis, refinement, integration, combination, coordination,

distribution, and restructuring of knowledge. Shared contexts and common representation are

required for knowledge conversion, and facilitated by group problem solving and decision-

making. Information technologies like e-mail, repositories, intranet portal, teleconferencing, and

the activities of mentoring, collaboration and training play a key role in transferring knowledge.

Forums such as communities of practice and centres of excellence, and training provide a

platform for the transfer of knowledge. Knowledge is effectively applied during the

developmental processes of an organization through rules and directives, routines and self-

organized teams. Knowledge is applied to formulate and refine the standards, procedures and

processes developed to execute tasks within theorganization.. (Sandhawalia B. and Dalcher D.

2011)

Creating knowledge implies a process of generating insights through

extracting information from data. Thus, IT serves as a tool or enabler for turning knowledge

into profitable industrial commodities. Financial investors treat a firm’s IT investments and

associated organisational assets as intangible assets that increase long-term output and

profits (Brynjolfsson et al., 2002), which may be a driver for linking IT with knowledge

management. To the hard track, knowledge management is almost equal to an IT-based

management system. The basic assumption is that information technologies can accelerate

the flow of knowledge and offer ‘‘modern’’ systems to stockpile formal knowledge and

support personal knowledge sharing. (Gao et al., 2008)

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

In this chapter the population of the study sampling plan, data collection analysis

techniques are presented

3.2 Research Design

The research will be a survey study of selected Supermarket chains in Kenya. It will be

necessary to collect data that will allow an in-depth understanding of determinants of

international expansion strategy at the Supermarket chains in order to carry out this

research successfully. Considering the type of data required for this research, survey study

research design will be the most appropriate method.

The design will be valuable for an in-depth study. Cooper & Schindler (2003) assert that

case studies place more emphasis on a full contextual analysis of fewer events or

conditions. An emphasis on detail provides valuable insight for problem solving,

evaluation and strategy. This will be essential in this study.

3.3 Target population

The target population is the supermarkets in Kenya. The sampling frame consists of simple

random selection of supermarkets. Population consists of 100 supermarkets in Kenya.

3.4 Sampling design

The target of this study is supermarkets within Kenya. Simple random will be used. The

procedure for collecting data will be done by use of structured interview questionnaire that

will be filled by senior managers. The interviews will give the researcher more control

over the data gathering activities and thus creating observations of the respondents’

reactions

3.5 Data Collection

Primary data will be collected using questionnaires targeting top-level managers especially

the strategy and planning manager. The top level managers are the director and two deputy

directors. An interview guide will be used to get responses from the respondents.

Questions will be issued in advance to help the respondents recollect facts, or make

reference where necessary.

In addition, the researcher will obtain secondary data and material especially from the internal

documents such as external communication. the current strategic plan.

The primary data is gathered through in-depth interviews

with key managers from the selected firms from different

industries within the service sector. In addition to primary

data, the study will also use secondary data that is extracted

from various sources such as the companies’ annual reports,

paper clippings, magazines, and the statistical reports from

the government and its related agencies. Analyzing

secondary data provides insight into the historical trends of

international activities and foreign investment made by

Malaysian firms.

3.6 Data Analysis

Considering the kind of data intended as per the questionnaire guide, a conceptual and

qualitative content analysis will be the best suited method. Nachmias & Nachmias (1996)

define content analysis as a technique for making inferences by systematically and

objectively identifying specified characteristics of messages and using the same approach

to relate trends. Nyamweya (2004) who employed this kind of approach argued that it is

useful in gaining fresh material in even what was thought to be unknown.

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