Future Knowledge Worker Management – From Work-For-Hire to Intellectual Capital Co-Ownership P1 of 2
The last 50 years caused a major transformation in the industrial landscape. The manager’s emphasis shifted from technology and manufacturing management to service and ultimately to knowledge management. The internet has revolutionized the way business is conducted across borders and cultures and it also made knowledge easily available. Entrepreneurs now have a way to reach markets worldwide at little cost. This places them at a new stronger position due to lower capital requirements to establish a business and has given more bargaining power symmetry to knowledge workers than in the past. Knowledge workers are therefore different and need to be managed differently as they tend to be more loyal to their professions rather than the organizations they work for. One major challenge for human resource managers apart from recruiting and retaining knowledge workers is to find a way to motivate them. This paper rejects work-for-hire arrangements and instead advocates shared knowledge ownership scenarios which can generally result in a better outcome for all stakeholders.
The rapid technological advances of the 20th century and the massive changes in the global political landscape have dramatically changed the environment for every organization today. Before and shortly after World War II (WWII) managerial focus was mainly on manufacturing efficiency but the successive opening of international markets that lead to a globalizing economy confronted organization with far more complex issues, such as managing human factors, different cultures, and a rapid increase in competition (Wren, 2005). Even though the shifts from manufacturing excellence to service excellence and from national focus to global outlook started after WWII, management’s adaptation to these changing forces remains an ongoing process.
Several coping mechanisms were deployed by managers to cope with new risks and dynamics of today’s complex organizational environments. Some of these coping mechanisms have failed and some have worked in the past but will not continue to work in the future because the underlying assumptions are no longer valued. Diversification, for example, was long touted as a promising risk management tool; however, the recent economic meltdown and failure of dozens of financial institutions worldwide are an indication that there may have been too much reliance on diversification after all. Drucker (2006) suggested that organizations can only be effective if they focus on one task only. By diversifying, as stated by Drucker, the organization’s performance capacity is destroyed. Possible explanations for this contradicting outcome are the greater switching costs between concurrent activities within the organization as well as the increased administrational overhead of managing several endeavors.
As the organizational environment becomes more complicated, organizations responded by collecting more information. Drucker (2006) criticized, however, that most often companies used information only to trace the past rather than to base future action on it. Today the sheer volume of information collected and drawing the quality conclusions from it constitutes an additional challenge to management. Rather than simply responding to information, tomorrow’s organizations will have to be designed around information and create value and wealth in order to survive (2006). One of the critical information an organization should constantly monitor is the set of underlying assumptions around which the organization has been built.
Drucker (2006) also asserted that business crises often originate from the fact that organizations were built on assumptions that no longer hold true. Businesses, hence, need to constantly reassert that their assumptions still hold true and revise their internal structure to accommodate changes in their environment when this becomes necessary. This form of intelligent adaptation that Drucker favors can be interpreted as a form of organizational critical thinking and self-awareness.
As a great thinker in the field of management and a practicing consultant, Drucker realized that the human factor has become more important than ever before. Because of the transition from touch laborers to knowledge workers, the relationship between management and workforce needs to change from command-and-control to leadership by employee empowerment. Drucker’s main criticism is that managers tend to be too isolated from their workforce and do not spend enough time communicating with their employees. The failure to listen to employees is why managers have it difficult to build trustful relationships with their workforce and consequently have trouble motivating their teams. While these forces that are internal to organizations will need to be managed appropriately, there are several external forces as well that will affect the human resource management discipline of the future.
Future organizations will be exposed to higher degrees and frequencies of change (Aghazadeh, 2003). Competition rooted in globalization and technology will continue to intensify and businesses will increase their emphasis on the creation of intellectual capital. Furthermore, as many organizations will seek to increase their profitability through growth and consolidation, the new knowledge economy will need to find new ways to nurture and protect intellectual capital in the light of these developments (2003). In order to cope with these organizational forces that started to build up in the last two decades, a new form of organization emerged. Virtual organizations, powered by technology and low-cost communication, brought some relief to these forces but also several new challenges.
Virtual organizations have already started to influence managerial practice and their impact will certainly strengthen due to their wide deployment, especially in hybrid form, that is traditional organizations which have virtual components. One hybrid form is the partial virtualization of traditional offices known as telecommuting or teleworking (Sparrow & Daniels, 1999). Companies realized at the turn of the millennium that technology can result in several cost savings and flexibility even in traditional office settings. Telecommuting reduces or eliminates commuting times, and gives greater job autonomy to workers. Workers can save money by having to spend less on lunches and clothing and benefit from less work-related stress. Unfortunately, the virtualization also brought negative side effects, such as an increase in working hours, higher levels of home-related stress, and a change in social relationships between team members (1999). Sparrow and Daniels found that individuals varied greatly in their ability to adapt to the home office work environment and that working from home requires different skills than traditional office work. The impact seems to be stronger on purely virtual organizations and entrepreneurs, however, because telecommuters usually spend only part of their time at home and the majority at the office. Virtual work settings were found to promote routinization, longer hours, increases in work demands, decreased role clarity, poorer physical working conditions, fewer career opportunities, and less social support from colleagues.
Many of these negative effects will diminish due to improvements in technology and worker computer skills in the future; however, human resource departments will need to find ways to motivate and train workers to become productive in virtual settings. Setting up virtual organizations can be a great tool to benefit from globalization. For example, companies can reduce travel expenses and benefit from lower labor rates and uninterrupted operations by dispersing their workforce around the globe. Since competitors will be readily setting virtual organizations to seize such opportunities, ignoring or circumventing virtual work environments will not be an option in the future as it may be at the moment; rather, managers will need to reflect on their management styles and communication skills and find new, improved ways to handle work environment that lack of face-to-face communication.
Another trend affecting human resource management is that the U.S. economy has gradually shifted from manufacturing to services. In 1970, 27% of the workers were employed in manufacturing, whereas by the turn of the century that percentage dropped below 15% (Konrad & Deckop, 2001). At the same time, the female workforce participation rate approximately doubled from 31 to 63%. Konrad and Deckop further uncovered that incentive pay schemes have gained popularity and that skill shortages will continue to pose a threat to U.S. companies. Furthermore, there will be an increase in outsourcing even for small and medium sized enterprises and the workforce will continue to become more diverse (2001). The shift from manufacturing to service in the industry resulted in a shift of managerial focus from managing technology to managing people. What new issues will tomorrow’s managers face and how should human capital be managed?
One new challenge to today’s organizations is the internet. As foreseen long time ago by Ettorre and McNerney (1995), the internet has already strengthened employee bargaining power because the internet empowers people to become self-employed by reducing the costs for entrepreneurs and exposing them to worldwide markets. Employers are losing their grip on employees because there are many opportunities to make money as an entrepreneur online. To a certain degree and by establishing certain types of businesses on the internet, people will not have to work for organizations at all in the future. Technology has enabled entrepreneurs to reach customers globally at a very low cost and for many types of products and services individual entrepreneurs are now competing directly with large multinational corporations. The possibility of individuals competing directly with corporations imposes a great risk to many industry sectors; hence, managers will need to find strategies to protect their businesses as well as to attract and retain key employees.
With the transition from manufacturing to service, several new types of businesses emerged and existing professional service industries became stronger players in the market. As these professional service companies, such as law firms, designers, and software companies, become more common in the future, human resource management will need to adapt to such knowledge intensive firm environments.
Knowledge intensive firms are characterized by employing people with higher education who deliver knowledge intensive services and products (Teo, Lakhani, & Brown, 2008). Often there is a link to scientific knowledge within the area of expertise of the company and the products and services tend to be customized and delivered by experts in the firm. Another important characteristic of knowledge intensive firms is that they engage in intensive interaction with their clients in order to perform their services (2008). Because of the level of interaction required and all the other unique features of professional service firms, human resource management will need to develop place more emphasis on social intelligence of their workforce. In addition, because knowledge intensive companies have a complex internal and external structure, human resource departments should use performance management systems which require employees to set goals and align to the firm’s environment. Moreover, employees of such companies, the so-called knowledge workers, should be recognized and rewarded for their contributions, ideally using continuous feedback (2008).
Knowledge Workers in the Present
The future will bring lots of new challenges to the management theory and practice. The three main trends affecting the management of knowledge workers are likely to be globalization, technology, and the shifting workforce demographics (Ruona, Lynham, & Chermack, 2003). The success of knowledge workers as well as the organizations in which they operate will depend largely on their learning ability. The competitive advantage of the future is therefore likely to come from superior human resource development. It will need to be faster, more efficient, and across nations and places. Human resource departments will need to find ways to learn and deliver results more quickly. As the pace of business will be even faster in the future than it is today, the responsiveness of organizations will be more critical in the future (2003). Organizations, however, can only be responsive when their people are understood and motivated appropriately.
The knowledge age as we know it today has just begun. In developed economies after WWII, workers have migrated from farming to manufacturing and then from manufacturing to service-based work. (Despres, & Hiltrop, 1995). In OECD countries more than 60% of the workforce is employed by service industries (1995). After WWII, management theory transcended from bureaucratic and engineering perspectives to psychosocial and humanistic concepts before ultimately reaching the notion of systems. At the same time, the information revolution stimulated the creation of knowledge in the industries.
Today knowledge is often the major aspect of production and rather than being sold, it is shared; however, as it has been known since beginning of time, it is impossible to separate knowledge from whoever created it (Despres, & Hiltrop, 1995). In addition to the inseparability of knowledge and worker, human resources will need to promote several work practices that are peculiar to knowledge intensive firms. Workers need to challenge accepted wisdom and be intuitive, experimental, and knowledgeable about all systems within the company. Furthermore, incentive systems should be installed which promote the sharing of knowledge and information throughout the organization. One successful form of appraisal system which has been shown to achieve these goals takes into account all interface points of workers, such as superiors, peers, customers, as well as subordinates. Given that more than 50% of all workers report that they are unhappy about their pay and bonuses in general, human resources will need to work on its schemes and improve the framework in the future (1995).
More recently, Ehin (2008) proposed a more radical approach to solving the knowledge worker management problem. From an interdisciplinary viewpoint, Ehin made several observations which are crucial to the management and understanding of knowledge workers. Ehin noted that knowledge workers cannot be managed via traditional methods. The analogy from anthropology is that all biological systems are self-organizing and that their behavior adapts to environmental stimuli. Ehin pointed out that hierarchical social systems are manmade and do not support self-organization; hence, the rigidity of hierarchical systems is rooted in their inability to self-organize and adapt to changing environments. When organizations promote self-organization, so Ehin, more social capital will emerge from greater group interactions. Consequently, such organizations benefit from more commitment and intraentrepreneurship activities (2008).
Anthropological studies revealed that 200,000 years ago humans lived in self-governing groups with high levels of reciprocity where members were autonomous and would lead interchangeably based on their expertise instead of their rank or seniority (Ehin, 2008). Since all human interactions reflect self-organization principles, it is necessary to promote these principles in organizations and gradually shift from hierarchical means of control towards self-regulation of the group. Ehin predicts the intensification of knowledge work in the future will lead organizations to rediscover the principles of self-organization; however, this “un-management” of the knowledge workforce in the so-called Knowledge Age will require different skills than the common superior-subordinate setting in hierarchical systems. As companies try to deploy self-organization today, there are many internal conflicts due to a mismatch of ideology, practice, and reward schemes. Given Ehin’s observations, are organizations and society currently in a transition phase towards self-organization?
Knowledge intensive firms have existed for quite a long time; however, mostly in particular industries, such as law, medicine, architecture, etc. Since the Knowledge Age starts to affect most industries today and companies are constantly consolidating and growing, it becomes more difficult to motivate the workforce. Knowledge, however, being the most important asset today for many organizations, needs to be shared; otherwise, the company will not be able to capitalize on it. But how can organizations facilitate the exchange of knowledge? Apparently this is one of the main hurdles today and human resource departments can do a great deal about it. Forstenlechner and Lettice (2007) found that cultural differences can pose a great obstacle and make the exchange of information and knowledge very inefficient, especially in industries and cultures where individuality was expected in the past. For example, in the past, lawyers and general practitioners were working on their own but as competitive forces increased these medical and law offices discovered economies of scope and scale in consolidating.
The mentality of the associates, however, apparently has not followed that trend and lawyers tend to remain individualists (Forstenlechner & Lettice, 2007). Much of the knowledge management fails in those industries because of a lack of time, lack of incentives, and the individuality of workers. In individualistic cultures, which are typical for Western countries that score low on collectivism, it is therefore no surprise that 74% of the workers in law offices only feel motivated to share knowledge if knowledge sharing activities are considered in the appraisal system. Peer recognition and one-time rewards, on the other hand, scored lower with 59% and 43%, respectively (2007). The willingness of individuals to share information is therefore fundamental to the company’s success and companies need to find ways to reeducate the work style of their workforce to embrace knowledge sharing. Companies need to build internal knowledge and intellectual capital in order to survive but they will not be able to do so if knowledge workers fail to cooperate. The selection of suitable personnel and the motivation to share knowledge will hence become one of the main challenges to future human resource departments and theorists.
Adelstein (2007) took the point to an extreme with her analogy in comparing the knowledge worker to Icarus. Adelstein notes that as the world economy continues to change and grow together, manufacturing will move to third world countries and so-called first world countries will need to set themselves apart by the quality and quantity of the knowledge they posses and create. Adelstein holds that knowledge is an important asset and that the owning organization needs to be protected against knowledge theft and misuse. This ideology is unfortunately very common and reflected in the practices of most corporations today. Another point of view, which might have not gained yet much popularity in the press, is the opposite notion; the organization wants to protect and own what is actually the knowledge worker’s property. If knowledge was protectable per se, there would be legal instruments, intellectual property laws in particular, similar to copyright and patent law, to protect that knowledge. It appears that our society has recognized the need to protect the investments of inventors by granting them patents; however, by explicitly limiting patent life to at most 20 years and limiting the scope of patentable apparatuses the law has implemented a policy to strike a balance between keeping up strong levels of competition and protecting inventors and investments to a certain degree. One could argue, hence, that organizations may have an interest in the knowledge created by knowledge workers but there should not be an automatic claim to it because of mere employment.
The question then remains of whether organizations pay for the work that knowledge workers accomplish or for the knowledge they created. The rhetorical question is then where is the limit of knowledge property? It would be ridiculous for an organization to charge its employees for the experience they gained while working for that organization. Similarly non- compete clauses that are legal in some states target to protect “trade secrets” and other information; however, many states and countries do not uphold such clauses and other states only do so if consideration was received for it by the worker and only if there is a substantial interest to be protected by the company.
The treatment of non-competes in current legal discussions in effect reflects our transition phase as a society. The Knowledge Age will most likely bring unforeseeable new challenges to management theory and many old ones are likely to reappear as well. For example, Wren (2005) noted how workers retaliated by deliberately reducing their work output, such as limiting the number of pieces per hour. It is then to be expected that knowledge workers, who perceive they have reason to retaliate, will reduce the quality of their work to a minimum, just enough to pass “quality control” and meet requirements. Such knowledge workers will intentionally interfere with processes and fail to cooperate and hoard instead of sharing knowledge. As knowledge becomes a valuable asset and workers perceive a high risk of layoffs, they may try to secure their position by engaging in politics and by treating knowledge as what it is: an asset. This situation is very common, especially in companies that do not reward their knowledge workers for their achievements. The challenge, hence, is to better understand the Knowledge Age and knowledge workers and their idiosyncratic needs. Human resource departments can tailor specifically to the needs of knowledge workers and greatly affect how they perceive and succeed in their work environment.
Knowledge Workers in the Future
So what do knowledge workers want and need? As the above discussion has shown, the Knowledge Age has brought many new opportunities such that the need to work for an organization begins to diminish altogether; hence, attracting and retaining knowledge workers as well as their knowledge will depend on a thorough understanding of the situation.
The study conducted by Yigitcanlar, Baum, and Horton (2007) took a very broad perspective by looking at cities in which knowledge intensive organizations operate successfully. They found that knowledge workers need environments rich in retail and professional sports and music. In addition, childcare, school, and higher education as well as health care are also primary considerations of knowledge workers. Furthermore, knowledge workers demand affordable housing costs and seek affluent retirement. Knowledge workers prefer urban, cosmopolitan environments that a rich in time and offer good transportation facilities (2007). Organizations aim to attract this particular type of workforce should therefore focus on environments that satisfy these requirements; however, many of these requirements change as organizations set up on a large scale. For example, housing costs can be expected to rise when several large organizations establish offices in a particular area; hence, it is difficult for an organization to manage its environment. The organization can, however, try to offer additional incentives such as childcare in areas where such facilities are short in supply.
Contingent work, as a subclass of knowledge work, is a practice expected to gain more popularity in the next decade (Redpath, Hurst, & Devine, 2007). Redpath, Hurst and Devine’s survey of contingent workers revealed that most of them would prefer work that is not contingent but find it nevertheless rewarding. They enjoy working in different industries, projects, and companies and benefit from higher wages and generally more interesting assignments. Increasingly contingent workers are given greater independence and can choose how and where they complete their work. This additional flexibility also helps them to reduce the stress in their private life, for example by having more time to spend with their children.
It appears that gradually organization begin to realize that more value needs to be passed down to the worker and higher pay and additional flexibility in the work environment are just a two examples of a new wave of bargaining between organizations and workforce. The other transition taking place today is that human factor is found to be far more important with knowledge workers than with touch laborers in the past. Pyöriä (2007) argues that human relations should be therefore valued much higher by knowledge intensive firms than technology. Technology can be bought; however, talent needs to be nurtured and cultivated. Pyöriä found that technology has generally been overvalued and that it merely aids automation and coordination. This could explain in part why many knowledge management initiatives have failed because organizations overlooked the human factor by overemphasizing on technology. What can be done in some larger companies is to appoint knowledge facilitators who can help other workers to learn, organize, conceptualize, and share their knowledge. Given that many knowledge management systems are unsuccessful because of a mismatching organizational culture, such facilitators can help gradually changing culture and perceptions within companies towards a more cooperative environment.
Human resource departments need to also keep an eye on the variables influencing the job satisfaction of their knowledge workforce Lee-Kelley, Blackman, and Hurst (2007) found that shared vision, systems thinking, and team learning are skills that should be looked for in new recruits but organizations should also offer opportunities for knowledge workers to develop their skills. This can be achieved by assigning work that is challenging and requires the workers to come up with new ideas. In effect this is actually a form of employee involvement and also helps reduce turnover and increase job satisfaction (2007).
The lessening bond between knowledge workers and the organizations for which they work should also be a major concern for human resource practitioners. Knowledge workers have non-substitutable knowledge and are less dependent on their employer given their rare skills and knowledge (Donnelly, 2006). In addition, so-called psychological contract is no longer between employer and employee but the loyalty of knowledge workers slowly shifts towards their career and profession rather than the employing company (O’Donohue, Sheehan, Hecker, & Holland, 2007). As successful knowledge workers reach seniority, they seem to develop self-actualization needs that exceed the individual and the organization. Knowledge workers feel they need to make a contribution to the body of knowledge of their profession and industry; therefore, it can be expected that the workforce of the future will be much more autonomous and independent. Since command-and-control structures, which still dominate today’s organizational landscape, seem to go against self-sufficiency, how can human resources go about managing such individuals?
Successful knowledge workers are intrinsic learners, need less structure and more flexibility to thrive. Courtney, Navarro, and O’Hare (2007) proposed the Dynamic Organic Transformational (DOT) team model to support high-performance teams of knowledge workers. There are five dimensions in knowledge worker teams: purpose, people, partnerships, process, and performance. The DOT model is built on three major assumptions about such teams. First, knowledge worker teams are dynamic and need to have a holistic view of the organization. Second, teams consisting of experts can only thrive when they are self-directing and therefore need an organic environment. Third, such teams need an organizational culture of learning creates an environment that encourages innovation, high-performance, and effectiveness.
This dynamic view of teams was recently extended and applied to the concept leadership by Karl and Helgo (2008). According to their research, the concept of leadership will need to become more dynamic in the future. At the present time there is too much of a fixation on the leader in management theory rather than the followers. Because leadership is a transient phenomenon in groups, it appears from the internal group interaction; hence, a leader cannot be understood in isolation from the group. The social interaction within the group is a feedback mechanism and it also shapes the leader as well as the group. Trying to analyze leadership without focusing on the followers, hence, shifts the emphasis of the analysis away from the group. The group, however, is actually the nurturing ground for the group activity and the dynamics within the group are what leaders achieve to exploit. A better understanding of the group dynamics should then help the human resource discipline of organizations identify individuals who are better suited to lead departments and teams.