Knowledge Managements Social Dimension Lessons from Nucor steel

Knowledge Management’s Social Dimension Lessons from Nucor steel Upasna Paul Chitra Srivastava Barrett Newsome 1

Reversing the Paradigm �OLD: Knowledge is power �NEW: Sharing Knowledge is power �These days 80% of the Fortune 500 companies have Knowledge Management teams and 25% have CKOs (Chief Knowledge Officers) 2

Building Effective Social Ecology �Social Ecology is the social environment within which people operate. �Examples: workplace, teams, group work, etc �Culture, structure, information systems, reward systems, processes, people and leadership are the determinants of social ecology. �The word ecology suggests that the social system should be viewed not as a random collection of different elements but as a comprehensive whole in which the various elements interact with one another 3

Staying ahead in the industry while maintaining a good Social Ecology �Unless enterprise continuously generates new knowledge, it will soon be playing tomorrow’s game with yesterday’s tools. And unless knowledge is pumped efficiently throughout the network, the enterprise will not only pay the price of reinventing the same wheel but will also risk becoming prey to competitors that are able to replicate its ideas rapidly 4

Information systems vs. Social Ecology �Both IT and social ecology play central role in knowledge management. �IT platforms are neither proprietary nor unique and therefore provide at best a temporary advantage. �Whereas sustainable advantage depends on how smart a company is at using the technology which in turn depends fundamentally on the social ecology. 5

“Knowledge is power. ” �Knowing the correct way to apply this statement is imperative for an organizations growth. �“Shared knowledge is power. ” �The example given in the article is an example of a person using their coercive power. It was more important to those individual to have self gain and recognition. 6

Encourage Learning/Sharing Knowledge �Professional excellence is difficult to achieve outside of a good organization. Conversely, flourishing organizations are difficult to develop without good people. A domain where the intersection of professional and organizational goods is particularly important, especially in our information age, is the sharing of knowledge 7

Structured Vs. Unstructured KM �Explicit /Structured knowledge is knowledge that has been or can be articulated, codified, and stored in certain media. It can be readily transmitted to others. The information contained in encyclopedias (including Wikipedia) are good examples of explicit knowledge. �Tacit /Unstructured knowledge is knowledge that is difficult to transfer to another person by means of writing it down or verbalizing it. 8

Two central tasks of Knowledge management 1. Creating and acquisition • • • Creation of new knowledge Acquisition of external knowledge Retention of proprietary knowledge 2. Sharing and mobilization • • • Identification of opportunities for sharing Inflow/outflow or motivation of receiving/sharing Transmission—building effective transmission channels 9

Nucor Steel �Is headquartered in Charlotte, North Carolina is one of the largest steel producers in the United States, and the largest of the "mini-mill" operators (those using electric arc furnaces to melt scrap steel, as opposed to companies operating integrated steel works with blast furnaces). Nucor claims to be North America's largest recycler of any material, recycling one ton of steel every two seconds. The company maintains some of its largest operations in Birmingham, Alabama 10

Nucor Steel �It is the Largest steel producer in the United States �It has over $6. 2 billion in sales annually �It is also considered to be the nation's largest recycler �In 1972 the company adopted the name Nucor Corporation �Nucor Products include: • carbon and alloy steel in bars, beams, sheet, and plate • steel joists and joist girders • steel deck • cold finished steel • steel fasteners • metal building systems • light gauge steel framing 11

Nucor Steel �http: //www. youtube. com/watch? v=AT 1 B 68 Ig. Th 0

Social Ecology: Nucor Corporation �Nucor accumulates knowledge in three categories: � Knowledge Creation � Knowledge Acquisition �Knowledge Retention 13

Nucor Steel & Knowledge Management �Creating Knowledge: �In order to have knowledgeable employees you have to find them, Nucor set up their plants in rural with hard working people readily available. �Employees could earn higher bonuses only by discovering new ways to boost productivity (sandbox) �Managers encouraged employees to experiment, which empowered them and gave them a feeling of trust for the employer. �Nucor states that a company that does not tolerate failure will severely inhibit experimentation, “Don’t keep making the same bad decisions. ” 14

Nucor Steel & Knowledge Management cont. . �Knowledge acquisition �Mind-set and behaviors � They had Experts in the industry � They had complete Confidence in organization’s ability � Ability to face risk �Nucor acquired their knowledge through taking risk, but they always would make sure that the risk was worth the reward 15

Nucor Steel & Knowledge Management cont. . �Knowledge retention �They had been Successful in identifying mutual interests and goals �Operating policies cultivated loyalty and commitment � The “Share the pain” policy No layoffs during recessions � Reduced work week; reduced wages � Greater reduction in pay for managers and CEOs � � In no time Nucor had the Lowest Turnover rate 16

Nucor Steel & Knowledge Management cont. . �Identifying opportunities to share knowledge �Systematic collection and sharing of performance data was made visible within the company. �Knowledge outflow/inflow—encouraging employees to share/receive knowledge �Group-based incentives � Share own best practice with peer units to boost the performance of the entire bonus group � Plant manager’s pay linked to company’s performance �Bonuses were based entirely on group performances �They motivated sharing of knowledge and best practices 17

Nucor Steel & Knowledge Management cont. . �Building effective and efficient Knowledge transmission �Structure of knowledge requires appropriate channel for transmission They Shared Highly structured/codified knowledge through Information technology � They Shared Unstructured knowledge also through � Face-to-face communication � Transfer of people between departments and plants � 18

Nucor Steel & Knowledge Management cont. . �Intraplant Knowledge transfers: � Built a social community promoting trust & open communication Kept the number of employees small (250 -300) � High degree of interpersonal familiarity � Annual dinner with plant manager only to discuss business � �Interplant Knowledge Transfers: � Detailed performance data was distributed to all plant managers � General managers met three times/year to review facilities performance � Composite teams would visit plants to share best practices � They reassigned people from one plant to another on basis of expertise � Best practices were built in to new plant start-ups � They were convincing people to accept and use the knowledge they receive � Strong performers were showcased before their peers; weak ones were exposed to intense heat of peer pressure. 19

Framework for building an effective knowledge management �Maximizing knowledge creation and acquisition � They had encouraged employees to set stretch goals � Set targets that cannot be achieved without innovation � They Provided high-powered incentives � Increase person’s level of risk in performing a task � They Cultivated Empowerment and Provided “Slack” Resources � Provide opportunity to be creative and work on individual projects without asking � They Provided a Well-defined “Sandbox” � A safety-net for organization � Creating a culture that values experimentation means encouraging a willingness to take risks � They also Cultivated a market for ideas within the company � Employees allowed to market ideas outside of department � They had a Screening mechanism to determine which ideas should be supported and which should be abandoned 20

Framework for building an effective knowledge management cont. . �Maximizing knowledge sharing �Rely on Group-Based Incentives � Reinforce knowledge sharing as a cultural norm � Maximizes performance of the entire system rather than that of an individual unit. � Empower group to expel the chronic underperformer �Invest in Codifying Tacit Knowledge � An explicit mapping of what a company knows is the basis for discovering what it does not know � Can Have high Payoffs �Match Transmission Mechanisms to Type of Knowledge 21

Pathologies & challenges in knowledge accumulation & Knowledge sharing �A common pathology is the “knowledge is power” syndrome. �Virtually all the pathologies that companies exhibit emanate from some type of dysfunction in the social ecology of the enterprise. �Companies can avoid pathologies and create an exemplary social ecology for effective knowledge management as Nucor did. 22

Conclusion �Recreating competitive Advantage Everyday �In the emerging economic landscape, competitive advantage must be created everyday �A company’s ability to function as a knowledge machine depends not merely on the sophistication of its IT infrastructure but more critically on the social ecology that drives the behavior of its people and teams. �It requires building a whole ecosystem of complementary and mutually reinforcing organizational mechanisms 23

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