UNIT V CHAPTERS: REDEFINING THE FIRM, THE REWARDS FOR KKNOWLEDGE

PART A 1. Give two types of approach to deal with emerging knowledge based strategies . There are two types of measuring the knowledge capital. They are as follows: i. measurement and valuation. Example for using this approach is Dow Chemicals. It has 29000-strong patents base. It concentrated on capitalizing the patents. This exercise increased the patent licensing income 5 times.(from $US25 million to $US125 million ). ii. The practice of knowledge sharing and organizational learning. Buckman laboratories are an example of using this approach. This company has 1200 clients spread across 80 countries worldwide. The company created a global knowledge network called KNetix and a learning centre called Bulab which provides a platform for communications, distance-based learning, knowledge sharing, and access to corporate information to assist its clients. 2. What are the ways through which knowledge based growth occurs? Knowledge-based growth can basically occur in one of two ways: i. Through increasing the knowledge retained within the firm thereby increasing the depth of knowledge. Example: Banks acquiring other banks, bigger software companies acquiring smaller software companies. ii. Through increasing the strength of the linkages between the firm and external knowledge sources thereby increasing the breadth of knowledge. Example: Suppliers of gas, water and electricity form a group of companies called utility companies. 3. What do you mean by worker ownership? A range of schemes such as Employee Stock Ownership Plan have evolved over the years which have offered worker participation in the ownership of the firms in which they were employed. It is called worker ownership. 4. Mention two positive and two negative factors associated with worker ownership firms. Positive factors are i. Knowledge intensity ii. Homogeneity Negative factors are i. Organizational size ii. Capital intensity.

PART B 5. Why focus is shifted from people management to knowledge management in managing the resources? During the industrial era (i.e. before the birth of computers), the firm was essentially an institution geared to mass production, thus massed labour. Productivity was dependent upon narrow, task based specialization. As workers were divided into groups performing different tasks, they had to be monitored and controlled, i.e. managed. The larger the firm and greater the diversity of tasks, more managers were appointed. Company management has to manage the people performing particular tasks or functions. All that is now changing. In computer era, task based specialization is reducing as industrial tasks are automated. Task management is now changed to process management, which means that fewer managers are required. Computers can now perform many monitoring functions formerly conducted by management, particularly for routine functions which were earlier performed by people. Fewer levels of hierarchy, fewer control points, less human monitoring, less need for intermediate layers of management between owners and workers. In the computer era, the managers monitoring and controlling the low-skilled workers is moved to operate on the outer ring of the firm. Managers working in the core area ( inner ring) is moved from managing physical resources to managing knowledge i.e. instead of managing the tasks people perform to managing their knowledge inputs and outputs. Thus the focus is shifted from people management to knowledge management. 6. Comment on Use of Performance-Based Incentives for employees in an organization. As firms downsize physically, upsize mentally, and gear their organization for knowledge-based growth, many are still follow incentive and reward structures. For an employee, in addition to a basic salary, The firm offered a variety of other incentives and rewards such as performance based bonuses, profit sharing and stock options, and the range of psychological benefits such as awards from CEO. As the firm evolves rapidly towards a knowledge-based institution, so the profile of workforce and the incentive and reward systems necessary to motivate and reward that workforce must undergo a radical change. With the organizational restructuring of the firm, the incentives and rewards will change as follows: - Greater use of performance or merit-based rewards for all employees;

Increasing use of personal performance-based incentives for the outer ring group of employees; - Increasing use of personal, team, and corporate incentives for the associative and core groups. For example, for a college, the teaching faculty are considered as core group, lab instructors are associative group and all other non-teaching staff are outer ring group (periphery group). 7. Comment on Promotion as an Incentive for employees in an organization . In any organization, promotion to a higher level in the hierarchy is viewed as the most powerful incentive for everyone. Deficiencies with promotion as an incentive are found in slow-growing organizations where opportunities are limited. In such organizations, payment based on performance are more likely to provide genuine incentives. Another deficiency with the promotion as incentive is to give preference for internal candidates over candidates from outside the firm which may lead to the selection of less efficient candidate. The two types of promotion which is followed are as follows: i. The up or out system ii. the up or stay system. The up or out system In this system, the institution gives training for several years to workers and evaluates at the end of training. If he or she is found fit for promotion then it will be given otherwise asked to leave the job. The up or out system is popular because it ensures that the training which they receive during their apprenticeship period is enough to search job outside the firm. The up or stay system In this system, the employees who have not been promoted have generally been retained by firms. Many companies follow this system for giving promotion. 8. What are various forms of worker ownership? Various forms are as follows: i. Employee Stock Ownership Plan ii. Worker Cooperatives iii. Codetermination iv. Management Buyouts. v. Service Sector Firms. We will see each of them in detail.

Employee Stock Ownership Plan Companies started to offer employees stock ownership as a proportion of their annual salary. The reasons for firms to offer such plans appear to a desire to obtain greater productivity, to combat growing union power, or to improve their financial flexibility. Worker Cooperatives This involves workers collectively owning, managing and controlling enterprises such as cooperative banks, cooperative stores. Codetermination Some firms, notably in Germany, have allowed workers and investors to participate equally in electing board directors. The reason is to improve worker involvement in communication and decision making. The results of these experiments have tended to show that different levels of knowledge in two groups have rendered joint decision making impractical. Management Buyouts(MBOs) In MBOs, a small number of management tend to be involved. In effect a management elite becomes the new investors, the rest of the management and key workers remaining uninvolved. Service Sector Firms Workers having similar educational backgrounds and skill levels join together to form a company such as doctors join together to form hospital, chartered accountant firms etc. Many management consultants, IT consultants, engineers, scientists, doctors tend to operate in mutually owned practices. 9. One of the factors leading to success of worker ownership is knowledge intensity Explain Positive factor associated with worker ownership firms are Knowledge intensity and homogeneity. The service workers such as doctors or lawyers tend to depend upon explicit knowledge derived largely fromAcademic training plus tacit knowledge gained on the job. The other service workers such as milkmen, taxicab drivers who have not received any formal training depend solely on self learning and the knowledge gained on the job. All service workers tend to update their knowledge frequently. Knowledge has played an important role not only in service sector but also in manufacturing sector.

An example for this is in labour-intensive factories, in Israel, the management employed a small percentage of workers but significantly used 60 percent of the countrys industrial robots. As a result, only less than 50% of the workers were human workers involved in production, the rest being employed in areas where professional knowledge was needed. 10. One of the factors leading to the success of worker ownership is homogeneity--Explain Workers in worker- owned firms enjoy similar educational backgrounds and skill levels, perform similar types of work, and enjoy similar status. This applies particularly to those in the core group of workers who actually own and manage the firm, such as the partners in an accountant firm or doctors firm. The relevance of homogeneity to the success of worker-owned firms can be seen to operate in many ways. - the greater the similarity in knowledge levels the easier it is for one worker to monitor another effectively; - attitudes to standards of quality and professionalism are less likely to diverge where cultural and educational background is similar; - the substitution for one worker for another when that worker is not available is easier; - decision making is faster as everybodys view is similar. Homogeneity applies not only to skill levels but also to modes of work, monitoring system, style of remuneration, knowledge of firm systems and procedures and cultural attitudes. One of the most striking aspect of homogeneity is the facility with which workers in a similar profession can work collectively or independently. Doctors, lawyers or taxicab drivers can operate efficiently, either as independent worker within a mutually owned firm, or in a loose business network. Thus it seems that knowledge and homogeneity are mutually reinforcing factors, so that when both factors are strongly represented, the chances of ownership by the key knowledge workers in the firm are greater.