An emerging model of people management practices
Knowledge-intensive work has become increasingly important over the last decade or so, and in today's knowledge economy, information and knowledge have become tradeable commodities. The changing economy has given rise to new firms - knowledge-intensive firms - that are challenging widely held beliefs about how organisations should be structured and managed. Knowledge-intensive firms have a number of distinctive organisational and market characteristics which challenge traditional ways of managing and organising.
This bulletin summarises the research report People Management Practices in Knowledge Intensive Firms. People management practices are especially important in knowledge-intensive firms because they rely completely on various forms of knowledge held by their employees to compete successfully. The knowledge-intensive sector was chosen for special investigation because it reflects likely changes in the UK economy in the future.
This report highlights the important issues to consider when managing performance in knowledge intensive firms. Discover the three key tensions:
- Why it is important to satisfy the needs of individuals knowledge workers, as well as facilitate the transfer of knowledge between teams.
- How to manage potential tension caused by differing loyalities and identitites between the team, the organisation, the profession and the client.
- Why people management practices may be more effective when they have been allowed to develop inductively and organically, rather than directed from the top down.
Research background
Over the past few years, the CIPD has commissioned significant research into the area of people management and business performance. This report is one of a series of publications detailing the results from a three-year study from the University of Bath. The research team, led by Professor John Purcell, has collected a wealth of data on a number of issues, including detailed employee attitudinal data and a range of performance data within each of the participating organisations.
To improve the understanding of why and how people management practices influence business performance, we expanded investigation into those organisations which employ a high proportion of knowledge workers. The original intention of the work was to discover whether knowledge-intensive firms are developing a model for people management which is different from that of larger, more established organisations. This study has been conducted alongside and following the same methodology. The results are therefore discussed in the light of the larger study.
What are knowledge intensive firms?
Knowledge intensive firms are organisations which are relatively young, small and fast-growing. These organisations employ knowledge workers, who are engaged in work that applies expertise to novel problems. They often provide services for business clients, sometimes in collaboration with partners in an external network.
Case study organisations
The organisations chosen for study are populated largely by knowledge workers, and the knowledge of those workers is inextricably linked with the product or service they offer - which is, for example, software design, consultancy or creative solutions.
Knowledge situations
There are three 'knowledge situations' that are critical to the success of these firms:
- developing individual knowledge and skills
- sharing and developing this knowledge within the organisation
- sharing and developing this knowledge with clients and other parties in the network.
The success of our organisations as measured by a variety of indicators is a reflection of their ability to manage the tensions that are created between the needs of knowledge workers and the requirement to share knowledge between competing team, organisational, professional and client identities, and between the need for formal HR policies and more informal approaches to the management of employees.
Successful people management practices
People management processes play a key role in managing these knowledge-intensive situations successfully - in particular, those concerned with:
- recruiting, developing, rewarding and retaining key employees
- developing forms of social capital to facilitate the sharing of knowledge within the organisation
- developing processes for acquiring client and market capital and for managing relationships with clients and other partners.
Successful knowledge-intensive firms (KIFs) overcome these tensions by ensuring that the way they manage their people supports and enhances their practices and processes for developing and sharing knowledge. These firms gain an intellectual capital advantage by achieving a mutually supportive HR advantage.
The results clearly show that a new model of people management is emerging in knowledge-intensive firms. This model plays a key role in developing the kind of intellectual and social capital these firms need in order to acquire business and manage customer relationships. The authors conclude that it is not just the knowledge and skills of the workforce that is critical but also the knowledge-sharing processes within the firm which help maximise the benefit of their expertise for the firm.
In 2003 we shall be publishing the results from the main study, including the Ability, Motivation and Opportunity (AMO) model which explains the relationship between people management practices and performance outcomes - highlighting the importance of discretionary behaviour. With this work we will be able to strengthen the arguments about causality and improve understanding of how the relationship works in specific circumstances and environments.
CIPD has been working in the area for five years, and the academic research is now drawing to a close. Our investigations have been:
- to improve the evidence linking people management to business performance or organisational competitiveness
- to improve understanding of why and how people management practices influence business performance
- to provide accessible information on which managers can act through effective choices and decisions.
We are confident that we have demonstrated compelling reasons why good people management really does make a difference to the bottom line. The challenge now is to turn that evidence into everyday reality reflected in all business decision-making.
If you would like to discuss the research on which these findings are based, please email our research department or telephone Angela Baron, Adviser, Organisation and Resourcing, on 020 8263 3282.
For details of our many other research projects, and the latest state of play on each, visit our research area .
How to get further information The full report,
People and Performance in Knowledge-Intensive Firms. by Juani Stewart, Nicholas Kinnie and John Purcell is published by the CIPD (ISBN 0852929765. £29.99 to CIPD members; £49.99 to non-members).
It is available from CIPD Publishing. To purchase:
- online, visit our Bookstore. This is under 'Research - people management and business performance'
- by phone - 0870 800 3366
- or write to - CIPD Publishing, Units 5 & 6, Industrial Estate, Brecon, Powys. LD3 8LA.
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The case study organisations studied are:
- MPC - small software house employing 30 software engineers.
- Ingenta - medium-sized e-publishing and web delivery company with 200 staff.
- Marlborough Stirling - provides software and services to the mortgage, life and pensions sector, employs 840 people worldwide.
- Microgen-Kaisha - software consulting group employing 110 consultants.
- Tocris Cookson - a specialist chemical company with 60 employees.
- Epinet Communications plc - software development and consulting, employing 25 staff.
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