Role of Knowledge Management on Employee's Job Performance in Nepalese

Commercial Banks

By: Dilli Raj Pandey

CHAPTER I

INTRODUCTION

1.1 Background

Knowledge management is managing the corporation’s knowledge through a systematically and

organizationally specified process for acquiring, organizing, sustaining, applying, sharing and
renewing both the tacit and explicit knowledge of employees to enhance organizational
performance and create value, (Allee, 1997).Knowledge management can be defined as adopting
such approach which is systematic that act as a knowledge assets of an organization that can be
best managed (Dunn and Neumunster (2002).

Knowledge is something which has only intrinsic value and its extrinsic value only lies in
properly managing and utilizing it. Human being was first living in an agricultural economy and
after the breakthrough of technology, human first enter into industrial economy and land and
labor was the two factors of prime importance in that economy (Danish, et al., 2014).Prime
resource of any organization is not its financial resource or technical resources but it is the
knowledge which is enclosed in the mind of its human, (Malhotra 1997). Knowledge base
resources are the path or way that follow in order to have a sustainable competitive edge
otherwise we will be out of the game. One of the key benefits of introducing KM practices in
organisations is its positive impact on organisational performance. The research conducted in
Croatia suggests that knowledge management positively affects organisational outcomes of
company innovation, product improvement and employee improvement(Rasula, et al., 2012).
According to (Fugate, et al., 2009), results collected in a logistics operations context prove the
existence of a strong positive relationship between a knowledge management process and
operational and organisational performance. Still, it is not well understood how different KM
strategies affect organisational performance.

1
Chigada & Ngulube (2015), knowledge management practices in the banking situation should be
actions aimed at improving the internal flow and use of information and knowledge, and banks
can be a major participant in these activities. The banking customers’ ever-changing tastes and
preferences require banks to proactively improvise products, exit projects and product lines that
can drag down the business and engage in others that maximize the growth potential as radical
market shifts threaten to put the bank’s business with the wrong product. By rapidly exploiting
and applying fragmented internal and external knowledge, a bank can reliably detect emerging
windows of opportunity before competition takes the market by surprise. This study investigated
the extent to which selected banks in South Africa have implemented knowledge management
practices such as the acquisition, sharing and retention of knowledge. In knowledge-intensive
institutions such as banks, enabling environments are envisaged that allow different departments
or individuals to acquire insight, skill and relationships. Management should counter the silo
mentality and allow departments to share information, notwithstanding the privacy and secrecy
policies of banks. Training and development programmes inherent in banks should pave ways for
knowledge acquisition.

Turban, et al. (2004), illustrates that organizations should have systems in place that help the
process of knowledge sharing. A good example of such systems would be computer-based
systems because of its speed, ability to store large volumes of information and retrieval
capabilities. Knowledge sharing enables organizations such as banks to converge towards.
Knowledge may be shared during seminars, conferences, team-building exercises, written
reports, performance appraisals and conventional programmes where employees’ function of the
banks plays a significant role to coordinate planning programmes for training and development
as well as induction and succession. For these elements to work together, the prevailing
organizational culture as enabler of knowledge management helps to facilitate synergy between
the knowledge management practices. (Pacharapha & Ractham, 2012), define knowledge
acquisition as the process of the development and creation of insight, skill and relationships. For
knowledge to be acquired there should be willingness and ability of a recipient to acquire and use
knowledge are crucial elements.

Improving the knowledge management process is closely related to evaluation of the results
derived from the knowledge management applications. Contrary to what is expected from the

2
study, knowledge management culture has been determined as having no influence on the
knowledge management process. Knowledge management process, which has been briefly
defined as the process of transformation of data to information and transformation of information
to value generating knowledge, has become an indispensable factor for the banking sector. In this
context, banks have been intensely competing to know their customers better, to offer solutions
for individual needs, face-to-face if required, and to transform them to their life-long customers.
At the heart of all these developments, proper management of knowledge becomes even more
crucial and only a mechanism, in which a proper and efficient manner of managing knowledge
creates a difference, becomes operative (Ugurlu & Kızıldağ, 2013).

Knowledge Management is not only about managing knowledge assets such as knowledge
regarding markets, technologies, products, and organizations, which facilitates business
processes to make profits, add value, etc. But also managing the processes that act upon the
assets. Developing knowledge; using knowledge, and sharing knowledge; preserving knowledge
are a few examples of these processes. In accordance with these, (Macintosh, 1999).Knowledge
management is a discipline that promotes an integrated approach to the creation, capture,
organization, access and use of an organization’s information assets. These assets include
structured databases, textual information such as policy and procedure documents, and most
importantly. Knowledge Management is the systematic management of processes enabling vital
individual and collective knowledge resources to be identified, created, stored, shared, and used
for the benefit of the actors involved. The process of capturing, organizing, and storing
information and experiences of workers and groups within an organization and making it
available to others. By collecting those artifacts in a central or distributed electronic
environment. Knowledge management aims to help a company gain competitive advantage.

Knowledge management is a business process that formalizes the management and use of an
enterprise’s intellectual assets. Knowledge management promotes a collaborative and integrative
approach to the creation, capture, organization, access and use of information assets, including
the tacit, uncaptured knowledge of people. Knowledge management aims to gather, analyze,
store and share knowledge and information within an organization. The primary purpose of
Knowledge management is to improve efficiency by reducing the need to rediscover knowledge.

3
Knowledge management is the overall task of managing the processes of knowledge creation,
storage and sharing, as well as the related activities(Kucza, 2001).

Knowledge Management as a discipline has been a focal point of discussion over the past
decades. In recent years, the importance of Knowledge Management has been widely recognized
as the foundations of industrialized economies shifted from natural resources to intellectual
assets. Since 1995 there has been an explosion in the literature surrounding the developing
concept of Knowledge Management. Today, there is hardly a conference or published journal
without seeing literature referring to the concept, Knowledge Management. The importance of
Knowledge Management as a critical tool in organization and the society (Omotayo, 2015).

The management of knowledge has generated considerable interest in business and management
circles due to its capability to deliver to organizations, strategic results relating to profitability,
competitiveness and capacity enhancement. The management of knowledge is promoted as an
important and necessary factor for organizational survival and maintenance of competitive
strength. KM is identified as a framework for designing an organization’s strategy, structures,
and processes so that the organization can use what it knows to learn and to create economic and
social value for its customers and community. Management of knowledge is regarded as an
important features for organizational survival while the key to understanding the successes and
failures of knowledge management within organizations is the identification of resources that
allow organizations to recognize, create, transform and distribute knowledge. Organizations that
effectively manage and transfer their knowledge are more innovative and perform better (Riege,
2007).

Managing knowledge is as important to banking institutions. Despite the significance of

implementing a knowledge management initiative, there are very few banking institutions
formally engaged in a fully integrated knowledge management programs. The change in the
global competitive business environment has compelled banks to rationalize their products and
services and made them to look into knowledge management in order to improve their
competitiveness and performance. Banks to gain competitive advantage may reside in the ability
to force knowledge management in the banking sector (Lamb, 2001). The aim of this study is to
determine the components, which influence the business knowledge management process, and to
analyze whether there are differences between the state and private banks with respect to their

4
components of knowledge management, by determining the related skills and level of
implementation of organizational knowledge management in the banking sector (Ugurlu &
Kızıldag, 2013).

Knowledge management processes play an important role as potential enablers of working skills
and to improve the capacity of the teams to enhance the ways as they share knowledge and the
tools that they use (Wang et al. 2006). The various knowledge management process includes
Knowledge creation which deals in risk management new risk implies new ways to measure it
and to identify the potential effects that could have, acquisition, synthesis, fusion and adaptation
of existing risk knowledge is part of the way to understand new and current risks, knowledge
storage and retrieval actions and methods require codification, organization and representation of
risk knowledge. It includes the activities of preserve, maintain and index risk knowledge,
Knowledge transfer is a multidisciplinary work, interdepartmental development and a holistic
view of risk across the organization, that requires knowledge dissemination and distribution in
order to support individuals, groups, organizations and inter-organizations to develop RM
capacity and knowledge application deals in converted in competitive advantages for financial
institutions adopting the best practices, developing products and methods for risk control
(Rodriguez & Edwards, 2005).

Cress and Martin (2006) expressed that there is a difference in knowledge between small and
large groups. ERM people represent a big group across the organization. They identified that in
large groups that knowledge exchange using questions is not very efficient because of similar
questions coming from different people. This means that probably is better to create some
repositories of experience, data and collaboration tools in order to enhance the knowledge
exchange.

knowledge sharing has an important influence in knowledge management implementation

because it provides connection between people and organization, producing dissemination,
collaboration, innovation and acquisition of knowledge They regarded knowledge sharing as
critical in knowledge creation and found that factors influencing knowledge sharing included:
business context, organizational structure and roles, business processes, motivation, means,
ability etc. The study also found that many factors enabled knowledge sharing such as the
strategy link with knowledge sharing or the proper adjustment to leadership, human networks,

5
organizational culture and learning processes.Knowledge sharing and effective communication
depend on the overlap and amalgamation of knowledge bases among people. Knowledge sharing
requires more than information technology it requires the creation of a means, and a willingness
to share. This means that it takes into account the differentiation of knowledge sharing between
and among groups, for example the knowledge adapted to be communicated among individuals
and groups.

Knowledge management system that supports the knowledge management processes includes the
technological aspects and people interaction components, which in particular, can modify the
quality of the knowledge sharing attributes from risk management language to organizational
roles, communication channels and technological means for knowledge transfer. Knowledge
contributes to control, business strategy and underwriting processes most risks are not possible to
transfer or to hedge, because they depend on human actions. The organization needs to learn how
to deal with non-transferable risks such as lack or loss of knowledge, and with risk minimization
actions: legal actions, outsourcing and risk retention (Shaw, 2005).

Businesses today face the problem of sustainability due to the constant change of environmental
conditions and global competition. The concept of knowledge has been viewed as the most
strategic source of the businesses and knowledge management has been frequently studied within
the management studies and applications. In order for the concept of knowledge management to
be defined in the literature, concept of knowledge is being addressed first. Notion of knowledge
includes notions of data and information. In some cases, notions of information and knowledge
are used as synonyms by ignoring the difference between them. Information expresses a state of
knowing certain things about a phenomenon. Knowledge, on the other hand, expresses the
assumption of how a phenomenon may react when exposed to change and the transformation of
information to an idea (Geyik & Barca, 2004).

Knowledge management depends on the leader that he/she is expected to provide facilitating
conditions for knowledge management. Leader is needed for sharing knowledge and supporting
the climate, applications and motives within the organization .Leaders play an important role in
the process of constituting a learning culture within the organization and its dissemination. The
leader should help the organization members to adopt the knowledge by ascribing value to it and
he/she should encourage them to question and experiment through workforce enhancement

6
applications. In addition, leader is thought to be making important contributions to knowledge
management activity by building trust and facilitating access to implicit knowledge.Culture is an
important factor in the creation of commitment in employees both for each other and for the
objectives of the organization. Therefore, culture has an important status in the process of
establishment and achievement of the objectives, decisions, strategies, plans and the policies of
the organization.In order to sustain knowledge management applications, however, senior
management has to see material or immaterial measureable results. Best way to measure the
effectiveness of knowledge management applications is to measure its influence on the business’
performance(Dell & Grayson, 2003).

In context of Nepal regarding studies on the knowledge management on bank performance has
been conducted. The study revealed that firm's knowledge management strategy relates to its
strategic arrangements in building and management knowledge stock through the effective
process of creating, transferring and distributing knowledge. The result also indicates that a fit
between business and knowledge management strategy are significantly related to better
organizational performance effective management of human resource strategy in organizations.
Knowledge management with corporate strategy banks are found more profound in comparison
of private banks, and it is because of own training center and government financial support. But,
their employee expenses in terms of salary and benefit are higher than in public banks. So, the
attitude of employee in the private banks is found to be more positive than in public one that's
why they are committed, motivated and satisfied in the bank. It is also found that interaction
between both strategies needs to be considered for the successful applications of knowledge
management initiatives in an organization. There is significant difference between private and
public banks in terms of knowledge management practices existing in Nepalese banks. In case of
codification strategy of knowledge management, private banks acquire and use knowledge as a
strategic resource to gain competitive advantage and focus more on information technology
development and preparation.(Chaudhary, 2012).

Nepalese banks must be sure of its position in the competitive market and of its business
strategies for defending and gaining current market share under complex situation. So to be the
best and to sustain in the market, human resource through Knowledge Management Strategy
effective application with upgrading capability is required. These studies indicate the gap of

7
understanding in the area of knowledge management strategy with business strategy for
performance and competitiveness. In case of going through various research work of renown
experts as the part of research undertaking, it is fairly learnt that knowledge management
initiative are unlikely to be successful unless they are integrated with diverse business strategies
and unless they are related to the development of the core capabilities of the organization. The
study has revealed that the implementation of knowledge management as the integrated part of
an organization has every remained a gap in Nepal.

Nepalese banks use computer as the major mode of knowledge transfer and have intranet
facilities but they are not very effective for the organizations to use them to give remarkable
output. The employees are encouraged to attend trainings, seminars, and conferences in Nepalese
banking Industry. It is also found that there is a culture of encouraging interactions among
employees in Nepal banking sector. Also, it does have reward system to encourage such
employees for knowledge transfer among workers.Today's companies are facing important
challenges, so every firm operates within some industry and adopts a competitive position within
that industry and every strategic position is linked to intellectual resources and capabilities. Due
to the intense global competition, the most important managerial context for investing in and
promoting the use of knowledge management is the corporate strategy. Increasing knowledge is
being recognized as the most strategically important resource and learning capability for
business. For many years, organizational knowledge has been stored in several ways, including
human minds, documents, policies, and procedures, and shared among individuals through such
means as conversations, training, apprenticeship programs, and reports. Clearly, knowledge
management (KM) is not a new phenomenon. However, the importance of knowledge has grown
considerably in recent times (Chaudhary, 2012).