What is the Islamic Bank of Britain’s approach towards managing knowledge?
Responses of managers and employees show that Islamic Bank of Britain approaches knowledge management with moderate importance by considering this merely as a technological issue. This means that Islamic Bank applies a segmented approach, as opposed to a holistic approach, in applying knowledge management. Headquarters has expressed recognition of the importance of knowledge management to the bank. However, this was only to the extent of obtaining information about developments in the industry and its market as basis for top-down decision-making (2004). A top-down decision-making means that the employees at headquarters or employees at the branches are not consulted prior to decision-making so that decisions are handed down only for implementation. This means that headquarters failed to recognise the bigger role of knowledge management in improving the quality and efficiency of the performances ( 2001; 2003) of frontline employees in the different bank branches through the exchange of information or feedback.
Moreover, the bank also applied the technological approach to knowledge management by considering this as involving hard aspects (2000). This is expressed through the bank’s plans to enhance its knowledge management by establishing an Intranet system to link headquarters with the London and regional branches. During the data collection process, the managers and employees have not been apprised of any pending plans to develop the soft aspects of knowledge management.
The extent of knowledge management applied by Islamic Bank is consistent with existing concepts. Islamic Bank recognises two aspects of knowledge management differentiated by (2000) as hard and soft systems. Islamic Bank considers hard systems as computers with Intranet and Internet linkages; and soft systems as the environment, channels and attitudes geared towards open communications to make it easier to share information. However, Islamic Bank has yet to achieve the systematic and explicit management of knowledge that extends to the soft systems, such as corporate culture as well as policies, activities and practices mentioned by (2000). Islamic Bank has yet to establish a team in charge of knowledge management or informed employees of this policy change and the extent of changes involved.
How important is knowledge to the success of Islamic Bank of Britain?
Knowledge is important to the success of Islamic Bank of Britain in raising its quality of service and competitiveness. Knowledge is needed by the bank in making decisions and policies that provide guidance to frontline employees in servicing bank customers and guidance to managers in assessing the performance of frontline employees. Knowledge is also important to Islamic Bank because of the wide array of benefits that the bank stands to experience in maintaining and further developing its knowledge management system. Existing literature provides that knowledge improves the competency of employees because this constitutes the basis of good and effective decisions (2002; 2002) especially in the frontline level; and the capability of the bank to develop strategies (2006) that target the needs of consumers especially in a rapidly changing market. With heightened competition, knowledge and its management allows Islamic Bank to determine the demands of customers and provide quality service addressing these needs.
Moreover, knowledge also provides the bank with its capabilities. The bank can improve its existing services and provide new services by developing on its limitations and weaknesses, based on its in-depth knowledge of changing market demands (2001).
How does Islamic Bank understand knowledge management?
Islamic Bank understands knowledge management as the process of collecting and analysing information to develop top-down policies for frontline employees. Although available literature has yet to provide a commonly accepted definition of knowledge management, some of the conceptualisations in literature are consistent with the definition of Islamic Bank that knowledge management involves the collection and analysis of information. However, the definition of Islamic Banks lacks the aspect of information sharing ( 1999) mentioned in literature. This is because of the lack of open communications in Islamic Bank at the organisational level. The limited definition of Islamic Bank of knowledge management is the reason for its slow uptake of knowledge management even if this offers important benefits to the bank.
What are the main problems and barriers to Islamic Bank of Britain and its staff towards managing knowledge?
Results of the data collected on Islamic Bank shows that even if Islamic Bank realised the need to establish a formal and organised system akin to knowledge management, it failed to provide solutions to a number of actual problems. First problem is collating the information needed by frontline employees in dealing with customer needs and updating the information base to prepare frontline employees to deal with new issues presented by customers. Second problem is establishing an efficient system of continuous information collection, analysis, sharing and updating ( 1999) from frontline employees since there is no officer specifically taking charge of knowledge management. Third problem is opening and developing a two-way channel of communication, with one channel connecting frontline employees with managers and the other line linking the bank through the frontline employees with consumers.
These problems occurred because of a number of barriers to effective knowledge management in Islamic Bank. One barrier is the lack of open communications (1995) between frontline employees and top management as well as the bank branches and headquarters. Without open venues or channels for communication, it is difficult to organise, analyse and share information coming from the frontline employees who provide accurate information on changing customer needs. As such, decisions made by top management may not necessarily reflect changing customer demands. Another barrier is the limited implementation of knowledge management, with headquarters insufficiently looking at hard systems without considering that soft systems are also necessary to effective knowledge management.
How is Knowledge Managed at Islamic Bank?
If the determinant of the importance of managing knowledge management to a business firm is the commitment to the establishment of hard and soft systems (2000), then Islamic Bank manages knowledge as a minor process. Responses offered by employees of Islamic Bank showed that they perceive the bank as not applying knowledge management. This is because of the lack of a team or an officer specifically playing the role of knowledge manager as well as the lack of channels and tools for knowledge management (2004). Due to the lack of observable expressions of knowledge management in Islamic Bank, the employees especially those engaged in frontline services, who greatly benefit from information sharing, perceive nil knowledge management in the Bank.
Moreover, even if information sharing occurs across the different branches and from management to frontline employees, more respondents considered the shared information and channels of information sharing as inadequate. This means that Islamic Bank needs to develop a more organised and explicit knowledge management system.
Apart from the limited sharing of information and channels for information sharing, Islamic Bank does not optimise information. The company has implemented no incentives for information sharing so that employees take greater responsibility in generating knowledge that they need to accomplish their work. Access to information by different branches is limited and not uniform and even with sufficient technological tools, these were not maximised in knowledge management. This means that even if the bank has sufficient relevant and updated information, it is not able to use the information effectively to support decision-making for frontline services in the difference branches. Islamic Bank needs to optimise the use of available information and communication technology for knowledge creation and sharing (1998), shift organisational culture towards knowledge valuation (1999), and provide greater support to employees in accepting and utilising knowledge management channels and systems.
Islamic Bank applies a knowledge management system intended to support the strategy of the organisation to improve the competency of its employees to support frontline decision-making that in turn increases the quality of service. With a higher service quality, Islamic Bank expects to enhance its market competitiveness. Although the bank has achieved this goal, it has not achieved maximum results because of the limited use of information in creating and sharing knowledge, which should reach the front employees and extend across the different branches. This means that even if Islamic Bank recognises knowledge management as an important factor in achieving high levels of competitiveness, from quality service that is linked to optimum employee performance and productivity, it has not taken advantage of available tools and information to manage organisation-wide knowledge. This coincides with the failure of the bank to achieve optimum benefits from managing knowledge because of the application of strategies not appropriate or not exactly meeting the specific context of the bank (2001). Islamic Bank could have enhanced the performance and productivity of its frontline employees by learning new market demands together with developing best practices on service provision techniques. It could have achieved greater customer satisfaction necessary to create a client base that could have supported the competitiveness of the bank relative to its closest competitors and other industry players.
Based on the four processes of knowledge conversion ( 2007), the extent of application of knowledge management of Islamic Bank only extended to knowledge conversion on a branch and not on an organisational level. Respondents provide that at the branch level, they are encouraged to share innovative ideas and learning but this is not the case at headquarters. On the organisational level, socialisation does not happen because headquarters is not strongly linked with the branches to facilitate knowledge sharing, Due to this weakness in the core process of knowledge conversion, the other processes of externalisation, combination and internalisation did not materialise as firm values.
In considering the generic model of knowledge management (2001) consisting of the three aspects of people, technology and processes, Islamic Bank primarily focused on technology and secondarily on people and processes. The secondary consideration of people as an element of knowledge management is expressed in the activity of headquarters of commissioning information from external sources without conducting internal information gathering based on the feedback of frontline employees. The secondary priority for processes, that actually constitute the core aspect of knowledge management, is expressed in the non-inclusion of change in corporate culture to enhance open communication channels for top-down and bottom-up feedback exchanges. The aspects of people and processes constitute areas for improvement in Islamic Bank.
Due to the moderately effective use of knowledge in the operation of Islamic Bank, it has not been able to experience all the benefits of knowledge management. (1999) provide that knowledge management allows firms to create, share, source, map and measure various aspects of its operations as well as its relative competitive position for purposes of strategy formulation (2006) and effective application of strategies by employees through knowledge conversion ( 2007). Technology cannot singly support knowledge management because of the need to focus on the people applying the technology to achieve productivity and competitive goals.
How is bank’s culture helping frontline customer service staff in developing their knowledge?
Islamic Bank’s organisational culture is in a way helping the application of knowledge management of the bank but in another way hinders effective knowledge management. On the branch level, communications is open since employees replied that they could discuss results of failed projects with their managers and with team members. Moreover, employees of London and regional branches also reported that they receive encouragement to derive innovative ideas that are important in knowledge management. With open communications at the branch level, the frontline customer service employees are able to have a venue for sharing information and deriving learning that they can apply in servicing customers.
However, at headquarters, a limited number of employees agree that the company encourages employees to become innovative. This means that even with open communications and incentives for innovativeness at the London and regional branches, headquarters is not so keen in developing open communications and innovativeness. Without sufficient support from headquarters, Islamic Bank cannot develop an effective and comprehensive knowledge management system that facilitates the development of knowledge of frontline employees. Through a bottom-up initiative, top management at headquarters should change their prioritisation of knowledge management by realising the importance of open communications as an organisation-wide practice (1988; 1990).
Does Islamic Bank have the right infrastructure to support knowledge management?
Based on the responses of Islamic Bank employees, the bank has the basic technological infrastructure to support the first stages of knowledge management. However, by having only the basic infrastructure, this cannot effectively support the further development of knowledge management because of the poor linkages or channels of communication between headquarters and branches. This is sought to be addressed through the Intranet system but a concurrent change in the organisational structure, especially the development of a cyclical system of top-down and bottom-up linkages (1990), is needed to facilitate open communications. In order to support the use of the wide-ranging modes of multi-media communications, the bank has to develop employee acceptance and appreciation for these tools through a change in corporate culture.
(1999) provides that the commitment of senior or top management is important in the process of implementing knowledge management and change management to facilitate changes in corporate culture and structure to support the achievement of goals. Although Islamic Bank’s corporate behaviour shows its realisation of the importance of managing knowledge in competitive business firms, because it commissions information gathering, it has not been aggressive or committed enough to implement knowledge management across the organisation. Even if headquarters is planning the establishment of an Intranet system, this only constitutes one hard aspect of knowledge management. Without greater effort from the top management to facilitate the application of knowledge management, the span of benefits would not be realised.
Does Islamic Bank have the most appropriate staff development tools to support knowledge management practices?
Islamic Bank needs to improve its staff development tools to support knowledge management practices. Most of the respondents provided that they are not even aware of any staff development activities being implemented by the bank. This means that the bank should recognise knowledge management as an important tool for competitiveness (2006). In line with this recognition, it needs to develop competencies to support knowledge management ( 2004). First competency is organisational communication that covers open and trusting communication attitudes together with multi-media communication channels. Second competency covers change management to facilitate the systematic integration of the values of knowledge and knowledge creation and sharing roles among the members of the organisation. Third competency involves leadership and people management for the leaders to commit to their roles in knowledge management and for the employees to become motivated to engage in innovative activities to support continues information gathering and learning of the organisation. These competencies support continuous learning from the experiences Islamic Bank, with knowledge management then becoming the basis of best practices for the firm.
Conclusion
The case shows that knowledge management is a complex process involving multi-faceted aspects, such as hard and soft systems, encompassing the entire organisation. As such, the impact of applying knowledge management is far-reaching or long-term. Knowledge management concepts offer the benefits of creating, analysing and using information to derive knowledge useful in supporting policy-making at the top level as well as innovative decision-making of front-line employees. Overall, knowledge management constitutes a tool to allow organisations to achieve their competitive goals.
However, the complexity of knowledge management results to difficulties in application. This is caused or worsened by the lack of a common conceptualisation of knowledge management. This means that even if knowledge management offers valuable benefits to organisations, this may be difficult to achieve because of the lack of standards, which finds basis on a clear definition of knowledge management, to support the practice of knowledge management. There are also scant best practices available to guide application in different business settings such as in the financial sector. The themes that emerged from the case highlight the limitations of knowledge management.
Based on the consideration of the experiences of Islamic Bank of Britain with knowledge management, relative to existing theoretical and empirical knowledge, a number of themes constituting the areas for improvement of Islamic Bank emerge.
First theme involves defining knowledge management. Islamic Bank has to expand its definition of knowledge management to support its needs and objectives. Existing literature do not provide a commonly accepted understanding of knowledge management. This resulted to the differentiated perception of knowledge management such as the technological perspective of Islamic Bank of knowledge management, which is different from the fusion of people, technology and processes or the complementary linkage of hard and soft systems. An expanded or holistic understanding of the bank of knowledge management would clearly set out the management of knowledge according to its needs and objectives. As an area of best practices, this means the need to develop a definition that encompasses the general principles of knowledge management together with organisational goals. One principle is the holistic approach of knowledge management that involves the fusion of hard and soft systems; or people, technology and processes. Another principle is the competency and resource-based approaches that look into the effective development and utilisation of competencies and resources to support the creation, sharing and conversion of information into practical knowledge helpful in improving employee performance in providing quality service that enhances the competitiveness of the firm.
Second theme covers the role of knowledge management in facilitating the bank’s goal achievement. Previous studies on knowledge management of banks have identified the lack of uniformity in the perception of the importance of knowledge management by individual firms. Islamic bank accrues moderate importance to knowledge management expressed through its minimal use of information derived primarily from external sources. Due to this perception of knowledge management, this area has not been considered for inclusion in firm efforts to develop firm standards based on best practices. As an area of best practices, this means that need for the bank to develop a common or organisation-wide recognition of the importance of knowledge management to service delivery. The importance of knowledge management to the bank would be based on the failures and issues it faced in applying knowledge management. Learning from its failures ensures that the bank incorporates knowledge management in its core strategies in order to ensure quality service for consumers and improve operational efficiency.
Third theme covers the benefits of knowledge management. Although existing literature cited the various benefits of knowledge management to business firms in general and to banks in particular, there are limited comprehensive or encompassing models linking various elements of knowledge management with particular benefits. These linkages have not also been clarified by Islamic Bank. Knowledge management should be recognised as influencing efficiency through feedback exchanges among employees, so that this covers group dynamics. Knowledge management should also be recognised as enhancing performance through innovativeness, implying benefits on the individual level. Knowledge management should further be recognised as ushering productivity and quality service through decision and policy-making, indicating benefits at the organisational level.
As an area of best practices, these benefits should be considered as experienced simultaneously with the application of knowledge management across the organisation. Recognition of simultaneous experience of benefits is important to enable the bank to focus on not only one or more areas of knowledge management but also the management of knowledge on the individual, group and organisational levels to achieve results more efficiently and optimally. By looking at knowledge management occurring in various levels, the bank would also adopt a comprehensive approach that targets efficiency on the individual, group, branch and organisational levels. There is need to develop a holistic model highlighting the multi-level benefits of knowledge management coinciding with the various parties and interests as well as competencies and resources involved in effectively managing knowledge to derive the intended outcomes.
Fourth theme involves recognising the complexity and scope of knowledge management. Existing literature recognise knowledge as complex. However, there are limitations in the discussions of the nature and extent of the complexity and scope of knowledge management. In the case of Islamic Bank, it considers knowledge management as a complex system but limits the scope of knowledge management to technological processes only. Without identifying the extent of complexity and scope of knowledge management in the context of the bank’s experiences, it cannot be able to develop effective ways of addressing these complexities and working within or around the scope to achieve effective knowledge management.
As an area of best practices, the bank needs to recognise the scope of knowledge management as cutting across the different areas of management and operation to include people management, change management, strategic management, and other relevant areas of management. Knowledge management also involves different levels of the organisations including individuals, departments, branches, headquarters and the organisation as a whole. Knowledge management also affect both employees and management and require various competencies and resources including skills and experiences of employees, leadership capabilities of managers, and technological tools to support information collection and sharing as well as knowledge conversion.
Fifth theme involves the development of practice-based learning so that lessons from the experiences of Islamic bank are translated into practical knowledge. Existing literature on knowledge management can be categorised into philosophical or theoretical and empirical studies. Theoretical studies look into the concept of knowledge management and its relation to various business concepts while empirical studies focus on the specific experiences of particular business firms in implementing knowledge management. Although, these are able to provide important insights into the understanding of knowledge management, information is limited only to either theoretical or practical results. As an area of best practices, the bank needs to focus on the application of appropriate theories in its actual business context to derive learning from its successes and failures. The study on the knowledge management of Islamic Bank of Britain involves the application of theories and the development of best practices from its actual experiences to derive ways of enhancing the bank’s application of knowledge management.
Gaps or inconsistencies between the case and theories or models of knowledge management exist. Key to knowledge management is the culture of communication, which was not given sufficient attention by the bank. This was because its priority was on developing the technical aspects. Ideally, communication could have fostered information sharing to spur the creation of practical knowledge, especially among the frontline employees. Knowledge management also intends to encompass organisational operations, processes and relations, such as organisational culture, human resource management, and marketing, in order to achieve the goal of competitiveness. The bank failed to recognise the scope of knowledge management by focusing only on certain aspects. This may be due to the lack of a clear conceptualisation of knowledge management for the financial sector. These are the reasons for the fair achievement of the benefits of knowledge management by the bank. Nevertheless, knowledge management remains an important business tool that involves further clarification and development of best practices.
Credit:ivythesis.typepad.com
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