Governance, knowledge creation, and organizing: an afterthought.

Governance and knowledge are important considerations in designing the organizations of the future. Corporate governance has been associated with increasing the return on capital employed and more rigid control of management teams. The emphasis on creating shareholder value has led other stakeholders to become more vocal about their competing expectations. Concurrently, knowledge creation processes have risen in importance and caused new thinking about turnover and retention: of knowledge or of people?

Among the key phenomena that characterize the evolution of firms and organizations during the past decade, shareholders' power is perceived as having had an important impact upon organizational structures and processes (Brilman, 1998). This phenomenon -- namely, the development of corporate governance -- has resulted in increasing expectations of higher returns on capital employed and more rigid control of management teams. The recent financial scandals (Enron, Worldcom) have, however, put somewhat into question the traditional relationship between shareholders and management teams as postulated by agency theory (Jensen & Meckling, 1976; Melbourne & Cyr, 1997).

Corporate governance gives back to the firm's owners the power to influence strategic orientations and decisions that previously were left in the hands of the management team (Charreaux, 1997). This well-entrenched trend has been followed in the majority of Western economies (with some variations, as in the case of Germany where decision-making processes are more consensual and boards are more collective (Charkham, 1995; Kay & Silberston, 1995)); but it is mostly associated with the Anglo-Saxon (American) form of capitalism. Corporate governance has thus become synonymous with the development "short-termism" through the "tyranny" of the quarterly report. This situation has laid a great deal of pressure on managers to focus on creating economic wealth, because they are mainly rewarded for this. In France, the recent dismissal of JeanMarie Messier, the head of the media giant company Vivendi Universal, has followed its dramatic turn of fortunes, yet it was also a verdict on his American style of management, whi ch created much controversy.

The excessive attention given by management teams to the creation of shareholders' wealth has generated what could be described as a "group-think" phenomenon discounting any other perspective about the ultimate goal of the organization. In most recent years, particularly in Europe under the pressure of the "green" movement and other citizens' groups, other stakeholders -- customers, employees, trade unions, communities, government -- have become more and more influential in the conduct of organizations because they have other expectations beyond the profit motive (Ferone, 2001; Ramirez & Wallin, 2000; Brilman, 1998).

This enlargement of the concept of value creation can be identified in the Oticon case described by Larsen (2002, in this issue) and the Leisureplanet.com case deconstructed by Verkinderen & Altman (2002, in this issue). As a positive example, what is striking in the Oticon case is the systemic change that moved the company to a "knowledge-based organization" in which the value creation not only emphasizes the financial return for shareholders, but also focuses on customer satisfaction and employee involvement. This example may be viewed as an applied case or the balanced score card approach that has been advocated by Kaplan & Norton (1996). As a negative example, the inability of Leisureplanet.com to create value for multiple stakeholders led this company to cease operations abruptly. The "unplugged" nature of Leisureplanet.com failed to bring much value to local employees, communities, and customers.

Another phenomenon that has drawn much interest over the past decade -- knowledge -- has been positioned as one of the most critical assets that an organization must acquire, develop, and retain (Baumard, 1999; Nonaka & Takeuchi, 1995). Knowledge is a prime source of competitive advantage because it may possess several key characteristics: valuable, rare, non-imitable, non-substitutable -- as the resource-based view of the firm postulates (Wernefelt, 1984; Barney, 1991, 1997). The development of project-based organizations described by DeFillippi (2002, in this issue) leads to the creation of specific knowledge through the combination of internal and external learning made possible by Internet technology. Moreover, the impact of regional collaboration (e.g., Silicon Valley or Route 128 in the USA, Sophia Antipolis in France, the M4 corridor in UK) is critical to understanding the emergence of informal communities of practice that not only disseminate knowledge of technical practices but also maintain a code o f conduct. At stake here is the capacity of organizations permanently to learn and adapt (Argyris & Schon, 1978).

In this context, Arthur and Parker (2002, in this issue) convincingly argue that HRM is no longer a person-centered approach but rather a knowledge-centered approach. Traditional HRM tools and practices are put in question with the development of knowledge management. The management of careers in knowledge-based organizations is, for instance, dramatically different according to Arthur and Parker (2002, in this issue), who emphasize the importance of communities that serve as "natural arenas for knowledge sharing and new knowledge generation." As another illustration, the case of Oticon provides a textbook example of the learning organization according to Larsen (2002, in this issue), who argues that "the possibilities for professional and personal development are proclaimed to be -- and to a vast degree are indeed -- unlimited, if one knows how to exploit these opportunities."

These cases illustrate the critical importance of various knowledge creation processes that relate tacit and explicit, individual and collective knowledge: awareness, assimilation, implicit learning, internalization, articulation, appropriation, and extension (Baumard, 1999). In this perspective, the community webs described by DeFillippi (2002, in this issue) may be viewed as boundaryless organizations in which knowledge is created at the collective level mainly through articulation and internalization processes. Similarly, the early success of Leisureplanet.com (Verkinderen & Altman, 2002, in this issue) illustrates other knowledge creation processes that relate individual and collective knowledge such as extension, appropriation, and implicit learning with the development of its innovative approach of travel business. In order to foster these knowledge creation processes, some specific HRM practices are likely to be implemented (Arthur & Parker, 2002, in this issue): recruitment of knowledge not people, re tention of knowledge not people, acceptance of turnover, encouragement of community links, reinforcement of industry citizenship.

And the final question: Are we really witnessing the emergence of new organizations based on radically different structures and processes? The answer is cautiously positive when considering the cases described in this issue, but the extent to which these new organizations are radically different from old economy companies may be subject to debate. DeFillippi (2002, in this issue) advocates for a positive answer arguing that these organizations adopt project-based organizing with the use of Internet technology that allows both flexibility and optimal use of their human capital. The major change experimented successfully by Oticon (Larsen, 2002, in this issue) is also an argument in favor of the emergence of new organizational models, though the case has its limitations (e.g., career progression opportunities).

In a similar perspective, Arthur and Parker (2002, in this issue) point out the need for companies to respect employee career investments in order to reinforce their "knowing-why" motivation. These companies have to develop new ways of organizing and managing knowledge, not people. Last, but not least, the failure of Leisureplanet.com (Verkinderen & Altman, 2002, in this issue) illustrates the difficulty for new organizations to emerge and develop in an evermore demanding environment. The collapse of the first wave of dot.coms and recent accounting scandals call for a more cautious approach to new organizational (and financial) models.

References

Argyris, C. & Schon, D. (1978). Organizational Learning: A Theory of Action Perspective. Reading, MA: Addison-Wesley.

Barney, J. (1991). "Firm Resources and Sustained competitive Advantage." Journal of Management, 17: 99-120.

Barney, J. (1997). Gaining and Sustaining competitive Advantage. Reading, MA: Addison Wesley.

Baumard, R (1999). Tacit Knowledge in Organizations. London: Sage.

Brilman, J. (1998). Les Meilleures Pratiques de Management, an coeur de la Performance. Paris: Editions d'Organisation.

Charkham, J. (1995). Keeping Good company: A Study of corporate Governance in Five Countries. Oxford: Oxford University Press.

Charreaux, G. (1997b). "Vers une Theorie du Gouvernement des Enterprises," in G. Charreaux (Ed.): Le Gouvernement des Entreprises, corporate Governance, Theorie et Faits. Paris Economica, ch. 15, 421-470.

Ferone, G. (2001). "Racines et Evolutions de l'Investissement Socialement Responsable dans le Monde," in G. Ferone et Coll: Le Developpement Durable, des Enjeux Strategiques pour l'Entreprise. Paris: Editions d'Organisation. partie 1,7-81.

Jensen, M.C. & Meckling. W.H. (1976). "Theory of the Firm: Managerial Behavior. Agency costs, and Ownership Structure." Journal of Financial Economics, 3, October. 305-360.

Kaplan, R. & Norton, D. (1996). The Balanced Scorecard: Translating strategy into Action. Boston: Harvard Business School Press.

Melbourne, T.M. & Cyr, L.A. (1997). "Agency Theory Implications for Strategic Human Resource Management: Effects of CEO Ownership, Administrative HRM and Incentive Alignment on Firm Performance." Working paper No. 96-17, ILR cornell University.

Nonaka, I. & Takeuchi. H. (1995). The Knowledge creating company New York, NY: Oxford University Press.

Ramirez, R. & Wallin, J. (2000). Prime Movers. London: Wiley & Sons.

Wernefelt, B. (1984). "A Resource-Based View of the Firm." Strategic Management Journal, 5: 171-180.

Biographical Sketch

Charles-Henri Besseyre des Horts has been an associate professor of human resources management and organizational behavior at Groupe HEC since 1990. He directs the MS in Strategic Human Resources Management. Between 1993 and 1995 he was the dean of Marseilles-Provence's Graduate School of Business. Charles-Henri earned a Doctorate in Management (Aix-Marseilles) and a Ph.D. (UCLA). He has been and is actively involved in a number of international training and consulting activities in the United States, Canada, Nigeria, Algeria, Morocco, Tunisia, South Africa, Brazil, Lebanon, Rumania, Russia, Malaysia, Vietnam, China, and Australia. He has published several books, one of which (Vers une Gestion Strategique des Ressources Humaines (Towards a Strategic Human Resources Management)) received the 1988 award for the best socio-economic management book.