=Paper= {{Paper |id=Vol-34/paper-12 |storemode=property |title=Managing Knowledge through Experimentation and Socialisation |pdfUrl=https://ceur-ws.org/Vol-34/handzic.pdf |volume=Vol-34 |dblpUrl=https://dblp.org/rec/conf/pakm/Handzic00 }} ==Managing Knowledge through Experimentation and Socialisation== https://ceur-ws.org/Vol-34/handzic.pdf
     Managing Knowledge through Experimentation and Socialisation
                                                    Meliha Handzic
                              School of Information Systems, Technology and Management
                                           The University of New South Wales
                                                  Sydney, NSW 2052
                                                m.handzic@unsw.edu.au



                                                                        With this comes a growing recognition of the need to
                                                                        determine ways to better cultivate, nurture and exploit
                               Abstract                                 knowledge in modern organisations at different levels and
                                                                        in different contexts. Yet, there is little understanding of
     This paper reports results of an empirical                         the nature of the knowledge-creating organisation and
     examination of the facilitating role of                            how it should be managed.
     experimentation and socialisation in enhancing                         Western theorists generally view organisations as
     individual knowledge and performance in                            information processing machines. They show central
     decision making. A laboratory experiment was                       preoccupation with hard and quantifiable “explicit”
     conducted using 28 graduate students as                            knowledge embedded in organisational repositories as the
     voluntary subjects. Performance of actual                          only useful kind of knowledge [Bax99, Non98]. Eastern
     subjects was compared with that of their nominal                   theorists, on the other hand, focus more on “tacit”
     naive and optimal counterparts. Results indicate                   knowledge that people derive from their own experience
     that both opportunities for independent                            and through sharing [Non95, Non98]. The notable success
     experimentation and socialisation among                            of Japanese companies suggests that any company that
     subjects significantly facilitated individual                      wants to compete on knowledge should learn from their
     knowledge enhancement and led to improved                          examples, and master techniques for creating and sharing
     decision performance. Subjects encouraged to                       tacit knowledge. Given that between 40% [Aao98] and
     interact with others tended to make better quality                 90% [Hew99] of the needed knowledge in organisations
     decisions than those who individually                              is tacit, it is not surprising that there is currently a sense of
     experimented with the decision task. Both                          urgency felt among knowledge management researchers
     performed better than notional naive subjects                      to better understand how to tap the wealth of knowledge
     who applied random walk decision strategy.                         in people’s heads.
     However, the results indicate room for further                         Some authors suggest that new knowledge always
     improvement. Subjects failed to reach                              begins with the individual, and that making personal
     performance of notional optimal counterparts                       knowledge available to others is the central activity of the
     who used linear decision strategy. The results                     knowledge-creating company [Non95]. The spiral
     also suggest the need for a holistic approach to                   knowledge model assumes that the process of sharing will
     managing knowledge by combining and                                result in the organisational amplification and exponential
     integrating various initiatives to create even                     growth of working knowledge. Others propose that in
     higher levels of knowledge and performance.                        order to build a learning organisation the first step should
                                                                        be to foster the environment conducive to individual
1 Introduction                                                          learning, that is allow experimentation to gain experience,
                                                                        and second, to open up boundaries and stimulate
Knowledge management literature indicates a widespread                  exchange of ideas [Gar98]. However, given the current
agreement among researchers and practitioners alike that                infancy of the knowledge management research, there is
knowledge is the only sure source of lasting competitive                little empirical evidence regarding the ways in which tacit
advantage or even economic survival for organisations                   knowledge is actually acquired and shared, and the impact
operating in a new-age economy [Dev99, Dru93, Ste97].                   it has on performance.
                                                                            The main purpose of this study is to address the issue
The copyright of this paper belongs to the paper’s authors. Per-        by empirically investigating the potential of two specific
mission to copy without fee all or part of this material is granted     knowledge management initiatives (experimentation and
provided that the copies are not made or distributed for direct         socialisation) to facilitate individual knowledge
commercial advantage.                                                   enhancement and application in a judgemental decision
Proc. of the Third Int. Conf. on Practical Aspects of                   making task context. Decision making is an important and
Knowledge Management (PAKM2000)                                         knowledge intensive activity. Business decisions in
Basel, Switzerland, 30-31 Oct. 2000, (U. Reimer, ed.)                   organisational environments can be made individually or
http://sunsite.informatik.rwth-aachen.de/Publications/CEUR-WS/Vol-34/   in groups. The literature suggests that the majority of



M. Handzic                                                                                                                          12-1
important decisions are made individually, but after           which strategy to use in a particular decision problem is
significant social interaction [Hea95]. Therefore, it is       contingent upon the demands of the task, environment
important to address both individual and social factors        and the characteristics of a person. Most empirical studies
that influence knowledge and performance of                    show that people adapt their behaviour to changes in task
organisational decision makers.                                and context in ways that seem reasonable given a concern
                                                               for both accuracy and effort [Pay88, Cre90]. These
2 Literature Review and Research Model                         studies also show that people adapt well enough to
                                                               satisfice, but do not in general optimise.
                                                                  In summary, most earlier research in the psychology of
2.1 Psychology of Judgement and Decision Making
                                                               human judgement and decision making is devoted to
Decision making has been studied from normative and            individual and group biases and errors. Studies of flawed
descriptive perspectives. Normative (classical) decision       reasoning are six times more often cited in journal articles
theory is the collection of axiomatic models of utility and    than studies of successful reasoning [Plo93]. However,
probability that describe the optimal decision making          adaptive models of human behaviour offer a more
under uncertainty [Bea93]. In its normative role, this         optimistic view. Beach and Mitchell [Bea78] have
theory describes decisions of an ideal economic man who        identified a number of specific factors that lead to
would behave in accordance with the principle of benefit       decision behaviour in the direction suggested by the
maximisation. In its prescriptive role, the way that the       normative models. Thus, greater uncertainty and
economic man would behave is assumed to be a uniquely          significance, lower complexity and constraints of the
appropriate rational way.                                      decision task, as well as higher decision maker’s
   Empirical research has repeatedly demonstrated that         knowledge, motivation and ability to learn are likely to
decision makers do not conform consistently to the logic       encourage the choice of a more analytical strategy and
of normative theories [Tve74]. Instead, individuals use        lead to better performance.
heuristics or general rules of thumb to arrive at their
judgements. This leads to predictable biases or deviations     2.2 Model of Knowledge Management
from normatively derived answers. Some of the best
                                                               Failures in judgement and decision making described by
known individual biases and                errors   include
                                                               “pessimists” and adaptive nature of decision making
representativeness, availability, and anchoring and
                                                               emphasised by “optimists” are quite informative for
adjustment. Studies have shown that reliance on
                                                               knowledge management research. They provide a basis
representativeness leads people to ignore base rate
                                                               for its interventionist approach to knowledge processes, as
information which, in turn, leads to inaccurate
                                                               they identify points of concern and suggest adaptive
predictions. The availability heuristic can lead to critical
                                                               directions. It is argued here that a generic knowledge
biases in judgement of probabilities and frequency
                                                               management model [Aao98] with four major enablers
estimates. The effects of anchoring show that people
                                                               (technology, culture, leadership, measurement) that
adjust insufficiently from anchor values regardless of the
                                                               facilitate knowledge processes can provide an appropriate
topic. People also have difficulties in assessing
                                                               theoretical framework for studying knowledge
correlations among variables [Plo93].
                                                               management in judgement and decision making. The
   Because people are social by nature, their judgements
                                                               central task here is to identify those initiatives and
and decisions are subject to social influences. Much of the
                                                               practices that would reduce the complexity and
earlier research into group interactions is devoted to a
                                                               uncertainty of the decision task, minimise environmental
groupthink phenomenon. According to Janis [Jan82]
                                                               constraints, and facilitate development of relevant
members of the cohesive long-term groups strive for
                                                               decision makers’ knowledge and skills to maximise
unanimity and do not realistically appraise alternative
                                                               decision performance.
courses of action. This results in unfavourable outcomes.
                                                                  The focus of the current study is on two knowledge
In general, past research indicates that most individual-
                                                               management         initiatives,    experimentation     and
level biases and errors tend to operate with equal force in
                                                               socialisation, both aimed at fostering working knowledge
groups [Plo93].
                                                               of individual decision makers. These two initiatives have
   While there is little doubt that people violate the
                                                               been suggested as central activities of a knowledge
principles of normative theory, these violations do not
                                                               creating company [Gar98, Non95]. Organisational culture
mean that people are irrational, or that the way people
                                                               encouraging experimentation is assumed to foster
make decisions is unreasonable. Simon [Sim90]
                                                               individual learning, while socialisation is believed to
suggested that processing capabilities of the decision
                                                               enable amplification and exponential growth of working
maker interact with the complexity of the environment to
                                                               knowledge. The objective of this study is to empirically
produce bounded rationality. The awareness of the
                                                               test these two assumptions. More specifically, the study
calculated rationality has led to several models that
                                                               will attempt to answer the following research questions:
emphasise the cognitive costs and benefits of various
                                                               (i) whether and how an opportunity for individual
strategies people might use in constructing preferences
                                                               experimentation and social interaction among decision
and beliefs. The Beach and Mitchell [Bea78] model for
                                                               makers affect their working knowledge, and (ii) what
the selection of decision strategies represents a direct
                                                               impact these two initiatives have on their subsequent
extension of the bounded rationality concept. Selection of
                                                               decision performance.



M. Handzic                                                                                                            12-2
3 Research Methodology                                        vs. socialisation). It was manipulated by providing the
                                                              subjects with an opportunity to either individually
                                                              experiment and learn the task by trial and error, or by
3.1 Experimental Task
                                                              encouraging them to socially interact with each other and
The experimental task for the current study was a             share ideas and opinions while handling the task.
simulated production planning activity in which subjects         The dependent variable was decision performance. It
made decisions regarding daily production of fresh ice-       was operationalised by symmetric absolute percentage
cream. The participants assumed the role of Production        error (SAPE), chosen because it controls for scale. SAPE
Manager for an imaginary dairy firm that sold ice-cream       is a popular accuracy measure suggested by the
from its outlet at Bondi Beach in Sydney, Australia. The      forecasting literature [Mak93]. In this study, it was
company incurred equally costly losses if production was      obtained by dividing the absolute difference between
set too low (due to loss of market to the competition) or     estimated and actually demanded units of product by an
too high (by spoilage of unsold product). The                 average of the two values and multiplying by 100%. In
participants’ goal was to minimise the costs incurred by      addition, the corresponding errors of nominal naive and
incorrect decisions. During the experiment, participants      nominal optimal decision makers were calculated. These
were asked at the end of each day to set production quotas    are error scores that would have been obtained by
for ice-cream to be sold the following day. Subjects were     completely ignorant and ideally knowledgeable people
required to make thirty production decisions over a period    who produced their decisions using naive (random walk)
of thirty consecutive days. Before commencing the task,       and optimal (linear) strategies respectively.
participants had an opportunity to make five trial
decisions for practice purposes only.                         3.3 Subjects and Procedure
   From pre-experimental discussions with actual store
                                                              The subjects were 28 graduate students enrolled in the
owners at Bondi Beach, three factors emerged as
                                                              Master of Commerce course at The University of New
important in determining local product demand: the
                                                              South Wales, Sydney. They participated in the study on a
ambient air temperature, the amount of sunshine and the
                                                              voluntary basis and received no monetary incentives.
number of visitors at the beach. This important contextual
                                                              Generally, graduate students are considered appropriate
information was provided to the participants in addition to
                                                              subjects for this type of research [Ash80, Rem96, Whi96].
past product demand to aid their decision making.
                                                              Individuals were assigned randomly to one of the two
Subjects were free to use the available information as
                                                              treatment groups by picking up a disk with an appropriate
much as they wished to, by making explicit request to the
                                                              version of the instrument. Then, they were directed to two
computerised information system. All contextual factors
                                                              designated microcomputer laboratories where they were
were artificially generated to provide similarly moderate
                                                              briefed about the purpose of the study, read case
predictive power in estimating future sales. This was
                                                              descriptions and performed the task. The session lasted
achieved by setting correlation coefficients between
                                                              about one hour.
contextual and predicted variables to r=0.80.
   Subjects performed the task under different working
conditions. Half of the subjects were allowed to
                                                              4 Results
experiment with their information to learn causal             The collected data were analysed using a series of
relationships among contextual and demand variables.          statistical T-tests to compare decision performance
They were expected to apply that knowledge in their final     (SAPE) among four experimental groups of subjects
individual production decisions. The other half were          (notional naives, independent experimenters, social
encouraged to share their personal knowledge with others.     interactives and notional optimals). Results are presented
In particular, participants from this group were placed in    graphically in Figure 1.
teams of two and instructed to discuss their ideas and           Results of the analyses performed indicate significant
opinions before making final decisions. However, they         improvement in decision performance due to individual
were not required to reach a consensual decision.             experimentation. Independent experimenters tended to
   At the beginning of the experiment, task descriptions      make significantly smaller decision errors (SAPE) than
were provided to inform participants about the task           their notional naive counterparts (17.80% vs. 20.67%,
scenario and requirements. The given text differed with       p<0.05). There was a real drop in error by 14%. Results
respect to the working conditions prescribed. Throughout      also indicate significant further improvement in decision
the experiment instructions and feedback were provided        performance due to socialisation. Social interactives
to each participant to analyse earlier performance and to     tended to make significantly smaller decision errors than
adjust future strategies.                                     independent experimenters (11.42% vs. 17.80%, p<0.05).
                                                              This meant a further drop in error by 31%, to a total of
3.2 Experimental Design and Variables                         45%.
                                                                 Furthermore, the results of the analyses indicate that
A laboratory experiment with random assignment to
                                                              participants failed to achieve optimal performance. Both
treatment groups was used in the current investigation
                                                              independent experimenters and social interactives tended
because it allows drawing of stronger causal inferences
                                                              to make significantly larger decision errors than their
due to high controllability. The only independent variable
                                                              notional optimal counterparts (17.80% or 11.42% vs.
was knowledge management initiative (experimentation



M. Handzic                                                                                                         12-3
6.25%, p<0.05). These participants were able to acquire       review see Bre80]. It is possible that graphical
and apply 20% and 64% respectively of the knowledge           presentation of historic data used in this study enabled
possessed by an ideally knowledgeable decision maker on       subjects to easier identify the existence and direction of
the same task.                                                relationships among various task variables. Such
                                                              proposition is consistent with the earlier finding by
                                                              Lawrence et al. [Law85] that graphical presentation form
                                                              enhances the accuracy of novice decision makers. It is
                                                              also possible that the subjects in this study were given
 SAPE
                                                              sufficient time for experimentation that enabled them to
   20%                                                        appropriately adjust their strategies through task repetition
                                                              and from feedback. Klayman [Kla88] also reported that
                                                              people could learn reasonably well cue discovery over a
                                                              larger number of trials.
   15%                                                           The study also demonstrated a highly beneficial effect
                                                              of socialisation on individual decision making. Social
                                                              interactives were found to make significantly more
   10%                                                        accurate decisions than independent experimenters. The
                                                              incremental drop in their error scores was 31%. This
                                                              finding suggests that subjects encouraged to interact with
    5%                                                        others were able to enhance knowledge through exchange
                                                              of ideas and opinions and consequently improve
                                                              performance. Participants might have brought their
                                                              personal analysis and know-how to the task, acquired
                                                              information about their partner’s ideas and arguments and
                 Nai.    Exp.      Int.    Opt.               considered both in making final decisions.
                                                                 The beneficial effect of socialisation evident in this
                                                              study is consistent with the theoretical propositions of the
             Figure 1: Decision Performance                   knowledge management literature [Gar98, Non95]. It also
                       by Experimental Groups                 agrees with frequent anecdotal evidence from the real
                                                              world organisations [Hew99]. However, such findings are
                                                              contrary to a large number of earlier studies on group
                                                              decision making that emphasise negative aspects of
                                                              decision making in groups such as groupthink [Jan82,
5 Discussion                                                  Plo93]. One potential reason for the discrepancy may be
                                                              due to the nature of the group decision process used in
                                                              this study. The study encouraged participants to interact,
5.1 Main Findings
                                                              but did not require them to reach consensual decisions.
In summary, the main findings of the present study            Thus, it might have avoided a potential negative effect of
indicate that knowledge management initiatives aimed at       groupthink. In addition, subjects in this study were
providing opportunities for experimentation and               provided with continuous performance feedback that
socialisation were quite useful in enhancing individual       might have enabled them to evaluate their own ideas
decision makers’ working knowledge and performance in         against those of their partners and adjust future strategies
a judgemental decision making task. In addition,              accordingly. Earlier empirical research indicated
socialisation was relatively more valuable than               beneficial effect of objective feedback on performance
experimentation. However, performance gains were less         [Kop86]. In short, generating and sharing personal
than possible given an expert knowledge of the task.          knowledge coupled with the opportunity to test its
   With respect to experimentation, the study                 contribution to performance might have enhanced
demonstrated that it had a significant positive impact on     knowledge and resulted in greater accuracy.
individual knowledge and performance. Independent                An important additional finding of the study is a
experimenters were found to make significantly smaller        substantially larger positive effect of socialisation than
decision errors that notional naive decision makers. In       experimentation on decision making. Social interactives
real terms their error scores dropped by 14%. This finding    tended to make more than twice as many accurate
suggests that subjects allowed time and opportunity to        decisions as independent experimenters. This finding
experiment on their own were able to acquire enough           appears to agree with the proposition of the spiral
relevant knowledge of the decision problem and solving        knowledge model [Non95] suggesting that sharing
strategies to improve performance. As a result they           personal knowledge results in amplification and
significantly reduced decision errors.                        exponential growth of working knowledge. Some reports
   This finding provides a more optimistic view of human      indicate that a number of large western companies (eg.
ability to learn multivariate probabilistic judgement tasks   British Airways) have already realised this and have built
through experience than suggested by earlier research [for    an appropriate infrastructure (eg. a coffee village) to




M. Handzic                                                                                                            12-4
facilitate social interaction and knowledge sharing among       transfer through education and training) to enable even
its employees [Hew99].                                          higher levels of knowledge and performance. According
    With respect to overall performance, the study revealed     to Davenport and Prusak [Dev97] only by taking a
serious deviations from optimal performance irrespective        holistic approach it is possible to realise the full potential
of the knowledge management initiative implemented.             of knowledge ecology.
Both independent experimenters and social interactives             Future research is necessary to empirically investigate
were found to make significantly larger decision errors         the potential of other various individual or combined and
than they could have. Further analysis revealed that, on        integrated knowledge management initiatives to further
average, they acquired and applied 20% and 64% of the           enhance knowledge and enable optimal performance. One
knowledge assets of an expert decision maker through            possible direction for future research is to explore the
experimentation and socialisation respectively.                 potential contribution of instruction (eg. coaching and
    One potential explanation for the failure to achieve        mentoring) to enhancing individual tacit know-how.
optimal performance may be the difficulty of learning           Future research may also examine the role of explicit
optimal functional forms among given variables.                 analytical and procedural knowledge embedded in
According to Klayman [Kla88] people can learn                   organisational repositories. Technology may play an
reasonably well the existence and direction of a cue-           important role in capturing and distributing organisational
criterion relationship, but have difficulties in learning its   knowledge, as well as in promoting human interaction
shape. As a result they tend to perform sub-optimally.          and knowledge sharing. Therefore, future research may
Alternatively, the failure could be attributed to the           examine the potential of various information and
moderately predictive power of contextual factors. Hoch         telecommunication technologies to enable and facilitate
and Schkade [Hoc96] have proved theoretically that              knowledge processes. Finally, future research may look at
pattern matching strategy can not produce good results in       how different knowledge management initiatives interact
environments that are not highly predictive. Finally, the       to create potential synergy effects. These suggested
participants in the study were not expert decision makers,      directions are neither prescriptive nor exhaustive, but
but novices. Garvin [Gar98] suggests that to become an          represent only a small selection of issues that are
expert each individual must pass through a number of            currently of interest to the author.
stages of knowledge. In this context experimentation and
socialisation might have helped push participants from          6 Conclusions
lower to higher stages. However, examples from literature
                                                                The main objective of this study was to investigate
suggest that for maximum effectiveness other initiatives
                                                                whether and how the opportunity for individual
including transfer of knowledge through education and
                                                                experimentation and socialisation with others may affect
training programs are essential.
                                                                decision makers’ working knowledge and performance in
                                                                a specific judgemental decision task. The findings of the
5.2 Limitations and Implications
                                                                study indicate that both experimentation and socialisation
While the current study provides a number of interesting        were beneficial in enhancing decision makers’ working
findings, some caution is necessary regarding their             knowledge and subsequent decision performance. The
generalisability due to a number of limiting factors. One       opportunity to experiment led to enhanced decision
of the limitations refers to the use of a laboratory            accuracy compared to naive strategy, while encouraged
experiment that may compromise external validity.               social interaction led to further significant improvement
Another limitation relates to artificial generation of          in accuracy over and above that achieved through
information that may not reflect the true nature of real        independent      experimentation.      However,      optimal
business. The participants chosen for the study were            performance was not achieved. These findings indicate
students and not real life decision makers. The fact that       room for improvement. They also suggest that non-expert
they were mature graduates may mitigate the potential           professional knowledge workers in judgement and
differences. No monetary incentives were offered to the         decision making tasks could benefit from other additional
participants for their effort in the study. Consequently,       knowledge management initiatives. Therefore, further
they could find the study tiring and unimportant and            research is necessary to systematically address various
would not try as hard as possible. Most decisions in real       combined and integrated initiatives in different tasks and
business settings have significant consequences.                contexts and among different knowledge workers if a
   Although limited, the findings of the current study may      better understanding of the field is to be achieved.
have some important implications for organisational
knowledge management strategies. Firstly, they provide          References
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M. Handzic                                                                                                               12-5
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M. Handzic                                                                                                    12-6