Key Best Practices to Improve Knowledge Management Effectiveness and Firm Performance

Organizational performance can be enhanced when executives reshape corporate structure and implement information technology to provide open access to knowledge and information.

A hierarchical corporate structure is one of the biggest problems for organizations. But such a structure can be reshaped by executives when they develop knowledge sharing and inspire employees to create new ideas for a better environment among business units and departments. 

Two scholars, Sirkka Jarvenpaa and Sandy Staples, maintain that a flatter corporate structure can facilitate new idea generation to build a more innovative climate within organizations. Executives can implement organizational changes that develop better collaboration among subordinates and managers. 

Centralized versus Decentralized Decision-Making

Centralized versus decentralized decision-making is another topic executives must deal with. Scholars found that more emphasis on hierarchical and centralized corporate structures can negatively impact an executive’s ability to exert organizational changes. On the contrary, a more decentralized and flatter corporate structure may improve departmental and managerial interactions. The centralization at the commanding level of leadership impairs the opportunity to develop relationships among managers, business units, and departments. 

Executives can reshape corporate structure to be more effective when the command center of organizations can disseminate information in a decentralized and organic way as opposed to a hierarchical and centralized command center. Decentralized structures shift the power of decision-making to the lower levels and subsequently inspire organizational members to create new ideas and even implement them, while hierarchical or centralized structures may negatively impact interdepartmental communications and inhibit knowledge exchange. 

Recent research in this area, such as that done by Wei Zheng, Baiyin Yang, and Gary MCLean, affirms that the there is a negative impact of centralization on various knowledge management processes such as knowledge acquiring, creating, and sharing among both managers and departmental units. On the other hand, a more decentralized and flatter structure may enable executives to improve departmental and managerial interactions that can lead to identifying best opportunities for investment that potentially lead to an improved knowledge utilization process. 

IT and Knowledge Management

Furthermore, scholars such as Brian Fugate, Theodore Stank, and John Mentzer have affirmed that knowledge management is a significant indicator of improving organizational performance. Knowledge management can, in fact, improve organizational performance through increased sales, customer satisfaction, learning opportunities, innovation, and quality of products and services. Therefore, if corporate structure is not completely in favor of supporting knowledge management, executives cannot effectively manage organizational knowledge to improve performance, and organizations may become obsolete or be taken over. 

Information technology also can play a critical role in the success of knowledge management. For instance, scholars such as Yew Wong and Mahmoud Migdadi highlight the importance of information technology in facilitating knowledge flow and communication. They indicate that the effectiveness of knowledge management implementation is positively associated with using information technology and setting up useful software and systems to enhance strategic decision-making. Executives can implement information technology through employing IT professionals and allocating more budgetary resources to share and utilize knowledge within organizations. 

Executives around the globe realize that they play a critical role to achieve the best climate that creates learning and growing the organization. The key is for executives to inculcate a climate of learning and transparency of knowledge sharing within organizations so information can be found and used instantaneously. In doing this, executives can use information technology as a communication mechanism manifestation and deployment and decision-aid technology. 

For example, Hsieh argues that communication technology provides the ways to enhance interactions among members and departments within organizations. This type of technology uses and eliminates the barriers of organizational communications while improving the extent of knowledge sharing and access for all followers at various levels of the organization. Decision-aid technology develops cohesive infrastructures to store and retrieve knowledge to enable followers in creating more innovative solutions to problems and managing operational risks. As such, information technology supports organizational knowledge management by enabling interactions and providing more comprehensive and effective solutions to solve organizational problems. More effective solutions and better ideas improve the quality of services and products, which can add to the organization’s profitability. Executives now can see how information technology enhances a climate of openness within organizations, which will enable knowledge management processes in which followers can more effectively contribute to a company’s performance and competitive advantage.

Keys to Success

In conclusion, executives can see that improving organizational performance requires developing knowledge management within organizations—not only at the higher echelons of the organization but at every level. Organizational performance, therefore, can be enhanced when executives reshape corporate structure and implement information technology to provide open access to knowledge and information. 


Fugate, B.S., Stank, T.P., & Mentzer, J.T. (2009). “Linking improved knowledge management to operational and organizational performance,” Journal of Operations Management, 27(3), 247-264.

Jarvenpaa, S. L. & Staples, D. S. (2000). “The use of collaborative electronic media for information sharing: An exploratory study of determinants,” Strategic Information Systems, 9(2), 129-154.

Migdadi, M. (2009). “Knowledge management enablers and outcomes in the small-and-medium sized enterprises,” Industrial Management & Data Systems, 109(6), 840-858. 

Wong, K.Y. (2005). “Critical Success Factors for Implementing Knowledge Management in Small and Medium Enterprises,” Industrial Management & Data Systems, 105(3), 261-279.

Zheng, W., Yang, B. & Mclean, G. N. (2010). “Linking organizational culture, structure, strategy, and organizational effectiveness: Mediating role of knowledge management,” Journal of Business Research, 63(7), 763-771.

Mostafa Sayyadi, CAHRI, AFAIM, CPMgr, works with senior business leaders to effectively develop innovation in organizations, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and long-time contributor to and Consulting Magazine. 


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