Conceptos Sobre Conocimiento

Abstract 002-0156

Operations management and knowledge management in construction

projects

(Gestión de operaciones y gestión del conocimiento en proyectos

constructivos)

Second World Conference on POM and 15th Annual POM Conference, Cancun, Mexico,

April 30 - May 3, 2004.

Josep Capó, Guillermina Tormo, Raúl Poler

Dpto. de Organización de Empresas – Universidad Politécnica de Valencia

Plaza Ferrandiz y Carbonell; 03801 Alcoy (Alicante) Spain

Tel. + 34 96 652 84 66 / Fax: + 34 96 652 84 65

[pepcapo, gtormo, rpoler]@omp.upv.es ABSTRACT

The construction sector has a number of characteristics that make it different from other production sectors. The supply chain is set up for each individual project and is made up of various increasingly specialized companies.

This paper analyzes the most usual methods of managing construction projects, paying special attention to the relationships between members of the supply chain and the requirements necessary for managing knowledge between them.

We analyze the way the knowledge already existing in the participating companies is managed, and also that generated with each new project. By doing this we can define the actions necessary for increasing efficiency, reducing losses, improving the level of innovation, etc., in each construction project.

Key words: Knowledge management, construction, new organizational forms

1. Introduction

The objective of any company is to survive indefinitely. To achieve this it must be able to gain and maintain a competitive advantage that is sustainable in the long term. It cannot base its ability to be different on its assets alone, since the ever greater complexity of these assets means that virtually all companies in a particular sector possess them.

It is for this reason that competitive advantage appears through knowing how to make use of these assets rather than by simply possessing them. It seems, therefore, that a determining factor is the need to manage these intangibles in the same way the company's other assets are managed. This is the context in which the concept of knowledge management comes into its own. Knowledge management can be defined as “the function that plans, coordinates and controls the knowledge flows that occur in a company, in relation to its activities and environment, with the aim of creating essential abilities. This means integrating the management of information (explicit knowledge), processes (encapsulated knowledge), people (tacit knowledge), innovation (knowledge conversion) and intangible assets or intellectual capital.

Intellectual capital includes the value created by the knowledge management system. It is a measurement of the essential abilities in which the new knowledge can be set. It is therefore a capital asset at a particular moment in time which combines three elements: human capital, i.e. the knowledge value created by people; structural capital, i.e. the knowledge value created by the organization, forming its systems, procedures and technical development; and relational capital, i.e. the knowledge value created by the company in relation to its environment.

In this way, intellectual capital can be considered as a measurement of the value created, or in other words it makes it possible to explain the effectiveness of organizational learning and, basically, to assess the efficiency of knowledge management.

The current situation means that companies have to face important changes more and more often. The organizations that will have greater success in the future will be those that are capable of adopting these fundamental changes rapidly and efficiently. An organization's ability to change is therefore a key factor in determining whether it will be able to function well in both the short and the long term.

The real problem faced by programs for change is resistance from the people involved in the changes. Finding a model for managing these changes which would help overcome these resistance factors will to a great extent determine the company's long-term survival.

The success of these programs for change will therefore be to establish a process whereby organizations, actively and with the commitment of all their members, can detect and overcome those obstacles that prevent learning. This can be done by developing knowledge, techniques, values, beliefs, skills and learning by trial and error and past experience, which together will help bring about a change in behavior which should lead to an improvement in all aspects of the company's performance (organizational learning).

Knowledge is a factor with special characteristics in comparison to other production factors:

 First of all it is an intangible factor, as opposed to the tangible factors which until now

have reigned supreme in organizations (machines, tools, facilities,...). That is why

organizations have always been concerned about developing techniques and methods

geared towards managing tangible things. Unlike the company's other production

factors, the more knowledge is used the more value it has.

 Secondly, organizational structures have been designed on the basis that there were

only a few people in the company, and they were the ones that made the decisions

while the rest followed orders. Knowledge was therefore something that was

connected to the individual, who used it to make decisions. And so, if the decision

made was a correct one, there was a close link between possessing information and

being recognized economically and personally (knowledge is power).

Because of this, knowledge has four properties relevant for management:

 It is volatile. Due to the nature of its being stored in people's minds, knowledge

changes and evolves.

 It is a process which is developed basically by learning.

 It becomes action through motivation.

 It can be transferred without being lost.

The knowledge management movement as such evolved rapidly during the early 1990s. This growth resulted in a large number of events with little technical and scientific basis, where knowledge was shown as a panacea for the problems of the time.

However, the term “knowledge worker” - which was coined by Peter Drucker in 1969 - can be considered as the starting point for the great gurus' concern about knowledge management. Along with Drucker, many others such as Peter Senge, Nonaka, Takeuchi, Karl

Erik Sveiby, Larry Prusak, Chris Argyris, Leif Edvinsson etc. have considered knowledge as a key production factor in the post-industrial era. These authors have contributed different models, tools and methodologies to facilitate the introduction of knowledge management in organizations.

The origins are to be found in a study by Polany (1966) which, in the second half of the twentieth century, divides knowledge into tacit and explicit, highlighting the dynamic role of knowledge and then analyzing what is termed “knowing”, considering knowledge to be a continuous flow.

Knowledge can be studied from a number of different perspectives - from philosophy, psychology and sociology, for example, up to industrial organization. There are therefore a great number of models within the realm of knowledge management.

The distinction between tacit and explicit knowledge is crucial as it represents the keystone of current theories regarding the creation of knowledge in the company (Nonaka and

Takeuchi, 1995).

There are currently two tendencies in the field of knowledge: one followed by those who research and study aspects regarding how to identify, extract, structure and fix knowledge in the company, and the other followed by those trying to develop methodologies to enable its intellectual capital to be measured.

Similarly there are currently various different ways in which knowledge management can be introduced into the company. Some authors consider knowledge to be the “OBJECT”, while others see it as the “STRATEGY”. The former choose information technology to manage it, while the latter consider it to be a change of model.

Introducing knowledge management by considering knowledge as the "object" makes it possible to manage explicit knowledge. However, the same system is absolutely useless for managing tacit knowledge if favorable conditions do not exist in the organization to encourage the individual contribution of knowledge. In other words, knowledge management along these lines will enable an optimistic 20-25% of the knowledge existing in the company to be managed. Manage; in this case, can be understood as entering it in duly encapsulated form onto databases, but with no certainty that it will be used and even less certainty that it will be reused to create new knowledge.

Knowledge management means more than just the simple management of data and information. It is a process for converting individual knowledge into company knowledge, i.e. it means acquiring (intangible) assets for the company and capitalizing on them.

Managing these assets and incorporating them into the company's products and services is the key to new business management.

Within the process of knowledge conversion, learning takes on a fundamental importance.

Learning is the main way to acquire knowledge and then turn it into a business asset.

To summarize, knowledge management requires organizations to take on a change of model, with knowledge management needed as a “strategy” for achieving the total integration of the company. This strategy needs to be supported by organizational change aimed at building an intelligent organization that learns by importing, creating and reusing knowledge.

Strategic knowledge helps organizations to pass on greater benefits to their customers. It supports the decisions and actions needed to bring about the critical factors for success; it differentiates the organization's products and services, generates leadership in performance, helps greatly in passing benefits on to customers, anticipates the future, makes copying by third parties difficult, and unites and organizes the company's knowledge base.

2. Knowledge management in the construction sector

As already mentioned in the section above, the creation of knowledge comes about mainly through the learning acquired by individuals when solving problems or dealing with new situations deriving from change or innovation (Muñoz-Seca and Riverola, 1997), and it is precisely the process of developing new products that is the central process in the creation of organizational knowledge.

In the specific case of the construction industry, each project can be said to be a prototype in so far as it is completely different from any other. We can therefore see that project teams will to a greater or lesser extent always find themselves facing new situations. This implies the need to solve problems, which in turn will bring about learning and therefore new knowledge.

For this reason it is important to look at the main features of construction projects, the different people involved in them and the possible ways they can be managed so as to understand the requirements that must be met in order for us to be able to talk of real knowledge management in this sector.

Each construction project is made up of various stages. These can range from the design phase to the drawing-up of a complete maintenance plan for the infrastructure or building, passing through all the purely construction stages on the way.

One or more companies may be involved in any of these stages. The current trend in these companies is towards greater specialization, especially where construction processes are concerned. This is due to the fact that the teams needed to carry out these processes are very costly and have long amortization periods, which means that activities have to be planned to make the most intense use of capital. Companies appear whose business is built solely around the use of specific machinery for earth-moving, foundation-laying, structures, road-surfacing, etc.

We therefore find a great number of people involved (promoter, project manager, site director, constructor, subcontractors, industrial advisors, specialists, control laboratories, suppliers, owners and users), and these people should be coordinated by either one person or a team, which will be the key figure in the process of organizational knowledge creation.

This coordination figure and, more specifically, its characteristics and competences will depend upon how each construction project is managed. In the following section there is a brief description of the three basic structures used to manage construction projects (Gallego and Armañazas, 2002). We show in each case whether the structure provides the conditions necessary to enable us to talk about knowledge creation, transmission and management.

Traditional system

This follows the idea of separate blocks, and remains one of the most used systems in all types of urban, civil and public construction works. The owner contracts the services of an architect or engineer, who will normally also draw up the master schedule and take over the technical management with the functions and responsibilities of Technical Direction.

The owner also signs a contract with the general contractor who will actually carry out the master schedule designed by the technicians. The contractor coordinates all the subcontractors, of which there may be a great many since, in order to reach his objectives efficiently and make the best use of resources, he tends to subcontract as much as possible.

In this set-up there is no systematic organizational structure that takes into account the knowledge of the people involved and the working environment. Important decisions are trusted to the owner's intuition and experience or a preliminary suitability or viability study, and the selection process and the contractor's awarding of contracts. The project manager acts independently, receives instructions from the owner, and in the construction stage is the technician in charge of the site.

Project and site system (turnkey)

This system takes the first steps towards optimizing resources and is the most used in industrial plant construction. A turnkey contract brings together in a single contractual relationship all the services needed to give expression to an investment in something tangible and concrete.

In practice the relevance of a turnkey contract is to be found in the fact that, simply put, it is a sales contract for a ready-to-function combined unit. This means that all the responsibility falls to a single legal or physical entity.

The contractor or engineer who is turnkey contracted has a predominant role in the process as a whole and takes charge of distributing tasks between designers, Technical Direction, subcontractors and specialist suppliers. Whether the knowledge and experience of the participants will be put to good use or not depends on the company contracted and the manager assigned to the project.

Construction Management

Construction management can be defined as a professional consultancy service contracted by the owner (Heredia, 1999), which starts to act at the start of the construction process. It is contracted at the same time as the project team (architect/s and/or engineer/s). The person in charge of this function is the “construction manager”, who takes on the management of the construction project -as far as the optimization of available resources is concerned- with the aim of obtaining the desired results. As the person in charge of integrated construction management, the construction manager is also responsible for checking and controlling the whole construction process. Once the final objectives of the project have been agreed (with both the owner and the project manager/s) regarding quality, performance, function, schedule, programming, costs and cash flow, he will take definitive action to make sure the objectives are achieved.

When a project is organized according to this system, the technical project and the technical assessment for carrying out the work are the task of the architect or engineer. The work itself is done by a number of contractors, all of them specialized, hence the name main contractors.

In this case the contractors have a direct contractual relationship with the owner's representative (construction manager) and are not dependent on the general contractor, as happened in the previous cases.

The nucleus of the integrated construction management system resides in the fact that the whole process of generating and determining the cost of the project and controlling it is open to the owner. The needs and requirements of the project are established through the concept of the project team, which is made up of the owner, the technicians and the integrated management, on an equal basis. If this objective is reached, then the particular knowledge and experience of each member can be used to the benefit of the project. Then new knowledge is generated that can be assimilated by these same people as long as there exists a series of conditions, as explained in the following section.

3. The need for new organizational forms to manage knowledge

In the first system analyzed in the previous section (traditional system) - and even in many projects run along turnkey lines - there is no systematic use made of the knowledge and experience of the people involved. The project manager frequently acts independently of the others, even independently of the owner, and the general contractor gains experience with each job but, as he is independent of the project manager and the owner, he does not pass it on, etc.

What usually happens in these two cases is that the different companies taking part in each phase of the project do not establish any closer contact with each other than that which is strictly necessary for it all to proceed according to plan (communication of completion dates, problems arising, etc.). Therefore at no time is there any real coordination between them; neither is there any true exchange of knowledge.

We find ourselves with a dominant or principal company (main contractor or engineer) and a series of subcontractors. The relationship between them is based on competition in so far as the main company seeks to obtain the lowest prices and shortest completion times by stimulating competition among possible subcontractors. It is what can be defined as an arms- length relationship between client and supplier in a climate of mutual distrust.

In addition to this the contracts between the dominant company and the rest (subcontractors, suppliers, etc.) are usually specific and short-term, and therefore the levels of shared knowledge are low and commitment between both parties practically non-existent.

Both these ways of approaching construction projects are only valid in cases where the final quality of the construction is not fundamental, since they encourage the use of unqualified labor and low quality materials due to the price war generated between the subcontractors and their low level of involvement in the project.

If we look at the market as it is today, we will realize that these models are not the most suitable since many clients are no longer looking for standardized, low-cost products, but rather a personalized quality product adapted to their needs. To obtain this they will take an active part in defining and carrying out the construction project, which will finally become a

“tailored product”, though maybe at a slightly higher cost. As we saw in the previous section, integrated construction management is the only way the construction project can be managed if the owner is to take an active role.

This management structure will also be the only one to enable true knowledge management between the participants in a construction project. This is because in some arms-length relationships knowledge is transferred between the companies that participate in a construction project through intermediaries, whereas, in a successful alliance, the relationships are transformed through investments into specific relational assets, a recombination of abilities and routines, and distinctive developments of know-how, thereby establishing common experiences and practices and developing a new common language which facilitates cooperation. All these mechanisms favor the transfer and recombination of knowledge and learning (Ciborra and Andreu, 2001).

This interconnection between the companies participating in the construction project does not happen immediately, even though the project may be managed according to the principles of integrated construction management. A series of additional conditions must exist concerning the companies' infrastructure, the compatibility of resources and data systems and, especially, the organizational structures.

Specifically, the total involvement of all the components of the project must be achieved, creating a climate of collaboration and mutual trust. This is only possible if collaboration is more stable and long-lasting and when the components establish a relationship between equals in such a way that links are developed and the creation and joint management of knowledge comes about. This is the creation of a true dynamic knowledge network.

An organizational structure must therefore arise which enables any barriers to the creation, transfer and diffusion of knowledge to be eliminated, fulfilling, in its turn, the needs already seen above. References

Ciborra, C.U. and Andreu, R. (2001) “Sharing knowledge across boundaries”. Journal of

Information Technology, 16: 73-81.

Gallego, J.; Armañazas, E. “La dirección integrada para la construcción: estructuras de

organización para proyectos de construcción”. Directivos Construcción nº 1115, pág.10.

Septiembre 2002.

Heredia, R. “Dirección Integrada de Proyecto – DIP- “Project Management”. E.T.S.I.I.

Universidad Politécnica de Madrid. 1999

Muñoz-Seca, B. and Riverola, J. (1997) “Gestión del conocimiento”. Folio, Barcelona

Nonaka I. and Takeucki H. (1995) “The Knowledge-creating Company: How Japanese

Companies Create the Dynamics of Innovation”. Oxford University Press. New York.

Polanyi, M. (1966). “The tacit dimension”. Doubleday, EE.UU.

Acknowledgements

This research has been developed in the framework of a Project funded by the Comisión

Interministerial de Ciencia y Tecnología (CICYT) of the Spanish Government, titled

”Integración de Procesos de Negocio, Gestión del Conocimiento y Herramientas de Ayuda a la Toma de Decisiones en la Cadena de Suministro de Pymes Industriales.” Ref. DPI2002-

01755.

We would like to thank the Foreign Language Co-ordination Office at the Polytechnic

University of Valencia for their help in translating this paper.