There is a confluence of events brewing, equal to an organizational version of a perfect storm, and it will have consequences that are difficult to pinpoint. The elements coming together include the following: a wave of Baby Boomers set to retire; increased entrepreneurship, as measured by business start-ups; foreign students leaving after graduation; a dearth of students in science, mathematics, accounting and other rigorous disciplines; and a shift in wealth creation from the tangible to the intangible.The final element is the most critical of all. It represents a sea change in how businesses function and prosper. This epic shift in wealth creation, from the tangible to the intangible, is the source of much consternation and stress all on its own, and deserves a critical examination.

THE SHIFT

The movement of wealth creation from the tangible to the intangible means that knowledge and knowledge workers are becoming the scarce resources of the enterprise. We have not yet come to grips with this shift, so we try to leverage the value of knowledge through Industrial Age mechanisms and traditional management practices designed for another era.

An example of this is knowledge management, where knowledge is treated as an object that can be collected, organized and distributed on demand. The Industrial Age method of handling this perception of knowledge is through technology. The trouble with this is that it assumes that knowledge can be detached from the individual who holds it and the context in which it was developed.

Further complicating the industrial approach, there are at least two types of knowledge. The first type is explicit, which lends itself to a technological solution. The second type of knowledge is far more elusive, and sometimes the holder of the knowledge doesn't recognize that it exists. The failure to recognize the importance of this tacit knowledge has led to disappointing results among technology-based knowledge-management efforts.

The more egregious failure among the current practices of knowledge management, however, is the baseline assumption that knowledge can be managed. The term "knowledge management" generally refers to the Industrial Age concept of management through control, order and prediction. In the Idea Age, knowledge management needs to embrace the concepts of connections, openness and permissions.

If a work environment has a large number of disengaged workers, the best systems approach to knowledge management won't work because there are no connections. Under the Industrial Age model, the workplace may have been able to tolerate a higher level of disengagement so long as the hard product shipped, but in an era where ideas count, a disengaged environment is toxic to creative thinking and innovation.

Knowledge workers engage when they believe in a purpose. Business leaders must create a culture that provides an opportunity for individuals to express both their own purpose in life and contribute to the purpose of the organization. In the Industrial Age, organizations at first required only the hands of the worker, and then later their brains as well. In the Idea Age, we need the full person present - hands, head and heart - engaged in problem-solving and creativity.

Knowledge workers thrive on information, requiring it for energy and growth. Too often, however, we remain stuck in Industrial Age practices of tightly controlling information. Management needs to do a better job of ensuring that systems are in place that enable information to flow in all directions. This includes space architecture too. We often create workspaces that resemble canyons, killing the creative spirit and dampening unplanned get-togethers.

A review of management literature from the early 1990s until now shows an evolution in thought, first focusing on change, then innovation, and now knowledge. The common denominator among these three topics is learning, which is the foundation for each. This suggests that organizations with a supportive learning environment - including leadership, structures, systems and culture - are also adaptive, innovative and able to exploit and share knowledge.

If we can move away from the outmoded convention of knowledge management as a technology-driven practice where knowledge is treated as a thing, toward a new mindset where relationships matter and knowledge and the knowledge-holder are one, we will be led back to people. The switch is critically important, especially for organizations that face the prospect of losing the tacit knowledge of impending retirees.

Technology alone won't help. Individuals working together in cross-training assignments, creating settings that encourage sharing of work practices, and facilitating opportunities for observation while problem-solving or creating will help. Suggestions like these can help organizations capitalize on the fact that 70 percent of workplace learning takes place informally.

KNOWLEDGE MANAGEMENT

The management of information through the use of technology has been deemed critical to the success of most firms.

Accounting practice management information systems are focused on organizing data and making them readily accessible in a usable form. These systems, however, fail to capture the important information that lies outside the technological boundaries, such as little-known or personal facts about a client, special circumstances regarding a client process, or new procedures that might enhance the firm's operations.

Those responsible for the administration of a CPA firm need to be aware of the value of this human knowledge within the organization, and take steps to maintain an environment that fosters the exchange of ideas and information. The older-era structure of a CPA firm with the partners at the top of the ladder, segregated from staff members who handle the day-to-day needs of the clients, will lead to the failure to transmit important knowledge.

A number of steps can be taken to create an environment that will facilitate the flow of information throughout the firm, if you are willing to start moving into the new Idea Age.

First and foremost, the tone of the organization always comes from the top. Senior members of any CPA firm need to make themselves available to the staff, both formally and informally. Simply walking through the office and sharing thoughts with staff members can be invaluable. This makes staff members feel comfortable speaking with the senior firm members, opening a door for the transfer of knowledge. What can be learned while sharing a few moments with an associate around the water cooler or the coffee pot is amazing.

Also, the belief that senior members should only socialize with other senior firm members is a lost opportunity to share knowledge with someone who is on the front line, interacting with clients every single day. Staff have a lot more information to pass on than what can be filled out in a data field.

The practice's facilities are another key component to enhancing the transfer of knowledge among staff. Office layout needs to be designed so staff members can communicate with one another freely, and be accessible to senior personnel. Office floor plans need to be open meeting places that foster the transfer of knowledge. These areas can be functional gathering places, too.

Although it may seem redundant, there is a real benefit to assigning more than one accountant to each client. This provides the client with a comfort level of having more than one individual to contact within the firm, and creates a failsafe in the event a staff member leaves or encounters a long-term absence. Through this introduction of some "slack," there will always be another member of the staff aware of the client's issues who can step right in.

Ultimately, the long-term success of the firm depends upon the transfer of knowledge among its members. The free exchange of knowledge is critical. Learning, development and listening are important objectives if you want to succeed in the new Idea Age.

Philip E. Howe, CPA, is director of accelerated programs at The Wescoe School of Muhlenberg College. Reach him at phowe06@rcn.com. Martin C. Levin, CPA, is director of accounting services at Levin, Savchak & Associates PC, in Allentown. Reprinted with permission from The Pennsylvania CPA Journal.

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