Improving Organizational Performance - Case Study Example

IMPROVING ORGANIZATIONAL PERFORMANCE AT PETRO RABIGH THROUGH ESTABLISHING EFFECTIVE KNOWLEDGE MANAGEMENT DEPARTMENT Improving organizational performance at Petro Rabigh through effective knowledge management department Customer Name: Lecturer Name: Date: Management Report: Improving organizational performance at Petro Rabigh, through establishing effective knowledge management department Content page Executive summary P.5 Abstract P.7 Introduction P.8 Objectives P.9 Knowledge Management P.11 Knowledge Categories P.11 Advantages of Knowledge Management P.12 – P.14 Knowledge Management Strategy P. 14 - P. 19 Implementation P.19 Implementation Schedule P. 20 Budget P. 21 Evaluation P. 21 Conclusion P.21 Notes P. 22 References P.23 Executive Summary Rabigh Refining and Petrochemical Company was founded as a partnership between Saudi Aramco and Sumitomo Chemical Company in the year 2005, with the objective of building integrated oil refining and petrochemical operations through construction of a new petrochemical complex and upgrading Saudi Aramco’s oil refinery. The company which operates in the Kingdom of Saudi Arabia has been undergoing a period of transformation in terms of ownership, this is bound to impact on the human resource capacity of the company , analysis on the firm suggests that:- 1. The change of ownership structure through the Sale of 219,000,000 shares representing 25% of Rabigh Refining and Petrochemical Company through an Initial Public Offering impacted on the organizational structure and the workforce of the company, in the course of realignment there is need to appreciate the introduction of new departments while appreciating human knowledge as an important asset. 2. The company currently undertakes expansion programs which include internationalization and venturing into other areas such as the current front-end engineering studies in Japan, this shall affect the employee setup. In consideration of the above facts therefore, there is need to retain and maintain the knowledge that the company has over the years acquired through experience or otherwise. Since knowledge management is related with the company’s profitability, failure to effectively manage the company’s knowledge implies that the company cannot maximize its revenue potential, effectively control expenses and shall also lose the experiences its workforce has acquired over the years. There is therefore need to establish a knowledge management department which to primarily deal with achieving improved organizational performance through knowledge execution. For the knowledge management department to effectively operate, the company shall adopt diverse recommendations, based on the maximum utilization of the tacit and explicit knowledge in the organization. The plan offers appraisal on the importance of knowledge management in achieving the strategic objectives of the organization. The knowledge management plan is recommends several approaches including adopting Knowledge Transfer Strategy, Knowledge Strategy as Business Strategy, Knowledge Creation Strategy and Customer-Focused Knowledge Strategy, these recommendations shall be administered through the establishment of knowledge management department. The establishment of the knowledge management department and the accompanying strategies shall subscribe to a developed action plan. To establish the department and effective implement the recommended strategies, the company shall spend an estimated 18 million riyals; annual maintenance of the department is expected to cost 3 million riyals. To create the department and execute the knowledge management plan, it is envisioned that the company shall select persons with expertise from the already existing departments who shall be seconded to the knowledge management department; external expertise shall be sought in case of disparity between existing knowledge and the requisite knowledge. The plan shall be implemented within six months after which the department shall be evaluated on yearly basis. In evaluating the success of the plan, basic business constructs shall be used as the basis. These include reducing operating costs, enhancing customer satisfaction and increasing the company’s revenue. Abstract Most organizations have regarded knowledge management as a subordinate function which does not directly affect organizational performance; it is on this regard that most organizations give low consideration to establishing knowledge management department. The appreciation of knowledge has been a controversial topic, which has raged on from the time of Plato to the present, among philosophers in the field of epistemology. Several researches have for a long time differed on what constitutes Knowledge Management, just like there have been disagreements on the impacts of knowledge management on organizational performance. A number of organizations have fully embraced knowledge management as a managerial tool and technique, hence creating departments and sections that deal with knowledge management, other organizations have disregarded knowledge management arguing that knowledge is the sum total of a person’s skills, education, experience and beliefs hence cannot be managed whatsoever. The report is intentioned to provide an objective analysis, critique and review of the importance establishing a knowledge department at Petro Rabigh' Limited. The article utilizes available literature and statistical analysis to present its findings and recommend the plan, the article is intentioned for the Chief Executive Officer and the executive leadership team in offering impartial critique of the relationship between effective knowledge management plan and improved organizational performance. The objective of presenting the plan to the executive is to enable them agree and approve the project. The main purpose of the knowledge management department shall be to ensure that the company gets access to the best practice and knowledge base, intended to provide leading cutting edge technology to in utilizing both internal and external knowledge that can be availed by the company. Introduction Rabigh Refining & Petrochemical Company (Petro Rabigh) has been facing a host of challenges. Thorough investigation and analysis of the business environment in Saudi Arabia suggests that competition level and challenges in the petroleum-based products have been increasing in the past. The expansion plan being undertaken by the company has also presented challenges which demand substantial knowledge base. The company has to utilize internal and external knowledge to improve organizational performance and foster the attainment of the organizational strategic competitive advantage. Petro Rabigh is facing escalating operation costs as well as insufficient human expertise, due to the expansion programs. Saudi Aramco and Sumitomo Chemical founded the Petro Rabigh Project with the objective of creating integrated petrochemical operations and oil refining through upgrading Saudi Aramco’s oil refinery and constructing a new petrochemical complex. The company began operations with envisioned investments of US$ 9.8 billion, and changed the ownership structure in January 2008, through an initial public offering (IPO) on the Saudi Arabian stock exchange. Petro Rabigh deals with Petrochemicals, which have gained popularity in the past as the lifeblood of the modern world. Petrochemical impact on every facet of human life, the company has been in the forefront utilizing 1.2 million tons per year of ethane and 400,000 barrels per day of crude oil as essential raw material to produce a several refined petrochemical and petroleum products. The company produces a variety of products such as light oil, kerosene, naphtha, gasoline and other distillates, which added new annual capacities of 2.8 million tons of gasoline. The company which converts ethane gas ethylene then utilizes the ethylene to produce a variety of other products such as high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), mono ethylene glycol (MEG), homo polypropylene (PP), easy processing polyethylene (EPPE), propylene oxide (PO), and block PP. The vision of the company is to be recognised globally while being committed locally, while the mission is to achieve maximum shareholder value through sustainable utilization of resources. The company has several objectives such as strengthening safety performance, cultivating talent, attaining operational excellence, energizing the work environment and optimizing domestic and International Portfolios. Whereas the company has an on-site Research and Development facility, and promotes continuous acquisition of skills and knowledge by its employees, by sending the employees around the world to keep up with the latest innovations the company currently has no department dedicated to the management of knowledge. Therefore there is bound to be knowledge acquisition without enabling environment to retain and/or utilize the acquired knowledge, as presented by Evangelou & Karacapilidis, (2005). Petro Rabigh has achieved exponential growth since its inception; this has been promoted by several strengths such enjoying the expertise, experience and capabilities of its major shareholders Saudi Aramco and Sumitomo. The company also enjoys the advantage that it is among the largest refineries in Saudi Arabia with the capability to take feed of 400,000 barrels per day of crude oil; in addition, the company enjoys a large and reliable supply of feedstock which enables the company to achieve unprecedented levels of economy and efficiency. In addition, the company enjoys world-leading technological know-how provided by Sumitomo, with close to a century experience in the global marketing of chemical products. The global demand for petroleum products has also been rising making the company’s future certain. Furthermore, the current development of an industrial park adjacent to the complex is envisioned to will drive demand of Petro Rabigh’s products upwards. Objectives Rabigh Refining & Petrochemical Company (Petro Rabigh) has been facing a host of challenges. Thorough investigation and analysis of the business environment in Saudi Arabia suggests that competition level and challenges in the petroleum-based products have been increasing in the past. The expansion plan being undertaken by the company has also presented challenges which demand substantial knowledge base. The company has to utilize internal and external knowledge to improve organizational performance and foster the attainment of the organizational strategic competitive advantage. Petro Rabigh is facing escalating operation costs as well as insufficient human expertise, due to the expansion programs. Saudi Aramco and Sumitomo Chemical founded the Petro Rabigh Project with the objective of creating integrated petrochemical operations and oil refining through upgrading Saudi Aramco’s oil refinery and constructing a new petrochemical complex. The company began operations with envisioned investments of US$ 9.8 billion, and changed the ownership structure in January 2008, through an initial public offering (IPO) on the Saudi Arabian stock exchange. Petro Rabigh deals with Petrochemicals, which have gained popularity in the past as the lifeblood of the modern world. Petrochemical impact on every facet of human life, the company has been in the forefront utilizing 1.2 million tons per year of ethane and 400,000 barrels per day of crude oil as essential raw material to produce a several refined petrochemical and petroleum products. The company produces a variety of products such as light oil, kerosene, naphtha, gasoline and other distillates, which added new annual capacities of 2.8 million tons of gasoline. The company which converts ethane gas ethylene then utilizes the ethylene to produce a variety of other products such as high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), mono ethylene glycol (MEG), homo polypropylene (PP), easy processing polyethylene (EPPE), propylene oxide (PO), and block PP. The main objective of the knowledge management plan is to aid the management in decision making in factors concerned with building reliable organizational knowledge base which can be utilized to assist the company to achieve strategic competitive advantage. The company has implemented several strategies aimed at making the company become intentioned to aid the management and the administration to be ahead in competition in the Australian region. Whereas the company has successfully improved its financial performance over the years, increasing organizational knowledge base is imperative to maintaining the performance; this demands an elaborate knowledge management plan. The general objective of improving organizational performance through knowledge management shall be realized through series of specific objectives such as creation, nurturing and promotion of an atmosphere where all the staff in the company are respected and valued for their knowledge, promoting and enhancing open and seamless sharing of new knowledge obtained from the plan by the different strata of employees and personnel at Petro Rabigh it that the company’s staff should be able to effectively collaborate and communicate, so that the company can achieve improved performance through effective and well informed decision making, by the executive and other employees. Knowledge management is also intended to recognize and appreciate the amount of knowledge and skills available to the company, which can be exploited to improve the performance of the individuals hence resulting to the improved performance of the entire company as presented by Finnegan and Willcocks, (2006). The plan is also aimed at creating knowledge management strategic plan that shall be used as a blue print and a resource for reference in human resource decision making and management, and in the realization and achievement of the company’s vision and mission. Knowledge management Knowledge Management is defined as the different activities strategies and practices that are utilized by an organization to recognize, generate, characterize, distribute, and facilitate adoption of insights and experiences. The definition of knowledge management however has not enjoyed global acceptance since some studies have argued against any likelihood of the existence of knowledge management, arguing that knowledge is the perception of the agreement or disagreement of two ideas and that knowledge is an inherent conception, possessed by a human mind, therefore fundamentally cannot be managed. In agreement with Athanasiou, Thanos and Ara Darzi, (2010), who argues that knowledge is the psychological result of reasoning, perception and learning, Petro Rabigh company has to develop a knowledge management department, the establishing of the department is supported by several merits associated with knowledge management. Justification for establishing knowledge management department Knowledge management function in the department has been performed since inception of the company by the human resource department. Whereas the human resource department has attempted to serve the knowledge management function, the difference between the human resource management and knowledge management are so diverse that they cannot be interchanged and still serve the intended purpose well. Whereas human resource management has been concerned with administration on what has been termed as the most important organizational asset- the human resource, knowledge management encompasses a different scenario which is a concept in which an organization intentionally and expansively gathers, organizes, shares, and analyzes its knowledge in terms of capital, documents, and personnel skills. There are varied activities which demand the establishment of a knowledge management department, these include four major processes, namely gathering, organizing, refining and disseminating of the knowledge. Economics and business theorists have been in agreement that knowledge is the ultimate ingredient for a modern organization to attain strategic competitive advantage Humphreys, McIvor, & Huang, (2002). Whereas the organization has been having strategies to ensure that it has access to array of information, there exists substantial difference between having information and being able to apply the information to gain competitive strategic advantage. Wilson, (2000) argues that there is critical distinction between information and knowledge. In the current era of data glut and information overload, access to information is irrelevant, what matters however is the capacity to focus on patterns of information, so as to relevantly execute the information for the benefit of the organization. The basic foundation of knowledge is data and information, so as to attain wisdom. There are several purposes for the knowledge management department in the organization from translating the basic data, into information that can be used to provide strategic competitive advantage to the organization, these can be referenced by the Knowledge-Management Cosmology  The department shall strive to achieve knowledge management through a coalescence of four basic activities which can be through human intervention, through automation, or a combination of both. The crucial activity to be performed by the department is gathering which in-putting of data and information and data into the system. This is followed by organizing which is the process of associating items to subjects. The department shall also perform information refining, which entails adding value by discovering relationships, abstracting, synthesis, and sharing. The department in addition shall be charged with the responsibility of information dissemination, which involves transferring and distributing knowledge to persons in the organization who can use it to foster organizations performance. The processes are supported by products, which rely on technologies. The department shall therefore require diverse technologies so as to execute its functions. Each important process, entails several activities, gathering engages several activities such as information searching, Data entry, data mining from diverse sources and Optical Character Recognition and scanning. Organizing includes linking, filtering, indexing and cataloging. In performing the refining function, the knowledge management department shall perform operations such as Mining, projecting, compacting, collaborating and contextualizing. The department shall also be engaged in dissemination of information by activities such as alert, floe push and sharing. This can be graphically represented as below:-   Merits of knowledge management department The development of knowledge management department is envisioned to offer several benefits to the organization. The knowledge Management shall enable the company generate value from their knowledge-based assets as well as intellectual assets. Having a knowledge management department shall enable the organization to benefit from reduced cost of production due to the realization of economy of scale, Gadman, & Cooper, (2005), enhanced level of personal creativity and therefore achieving augmented chance of innovation, offering good product quality and avoiding repeating mistakes. Furthermore, knowledge management shall enable the production and conservation of innovative values to Petro Rabigh, which in the past has immensely valued traditional assets, such as land, oil fields and buildings, the organization shall experience shift in dynamics to appreciate Intellectual Property Assets, as part of the company’s assets. Petro Rabigh Company is envisioned to benefit from unleashing innovative ideas and creativity therefore creating better organizational flexibility, dynamism responsiveness and adaptive management. The management and staff shall also benefit from enhanced collaborative environment and sharing of ideas in ways that would not have been possible previously. The department shall also increase organizational revenue, with effective utilization of knowledge manpower wastage is decreased, resulting to enhanced organizational performance. In addition, knowledge management promotes sustainable, organic growth which enhances the generation of new wealth and escalating returns. Establishing the department shall also enable Petro Rabigh Company to create and enhance profound relationships and fragmentary Mind-Share with Customers, Jones, (2003). this shall enable the company understand the customer’s view and demands hence facilitating decision making. Among the greatest benefits expected to be gained by company through the department is improvement and acceleration of learning in the organization as argued by Ford, (2006). In addition, Petro Rabigh shall benefit from the knowledge management creating a new level of sophistication to managing the brand, reputation, and intangibles that customer’s value hence enhancing customer satisfaction levels. The department shall also be beneficial in maximizing Petro Rabigh Company’s utilization of available collective wisdom, experience, and the Brain-Power of human capital assets. Essentially therefore, knowledge management ensures organizational flow of knowledge as well as enhancing team collaboration, communication and coordination, which results to enhanced organizational performance, Nonaka and Takeuchi, (1995). Knowledge Management Strategies The adopted strategies by the department are intended to improve organizational improve innovation, responsiveness and adaptability, Petro Rabigh therefore shall implement diversified strategies to ensure that organizational objectives are achieved. The strategies are based on work models. The company can adopt Transaction model strategy, in this strategy, work is appreciated as a routine which depends on the defined procedures, formal rules and staff training and development. Petro Rabigh can also adopt Collaboration model, which boasts of a high degree of both interdependence and complexity. In the model, work engages improvisation and learning by doing, Dodani, Mahesh, (2009). Petro Rabigh has to rely on deep expertise across functions and the use of flexible teams. The expert model is a probable alternative strategy that can be adopted by the company. In this strategy, there exists low interdependence and high complexity. Moreover, Petro Rabigh has the option of adopting the Integration model, in which there exists high degree of interdependence and a low degree of complexity. The defined work models shall translate to strategies, which can be adopted by the Knowledge management department. The strategies are intended to create new knowledge in the company, bring new knowledge into the company and develop and utilize the existing organizational knowledge. Implementation Implementation of knowledge management plan at Petro Rabigh shall demand restructuring of the organizational chart. These shall begin be seeking the support of the executive, who shall then catalyze the creation of the department. The management shall then appoint Knowledge Management team, considering the diversity of the company. The areas which demand knowledge acquisition shall then be identified, and the duties to be performed by the department defined. This shall be followed by the definition of the proper means of externalization, codification, integration, storage and transfer of knowledge learned. The company shall encourage collaborative and information exchange sessions between all the concerned stakeholders. Implementation Schedule Company Petro Rabigh Company Current Date 22/10/2010 Title Knowledge Management Establishing Plan Project Start 3/01/2011 08:00:00 Project Finish 30/06/2011 17:00:00 Budget consideration To establish the department and effective implement the recommended strategies, the company shall spend an estimated 18 million riyals; annual maintenance of the department is expected to cost 3 million riyals. Performance Indicators Effectiveness and the success of the knowledge management plan are dictated by several factors such as excellent evaluation throughout the entire process. The key performance indicators shall be benefits attributed to the department in terms of improved organizational performance. This includes personnel and administration. Conclusion Petro Rabigh is in a precarious and competitive market position, where market dynamics are always changing, whereas the demand for the company’s products has been increasing and is projected to continue rising, there is need to have a knowledge management department to enable the department achieve improved organizational performance. The capital intensive venture is envisioned to result to cost savings, therefore being worth the undertaking. References Athanasiou, Thanos and Ara Darzi, 2010, Key Topics in Surgical Research and Methodology. New York: Springer books. Dodani, Mahesh, 2009, Knowledge based systems architecture, Journal of Object Technology, Vol. 8, No. 6, pp. 35-44 Evangelou, C., & Karacapilidis, N, 2005, On the interaction between humans and knowledge management systems: A framework of knowledge sharing catalysts. Knowledge Management Research and Practice, 3(4), 253-260. Evgeniou, T. (2002). Information integration and information strategies for adaptive enterprises. European Management Journal, 20(5), 486-494. Finnegan, D., & Willcocks, L. (2006). Knowledge sharing issues in the introduction of a new technology. Journal of Enterprise Information Management, 19(6), 568-590. Ford, N. J. (2006). The development and evaluation of an information technology support system to facilitate inter-organisational collaboration in HRD. Journal of European Industrial Training, 30(7), 569-588. Gadman, S., & Cooper, C. (2005). Strategies for collaborating in an interdependent world. Leadership & Organization Development Journal, 26(1/2), 23-34 Humphreys, P., McIvor, R., & Huang, G. (2002). An expert system for evaluating the make or buy decision. Computers & Industrial Engineering, 42(2-4), 567-585. Jones, R. (2003). Measuring the benefits of knowledge management at the financial services authority: A case study. Journal of Information Science, 29(6), 475-487. Nonaka, I., & Takeuchi, H., 1995, The knowledge-creating company: How Japanese companies create the dynamics of innovation, Oxford University Press, New York: Wilson. T.D,2000, The nonsense of 'knowledge management', Information Research, Vol. 8 No. 1 Read More