Tuesday, 9 November 2010

Knowledge sharing, the incentive that works

i love to share
Originally uploaded by creativecommoners
There is a lot of discussion about incentives for sharing and re-use of knowledge, and many of these revolve around the topic of whether you should pay people, or reward people, for putting material into a "knowledge base" such as a wiki or a best-practices database. I have always argued against this sort of transactional incentive, as all too frequently it can easily be gamed.

So I would like to share with you the only incentive system that works to drive knowledge sharing and re-use (other than the hard-nosed approach of making it such an integral part of company culture, that if you don't do it, you aren't welcome at that company).

The most effective way to motivate knowledge sharing across different business units or teams, is to give those teams or unit a common target, a stretch target, and incentivise them strongly for meeting that target. This is the concept of a Peer Group.

For example, imagine a food company, with ten factories round the world producing ready-meals. Imagine that in total, those ten factories annually produce $1bn-worth of product, at a cost of  $200m. Now consider what would happen if you said to those ten factory managers - "you guys are now the Food Production Peer Group.  If you, as a group, can collectively get your total production costs down to $180m, then you will all, as individuals, get a 50% bonus".

What do you think would happen then?

Those 10 factory managers are no longer in competition, they are now part of a collaborative group - a Peer Group.  The first thing they will do is take a good look at the ten factories, and look how they can help each other out. They may certainly look at economies of scale in raw materials etc, but they will also look at how they help each other solve problems, how the poorer performers can learn from the better performers, and how knowledge and good practices can be developed and shared and reapplied among the ten factories. The incentive may be at leadership level, but the leaders will themselves start to set the tone in their own factories; asking "how does the factory in Prague deal with this problem? "Have you looked at how Beijing tackle this? Have you shared that solution with Rio?". They will set up the Peer Assists and the Communities of Practice that enable the sharing of knowledge across the Peer Group, and that will start to improve teh collective performance.

Here is a quote from a manager in a Peer Group, illustrating how the peer group structure actually makes a difference, through knowledge sharing, to the individual businesses.

"I think the activity that builds trust and proper behaviour is when the Peer Group actually begins to intervene in the details of a business and it makes a positive impact. They've done a Peer Assist, or somebody has learned some valuable lessons; its when the individual business begin to feel that belonging to this club is helping them manage their business better."

A Peer Group doesn't have to be a group of factory owners. It is a grouping of mid-level managers who are all tasking the same business problem. Maybe its a group of sales directors selling the same brand. Maybe its a group of store managers in charge of city-centre stores. Maybe its a group of project leaders, leading construction projects building road tunnel projects. The key is to incentivise them collectively, and not just individually; to give them a collective stretch target, and to incentivise it powerfully enough that they become what is known as T-shaped managers - managers that look laterally to their peer group, as well as downwards to their business unit, project or team. And T-shaped managers drive a connected organisation.

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