3.1.Fragmentation and integration in construction industry
The construction industry is often characterised as fragmented when the traditional construction process involves players that are disconnected and isolated from each other, resulting in inefficiencies (Egan, 1998). Because a large number of construction firms are geographically dispersed (Latham, 1994), project teams often have to work together virtually, from many different locations over the life of a project. As a result of the lack of integration in the industry, the traditional construction process tends to incur additional costs for rework stemming from quality issues, disputes, and slower building times. Therefore, in addition to the immediate project team, construction firms need to further manage networks of suppliers, customers, and regulatory bodies, as knowledge is differentiated and distributed within, and across, these supply networks (Gann and Salter, 1998).
The problem of fragmentation can significantly hinder learning and knowledge advancement within the industry (Senaratne, 2005). At a project level, knowledge and learning is very much affected by the activities of project team members. Therefore, the manner in which the construction project team members are integrated and coordinated is important (Cox and Townsend, 1997). According to a report by Constructing Excellence (2004: 4), “construction is a collaborative activity—only by pulling the knowledge and experience of many people can buildings meet the needs of today, let alone tomorrow. But simply bringing people together does not necessarily ensure they will function effectively as a team.” Thus, construction participants or supply chains (e.g., clients, architects, engineers, quantity surveyors, contractors, and suppliers) are required to work effectively as a team to deliver a project successfully.
The level of integration in the construction supply chain stays is one of the major problems of the construction industry (Akintoye et al., 2000). The key barriers to integration originate from the historical fragmentation of project delivery systems and the adversarial culture of construction project relationships (Dainty et al., 2001). A fragmented and largely subcontracted workforce has increased the complexity of the construction supply chain and disabled the process of integration (Biscoe and Dainty, 2005). The relationships between the contractors and subcontractors, moreover, are heavily based on price and competitive bidding (Dainty et al., 2001). In this context, the downstream of construction does not have efficient and longstanding supplier-contractor relationships (Akintoye et al., 2000). A case study in small and medium enterprises for the construction industry (Dainty et al. 2001) revealed that there is growing interest in the integration of the upstream of construction supply chain (clients, consultants, and contractors); however, there is a lack of interest and development in the downstream (contractors and sub-contractors).
In relation to quality and productivity problems, more inter-organisational relationships and communications would reduce the inefficiencies that cause additional costs and delays in delivery arising from design changes and rework. Although inter-organisational relationships are not new, pursuing greater levels of integration in the industry will help address the challenges brought about by fragmentation. Therefore, it is perhaps not surprising that most construction projects will evidence some forms of relational contracting approaches and that the use of RC in the construction industry has grown worldwide (Colledge, 2005). The core values of the relationship rely upon commitment, trust, respect, communication, collaboration, innovation, fairness, and enthusiasm. KM through knowledge sharing and knowledge transfer is important for effective communication and collaboration. However, several barriers for such integration approaches have been identified. These include lack of a learning culture, lack of a knowledge-sharing culture, low levels of commitment amongst partners, lack of competency, focusing on the project instead of the process, and the adversarial culture of the industry
(Maqsood, et al., 2003), which may hinder knowledge flow within the construction processes.
Such barriers can be minimised through the effective implementation of KM, which can facilitate collaboration through tools and processes that help ensure the flow of the knowledge utilised by the project team.
3.2. KM and its relationship to team integration
KM has been defined in many different ways. Wiig (1997) suggests that KM deals with the management of knowledge-related activities, which include creating, organising, sharing, and using knowledge to create value for an organisation. A more formal definition of KM, given by the American Productivity and Quality Center, is the strategies and processes of identifying, capturing, and leveraging knowledge (Carrillo and Chinowsky, 2006). Von Krogh (1998) refers to KM as the process of identifying and leveraging the collective knowledge in an organisation to help it compete. However, the most common description of KM is as a business practice that emphasises the creation, dispersion, and use of knowledge (Davenport and Prusak, 1998; Alavi And Leidner, 2000). In this case, the purpose of KM is to enable the organisation to gain access to the knowledge held within the individuals of the firm.
Davenport and Prusak (1998: 5) define knowledge as “a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knower. In organisations, it often becomes imbedded not only in documents or repositories but also in organisational routines, processes, practices, and norms.”
There are several dimensions of organisational knowledge, including individual and group knowledge, and internal and external knowledge (Al-Ghassani et al., 2002). However, one of the most practical distinctions is that between tacit and explicit knowledge (Nonaka and Takeuchi, 1995). Tacit knowledge is stored in the heads of individuals and is difficult to communicate externally or to share. On the other hand, explicit knowledge is captured or stored in an organisation’s manuals, procedures, information systems, and is easily communicated or shared with other people or parts of an organisation (Nonaka, 1991; Roberts, 2000; Robinson et al., 2005).
Within the KM literature, there are at least two classifications of knowledge processes. Nonaka and Takeuchi (1995) define one in which there are four processes: internalisation, externalisation, combination, and socialisation. The socialisation mode refers to the conversion of tacit knowledge into new tacit knowledge through social interactions and shared experiences amongst organisational members (e.g., apprenticeship). The combination mode refers to the creation of new explicit knowledge by merging, categorising, reclassifying, and synthesising existing explicit knowledge (e.g., literature survey reports). Internalisation is a process in which an individual internalises explicit knowledge to create tacit knowledge. Finally, externalisation is a process in which a person turns their tacit knowledge into explicit knowledge through documentation, verbalisation, etc. This classification focuses on different processes in which knowledge is created and transferred throughout an organisation.
Another classification focuses on the lifecycle of knowledge within an organisation (Alavi and Leidner, 2000; Davenport and Prusak, 1998; Teece, 1998). It includes knowledge generation (creation and knowledge acquisition); knowledge codification; (storing); knowledge transfer (sharing); and knowledge application. Knowledge generation involves the discovery and resolution of opportunities or problems; the creation of innovations (Gray and Chan, 2000; Matusik and Hill, 1998); and knowledge acquisition, which is the acquiring and integrating of knowledge from external sources (Davenport and Prusak, 1998). Knowledge codification is the translation of knowledge into text, drawings, etc. for storage in a repository. Knowledge transfer refers to the sharing of knowledge amongst individuals within an organisation. Finally, knowledge application is the use of knowledge to gain a competitive advantage (Alavi and Leidner, 2000).
KM is not entirely new to the construction industry. In some form, construction organisations have always managed their knowledge and relied on the expertise of key members of staff (Carrillo, 2004). KM has always been a challenge to the construction industry, which is predominantly project-based (Kamara et al., 2000). Information overload, lack of time to share knowledge, not using technology to share knowledge effectively, and difficulty capturing tacit knowledge are a few challenges in implementing KM (Carrillo et al., 2004). Other identified barriers include lack of management support, employee resistance to sharing
In the construction industry, KM is required at the inter-organisational level (i.e., within projects and across temporary and multidisciplinary project organisations), and at the intra- organisational level (i.e., within individual firms) (Kamara et al., 2002). Because it is aimed at improving integration, the present research will examine how KM is being implemented at the inter-organisational level—i.e., in a collaborative project or relational contracting (RC) setting. Implementing KM remains a challenging task for organisations. As Drucker (1993) asserts, one of the most important challenges facing organisations is to build systematic practises for managing knowledge. Therefore, to ensure the success of their KM activities, it is appropriate that a sound implementation framework be developed to guide organisations before the actual implementation takes place. The next section discusses the concept of RC in the construction industry in order to provide a better understanding of how this framework can be utilised to implement KM for integration improvement.
3.3. The concept of relational contracting (RC)
Theories that emphasise the benefits of close, long-term relationships amongst different organisations are receiving increasing attention throughout the academic literature. One of these theories is RC. Many other terms have been used to describe relationship phenomena, such as relationship quality, cooperative relationships, partnering, strategic alliances, supply chain management, and team-working.
RC (also known as relational contract theory) has been defined as “the relations among parties to the process of projecting exchange into the future” (Macneil, 1980: 4; see also Faisol et al., 2005). RC theory is a socio-legal philosophy of contracting (Macneil and Capbell, 2001), which views the need for the enforcement of formal contracts or agreements as less import than the need to maintain relationships in the interest of future cooperation (Arrighetti et al., 1997). RC is an appropriate way to provide the necessary flexibility in contractual relationships and overcome transactional barriers to teambuilding (Rahman and Kumaraswamy, 2004a; 2004b; 2002). Colledge (2005: 31) defines RC as “a transaction or contracting mechanism that seeks to give explicit recognition to the commercial “relationship between the parties to the contract. In essence, the terms of the contract assume less importance than the relationship itself, with mechanisms for delivery that focus on trust and partnership.”
CRC CI (2002) suggested a working definition of RC that consists of the following characteristics:
• based on recognition and striving for mutual benefits
• win-win scenarios
• cooperative relationships
• underpins various approaches (partnering, alliances, joint ventures, etc.)
• better risk-sharing mechanisms
• long-term relationships develop and change over time
Figure 1. Relational contracting: success factors and outcomes.
Several researchers (Badger and Mulligan, 1995; Cheng et al., 2004) have highlighted the positive outcomes (see Figure 1) of building good relationships. In relational contracting, such relationships can occur at three different levels:
1. Project level, where the benefits may include improved quality, reduced cost, reduced risk, reduced rework, and on-time completion.
2. Business level, where the benefits may include increased profits, increased market share, enhanced competitive position, and competitive bidding.
3. Corporate level, where the benefits may include cost effectiveness, increased labour productivity, improved efficiency, increased opportunity for innovation, increased cultural responsiveness, and continuous improvement of quality products and services.
At a project level, RC can improve working relationships amongst all project stakeholders in the construction industry; facilitate efficient and effective construction; enhance financial returns; minimise the incidence of conflict; and facilitate conflict resolution (Colledge, 2005). Some key issues that have been identified in the literature include trust (Kadefors, 2004; Swan et al., 2002, McDermott et al., 2005); and commitment, mutuality, openness, flexibility, long-term perspectives, teamwork, and honesty (Black et al., 2000; Cheng et al., 2004; Wood and Ellis, 2005). Kwawu and Hughes (2007) also suggest that the success of the relationship is basically dependent on mutual trust, commitment, and cooperation in both performance and further planning.
The need for relational approaches or inter-organisational relationships in construction might be due to the nature of the industry itself, which is often highly specialised, involving multiple participants and complex projects that require extended periods of time for commencement and completion (Colledge, 2005). Dissanayaka and Kumaraswamy (1999) note that given the nature of the construction industry, conflicts between diverse participants need to be minimised through better relationships and cooperative teamwork. The shift towards more RC
Organisation 1 Commitment Organisation 2 Mutual trust Effective communication Understanding of roles and objectives
Flexibility
RC
Integrity Outcome Project level - improved quality - reduced cost - reduced risk - reduced rework i l i Corporate level - cost effectiveness - increased productivity - improved efficiency- increased opportunity for
innovation - continuous improvement of quality projects/services Business level - increased profit
- increased market share
- enhanced competitive
position
substitute for traditional or formal contracting, with the aim of overcoming inadequate organisational systems, adversarial contractual relationships, and mistrust in the UK construction industry (Latham, 1994; Egan, 1998).
Previous research on inter-organisational relationships in the construction industry has been conducted from various perspectives. Most of these studies have concentrated on the relationships between the principal participants in the industry—namely the client, main
contractor, subcontractor, supplier, and consultant (Faisol et al., 2006). As a result, many
terminologies have been developed and used in different contexts. For example, the term “partnering” has been widely used to refer to “alliances” within the supply chain. Such alliances are usually informal (rather than contractual) relationships (Bresnen and Marshall, 2000; Cheng et al., 2004). The importance of embedding the relationship within a contract has been recognised, resulting in the emergence of new forms of relationships, such as public- private partnerships (Ahadzi and Bowles, 2004; Parker and Hartley, 2003). In addition, partnering has been defined in many ways. It can be viewed as an individual project mechanism or as a long-term strategy (Faisol et al., 2006). Alliancing is normally assumed to be a long-term business strategy, linking together client, contractor, and supply chain (Rowlinson and Cheung, 2004). Gulati (1998) defined an alliance as any voluntarily initiated cooperative agreement between firms that involves exchange, sharing, or co-development; it can include contributions by partners of various resources. RC provides a more efficient and more effective contracting mechanism for certain types of transactions, particularly when close collaboration amongst parties is required in order to realise complex construction projects or long-term development programmes (Colledge, 2005).
A common approach of RC is partnering or collaborative contracting. This tool encourages the creation, maintenance, and utilisation of a knowledge pool across organisations. However, how to facilitate KM within the collaborative work culture is an under-researched area.
3.4. The link between RC and KM
RC and KM are two significant management concepts. Both concepts focus on communication, trust, knowledge sharing, loyalty, and commitment (Rowley, 2004). Repositories of data or information can be used as a platform for processes associated with both relationships and knowledge. Both RC and KM recognise the value to be created through appropriate synergies of technology, people, and process. KM principles and techniques play an important part in the success of RC. Some of its basic principles include a systematic approach for capturing, codifying, and sharing information and knowledge; a focus on building social capital to enable collaboration amongst people and communities; an emphasis on learning and training; and an emphasis on leveraging knowledge and expertise in work practice (Khamseh and Jolly, 2008). KM is primarily concerned with capturing, codifying, transferring, and sharing both tacit and explicit knowledge (Nonaka, 1994)). The challenge of KM is to convert tacit knowledge into explicit knowledge through the balanced use of technology and soft human-related factors, such as leadership, vision, strategy, reward systems, and culture. Briefly, insufficient knowledge flow amongst construction participants, inefficient communication channels, inability to share information, and lack of a knowledge-sharing culture and common goals can be regarded as the barriers to effectively implementing KM in a collaborative environment (Briscoe et al., 2001). Therefore, it is important to study the critical factors that influence the success of KM in organisations, so that they can be extended to improve integration within the RC setting. The similarities between KM and RC could be used as a basis for developing a new framework that employs CSFs for KM as tools for improving integration in the construction industry.
3.5. The concept of critical success factors (CSFs)
Organisations have used critical success factors (CSFs) to identify the key organisational capacities necessary for success and to focus their efforts on building these capabilities.
Several definitions of CSF are provided in the literature. Drawing on ideas from Daniel (1961) and Anthony et al. (1972), Rockart (1979: 85) provides one the most frequently cited definitions: CSFs, he notes, refer to “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If the results in these
areas are not adequate, the organization’s efforts for the period will be less than desired.” Consequently, Rockart (1979) stresses that companies should constantly and carefully manage these particular areas of activity. In a similar vein, Bruno and Leidecker (1984: 24) define CSFs as “those characteristics, conditions or variables that, when properly sustained, maintained, or managed, can have a significant impact on the success of a firm competing in a particular industry.” Pinto and Slevin (1987: 22) regard CSFs as “factors which, if addressed,
significantly improve project implementation chances.” However, according to Esteves (2004),
the latter two definitions fail to address the comprehensive concept proposed by Rockart (1979), which emphasises the importance of creating an ideal match between environmental conditions and the business characteristics of a particular company.
CSFs can be events, conditions, circumstances, or activities. Specifically, they are “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance of an operation” (Jenster, 1987: 103). The identification of these factors provides a vehicle for the design of an effective system of performance measurement and control. The CSF method is considered a top-down approach for planning (Byers and Blume 1994). CSFs are areas that should receive constant and careful attention and monitoring. These factors are also useful in prioritising critical concerns for a project. In addition, the CSF method generates user acceptance amongst senior management, and works well at the policy, operational, and strategic levels of information resource planning (Dobbins and Donelly, 1998).
A considerable amount of literature has been published on CSFs for KM. Since the late 1990s, many researchers have attempted to develop a comprehensive list of factors. However, the lists differ because of the multidisciplinary nature of KM, and because of the different backgrounds and interests of KM researchers. Our literature review that found that CSFs for KM can be broadly categorised into three aspects: people, process, and technology, as shown in Figure 2:
Figure 2. Summary of CSFs for KM.
Moreover, CSFs vary according to the scope and context of the relevant research. It was found that the CSFs identified focus mainly on the organisational level.
Only several studies have been done to identify the CSFs for KM in the construction industry. Bishop et al. (2008) identifies a set of people-oriented CSFs that ensure the effectiveness of
• Strategies
• Activities
• Measurement
• Resources
• Top management and leadership
support/commitment
• Culture
• Motivation and rewards
• Human resource management
• Trust
• Training and education
People
Process CSFs for KM Technology
• Information technology • Organisational infrastructure • KM systems and tools
RC is a very broad concept for an inter-organisational relationship. Our literature review of studies on CSFs was thus based on various approaches, such as partnering, strategic alliances, public-private partnerships, and joint-ventures. Common CSFs for RC-based approaches include mutual trust (Kwawu and Hughes, 2007; Kadefors, 2004; Swan et al., 2002;