Organizational Knowledge and Change: The Role of
Transformational HRIS
Huub Ruel
1
and Rodrigo Magalhaes
2,3
1
University of Twente, Enschede, The Netherlands
2
Kuwait-Maastricht Business School, Dasma, Kuwait
3
Organizational Engineering Center, INESC Inovação, Lisbon, Portugal
Abstract. Research on HRIS has uncovered different types of HR systems,
namely operational, relational and transformational. Each type of HRIS
addresses a particular organizational problem and must be researched with a
particular type of research design. In this paper the issue of transformational
HRIS is addressed with the emphasis being placed on the need to associate this
type of system with the broader concerns of organizational knowledge and its
impact on the competitiveness of business. Such a link is achieved through a
conceptual tools named the Organizational Knowledge Cycle and illustrated by
the re-visitation of the case of Dow Chemicals’ People Success System (PSS) in
the Benelux [7].
1 Introduction
The global spread of information technologies in the last 30 years has facilitated the
establishment of knowledge (individual and organizational) as the driving force of the
economy. Thus, in the early 21
st
century, we can safely talk of organizational
knowledge as a competitive market pressure as a major cause/consequence of the
organizational integration of information technology [1]. Enabled by IT applications,
human networking and organizational communication have become key ingredients in
the overall improvement of the effectiveness of organizational processes which, in
turn, provides a major contribution to the creation and accumulation of knowledge in
the organization.
Organizational knowledge is credited now-a-days as the key variable in sustainable
competitive growth [2] [3] [4] [5] [6]. And as more knowledge is created and
accumulated within and across organizations with the contribution of IT applications,
the greater the demands from the market for more infusion and more diffusion of such
applications. There exits therefore a circular loop of cause and effect between the
adoption of IS/IT and the creation of organizational knowledge.
In this paper we explore this loop by focussing on one type of IT application -
Human Resources Information Systems (HRIS). HRIS, in turn, are made up of
various types – operational, relational and transformational. It is our contention that
transformational HRIS are better understood in the context of an organizational
knowledge management framework. We put forward the organizational knowledge
cycle as a conceptual tool to analyse the impact of transformational HRIS on the state
Ruel H. and Magalhaes R. (2008).
Organizational Knowledge and Change: The Role of Transformational HRIS.
In Proceedings of the 2nd International Workshop on Human Resource Information Systems, pages 111-123
DOI: 10.5220/0001744001110123
Copyright
c
 SciTePress

of organizational knowledge in the organization, thereby allowing conclusions to be
taken not only about this type of HRIS but also about the process of organizational
transformation itself. In order to validate our proposition, we re-visit an empirical
case study by [7] of a transformational HRIS - Dow Chemical in the Benelux. Our
aim is not to re-interpret the case but simply to show the benefits of the organizational
knowledge cycle as a methodological tool for establishing the links between HRIS
and organizational transformation.
2 Perspectives on Organizational Knowledge
Nonaka and Tekeuchi [8] have put forward a well known theoretical framework for
the creation of organizational knowledge where the various elements of knowledge
creation are identified and interrelated in a dynamic whole. The framework
incorporates two major dimensions, one epistemological and one ontological. The
epistemological dimension contains the theory’s key proposal, i.e. that the interactive
processes of knowledge conversion, between tacit and explicit knowledge, lies at the
heart of knowledge creation [8]. There are four possible modes of knowledge
conversion, at the epistemological level: from tacit to tacit (socialization); from tacit
to explicit (externalization); from explicit to tacit (internalization); and from explicit
to explicit (combination). The ontological dimension considers four different levels of
knowledge creation: individual, group, organization and inter-organization. Along the
ontological axis, the knowledge creation movement starts with the individual’s tacit
knowledge, is amplified through the four modes of knowledge conversion and is
finally crystallized at higher ontological levels (organizational or inter-
organizational).
The theoretical framework put forward by Nonaka and Tekeuchi [8] is compatible
with Orliskowski’s [9] epistemological notion of knowing-in-practice, i.e. “the mutual
constitution of knowing and practice” (p. 251). Supported by the Gidden´s [10]
structuration theory and by Maturana and Varela’s [11] concept of autopoiesis,
Orliskowski explains that knowledge lies essentially in the practice. Knowledge is not
something which is inscribed in our thoughts or our brains but knowledge is what
makes practice come to life. Knowing-in-practice is equivalent to Gidden’s concept of
knowledgeability or the inherent ability of human beings to “go on with the routines
of social life” [10, p. 4]. Hence, it is neither “out there”, incorporated in external
systems or “in here”, inscribed in the human brain, but is something that exists in
people’s ongoing engagement in social practices. Competence or skillful practice is,
therefore, is not something that can be presumed independent of practice.
Besides the epistemological and ontological dimensions, knowledge creation can
also be approached from a pragmatic perspective. Pragmatic knowledge is that which
is intended to reach objectives within a limited time period. The objective might be,
for example, to improve the levels of an organization’s efficiency, effectives and
competitivity. In accordance with this perspective Holzner and Marx [cited in 12]
proposes the formulation of society’s knowledge system as being a five-step process
of construction, organization, storage, distribution and application of knowledge. This
perspective is consistent with both Nonaka and Takeuchi’s [8] SEIC framework for
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the formation of organizational knowledge and with Orliskowski’s [9]
epistemological notion of knowing-in-practice. On the other hand, each of the steps of
the organizational knowledge cycle has been approached by a variety of authors from
the organizational learning and the knowledge management literatures. An overview
of some of the most representative authors whose writings support each of the steps of
the cycle is presented in Table 1. It is also important to point out that such a cycle is
not linear in the sense that it does not have start or end points. Given that individual
knowledge pre-exists the organization and that it is difficult to determine exactly
when individual knowledge becomes organizational, the cycle can start at any point.
Regarding the end point, some knowledge will be applied and utilized by the
organization, but some might just remained shared or stored without any utilization.
Table 1. The Organizational Knowledge Cycle.
KNOWLEDGE
PROCESS
DESCRIPTION IN AN ORGANIZATIONAL
SETTING
SUPPORT
FROM THE
LITERATURE
Formation or
Construction of
Knowledge
Purposeful action towards reaching objectives (pragmatic/ strategic
view). Searching, identifying, locating, validating and accessing
knowledge and information relevant to the organization and its
objectives
[8] [13] [14] [15]
Organization of
Knowledge
Integration into known categories. Organizational structures.
Process architectures. Information and work flows. Organizing,
codifying, appropriating, absorbing and incorporating knowledge
and information within the bounds of the organization
[16] [17]
Storage or
Retention of
Knowledge
Recording in oral and written media. Institutions and people
themselves as means of retaining knowledge. IT as the means of
storing and “textualizing” information. Aquiring and managing the
resources which contribute to the creation and accumulation of the
organization’s stock of knowledge and information.
[18] [19] [20]
[21] [22]
Distribution,
Transfer or
Sharing of
Knowledge
Channeling of knowledge to where it is needed. Communication.
Dialogue. Facilitation (culture and climate) and Inhibition
(organizational politics) factors. Leadership styles. Managing the
communication, the diffusion and the sharing of knowledge in the
organization.
[23] [24] [25]
[26] [27]
Aplication, Use or
Re-Creation of
Knowledge
Construction presuposes Application (pragmatic view). Excelence
of output. Improvements in performance. Re-creation of
knowledge. Innovation. Enabling, evaluating, rewarding and
institutionalizing (i.e. cristalizing) organizational results rated as
highly performant, excellent or innovative, achieved intra or inter-
organizationally
[28] [29] [30]
[31]
The knowledge life cycle and its five processes are a theoretical construct
representing actual needs for survival and growth of any organization. The expression
“process” is used to mean that knowledge is the result of actual practices, embedded
in the social and physical structure of the organization. Given the dynamic character
of knowledge, the cycle is not intended to mean a sequential type of behaviour. On
the contrary, the cycle’s processes interact randomly and simultaneously. The process
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of Use/Re-creation is the final aim of the cycle and serves as the measure for the
effectiveness of knowledge management activities in the organization. Processes, by
definition, cut across the whole organization and work within contexts. There are
many contexts within the organization where it is necessary to act in order to make it
more responsive to the requirements of knowledge creation. Thus, when analysing a
knowledge creation cycle it is necessary to spell out the context(s) of interest.
3 Organizational Knowledge and HRIS
The effects of implementing information technology artefacts cannot be pinned down
to one or two areas in the organization, but are much more pervasive and continuous.
Implementation should not be seen as a “one-off” event, which is finished when the
information systems development cycle is complete. We see any form of IT
implementation as a process more akin to organizational learning and change then to a
single step in the methodological frameworks popularized by information systems
development methodologies. The key issue regarding IT implementation in
organization is organizational change which, in turn, is a holistic, complex and non-
linear process[32]. An organizational change perspective on the application of IT in
organizations affords us the necessary linkage between the perspective on pragmatic
knowledge outlined above and HRIS.
Fig.1.
In Figure 1 a diagram representing the impact of HRIS on the organizational
knowledge cycle is presented. It depicts the relationship among the five steps of the
Designing
Outcomes
Knowledge creation
contexts
Formation or
Construction of
Knowledge
Aplication, Use or
Re-Creation of
Knowledge
Storage or
Retention of
Knowledge
Distribution,
Transfer or Sharing
of Knowledge
Organization of
Knowledge
HRIS’s role in organizational transformation
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cycle and the knowledge creation contexts. The interaction of the six dimensions
gives rise to changes in organizational design, with design being the ultimate
destination of organizational transformation. This model will be used to re-visit the
empirical case study of Dow Chemical in the Benelux [7].
3.1 Types of HRIS
HRIS is not a specific stage in the development of HRM, but a choice for an approach
to HRM. Wright and Dyer [33] distinguish three areas of HRM where organizations
can choose to ‘offer’ HR services face-to-face or through an electronic means:
transactional HRM, traditional HRM, and transformational HRM. Lepak and Snell
[34] make a similar distinction, namely operational HRM, relational HRM and
transformational HRM. In this paper we address only the transformational dimension
of HRM.
The first area, operational HRM, concerns the basic HR activities in the
administrative area. One could think of salary administration (payroll) and personnel
data administration. The second area, relational HRM, concerns more advanced HRM
activities. The emphasis here is not on administering, but on HR tools that support
basic business processes such as recruiting and the selection of new personnel,
training, performance management and appraisal, and rewards. Transformational
HRM, the third area concerns HRM activities with a strategic character. Here we are
talking about activities regarding organizational change processes, strategic re-
orientation, strategic competence management, and strategic knowledge management.
The areas mentioned could also be considered as types of HRM that can be
observed in practice. In some organizations, the HRM emphasis is on administration
and registration, in others on the application of operational HRM instruments, and in a
third group the HRM stress is on its strategic role. Within all the types of HRM,
choices can be made in terms of which HRM activities will be offered face-to-face,
and which will be offered through web-based HR (e-enabled). This question, for the
operational type of HRM, provides the choice between asking employees to keep their
own personal data up-to-date through an HR website or to have an administrative
force in place to do this.
For relational HRM there is the choice between supporting recruitment and
selection through a web-based application or using a paper-based approach (through
advertisements, paper-based application forms and letters etc.). Finally, in terms of
transformational HRM, it is possible to create a change-ready workforce through an
integrated set of web-based tools that enables the workforce to develop in line with
the company’s strategic choices or to have paper-based materials.
In cases where an organization consciously and in a focused way chooses to put in
place web technology for HRM purposes, based upon the idea that management and
employees should play an active role in carrying out HR work, we can speak of e-
HRM. With this line of reasoning, three types of HRIS can be distinguished:
Operational HRIS, Relational HRIS, and Transformational HRIS.
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4 The Empirical Case: Dow Chemicals
The Dow Chemical Company is one of the largest chemical companies in the world.
This US-based company (Midland, Michigan) is now active in 33 countries around
the globe. In 2001, Dow completed an important milestone, namely the merger with
Union Carbide, which strengthens Dow’s position as a global chemical company.
Until de mid-1990s Dow had been a country-oriented company, with fairly
autonomous sites around the world only loosely coupled with Dow sites in other
countries. In the last decade this changed and Dow aims to become a global company.
Dow’s organizational structure is flat (a maximum of six layers) and based upon
worldwide-organized businesses. This provides employees with a high level of
independence and accountability, working in self-managing teams, including process
operators as well as managers.
4.1 Dow Benelux B.V.
Dow Benelux is part of the global Dow Company, and has ten production locations
and three office locations. Dow’s largest production site outside of the United States
is located in Terneuzen (the Netherlands). This site consists of 41 units, of which 26
are factories. The total number of employees at Dow Benelux in 2001 was about
2800, with about 600 in Belgium and 2200 in the Netherlands. It produces more than
800 different products, most of which are semi-manufactured goods for application in
all kinds of products used in aspects of our daily lives. Examples of markets where
Dow is a major ‘player’ are: furniture and furnishings (carpets, furniture materials),
maintenance of buildings (paint, coatings, cleaning materials, isolation), personal care
(soap, creams, lotions, packing materials), and health and medicine (gloves for
surgeons, diapers, sport articles).
Before the 1990s, Dow Chemicals was mainly a “blue collar/manual work”
organization. During the first half of the 1990’s, they suffered hard times and the
company made financial losses. Global competition was increasing and technological
developments were speeding up. Dows’ management concluded that if the company
wanted to survive it had to become more flexible, more responsive, and permanently
alert. Therefore a new strategic plan was developed: the Strategic Blueprint.
This need for change led to the development of a new global HR strategy that
broke with the tradition of job security and switched to career security. Since the mid-
1990s, Dow no longer guarantees a lifelong job, but instead the company offers a
career that can develop at Dow, but also elsewhere. Furthermore, Dow made a switch
from a ‘manual work/blue collar work’ organization towards a ‘brainwork/white
collar work’ organization during the 1990s. Therefore, to transfer the knowledge and
experience from ‘one head to another’ became a very important challenge for the
company.
In 1997, Dow started to introduce the People Success System (PSS): “a system of
Human Resource reference materials and tools that help provide the underpinnings of
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Dow’s new culture”
1
. Before the introduction of PSS (which is technically based upon
Peoplesoft), Dow already had a number of electronic HR systems in use. PSS’s
difference was that it was based upon the idea of having one database, and more
importantly, with PSS, a completely new HR philosophy was introduced.
Coming up with a new HR strategy was part of the initiative to improve Dow’s
performance after a period of tough years with annual losses of 1 billion US dollars.
The new HR strategy was part of the new so-called Strategic Blueprint, introduced as
a ‘roadmap for the company’s transformation’. Dow wanted to become a real global
company, instead of an internationally dispersed one. In order to achieve this, internal
policies, including HRM, had to be unified. The use of state-of-the-art information
technology to support a new HR policy was seen as the obvious choice! Therefore,
the way forward to the implementation of web-based HR, i.e. e-HRM, was open and
the new HR system was called the People Success System (PSS).
5 The PSS Analysed in Terms of the Organizational Knowledge
Cycle
This section contains the discussion of our proposition, i.e. that transformational
HRIS can usefully be analysed in terms of the Organizational Knowledge Cycle as
put forward at the outset.
5.1 The Knowledge Creation Context: Linking the HR Strategy and Dow’s
Overall Strategy
Dow’s HR strategy, the so-called People Strategy, is rooted in the company’s overall
strategy, the Strategic Blueprint. This People Strategy should ultimately provide the
strategic leadership that is necessary to allow all Dow employees to use their ‘full
potential’. Besides this, the People Strategy has to make employees realize that they
are responsible for their own development in order to support the company in
advancing to the next performance stage. Dow, in response, practices a ‘pay-for-
performance’ philosophy, expresses the sentiment that it wants employees to stay for
a long period of time, and offer employees the possibility to develop themselves and
advance their careers.
Dow’s top management introduced the People Success System as part of the
organizational change process. The PSS is seen as ‘a global, integrated competency-
based Human Resources system for Dow employees’. It includeed four prime
components: performance expectations, compensation, development, and
opportunities. The stated goals of the PSS were:
- To provide an integrated Human Resources system that supports the strategy
of the company and enables the culture required for individual and business
success to flourish.
1
Brochure for employees new to Dow: “Enabling People Success at Dow”
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- To support a global business organization of empowered employees who
know what to do, know how to do it, and who want to do it: a de-layered
organization with ‘broad spans of control’, self-directed teams, and that has
created a workforce ready for change.
5.2 PSS’s Contribution to the Company’s Formation or Construction of
Knowledge
Overall, people at Dow appreciated the fact that, with the PSS, information became
available that was not previously accessible. The global compensation system
especially received a lot of hits at the beginning, because it provided information
about salaries at all job levels at all Dow sites around the world. People could
compare between countries and between job levels. This contributed to the open
culture that had been announced as part of the HR changes at Dow.
Interestingly, due to the introduction of a whole new HR philosophy, there was so
much information available that it discouraged people from exploring the system. It
could create a feeling of getting lost, not knowing how to find the way. With the
implementation of the web-based version of the People Success System, most of the
information available concerned compensation. The new HRM policy included a new
global compensation system, based upon the idea that compensation had to be
comparable among all Dow sites.
One interesting aspect is that the opinion exists that the PSS stresses very much the
social issues (training, conflict management, language, and social skills) rather than
the professional technical skills. As one person close to this topic said: “We simply
rely on their (new employees) education; presuming that they have their technical and
professional skills. In my view, many mistakes were made in the recruiting of new
employees because of the issues in the system: too much attention is given to the
social aspects and not to the normal professional skills”.
5.3 The Organization of the Company’s Knowledge through PSS
Using PSS’s navigator, employees could find plenty of information about Dow’s HR
philosophy as described earlier, which was in itself very relevant since this was
completely new and different from Dow’s earlier HR approach. Thus, initially, the
PSS was mainly an information provider. However, from the first moment on, new
tools were regularly implemented. Today, Dow Chemicals claims to be one of
companies who have made the largest investments in ICT in recent years. With the
implementation of these tools, the PSS has become more interactive, and provided
HR instruments to employees and line management. Table 2 provides information
about the main specifications of various components in the PSS.
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Table 2. Content of the PSS at Dow Chemicals.
Main components of PSS PSS services
Performance expectations
Helping employees understand what is expected
from them in their job, what knowledge, skills
and behavior are required, and how their work
will be evaluated.
•
Job Families
• Competencies
• Development Stages
• Competency matrices
• Competency profiles
• Managing Performance
Development
Helping employees plan their careers: to
develop their knowledge and skills for their
current and future job.
•
Employee Development Process,
e.g.:
- Seek feedback
- Define and Document a Plan
- Implement the Plan
• Employee Development Tools, e.g.:
- 360˚ Development tool
- Mentoring Process
- Managing Personnel Growth
- Learning resources list
- Writing SMART goals
Opportunities
Guiding employees through the opportunities
and career transitions.
•
Career Opportunity Maps, e.g.:
• Job Announcement System
• Future Leader Process
• Succession Planning Process
5.4 PSS’s Capability for Storage or Retention of Knowledge
The PSS initially contained mostly information, much about all the aspects of the HR
policy and the philosophy behind it. Especially the information about the new
compensation system attracted a lot of attention. The system provided information
about the salaries of all the job families at all levels, and in all countries where Dow
has a site. For example, employees could (and did) compare their salaries with those
doing the same job in other countries. Also information about the salaries of the most
senior employees at the company attracted much attention.
5.5 PSS’s Key Capabilities: Distribution, Transfer or Sharing of Knowledge
As the system became more sophisticated, the enthusiasm for using the system itself
increased. Quite soon after the implementation, in 1997, Dow’s Job Announcement
System (JAS) became available. Until then, the people at Dow had been reluctant to
believe that this system would really create the transparent and flexible internal labour
market promised. At Dow, the traditional way of filling vacancies was to contact
friendly colleagues or line managers within the company. Some people expected to be
blocked by their managers if they wanted to apply for a job elsewhere in the
company. However, the JAS has been the greatest success story with the PSS, initially
and still today. Line managers have to publish job vacancies on the JAS, and
employees, right from the very start, have used the opportunities offered to apply
internally for jobs. Some line managers were not pleased by the fact that their
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employees ‘walked out’, and complained to HR “Help, my people are walking out”.
HR’s reply in such cases was “Then you have a problem” meaning that the line
managers had to work on the way they managed their people.
5.6 The Outcomes of PSS: Aplication, Use or Re-Creation of Knowledge
An overall view is that it took Dow’s employees (line managers and employees in the
plant) three years to get used to the People Success System. By the end of 2004 all
employees had to have a personal development plan. This meant that they had to use
tools in PSS. People were ‘forced’ to schedule time (in advance) to work with the
system, in order to learn how to work at Dow or for personal development.
At the same time we have found an indirect connection: the transparency of the
company has increased and its policies have become more open - the same
information is available to the management and to the employees. The most
impressive example is the openness of the compensation part of the PSS. Salaries of
all positions are visible to everybody, anyone can see how much the leaders earn, and
in all countries.
With the new Strategic Blueprint and the new HR philosophy (competence-based)
there can be more people than before on a senior level within a group of workers.
There can now be more than one ‘first operator’ working on a shift, and an increase in
the number of team members who can do specific tasks, and this makes job rotation
possible.
Since the implementation of the PSS, employees can see how to change and
develop, and this is very new to them. According to some views, the idea of career
self-management is not yet fully working: employees need more time and this has to
be granted by their team leader. Within Dow, a more revealing opinion can be heard
about the opportunities the PSS gives. There is a commonly held view that there are
many examples of individuals who have wanted to develop themselves at Dow, and
who have been successful due to the PSS.
Communication is now very fast and it is very simple to communicate with
anybody. In the plant, however, there are still employees who never check their e-
mail. However, one hears that direct contacts have been dramatically reduced. HR
specialists say that people are now more aware of what the company wants from
them. People are trying to do something about their knowledge and skills. All the
information needed about how to develop is on-line, so there is no need to physically
go to the HR department.
In terms of cost effectiveness, it is difficult to determine whether the PSS has
helped in reducing costs. The e-learning component Learn@dow
has saved money. It
reduced costs in terms of space, time and human resources. The number of courses
that can be offered through the HR intranet is also far more than the number that
could be offered class room-based.
In conclusion, it can be said that the organization’s members, in the first stage of
usage, worked with the PSS mainly as an operational e-HR tool. They used it a source
of information. When more tools and resources were added usage switched, to some
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extent, towards relational e-HR, albeit with caution. We have concluded this in view
of the fact that young new employees use the competency assessment tool for new
employees right from their start at Dow. They use the development tool to compile
their development plan for the near future and are happy to use learn@dow. In this
way the workforce has become more change ready.
6 Conclusions
In this paper we have put forward the organizational knowledge cycle as a conceptual
tool to analyse the impact of transformational HRIS on the state of organizational
knowledge in the organization, and have used a published case study [7] to illustrate
our proposition. Our aim is to provide an alternative set of epistemological and
methodological tools to analyse transformational HRIS. A question we have asked
ourselves at the outset was whether an intranet-based system was really necessary to
achieve an improvement in the strategic role of human resource management, i.e. a
major transformation, at Dow Chemicals. Our conclusion is that it was indeed
necessary given that an intranet-based system created the opportunity to reach every
employee at any time anywhere around the globe. Information technology also
provided the best opportunities to personalize information (by personalized portals),
to provide a better service to clients and to improve increased efficiency in many
administrative processes.
Besides, it is also clear that a global intranet-based system offered the opportunity
to develop one global standard, a centrally-steered HR policy and global standard HR
practices. Dow’s top management perceived this as advantageous for the company as
the whole. However it also implied opportunities to serve employees better, especially
in giving them more control and also the responsibility to develop themselves: up-to-
date information, relevant electronic links, and relevant instruments to work with
individually. It is also clear that the PSS created opportunities to standardize and
centralize HR processes, and to make HR processes more efficient, for example by
electronic database management, online recruitment, online training, and online
assessment tools.
The PSS has been instrumental in improving skillful practice at Dow which is the
same as saying that it has contributed to an improvement on the organization’s
knowledge. However, in talking of organizational knowledge, it is important to bear
in mind that knowledge is neither “out there”, incorporated in external systems or “in
here”, inscribed in the human brain, but exists as something in people’s ongoing
engagement in social practices. This perspective is compatible with the view that
organizational knowledge can be pragmatically conceptualized as a five-step process
of construction, organization, storage, distribution and application. Each individual
step of such cycle has been discussed by a variety of authors in the organizational
knowledge and learning literatures, giving intellectual validity to this framework. We
hope that future research into HRIS that can take the concept of the organizational
knowledge cycle further by establishing more precise links between the steps of the
cycle and the characteristics of transformational HRIS.
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