The Analysis of Knowledge Management Implementation and
Relationship-oriented Leadership Behavior in Developing
Organizations’ Human Capital
Pieter Sahertian
Faculty of Business and Economics, University Kanjuruhan Malang, Jl. S. Supriadi No. 48, Malang, Indonesia
Keywords: Leadership Behavior, Knowledge Management, Human Capital.
Abstract: Leadership capability development through the application of knowledge management concepts as human
capital in an organization is required to achieve a sustainable competitive advantage. This article was aimed
at analyzing whether or not knowledge management can be a theoretical framework in developing
leadership capability as a human capital in an organization. This research was conducted in literature study
approach. it was done by systematically investigating the basic theory and contemporary result findings.
The results of the analysis indicated that, although the organization has a focus on enhancing human capital
capability, leaders have the potential to influence perceptions of the human capital benefits of its employees.
Employees have the greatest potential to gain these benefits through their inclusion in the process of
applying knowledge management, developing organizational culture and encouraging communication
among employees. The implications of this analysis are that human resource managers should intensively
carry out training for managers to develop their leadership behaviors, as these behaviors will contribute to
improving human capital whereby an organization can achieve competitive advantage. The analysis
contributes to the development of leadership literature to enrich the concept of leadership behavior as a
variable that can increase human capital in an organization.
1 INTRODUCTION
Researchers have concentrated on changing the
paradigm from human resources into human capital
within the company in order to maintain a
competitive advantage (Bontis, N. and Fitz-enz,
2004; McGregor et al.;McGregor, J., Tweed, D. And
Pech, R). Human capital is a "combination of
knowledge, skill, innovation, and ability of
individual employees of a company in
accomplishing the task at hand" by Bontis (Bontis,
N. 2001). Human capital development practices can
be done either internally or externally, such as
staffing, training, performance appraisal, and
rewards (Snell, S.A. and Dean, J.W. Jr., 1992).
Universally, this kind of development model is taken
into account as an investment for human capital
development so that companies can increase their
economic added value. Drucker, P.F. (2002)
describes the development of human capital as "sine
qua non of a competition in an economy of
knowledge".
The research that has been done in many
companies to link leadership behavior, knowledge
management and human capital is still relatively
limited. Studies aimed at exploring the role of
leadership behaviors on individual employee
performance and organizational performance
through acquisition of knowledge, knowledge
creation, knowledge exploitation have been
undertaken by(Bryant, S.E. 2003; Politis, J.D.,
2002). Although the results of Smith's research,
1998); Darroch, (2003) shows there is a relationship
between knowledge management and human capital,
but the influence of knowledge management on
human capital development is still not widely taken
into account. The main focus of this paper is to
establish a framework for organizing relevant
literature to support the relationship between
leadership behavior, knowledge management and
the benefits of human capital.
406
Sahertian, P.
The Analysis of Knowledge Management Implementation and Relationship-oriented Leadership Behavior in Developing Organizations’ Human Capital.
In Proceedings of the Annual Conference on Social Sciences and Humanities (ANCOSH 2018) - Revitalization of Local Wisdom in Global and Competitive Era, pages 406-414
ISBN: 978-989-758-343-8
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

2 LEADERSHIP BEHAVIOR
Leadership is generally defined as the use of
influence to encourage participation in achieving
predetermined goals (Yukl, 2006). The leadership
process involves the personalityand behaviorof the
leader,the follower's perceptionof the leaderand
thecontext within which the interaction takes place
(Antonakis et al., 2004). The concept of leadership is
more focused on the relationship between leaders
and followers. Leaders must structure or restructure
the situation, perceptions, and expectations of their
group members (Bass, & Stogdill’s, 1990).
The importance of organizational leadership
development programs in organizations is strategic,
since the results of the research show that there is a
relationship between leadership and organizational
performance (Aragon-Correa et al., 2007; Lowe et
al., 1996). Leaders are the central focus in an
organization because it is they who set a clear vision
in mobilizing followers to realize the organization
vision and mission. Stogdill in Bass(1985) defines
leadership as "an interaction between group
members". In line with that opinion, Yukl (2006)
says that leadership is a process in which an
individual influences other group members to
achieve organizational goals. Cartwright and Zander
in Kleiner (1987) developed a functional approach to
leadership. They observed that leadership behaviors
is a result of the performance of two functions,
namely the goal achievement (task) and maintenance
(relationship) function .
Although each leadership behavior has its own
advantages and disadvantages, in practice, the
relationship-oriented behavior attracts a lot of
attention within the organization because it
contributes to corporate innovation, organizational
learning, and the skills and creativity of workers (De
Jong and Den Hartog, 2007; Aragon-Correa et al.,n-
Correa, 2007). Leadership behavior that performs
this maintenance function is more beneficial for the
development of human capital in the organization.
Researchers define leadership behaviors as
influencing, motivating, or intellectual stimulation
for individuals within the organization (Bass, 1985;
Nemanich, and Keller, 2007). In addition some
researchers mention that two main things influence
of idealized and inspirational motivation are the
charisma(Kark et al., 2003; Avolio et al., 1999). The
idealized influence implies that the leader is a figure
who is respected, trustworthy and admired. This
suggests that the behavioral characteristics of leaders
determine the vision and how to deliver them to be
achieved along with their followers (Bass, 1999;
Bass et al., 2003). Inspirational motivation describes
how leaders encourage their employees to achieve
their vision through creating an individual spirit and
team spirit (Bass et al., 2003). Intellectual
stimulation explains how leaders promote the
innovative and creative skills of his employees in
solving problems in innovative ways without
criticizing the employees for their mistakes (Bass,
1999; Bass et al., 2003). While individual
considerations emphasize the role of mentor of
leaders in terms of developing employee potential,
focusing on employees' needs for achievement and
growth and developing employee opportunities for
learning(Bass,; Bass et al., 2003; Bass and Riggio,
2006).
3 KNOWLEDGE MANAGEMENT
Knowledge management is the subject of business,
industry and education circles. The process by which
organizations create, organize and share knowledge
(knowledge management) becomes a source of
sustainable competitive advantage (Hatch and Dyer,
2004).
The ability of an organization to build an
environment that can facilitate KM as a strategic
asset, is a big corporate challenge. The KM
process,as a step that will help the organization build
knowledge as a strategic source, will drive the
effectiveness and performance of the organization
(Bharadwaj, et.al,2015).
Therefore, companies need to make enormous
efforts in creating new knowledge among employees
so that they can develop their organizational
knowledge. Serban et al. (2002) describes
knowledge management as all about using the
systematic and organized thinking power of an
organization to achieve efficiency, ensuring
competitive advantage, and spurring innovation. In
essence, the knowledge management framework is
the creation of knowledge. Davenport and Prusak
(1998) describes knowledge as a fusion of
experience constructed in terms of value, contextual
information, insights that provide a framework for
evaluating and incorporating new experiences and
information. Nonaka and Takeuchi (1995) argue that
the process of creating organization knowledge
occurs because of the interaction between tacit
knowledge and explicit knowledge through the
socialization , externalization, combination, and
internalization process.
The Analysis of Knowledge Management Implementation and Relationship-oriented Leadership Behavior in Developing Organizations’
Human Capital
407

What follows describes the SECI Model
(socialization, externalization, combination,
internalization).
3.1 Socialization
One of the socialization processes among human
resources in the organization is done through face-
to-face meetings (meetings, discussions, and
monthly meetings). In the knowledge management
system to be developed,collaboration features like e-
mail, discussion, electronic, communities of practice
allow the excahnge of tacit knowledge (information,
experience and skill) that a person possesses so that
the organization is able to learn and generate new,
creative and innovative ideas.
3.2 Externalization
Support for this externalization process can be
provided by documenting the meeting minutes
(explicit form of knowledge created at the time of
the meeting) into electronic form for later
publication to those who concerned. Bringing in
experts will provide new knowledge within the
organization that can be learned, developed, and
utilized to improve knowledge / resource
competencies.
3.3 Combinations
The process of converting knowledge through
combinations is to combine different explicit
knowledge to be compiled into a knowledge
management system. the media for this process can
be through discussion forums, organizational
databases, and the internet to obtain external
sources. Enterprise portal features such as the
knowledge organization system that has functions
for categorizing information (taxonomy), searching,
etc. are helpful in this process.
3.4 Internalization
All documented data, information and knowledge
can be read by others. In this process the increase in
human resource knowledge takes place.
Knowledge management is part of a responsible
management function for the selection,
implementation and evaluation of internal and
external knowledge aimed at creating an
environment to support organizational performance
improvement(Maier, 2005).
Apart from the capabilities of the knowledge
process(Lindsey, 2002) also emphasizes that the
effectiveness or success of knowledge management
will depend on the knowledge infrastructure
capabilities of an organization. Supporting the
importance of knowledge infrastructure, Davenport
and Prusak (1998)identified from 31 knowledge
management projects that developed a knowledge-
friendly culture and introduced knowledge transfer
channels. Although taking into account knowledge
as a crucial factor behind sustainable competitive
advantage and overall organizational success, it must
be recognized that knowledge issues are closely tied
to organizational culture (Davenport and Prusak,
1998). Because culture has no exact
conventionalized meaning. Specifically, Miron et al.
(2004) defines organizational culture as a belief and
value shared by members of the same organization,
which influence their behavior. Culture, therefore, is
not in the minds of individual employees, but rather
between the minds of groups of employees within
the organization, whose symbols and meanings are
expressed publicly through the interaction of
working groups(Alvesson, 2002). In addition,
culture also stands out in organizations through
artifacts, language in the form of jokes and
metaphors, patterns of behavior in the form of rituals
and ceremonies, behavior norms, heroes, symbols,
symbolic and historical acts (Brown, 1995).
Organizational culture is very important in utilizing
KM, because it has been regarded as an effective
facilitator.
The picture below reflects the interconnected
SECI thus forming an ongoing knowledge
management for an organization.
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Figure 1: The Knowledge Creating Company, Oxford University Nonaka and Taekkeuci, 2001).
4 HUMAN CAPITAL
Intelectual capital contributes to the development of
human capital. While social capital as a component
of human capital contribute in the development of
intellectual capital. According to Nahapiet and
Ghosal (1998), social capital is a number of actual
and potential resources that are embedded within,
and derived from a network of relationships owned
by a person or social unit. Human capital can take
the form of employee knowledge, skills, capabilities,
commitments, know-how and ideas and employee
health, which adds economic value to the
organization(Becker, 1975; Skandia, 1998;
Sullivan, 1999; Ulrich et al., 1999; and Bart,2001)
defines human capital as collective knowledge,
education, skills, attitudes and experience of
employees in an organization. Investments in human
capital will have high value when employees benefit
enormously from the development process (Wayne
et al., 1999). Benefit human capital is a high return
on individual investment, increased compensation,
becoming a future leader, opportunities to participate
in major projects and improvements in status and
authority (Ulrich et al., 1999; Harley, 1999; Bontis
and Fitz-enz, 2004; Motley,2017).
Employees feel the benefits of human capital
when they have the potential to give more return in
the sense of contributing to the creation of
intellectual capital for their investments (Bontis &
Fitz-enz, 2004). Taking into account an employee as
one of the future leaders is a benefit from human
capital because it has great potential to move
vertically into an influential position (Ulrich et al.,
1999). These future leaders demonstrate their better
performance in certain responsibilities and activities
related to their work. Employees also benefit from
their human capital as their authority and status
increase.
5 RELATION-BASED
LEADERSHIP AND HUMAN
CAPITAL BENEFIT
Within the organization, relations-oriented leader
behaviors can stimulate employees' abilities, provide
vision, personally acknowledge employees and
consider individual employees by Rafferty and
Griffin, 2004). Therefore leaders and followers
mutually increase their level of morality and
motivation to one another (Burns, 1978). Leaders
who have the characteristics of influence, always
have more willingness to engage in work activities,
take risks and hence they are more influential,
The Analysis of Knowledge Management Implementation and Relationship-oriented Leadership Behavior in Developing Organizations’
Human Capital
409

effective and willing to trust their employees (Bass
and Bass& Stogdill’s, 1990; Bass and Riggio,
2006). These leaders create trust by giving
autonomy and decision-making to their employees
to do their job and therefore they promote innovative
behavior as well as self-efficacy of their employees
(Scott and Bruce,1994; Conger and Kanungo,1988).
On the other hand, empowerment or enhancement of
intrinsic motivation will improve employee's
creative performance (Speritzer, 1995). Associated
with the benefits of human capital perceived by
employees, it indicates that empowerment helps
employees to gain authority within their
organizations (London, 1993 and Harley, 1999).
Phillips (2005. ) in his analysis, takes into account
the innovative behavior and creativity of employees
as a human capital parameter because these
attributes can increase the effectiveness of human
capital in the form of return on investment such as
new products or process development, patents and
copyrights. Similarly Podsakoff et al. (1996) in his
research found that of 1539 employees who express
more trust to their leaders felt more ability,
experience and knowledge.
Leaders who possess inspirational motivational
characteristics increase the capability of achieving
employee goals or performance in order to achieve a
predetermined vision Nemanich and Keller (2007).
On the other hand, leaders who behave in
relationship orientation can create individual and
team spirit among employees as they demonstrate
enthusiasm and optimism in employees through
coaching, encouraging and supporting. As a result,
they are able to improve employee performance in
conducting work activities and generate high return
on investment for employees (Yukl, 2006; Boerner
et al., 2007). Leaders who intellectually stimulate
employees will encourage them to solve task-
oriented problems in new and different ways and
hence leaders force employees in challenging the
beliefs and values that exist within the organization
(Yukl, 2006). Thus, leaders encourage the growth of
employee professionalism in order to benefit human
capital (Turner et al.,2005).
In addition, leaders must prepare their employees
who possess human capital value in order to have
the opportunity to participate in various activities
that contribute to achieving competitive advantage
(Schepers et al., 2005). Based on the various
arguments presented in relation to the relation-
oriented leadership behaviors on the employee's
human capital benefits, we propose that:
P1: Leadership-oriented relationships
significantly support employees to feel the benefits
of human capital in the life of the organization.
6 THE ROLE OF
RELATIONSHIP-ORIENTED
LEADERSHIP IN
KNOWLEDGE MANAGEMENT
PROCESSES
Although researchers such as Politis (2002) and
Bryant (2003) have examined the role of
relationship-oriented leadership towards knowledge
management, its impact on human capital
development of employees is still quite scarce in the
literature. According to Filius et al. (1996),
knowledge was gained through participation in
professional networks, interaction with customers
and competitors, research and development.
Establishing relationships with professional
networks is a social capital owned by an individual
employee,(Friedman and Krackhardt,
1997).Through such networks, employees
communicate with suppliers, customers and
competitors. Coleman (1988) describes that social
capital is an essential element for the creation of
human capital. In addition, Lin and Huang (2005)
found that employees involved in creating human
capital have received high and positive appreciation
from their leaders. In this context, relationship-
oriented leaders support the promotion of employees
through the creation of human capital among
employees and, as a result, influence their income
growth. A study of 239 employees by Politis
(Politis, J.D. 2002) suggests that relationship-
oriented leadership behaviors, particularly the
dimensions of charisma and intellectual stimulation,
have a positive relationship with acquiring
knowledge, but individual considerations have a
negative relationship with knowledge acquisition.
Courageous risk-taking behaviors that
characterize relationship-oriented leaders often
invite successes and failures during the
implementation of high-value programs (Hater, and
Bass, 1988). In this case, these leaders introduce
corporate innovation through employee innovative
behavior in the form of creating and managing
information and knowledge by Aragon-Correa et al.,
(Aragon-Correa, J.A., Garcia-Morales. V.J.
andCordon Pozo, E 2007). In addition, Crawford
(2005) based on research conducted on 1046
respondents, found that, relationship-oriented
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410

leadership behavior has a positive correlation with
the creation of documents. Thus, these leaders
support employees to achieve the benefits of human
capital through knowledge ownership.
This shows that relationship-oriented leaders
create new ideas and support employees to create
and apply these ideas into new products and process
development. Thus, increased employee
performance has a positive relationship with the
application of relationship-oriented leadership
behaviors (Podsakoff et al., 1996; Bass et al., 2003).
However, the results of the Sahertian (2011) study,
found different results from previous studies.
According to Filius et al. (1996), an organization
applies knowledge in the form of the use of
knowledge to improve its products or services.
Linking knowledge applications with innovation,
The relationship-oriented behavior of a leader insists
on supporting the implementation of knowledge that
impacts organizational innovation (Yahya, and Goh,
1996; Crawford, 2005).
Significantly, organizations are engaged in
implementing the process of creating organizational
knowledge to achieve and sustain a competitive
advantage. Therefore, implementing knowledge
management processes within the organization will
ultimately improve employee knowledge. If
knowledge is perceived as a component of human
capital to improve employee knowledge, it affects
the human capital benefits of the employees.
P2: Relationship-oriented leadership engages in
the process of knowledge management in the
organization, and through that process leaders can
increase the employee's human capital benefits.
7 DISCUSSION
Many organizations concentrate on the process of
developing human capital. The reason is that human
capital contributes to the creation of intellectual
capital within the organization through the
achievement of competitive advantage by Bontis and
Fitz-enz, (2004). Therefore, the organization does a
lot of effort in finding possible ways to increase the
accumulated contribution of human capital in
improving the organization's financial performance.
In the literature review that the authors discusses is
to analyze the role of knowledge management and
relationship-oriented leadership behaviors in
developing the benefits of human capital perceived
by employees. Specifically, knowledge management
is seen as two dimensions as proposed (Lindsey,
2002) that includes the ability to process knowledge
and knowledge infrastructure skills. This knowledge
management process has a greater impact on
employee performance because it affects the daily
activities of employees. The perceived benefits of
human capital analyzed in this study have great
potential in contributing to leadership literacy,
knowledge management and human capital
management.
Although the results of the study show a
relationship between leadership and human capital
(Edmondson, 1996), the relationship-oriented
leadership significance in creating human capital
benefits is more focused on individual employee
skills, innovative behavior, increased salaries and
their status (Rafferty and Griffin, 2004; Scott and
Bruce, 1994; Wayne et al., 1999.). Therefore, more
attention should be given to developing
organizational human capital through support for
human capital development of employees. In this
case, organizations should instruct their managers to
develop relationship-oriented leadership behaviors.
This training will force leaders to ensure the human
capital development process to increase employees
potential in maintaining their competitive advantage.
Therefore, it is necessary to make recommendations
from the results of empirical studies on the
importance of relationships between relationship-
oriented leadership and the perceived benefits of
human capital.
The results of research on the relationship
between relationship-oriented leadership with
knowledge management have been extensively
carried out (Politis, J.D. 2002; Bryant, 2003;
Crawford, 2005). This article links relationship-
oriented leadership and knowledge management
with the benefits of human capital. Therefore, it is
necessary that the future research see the
contribution of the relationship between the three
factors in the organization. In this case, to conduct
further empirical studies, the concept developed by
Filius et al. (1996) can be used to measure
knowledge management processes.
In the future, the in-depth study can be expanded
by focusing on other leadership behaviors other than
relationship-oriented behavior. Empirically, intense
research on the impact of leadership behaviors on
perceived human capital benefits can support
organizations to find the best way to implement
leadership behaviors to improve organizational
financial performance.
It is also worth to examine the benefits of human
capital viewed from demographic aspects (gender,
age, education and others) as well as related to the
relationship between the ability to process
The Analysis of Knowledge Management Implementation and Relationship-oriented Leadership Behavior in Developing Organizations’
Human Capital
411

knowledge, such as the process of acquiring
knowledge, the ability to structure knowledge, such
as culture of organizational culture and
communication as proposed (Park et al., 2004; Al-
Alawi et al.,2007; Connelly and Kelloway, Lai and
Lee, 2007). This article focuses more on
relationship-oriented behavior as proposed by Bass
and Avolio (1995). Therefore, it is necessary to
conduct further study by involving other leadership
behaviors.
8 CONCLUSIONS
The complexity and dynamics of organizations
today require significant leadership skills. Efforts to
develop human capital with knowledge management
support encourage effective leaders to create
differences within the organization. However, in
order for the organization to develop their leadership
abilities, the maintenance of the elements of human
capital and knowledge management becomes of
strategic value. Successful organizations in the
modern era (the twenty-first century) are leaders-
supported organizations that not only have the
knowledge, skills and ability to operate
organizations effectively, but also have the ability to
build relationships by empowering human capital
and understanding knowledge management in order
to realize their vision and goals.
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