Staff urged to share expertise

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Investment banks are well aware of this and are trying various ways to encourage knowledge-sharing - no small task in an industry full of fiercely competitive individuals.

Intranets aim to make the wisdom of individuals accessible to all. Dresdner Kleinwort Wasserstein cites 'explosive growth' in its intranet systems, and it is not alone. It would be a strange bank indeed that today does not make use of intranet, bulletin boards and email groups.

Merely having the technological infrastructure in place is not enough, however. 'Many executives think that knowledge management begins and ends with building sophisticated information systems,' says a report by the McKinsey consultancy.

In fact, this is only the first step. Knowledge is much more than just raw data. It involves the sharing of experiences and expertise over a long period, according to the management book Enabling Knowledge Creation: How to Unlock the Mystery of Tacit Knowledge and Unleash the Power of Innovation.

In investment banks, equity analysts are examples of employees who sometimes share knowledge in this way. They discuss particular markets, countries and companies in a manner that includes a range of tacit elements linked to individual perception, physical experiences, rules of thumb and intuition.

People are unlikely to even consider sharing knowledge with those doing very different types of work, however. Some banks, such as Schroder Salomon Smith Barney (SSSB), offer them financial incentives to do so. In annual appraisals, every banker is assessed by staff in other departments as well as their own. Panfilo Tarantelli, head of European Investment Banking at SSSB, says: 'These colleagues indicate the quality and frequency with which the individual shares his knowledge and encourages cross-selling. Bonuses are influenced by this feedback, meaning that pay is determined by how well knowledge is shared.'

The system operates throughout Citigroup, which includes a commercial bank and an insurer as well as an investment bank, following the mergers between Citicorp, Travelers, Salomon Smith Barney and Schroders. Tarantelli says: 'No other institution in the world has the same breadth of knowledge and products as Citigroup. The question has been how to bring these three different worlds together to generate the business advantages that come from knowledge sharing.'

The idea is to encourage cross-selling, in which one part of a firm produces business for another part. A corporate financier might point a wealthy executive towards his firm's private banking department, for example.

The authors of the McKinsey study cite Goldman Sachs as one of the stars of successful knowledge management practice. The firm has deliberately set out to foster a performance culture that encourages knowledge sharing.

The Boundaryless Organisation, a book published in 1995, said Goldman was even then encouraging the free flow of knowledge. A new compensation structure was set up in the early 1990s to encourage co-operation between divisions. By basing pay on subjective criteria, as opposed to just transaction count, interdepartmental rivalry went down while co-operation went up.

The bank has recently appointed Dr Steve Kerr, the book's author, as its head of learning.

UBS Warburg also encourages knowledge-sharing, with 'cross product rewards' and credits for assisting other departments. These are taken into account when bonuses are handed out.

But not everyone is convinced that such incentive schemes are effective. Emmanuel Gobiot, a knowledge expert at the Hay Group of management consultants, says: 'Until someone has found a system to hook into someone's brain you can never know precisely what knowledge is stored inside.' He adds that many staff 'just dump the knowledge on the table and leave it at that.' They fail to explain how it might be used in practice.

Egon Zehnder, the headhunting firm, goes further than any investment bank in encouraging knowledge-sharing. Its consultants are paid only according to the performance of the group as a whole. 'There is no formal procedure for tracking the performance of country offices, let alone individuals,' says Egon Zehnder, the firm's founder, in the Harvard Business Review.

This approach comes close to the ideal of free-flowing, cross-selling corporate consciousness. Andrew Lowenthal, who runs the global financial services practice from London, says: 'The concept of sharing knowledge is completely ingrained in the culture of the firm. Whether it's a fantastic candidate, or interesting market or client news, we ensure that the message is available to every office. We have a completely open architecture.' Lowenthal says that the focus on individual performance in investment banks means that there is too much emphasis on personal profit and loss.

If the free flow of knowledge needs to be backed up by a selfless reward system, then eliminating individual bonuses may be just as important as building the intranet. How well this would go down well with banking minds is another matter.

  • Enabling Knowledge Creation: How to Unlock the Mystery of Tacit Knowledge and Unleash the Power of Innovation by Georg Von Krogh, Kazuo Ichijo and Ikujiro Nonaka, Oxford University Press.
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