knowledge management in the aec sector: an exploration of the mergers and acquisitions context

& Research Article

Knowledge Management in the AECSector: an Exploration of the Mergersand Acquisitions Context

Patricia Carrillo* and Chimay Anumba

Loughborough University, UK

Knowledge Management (KM) is a relatively new terminology within the architecture,engineering and construction (AEC) industry, although certain aspects have always beenpractised within the industry. This paper conducts an exploratory study of how mergersand acquisitions affect knowledge management initiatives. The paper introduces the CLEVERconceptual framework that was developed at Loughborough University, UK. The conceptualframework is used to formulate the key aspects organizations should consider when imple-menting knowledge management initiatives. The paper presents case studies of AEC organiza-tions that have recently undergone mergers and acquisitions. The case studies demonstratewhat these companies are doing in terms of knowledge management, especially to collateand deploy the bodies of knowledge held in the hitherto separate organizations, to enhancetheir competitive advantage. The paper concludes by providing guidelines for companies toconsider in developing knowledge management initiatives to cope with structural changes atan operational level. Copyright # 2002 John Wiley & Sons, Ltd.

INTRODUCTION

The emergence of the knowledge economy meansthat organizations’ know-how is becoming moreimportant than traditional sources of economicpower (Scarborough and Swan, 1999). The vastmajority of the literature on KM is overwhelminglyoptimistic and the claims made about the value ofKM irresistibly attractive (Storey and Barnett,2000). Knowledge is now considered the most stra-tegically important resource and learning the moststrategically important capability for businessorganizations (Zack, 1999). Webb (1998) definedknowledge management as the identification, opti-mization and active management of intellectualassets to create value, increase productivity, and

gain and sustain competitive advantage. Knowledgemanagement, if implemented effectively, appears tooffer a partial solution to organizations for gainingsustainable competitive advantage. However,many question whether KM is yet another manage-ment fad. Wiig (1997) argued that previous fadswere one-dimensional and led to brief performanceimprovement. He stated that KM’s objectives andscope were quite different, providing a broad,multi-dimensional perspective and covering mostaspects of an organization’s activities.

AEC organizations are becoming increasinglyaware of KM issues because of the impact claimedby other industry sectors. Organizational changesdue to mergers and acquisitions add a furtherdimension to KM. Two organizations, which mayhave had totally different strategies at a numberof levels, are amalgamated. They will both havedifferent levels of knowledge stored in variousmedia. The challenge will be to manage the knowl-edge that is held by these two organizations

Knowledge and Process Management Volume 9 Number 3 pp 149–161 (2002)Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/kpm.146

Copyright # 2002 John Wiley & Sons, Ltd.

*Correspondence to: Patricia Carrillo, Department of Civil andBuilding Engineering, Loughborough University, Ashby Road,Loughborough, LE11 3TU, UK. Email: [email protected]

efficiently, so as to enhance their collectiveknowledge assets and thereby create the synergyanticipated by the merger or acquisition. Thispaper therefore explores how AEC organizationsneed to adapt their knowledge management strate-gies to cope with mergers and acquisitions. Thecontents of the paper are as follows: (1) the rele-vance of knowledge management to construction;(2) the context of mergers and acquisitions; (3) aknowledge management conceptual framework;(4) the research methodology adopted; (5) thecase study results; (6) discussion; and (7) theresearch’s conclusion.

KNOWLEDGE MANAGEMENTIN CONSTRUCTION

The AEC industry delivers large, expensive,custom-built facilities at the end of a constructionprocess. The construction industry is a strongknowledge-based industry which relies heavilyon the knowledge input by the different partici-pants in a project team. Elements of knowledgemanagement have always been practised withinAEC organizations whether in the form of codesof practice, lessons learnt, or in the use of informa-tion technology (IT) applications (Anumba et al.,2000; Kazi et al., 1999). Kamara et al. (2001) pro-posed the simplified model of the constructionprocess as shown in Figure 1.

Construction project delivery entails the forma-tion of a ‘virtual’ and temporary, multi-disciplinaryorganization that consists of the client and repre-sentatives of the supply chain. The supply chainmay consist of architects, structural engineers,mechanical and electrical engineers, contractors,sub-contractors, material and construction plantsuppliers, etc., all employed by different

organizations. It is quite usual for these temporaryteams to disband on project completion withoutdiscussing or disseminating the lessons learnt.Knowledge and information exchange is thereforeneeded both at a project level and also within theindividual supply chain firms (Kamara et al.,2001). This transfer of knowledge is further exacer-bated when one component of the supply chain hasundergone a merger or acquisition and potentiallyhas knowledge that can add value to the project butdoes not know it exists.

KM is particularly relevant to the UK AECindustry with its current focus on collaborativeworking, knowledge exchange and the creation ofnew networks to increase competitiveness andprofitability (Moodley et al., 2001). The publicationin the UK of the report Rethinking Construction

(Egan, 1998) and the low levels of company profitshave forced a number of AEC organizations toreconsider the way in which they manage theirbusinesses and the role of learning and knowledgein achieving performance targets.

The AEC industry has been made increasinglyaware of KM through published literature andindustry workshops run by both construction andnon-construction organizations. To date, most ofthe KM literature has focused on the nature ofknowledge, types of knowledge and the theoreticalbases for knowledge management (Storey andBarnett, 2000). Since 1999 there have been a numberof research papers published on KM relevant toconstruction. Issues covered include: providing aframework for KM (Kamara et al., 2001); knowl-edge transfer between organizations (Fernie et al.,2001); the role of IT (Carrillo et al., 2000; Patelet al., 2000); the impact on innovation (Egbu et al.,2001); the impact on business performance(Robinson et al., 2001); and case studies withinspecific AEC companies (Moodley et al., 2001).

Figure 1 The simplified Construction Process (Kamara et al., 2001)

RESEARCH ARTICLE Knowledge and Process Management

150 P. Carrillo and C. Anumba

An increasing number of AEC companies arealso involved in KM research projects as industrialpartners. Many of these companies have appointedKnowledge Managers who are tasked with devel-oping and implementing KM strategies and thuswant to learn from the experiences of other AECorganizations. The main drivers for implementingsuch KM initiatives are (Robinson et al., 2001):

* The dissemination of best practice to a key set ofemployees;

* The retention of the tacit knowledge of keyemployees;

* To promote continuous improvement;* The need to respond to customers more quickly;

and* The need to reduce rework.

A number of researchers (McConalogue, unpublis-hed dissertation, 1999; Preece et al., 2000; Robinsonet al., 2001) have highlighted that KM is still in itsinfancy in the AEC market and there is need tounderstand how different industry sectors aredevising and implementing KM in order to learnfrom their experiences.

CONTEXT OF MERGERS AND ACQUISITIONS

Organizations find it difficult to manage efficientlytheir own knowledge resources through each phaseof the knowledge life cycle. KM also becomes morecomplicated when companies suddenly changetheir size through organizational changes such asdownsizing or growth through mergers and acqui-sitions. This means that either the organization’sintellectual capital is lost or another organization’sknowledge assets have to be managed within thecontext of changing organizational structures,politics and culture.

Stewart et al. (1963) defined a merger as ‘anacquisition that takes place with the agreement ofthe board of the acquired company’. Occasionally,the terminology ‘merger’ is used when the twocompanies have a similar size in terms of numberof employees and annual turnover while ‘acquisi-tion’ is used when one partner is much largerthan the other. Bengtsson (1992) adopted a realisticapproach and stated that most companies use theterms loosely and interchangeably, and are mostlikely to settle on a term which is likely to be bestreceived by the business world, confuse competi-tors, and protect their products. In this paper theterminology ‘mergers and acquisitions’ will beused jointly to indicate a change in company own-ership independent of the size of the companiesinvolved.

Haspeslagh and Jemmison (1991) distinguishedbetween four types of acquisitions based on thelevel of strategic interdependence and organiza-tional autonomy as shown in Figure 2. The typeof acquisition will dictate what knowledge is tobe shared and how this should be done. For exam-ple, a Preservation type acquisition may need toshare knowledge, mainly at corporate level andwill differ markedly from the knowledge sharingrequired by an Absorption type of acquisitionwhere there may be full integration of the acquiredcompany.

In the mid-1990s, a number of mergers andacquisitions occurred within the US and EuropeanAEC markets. Mergers and acquisitions is thepreferred vehicle for AEC expansion to cope withthe globalization of the AEC market and the newways of procuring construction projects (Schrienerand Angelo, 1995; Carrillo, 1998). The globalizationof construction aims to provide opportunity in newmarkets whilst reducing the dependency on indivi-dual, national construction economies. Also, thenew forms of procurement in the UK, such asthe Private Finance Initiative (also known as PublicPrivate Partnerships) and Prime Contracting, havedictated the trend towards larger AEC organiza-tions because of their ability to form large, influen-tial consortiums that are better able to attractfunding. Mergers and acquisitions therefore offerthe mechanism for rapid growth (Fellows et al.,1983; Friedman, 1984; Ball, 1988).

With respect to the rapid increase in companysize through mergers and acquisitions, it becomesincreasingly difficult to determine ‘what theorganization knows’ and ‘who knows what’.Horizontal mergers or acquisitions, those that

Figure 2 Types of acquisitions (Haspeslagh and Jemmison,1991)

Knowledge and Process Management RESEARCH ARTICLE

Knowledge Management in the AEC Sector 151

involve organizations with the same type of busi-ness portfolio, introduce particular problems.Inadequate knowledge exchange does not createthe synergy anticipated and may lead to duplica-tion of effort and even repetition of errors withinthe organization. Thus, there is a need to dissemi-nate and provoke debate on the success and rele-vance of the approaches adopted by organizationsin order to add to the limited body of knowledgecurrently available in this area.

The AEC sector is well known for repeatingcostly mistakes because they have not leveragedknowledge held in other parts of the organization.KM within the context of mergers and acquisitionsallows companies, particularly those who haveundergone horizontal mergers and acquisitions, tobuild their knowledge capacity and disseminate iteffectively and efficiently to those who need it,thus reducing costly errors.

KNOWLEDGE MANAGEMENTCONCEPTUAL FRAMEWORK

Some AEC organizations are implementing KMinitiatives, but these tend to be on an ad hoc basiswithout a clear KM strategy (Robinson et al.,2001). A framework proposed for studying KM inorganizations is the CLEVER conceptual frame-work (Kamara et al., 2001). It was developed aspart of a twenty-month UK government-fundedresearch project on ‘Cross sectoral LEarning in theVirtual entERprise (CLEVER)’. The intention of thisproject was to explore the characteristics of knowl-edge management in different industry sectors inorder to derive a cross-sectoral framework thathelps companies to select knowledge managementprocesses best suited to their circumstances. Thiswas in recognition of the fact that, in multi-projectenvironments, the management of project knowl-edge (i.e. its collection, propagation, reuse andmaintenance) is generally accepted as being open

to considerable improvement, both within compa-nies and between companies in the supply chain(Siemieniuch and Sinclair, unpublished internalreport, 1999). Even where good practice can beidentified it is usually only disseminated withinthat industrial sector, with almost no learningacross sectoral boundaries. Knowledge is gener-ated within one project and then buried in unreadreports and arcane filing systems, or lost becausepeople move on. Failure to transfer this knowledgeleads to wasted activity and impaired project per-formance. The emphasis of the CLEVER projectwas thus on the organizational and cultural dimen-sions of knowledge management within a projectcontext (Anumba et al., 2001). The objectives ofthe CLEVER project were:

(1) To generate an ‘As-is’ representation of knowl-edge management practices in project environ-ments both within and across enterprises in themanufacturing and construction sectors;

(2) To derive generic structures for these practicesby cross-sectoral comparisons;

(3) To develop a viable framework for knowledgemanagement in a multi-project environment,within a supply chain context, together withrequirements for support; and

(4) To evaluate the framework using real-lifeprojects and scenarios supplied by the partici-pating companies.

It is the third objective, the development of the fra-mework for knowledge management, that is ofrelevance to this paper. The conceptual frameworkwas thus intended to assist an individual companyin determining important factors to consider whendevising knowledge management initiatives in amulti-project environment. The CLEVER concep-tual framework will be used to describe theattributes of knowledge and to propose solutionsfor effectively managing knowledge within organi-zations. The conceptual framework is divided intofour inter-related elements as shown in Figure 3.

Figure 3 The CLEVER conceptual framework for KM



Table 1 describes each element of the conceptualframework. The CLEVER conceptual frameworkis particularly useful for studying knowledge man-agement within the mergers and acquisitionscontext because it provides a holistic approach toKM. It helps to identify the organization’s ‘As-is’KM state, and recommends tools and techniquesfor achieving its ‘To-be’ state whilst consideringinternal and external factors that may impact onthe organization. The elements of the conceptualframework are described below with particularreference to mergers and acquisitions in AECorganizations.

The Knowledge Base

The Knowledge Base is concerned with identifyingthe knowledge the organization is interested inmanaging. AEC organizations require certain typesof knowledge. Kamara et al. (2001) recognized thatknowledge will require to be managed at different,inter-related levels, namely intra-project (acrossdifferent stages of a project and between differentstakeholders) and intra-organization (across differ-ent departments within the same firm). Within the

context of mergers and acquisitions, there is a clearneed to concentrate initially on intra-organizationalKM (i.e. within the new, larger organization).

The CLEVER conceptual framework proposesthat the knowledge base must be thoroughlyunderstood before it can be managed effectively.To do this, the framework proposes the use of theattributes shown in Table 2.

Process-shaping Factors

This factor investigates the root cause of the KMproblem and must be taken into account in devis-ing any KM initiative. In this context, mergersand acquisitions are expected to create synergy,thus the body of knowledge held within the twocombined companies can be expected to be greaterthan the sum of the two individual parts. In fact,this seldom happens because of the period of jobuncertainty created by the merger and acquisition.Employees who do not have a sense of job securityor trust their colleagues and new owners are unli-kely to co-operate with any KM initiatives. OtherProcess-shaping Factors that may impact uponthe organization are summarized in Table 3.

Table 1. The CLEVER Conceptual Framework Elements

Element Description

Knowledge Base The attributes of the knowledge being considered such as its class, source,importance and where it is located

Process-shaping Factors The internal and external factors that may impact on the KM processKnowledge Management Process The goals of KM, the processes involved in KM and the tools requiredPerformance Measurement The metrics and measurement methods used to assess the effectiveness of

knowledge management

Table 2. The Knowledge Base description

Attributes Sub-attributes

Type Identifies the class of knowledge, its importance and relationship to business goalsCharacteristics Identification of knowledge characteristics, namely: Explicit/Tacit; Slow/

Rapid change, etc., where the knowledge is located and how it is acquiredSource and Users Identifies the source and the end users of the knowledge in terms of People, Software and Paper

Table 3. Process-shaping factors

Process-shaping factors Sub-divisions

Organizational Structure Centralized, hierarchical, function-based, project-based, etc.Organization Culture Hierarchical, devolved, degree of agility, etc.Team Boundaries Departmental, functional, project, organizational, cross-organizational



Knowledge Management Processes

The Knowledge Management Processes are con-cerned with the component sub-processes in theknowledge life-cycle and the tools that can beused for each sub-process.

Knowledge Life CycleSeveral authors now recognize KM is multi-faceted. Ruggles (1997) identified three categoriesof the KM life cycle as generate, codify and transfer.Tiwana (2000) identified four categories as the crea-tion, location, capture, sharing and use of knowl-edge. Siemieniuch and Sinclair (2002) extendedthe classification of the knowledge life cycle intofive stages as shown in Table 4.

Within the merger and acquisition context, someof the KM sub-processes may be deemed of higherpriority than others, particularly during the earlystages of organizational change. One examplemay be the need to focus on the ‘who knowswhat’ (i.e. the Propagate sub-process) rather thanthe creation of new knowledge (i.e. the Generatesub-process). However, it is important to notethat whilst some stages may take priority, the otherstages of the life cycle cannot afford to be ignoredfor the effective management of knowledge.

KM ToolsKM tools consists of both IT tools and non-IT tools.However, much emphasis to date has been on thelatter. Patel et al. (2000) categorized KM tools intofour areas: Knowledge Generation, KnowledgeRepresentation, Knowledge Retrieval and Knowl-edge Sharing. They also identified over 100 exam-ples of commercially available software that claimto support KM. Carrillo et al. (2000) argued thatany KM system must support the full KM lifecycle—from knowledge generation through totransfer and eventual retirement—and not just asubset thereof. Realistically, most organizationslooking to implement a KM system would expectan IT-based system in order to increase efficiencyand flexibility.

Performance Measurement

Tiwana (2000) found that whilst several companieshad been successful in implementing KM, as yet,none had a strong measurement programme inplace. Moodley et al. (2000) noted that many ofthe AEC knowledge management initiatives arestill in their infancy and thus measurements willonly emerge as these reach maturity. A numberof authors have proposed methods for measuringintellectual capital such as the Return on Assets(ROA) method, Market Capitalization Method(MCM), Direct Intellectual Capital (DIC) method,Tobin’s q, human capital measures, the knowledgebank method, etc. (Abdolmohammadi et al., 2000;Stewart, 1997; Siemieniuch and Sinclair, unpub-lished internal report, 1999). However, Siemieniuchand Sinclair noted that none of these addressedorganizational structures, roles, or configurationof knowledge and these measures did not providea direct measure on whether the problem was poorsystems, bad processes, wrong organizationalstructure, or disaffected staff.

This raises the question of how the value of anintangible asset, like knowledge and its manage-ment, can be measured. Currie (1995) found that85.5% of managers believe that qualitative benefitsare as important as financial ones but only 53%attempted to quantify them because of their vaguenature. Clearly, formal financial accounting termssuch as those proposed by Tuck (2000) are inade-quate since knowledge assets are hidden, not onthe balance sheets, and they seek to provide a rangeof intangible benefits (Kanter, 1999; Martinsonset al., 1999).

Within the context of mergers and acquisitions, itis important that any KM system is able to performsatisfactorily with the expansion of the organization.Also, the benefits of such a transaction are long-term,rather than short-term and any attempt to measurebenefits must ensure that a KM system has perfor-mance measures spanning both these time periods.

At present, the UK AEC sector is undergoing amajor transformation. Performance Measurementhas been given a major boost through a number

Table 4. Knowledge life cycle processes (Siemieniuch and Sinclair, 2002)

Sub-process Description

Generate Obtain new knowledge from source, e.g. research or training courses, etc.Propagate Disseminate the knowledge to other partiesTransfer Convert knowledge from one medium to another and/or one type of knowledge into

another, e.g. tacit knowledge to explicit knowledgeLocate and Access Store the knowledge in a particular medium for access by othersMaintain and Modify Ensure the knowledge is current and can be made obsolete when required



of government-promoted initiatives geared towardsimproving the performance and profitability of thesector. Thus the sector is currently amenable toinitiatives to improve performance, such as KMinitiatives and also to mechanisms for measuringperformance.

RESEARCH METHODOLOGY

A qualitative methodology was considered themost appropriate method for the research. Theuse of case studies of organizations was adoptedbecause it afforded an opportunity to explain,describe, illustrate, and explore specific aspects ofthe merger and acquisitions phenomena. Case stu-dies contribute uniquely to our knowledge of theorganization being investigated. Yin (1984) statedthat case studies allow the retention of holisticand meaningful characteristics of real-life events(such as mergers and acquisitions), within the con-text of organizational and managerial processes. Inaddition, case studies are ideally suited to explora-tory studies such as this in order to investigate theactions taken by companies and their conse-quences. Multiple-case studies, in this case three,were used to provide in-depth, unique knowledgeof the merger or acquisition phenomenon withineach of the organizations studied. Semi-structuredinterviews were used to collect data on eachorganization’s approach to their knowledge man-agement strategy. Each interview lasted approxi-mately two hours and was conducted with seniorstaff within the case study companies. Wheremore than one member of staff was responsiblefor the company’s knowledge management initia-tives, they were consulted to obtain an unbiasedview. Case study summaries were written asreports and the interviewees asked to commenton their accuracy. Additional documentation wascollected from company literature in the form ofreports and the company web site. The data wasthen analysed using content analysis. Whilst casestudies do offer advantages, there are some disad-vantages as a research methodology. These are thelack of rigour; the tendency for generalization; andvalidity (Yin, 1993; Hamel et al., 1993). The stepstaken to minimize these disadvantages arediscussed in greater detail under the section oncase study results and discussion.

CASE STUDIES

Three AEC organizations were used as case studiesto investigate their approach to developing a knowl-edge management strategy. The organizations were

AMEC plc (a construction and engineering organi-zation), WSP Group (an engineering consultant)and Galliford Try (a construction contracting orga-nization). These companies were selected accordingto:

* Topical relevance—i.e. companies selectedbecause they are known to have a particularinterest in the subject area (Yin, 1984);

* Feasibility and access—i.e. individuals werewilling to let their companies act as case studies(Yin, 1984); or

* Extreme cases—i.e. to demonstrate polar situa-tions (Eisenhardt, 1989).

The data from each organization was obtainedusing semi-structured interviews with seniorexecutives such as the Chief Knowledge Officer,the Assistant to the Group Managing Directorand the Deputy Chief Executive.

The following sub-sections will be used toprovide details of the case study. The four-partCLEVER conceptual framework will be used todiscuss the main attributes of the case study orga-nizations’ approach to knowledge management,namely the Knowledge Base, the Process-shapingFactors, the Knowledge Management Processesand Performance Measurement.

AMEC plc

AMEC plc is a leading international capital pro-jects, services and investment group with signi-ficant operations in Europe, Asia and Australiawith an annual turnover of over £3.1 billion. InApril 2000 AMEC acquired the North Americanfirm AGRA in what could be considered an Absorp-tion type of acquisition. AGRA was a professionalservices group specializing in engineering, environ-mental and technology solutions. AMEC is nowthe largest international design firm (ENR, 2000)with over 50,000 employees in more than 40countries. The case study focuses on the AGRAacquisition. A full integration process has occurredsince the merger to create one company with onevision. All the major corporate systems, such asthe Project Management, Financial and HumanResource Systems, are to be integrated on an inter-national basis through an innovative Web-basedEnterprise Resource Planning (ERP) system. Theacquisition of the American organization providesAMEC with leading-edge web-enabled capabilityand e-business.

Knowledge BaseKnowledge management within AMEC is a rela-tively new initiative that focuses on achieving a



culture of sharing, learning and best-practice disse-mination throughout the group. At present KMactivity is considered at a more advanced state inthe UK. AGRA is not known to have undertakenany formal knowledge management activity priorto the merger. However, as an integral part of thegroup, it will now play a full role in AMEC’sknowledge management initiative. AMEC is inter-ested in AGRA’s:

* Customer base;* Its relationships with clients;* Marketing expertise; and* Web-based technologies.

Most of this knowledge is tacit and is currentlybeing shared through small networks facilitatedby their Chief Knowledge Officer. It is anticipatedthat in the future this knowledge will be sharedmainly by networking, face-to-face meetings anda company intranet which hosts a personal profil-ing system and 12 communities of practice. In theUK, key individuals and specialist groups are con-sidered to be the main source of knowledge. Some‘external’ knowledge is held by joint venture part-ners and strategic alliances. The knowledge cur-rently being investigated may be characterized astacit (mainly who knows what) and rapidly chan-ging (such as lessons learnt).

Process-shaping FactorsThe new AMEC intends to be a centralized, function-based organization with a devolved organizationalculture that promotes cross-organizational teams.The main barriers to knowledge management withinthe organization are seen as follows:

* The protectionism of middle management wherethere is a climate of individual job and bonusprotection, and reluctance to co-operate; in fact,intense competition between business units. Thisis due to the earlier focus on geographical andoperational profit centres;

* The lack of a KM culture supported by a goodknowledge management system that is easy tonavigate and update;

* The low level of IT literacy at key levels withinthe organization; and

* The perceived lack of time to expend on knowl-edge management activities.

Knowledge Management ProcessesTo date, the focus has been on storing, sharing andusing knowledge. A KM system will eventually beimplemented that is expected to cover the entirelife cycle of knowledge management. No specificKM tools are currently used but it is envisaged

that a proprietary system will be built, perhapson a piecemeal basis.

AMEC recognizes that a KM system can bedelivered without IT. However, such a systemwould be inefficient and IT is seen as an enablerto increase speed, flexibility and efficiency.

Performance MeasurementThe area of performance measurement is stillunder consideration. To date, funding for the KMinitiative has been obtained through storytellingthe success of other organizations but more tangi-ble measures need to be considered for furtherfunding.

Lessons LearntThe programmed absorption of AGRA means thatthere will be a great need for knowledge transferbetween organizations. However, geographicaldistance appears to be a problem. People needface-to-face contact to build trust (Davenport andPrusak, 1998; Augier and Vendelo, 1999). This can-not be the responsibility of the Chief KnowledgeOfficer alone, as happens at the moment. To date,the main focus has been on KM within the UK busi-nesses with little leveraging of AGRA’s knowledge.The current organizational structure, based oninternal competition, does not encourage sharingbut this is may change. The use of non-IT toolsfor sharing tacit knowledge needs to be explored.There is currently an internal debate on whetherthe piecemeal KM system proposed is a viablesolution. Also, a more tangible mechanism for mea-suring KM performance needs to be implemented.

WSP Group

WSP is now one of the UK’s top consultingengineering practices with a turnover of £150 mil-lion and over 3000 employees. The group has eightUK operating companies and operations in theUSA, South Africa and Asia. It has actively pur-sued acquisitions as a mechanism for growth,completing 12 horizontal acquisitions since 1988.

WSP’s strategy is to increase their internationalbusiness in order to reduce reliance on the UKand to benefit from the globalization of the market.This growth is being done through organic meansbut mainly through acquisitions. In 2000 the groupacquired two US companies—Cantor SeinukGroup (structural engineers rated in the top threein the USA for high-rise buildings) andFlackþKurtz (a building services engineeringfirm specializing in high-rise buildings and ratedin the top five internationally for high-rise build-ings). The US acquisitions could be considered



Preservation acquisitions with each companyretaining their name and integration limited toBusiness Development and IT systems. The casestudy will focus on the two recent US acquisitions.

Knowledge BaseWSP is interested in their US acquisitions’ technicalknowledge of:

* High-rise building construction; and* the associated building services.

The knowledge is mainly of a tacit nature andrapidly changing based on technological develop-ments. In both cases, knowledge is held internally,with either individuals or groups and acquiredmainly by interacting with others. Primarily, indi-viduals or groups hold this specialist knowledgebut some is held on paper and software.

Process-shaping FactorsWSP has a dual organizational structure. It usescentralized support for common areas such asHR, Finance, Marketing, IT, etc. and a decentra-lized structure for the various operating compa-nies. A concern has been the rapid growth of theorganization in recent years and the loss of keystaff. The autonomy of the operating companies isalso a factor in that each company tends to manageprojects in isolation without input from the otheroperating companies. In the case of CSG andFþK, the organizations have a very high degreeof autonomy linked to their purchase agreementsand operate in a very narrow market that makesknowledge transfer to the wider WSP Groupmore difficult.

Knowledge Management ProcessesWSP’s intranet consisted of a skills database, alibrary service, collection of technical papers, etc.However, its use relied on personal initiative only(i.e. it was a ‘pull’ system), it was not very intelli-gent, and there was a lack of appropriate businessprocesses to encourage its use. 1WSP is the name ofa new knowledge management initiative involvingthe eight core UK operating companies. 1WSP willfocus first on implementing business processes asthe precursor to improving knowledge manage-ment within the organization. The improved pro-cesses are expected to change the current culturewithin the organization. The immediate focus willbe on obtaining and sharing knowledge. Even-tually, maintaining and modifying knowledgewill gain importance. A number of problemswere identified at different phases of KM. Theseincluded:

* A lack of business processes;* A culture against sharing in a rapidly expanding

organization;* Too many sources and ways of acquiring knowl-

edge; and* A perceived lack of affordable technology, etc.

Performance MeasurementWSP does not currently use any performance mea-sures but believes that performance measurementshould be directly linked to their three existingmeasures:

(1) Client satisfaction (service improvement);(2) Staff satisfaction (whether the KM system

provides satisfactory help); and(3) Shareholder satisfaction.

There is agreement that the measures used couldalso include quality of knowledge (will dependon type of knowledge, i.e. business or technical),use of knowledge (monitored by the system),impact in terms of business performance and pro-ject performance and efficiency of KM processes.

Lessons LearntWSP considers itself as an integrated group. How-ever, the two US acquisitions operate in such a nar-row, specialized market that sharing technicalknowledge with the rest of the WSP Group maynot be realistic. Additionally, the level of autonomyposes a challenge for a corporate-wide KM system.It may be more sensible to address KM withinoperational units rather that at corporate level. Itis laudable that WSP recognizes that they must firstaddress their internal processes before implement-ing technology solutions for their knowledge man-agement problem. It is also encouraging that theyrecognize the need to measure the effectiveness ofKM initiatives.

Galliford Try Group

Galliford and Try merged in September 2000 toform Galliford Try. Both organizations were med-ium-sized UK companies providing constructionservices and house building in specific geographi-cal regions. The combined company has a turnoverof £452 million and approximately 1750 employees.The merger could be considered as Symbiotic andis expected to produce growth, cost savings andsynergy. Each business unit will maintain itsexisting autonomy because they operate in specific,complementary geographical regions. Some corefunctions are being integrated to provide anenhanced service. These functions are Marketing



and Sales, IT support, Purchasing, HumanResources, Accounting, Safety and membership ofBest Practice clubs.

Knowledge BaseGalliford and Try were primarily interested inusing the merger to increase geographical coverage(and therefore a wider client base) rather thanacquiring each other’s knowledge base or technicalskills. However, Galliford was interested in Try’sexpertise in:

* Commercial buildings in London; and* Housing on brownfield sites.

Correspondingly, Try was interested in Galliford’s:

* Work on the Environment standards (ISO 14001);and

* Expertise in Partnering types of contracts.

Both companies were also concerned with thesharing of best practice and product knowledge.The knowledge required could best be character-ized as explicit and slow changing. This knowledgeis held by groups of people both internally andexternally. A large proportion of knowledge isheld externally because of the reliance on sub-contractors (typically 70-80% work) to completehousing projects.

Process-shaping FactorsThe merger has not had a significant impact at anoperational level and the emphasis has been oncontinuity. Galliford had a decentralized, func-tion-based structure, whilst Try had a morecentralized, function-based structure. The newcompany wishes to move towards a decentralized,project-based structure to provide a better serviceto its clients.

Knowledge Management ProcessesGalliford Try’s focus has been on obtaining newknowledge and embedding them in its businessand technical processes. New knowledge isobtained through involvement in a number ofnational Best Practice initiatives. This new knowl-edge was then disseminated throughout the com-pany by a number of means, mainly paper-based.The company is about to implement a managementinformation system (MIS) that will be intranet-based for the purpose of disseminating explicitknowledge (e.g. accounting information, drawingregisters, document management system, etc.).This will be supplemented with monthly digestsand a biennial company newspaper. The mainproblem faced by the organization is the effectivedissemination of knowledge. The onus was on

individuals to source knowledge of previousprojects. The main problem causes were seen as:

* A lack of a proper system; and* The culture of staff, i.e. staff are interested in

obtaining new knowledge but do not see theinternal knowledge base as the primary source.

Performance MeasurementGalliford Try does not measure the performance ofany of its knowledge management processes at themoment. The view is that knowledge managementshould not be measured in isolation. Its perfor-mance should be linked to other company perfor-mance indicators, namely its Customers’,Employees’ and the Supply Chain’s satisfactionand Egan’s Key Performance Indicators (Egan,1998). These indicators, when investigated in detail,will determine whether knowledge is being mana-ged efficiently. The key issues to address will be theaccessibility of knowledge and ensuring that staffare able to add value once the knowledge isobtained.

Lessons LearntAt the moment, the knowledge held in theorganizations is not being exploited because bothcompanies continue to operate in an autonomousfashion. This may change as organizationalchanges take effect to reduce duplication. Mergingthe two companies may introduce cultural pro-blems based on their opposing structures. GallifordTry recognizes (and is content to address) only partof the KM life cycle. Its new MIS will only deliverexplicit knowledge but that is the main focus oftheir business. It is significant that Galliford Try’srecognizes the need for measuring the effectivenessof their KM processes.

DISCUSSION

The case study organizations are at different levelsof maturity in terms of KM. The differentapproaches adopted will be discussed in terms ofthe CLEVER conceptual framework and how KMshould be approached in light of the observationsmade.

Knowledge Base

The Knowledge Base is that body of knowledgethat the acquiring company wishes to gain fromthe acquired company for competitive advantage.Knowledge cannot be managed unless organiza-tions have a true understanding of the knowledge



needs of individuals and teams within the com-bined organization. The interviewees all hadsome idea of the type and characteristics of theknowledge that needs to be managed. However,this was from a corporate viewpoint and specificsources and users of knowledge were not identi-fied. This may be because the interviewees’ senior-ity meant that they were more concerned withstrategic issues. However, it does emphasize theimportance of understanding the knowledge needsat an operational level. This sort of knowledge basecan only be managed at individual business unitlevel rather than at a corporate level by identifyingspecific knowledge management problems withinbusiness units.

Process-shaping Factors

The Process-shaping Factors are those internal andexternal factors that impact on the manner in whichknowledge is managed within the organization.The specific factors considered were the organiza-tional structure, the organizational culture andthe team boundaries. One company aimed for anintegrated organization with all its acquisitionsbut the remaining two companies allowed a largedegree of autonomy. The latter meant that knowl-edge was only managed at a high level for coresystems such as HR, Finance, Marketing and IT.Technical knowledge, however, remains thedomain of the individual operating units.

The three companies all agreed on a devolvedorganizational culture but all three companiesidentified cultural issues as a major barrier forknowledge management. There was an unwilling-ness to share knowledge for a number of reasonsincluding:

* Knowledge is power;* Lack of time was highlighted;* Difficulty in validating knowledge; and* Lack of a recognized, easy-to-navigate and

maintain IT system to support knowledgemanagement.

The case studies revealed that little effort was beingspent on addressing cultural issues as part of theKM initiative. Egbu (2000) outlined factors thateither promoted or inhibited knowledge sharingin construction organizations and emphasizedthat KM cannot take place effectively withoutextensive behavioural, cultural and organizationalchange. Bourdreau and Couillard (1999) proposedthe use of new organizational structures, designedaround teamwork, self-managed teams, and over-lapping responsibilities to facilitate knowledgesharing and development. This is particularly

important when, as in the case of AMEC, the fullassimilation of another company is planned.

There was no agreement on the team boundariesto be adopted (these were organizational, cross-organizational and function-based) and howknowledge may be transferred between teams,based on these boundaries. Therefore there is aneed to initiate mechanisms for disseminatinglessons learnt between teams, whatever theirboundaries.

Knowledge Management Processes

Knowledge Management Processes are concernedwith the KM life cycle and the tools to facilitatethese. The life cycle includes the creation, location,capture, sharing and use of knowledge (Tiwana,2000). The focus to date has been very much onthe sharing of explicit knowledge using companyintranets. The three companies all plan to imple-ment IT systems to deliver a KM solution. AMECand WSP would like to implement KM Systemsthat cover a number of KM processes whereasGalliford Try plans to use a company intranet forsharing knowledge only.

Zack (1999) and Tiwana (2000) both agree thatwhilst IT systems are capable of managing explicitknowledge, it can do little to support the manage-ment of tacit knowledge as required by AMEC andWSP. Instead, such organizations are advised toconcentrate on encouraging staff to interact repeat-edly over time to disseminate tacit knowledge.

Performance Measurement

It is important to evaluate whether any KMinitiative implemented is effective, good value formoney and has an impact on business perfor-mance. None of the three case study companiesare at a sufficiently advanced stage of KM develop-ment to implement performance measurement.Both WSP and Galliford Try hoped to link perfor-mance measurement to their company-wide mea-sure for stakeholders’ satisfaction. However, itwas unclear how performance in these categoriescould be directly attributed to KM initiatives.Clearly an effective KM system should supportthe company’s performance indicators but it isdifficult to isolate the specific contributions of KMto these indicators.

Proposed KM Performance IndicatorsA number of authors have proposed adaptingKaplan and Norton’s (1992) Balanced Scorecard forKM performance measurement (Martinson et al.,1999; Tiwana, 2000; de Gooijer, 2000). However,



the Balanced Scorecard is better known, particularlyin the USA, for assisting in strategy formulationrather than as a measurement tool. In Europe,many organizations are implementing the EuropeanFoundation for Quality Management (EFQM) Excel-lence Model (EFQM, 2002) as a mechanism forassessing company performance on a broad rangeof criteria. For this reason, the use of the ExcellenceModel may be better suited because of its strengthsin performance measurement, rather than theBalanced Scorecard, which requires adapting bothfor KM and as a measurement tool. Those organiza-tions interested in measuring performance againststakeholder satisfaction will find this fits comforta-bly under the Excellence Model’s ‘Results Criteria’,namely People Results, Customer Results and KeyPerformance Results. Thus, the high-level goals ofa KM strategy can be broken down into more task-specific objectives and assessed for effectiveness bythe stakeholders in conjunction with the overallfinancial results.

CONCLUSIONS

This paper investigated how AEC were adaptingtheir KM initiatives to cope with mergers andacquisitions. It introduced the CLEVER conceptualframework as a mechanism for studying KMinitiatives in organizations. The CLEVER concep-tual framework investigates the company’s Knowl-edge Base (the specific knowledge the company isinterested in managing across organizations); theProcess-shaping Factors (the organizational envir-onment as it affects knowledge management); theKnowledge Management Processes (the varioussub-processes involved in the management ofknowledge and affiliated tools); and PerformanceMeasurement (mechanisms for analysing the bene-fit of the KM programme). Three case studies wereundertaken to investigate the different approachesadopted for Knowledge Management strategieswith AEC organizations involved in mergers andacquisitions.

The paper found that the case study companieswere embarking on a number of mechanismsfor enhancing the management of knowledgewithin the organization. However, the followingobservations and recommendations are made:

(1) Organizations were not sufficiently aware oftheir knowledge bases because specificknowledge management problems had not yetbeen identified. This is best addressed at anoperational unit level rather than at a corporatelevel;

(2) Organizational culture and the ability to dis-seminate lessons learnt between teams will playa major role in the success of any KM initiatives.Organizations should therefore examine mech-anisms for promoting a culture that encouragesmanaging knowledge. This is with an emphasison developing employee trust during the deli-cate period merger and acquisition activity;

(3) There was a strong focus on sharing knowledgeusing electronic means. Little attention waspaid to other aspects of the KM life cycle andto the use non-IT tools. Companies thereforeneed to realize that KM is about processes andnot just the provision of an intranet; and

(4) Whilst organizations are keen to measure theeffectiveness of KM initiatives, little has beendone in this area. The Excellence Model wasrecommended as a potential measurement tool.The KnowBiz (Knowledge Management forImproved Business Performance) project atLoughborough University (Robinson et al.,2001) is currently addressing this.

Based on anecdotal evidence, mergers and acquisi-tions in the AEC sector is not that unique comparedto other sectors. Its end products may be uniquebut the aspects of design and construction pro-cesses are generic. In the UK, there has been amajor push to encourage the sector to realize thatit encompasses aspects of both the manufacturingand service sectors and thus some processes arerepeatable. Therefore, the findings of this researchmay be equally relevant to other industrial sectors.

REFERENCES

Abdolmohammadi MJ, Greenlay L, Poole DV. 2000.Accounting methods for measuring intellectual capital.Accessed on 8 January 2000. Found at www.round.table.com/scholars/articles/acctg-intellectual-capital.htmland

Anumba CJ, Bloomfield D, Faraj I, Jarvis P. 2000. Mana-ging Your Knowledge Assets: Knowledge Based DecisionSupport Techniques for the Construction Industry. BR 382,Construction Research Communications Ltd.

Anumba CJ, Carrillo PM, Backhouse CJ, Brookes NM,Sinclair MA. 2001. Cross sectoral learning in the virtualenvironment. EPSRC Final Report, LoughboroughUniversity.

Augier M, Vendelo MT. 1999. Networks, cognition andmanagement of tacit knowledge. Journal of KnowledgeManagement 3(4): 252–271.

Ball M. 1988. Rebuilding Construction: Economic Changeand the British Construction Industry. Routledge: London.

Bengtsson A. 1992. Managing Mergers and Acquisitions: AEuropean Perspective. Gower: Aldershot.

Bourdreau A, Couillard G. 1999. Systems integration andknowledge management. Information Systems Manage-ment Fall: 24–32.



Carrillo PM. 1998. Mergers and acquisitions: the impactof information systems and information technology.Engineering, Construction and Architectural Management5(3): 276–284.

Carrillo PM, Anumba CJ, Kamara JM. 2000. KnowledgeManagement strategy for construction: key I.T. andcontextual issues. Proceedings of Construction Informa-tion Technology (CIT 2000), Gudnason G (ed.), 28–30June, Reykjavik, Iceland, 1: 155–165.

Currie W. 1995. Management Strategy for IT—An Interna-tional Perspective. Pitman Publishing: London.

Davenport T, Prusak L. 1998. Working Knowledge: HowOrganizations Manage What They Know. Harvard Busi-ness School Press: Boston, MA.

de Gooijer J. 2000. Designing a knowledge managementperformance framework. Journal of Knowledge Manage-ment 4(4): 303–310.

Drew S. 1999. Building knowledge management intostrategy: making sense of a new perspective. LongRange Planning 32(1): 130–136.

EFQM. 2002. At http://www.efqm.org (last viewed 10April 2002).

Egan J. 1998. Rethinking Construction. HMSO: London.Egbu C. 2000. Knowledge management in construction

SMEs: coping with the issues of structure, culture,commitment and motivation. Proceedings of the 16thAnnual ARCOM Conference. 6–8 September 2000,Glasgow Caledonian University, Scotland 1: 83–90.

Egbu C, Botterill K, Bates M. 2001. The influence ofknowledge management and intellectual capital onorganizational innovations. Proceedings of the 17thAnnual ARCOM Conference. 5–7 September 2001,University of Salford, UK, 2: 547–555.

Eisenhardt KM. 1989. Building theories from case studyresearch. Academy of Management Review 14(4): 532–550.

ENR. 2000. The top 200 international design firms.Engineering News Record 17 July: 68.

EPSRC. 2001. Research landscape 2001/2002. EPSRC.Fellows RD, Langford D, Newcombe R, Urry S. 1983.

Construction Management in Practice. ConstructionPress: London.

Fernie S, Weller S, Greene S, Newcombe R, Williams M.2001. Learnig across Business sectors: context,embeddedness and conceptual chasms. Proceedings ofthe 17th Annual ARCOM Conference. 5–7 September2001, University of Salford, UK, 2: 557–565.

Friedman W. 1984. Construction Marketing and StrategicPlanning. McGraw-Hill: New York.

Hamel J, Dufour S, Fortin D. 1993. Case Study Methods.Sage: Beverly Hills, CA.

Haspelagh P, Jemmison D. 1991. Managing Acquisitions.The Free Press: New York.

Kamara JM, Anumba CJ, Carrillo PM. 2001. Knowledgemanagement in a multi-project environment in con-struction. Proceedings of the First International StructuralEngineering and Construction Conference (ISEC-01). 24–26January, Hawaii.

Kanter J. 1999. Knowledge management, practicallyspeaking. Information Systems Management Fall: 7–15.

Kaplan R, Norton D. 1992. The Balanced Scorecard.Harvard Business School Press: Boston, MA.

Kazi AS, Hannus M, Charoenngam C. 1999. An explora-tion of knowledge management for construction.Proceedings of the 2nd International Conference on Concur-

rent Engineering in Construction, Hannus M et al. (eds).CIB Publication 236, Espoo, Finland, 25–27 August,247–256.

Martinsons M, Davison R, Tse D. 1999. The balancedscorecard: a foundation for the strategic managementof information systems. Decision Support Systems 25:71–88.

Moodley K, Preece C, Kyprianou R. 2001. An examina-tion of knowledge management implementationwithin civil engineering consulting organizations.Proceedings of the 17th Annual ARCOM Conference,University of Salford, UK, 5–7 September, 587–596.

Patel MB, McCarthy TJ, Morris PWG, Elhag TMS. 2000.The role of IT in capturing and managing knowledgefor organizational learning on construction projects.Proceedings of Construction Information Technology(CIT 2000), Gudnason G (ed.) 2: 674–685.

Preece C, Moodley K, Hyde J. 2000. Knowledge manage-ment strategies to inprove construction business devel-opment processes: a preliminary study. Proceedings ofthe 16th Annual ARCOM Conference, University ofGlasgow 1: 325–335.

Robinson HS, Carrillo PM, Anumba CJ, Al-Ghassani AM.2001. Perceptions and barriers in implementing knowl-edge management strategies in large constructionorganizations. Proceedings of the RICS FoundationConstruction and Building Research Conference, Kelly J,Hunter K (eds). Glasgow Caledonian University, UK,3–4 September, 451–460.

Ruggles R. 1997. Knowledge Management Tools. Butter-worth-Heinemann: Oxford.

Scarborough H, Swan J. 1999. Case Studies in KnowledgeManagement. Institute of Personnel Development:London.

Schriener J, Angelo WJ. 1995. Big firms are getting biggeron the bones of the small. ENR 23 October: 26–29.

Siemieniuch CE, Sinclair MA. 2002. Aspects of knowl-edge life-cycle management in manufacturing indus-try, and their implications for organizationalconfigurations. International Journal of Human–ComputerStudies (forthcoming).

Stewart R, Wingate P, Smith R. 1963. The Impact ofMergers. The Acton Society Trust: London.

Stewart TA. 1997. Intellectual Capital: The New Wealth ofOrganizations Doubleday: New York.

Storey J, Barnett E. 2000. Knowledge managementinitiatives: learning from failure. Journal of KnowledgeManagement 4(2): 145–156.

Tiwana A. 2000. The Knowledge Management Toolkit.Prentice Hall: Englewood Cliff, NJ.

Tuck J. 2000. Why KM is today’s business imperative.Journal of Knowledge Management April: 8.

Webb SP. 1998. Knowledge Management: Linchpin ofChange. The Association for Information Management(ASLIB): London.

Wiig KM. 1997. Integrating intellectual capital andknowledge management. Long Range Planning 30(3):399–405.

Yin RK. 1984. Case Study Research—Design and Methods.Sage: Beverly Hills, CA.

Yin RK. 1993. Applications of Case Study Research. Sage:Beverly Hills, CA.

Zack MH. 1999. Developing a knowledge strategy. Cali-fornia Management Review 4(3): Spring, 125–145.



knowledge management in the aec sector: an exploration of the mergers and acquisitions context

Documents