Impact of Interpersonal Skills and Capabilities of Leadership on Knowledge Based Organizations


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The role of leadership in the success of any organization is very much important. Although in Pakistan very little importance is given to this aspect of organizations inspite of this its importance cannot be denied. In other words, Leadership is the backbone of any knowledge centric organization. This research article shed light on the importance of effective leadership skills and practices which can lead any organization to its golden era. The main focus of the study is the changing nature of leadership with the evolution in the meaning of knowledge based organizations. The study is descriptive in nature and relies on secondary as well as questionnaire based survey.


Knowledge based organizations are usually considered to be those whose products or services are knowledge -intensive. Knowledge based organizations (also referred as knowledge-enabled or knowledge- intensive organization) are usually described in terms of the knowledge intensity of their product or service. The greater the degree to which knowledge forms the core of the product or service, the more knowledge- based the organization. However, using products or services as a mean for categorizing the knowledge – based organization is inadequate. Products or services reflect only the tangible part of the organization. The primary resource that enables an organization to produce is hidden within the “invisible asset – intellectual capital”. (Itami, 1987).

Knowledge- based organizations (KBOs) lives and breathes knowledge. From day–to-day operations to long-term strategy, creating and applying knowledge is always in the forefront. Prior researches have explored which factors are essential for managing knowledge effectively. Most studies of them have examined the relationship of knowledge management capabilities, processes and performance. Some researchers have focused on the relationship between capabilities and processes (Hansen, 1999; Szulanski, 1996; Zander & Kogut, 1995). Other studies have focused on the relationship between capabilities and organizational performance (Becerra- Fernandez & Sabherwal, 2001; Gold, Malhotra & Segars, 2001; Simonin, 1997).

A key to understanding the success and failure of knowledge management within the organization is the identification and assessment of various factors that are necessary for the knowledge management performance measurement with a balanced view (Arora, 2002; Gooijer, 2000).

In this study, we examine the relationship among the interpersonal skills and capabilities towards the knowledge-based organizations. To serve this purpose we figure out the core constructs of interpersonal skills and capabilities. Knowledge based organization base their competitiveness on knowledge .Interpersonal skills and capabilities can be critical for the knowledge based organization. Skills are linked with personal knowledge management in knowledge focused organization. Skills can be either basic or cross functional. In basic skills we develop capabilities that assist in the learning of knowledge on the other hand cross functional skills are the ability to carry out the tasks the can help the organization to boost up.

Interpersonal skills involve not only how we communicate with others. Aside our confidence and capability to listen and understand, problem solving decision making and personal stress management all these are related to the interpersonal skills and capabilities. Interpersonal skills and capabilities allow dealing effectively with persons of different temperaments, backgrounds and educational qualification in the organization. Knowledge leadership has a capability to built good relation with subordinates and dealing with them. An organization is successful when it posses good team capabilities and interpersonal skills.

People create and share knowledge therefore, managing people who are willing to create and share knowledge is important. Knowledge and competence can be acquired by hiring new people with desirable skills. In particular, T-shape skills embodied in employees are most often associated with core capability. T-shaped skills may enable individual specialists to have synergistic conversations with one another (Madhaven & Grover, 1980).

Although a company’s value is generated by intangible assets like knowledge or brands. Performance measurement is one of the most important management activities. Performance measurement becomes the basis of strategy establishment and achievement in the future because it can definitely bring a company’s vision and strategic target to all organization members.

3 Objectives of Study

➢ The objective of our study is to examine the relationship among the interpersonal skills, capabilities and performance of knowledge-based organizations.

➢ To develop the results that the primary resources that enables the organization to perform extraordinary lies within “intangible assets (intellectual capital)”.

4 Significance of Study

Now intangible assets such as knowledge rather than tangible financial assets are a measure of a company’s value. Knowledge is the one of the important resource that increases the value of organizations and gives them an edge over competitors. Therefore various attempts to measure organizational performance in knowledge management have been conducted accordingly.

5 Problem Statement

Interpersonal skills and capabilities of leadership have a strong impact on the performance of knowledge based organizations.

6 Rational of Study

With the shift of industrial economy to knowledge economy there is a need to recognize the value of preserving and sharing knowledge among the organizational communities. This includes the development of strategic knowledge focus, knowledge leadership factors which promote knowledge culture and its impacts on knowledge workers and outcomes of the organization.


Organizational theorists have defined knowledge based organizations (KBO) in various ways. Knowledge based organizations (Perez- Bustamante, 1999) are organizations applying a knowledge based approach to the organization. This approach perceives organizations as a means for the development, integration, preservation, sharing and application of knowledge. (Wu, Ong & Hsu, 2008) add that knowledge based organizations allocate resources to intangible assets in the rapidly changing and highly competitive business environment in order to gain competitive advantage. Gold, Malhotra, & Segars (2001) examined an empirically effective knowledge management model from the perspective of organizational capabilities. Sveiby (1997) developed an intangible asset monitor (IAM) to measure the performance of intangible assets such as human capital, structural capital, and market capital. Based on the analysis of secondary data (Nonaka & Takeuchi, 1995; Choo, 1998; Trunecek, 2003; Bartak, 2006; Calabrese, 2006; Bures, 2007; Medzihorsky & Medzihorska, 2007; Sladecek, 2007) by mean of the method of comparison, the following general characteristics of knowledge based organization were identified.

|Knowledge Based Organizations | |Creates, integrates, preserves, shares and applies knowledge; | |Is efficient, innovative, flexible and proactive; | |Is customer focused;
| |Uses ITs; | |Has a strong and open corporate culture; | |Implements knowledge processes; | |Exploits knowledge resources; | |Manage risks; | |Implements project management; | |Places emphasis on education and organizational learning; | |Disposes of knowledge employees; | |Is process- oriented | |Supports team work; | |Encourages participation in management |

(Martina, Hana & Jiri, 2012)

1 Capability (Competency- Based Approach)

“Competency” is a commonly used term for people asserting of their working potential in real activities. The first characterizes competencies as a power and a scope of authority associated with a certain person or body. The second meaning of competencies refers to the capacity, i.e. abilities to perform a certain activity, to have certain general and specific characteristics and skills, to be qualified in the given area. Generally it can be said that it is a set of specific knowledge, abilities, skills, traits, motives, attitudes and values essential for the personal development and successful participation of each person in the organization.

This refers to the performance aspect of a competency determined by the level of inputs (knowledge, abilities, skills, traits, motives, attitudes and values) and measured by the analysis of output (real behavior and results). According to its development, it is possible to divide competencies into three main development phrases. The first phrase consists of individual competencies (White, 1959; McClelland, 1973; Boyatziz, 1982; Schroder, 1989; Woodruffe, 1992; Spencer & Spencer, 1993; Carroll & McCrackin, 1997). The second phase is based on the possibility of managing competencies in an organization by mean of competency models (Mensfield, 1996; mcLagan, 1997; Lucia & Lepsinger, 1999; Rothwell & Lindholm, 1999). The third phase is the identification of core competencies, a sum of organization key organizational competencies that may be exploited to gain competitive advantage (Prahalad & Hamel, 1990; Ulrich & Lake, 1991; Gallon, Stillman, & Coates, 1995; Coyne, Hall, & Clifford, 1997; Rothwell & Lindholm, 1999; Delamare & Wintertone, 2005).

2 Interpersonal Skills

Studies say 90 percent of executive failures are attributable to interpersonal competencies, factors such as leading teams, developing a positive work environment, retaining staff, inspiring trust, and coping with change. If you lack the skills to motivate your frontline employees to accept and optimally use new information technologies, your organization could be missing revenue opportunities. This category grows out of what previous research has referred to as interpersonal skills involve social perceptiveness (Graham, 1983; Mintzberg, 1973; Yukl, 1989) to allow for an awareness of other’s reactions and understanding of why they react the way they do. The interpersonal skill requirement also includes the skills required for coordination of actions of oneself and others (Gillen & Carroll, 1985; Mumford, Marks, Connelly, Zaccaro, & Reiter-Palmon, 2000) and negotiations skills to reconcile differences among employee perspective and establish mutually satisfying relationships (Copeman, 1971; Mahoney, Jerdee, & Carroll, 1963; Mahoney et al., 1965; Mintzberg, 1973), and persuasion skills to influence others to more effectively accomplish organizational objectives (Katz, 1974; mintzberg, 1973; Yukl, 1989).


1 Data Collection and Sample Description

Samples were restricted to the companies that adopted knowledge management or held similar process innovation campaigns. The sample was designed to include people from different position, departments and industries. Respondents include executive rank managers of various organizations.

In this study, we conducted a questionnaire based survey. The questionnaire’s data is arranged in terms of various variables and five-point Likert scales are used. Respondents are asked to indicate the extent to which they disagree or agree with the given statement by selecting a point on the scales for each question. (Where 1= strongly agree and 5= strongly disagree).

2 Survey Instrument

This research uses a survey questionnaire to test the hypothesis. The questionnaire consists of 26 items about leadership skills, practices and the performance of knowledge based organizations. Items about leadership skills consist of cognitive skills (four items), interpersonal skills (three items), and strategic skills (two items).

Leadership practices consist of leading by example (two items), coaching (six items), team interaction (three items). Knowledge based organizations performance is assessed using three items including: organizations products (two items), employees performance (two items), and organization reputation in the market (two items).

3 Theoretical Framework

The dependent variable is knowledge centric organizations performance, which is the variable of primary interest. We attempt to explain the variance in this dependent variable by the two independent variables of (1) Leadership skills and (2) Leadership practices. By General Colin Powell’s: “Leadership is the art of routinely accomplishing more than the science of management says is possible”. Interpersonal skills are “Considers and responds appropriately to the needs, feelings and capabilities of different people in different situations, is tactful, compassionate and sensitive, and treats with respect”.



5 Hypothesis

Ho= Leadership does not affects knowledge based organization’s performance.

Ho: p = 0

HA= Leadership affects knowledge based organization’s performance.

HA: p >1


|Variables |Mean |S.D |N |Cronbach’s alpha | |Independent variables | |Cognitive skills |1.64 |0.7795 |100 |.564 | |Interpersonal skills |1.53 |0.6276 |100 |.371 | |Strategic skills |1.60 |0.7695 |100 |.289 | |Leading by example |1.72 |0.828 |100 |.682 | |Coaching |1.62 |0.7848 |100 |.781 | |Team
interaction |1.80 |0.904 |100 |.784 | |Dependent variables | |Organization’s performance |1.85 |0.8027 |100 |.562 | |Organization’s offerings |1.96 |0.8795 |100 |.676 |

The leadership skills requirement means range from 1.53 to 1.64 and the S.D ranges from .6276 to .7795, showing a good range and variation. The leadership practices means range from 1.62 to 1.80 and the S.D ranges from .7848 to .904, while organization’s performance mean valued at 1.85 and S.D .8027 and organization’s offerings mean calculated 1.96 and S.D .8795.

The correlation between


This research proposes and tests a model of leadership skills and practices to better understand the contribution of leadership towards the performance of knowledge centric organizations. The main objective of this research is to investigate the relationship between the leadership skills, practices and KBO’s performance. The findings show how leadership improves the performance of knowledge centric organizations.

A knowledge organization focuses on developing interpersonal, structural and network relationships to achieve its goals and objectives effectively and to further generate new knowledge and capabilities for organizational competitiveness and success.

Several aspects of the leadership skills were tested, most of which attained empirical support. The major findings are as follow. First, leadership skills grouped into three- parts complex: cognitive, interpersonal and strategic skills. Second, leadership skills were related to organizationallevels. That is, jobs at higher level in the organization have significantly greater overall leadership skill requirement.

These findings have important implications for organizational research and practice. They provide empirical evidence of the usefulness of considering different categories of leadership skills. Practically, this indicates that careful attention should be given to management development systems because as managers proceed from lower, to mid, to top level jobs, the rate at which they acquire strategic skills will need to be faster than that for leadership skills in general.

Our results imply that effective leadership skills and practices positively impacts key aspects of KBO’s performance. We hope that future research will take advantage of the conceptual and practical findings and further test the model in the other organizations and improve management development, placement and hiring system in knowledge centric organizations.

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