Resource Rings:

An Integral Part of the South Carolina Department of Revenueís Knowledge Management

By Rick Handel

Introduction

The South Carolina Department of Revenue (Department) has joined the many multi-national corporations who are taking knowledge management seriously. The Department and these companies recognize knowledge as an important asset which can and should be created, disseminated and managed. This paper will first briefly describe knowledge management and its goals and methods. Second, it will provide a short explanation and description of the Departmentís Resource Rings. Finally, it will describe how the Resource Rings strengthen the Departmentís knowledge management.

A Brief Overview of Knowledge Management?

This overview is a summary of a 1998 IBM sponsored study by Michael Earl and Ian Scott of the London Business School.

Definition of Knowledge Management

Knowledge management has been defined as:

"The capability of a company to create new knowledge, disseminate it throughout the organization and embody it in products, services and systems."
Nonaka, I. and H. Takeuchi (1995) The Knowledge Creating Company, Oxford University Press.
Knowledge management is an oxymoron ó "it is not a Ďthingí which can be managed; it is a capacity of people and communities continuously generated and renewed in their conversations to meet challenges and opportunities." This view holds that the environment in which knowledge workers create and share knowledge can be managed and that therefore it should be called knowledge ecology or ecosystem management because these descriptions are more accurate than knowledge management.
Skyrme, D.J. (1997) "Knowledge Management: Oxymoron or Dynamic Due?" Managing Information, Vol. 4. No. 7

Whether called knowledge management or knowledge ecology management is less important than what it is and what is done in its name. It is about creating, or increasing, knowledge; maintaining, or not losing, knowledge; disseminating, or sharing, knowledge; and having useful knowledge in the hands of those who can use it. It is creating and maximizing value from the optimal deployment of a human resource, intellectual capital.

As a public agency, the Department does not have to be concerned with keeping trade secrets from its competitors. Therefore all of its employees and customers can benefit from each otherís increase, dissemination, and use of knowledge.

 

Knowledge Management Theory

Knowledge. Knowledge includes, but is more than, information or data. Knowledge includes expertise, know-how, skills, competencies, and judgment. How both individuals and organizations learn is critical to any form of knowledge. Earl and Scott conclude that humans are "information processors," and that much data collection is by observation; much reading into information is judgment; and that much ongoing knowledge accumulation is through experience.

Knowledge includes both "explicit" and "tacit" knowledge. Explicit knowledge is what is generally thought of as knowledge. It can be expressed in words and numbers. It can be communicated and shared in a classroom setting and in writing. A computer system can store it and, to some extent, deduce new information from it. Explicit knowledge is articulated knowledge.

Tacit knowledge is personal, context specific and hard to formalize. It is difficult to share. It is unwritten. It is internal to individuals and teams. It includes subjective insights, intuitions, and hunches. It is deeply rooted in an individualís experience, and his or her ideals, values and emotions. Tacit knowledge is unarticulated knowledge.

Without realizing it, it is easy for management to emphasize explicit knowledge at the expense of tacit knowledge.

Complementary to explicit and tacit knowledge are planned ignorance and innocent ignorance. Planned ignorance is what you know that you donít know. Innocent ignorance is what you donít know that you donít know.

 

Immediate Goals and the Objectives of Knowledge Management

Immediate Goals

The immediate goals of knowledge management are:

1. Protection (or avoidance of loss) of an organizationís knowledge;
2. Leveraging (or maximizing use of) an organizationís knowledge; and
3. Creating (or generating and improving) an organizationís knowledge.

Objectives

Recognizing that knowledge must be used to produce value, the objectives of knowledge management system become:

1. To improve and redesign knowledge based business and management processes;
2. To improve and develop knowledge based products and services; and
3. To improve decision making, particularly by making it adaptive and responsive to the needs at any moment.

 

Knowledge Management Techniques

A knowledge management technique for each type of knowledge and ignorance has been developed. They are:

1. Inventorying for explicit knowledge ó Identifying what individuals and organizations know so that at least someone in the organization knows where or to whom to go for knowledge. This identification is important for the use and dissemination of explicit knowledge. Formal classroom training and development activities, including on the job training and supervision can be used to disseminate explicit knowledge.
2. Auditing for planned ignorance ó Identifying what people think they should know but donít know. Here surveys, audits or assessments of knowledge, skills or competence gaps can be used. Formal classroom training and development activities, including on the job training and supervision can be used to eliminate planned ignorance.
3. Socializing for tacit knowledge ó If tacit knowledge is unarticulated so that it is not necessarily "known" or recognized by its owners, how do you manage it? Earl and Scott explain that tacit knowledge is drawn out, explicated and shared by social processes, such as meetings, chance conversations or gossip. Thus, knowledge management becomes a matter of facilitating socializing through creating events, enabling people to meet, and even improving peopleís ability to converse.
4. Experiencing for innocent ignorance ó Earl and Scott state that innocent ignorance can be remedied through surprise encounters with problems, with observation, or with people. Often this is learning from experience ó from doing new things, from visiting to new places, or from handling unusual situations. So management in this domain involves creating experiences for individuals and teams.

Knowledge Management Actions

The theory of knowledge management suggests investment in the following activities:

1. Designing and implementing techniques to identify and record both knowledge and ignorance (e.g. inventorying and auditing) and then designing processes to share, use and protect such knowledge and to remedy ignorance by learning or knowledge creation.
2. Designing and orchestrating contexts, environments and activities to discover and release what is not formally or explicitly known (e.g. socializing and experiencing) and perhaps coaching and encouraging people to be effective in these processes.
3. Articulating and communicating the purpose and nature of knowledge management and connecting it to other strategic and operational initiatives and activities of the organization.

 

Resource Rings

Resource rings are technologically enhanced communication circles where tax experts and experts-in-training work together solving tax problems. The ring serves as a knowledge resource for the Department and all its employees. The rings create, share and allow employees to efficiently use explicit and tacit knowledge. This knowledge, in turn, supplements the Departmentís other knowledge management enterprises.

There are five separate resource rings, each organized around types of taxes. They are sales and use taxes, business income taxes, individual income taxes, property taxes, and miscellaneous taxes.

Functions of the Resource Rings

These rings provide the following services for the Department:

  • Efficiently answer technical tax questions which do not need formal policy interpretations ("Policy Documents") for Department staff, taxpayers and their representatives, other states, The Federation of Tax Administrators, The Multistate Tax Commission, tax publishing companies, etc.
  • Answer technical tax questionnaires received by the Department.
  • Develop tax experts by providing training and supervision to the associates who are part of the resource ring, and by permitting all employees to follow the questions, discussions and conclusions of the ring.
  • Provide technical tax training for Department staff, taxpayers and taxpayer representatives by regularly updating files of frequently asked questions (FAQs) which are made available in print and to the Department employees and the public on the Departmentís web site.
  • Provide a well trained resource to assist the Department in giving speeches, providing classroom and on the job training, and writing technical tax publications and training materials.
  • Recommend subjects for Policy Documents to assist taxpayers and the administration of tax law.
  • Recommend legislation to clarify and simplify statutes thereby making it easier and less expensive for taxpayers to comply with them and for the Department and local governments to administer them.
  • Serve as a resource for the team which oversees the Departmentís correct and consistent implementation of newly enacted legislation.
  • Provide an efficient and accurate way to determine if a matter is being consistently interpreted by the Departmentís various operating divisions and field offices.

 

Composition of the Resource Rings

Each ring is composed of members, associates, and monitors. The members of each ring are experts in the tax or taxes on which the ring focuses. One member serves as the chair of the ring and another as the vice chair. They are responsible to see that the ring operates as it should.

The associates of each ring are employees who have a desire to be, and are capable of becoming, experts in one or more taxes covered by the ring.

The monitors for the rings are those employees who have knowledge of legislative, litigation, policy, and systems considerations to which the members of the ring may not always be privy. Their function will be to monitor the communications of the rings and be a resource for the rings. The monitors inform the rings about these activities so that the answers and recommendations the ring makes will not inadvertently and unnecessarily create problems for taxpayers or the Department. They will also assist the rings by communicating their answers and recommendations. A monitor may also serve as a member of a resource ring.

Each division of the Department and each of the nine district offices around the state is represented by at least one member, associate or monitor on each ring.

 

Operation of the Resource Rings ó Answering questions

Each resource ring is a "public group" on the Departmentís Netscape discussion software. This software allows ring participants to keep the discussions of the various questions separate and to see at a glance what comments have been added since they last reviewed the ringís activities.

Anyone in the Department can ask or forward a question to a resource ring by posting it to the group on the ringís software. When a question is posted to the ring, the members and associates respond to the question, with the answer, with agreement or disagreement with a previous personís response, or with a statement that the question does not have an immediate and clear answer and should be researched. In each case, the member or associate includes reference to any authority of which he or she is aware.

As necessary, the chair appoints an associate to research and draft the question, answer, and authority, and a member to review and approve the work. The draft will confirm that it contains references to all relevant statutes, regulations, cases, rulings and attorney general opinions. The final work will be posted to the ring for comments, including whether the answer is consistent with prior practice.

If there is universal agreement, the answer is consistent with prior practice, and it does not contain a new policy interpretation, the chair publishes the answer as the ringís response. If such is not the case, the question, proposed answer and comments will be forwarded to the policy section of the Office of General Counsel for incorporation into an official policy interpretation as a Policy Document. The ring will then determine what position its members and associates should take until a policy determination is received.

During this process all members and associates of the ring are encouraged to comment and suggest solutions. If necessary to ensure participation, the chair encourages and questions members and associates who haven't responded.

Every member, associate and monitor is responsible for making his division or district office aware of the activities and answers of the ring. Each person in a district office is responsible for communicating with the entire district office, including individuals in different divisions.

Every six to twelve months the rings meet in person and discuss their accomplishments and ways to improve the process for the future.

 

Resource Rings as an Integral Part of Knowledge Management

Overview ó Knowledge management at the Department

In addition to resource rings, the Departmentís knowledge management efforts include in house classroom training; on the job training; sending employees to professional seminars, continuing education programs, college and law school courses and meetings both inside and outside South Carolina; forming advisory and study groups of professionals within and outside the Department to exchange ideas; encouraging employees to do professional speaking and writing; providing research materials and access to the internet; surveying customers and studying Department processes; and making an effort to obtain fresh ideas and perspectives by hiring highly qualified personnel from outside the Department and bringing in renowned experts as speakers. And, although not within the control of the Department, the Department views the appointment of its Director by the Governor as another way the Department obtains fresh ideas and perspectives and renews its understanding of the interests of the stateís taxpayers.

 

How do Resource Rings Serve as an Integral Part of the Departmentís Knowledge Management?

Before looking at how the resource rings form an integral part of the Departmentís knowledge management, it should be noted that the resource rings could not have been successful for much of any purpose if the Department did not have an institutional culture conducive to their success. Ingrained in the Departmentís culture is the philosophy of W. Edwards Deming. This philosophy provides an open environment where diversity is encouraged; where all opinions respected; where employees are not afraid to disagree or express their honest opinions; where not trying is a sign of failure, and making a mistake is a sign of learning; where no one fears to be him or her self; where no one erects, recognizes or permits barriers between divisions or offices; and where it is permissible not to know something, and commendable to find out what you donít know and do something about it.

In order to determine how resource rings serve knowledge management, the three types of actions suggested by the Earl and Scott study on knowledge management will be reviewed and how the resource rings implement these activities will be discussed.

 

Inventorying, Auditing and Sharing. Designing and implementing techniques to identify and record both knowledge and ignorance (e.g. inventorying and auditing) and then designing processes to share, use and protect such knowledge and to remedy ignorance by learning or knowledge creation.

This type of activity encompasses the first two theoretical techniques discussed above, inventorying for explicit knowledge and auditing for planned ignorance. This type of activity also supports the immediate goals of protecting (or avoiding loss of) an organizationís knowledge, and leveraging (or maximizing use of) an organizationís knowledge.

The process of establishing the resource rings involved inventorying the knowledge the Department knew was necessary (explicit knowledge) and determining who in the Department had this knowledge and making those employees members of the ring.

Each time anyone in the Department is asked a question it is in a sense an audit of the Departmentís knowledge. All employees can ask the ring questions whether they are a member or associate of the ring or not. These questions come from innumerable sources including the employeeís curiosity; issues raised in an employeeís reading or through attending a seminar, conference or educational program; from taxpayers and their representatives; from legislators and lobbyists; from questions and questionnaires from other states, the Federation of Tax Administrators, the Multistate Tax Commission, and accounting or law firms. Each question continues the auditing process of determining what is known and what should be known but isnít.

In addition, the process develops tax experts by providing training and supervision to the associates who are part of the resource ring. This process assures the Department of a continuing supply of technical experts.

The rings also share and protect knowledge and make sure that it is available for all to use by encouraging all employees to follow the questions, discussions and conclusions of the ring, by requiring all members, associates and monitors of the ring to keep their divisions and offices aware of the conclusions of the rings, and by adding the appropriate questions and answers to the Departmentís public frequently asked questions database.

The use of the knowledge is leveraged (maximized) because it is used in many ways. In addition to being added to the database of frequently asked questions, it will be reviewed and as appropriate added to the Departmentís classroom training, on the job training, speeches, articles, pamphlets and other publications, forms and instructions, and other information provided to the public. The ring also assures that issues are consistently interpreted by the various operating divisions and offices of the Department. When the resource ring determines that a question cannot be clearly answered and a policy determination is necessary, the question is referred to the Office of General Counselís policy section. That section uses the ringsí comments and research, does any additional research necessary and makes a policy recommendation to the Departmentís management and director so that an answer can be given to the Departmentís employees and published for the public. The ringsí work is also used to determine when legislation should be recommended to clarify ambiguous statutes and simplify statutes where compliance is difficult or expensive for taxpayers, the Department, or local governments. The ring is also used to answer questions where decisions need to be made to implement new legislation.

 

Socializing, Experiencing, and Coaching. Designing and orchestrating contexts, environments and activities to discover and release what is not formally or explicitly known (e.g. socializing and experiencing), and coaching and encouraging people to be effective in these processes.

This type of activity encompasses the last two theoretical techniques discussed above, socializing for tacit knowledge and experiencing for innocent ignorance. This type of activity also supports the immediate goals of leveraging (or maximizing use of) an organizationís knowledge, and creating (or generating and improving) an organizationís knowledge.

The resource rings provide an electronic (and occasionally in person) socializing, experiencing and coaching environment. This environment allows the creation and sharing of explicit and tacit knowledge.

This process, especially in its creation and sharing of tacit knowledge, is somewhat similar to the law school experience. First year law students find that their professors ask, rather than answer, questions; and that their study does not consist of learning rules which can be applied to real life later, but rather studying cases, hypotheticals and problems, and trying to make some sense of hundreds of individual, fact specific, situations. At the beginning students find the first year process confusing and frustrating. Many students ask in their class evaluations why the professor doesnít just tell them the law. At the end of the semester or year, the student reviews all of those cases, hypotheticals and questions, and the good student is amazed at how all those confusing and frustrating questions fall into place and make sense. This epiphany doesnít mean he or she knows all the answers, but that he or she knows many answers, recognizes why some questions have no clear answers, and understands why and what arguments support the possible answers.

The resource rings provide similar training. It is an inductive rather than a deductive process. The questions take the place of the cases, hypotheticals and problems of the law school class.

The resource rings, like law school, create and disseminate tacit knowledge, including judgment, and decimate innocent ignorance. This is at least, in part, the result of inductive reasoning, and active, as opposed to passive, learning.

In addition, the members (and monitors) are continually coaching the other members and associates and continually developing them into tax experts or better tax experts.

These activities also support the leveraging (or maximizing use of) knowledge because they support and become part of the processes which are improved as discussed in the previous section.

 

Articulating, Communicating, and Connecting. Articulating and communicating the purpose and nature of knowledge management and connecting it to other strategic and operational initiatives and activities of the organization.

Just as machinery that is built, protected, and managed but never used is, at best, of limited value; so knowledge which is created, protected, but never used is, at best, of limited utility. Therefore this type of activity supports the second immediate goal of maximizing the use of the organizationís knowledge and the objectives of (1) improving and redesigning knowledge based business and management processes; (2) improving and developing knowledge based products and services; and (3) improving decision making, particularly in the areas of adaptiveness and responsiveness.

The purposes and processes of the resource ringsí knowledge management are continually being articulated and communicated by the rings themselves through their presence on the Departmentís intranet, through e-mail and the frequently asked questions data base they maintain, through the meetings the rings have every six to twelve months, and most importantly by the ringsí members, associates and monitors continually communicating the ringsí activities to their divisions and offices.

The resource rings operate to leverage (or maximize use of ) knowledge because they support and become part of the processes which are improved as discussed in the Inventorying, Auditing and Sharing section above.

 

Conclusion

The resource rings, along with the Departmentís continual work to improve its processes, clearly operate to help the Department meet its knowledge management objectives to:

(1) improve and redesign its knowledge based business and management processes;
(2) improve and develop knowledge based products and services; and
(3) improve decision making particularly in the areas of adaptiveness and responsiveness.

                    

The Department improves and redesigns its resource ring knowledge and management processes by continually reviewing and improving the operation and usefulness of the rings. This process occurs through the use on the Departmentís intranet, e-mail, and meetings every six to twelve months. In addition, the rings are continually reviewed by the Departmentís Technical Training Committee.

The resource rings improve and develop the Departmentís knowledge based products and services, including its pamphlets, speeches, processing of returns, legislation,its forms and instructions, and the informal and formal advice it gives to taxpayers.

Finally, the resource rings improve the decision making of the Departmentís employees because they are more knowledgeable and the knowledge of employees in different divisions and offices will be more consistent. In addition, the inductive reasoning experiences and training allows them to use good judgment making logical decisions, and to respond better when a question arises that needs an immediate response.

 

Rick Handel serves as Chief Counsel for Policy for the South Carolina Department of Revenue.

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