After hearing a seminar on organizational learning, a mining company executive argues that this perspective ignores the fact that mining companies could not rely on knowledge alone to stay in business. They also need physical capital (such as digging and ore processing equipment) and land (where the minerals are located). In fact, these two may be more important than what employees carry around in their heads. Evaluate the mining executive’s comments.

This question relates to the importance of organizational learning perspective in achieving organizational effectiveness. Meanwhile, the question emphasizes the critical understanding that organizational effectiveness is a function of an overall holistic system view of the effective and efficient interplay of all three elements of software (the knowledge and processes), hardware (the structures and the people) and the harmonious relationship between the organization and its environment. Focusing on any one component at the expense of the rest would definitely result in incomplete picture of an effective organization.

Some executives still view land and capital as a company’s most valuable assets. They give lip service to the idea that “People are our most value assets” but still don’t understand that land and capital have little value without people. For instance, this mining company would not have found land with ore deposits unless it had the
knowledge to find those minerals. It could not operate the equipment to extract and refine the ore unless it had
enough knowledge.

The executive’s comment that companies cannot remain in business with only knowledge is incorrect. On the
contrary, some of the wealthiest organizations (including many software companies and consulting firms) have
few physical assets. Many firms have sold their headquarters and other buildings because their competitive
advantage -- their source of wealth -- is found in knowledge. Mining companies are also outsourcing several
aspects of physical assets. Their ships and rail cars are often owned by others. The digging equipment is leased or owned by companies that specialize in drilling. The major oil companies today are mainly in the knowledge
business – prospecting for minerals or marketing what others have found and extracted.

This question also suggests a subtle misunderstanding by the executive about organizational learning. Although
much corporate knowledge resides in the brains of its employees (called human capital), it also resides in the
organization’s systems and structures (known as structural capital).

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