KNOWLEDGE, ETHICS, QUALITY, AND VALUE IN HUMAN
ORGANIZATIONS: A SYSTEM DYNAMICS APPROACH
Arne Collen! and Cecilia Tagliaferri2
Abstract
A work in progress is described that uses system dynamics to model the flow of
knowledge in human organizations. The concept of the knowledge unit is proposed for
simulation. The interest is to the study of the flows of knowledge for product and
service processes, and relate them to quality factors and value that can bring greater
weight to societal ethicality and worth rather than solely monetary profitability.
Introduction
We have been applying system dynamics to construct a model of the flow of
knowledge within the human organization to consider (1) consequences and ethicality
of business practices, and (2) quality and value of the organization in its utilization of
knowledge in the production of products and services that indirectly contribute to its
worth for society. The purpose of our paper is to provide a report of our progress,
Human organizations in their societal and environmental contexts consume resources
to provide products and services. These activities are typically described in terms of
the raw materials and information required. Increasingly, the knowledge involved to
engage in these activities is coming into the foreground as the main focus [2], in order
to know how to engage continuously and complete successfully these activities in a
highly competitive, fast-paced, rapidly changing global market. Consequently, we have
chosen to center our paper on knowledge as the chief construct for modeling some
elementary flows in a system dynamics model.
Our model, termed the Organization Value and Knowledge (OVK) model, is built upon
the idea that knowledge can be conceptualized much like other substances that
comprise the flows in system dynamics models and simulations, such as information,
material, money, and time [1, 3, 4]. The basic unit of flow is termed the Knowledge
Unit (K). Although knowledge is best understood in reference to that which is known
by a single person, it may be meaningfully represented at the collective level of a
group of persons, specifically in reference to such constructs as human organization,
human activity system, and organizational learning. For the purposes of modeling,
various parameters for simulation appear in K terms. Further, a construct yielded in
simulation is the Value (V) of an organization, not in terms of profit and financial net
worth, but value to clients, society, humanity, and future generations.
Tame Collen is Professor of Psychology and Human Science at Saybrook Institute,
450 Pacific, San Francisco, California 94133 USA.
2Cecilia Tagliaferri is Organizational Consultant with the System Dynamics - Italian
Chapter (SYDIC), Via Pontevecchio, 16, 40139 Bologna, Italy.
The Model
The connections among levels and variables of the model are shown in Figure 1. The
traditional depiction of the production of products and services is represented by the
SO-TK-KP feedback loop. We have used this loop as perhaps the easiest reference
point for elaborating the model. A second loop emphasizes the ethical use of
knowledge in the traditional production process, and OVK enhances and diminishes
the resultant V according to expected ethical business practices in the production
process. Two additional loops represent the quality dimension. We have attempted to
Tecognize the superior production that should yield higher Vs, and also appropriate
consideration of environmental and human impact of products and services.
Organizational Value and Knowledge Model
(OVK)
Figure 1. OVK: a system dynamics model.
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However, the flows are Ks rather than materials and information. To apply OVK, all
inputs, throughputs, and outputs must be expressed in quantitative Ks. This
operationalization of constructs in the exercise of modeling is both an advantage and
disadvantage. While it helps to concretize, simulate, and assess the constructs and
outputs of the model (some advantages), it may not be the mode in which the
constructs are communicated, understood, and evaluated by human beings in
organizational settings (some disadvantages). In this model the worth of an
organization to society becomes an inference based on Vs generated under varying
conditions.
Simulation Strategies and Potentialities for Further Research
Some preliminary examples of our model simulations are presented in Figures 2 and 3.
Figure 2 depicts V over time at three levels of Ethicality (E). Figure 3 depicts the
relationship of K, V, and E over time.
‘ORGANIZATIONAL VALUE
ME
Figure 2. OVK to generate V at three levels of E.
From our initial formulation of OVK, several directions are suggested for further
testing, refinement, and development of the model. These directions also suggest to
us potential applications of OVK, given a specific set of parameters and a specific
human organization. Some directions are (1) V as a function of growth in K, (2)
enhancing W through ethical practices that increase V, and (3) combinations of
quality, ethicality, and practical knowledge that increase V.
OVK may be used to simulate the flows of knowledge in the production of products
and services. OVK highlights three aspects of human organizations not traditionally
considered essential to production: quality, ethicality, and value. Moreover, the
contemporary context dictates that these aspects be placed more on a par with such
traditional aspects as functionability, quantity, and profitability [2].
Although abstract and user-defined at this point, we hope that through simulation
development, OVK can become increasingly more meaningful to those who use it. K
and V import more emphasis on the idea that an organization can have worth to
society in other terms than monetary, which can fluctuate, depending on several
factors inclusive of K and V in simulation. It is one challenge of the model to discover
the sets of K that bear critical relations to V in a particular human organization as well
as among a set of competing/cooperating organizations.
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OV_ Organizational Value
KPP Knowledge Put into practice
EPP Ethics Put into Practice
dis tatiedi
ov
—kPP
3 EPP
0 20 40-60" 80100
TIME
‘OV_ Organizational Value
‘Knowledge Put into practice
EPP Ethics Put into Practice
Null Ethical Wilingness
a kpP
ae
GPP
oO” 20° 40” 60 1
TIME
‘OV Organizational Value
KPP Knowledge Put into practice ;
EPP Ethics Put into Practice Ethical
Wilingness
+ 30 05 00 05 140
= EPP
= KPP
oS 2 Positive Ethical Willingness
TIME
Figure 3. The relationship of K, V, and E over time.
References
{1] Keys, P. (1990). System dynamics as a systems-based problem-solving
methodology. Systems Practice, 3, 479-493.
[2] Vazquez, M., Liz, M., and Aracil, J. (1996). Knowledge and Teality: some
conceptual issues in system dynamics modeling. System Dynamics Review,
12, 21-37.
[3] Vennix, J., Akkermans, H., and Rouwette, E. (1996). Group model-building to
facilitate organizational change: an exploratory study. System Dynamics
Review, 12, 39-58.
i {4] Wolstenholme, E. (1990). System Enquiry: A System Dynamics Approach. New
| York: John Wiley & Sons.
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