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Determinants of operational efficiency in the oil and gas sector: A Balanced

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Article  in  Benchmarking An International Journal · October 2018

DOI: 10.1108/BIJ-04-2017-0079

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 Determinants of Operational Efficiency in the Oil and Gas Sector:
A Balanced Scorecard Perspective

Can be cited as:

Salama S. Al-Qubaisi, Mian M. Ajmal, "Determinants of Operational Efficiency in the Oil And Gas Sector:
A Balanced Scorecard Perspective", Benchmarking: An International Journal, https://doi.org/10.1108/BIJ-04-2017-
0079

Abstract
Purpose: - There is limited research that indicates the relation between Knowledge Management Practices
(KMP’s), organizational culture (OC) and operational efficiency performance (OE) by using Balance
scorecards (BSC) specifically in oil and gas sector. This relationship is not yet acknowledged through
empirical tests. This research aims to fill this gap by providing a better understanding of that relationship and
its importance with regard to business outcomes.
Design/methodology/approach: - In order to examine the relationship between OC and OE, this research
takes a balance scorecard (BSC) perspective with the mediating impact of knowledge management practices
(KMP’s). Three hypotheses were developed using literature review and tested through the application of
Confirmatory Factor Analysis (CFA) in Structural Equation Modelling (SEM). Altogether, 568 valid
responses were collected from one of the biggest Oil and Gas Company in the UAE.
Findings: - All KMPs were found to have significant relationship with OE and OC. Also, KMP’s mediate
the relationship between OC and OE. In addition, the results show that the standardized coefficients of these
paths and the loadings of the indicators on their factors are significant. Pearson’s Correlations indicates
strong evidences of the joint impact of organizational culture and KM practices on Operational Efficiency,
with a possible mediator impact of KM practices on Operational Efficiency.
Research limitations/implications: - One of research limitations is type of organization. Future research
may include other industries such as manufacturing and construction. Only the operational variable is
evaluated and there is no consideration of other dimensions such as leadership type, organizational structure
and technology.
Originality/value: - This paper is the first in the UAE and the region that examines the relationship between
OC and KMPs by considering OE from balance scorecard perspective with the mediating impact of
Knowledge Management Practices (KMP’s).

Keywords – Organization culture, knowledge management, performance, Balance scorecards, structural

equation modelling, Oil and Gas, United Arab Emirates, Efficiency, Excellence.

Paper Type – Research paper

 1. Introduction
Considering knowledge as an inevitable source within the competitive context of businesses has
gained traction in recent years. In fact, it is considered that knowledge is the only reliable source that can
help in the creation of a sustainable and competitive advantage within a company (Lee & Choi, 2003).
Companies have come to accept the fact that knowledge is intellectual capital (Nonaka, 2008). This has
led to organizations putting in the effort to take advantage of their knowledge resources and environment
(David & Fahey, 2000). This approach has led to the development of what is generally known as
'knowledge management' (KM). Many studies on knowledge creation and organizational learning have
indicated that knowledge management practices (KMP’s) are strongly affected by cultural values of
individual (Jennex, 2007; Hutchings & Michailova, 2004; Hofstede & Hofstede, 2001; and Pfeffer &
Sutton, 1999). Research also suggests that the performance of an organization depends on the extent to
which the organization’s cultural values are shared (Lai & Lee, 2007). Ford & Chan (2003) argued that if
companies want to gain a competitive advantage through knowledge sharing, an appropriate culture and
environment should be in place. Hence Organizational culture has been found not only influencing the
successful achievement of knowledge sharing, but also knowledge workers’ morale and productivity
(Phusavat, 2013; Ruppel & Harrington, 2001 and Carayannis, 1998). However, several authors raised
concerns that a lack of trust and a knowledge-holding mentality of the staff leads to situations where
sharing knowledge within the organization are ineffective (Moffett et al., 2003). Therefore an
organizational culture that creates knowledge-friendly exchanges needs to be encouraged to ensure
successful execution of KM strategies (Rai, 2011; Choi et al., 2008; Ryan & Prybutok, 2001; Wild et al.,
2002; Gupta et al., 2000)

While understanding how KM practices can be implemented to maximize the efficiency of the
organizations, strategic business managers should also know how to assess and measure performance
improvement and the impact of KM implementation throughout organization by creating the right culture
(Asl & Rahmanseresht, 2007). Numerous studies suggested that strategic management tools, such as the
balanced scorecard (BSC), can be used to evaluate the performance of KM systems and practice as they
play a vital role in success of any project, business or operation (Ajmal et al., 2010; Ajmal & Koskinen,
2008). It is been claimed that a well-developed BSC could align KM practices to business objectives and
consequently, link the output to the investment (input) (Chen & Mohamed, 2008; Fen Lin, 2015). In view
of knowledge management practices (KMP’s) and operational efficiency (OE), it has been indicated that
the Operational Excellence Management System (OEMS) is a good instance of an application that leads
people to engage in better discipline and pursuing higher levels of competence (Chevron, 2010).
Organizational culture and management styles are also found to hugely impact the implementation of an
OEMS (Bititci et al., 2004). On the other hand Kaplan & Norton, (2004) emphasized that organizations
that succeeded in implementing BSC’s, were mostly those who's mission, vision and core values were
manifested within the organizational culture and its people.

In spite of the credible evidence within KM literature suggesting strong links between OC,
organization efficiency and BSC’s perspective, further research in this area is justified. Empirical
evidence validating the relation between organizational culture (OC), knowledge management practices
(KMP’s) and operational efficiency (OE) while considering BSC’s perspective is limited specifically
within context of oil and gas organization (Ho, et al., 2014; Lyu, et al., 2016; Rašula, et al., 2012; Zack, et
al., 2009 ; Chen & Mohamed, 2008 and Lee &Choi, 2003). This study seeks to provide empirical
evidence for the theoretical assertion that organization culture can visibly improve organizational
efficiency through KMPs that are capable of leveraging intellectual assets (Tseng, 2008; Chen &
Mohamed, 2008; Lee &Choi, 2003; Cavaleri, 2004; Phusavat, 2013). The study also explores and
analyses the link between OC, KMP’s and OE measured by BSC’s four strategic perspectives (Kaplan &
David, 1996). During the process of identifying the relationships between the variables the final objective
of the study is attained, namely, the theoretical model is validated and empirically tested in the context of
oil and gas organizations. The results may help academicians and managers to provide valuable and
practical guidance to business leaders to be successful in achieving world-class performance (Operational
Excellence) by creating and sustaining the right culture to implement KM practices throughout the
organization. This helps achieve triple P (improving efficiency of the Performance, developing
competence of the People, and Profitability) for long-term competitive benefits.

2. Literature Review
2.1 Organizational Culture
Culture is one of the main important factors of internal organizational variables for successful KM
implementation in an organization (Lee &Choi, 2003)Hence, culture can be defined as a collection of
beliefs that create an organization's identity, and which in turn describes the way the organization
operates (Choy & Suk, 2005). Culture also dictates working relationships among employees,
interpersonal behavior, conduct and communication within and outside the organization (Tseng, 2010).
Several studies emphasized that organizational culture plays an essential role in knowledge creation and
management in organizations due to the effects of how people learn, acquire and share knowledge.
Koudsi (2000) is clear that KM is more a cultural issue than a technological challenge. And, as indicated
by Ho et al., (2014), knowledge-friendly cultures facilitate implementation of KM practices. Besides,
Gupta, et al., (2000) stated that organizational culture that is formed by bringing together skills and
experiences of individuals is more successful than one that ignores employee contributions to KM.

2.1.1 Synthesis of Organizational Culture Previous Theories and Models: Earlier theories on
knowledge management indicate that a Resource Based View (RBV) of human capital plays a vital role in
determining the performance of individuals (Al-Khouri, 2014). However, the influence of human resource
(HR) on operational systems has often been neglected (Boudreau, et al., 2003). In spite of HR being
intrinsically tied in with operations in most businesses, the influence of OC on operations has largely been
ignored (Chen & Mohamed, 2008). The importance of employee communication, employee competency,
leadership strategic and their influence on operational performance has largely been unexplored in
existing management literature (Lopes & Pilatt, 2013 and Terra, 2005). Organizational culture is
interpreted as the shared meaning among organizational followers. Many cultures are known to show
more alignment in practice than in their opinions and beliefs (West & Turner, 2013). Therefore, this study
places emphasis on organizational values, such as, trust, collaboration, commitment and competency
(Sammons, et al., 2016; Eppler & Sukowski, 2000).

Gholipour et al., (2010) indicated that care is a powerful enabler for building organizational relationships.
In other words, knowledge can be created and shared in places where trust and care among colleagues is
seen. Key literature related to Organizational Culture is shown in Table 1.

2.1.2 Trust: Valmohammadi & Ahmadi (2015) indicated that the culture of confidence and trust
is a fundamental aspect of knowledge sharing. Trust among followers leads to greater agility, acceptance
of change, collaboration among members and affinity to adapt to new terms. The impact of trust
management on operational efficiency was studied by Pearlman, et al., (2002) demonstrating the
differences in trust of employees towards CEO’s and line managers. Leveraging trust within organization
has great results in the performance of employees as well as growth in the firm (Ajmal, et al., 2017).

2.1.3 Commitment: Studies found that engaging with employees led to them having a sense of
ownership of the task, leading to organizational commitment (Gupta, et al., 2000). Some studies find trust
as a foundation to commitment (e.g., (Kilburn, et al., 2006; MacMillan, et al., 2005). Trust and
commitment are enablers of relationship building (Humphreys, et al., 2006; Rao, et al., 2006).
 2.1.4 Collaboration: A collaborative culture encourages the expression and exchange of
knowledge, skills and ideas among the group. Fundamental to effective knowledge exchange is that
individuals come together, interact and exchange ideas (Valmohammadi, 2010). Initiating trust within
organizations improves cooperation and collaboration among teams and organizations (Lee &Choi,
2003). Hence the collaboration culture can help in creating a platform for learning and growth for various
competencies and prevents the repetitive mistakes.

2.1.5 Competence: As mentioned previously, learning embodies the acquisition of new

knowledge (Gholipour, et al., 2010). Breakthrough innovation is possible when individuals call upon their
learning faculty, bring together knowledge from several sources and reconfigure it in an original manner
(Nonaka, 2002). RBV advocates that competitive advantage is quite likely closely associated with
competence-based advantage (Helfat & Peteraf, 2003). Despite Ho, et al., (2014) and Alavi et al., (2005)
people expertise (I-Shape) elevates professional status, encouraging the sharing of knowledge with others,
thus improving overall KM performance. On the other hand, Yeh et al., (2006) recommended that
individuals with T-shaped skills are an asset to any organization since they possess the competence of
combining theoretical and practical knowledge and how knowledge of different domains complement
each other (Lee &Choi, 2003; Gholipour, et al., 2010). Soon & Zainol, (2011) determined that learning
and T-Shaped skills are key enablers of organizational creativity and performance. These are the same
people that create the value and worth of business processes, customer service, sales and numerous more
important activities and objectives that need to be accomplished.

2.2 Knowledge Management Practices

Knowledge can be defined as a combination of knowledge, experience and expertise. It requires

planning, designing, creating, operating and sustaining a knowledge management system (KMS) that can
provide the model for assessing and incorporating new experiences and information. And it is the
conscious design of processes, better policy, procedures, tools, and structures to increase, renew,
disseminate and improve the utilization of structural, human and social (Grant, 2013; Spring, 2003; Bhatt,
2001).

With knowledge comes experience and expertise. Knowledge is accessible from different sources like
documents, work experiences and practices of the organization (Saisuthanawit, et al., 2013; and Jafari &
Kalantar, 2003). Knowledge managements (KM) involves creation, storage, sharing and improving
processes that impact (KM) in the organization (Darvish, et al., 2012). Several literature was reviewed
which divided the elements of KM processes. KM has been a very significant and visibly original
approach to management during the past decades. KM entails a set of practices and strategies to create,
acquire, store, retrieve and diffuse knowledge or experience internally. Today's knowledge-based
economies depend on Knowledge Management (KM) best practices implemented to improve operational
efficiency (OE) (Jennex, 2007). KM provides solutions to handle business problems with some
differences; there is a rising recognition for companies that apply KM to manage business concerns and
progress. Consequently, KM becomes an orderly approach to decision making (Linderman, et al., 2010).
There are four major aspects of KM - knowledge creation, sharing, utilization and internalization.

2.2.1 Knowledge creation comprises of those activities that are involved in the development,
acquisition, codification and storage of knowledge (Ho, et al., 2014; Chen & Mohamed, 2008). During
this stage, knowledge can be created by internal knowledge workers, through processes such as research,
experimentation or experiential learning. In addition to this, knowledge can also be acquired from
external sources such as market channels, customers, suppliers and competitors through scanning and
searching. Once some sort of new knowledge is obtained, it is converted into accessible and applicable
formats through the process of codification and this can be stored in the organization’s knowledge
repository,
 2.2.2 The next aspect – Knowledge sharing or transfer, refers to the distribution or
dissemination of knowledge between two points - the point of generation and the point of use. This can
occur at different organizational levels such as between different individuals, groups, departments and
divisions through both formal and informal channels. Knowledge transfer is a very important step, as
without it, the impact of existing knowledge on organizational performance will be diminished. However,
this step may not be easy to achieve, as important and valuable knowledge can be inherent in individuals,
contexts or locations. (Rubenstein, et al., 2001; (Chun, et al.,2009)

2.2.3 The third aspect - Knowledge integration or utilization, refers to the capability of an
organization to organize, restructure and interpret the existing knowledge in order to reduce redundancy,
enhance consistency, replace outdated knowledge and maximize knowledge synergy (Wu & Chen, 2014).

2.2.4 The fourth aspect - Knowledge application or internalization refers to the actual use of
knowledge in order to develop the organization’s competencies and to locate the root of competitive
advantage. Further, the application of knowledge can lead to bringing about a change in the behaviour of
the recipients, development of new products, improvement of operational excellence, enhancement of
external relationships, adjustment of strategic direction and change in competitive conditions (Emerson,
2015).
To sum up, it can be said that the concept of knowledge goes way beyond merely data or information.
The whole idea of knowledge management is based on human experience, as well as the social context
(Oltra, 2005; Alavi, et al., 2005). Therefore, managing it requires attention not only to the information
technology, but also to the people involved in the organisation (Havens & Knapp, 1999) in Nayır &
Uzunçarşılı, (2008) For instance, an organization, such as an industrial facility or offshore plant is one
that becomes skilled at retaining information and performs according to the available best practices,
knowledge and management know-how. Organizations need to learn from their past mistakes and avoid
repeating them in the future (Nguyen & Mohamed, 2011). A dynamic model of organizational knowledge
creation proposed by Nonaka & Nishiguchi (2001) consists of re-using prior knowledge and skills in a
new application setting. This is known as the SECI model and supports the knowledge creation process
while engaging explicit and tacit knowledge. This study identified the following components: 1)
Knowledge Creation (KC): creating original knowledge (Nonaka & Nishiguchi, 2001) 2) Knowledge
Sharing (KS): sharing among people, both formally and informally (Probst, et al., 2002) 3) Knowledge
Utilization (KU): how knowledge can be put to use effectively (Gold, et al., 2001) 4) Knowledge
Internalization (KI): how explicit knowledge can be internalized by turning it into implicit knowledge (
Ho, et al., 2014).

Key literature related to Knowledge managements practices is shown in Table 2.

2.3 Optimizing Operational Efficiency

Operational excellence relates to an explicit business strategy that helps organizations become
efficient and effective in their processes while offering products and services at competitive price (Wu &
Chen, 2014). Optimum Operational Efficiency is expressed as an Operational Excellence Management
System (OEMS), which includes a set of rules that will guide a company in its operations in order to
achieve operational competence. This system is based on teamwork, leadership and creative problem
solving. This leads to a continual improvement cycle across the organization. It focuses on the
shareholder needs as customer, empowers employees, and optimizes existing activities in the process
(Chevron, 2010). OE refers to a system that identifies accountabilities across the organizational hierarchy
and triggers continual improvement (Caruso, et al., 2013). As the organization becomes more productive
and competitive it uses operational practices that focus on eliminating waste and effective utilization of
resources. Practically, productivity improves the organization's capability to produce more for a lower
cost. Better productivity has a positive impact on human resource by developing their capabilities and
competence, capital through expansion and scheduled upkeep, materials through quality improvement,
meeting customer demands and long-term partnership and with suppliers in through reducing wastage
(Phusavat, 2013). Operation management of the organization revolves around efficient resource
utilization to produce goods and services (Joseph & Monks, 2004).

Operational efficiency (OE) needs the following conditions to succeed - superior capture and
effective utilization of data and information, robust continual improvement culture, continual people
development efforts, compelling KM best practices, advanced systems that capture improvement, top
management commitment to create and sustain performance improvement (Operational Excellence-
Impact Solutions, 2012).

As stated previously, operational efficiency has typically meant standardization by rule and guided by the
phrase “it is not just about cost cutting" coined by (Burrows, 2012). Looking back at the definition of
efficiency – a measure of whether the correct amount of resources (inputs) has been used to deliver a
process, service or activity. An efficient process results in lower resource utilization for the same output
in a way that it results in less consumption than planned, it is referred to as being efficient (Phusavat,
2007). Globally, the oil and gas sector is struggling from the drop in oil price. The continuous decay in
crude oil prices has severely impacted profit margins of oil companies. Many firms have opted to cut their
manpower to avoid high operational costs (Maceda, 2015). Many companies have been forced to
downsize or abort drilling operations, leading to bankruptcy in certain cases. Currently, the low oil prices
are having a destructive impact on expansion, growth and profit margins. This implies a downward
pressure on oil and gas revenue and the need to reduce cost. Oil and gas firms that can keep their
production cost low have traditionally been the winners. Therefore, technologies that provide the much-
needed operational efficiency cannot be overlooked (Sebastian, 2015;Ramanigopal, 2013)

2.4 Balance Scorecards

Balanced Scorecard (BSC) is a performance management tool designed by Robert Kaplan and
David Norton in 1990 for measuring the alignment of small operational activities and large visions and
strategy (Niven, 2005; Chen, et al., 2009). It keeps the organization focused on its core business activities
and its achievement. BSC includes four performance indicators: financial, customer, internal process,
learning and growth (Kaplan & David, 1996). As mentioned earlier, in order to measure the effects of KM
on operational efficiency to understand organizational performance, BSC will be employed. The BSC
model provides an integrated framework that can help organizations convert strategic objectives to a set
of performance indicators. BSC differentiates from other frameworks by its capability to link different
kinds of business performance indicators – financial and non-financial. BSC is a tool to both share
strategy across the organization and also to dictate the implementation strategy (Valmohammadi &
Servati, 2011; Lee &Choi, 2003). There is a strong influence of strategy on execution. The right strategy
ensures better planning and execution (Amaratunga, et al., 2002). In Table 3 key related researches on
KM, BSC’s and organizational researchers. BSC complements financial performance indicators with
drivers for future growth such as learning. Such intangible measures demonstrate the association between
strategy and organizational knowledge (Kaplan & Norton, 2000).

2.5 Contribution of Balanced Scorecard to Operational Efficiency

There were several studies that link financial factors such as improvement in revenue growth and
improvement of profit margin to operational efficiency. Such studies found a significant link between
operational efficiency and features such as profitability, financial accuracy, and quality services for end
consumers. Thus, operational efficiency is an amalgam of productivity, growth and performance,
technical efficiency and profitability (Pasiouras, et al., 2009). Dydacomp (2014) stated that improvement
in revenue or sales growth can be achieved by accomplishing seven operational improvements such as
building brand loyalty, integrating shipping, labelling and rates, making and providing top-notch
customer services, gaining visibility, controlling inventory throughout sales channels, enhancing business
growth by using different channels, applying an integrated retail strategy and by the integration of new
systems as the business grows gradually.

Gilmore (2014) emphasised that operational efficiency can be increased by using five approaches
based on profit margins. Firstly, by measuring current performance by setting and examining the
organization’s Key Performance Indicators (KPIs). It would assist firms in understanding their existent
performance and in recognizing current inadequacies. Secondly, it can be done by assessing the
management of capacity and resources. This includes assessing employees’ skills and their relation with
their job roles, using past projects for guiding new project plans, and reviewing timesheets for identifying
idle resources. Thirdly, operational efficiency can be accomplished by increasing workforce capacity and
relocating resources accordingly. Next, operational efficiency can be boosted by improving project
management and thus creating maximum profits. The improvement can be made in areas such as
unbillable work and skills. Finally, operational efficiency can be enhanced by updating technology to save
time in manual work and thus positively affecting profit margins. Irrespective of the terms used, many
researches had defined how to measure the KMP’s separately for financial and non-financial parameters.
But none of the studies measured the improvement of operational efficiency through BSC’s approach by
linking KM and OC with tangible results for the oil and gas firm (Gholipour, et al., 2010). Kaplan &
David (1996) highlight the importance of BSC performance indicators, such as financial, customer and
learning, on overall strategy. KM fits in well with this approach by relating to the Learning and Growth
indicator. This suggests that KM impacts other processes. BSC allows the management to monitor
progress against set objectives by providing various measurement metrics. Such metrics provide a
valuable reference point for measuring KM implementation against planned goals. This study therefore
tests whether KMP plays a significant role in mediating the relationship between OC and OE

3. Background Theories and Hypothesis Development

3.1 Organizational Culture (OC) and Knowledge Management Practices (KMP’s)

Knowledge is understood as the most significant and important asset for organizations in dynamic
business environments, the ability of an enterprise to take on board the knowledge of its team, make new
knowledge and direct their knowledge more successfully than their competition will result in it attaining
competitive advantages (Drucker, 2002). Rhambasi (2010) insisted that knowledge is the basis of twenty-
first century enterprises that have a flair for innovative advances in all areas of organization. Knowledge
is also understood as an important tool to aid an enterprise towards its goals for achievement (Zhang, et
al., 2012). The goal of knowledge management is to come up with an atmosphere for people where they
are empowered to converse with each other and share knowledge more competently (Margaryan, et al.,
2011). According to Yang (2010), the word knowledge management can be identified as the modus
operandi of generating, collecting and producing organizational knowledge to develop fresh prospects and
increasing the performance for an organization. Organizational knowledge covers complete strategies and
implicit knowledge that people on areas as such as manufacturing and business systems, and the
unambiguous knowledge encrypted in guides, databases and factual systems. Organizational knowledge
also takes under its umbrella the strategic facts and figures that are collaborated in a joint manner in firms,
like schedules, cultures and expertise set in social development (Grant, 1996). Regarding the link between
knowledge management (KM) and organizational culture (OC), it been found that knowledge
management processes gain focus and direction from creating a culture rooted in thinking about business
risk and what is the value. The knowledge again is orientated to support the main aim of the business in
managing the risk and describing its value (Leavitt, et al., 2002).

Choy & Suk (2005) established in their study that it was vital to consider the cultural environment of a
company before implementing knowledge management. Furthermore, Gupta, et al., (2000) claimed that
an open culture built around integrating individual skills and experiences into organizational knowledge
would be more successful, as there are numerous studies examining the relationship between
organizational cultures and knowledge management (Mudor, 2014; Moradi, et al., 2012; Allameh, et al.,
2011; Foss, et al., 2010)

Nayır & Uzunçarşılı, (2008) stated that one of the most significant hurdles to implementation of
an effective knowledge management is organisational culture itself and a positive relationship constructed
on trust would be beneficial to the implementation of knowledge management practices within the
organization (Hassan & Semerciöz, 2010). That indicates that OC is significantly related to KMP. Hence
based on the relevant literature, the following hypothesis was postulated:

Hypothesis 1: Organizational Culture (OC) has a significant relationship with knowledge management
practices (KMP).

3.2 Knowledge Management Practices (KMP’s) and Operational Efficiency (OE)

While many studies contributed to assessing the link between KM and organization performance (Chen &
Mohamed, 2008) there was ambiguity towards measuring organizational performance only from financial
and non-financial perspectives (Fen Lin, 2015). As organizations have judged performance based largely
on financial perspectives, there is insufficient literature on assessing performance based on non-financial
aspects of performance, such as learning and growth, customer satisfaction and internal business process
(Figge, et al., 2002). Theriou, et al. (2011)and Demarest, (1997) emphasize that implementation of KM
practices in the organization would promote organizational learning, improved intellectual asset
management and increased operational efficiency as well as continual improvement. Hence KM meets the
requirements of financial and non-financial measures (Fen Lin, 2015; Chen & Mohamed, 2008).

As Knowledge utilization is a substantial contributor to business achievement. KM impacts BSC lagging

indicators such as financial performance indirectly and leading indicators such as internal process directly
(Looy & Shafagatova, 2016). However Zack, et al., (2009) argued that there was no direct relationship
between KM practices and financial performance. (Darvish, et al., 2012) empirically clarifies the effect of
knowledge management indices on the advancement of the four balanced scorecard perspectives. An
effective KM would enhance organization memory, and its ability to collect, analyze and apply
knowledge to its own advantage. As a result, knowledge competencies affect the present and the future of
the organization's performance (Quintane, et al., 2011)

Organizations must compete for their survival through continuous improvement and innovation to gain
competitive advantage. In the current competitive environment, the factors leading to enterprise success
are no longer simply in the investment of capital, labour and raw material, but in the ability of knowledge
innovation from all the members of an organization (Koontz & Donnell, 1993). Having an organization
with experienced people is essential to conduct the organization's business, the day that they walk out of
door; the organization would face serious problems. While the organization can hire a replacement, very
often the replacements lacks competence and experience resulting in reduced operational performance.
Experienced people are often more expensive to hire and retain, not to mention difficult to integrate. So
how does an organization retain and transfer its expertise? This explains why organizations and leaders
are turning to the KM model to manage risks and develop value (Avram, 2007). Operating companies are
now able to appreciate the use of Knowledge Management Practices since they are faced with the
necessity of continuously updating their employees’ knowledge and promoting this constantly. By
implementing Knowledge Management practices they can maximize the employee's competence as well
as the organization's level of knowledge as a whole (Enzer, 2014). Based on the relevant literature, the
following hypothesis could be developed:

Hypothesis 2: Knowledge management practices (KMP) have a significant relationship with

operational efficiency (OE).

3.3 Organization Culture (OC) and Operational Efficiency (OE)

In this section the link between organizational culture and operational efficiency (OE), will be
scrutinized. Introducing KMS in a company enhances the creation of knowledge-based competence,
which stimulates the harmonization and diffusion of tacit and explicit knowledge and generates the
integration of knowledge principles and practices into all processes, routine activities and employees. An
effective KM will enhance organizational memory, and ability to collect, analyze and apply knowledge to
company advantage. As a result, knowledge competencies affect present and future company performance
(Quintane, et al., 2011). It affirms Desouza, (2011)'s insight that processes and technology alone are not
enough to drive an organization, rather its human assets (people: staff) that are the important components
in an organization’s success. Omotayo, (2015) emphasized that knowledge management is a key driver of
organizational performance and a vital tool for organizational survival, competitiveness and profitability.
As the employee learns more from their own performance, knowledge assets increase. According
to another study, KM can contribute to a firm's performance in numerous ways: (1) improving the
effectiveness and efficiency of business processes; (2) empowering employee learning from internal and
external sources and (3) encouraging the development of new knowledge-based products or the
improvement of existing ones that provide significant additional value to the organization (Argote &
Ingram, 2000; Conner & Prahalad, 1996).
Still, there are some other studies that resist KM initiatives, and argue that KM does not always
positively impact business performance and often fail to result in improved task outcomes in
organization's operational performance (Sabherwal & Sabherwal, 2007). Based on the above varying
outcomes of previous studies, it has been observed that knowledge management's effects on a firm's
performance are not unanimous (Smith & McKeen, 2005). Yet various conceptual studies state that KM
can improve corporate performance and competitiveness (Holsapple & Jones, 2004; DeTienne & Jackson,
2001; Civi, 2000).
Tseng, (2008) pointed out that KM programs are successful when corporate performance is
improved. Therefore, it is essential to measure KM contribution to performance in reality, especially as
there is a lack of conclusive research at present on the relationship between Knowledge Management and
the firm's performance (Yang, 2010 ;Tayebi, et al., 2010; Nikpour & Salajegheh, 2010).
The results indicate that KM practices are positively associated with organizational performance
as generally suggested by the KM literature (Omotayo, 2015; Ho, et al., 2014). Organizational culture
positively impacts Knowledge Processes (KP), which subsequently positively impacts job performance;
corporate culture directly affects the achievement of management tools used to aide companies in process
improvement and decision-making (Ho, et al., 2014). On the other hand there is a direct relationship
between organizational culture and the successful implementation of BSC (Bititci, et al., 2004; Bititci, et
al., 2006). According to Chong & Besharati (2014), barriers to knowledge creating mostly stem from the
existence of poor organizational culture. Furthermore, barriers to knowledge building are classified into
three categories, namely individual (people), organizational and technological barriers. In order for KM to
be of value to the organization, these three barriers should be integrated in a way that they complement
each other. Based on previous studies it was indicated that OC is positively related to organizational
performance and efficiency (Gupta, et al.,2000; Lee &Choi, 2003; Hassan & Semerciöz, 2010; Gholipour,
et al., 2010; Ho, et al., 2014). In addition, Organizational Culture plays a significant role to improve
learning capability of the workforce and is considered a critical success factor for KM (Gold, et al., 2001;
Rehman, et al., 2015) Previous studies have indicated that there is a positive correlation between
organizational culture and employee satisfaction after the implementation of BSC (Ángel, et al., 2014).
The results of the study lead by Zheng, et al., (2009) suggest that KM fully mediates the impact of
organizational culture on organizational efficiency. Knowledge process capabilities and creative
organizational learning in turn mediate the relationship between KM infrastructure including culture and
organizational performance (Sangjae Lee, et al., 2012). Consequently, the following hypothesis is
proposed.

Hypothesis 3: Organization Culture (OC) has a significant relationship with operational efficiency
(OE).

The following Conceptual model is proposed to develop a maturity model with four elements of
Organization culture (OC) to be embedded in: on trust, collaboration, commitment and competency. If
OC elements are achieved through the Knowledge Management Practices (KMP’s) (Creation, utilization,
sharing and internalization) then operational efficiency can be optimized to achieve maximum production
and consequently better business performance. Ahmed, et al., (2014) defines competence as the
organization's capability to seek operational efficiency and effectiveness through the management of
internal processes. As per Hall & Goody, (2007), OC has a vital role in strengthening the learning ability
of employees. This is a success factor for KM (Gold, et al., 2001). Hence Organization culture affects the
operational efficiency (Productivity) of the organization (Coelli, et al., 2005). Overall, this paper proposes
a model (see Fig. 1) that extends the initial model and states that KMP mediates the relationship between
OC and OE.
4. Research Methodology
This research tries to conduct quantitative survey in order to study determinants of operational
efficiency in the Oil and Gas organization using BSC’s perspective.

4.1 Population and Sample Group

Participants were 1000 employees working in one of the biggest offshore oil and gas companies
in remote areas of the city of Abu Dhabi in UAE. They are broadly classified into upstream, midstream
and downstream activities. Upstream refers to oil and gas exploration and production. Midstream includes
transportation and storage while downstream accounts for the refineries and marketing of oil and gas
products. While most oil and gas companies function within a specific area within the supply chain, there
are also larger enterprises that have operations spanning both upstream and downstream (Investopedia,
2016). The participants in this study belong to upper and middle level managers, operational and technical
engineers, consultants, engineers, operators, assistant engineers, project managers and administrative
staff. The company has a multinational workforce, particularly for its field operations and projects. A self-
administrated questionnaire containing measures of organizational culture (OC), knowledge management
practices (KMP’s) and operational efficiency (OE) measured from BSC's four strategic perspectives were
distributed by using email Google survey tools to the sampling group.

4.2 Research Instrument

The instrument of the study was a questionnaire consisting of four parts. Part 1 consists of a
checklist of general information questions. Part 2 consists of the rating scales of Organization Culture.
Part 3 consists of the rating scales of knowledge management practices, and Part 4, the rating scales of
Operational Efficiency using the “Balanced scorecard” perspective. In this study, a 5-point Likert scale,
anchored by one (strongly disagree) to five (strongly agree) is used. Dimensions of organization culture
(OC) are measured within eighteen items and are adopted from Lee & Choi (2003), Chen & Mohamed
(2008), Marques ,et al. (2011) and Ho, et al. (2014).

This measure was made up of four components of OC: trust, commitment, collaboration and
competence. Whereas trust and competence was measured using five variables, commitment and
collaboration were measured using four variables, which had an overall OC reliability (α=0.766).
Furthermore Knowledge Management Practice (KMPs) is assessed within sixteen questions adopted from
(Lee &Choi, 2003; Wu & Chen, 2014; Ho, et al., 2014; Fen Lin, 2015). In this study (KMPs) is measured
as four constructs including knowledge creation, knowledge sharing, knowledge utilization and
knowledge internalization, each dimension consisted of four items, which had overall OC reliability
(α=0.814). And the measurement scale of operational efficiency used in this study considers four
“Balanced scorecard” perspectives. Balance scorecards were measured and quantified using twenty item
scale derived from that proposed by ( Fen Lin, 2015; Rehman, et al., 2015) This construct covered all four
balance scorecards perspective with five items: financial performance perspective, customer satisfaction
perspective, learning & growth perspective and internal business process perspective. This variable is
considered to be part of the balanced scorecard (Kaplan & David (1996), which had overall OE reliability
(α=0.773).

4.3 Data Collection and Analysis

The period of this study was from December 2016 to February 2017. Out of 600 questionnaires
distributed, 19 were undelivered and 13 questionnaires were incomplete. Thus, a total of 568 responses
were usable and used for subsequent analysis, giving a response rate of (97.7 %). To examine the relation
between Organization culture, knowledge management practices and operation efficiency using BSC’s
perspective, which were the nature of the correlations between the three dimensions of Organization
 culture, and its relation to knowledge management practices, and their impact to operational efficiency of
the organization particularly in oil and gas industry can further be described as follow:

• OC (Independent) variable and KMP’s are (Dependent) variable

• KMP’s (Independent) variable and OE are (Dependent) variable.
• OC (Independent) variable and OE are (Dependent) variable.

In this study the following was done: 1) Analyze general information by using frequency and
percentage, 2) Analyze using mean (X̅) and standard deviation (S.D.) and indicate the correlation between
the constructs. Then, the study presents the findings using a table with explanations in interpretation of
the mean value, 3) Analyze the construct for KMP, OC and OE using BSC’s perspective which was
analysed by confirmatory factor analysis (CFA). 4) Analyze the Reliability and the validity of the
constructs, 5) Testing the hypothesis by using Structural Equation Modelling (SEM) (Hair, et al., 2006 ;
Manning, 2006). The dependent variables were regressed individually OE and KMP against OC. KMP
was then regressed against OE. OC was regressed against each of the dependent variables to reflect the
entire hypothesis in this study except the mediation impact of KMP.

4.4 Results
The following are results of statistical analysis of data based on research objective of this study.
The results of descriptive analysis are presented as follow:

4.4.1 General Information

Table 4, it was found that 77.8 percentages of sample group were male while 22.2 percent were
female. Regarding educational background, it was discovered that 85.0 percentages of sample group were
University degree holders, 4.9 percent held Master’s Degree, 2.1 percent held Ph.D. (Doctorate) and 1.8
percent held Elementary school respectively. When consider the experiences in job, 32.2 percentage of
sample groups had 11 to 15 years work experience, 29.0 percent had 7 to 10 years work experience, 15.3
percent had more than 15 years work experience, while 3.5 percentage had less than 3 years’ work
experience.

Table 4: Number and percentage of the questionnaire respondents, categorized by basic character of the
sample group (n=568)
General Information Frequency Percentage
Male 442 77.8
Gender Female 126 22.2
Elementary school 10 1.8
High school diploma 35 6.2
Education University degree 483 85.0
Master degree 28 4.9
Ph.D. (Doctorate) 12 2.1
0 to 3 20 3.5
Experience 4 to 6 113 19.9
7 to 10 165 29.0
11 to 15 183 32.2
More than 15 years 87 15.3
Total 568 100.00
 4.4.2 Analysis of the Mean and S.D and Correlation among Variables

Table 5: The mean (X̅) and standard deviation (S.D.) of employee as end users opinions concerning level KMP, OC and OE.
Knowledge management practices (KMP) X̅ S.D Level of employee end users opinions
Knowledge Internalization (KI) 4.78 0.28 High
Knowledge Creation (KC) 4.74 0.32 High
Knowledge Sharing (KS) 4.73 0.36 High
Knowledge Utilization (KU) 4.73 0.33 High
Total 4.77 0.32 High
Organization Culture (OC ) X̅ S.D Level of employee end users opinions
Trust (TRU) 4.77 0.24 High
Commitment (COM) 4.76 0.26 High
Competence (COP) 4.75 0.26 High
Collaboration (COL) 4.74 0.29 High
Total 4.76 0.26 High
Operational Efficiency (OE ) BSC’s Perspective X̅ S.D Level of employee end users opinions
Internal Business Performance (IBP) 4.79 0.24 High
Financial Performance (FP) 4.78 0.23 High
Learning and growth (LG) 4.77 0.25 High
Customer Satisfaction (CS) 4.76 0.25 High
Total 4.78 0.24 High

Table 5 illustrates the (X̅) mean and standard deviation of each factor. The mean for all the
variables is almost 5 as well as the overall (X̅) for OC, KMP and OE is almost 5 which shows that all the
respondents have the same degree of engagement. The table also indicates higher S.D (0.36) for
Knowledge Sharing (KS) and lower SD (0.28) for Knowledge Internalization (KI). Analysing
Organization culture, trust shows lower SD (0.24) and higher S.D (0.29) for Collaboration (COL). On the
other hand Financial Performance (FP) shows lower SD (0.23) and higher S.D (0.25) for Learning and
growth (LG) and Customer Satisfaction (CS) respectively.
 Pearson’s Correlations in Table 6 and Table 7 indicates strong evidence of the joint impact of
organizational culture and KM practices on Operational Efficiency, with the possible mediator impact of
KM practices on Operational Efficiency supporting the theoretical framework of Kaplan & Thomson
(2007). Therefore findings support our hypothesis H1 - H3.

Table 6: Pearson Correlation Analysis

Variables TRU COM COL COP KC KS KU KI FP CS IBP LG
TRU 1
COM .225** 1
COL .498** .300** 1
COP .381** .376** .447** 1
KC .325** .256** .342** .374** 1
KS .296** .236** .330** .368** .521** 1
KU .261** .214** .328** .371** .479** .390** 1
KI .304** .300** .343** .375** .451** .450** .363** 1
FP .200** .184** .211** .332** .264** .250** .376** .291** 1
CS .291** .154** .238** .226** .267** .314** .331** .336** .360** 1
IBP .237** .194** .281** .274** .236** .307** .326** .350** .444** .344** 1
LG .305** .189** .333** .269** .222** .297** .354** .291** .238** .530** .255** 1
**. Correlation is significant at the 0.01 level (2-tailed).

Table 7: Pearson Correlation Analysis

Variables OC KMP OE
OC 1
KMP .555** 1
**
OE .369 .378** 1
**. Correlation is significant at the 0.01 level (2-tailed).

4.4.3 Confirmatory Factor Analysis- Overall Model Fit

In this study, confirmatory factor analysis (CFA) was used to analyze and validate the
consistency of the research model in oil and gas sector, using AMOS (version 20). As per Holmes &
Smith, (2000) the model is considered to be a good fit if the difference between the sample variances and
covariance, and the implied variances and covariance derived from the parameter estimates, is small. The
reference number of fit statistics has been used to assess how well the model fits the data (Barney, 2001;
Hair, et al., 2006). The twelve indictors are examined to determine whether the sample was appropriate
for such an analysis. The Kaiser Mayer-Olkin measure of sampling adequacy index was 0.830, and
Bartlett's Test of Sphericity was significant 2652.383, p <0.0001, indicating that the sample and
correlation matrix were appropriate for the analysis.
Confirmatory factor analysis (CFA) can be used to assess and test the stability of the twelve
factors 54-item (N= 568). Using name for SPSS statistical analysis software a CFA was conducted for
each of the twelve constructs to determine whether the twelve indicators measured the construct they
were assigned to adequately. Maximum likelihood estimation was employed to estimate the twelve CFA
models. Empirical evidence in CFA is generally assessed using criteria such as the comparative fit index
(CFI), the root-mean square error of approximation (RMSEA) Based on their experience with RMSEA,
Browne and Cudeck (1993) suggest that a RMSEA of .05 or less indicates a "close fit". CFI compares a
 proposed model with the null model assuming that there are no relationships between the measures. CFI
values close to 1 are generally accepted as being indications of well-fitting models (Hair et al., 2010).
Table 8 summarizes the results of these tests.

As shown in Table 8 the measurement model provides a reasonable good fit for the data (χ2 =
2652.38 ; degree of freedom (df) =1374; χ2/df,= 1.930 ; goodness-of-fit index (GFI) =0.852; Comparative
Fit Index (CFI )=0.714; Increment Fit Index (IFI)= 0.717 ; Root Mean Square Error of Approximation
(RMSEA =0.041 ), therefore, this study could proceed to evaluate properties of the instrument in terms
of construct reliability and convergent and discriminate validity.

Table 8: Goodness of Fit Statistics for the measurement model and structural model
Type Index Measurement Structured Recommended value for
Model model satisfactory fit for a model to data
χ2 test χ2 2652.38 2525.195 χ2 > 0.001 ,
df 1374 1362 χ2/df ≤ 3),
χ2/df 1.93 1.854 (Barney, 2001)
(Holmes & Smith, 2000)
Absolute fit index GFI(goodness-of-fit index) 0.85 0.86 ≥ 0.80 (Seyal et al., 2002)
CFI: Comparative Fit Index 0.71 0.74 Close to 1 indicate a very good fit.
(Bentler, 2004)
IFI: Increment Fit Index 0.72 0.74 Close to 1 indicate a very good fit.
Comparative fit (Bentler, 2004)
index RMSEA: Root Mean Square 0.04 0.03 RMSEA ≤ 0.08, (Bentler, 2004)
Error of Approximation

4.4.4 Reliability and Validity

In the study, measurement quality of the constructs was assessed by examining the convergent
validity, discriminant validity, internal consistency of the items and composite reliability (Gefen, et al.,
2000; Gefen & Straub, 2005). IBM SPSS statistics software version (20.0) along with Amos Version (20)
was used for the assessment of measurement validity and reliability. Cronbach's alpha reliability
coefficient normally ranges between 0 and 1. The closer Cronbach's alpha coefficient is to 1.0 the greater
the internal consistency of the items in the scale (Ringle, et al., 2005). Cronbach's alpha ≥ 0.7 is also
acceptable (Nunnally & Bernstein, 1994). As shown in Table 9, all Cronbach alpha values were higher
than the minimum cut-off score of 0.7 except Commitment and Financial Performance (0.69, 0.67)
respectively however they are almost equal to 0.7 hence the Cronbach alpha value for Commitment and
Financial Performance is acceptable.
The convergent validity of constructs was assessed with three criteria recommended by (Fornell
& Larcker, 1981). First, all standardized factor loading were significant at P<0.01 preferably latent factor
loadings should be greater than 0.40, Second the construct reliability was assessed by using composite
reliability (CR) analysis. All constructs produced satisfactory values for internal consistency of the items
while the majority of the constructs exceeded 0.7 in terms of Cronbach‘s alpha (α) and all Factor loading
above 0.4, all composite reliability (CR) values were above the recommended level of 0.50 (Hair et al.,
2006). Third, average variance extracted (AVE), measuring the variance captured by the indicators in
relation to the variance caused by measurement error of the indicators, needs to be equal or greater than
0.50 (Fornell & Larcker, 1981). As shown in Table 9 all Standardized factor loadings were significant (P
> 0.01); the composite reliabilities of constructs was higher than 0.7 (0.71-0.99) and AVE for all
constructs were above 0.5. The results of Trust , Commitment and Knowledge Internalization were AVE=
(0.46, 029, 0.48) respectively which are below the required minimum level of 0.5 However, they were
kept in the model to maintain the validity, since these constructs meet the required level of discriminant
validity and other reliability tests (Bagozzi & Yi, 1988). Thus, the results of high Cronbach’s alpha
values, the high factor loadings, composite reliability, and average variance extracted (AVE) estimates all
together provide strong evidence of convergent validity (Fornell & Larcker, 1981). Additionally Table 9
shows that the AVE of the individual constructs was greater than any squared correlation (SCM) among
constructs, confirming discriminate validity (Fornell & Larcker, 1981). Thus, the results of measurement
model exhibit acceptable reliability, convergent validity, and discriminate validity.

4.4.5 Hypothesis Testing

The next step was constructing a structural model in order to examine the hypothesis
relationships. A similar set of fit indices was used to examine the structural model (Table 8). The ratio of
χ2 to degree of freedom was 1.854 (χ2 = 2525.195; degree of freedom (df) =1362) for the structural
model. Similar recommended 3 level of other compression fit indices with the following recommended
values provided evidence of good model fit (GFI=0.86, CFI=0.74,IFI =0.743 and RMESA=0.03).
Therefore, this study could proceed to examine the path coefficient of the structural model.
The research model was further evaluated by estimating the structural relationships between the
research constructs (Hair, et al., 2010). Specific path coefficient were tested to determine whether each of
the three hypotheses is verified by the empirical evidence used in this research, Accordingly, the results
shown in Table 10, from the structural model used to test the hypothesized research model provide
statistical support only for two of the three hypothesis. This is true because only two (H1 and H2)
standardized path coefficient have t-value greater than 1.96, which indicate their statistical significance at
the level 0.05. Also the p-value was less than 0.01 which indicates (H1 and H2) are extremely significant
however H3 were not supported by statistically significant path coefficients (see Figure 1).

Table 10: Summary of statistically significant effect and hypotheses test

Hypothesis Path Beta 𝑹𝟐 t-value P-value Result
H1 ** KMP_<--- OC_ 0.734 0.811 8.170 0.000 Significant
H2 ** OE_<--- KMP_ 0.548 0.376 5.026 0.000 Significant
H3 OE_<--- OC_ 0.161 0.122 1.861 0.063 Not Significant
*P < 0.05 it is Significant ; **P<0.01 it is extremely Significant, **t-value >.1.96
5. Discussion and Implications
The study proposes and tests the research model that examines the influence of OC with
mediating impact of KMP on OE based on the BSC approach. The empirical analysis demonstrates
several major findings. Explanations based on these findings are discussed below. First, the result
provides clear support for H1 (OC on KMP) and H2 (KMP on OE). The result is consistent with the
finding that the success of firm can provide basis for future success as Valmohammadi & Ahmadi, (2015)
indicates that the culture of confidence and trust in knowledge sharing is a fundamental aspect and
leveraging culture within the organization leads to better in the performance of employees as well as
growth in the firm. When the followers in the organization have trust, they will be more agile for change
acceptance and have an affinity to adaptation with new terms and collaboration between members in the
organization. Pearlman, et al. (2002) emphasis on the impact of trust management towards operational
efficiency was demonstrated in this study by differences in trust of the employees towards CEO’s and line
managers. Within the oil and gas sector, firms that win the trust of its people see a higher rate of skills
growth. Organizations in oil and gas industry should take the lead in applying KM without focusing on
the organizational size as a goal (O’Brien & Rounce, 2001). An organization cannot excuse itself for not
having implemented and adopted knowledge management strategies (Grant, 2013). Once committed, the
parties are more willing to contribute towards the task at hand and work harder to prove that they are
reliable. A robust process with leadership commitment will be vital to its success and lead to
improvement in the organizational performance (Gino & Staats, 2015).
The oil and gas industry has been taking advantage of KM developments for more than a
decade. During this period, the industry has experienced rapid changes both internally and externally. The
advantages of KM have played a part in making operational processes more organized. KM teams provide
support through transfer of knowledge to oil and gas companies with new technology, contracting out,
new conglomerates, and administrative regulation as well as asset management.
 Once a business requires capacity management or cost reduction, KM plays a part by improving
estimation and planning for better resource utilization. KM can support and increase speed and suitability.
KM advantages can be extended to report the technology adoption of point-of-sale and efficiency of
procedures. KM has irrefutably proven to increase the valuation of stock market, helped in growth
through mergers, led to better development of products and encouraged leadership that is intelligent for
early adopters in organizations that have implemented KM. KM implementation in organizations should
have the tools and processes that focus on delivering the right information to the right people at the right
time, and in the right setting so they can make the best choices, exploiting opportunities in businesses and
promoting innovative ideas.
KM as a concept includes a set of strategies and practices in order to create, capture, store and
spread knowledge and experience within organizations (Patrick, et al., 2009). After many years of
implementation across different industries, KM may not be a novel concept anymore. However, existing
KM infrastructure can be an economical means of addressing new or relevant functioning issues in the oil
and gas industry. Additionally, many companies are regulating their best performing repetitive workflow
using automation to reduce interruption at field locations through the world.
Organizations that have found success with KM philosophies can now take the lessons learnt to a
well-informed work force and KM team to address different issues plaguing the industry, such as
globalization, downtime, etc. By viewing challenges as opportunities rather than as impediments, the
energy sector, particularly the oil and gas industry, can attain higher levels of operational performance
(Du Plessis, & Boon, 2004).
This paper can help both practitioners and academics understand the underlying factors affecting
value creation and managing risk to improve operational efficiency and business performance in the oil
and gas sector. The proposed framework can be generalized and utilized in other similar industries as
well. It is of vital importance too because it is aligned to Abu Dhabi's strategic goal of transitioning from
an oil-based economy to a knowledge-based economy (ADCED, 2008). An implication of this study is
that organizations may find that investment in KM does not match the expected operational performance
without building the right organizational culture. This requires improving the competence levels of people
and better communication networks for knowledge sharing.
The findings of this research can be utilized by managers who are looking to improve Operational
Efficiency in oil and gas firms by improving organizational culture, thereby leading to retention of
organizational knowledge. The advantages of using KM will be demonstrated through managing risk,
creating value and maximizing the efficiency within the organization. One disadvantage is the survival
instinct - individuals believe that one might benefit from holding onto information. One of the key
challenges is to ensure an incentive rewards system based on sharing information instead of holding it as
many studies proved that incentive programs play a major role in the success of KM initiatives (Ajmal, et
al., 2010; Alavi, et al., 2005a; Massey, et al., 2002; Davenport, et al., 1998; Jarvenpaa, et al., 1998).
Hence leadership needs to demonstrate trust along with this understanding and remove the
obstacles to sharing information and knowledge across organizations (Chevron, 2010). Hence
management shall create incentive and motivation system for new developers and experts so they can
share the knowledge with trust and commitments among the organization.

6. Conclusion and Future Research

To sum up, allocating more money for formal learning will not necessarily lead to positive
organisational performance results, unless it is supplemented by changes in organisational culture and
managerial practices. The management and culture of the organisation should put emphasis on taking
time to learn, to reflect on the mistakes made, to analyse situations and to integrate new knowledge.
Learning as an activity should be an integral part of an organisation's daily practices and instead of seeing
it as a cost, it should be seen as an investment to better the future of the company. For this, learning
should be seen as a cultural element of the organisation. Also, a company may provide training courses,
professional development opportunities, mentoring; coaching and it may even invest in a learning
management system and attempt knowledge management practices. However, this alone will not
guarantee that the organisation will achieve organisational or financial success. This is because, even
when an organisation has all of these going on, their organisational culture may be something that limits
learning among the employees. Therefore, it results in an organisation that is good at supporting
individual learning, but not so good at providing group learning or allowing new knowledge to flow
through the organisation. In order to develop this flow of knowledge, the organisations should become
learning organisations and develop learning cultures. This learning culture is a vital factor that makes
superior organisational performance possible. However, the progression from individual to group to
organisational learning is not smooth and cannot be guaranteed and there are many intervening
components that can inhibit the progression of learning through organisational levels. In order to avoid
this problem, learning must be managed strategically and systematically, so that the organisation can reap
benefits of the same and ensure it transcends organisational levels (Fuentes, 2008). A dedication as well
as skilled workforce is truly an asset for an organization that cannot be easily replaced and can help the
company implement right business strategies (Marimuthu, et al., 2009). Human capital encompasses
firm’s technological character. Whether or not a firm is technology advanced, human capital affects the
productivity and the market value of the firm (Ramirez & Hachiya, 2006). Investing in human capital can
be mutually beneficial for a firm in terms of productivity as quantified by its Return on Assets
(Marimuthu, et al., 2009).
The research encounters several limitations including type of organization. Future research may
include other industries such as manufacturing and construction to test the hypothesis. Only the
operational variable is evaluated and there is no consideration of other dimensions such as leadership
type, organizational structure and technology. The study can also be replicated across different regions to
ascertain the generalizability and applicability of the findings reported here in other sectors.

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 7 Appendix

Table 1: Literature Review Summary – Key Literature on Organizational Culture Elements

Author/Year Research Design Results & Conclusions
Uddin et al., ( 2008) Case Study organizational culture have significant positive influence over the performance of
organization
Hassan&Semercio¨z, Quantitative A positive relationship constructed on trust will be beneficial to the implementation of
(2010) research knowledge activities within the organization.
Nayir & Uzuncarsili, Case study One of the most significant hurdles to implementation of an effective knowledge
(2008) management is organisational culture itself.
Humphreys, (2006); Quantitative Trust and commitment are enablers of relationship building. Once committed, the
Rao et al., (2006) research parties are more willing to contribute towards the task at hand and work harder to
prove that they are reliable.

Table 2: Literature Review Summary – Key Literature on Knowledge managements practices

Author/Year Research Design Results & Conclusions
Quantitative research KM practices have positive and significant association on overall performance of
Rehman, et al., firms and organizational learning have positive and significant connection with
(2015) KM practices and overall performance of firms.
Looy & Quantitative research Knowledge utilization is a substantial contributor to business achievement. KM
Shafagatova, impacts BSC lagging indicators such as financial performance indirectly and
(2016). leading indicators such as internal process directly.
Theriou, etal., Quantitative research Knowledge management facilitates companies to be faster, more efficient, and
(2011) more innovative.
Quantitative research Knowledge sharing is the strongest predictor of internal process performance, ,
knowledge absorption is pivotal in improving customer satisfaction. The results
Fen Lin ,(2015 ) also show that non-financial performance measures directly and indirectly affect
financial performance through cause-and-effect relationships.
Zheng, et al., (2009) Quantitative research KM fully mediates the impact of organizational culture on organizational
efficiency.

Table 3: Literature Review Summary – Key Literature on OE and BSC’s

Author/Year Research Design Results & Conclusions
Ho, et al., (2014) Empirical /survey Organizational culture positively impact knowledge circulation processes
KCP and it has positively impact job performance. While the autonomous
organizational structure did not.
Rehman, et al., Empirical /survey KM practices influence on overall performance of firms and further to
(2015) investigate the mediating role of business process capability and
organizational learning using BSC.
Valmohammadi Empirical /survey The results revealed that KM practices positively and meaningfully (though
& Ahmadi (2015) weak) impact overall organizational performance.
Fen Lin, (2015) Empirical /survey Develops the decomposed model to examine the influence of knowledge
management orientation (KMO) dimensions on balanced scorecard outcomes.
Table 9 : Summary of factor loading, t-value, square multiple correlation for twelve constructs of study model
Convergent validity Average variance extracted Composite Reliability
Constructs Internal Elements l S.E SMC (R )
2
CR (t-value) Cronbach's Alpha (α)
(p-value) (AVE) (CR)
TRU1 0.874 0.095 0.311 9.178
TRU2 0.674 0.088 0.192 7.692
Trust (TRU) TRU3 0.507 0.105 0.059 4.835 All <0.01 0.46 0.87 0.70
TRU4 0.487 0.091 0.074 5.347
TRU5 0.764 0.104 0.167 7.335
COM1 0.487 0.092 0.069 5.263
Commitment COM2 0.448 0.093 0.057 4.787
All <0.01 0.29 0.71 0.69
(COM) COM3 0.664 0.099 0.125 6.716
COM4 0.542 0.099 0.081 5.463
COL1 1 0.247
Collaboration COL2 0.739 0.107 0.140 6.894
All <0.01 0.76 0.96 0.74
(COL) COL3 0.974 0.119 0.210 8.173
COL4 0.732 0.101 0.159 7.259
COP1 0.561 0.099 0.086 5.677
COP2 0.935 0.119 0.205 7.87
Competence
COP3 0.665 0.102 0.119 6.524 All <0.01 0.56 0.91 0.79
(COP)
COP4 0.676 0.098 0.145 6.903
COP5 0.837 0.107 0.191 7.802
KC1 0.702 0.085 0.202 8.278
Knowledge KC2 0.854 0.105 0.184 8.1
All <0.01 0.71 0.95 0.80
Creation (KC) KC3 0.809 0.093 0.227 8.666
KC4 0.983 0.108 0.244 9.088
KS1 0.977 0.107 0.257 9.15
Knowledge KS2 1 0.269
All <0.01 0.91 0.99 0.81
Sharing (KS) KS3 0.903 0.103 0.219 8.738
KS4 0.924 0.105 0.228 8.791
KU1 0.636 0.085 0.155 7.48
Knowledge KU2 0.678 0.088 0.168 7.727
All <0.01 0.60 0.91 0.72
Utilization (KU) KU3 0.91 0.143 0.102 6.344
KU4 0.844 0.094 0.254 8.984
KI1 0.746 0.094 0.180 7.933
Knowledge
KI2 0.63 0.085 0.150 7.45
Internalization All <0.01 0.48 0.86 0.76
KI3 0.748 0.09 0.201 8.313
(KI)
KI4 0.64 0.08 0.181 7.972
FP1 0.596 0.109 0.093 5.474
Financial FP2 0.572 0.131 0.052 4.364
Performance FP3 0.854 0.135 0.143 6.322 All <0.01 0.52 0.90 0.67
(FP) FP4 0.771 0.125 0.128 6.16
FP5 0.756 0.129 0.114 5.842
CS1 0.978 0.137 0.203 7.14
CS2 0.851 0.132 0.146 6.46
Customer
CS3 0.939 0.138 0.180 6.804 All <0.01 0.86 0.98 0.74
Satisfaction (CS)
CS4 0.949 0.142 0.163 6.674
CS5 0.918 0.137 0.162 6.698
IBP1 0.8 0.133 0.131 6.033
IBP2 0.813 0.132 0.134 6.158
Internal Business
IBP3 0.783 0.131 0.123 6.002 All <0.01 0.63 0.94 0.72
Process (IBP)
IBP4 0.675 0.126 0.09 5.372
IBP5 0.894 0.14 0.153 6.366
LG1 0.903 0.136 0.161 6.657
LG2 0.972 0.143 0.163 6.819
Learning and
LG3 0.654 0.122 0.088 5.366 All <0.01 0.71 0.95 0.72
Growth (LG)
LG4 1 0.175
LG5 0.62 0.119 0.082 5.211

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