Kenan Spaho, M.A.
Energoinvest, dd Sarajevo, Hamdije Čemerlića 2, 71000 Sarajevo, Bosnia
and Herzegovina
Phone: 00387 33 703 388 Fax: 00387 33 616 395
Email address: k.spaho@bih.net.ba
MANAGING BY KNOWLEDGE, CASE STUDY OF
BOSNIA AND HERZEGOVINA
ABSTRACT
Managers are the most important people in any company or organization.
They act wide set of different business activities in order to make their
companies successful. Those activities are combined so it is not possible to
make distinction between managerial functions. This paper is based on four
managerial skills: strategy, leadership, communication and conflict
management. The purpose of the paper was to find out attitude of Bosnian
and Herzegovina managers to these elements. We started our research with
hypothesis that Bosnian and Herzegovina managers have positive attitude to
these elements. On the end our hypothesis was confirmed.
Key words: Strategy, communication, leadership, conflict management
1. INTRODUCTION
In this new age of fast changes and turbulence what has high impact on large
companies, it is very important to know how to learn in order to adapt to
business environment. In other words intellectual capital is very important
factor in any company and in business sector in general. Managers of new
age must be creative what means that they must be ready to adopt new
knowledge nevertheless from their practical experiences or from some
business researches done by scientists or consultants. Since the managers act
wide set of different business activities it is logical that their knowledge must
be wide. The focus of this paper is four important elements of management
such as strategy, leadership, communication and conflict management.
The purpose is to find out attitude of Bosnian and Herzegovina managers to
these elements with hypothesis that managers have positive attitude to
these elements. In further text we will present theoretical background of our
research as well as methodology of this research and object of research.
2. MANAGING BY KNOWLEDGE – THEORETICAL APPROACH
As we mentioned above intellectual capital is very important factor in
business. By definition intellectual capital represents total capital of company
including human capital, consumer capital and structure capital (Sajfert et al,
2006, 85). Other definition is that intellectual capital is something what is not
possible to be materially defined but it can make you rich and give you
competitive advantage (Sundać, 2009, 35). As it is visible from these
definitions intellectual capital is something not visible but very important and
very wide because of fact that managers do wide range of activities. As we
mentioned above in this paper focus is on four important manager skills such
as strategy, leadership, communication and conflict management. In
further text we will present some theoretical aspects regarding these four
elements.
2.1. Strategy
Strategy is determination of basic long-term objectives of company, adoption
of action directions as well as allocation of necessary resources for achieving
these objectives (Weihrich, Koontz, 1993, 169). In this paper focus is on
marketing strategies using Porter generic strategies as follows:



Cost leadership means to be the cheapest producer in the market. This
strategy can be risky if profit margins are pared too low (Harris, 1999,
241).
Product differentiation strategy means creating consumer perception of
difference between similar products (Harris, 1999, 241)
Focus strategy (segmentation strategy) is concentrating on small
segment of the market which others have neglected (Harris, 1999, 241).
The relationship between these strategic alternatives is shown on Figure 1
and basic organizational characteristics for these alternatives are given in
Table 1.
In this paper we will see attitude of Bosnian and Herzegovina managers
about these strategic alternatives.
2.2. Leadership
Despite the fact that the term “leadership” is from English language this term
become international and used in all languages as original. There are several
definitions for leadership but here we will present three of them:



Leadership is process of animating others to take activity in direction of
common objective (Šehić, Penava, 2007, 3)
Leadership is process where individuals make on group of individuals
in order to achieve common objective (Šehić, Penava, 2007, 4)
Leadership is process of influence on activities of organized group in
their efforts to define and achieve the goal (Šehić, Penava, 2007, 4)
Figure 1: Relationship between Porter’s generic strategies.
Source: Adapted from (Šehić, 2002, 197)
Table1: Organizational characteristics for Porter’s generic strategies.
Strategy
Cost leadership
Differentiation
Focus
Necessary skills and resources
Hard cost control
Skills of process engineering
Intensive supervision over employees
Products designed for simple production
Frequent and detail control reports
Hard capability for marketing
Hard coordination between functions
Inclination to creativity
Hard capability for basic research
Company reputation in quality and technology leadership
The combination of above defined alternatives directed to
specific strategic objectives
Source: Adapted from (Šehić, 2002, 197)
Also there are several approaches to leader’s behavior. For the purpose of
this paper we will focus on Likert’s four systems of leadership as follows
(Šehić, Penava, 2007, 77):
System 1 defined as exploitive – authoritative style where leader:




Does not show confidence in subordinates
Puts on decisions, no makes delegation of authority
Makes motivations by threats
Makes a little communication and does not work in team
System 2 defined as benevolent – authoritative style where a leader:
 Shows superficially and polite confidence in subordinates
 Puts on decisions, no makes delegation of authority
 Motivates by prizes
 Sometimes includes subordinates in solving the problems.
System 3 defined as participative style where a leader:




Does not trust completely in subordinates
Listen to subordinates but control making decisions
Motivates by prizes and sometimes including subordinates
In constructive way uses ideas and opinions of subordinates
System 4 defined as democratic style where a leader:




Completely trusts in subordinates
Lets them to make decision by their own
Motivates subordinates by prizes for all goals which they set up
Shares ideas and opinions
In this paper we will see attitude of Bosnian and Herzegovina managers
about these styles of leadership.
2.3. Communication
Business communication can be inside the organization (internal
communication) and outside of the organization (external communication)
(Fox, 2006, 16). Internal communication is process where all employees take
part unlike external communication where only some employees take part
(Fox, 2006, 16). For the purpose of this paper we will focus on internal
communication or as it is called in some literature sources organizational
communication. There are free methods of organizational communication:
written communication, oral communication and nonverbal
communiction (Rouse, Rouse, 2005, 46).
Written communication is official and formal communication through
written information and directions (Miljković, Rijavec, 2008, 103).
Communication media are the official forms defined by the company in
accordance with the Quality Management System. These forms are different
from official memos and fax forms because it is for internal communication.
On the other hand oral communication can be formal and informal
(Weihrich, Koontz, 1993). Formal communication works through official
meetings in the company unlike informal communication which can have
can have official and unofficial character. Official character is represented
in conversations among employees and telephone network among employees
in order to make business faster (Miljković, Rijavec, 2008, 104). Unofficial
character of informal communication is so called “hearsay” communication.
There are four types of “hearsay” communication as it is illustrated in Figure
2 (Davis, 1993, 177):
The single–strand chain. In this chain one person transfers a message to
another that forwards the same to the third person, and that person transfers it
to the fourth person etc. This makes an endless communication chain.
The gossip chain. An individual transfers a message to everybody that he/she
meets, and everybody can, does not mean they will, transfer this message
further.
The probability chain. In this chain an individual communicates randomly to
other persons.
The cluster chain. In this chain a person transfers the information only to
defined persons selected by him/her. One or more persons will forward the
message again to a group of selected persons.
Informal communication sometimes has its bad sides because of rumor
spreading which can be dangerous especially in critical situations. In this case
the labor union has the key role to calm the situation down and inform the
employees about the situation (Adapted from Jolić, 2003, 19).
Figure 2: Types of “hearsay” informal communication
Source: Davis, 1993, 178
The above mentioned methods of communication are considered to be verbal
communication. There is also nonverbal communication which is defined as
all intentional and not intentional messages which are not written or oral
communication (Rouse, Rouse, 2005, 47). In other words nonverbal
communication includes elements such as face expression, look, gestures,
dressing, lookout, distance between collocutors and voice ton.
On the end it is necessary to emphasize that every message has three
componets (Rouse, Rouse, 2005, 48):



Verbal which is related to words
Sound which is related to tone in which words are said
Expression which is related to face expression or body speech which
accompany words
In Figure 3 it is presented impact of all these components.
Figure 3: Impact of communication components
Source: Adapted from Rouse, Rouse, 2005, 49
The purpose of this paper is to find out if managers prefer written or oral
communication as well as to see their attitude to nonverbal communication.
2.4. Conflict management
A lot of factors prevent employees from direct and open communication and
result of that is high risk for conflict situations. If managers apply direct
communication on time, the conflict could be avoided or its impact would be
minimal. There are several definitions of conflict but for the purpose of this
paper we define conflict as process of social interaction and social situation
where interests and activities of participants (individual or group) really or
apparently confronting, blocking and disabling realization of their objectives
(Jambrek, Penić, 2008, 1199). Conflict can have positive and negative
effects in organization (Bahtijarević, 1993, 57):


Positive effects initiate necessary social changes, development of
creative ideas and innovations, presenting important problems, quality
decisions and solving problems, organization reengineering, development
of solidarity and group cohesion.
Negative effects are something like bad cooperation and coordination in
organization and it takes more time which can be used in more productive
manner.
Practical experiences shoe that managers can have active or passive approach
to conflict management. The purpose of this paper is to see the approach of
Bosnian and Herzegovina managers.
3. METHODOLOGY
This paper is based on case study method and survey method by
questionnaire. The questionnaire is organized in fourth parts with one or two
closed questions. Presentation of research results is done by graphic method
with comment of results. The objects of research are managers in Bosnia and
Herzegovina companies. The questionnaire was sent to 100 managers and 35
of them took part in research.
As we mentioned above the subjects of research are four important
management skills, strategy, leadership, communication and conflict
management. We started this research with hypothesis that managers have
positive attitude to these elements. Also we defined four auxiliary
hypotheses as follows:
AH1: The managers are more oriented to quality of product then on costs
AH2: The managers are more democratic oriented then autocratic
AH3: The managers give significance to nonverbal communication
AH4: The managers have active approach to conflict management
4. RESEARCH RESULTS
As we mentioned above questionnaire was sent to 100 managers. Out of 100
managers 35 (35%) of them showed interest to take part in this research. Out
35 managers, 3 (8,6%) of them are managers from middle level unlike 32
(91,4%) of them who are first line managers. No top managers showed
interest to take part in this research.
4.1. Strategy
Out of 35 managers 17 (48,6%) declared for cost leadership strategy unlike
18 (51,4%) who declared for differentiation strategy. 27 managers (77,1%)
declared for focus strategy unlike 8 (22,9%) managers who declared for
presence on market from all over the world without difference.
This result shows that our first auxiliary hypothesis, that Bosnian and
Herzegovina managers are more oriented to quality of product then on
costs, confirmed.
4.2. Leadership
Out of 35 managers no one declared for System 1 and System 2. 17 (48,6%)
managers declared for System 3 unlike 18 (51,4%) who declared for System
4.
This result shows that our second auxiliary hypothesis, that Bosnian and
Herzegovina managers are more democratic oriented, confirmed.
4.3. Communication
In giving working orders out of 35 managers 19 (54,3%) prefer oral
communication with employees, 7 (20%) prefer written communication and 9
(25,7%) prefer combination of these two methods.
Regarding the attitude to nonverbal communication 11 (31,4%) mangers
declared only for verbal communication what means that they do not
recognize nonverbal communication. Unlike these 11 managers 5 (14,3%)
declared for importance of tone in communication and 19 (54,3%) of them
declared for importance of face expression or body speech in communication.
These results are illustrated on Figure 4.
Figure 4: Verbal versus nonverbal communication
Source: Done by author on a base of research
As it is visible there are some differences from Figure 4 because Bosnian and
Herzegovina managers give higher importance to verbal communication then
it is presented in literature. Also importance of tone in communication is low
but importance of body speech is higher then it is presented in literature. So
in general we can consider that our third auxiliary hypothesis, that
Bosnian and Herzegovina managers give significance to nonverbal
communication, is confirmed.
4.4. Conflict management
In conflict management out of 35 managers 33 (94,3%) declared for active
approach unlike 2 (5,7%) managers who declared for passive approach.
This result shows that our fourth hypothesis, that Bosnian and
Herzegovina managers have active approach in conflict management,
confirmed.
5. CONCLUSION
This paper was focused on four important managerial skills: strategy,
leadership, communication and conflict management. The purpose of this
paper was not to see if managers knew definitions of these elements but to
see their attitude to these elements. The research was focused on managers of
Bosnia and Herzegovina and out of 100 managers 35 of them took part in this
research.
We started this research with hypothesis that managers have positive attitude
to above mentioned elements and in order to prove it we defined four
auxiliary hypotheses. Since all auxiliary hypotheses are confirmed it means
that our main hypothesis is confirmed that managers in Bosnia and
Herzegovina has positive attitude to strategy, leadership, communication and
conflict management.
What is important to emphasize is that managers are more oriented on
differentiation strategy unlike cost leadership strategy. It means that they are
ready for EU process because new member countries in EU will be forced to
offer something new on EU market in order to deal with competitors in EU.
Also it is encouraging that managers are more democratic oriented what is in
accordance with trends in German and Germany is considered as leading
country in EU business.
Business environment is turbulent and every day we deal with new problems,
nevertheless small or big problems. Fastness and quality of solving these
problems have great influence on company effectiveness. Every new idea can
make better marketing, sales etc. Definitely there is no new idea without new
knowledge what means that managers must learn every day in order to
improve their knowledge and with knowledge their effectiveness.
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