In response to contemporary societal demands for organizations to adopt a humanized strategy, promoting social progress while achieving sustainable economic success, scholars are revisiting practical wisdom (Beabout, 2012; Kragulj, 2023; Nonaka et al., 2014; Nonaka and Takeuchi, 2021a; Rocha et al., 2022; Rocha et al., 2024; Sasse-Werhahn et al., 2020; Serenko, 2024). Practical wisdom (phronesis) is “a reasoned and true state of capacity to act about human goods” (Aristotle, 2009, p. 106). It involves making good decisions for the right reason at the right time and applying experiential knowledge to complex situations where there is no straightforward correct answer (Bachmann, et al., 2018a; Bachmann, et al., 2018b). In organizational contexts, practical wisdom is crucial for balancing multiple stakeholder interests and contributing to the common good (Kragulj, 2023; Rocha et al., 2024; Nonaka and Takeuchi, 2021a).

Recent research has developed an assessment for practical wisdom in the workplace (Serenko, 2024), but, despite its increasing appearance in the knowledge management literature (Rocha et al., 2024; Serenko, 2024), organizational practical wisdom has yet to be operationalized to the extent that a measurement instrument could be presented to assess how employees perceive the organizational level of practical wisdom and determine the maturity of a practically wise organization (Rocha et al., 2022; Rowley and Gibbs, 2008). This study, therefore, aims to fill this gap by developing and validating an instrument to measure organizational practical wisdom, and thus has the following research objectives: (I) To categorize the critical dimensions of organizational practical wisdom; (II) To develop and validate a reliable scale for measuring organizational practical wisdom in knowledge management.

We used a multimethod approach, including a literature review, content analysis, and the Delphi technique, to examine and combine the concepts and dimensions of practical wisdom in organizations, specifically in management and knowledge management. We then developed a measurement instrument and validated it using Exploratory Factor and Confirmatory Factor Analyses.

This study makes valuable contributions to both theory and practice. Theoretically, it advances our understanding of organizational practical wisdom by empirically identifying and validating its essential dimensions, thus enriching the conceptual framework of practical wisdom in organizational contexts. By developing and validating an instrument for measuring organizational practical wisdom, we provide researchers with a robust tool for future empirical studies, enabling more rigorous investigations into the role and impact of practical wisdom in organizational processes. This study offers practitioners a validated concrete instrument to assess and cultivate practical wisdom within their organizations, which can be used for organizational diagnostics, employee development, and strategic planning. The insights derived from this study can guide leaders in fostering wisdom-based decision-making and creating organizational cultures that balance economic success with social responsibility. The research advances the academic conversation by bridging the gap between theoretical conceptualizations of organizational practical wisdom and practical applications, providing actionable insights for organizations striving to navigate complex challenges.

Practical wisdom has been in the spotlight of various disciplines over the past decades, e.g., philosophy (Maxwell, 1984), psychology (Darnell et al., 2022; Baltes and Staudinger, 1993) and education (Sternberg, 2001; Jakubik, 2020), and still is an evolving research area (e.g., Jakubik and Müürsepp, 2022; Kragulj, 2023; Kristjánsson and Fowers, 2024; Rocha and Pinheiro, 2021c; Rocha et al., 2022; Rocha et al., 2024; Salovaara Janne, 2024; Peschl et al., 2023; Serenko, 2024). Measuring practical wisdom is complex (Serenko, 2024), even more so through the differing perspectives brought into the discussion by the various disciplines involved (Swartwood, 2020). In this study, we approach it through the lens of organizational learning and knowledge management (Rowley and Gibbs, 2008; Rocha et al., 2022). We will provide an overview of the construct in the next section.

We follow Lonergan’s (1993, p. 217) argument that we cannot have direct knowledge about reality but only about appearances. Our processing of a representation of the ‘world’ depends on our cognitive capabilities (Peschl, 2001). In other words, to gain (representational) knowledge about a practically wise organization, we need to recognize and understand the appearance of such an organization. Therefore, we used a multimethod qualitative approach to examine and review concepts and dimensions of organizational practical wisdom in management to develop relevant items for the instrument. Then, we validated the instrument using Exploratory Factor and Confirmatory Factor Analyses and quantitative methods. In the following subsections, we present the procedures and analyze their results.

From a philosophical perspective, technical and social knowledge is essential for sound judgment (Trnavcevic and Biloslavo, 2017). In the knowledge management literature, however, an additional category of knowledge has recently been brought into play. Nonaka and Takeuchi (2019; 2021b) consider that phronesis allows for making prudent decisions promptly and acting based on ethics, beliefs, and principles. It is connected to critical thinking and sensemaking towards knowledge. Learning and experience are crucial to cultivating phronesis. Practical wisdom results from a reflective learning process that goes beyond creating knowledge and involves “discerning judgments and taking appropriate action” (Bierly et al., 2000, p. 598). Embodying practical wisdom requires experience (Steyl, 2020), and it is neither one linear journey nor one path; it entails transformation through learning and exercising fundamental values (Spiller et al., 2011). Antonacopoulou et al.’s (2019) sensuous learning outlines how a learning organization can become practically wise. This is because, in this process (sensuous learning), organizations apply critical thinking and sense-making, reflect on values and moral rules, and build the capability to distinguish ‘right’ and ‘wrong’, given the particular situation of the organization and its relationship to its environment, all of which are necessary for phronesis.

Likewise, it is necessary to discern the universal moral rules (Steyl, 2020). Individuals need to live challenging experiences — with moral dilemmas and profound questions — to be able to act based on what they have learned and develop phronetic reasoning (Rocha and Pinheiro, 2021a). Time and active reflection on rights and wrongs are where the bond between experience and learning will lean (Bierly et al., 2000). Hence, as a meta faculty that goes beyond knowledge, practical wisdom manifests itself in the “characteristics of reflectiveness (considering events and their grounds and consequences, having foresight, taking the broad view) and judgment (appraising and choosing the appropriate goals, having sound judgment, using knowledge to achieve objectives)” (Bierly et al., 2000, p. 602). In summary, Bierly et al. (2000) recognize three roads to individual wisdom: (I) Experiences resultant from the interaction of the self and its ambiance fuel the capacity for wise actions. (II) Spirituality, as a moral and emotional basis for comprehending our role in the universe, can enhance wisdom by empowering self-reflection and providing courage, faith, and hope, which are crucial for wise behavior. (III) Passion gives the necessary belief in one’s self-efficacy to achieve wise actions against possible obstacles.

Organizations are socially embedded. Their virtue serves both business interests and human welfare. Consequently, fostering organizational virtues can result in long-term profitability while safeguarding individuals, even when profit remains a core motivator (Schudt, 2000). Moreover, organizational wisdom supports organizational outcomes (Dumitrache and Caramihai, 2013) once the practically wise company is, a priori, efficient, and effective in its actions (Pinheiro et al., 2012). This means the organization accomplishes its goals properly, using its resources best. Even more, selecting and applying specific knowledge and knowing how to apply it requires experience and foresight. Therefore, it echoes the organization’s learning (Senge, 1990) and knowing (Cook and Brown, 1999).

Furthermore, it is essential to highlight that organizational phronesis is not just about single organizational values but high-level organizational values supported by moral virtues. To make it effective, scholars and practitioners should understand how to disseminate phronesis (individually and collectively) and build phronetic organizations (McKenna and Biloslavo, 2011; Nonaka and Takeuchi, 2021b; Nonaka and Takeuchi, 2019). It is about virtuous learning organizations (Rowley and Gibbs, 2008) whose strategies focus on society and the future, grounded in values, principles, and morals (Nonaka and Takeuchi, 2021b). This perspective of organizations is based on the ontological assumption that organizations consist of individuals and their reciprocal relationships (Freeman, 2010; Felin and Foss, 2005).

Given our societies’ volatile and uncertain fabric (Antonacopoulou, 2018), learning must not be reduced to reactive adaptation. Instead, it should be considered an active change of the organization towards the social and environmental progress we want to see in society. In this way, the phronetic organization becomes a powerful actor transforming society and individuals for the common good (Bierly et al., 2000; Nonaka and Takeuchi, 2019) and the least harm (Hays, 2007). Although the common good is a prominent ethical theme (Frémeaux, 2020; Moore, 2005; Sison and Fontrodona, 2012; Wiefek and Heinitz, 2018), it is not our goal to discuss it in this study. Therefore, based on an Aristotelian-Thomistic interpretation, we consider it “a set of conditions that favor both the pursuit of a community good and the personal fulfillment of each member of the community” (Frémeaux, 2020, p. 200). It combines objective (production of goods and services) and subjective (personal fulfillment) dimensions (Sison and Fontrodona, 2012).

In summary, phronesis allows for accepting the complexity of organizational reality. It expands the basis for organizations to make decisions and then carry them out (i.e., values, principles, and morals) and aligns them with the common good. This means that the realization through actions is always oriented towards the common good.

Practical wisdom is an action-oriented construct in which knowledge and action become one (Bierly et al., 2000). As a result, organizational phronesis—having organizational spirituality guiding a humanized strategy—embodies high-level values evident in the organization’s actions. Organizational spirituality is the intangible component of organizational practical wisdom driving its actions, i.e., the organization’s practices. Therefore, the organization’s actions are weighted and correspond with its values.

Correspondingly, a wise organization is inevitably a learning organization (Senge, 1990) that demonstrates ethical conduct and meaningful action, contributing positively to its surroundings and the well-being of all parties involved (Rowley and Gibbs, 2008). Such an organization can be distinguished by the seven pillars that accompany Senge’s (1990) idea of a learning organization (i.e., personal mastery, systems thinking, building shared vision, mental models, team learning) with two action-oriented and conative-affective pillars: deliberated praxis and embodied learning. Though deliberated praxis points to the required engagement in action for developing wisdom, embodied learning emphasizes that learning and development are both inputs and outputs of action (Rowley and Gibbs, 2008).

Among the first who studied phronesis in knowledge management are Bierly et al. (2000). Reviewing the assumption that gathering more knowledge leads to more success, they claim that organizational wisdom can be a heuristic for reducing the complexity of knowledge and outline it as the process of making decisions, choosing, and utilizing certain knowledge within a particular setting is essential. It is connected to the ability to make effective decisions and apply suitable knowledge in a specific circumstance (Bierly et al., 2000). Expanding the discussion on organizational wisdom, Rowley (2006) characterizes a wise organization as one which uses knowledge sophistically and sensitively, employing discernment to ponder the concerns of various stakeholders. It considers broader social and ethical factors, demonstrates wise decision-making, and maintains a long-range perspective. All of this points to the action-oriented nature of phronesis. This means phronesis is realized through decisions and actions, distinguishing it from wisdom in general.

Closely linked to the action orientation, i.e., the fact that practical wisdom materializes in action, is the necessary ability to realize those actions over time, often referred to as organizational capabilities. Rowley (2006) argues that practical wisdom is the capacity to implement the most appropriate course of action, considering knowledge as well as ethical and social factors (the most good outcome), is what practical wisdom encompasses. Furthermore, Kessler and Bailey (2007) define organizational wisdom as an organization’s competence to utilize its reservoir of knowledge acquired through individuals’ discernment, ethics, virtues, intuitions, emotions/feelings, and behaviors to make effective decisions on organizational matters and events. Members of such an organization understand the significance of learning and the wise use of knowledge—that is, leveraging knowledge effectively and recognizing what is vital for both corporate and societal success (Bierly et al., 2000).

Leadership (Shotter and Tsoukas, 2014) and knowledge management (Rocha and Pinheiro, 2021a) support both individual (and organizational) learning in building phronesis through learning. Wise leadership is a key mechanism for fostering practical wisdom in employees and further shaping phronetic organizations (Kolodinsky et al., 2008; McKenna and Rooney, 2019; Nonaka and Takeuchi, 2011; Nonaka and Takeuchi, 2019; Nonaka and Takeuchi, 2021b; Rooney and McKenna, 2007). Beyond knowledge, such leadership capitalizes on human faculties such as insight, intuition, ethics, judgment, or creativity. It materializes in certain characteristics of the wise leader: Wise leaders produce conditions for living a virtuous life. Their personality is distinguished by humility, a capacity for transcending one’s egocentric perceptions. They endeavor for personal growth and can tolerate the experiences’ ambiguity. All these dispositions strengthen their adaptability to the environment (McKenna and Rooney, 2019).

More specifically, Nonaka and Takeuchi (2011; 2019) summarize six practical skills that wise leaders ought to have: (I) “Judging goodness” and the leader’s capacity to discern what is morally good, which depends on context, value, and ethics. (II) Wise leaders “grasp the essence”; they can grasp beyond the surface of a context and reflect on the situation’s causes and the future outcomes of possible judgments and actions. (III) “Creating shared contexts” is their ability to make others experience what they have in common and support a shared rationale. (IV) Wise leaders are competent communicators who can get to the heart of the matter and clarify it to all involved. (V) They “exercise their political power” to bring people together and collaborate. (VI) Wise leaders foster practical wisdom in others, spreading it throughout the organization and becoming a characteristic. In summary, leaders are key actors, and leadership is an institutional tool for learning, distributing, and applying phronesis.

Fundamentally, the literature offers several conceptualizations of organizational practical wisdom. Table 1 demonstrates how the literature supports the items on organizational learning and knowledge management, especially Bierly et al. (2000), North and Pöschl (2003), Kessler (2006), Hays (2007), Rooney and McKenna (2007), Rowley and Gibbs (2008), and Nonaka and Takeuchi (2011; 2019). Furthermore, few empirical studies focus on individual practical wisdom, especially on the leader (e.g., McKenna and Rooney, 2019). Other studies address the phenomenon in some way, but some articles do not clearly define the central concept, i.e., phronesis (e.g., Dumitrache and Caramihai, 2013; Liu, 2017; Van Wart, 1995). Moreover, we identified other instruments measuring organizational wisdom (e.g., Pinheiro et al., 2012; Akgün et al., 2019). However, none of the instruments highlight knowledge management and organizational learning’s connection to organizational practical wisdom. Accordingly, supported by the literature review, the most comprehensive perspective of organizational practical wisdom is the organizational proficiency of acting efficiently and effectively based on high-level values and toward its purpose. It leads to superior organizational performance and the common good, envisioning the long run while doing the least harm. It is supported by integrating individual practical wisdom rooted in the workplace and the organization (Rocha et al., 2024).

7.5 Analysis of the Results

7.5.1 Study 1 — Exploratory Factor Analysis

We used the Lusophone sample to conduct the scale’s Exploratory Factor Analysis (EFA), exceeding ten observations per item (Hair et al., 2009). The EFA is an inductive method based on heuristic rules that initiate with the theory building the items pulled and using the data for decision-making. The respondents are 68.8% Brazilian and 30.7% Portuguese. The largest age group is 40–49 (32.7%), with most respondents having higher education degrees. Over half (53.3%) work in companies with more than 250 employees, and a significant portion (27.6%) have been with their company for 1–5 years. The majority (55.3%) work on-site, with the administration department being the most represented (36.2%). Regarding company revenue, 32.7% work for companies with up to 2 million in annual revenue, while 23.6% are in companies earning more than 50 million. The service industry dominates the sample, representing 60.8% of respondents. These data suggest a diverse workforce primarily composed of experienced, well-educated professionals in larger service-oriented companies.

We conducted the EFAs in IBM SPSS Statistics (version 27; IBM United Kingdom Limited; Winchester, Hampshire, United Kingdom) software to assess the organizational practical wisdom scale’s relational structure and purify, excluding unnecessary or poorly performed items. We conducted case listwise exclusion since our sample is sufficient despite missing values (Hair et al., 2009). We examined EFA’s validity using Kaiser-Meyer-Olkin (KMO) criteria (= 0.929) and its significance by the p-value ($\le$0.001) as recommended by Hair and colleagues (Hair et al., 2019b; Hair et al., 2009).

We conducted numerous EFAs before the final analysis to extract items and create a clean scale that academics and practitioners can use. This iterative approach allowed us to refine the item pool, assess different factor structures, and ensure the most robust and interpretable solution. It is recommended to conduct multiple EFAs in scale development to evaluate the stability of the factor structure across different item combinations and identify the optimal set of items that best represent the construct (Worthington and Whittaker, 2006).

In the first EFA, we removed five variables because their communalities value was lower than 0.5 (Hair et al., 2009). We conducted other EFAs, eliminating some variables and returning them to assess their role and the Total Variance Explained. In the final EFA, we used the covariance matrix, the principal components’ method, to extract factors combined with a Varimax rotation. Once there was only one factor, the results were not rotated. We removed items with communality lower than 0.50 (Table 3), as suggested by Hair et al. (2009).

Table 3. Communalities and Pattern Matrix test (IBM SPSS).

Communalities			Component matrixa
Items	Initial	Extraction	Component 1
OPW_2	1.000	0.714	0.845
OPW_3	1.000	0.627	0.792
OPW_4	1.000	0.692	0.832
OPW_5	1.000	0.585	0.765
OPW_6	1.000	0.628	0.793
OPW_7	1.000	0.639	0.799
OPW_8	1.000	0.635	0.797
OPW_9	1.000	0.582	0.763
OPW_10	1.000	0.687	0.829
OPW_11	1.000	0.593	0.770
OPW_15	1.000	0.705	0.840
OPW_16	1.000	0.731	0.855
Extraction Method:		Extraction Method: Principal Component Analysis.
Principal Component Analysis.

OPW, Organizational Phronesis Wisdom. a. 1 components extracted.

The EFA disclosed a total variance explained (TVE) of 65.158%. Rates above 60% are appropriate for developing social science scales (Hair et al., 2019b; Hair et al., 2009). We extracted the factors by eigenvalue standards since, with less than 20 items, it tends to be a conservator extracting (Hair et al., 2009). Its first eigenvalue extracted is greater than one (=7.819); the second eigenvalue, on the contrary, is less than one (=0.904), revealing the scale’s unidimensionality (see Fig. 1). Lastly, we conducted the Cronbach’s Alpha test (C$\alpha$ = 0.951) to assess internal data consistency (see Table 4 for C$\alpha$ if the item was deleted). Values above 0.70 are adequate; in exploratory research, the least is 0.60 (Hair et al., 2019c; Hair et al., 2009).

Fig. 1.

Scree plot by IBM SPSS 27.

Table 4. Cronbach’s (C$\alpha$) test by IBM SPSS.

Item - Total Statistics
	Scale Mean if Item Deleted	Scale Variance if Item Deleted	Corrected Item-Total Correlation	Squared Multiple Correlation	C$\alpha$ if Item Deleted
OPW_2	40.80	82.315	0.810	0.699	0.945
OPW_3	40.67	83.724	0.747	0.642	0.947
OPW_4	40.92	82.853	0.794	0.774	0.946
OPW_5	40.98	83.610	0.716	0.693	0.948
OPW_6*	41.03	81.367	0.750	0.607	0.947
OPW_7	40.91	82.094	0.759	0.632	0.947
OPW_8	41.04	81.760	0.756	0.651	0.947
OPW_9	40.56	84.561	0.717	0.608	0.948
OPW_10	40.78	81.265	0.790	0.659	0.946
OPW_11*	40.61	83.472	0.723	0.577	0.948
OPW_15	40.95	80.014	0.804	0.893	0.945
OPW_16	40.97	80.161	0.824	0.907	0.945

OPW, Organizational Practical Wisdom.

* Items removed after the CFA.

The EFA unfolds a unidimensional scale with 12 items, following the recommendation of Hair et al. (2019a) in regarding of using at least four items. Therefore, following the instrument purification with the Exploratory Factor Analysis, we proceed with a Confirmatory Factor Analysis to examine the scale validity, reliability, and latent structure.

7.5.2 Study 2 — Confirmatory Factor Analysis

We performed a Confirmatory Factor Analysis (CFA) using Consistent PLS-SEM (via PLSc-SEM) of the 12 items using the SmartPLS (version 4.1.0.6; SmartPLS GmbH; Bonningstedt, Schleswig-Holstein, Germany) software (Ringle et al, 2024), with a sample of 157 answers from English speakers, above the 150 that would fit the criteria (Hair et al., 2009). The CFA adjusts the scale parameters and the factors that emerged from the EFA. PLS-SEM (via PLSc-SEM) estimations of common factor models is a method to confirm the theory and test the model structure (Ringle et al, 2024). We conducted the CFA by repeating the construct Organizational Phronesis Wisdom (OPW), which is OPW_F. Therefore, they are equal. We replaced all the missing values by means of nearby points (Hair et al., 2009).

The respondents are from 39 countries. The majority (50.3%) were between 18–29 years old. Most had higher education, with 29.8% holding a master’s degree. The largest group (31.7%) were Austrian nationals, followed by Malaysians (11.8%). Regarding employment, 62.7% worked in the services industry—55.3% in companies with over 250 employees. Company revenue varied, with the largest group (26.1%) reporting annual revenue of more than 50 million, followed by 18.6% in the 10–50 million range. Notably, 16.8% worked for non-profit organizations. Austria was the most common company location at 44.7%, followed by Indonesia at 8.1%. Regarding work conditions, 42.9% worked on-site, while 31.1% worked from home. The sample represents young and diverse educated professionals across various industries and countries.

We removed OPW 6 and OPW 12 because their outer loadings were below 0.708. Most of the VIFs values were lower than three, and all were lower than five (see Fig. 2 and Table 5), meeting the criteria (Hair et al., 2019a). The analysis provided a Composite Reliability (CR – rho_a) of 0.929 and CR_rho_C of 0.928; Cronbach’s Alpha (C$\alpha$) of 0.928 (see Table 6), fitting the standards ($\ge$0.7 and $\ge$ 0.7 $\le$ 0.95), indicating adequate internal consistency and indicators reliability (Hair et al., 2023).

Fig. 2.

Confirmatory Factor Analysis using Consistent PLS-SEM by Smart PLS. OPW, Organizational Practical Wisdom; OPW_F, Organizational Practical Wisdom – Factor. Commas are used as decimal separators (e.g., 0,7986 = 0.7986).

Table 5. Final items with outer loadings and Variance Inflation Factor (VIF).

Constructs and final affirmatives		Outer loadings	VIF
OPW_2	The company’s actions are weighted.	0.714	2.122
OPW_3	This company can adapt to changes and instabilities in the environment.	0.721	2.506
OPW_4	The company’s actions are efficient.	0.731	2.881
OPW_5	The company’s actions are effective.	0.730	3.052
OPW_6	In this company the leader is wise. *	0.650	2.266
OPW_7	People can effectively choose and apply the appropriate knowledge in a given situation.	0.762	2.395
OPW_8	People reflect on their actions and mistakes.	0.754	2.359
OPW_9	People believe that learning is important.	0.733	2.297
OPW_10	The company’s acting reflects its mission and values.	0.786	2.766
OPW_11	People take attitudes based on their beliefs and values. *	0.630	1.860
OPW_15	There is an understanding of the moral and ethical expectations of stakeholders (members, customers, suppliers, partners, and others).	0.777	3.498
OPW_16	There is a response to the moral and ethical expectations of stakeholders (members, customers, suppliers, partners, and others).	0.793	4.048

OPW, Organizational Practical Wisdom.

* Excluded variables after the CFA.

Table 6. Construct reliability and validity.

	Cronbach’s alpha	Composite reliability (rho_a)	Composite reliability (rho_c)	Average variance extracted (AVE)
OPW	0.928	0.929	0.928	0.564
OPW_F	0.928	0.929	0.928	0.564

OPW, Organizational Practical Wisdom.

OPW_F, Organizational Practical Wisdom – Factor.

In addition, Table 6 displays the Average Variance Extracted (AVE) of 0.564, which also meets the guidelines ($\ge$0.5) and demonstrates adequate convergent validity (Hair et al., 2023). The results suggested a minor modification (20%), excluding two items. Therefore, the CFA confirms its fitting in the parameters established by Hair et al. (2023). Discriminant analysis is not necessary because there is only one factor being analyzed.

To assess the measurement invariance (Table 7) between the two groups of respondents, Portuguese and English speakers, we conducted a Measurement Invariance of Composite Models (MICOM) analysis following the three steps recommended by Henseler et al. (2016). We selected 5000 permutations, maintaining the other settings by default. The first step, configural invariance, automatically fits the quality criteria by SmartPLS using identical indicators, algorithm settings/criteria, and treatment. The second step, compositional invariance, also met the quality criteria once the original correlation was greater than 5% quantile. The third step, (a) equally mean values and (b) variance, likewise complies with quality criteria because the results of the mean original difference and variance original difference are within the 95% confidence interval, and the p-value is above 0.05 (Henseler et al., 2016). Thus, the measurement invariance outcomes offered by MICOM analysis (see Table 7) support the full invariance of the scale between the groups, i.e., Portuguese speakers and English speakers. In other words, there is no significant difference between the two groups. Accordingly, the final instrument in the two languages has ten items (Appendix Table 8).

Table 7. Measurement Invariance of Composite Models (MICOM) analysis.

MICOM
		Original correlation	Correlation permutation mean	5.0%		Permutation p-value
Step 2	OPW	1.000	1.000	1.000		0.869
	OPW_F	1.000	1.000	1.000		0.869
		Original difference	Permutation mean difference	2.5%	97.5%	Permutation p-value
Step 3 (mean)	OPW	0.002	0.002	–0.207	0.209	0.989
	OPW_F	0.002	0.002	–0.207	0.209	0.989
Step 3 (variance)	OPW	–0.084	–0.004	–0.378	0.356	0.659
	OPW_F	–0.084	–0.004	–0.378	0.356	0.659

OPW, Organizational Practical Wisdom.

OPW_F, Organizational Practical Wisdom – Factor.

The Organizational Practical Wisdom Scale (OPWS) developed in this study offers a nuanced lens through which to examine the manifestation of phronesis in organizational settings. The final 10-item scale reflects key aspects of organizational practical wisdom as conceptualized in recent literature while revealing divergences from theoretical expectations.

The scale’s items collectively address the multifaceted nature of practical wisdom, encompassing elements of knowledge application, ethical consideration, and adaptive action. For instance, the item “People can effectively choose and apply the appropriate knowledge in a given situation” aligns with Bierly et al.’s (2000) definition of organizational wisdom as the ability to select and apply specific knowledge in context. This also resonates with Rowley’s (2006) emphasis on the capacity to put appropriate knowledge into action.

The inclusion of items related to understanding and responding to stakeholder expectations (e.g., “There is an understanding of the moral and ethical expectations of stakeholders”) reflects the ethical dimension of practical wisdom emphasized by scholars such as Nonaka and Takeuchi (2021a) and Sasse-Werhahn et al. (2020). This aligns with the view that phronetic organizations must balance multiple stakeholder interests and contribute to the common good.

The scale’s focus on adaptability, as seen in the item “This company can adapt to changes and instabilities in the environment”, echoes recent discussions about the role of practical wisdom in navigating uncertain and complex business environments (Intezari et al., 2018; Rocha et al., 2022). This adaptability aspect links closely with the concept of organizational learning, which is central to many conceptualizations of organizational wisdom (Rowley and Gibbs, 2008).

Interestingly, while the literature strongly emphasizes the role of leadership in fostering organizational practical wisdom (e.g., McKenna and Rooney, 2019; Nonaka and Takeuchi, 2011), leadership-specific items did not emerge as strongly in our empirical analysis. This suggests that employees may perceive practical wisdom as more diffused throughout the organization rather than centralized in leadership, potentially indicating a gap between theoretical conceptualizations and lived organizational experiences.

The items related to the efficiency and effectiveness of organizational actions (e.g., “The company’s actions are efficient”) align with North and Pöschl’s (2003) definition of organizational wisdom, which emphasizes the ability to resolve problems and carry out tasks efficiently and effectively. This practical, action-oriented aspect of the scale grounds the more abstract concepts of wisdom in tangible organizational outcomes.

While perhaps surprising, given the multifaceted nature of practical wisdom described in the literature, the scale’s unidimensional structure suggests that these various aspects may be more tightly integrated in organizational settings than previously theorized. This could reflect Nonaka and Takeuchi’s (2019) view of practical wisdom as a holistic capability integrating knowledge, ethics, and action.

Overall, the OPWS captures many key elements of organizational practical wisdom as conceptualized in recent literature. However, its unidimensional structure and the relative de-emphasis of leadership-specific items suggest that the lived experience of organizational practical wisdom may differ in some ways from theoretical conceptualizations. Thus, this scale provides a valuable tool for assessing practical organizational wisdom and offers insights that may help refine our understanding of how phronesis manifests in organizational contexts.

Our research addresses the recent call for empirical investigations into practical wisdom in organizational contexts (Jakubik and Müürsepp, 2022; Rocha et al., 2022; Kragulj, 2023; Serenko, 2024), moving beyond conceptual discussions to provide a concrete, measurable construct. The findings of this study offer several novel insights into the nature and measurement of organizational practical wisdom, contributing to the ongoing dialogue in the knowledge management literature. The instrument is valuable for monitoring and evaluating one’s perception of organizational change toward a practically wise organization. Leaders will be able to identify what parts of the organization need to adapt to become more practically wise. In addition, it allows for assessing if there is a (long-term) orientation to stakeholder expectations (Nonaka and Takeuchi, 2021a; Sasse-Werhahn et al., 2020).

Our findings resonate with Bratianu and Bejinaru’s (2019a; 2019b) thermodynamics approach to knowledge dynamics. Just as they conceptualize knowledge as a field that can be transformed, our results indicate that practical wisdom involves the dynamic integration and application of different knowledge. The items in our scale that address reflection, learning from experience, and adapting to change support this view of knowledge as dynamic and transformable. This perspective extends beyond traditional knowledge management approaches, often focusing primarily on explicit, codifiable knowledge (Bratianu, 2015).

The emphasis on social sustainability in our scale represents another unique contribution. While previous literature has touched on the ethical dimensions of practical wisdom (Steyl, 2020), our study explicitly links phronesis to broader societal impacts. This connection between organizational wisdom and social responsibility addresses a gap in the literature and responds to calls for more sustainable and responsible management practices (Ding et al., 2019; Basu and Palazzo, 2008; Flammer, 2013). Likewise, the items in our scale that address navigating complex environments and considering multiple perspectives speak to practical wisdom’s context-dependent nature, echoing literature discussions (Intezari et al., 2018).

Including integrative thinking and dealing with complexity in our scale aligns with recent discussions in the literature about the role of practical wisdom in navigating uncertain and ambiguous business environments (Intezari and Pauleen, 2017; Rocha et al., 2022). Moreover, our study goes further by providing an instrument to measure these capabilities within organizations.

Based on a three-stage methodological approach, our research introduces a comprehensive conceptualization of organizational practical wisdom that draws on a knowledge management and organizational learning perspective. The multidimensional conceptualization points to levers for increasing the practical wisdom of organizations, which can have remarkable social implications regarding increasing shared value creation, social innovation, common good, performance, and sustainability.

Moreover, our research pioneers the systematic measurement of one’s perception of organizational phronesis. It provides a validated scale for measuring practical wisdom at the organizational level, which can be used to assess how employees and other stakeholders perceive the practical wisdom of the organization. The proposed Organizational Practical Wisdom Scale (OPWS) is an instrument for this purpose. It fills a gap in organizational wisdom literature under the lens of knowledge management and organizational learning. Accordingly, the study’s main contribution is validating this ten-item bilingual scale of organizational phronesis. Correspondingly, we expect this instrument to support the intensification of experiential research on organizational phronesis and, consequently, the consolidation of this growing field.

This study offers practical contributions because it operationalizes the construct at the organizational level. Thus, it is relevant for transforming companies into practically wise companies, allowing managers to evaluate (I) the aspects that require more awareness and continuous monitoring to support their strategies towards a phronetic company and (II) employees’ perceptions about organizational phronesis. Overall, our scale opens new possibilities for research on organizational phronesis. It points to levers that managers can actively use as instruments to shape their organizations toward sustainable and responsible business practices.

Regardless of the novel contributions of the research for providing a reliable and valid scale of organizational phronesis, it has limitations that may guide further research. First, the OPWS is a cross-cultural self-reported methodology. Accordingly, cultural bias is another front for future research. Second, the OPWS is unable to grasp the temporal characteristics of organizational phronesis. We suggest longitudinal case studies to assess organizational practical wisdom’s temporal features properly. Likewise, future research should test nomological validity. Although academics have researched various constructs related to organizational phronesis, the effect of organizational spirituality remains a gap in the literature. Then, we suggest using related constructs such as knowledge management and organizational spirituality.

Additionally, we propose research on unlearning, psychological traits, and emotions in the workplace as predictors of organizational phronesis. Also, concerning organizational phronesis as a predictor of sustainability, social innovation, and entrepreneurship. These related constructs might create a richer construct network. Moreover, other constructs, such as reflexivity, overlap with phronesis. Thus, further studies should approach and develop a debate regarding reflexive organizations and the social and ecological impacts of values and knowledge. Furthermore, our scale does not cover political theory aspects of phronesis, which should be addressed in future research.

Finally, researchers may further develop our scale by adding other dimensions and items depending on specific and complex research contexts. For example, combining qualitative methods with our scale will enrich the research about organizational phronesis, allowing an understanding of how each feature connects to others in specific environments. Similarly, practitioners can use it in experiments concerning organizational phronesis’s practical effects on different cultures and industries.

All data reported in this paper will be shared by the corresponding author upon reasonable request.

RR: performed and designed the research; PP: supervised and designed the research; MJD: supervised the data analysis and interpretation of data for the work; FK: acquired data and drafted the manuscript. All authors contributed to critical revision of the manuscript for important intellectual content. All authors read and approved the final manuscript. All authors have participated sufficiently in the work and agreed to be accountable for all aspects of the work.

We sincerely thank the two anonymous reviewers for their invaluable feedback and guidance in refining this manuscript.

NECE and this work are supported by FCT - Fundação para a Ciência e Tecnologia, I.P. by project reference UIDB/04630/2020 and DOI identifier 10.54499/UIDP/04630/2020. The first author also received funding from a Santander Totta scholarship.

The authors declare no conflict of interest.

See Table 8.