Sunday, August 21, 2005

Preserving Knowledge in an Uncertain World

Preserving Knowledge in an Uncertain World

When employees walk out the door, they take valuable organizational knowledge with them. But managers who think creatively can keep it in-house.

Eric Lesser and Laurence Prusak

Throughout 2001, headlines have announced job cuts in a number of major corporations: AOL Time Warner, Lucent Technologies, Verizon, DaimlerChrysler and Sara Lee, to name a few. Although the economic downturn has not yet been on the order of magnitude of the early 1980s, indicators point to a substantial slowdown in a variety of sectors. The growth spurt of the late 1990s has clearly wound down.

During that boom, an important trend had appeared: Companies had begun to manage knowledge as a strategic capability. Time and resources went into enhancing the ability to create, share and use both individual and collective know-how so that businesses could improve productivity, organizational effectiveness and innovative capacity. Many public- and private-sector organizations undertook a wide range of knowledge-management initiatives, including identifying and sharing relevant practices, locating and highlighting expertise, fostering communities of practice and installing collaborative technologies.

The Risks to Knowledge Assets

The era of rapid growth and change was conducive to experimenting with and implementing new techniques for managing knowledge. Expanding budgets for new personnel and systems, coupled with a need to disseminate knowledge quickly to an ever growing and increasingly diverse work force, provided steady nourishment for knowledge-management efforts. However, in an era of uncertainty, shrinking budgets and staff reductions have put knowledge at risk: The most knowledgeable employees often leave first, critical social networks are damaged, trust decays and the time necessary for knowledge transfer is compressed and compromised.

The Most Knowledgeable Workers Leave First

Voluntary reductions in the work force may have a negative effect on preserving knowledge. Many organizations, in an attempt to soften the blow of impending layoffs, institute incentives to encourage individuals to leave the organization voluntarily. Unfortunately, voluntary attrition programs often encourage the most marketable and knowledgeable individuals to leave. In addition, early-retirement programs apply to older individuals, so companies often end up losing those who have accumulated the most knowledge — and rapidly deplete the corporate memory, knowledge base and supply of mentors. Rarely do organizations have any way of systematically identifying individuals' specific knowledge or tapping their ability to share that knowledge. Even fewer companies attempt to record and share the knowledge held by outgoing employees. Hence, remaining workers faced with new duties may be frustrated and unproductive.

Damage to Social Networks

Downsizings can hurt the social networks that speed the flow of knowledge across an organization. Our research and experience at the Institute for Knowledge Management has shown that social networks play a critical role in helping people identify, share and work with corporate knowledge. Through such networks, individuals identify experts, provide referrals for those seeking answers and facilitate knowledge transfer among groups. Downsizing disrupts the structures and causes "potholes" that impede and often block the flow of knowledge. Individuals who previously connected disparate groups may leave. Companies may not even be aware of the valuable roles such employees play; the roles are rarely described in formal job descriptions or organization charts. In the absence of what the World Bank has dubbed "bonders and bridgers" to assist in knowledge transfer, organizations find it difficult to locate specific information. Without people proficient at identifying "who knows what," the time needed to search for answers and find appropriate resources may increase dramatically. Knowledge activists oil the wheels that keep information flowing.

Undermining Trust

Cutbacks can erode the trust and sense of mutual obligation that is critical to knowledge transfer. Employee reductions have a powerful effect on how individuals view their relationship with the organization and with their colleagues. Some people may see layoffs as breaking an implicit social contract and may respond by withholding knowledge (overtly or unconsciously) that is critical to organizational success. Moreover, if employees see specific knowledge as pivotal to their ability to keep their jobs, they may be reluctant to share that knowledge. Also, in withholding information, they diminish colleagues' sense of obligation to contribute to company knowledge.

Loss of Thinking Time

Tightened business conditions may remove the slack time needed for sharing knowledge effectively. The survivors of downsizing often are asked to do more work with less assistance. They may feel pressured to be more productive. Given that most employees are overwhelmed with their current tasks, such conditions make it even more difficult for workers to take the time to share knowledge with colleagues. Time that used to be spent improving skills, reviewing projects and sharing experience evaporates. People who are struggling to stay on top of day-to-day routines are less likely to mentor junior employees or share relevant knowledge with a colleague in a videoconference. Both individuals and organizations suffer when staff capabilities are underdeveloped, problem solving is redundant and opportunities for improvement are lost.

Seeking Faster Payback

In a time of belt-tightening, companies scale back projects that are not deemed essential, often eliminating knowledge-management efforts unlikely to produce an immediate, quantifiable payback. For example, a business may reduce the support offered to a community of practice or cut the number of training sessions that employees may attend. However, eliminating such efforts entails costs that compound one another. The organization loses the potential benefits normally associated with such efforts, such as faster customer-response time, improved asset reuse and increased employee productivity. Further, by cutting knowledge-management efforts, organizations send a clear and powerful signal to employees: "Managing our knowledge is something we can live without." That message affects later efforts to regain commitment to any related initiative. By then, employees view knowledge management as "just another corporate program that went by the wayside." And knowledge stagnates.

Solutions That Have Worked

Although there are no magic answers to such challenges, some organizations have used techniques to mitigate knowledge loss in an unstable economy. For example, in April, Agilent Technologies announced its response to slowing customer demand. In a conscious attempt to limit the number of layoffs, the company planned to reduce the pay of all employees by 10%. By spreading the burden across all employees, Agilent could maintain its underlying social networks and build a perception of fairness.

Other organizations, such as the World Bank, have attempted to develop systematic processes for recording the knowledge of employees on the verge of retirement. With a combination of video interviews and hyperlinks to important documents and reports, sen¢or practitioners can impart their experience in a rich multimedia environment that can be shared with others. By capturing such insights, the organization is able to preserve its memory and share it with succeeding generations of employees.

Another technique has been used by Harvard Community Health Plan, a health-maintenance organization in Massachusetts; it involved paying bonuses to departing employees willing to share their working knowledge with their replacements. The process provided an incentive to make outgoing tacit knowledge more visible.

In project-based situations, an effective approach is to have the most knowledgeable employees work alongside newer employees. Because tacit knowledge is more easily reproduced through imitation and adaptation than through traditional documentation, lett_ng workers with varying levels of expertise mingle can facilitate the transfer of experiential knowledge. Although such techniques may not alleviate an organization's knowledge drain completely, they help managers cope with the challenges of an economic downturn. And recognizing the dangers associated with losing organizational knowledge is the first step to preserving a vital asset.

Eric Lesser is an executive consultant at the IBM Institute for Knowledge Management, which is based in Cambridge, Massachusetts. Laurence Prusak is executive director of the institute. Contact the authors at and

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