Knowledge is Power—and Profit
Category: Business • Jan 5, 2021
Preserve your institutional knowledge and protect your bottom line.
“An investment in knowledge pays the best interest,” Benjamin Franklin famously wrote. Be sure to invest in your company’s institutional knowledge—and reap the dividends.
Institutional knowledge is the understanding of processes, systems, and values that are vital to the continued operations of any company. What happens to your institutional knowledge when key employees walk out the door? It disappears—potentially taking your productivity and your profits with it. Unless you do something.
The Society for Human Resource Management, citing U.S. Department of Labor statistics, noted, “By 2050, the number of individuals in the labor force who are age 65 or older is expected to grow by 75%, while those who are 25 to 54 is expected to grow by 2%.” That makes a huge swath of the workforce eligible for retirement every year—for many years to come.
It isn’t just retirees that are fueling the massive loss of institutional knowledge. As Dr. Andrew Pena explained, “… some Gen. X'ers and many Millennials are not remaining employed in one organization long enough to learn from their older colleagues.” Workers are increasingly mobile, and few younger workers remain in roles for decades—as was the norm for their predecessors.
In manufacturing, many of the workers who will retire in the next decade are industry pioneers who created and perfected existing processes. According to GlobalSpec’s 2019 Pulse of Engineering Survey, 40% of respondents stated that loss of senior employees to retirement has increased. The 2,180 survey respondents work for companies large and small, across the entire engineering sector.
While these professionals are noticing losses, nearly half (49%) of respondents reported having no formal practices at their companies to identify senior level and specialized experts to train, transfer, mentor, manage, or retain knowledge in their organization. If companies are aware of the problem, why are they not addressing it?
“Knowledge management is important—but not urgent,” said CEO of GlobalSpec Pete Hoelscher. “Most executives will tell you that knowledge management is a concern, but that there are other higher priorities. As for the engineers, our research has shown that they are working on more projects simultaneously than ever before and are under a lot of pressure. It makes sense that knowledge management projects get delayed.”
Losing knowledge doesn’t just make everyone’s jobs harder; it is directly tied to losing money. “We found that on average, 42% of the skills and expertise required to capably perform in a given position will be known only by the person currently in that position,” explained Ari Bixhorn, Vice President of Marketing for Panopto, in an interview with HR Daily Advisor. “In other words, should that person leave, their remaining colleagues won’t be able to do 42% of their work, and someone hired into that role will need to learn 4% of it from scratch.” That adds up to loads of lost time and money.
Companies need to incorporate knowledge management into their long-term vision. “Instituting a knowledge management system does not have an immediate revenue result, but you have to look at it from a longer-range picture to see the ROI,” Hoelscher said. “There are several companies that are already using knowledge management to their competitive advantage—Ford, GE, and Amazon come to mind.”
Increasingly, professionals are eager to focus on knowledge management—as they are beginning to realize how much they must gain—and lose. A full 61% of surveyed engineers said that knowledge/information loss was very important or extremely important as employees left the company, according to the 2019 Survey.
A Preservation Plan
The first step in stopping knowledge loss is planning. Start with some basic information:
- Decide who owns it. Hoelscher suggests that the vision for a knowledge management effort come from someone at the top, such as the COO or the VP of Operations. This will make gaining buy-in throughout the company easier.
- Make a list. Have leadership identify information that is critical to preserve. This includes information that is instrumental to daily operations.
- Seek out resources. APQC (American Productivity & Quality Center) is a leading source for knowledge management research and resources. They have an interactive knowledge management framework and many other tools. You may also find industry specific resources online.
- Focus on information that is difficult to replicate. Technical processes, knowledge gained from difficult experiences, complex instructions, and even industry contacts can be hard to recreate. Make sure employees are in the habit of saving this information in common areas, instead of keeping it in their heads.
- Don’t forget the “simple” things. It is also important to make sure that even the simplest processes are explained step-by-step, and the instructions are saved in a shared location. If an essential employee leaves, simple tasks may prove to be quite difficult.
Practical Steps for Preservation
- Make sharing a priority. Be explicit. Explain to employees that preserving knowledge is a company priority.
- Be proactive. Don’t wait until employees start leaving to start sharing knowledge. Start now.
- Implement sharing tools. These can be as simple as creating a shared drive or a cloud-based file storage system, or as complex as building or installing an entire database. There are free tools that can help you get started including Google docs, Dropbox, and many others.
- Build a library. Once you have a system in place, create a company knowledge library. Move documents into a shared location, so that they can be regularly reviewed and updated. According to the Harvard Business Review, “Intel for example has an internal wiki (called Intelpedia), which gives employees a way of both capturing and accessing important terms, procedures, historical incidents, and more.”
- Save documents, records, and reports. These tangible pieces of institutional knowledge need to be saved in shared locations (instead of stuffed into the bottom of a filing cabinet). What may seem mundane to current employees could be extremely enlightening to future employees. For instance, machine performance records may reveal patterns over time, which are not initially obvious.
- Create methods for sharing intangible information. These are the stories that the “old timers” tell about the “one time.” Or the intuition that a machinist has developed after years on the job. Develop processes that allow subject matter experts to share this knowledge before it is gone. In-person training classes can be used to share this oral history.
- Use mentoring. A great way to connect experienced workers and new hires is through a formal mentoring program.
- Use video training. Have subject matter experts record short videos about vital processes and how they are performed. These can be used during onboarding and ongoing training.
- Create a succession plan. A succession plan can help you understand how many employees may be leaving in the next few years and envision how their roles may be filled. This can also help you identify future leaders.
- Discourage traditional retirement. Offer telework options and/or flexible hours to potential retirees to encourage them to continue working while preparing their successors.
- Incentivize sharing. Offer key employees who are retiring or leaving the company monetary incentives for sharing knowledge before leaving. Make sharing standard operating procedures part of your exit process. Consider adding information sharing as one of the metrics in employee reviews. Reward individuals who proactively record and share knowledge.
Institutional knowledge was gained over generations and honed through firsthand experiences. Do not let it walk out the door with each former employee. Capture it and put it to work. Acting now to save institutional knowledge is in your company’s best interest.