INSTITUTIONAL MEMORY: GONE BUT NOT FORGOTTEN (PART 1)

Everyone agrees that institutional memory matters, and indeed may be the most valuable asset that any organisation ever owns. However, is it even possible to retain an institutional memory these days, and if not, what are the likely corporate impacts and how can they be addressed successfully?

In the old days, many people spent their entire working lives with one company, accumulating an encyclopedia’s worth of knowledge about how it operates along the way. This provided organisations with valuable internal human knowledge repositories that everyone knew about and could easily tap when they needed the insight of experience.

However, today’s working environment is a very different beast from the one that existed only 20 or 30 years ago. Multi-generational workforces expose the fault lines in corporate knowledge retention, especially as the Boomer generation looks to retire. Meanwhile, many Generation X and Millennial workers are looking to move on, especially if they have skills that the marketplace needs.

All of this moving around comes at a hidden cost. First, the institutional knowledge, history and business continuity possessed by the Boomers may vanish as little hand-on to the next generation occurs. Second, every time an employee leaves, part of the organisation’s memory leaves with that person, making it harder to successfully incorporate the lessons they have learned, many the hard and expensive way, and to avoid past mistakes.

A classic example of organisational knowledge that had gone “missing” was the fiasco that cost Nasa several hundred million dollars when its Mars polar explorer flew straight into Mars instead of orbiting around it. It turned out that Nasa’s planning team and the engineering team of the contractor that built the spacecraft were using differing measurement systems (metric and imperial). The Nasa engineers who would have known about the discrepancy had moved on and the corporate memory had moved with them.

I was actually involved in some of the remedial work that went on after the inquiry into this disaster, and at least some good came from it as protocols were put in place to avoid a repeat.

Of course, not every organisation is as big as Nasa or has a similar potential for pricey failures. However, every organisation faces similar knowledge-retention challenges, and when you factor in the additional impacts that unforeseen job losses can bring, most have the recipe for an organisational failure of some sort already brewing, even if they don’t realise it yet.

While the knowledge that groups of individuals retain through the process of knowledge sharing is greater than that of any one individual, some individuals are more organisationally important, at least from a knowledge perspective, than others. Indeed, in a recent study 73% of the managers interviewed said they could identify key individuals whose departure would pose a major threat to their organisation’s short-to medium-term future.

The implication is clear, that while organisations can usually sustain the loss of most employees, it’s the loss of key knowledge held by certain individuals that poses the greatest threat to them.

However, it is very difficult to generalise and put an actual figure on just how much knowledge loss costs an organisation. Losses will vary depending on a whole set of differing circumstances and operating parameters; the one common denominator being that the more skilled the employee ism the more likely that his or her departure will have a significant impact on institutional knowledge and memory.

Whatever the level of an individual employee’s knowledge, what can be quantified are the likely impacts caused by the loss of this knowledge on an organisation’s intellectual capital (the value of its corporate knowledge). These losses can be seen through the lens of differing types of capital — human, social, structural and relational capital. Let’s take a closer look.

Human capital: The lost value here is in terms of competence and experience, seen in the activities the employee performs. This knowledge is a corporate resource allowing the organisation to create new knowledge, solve problems and develop workforce capability. The specific loss is that of the employee’s functional expertise, experience, skills and contacts, and the specific impact is that of a decrease in organisational capacity and productivity.

Social capital: This is the value that is created through relationships, which offer the opportunity to create, share and combine knowledge resources. The specific loss is that of the employee’s ability to draw on accumulated past knowledge to provide valuable insight on how to solve current problems.

Structural capital: This reflects the organisation’s ability to capture, package, share, and re-use its knowledge in support of its processes. The specific loss is that of the employee’s contribution to the capacity to be an effective learning organisation.

Relational capital: This is the knowledge an organisation gains through its relationships with its customers and suppliers. The specific loss is that of the personal business relationships that allow an employee to contribute value to the organisation’s knowledge base.

So, it’s obvious that losing an employee’s knowledge has consequences for an organisation. But are there any practicable, effective and achievable strategies and practices organisations can adopt to minimise their knowledge-loss risk? I’ll look at some approaches that might fit the bill in the next article in the series.