Knowledge loss, often an unintended consequence
of downsizing, can be one of the costliest problems confronting organizations
today. It is also one of the most widely ignored. Better workforce planning and
targeted knowledge-retention initiatives can help you avoid losing this key
source of competitive advantage. By David W. De Long and Thomas O.
Mann Outlook Journal, January 2003  
At 5:30 one December morning in 2000, a loud blast rocked a
small town on the US Gulf Coast; residents awoke to a scene of smoke and fire.
An ethylene reactor had exploded at a nearby petrochemical plant, one of the
town's largest employers. Fortunately, emergency response teams were able to
bring the fire under control quickly and contain the toxins released by the
explosion. A subsequent internal investigation found that the company's
engineer and the operators in the control room at the time of the incident had
all been on the job less than a year, and that they probably lacked the
experience needed to prevent the accident.
As this dramatic example shows, knowledge loss, often an
unintended consequence of downsizing or retirements, can be one of the
costliest problems confronting organizations today. It is also one of the most
widely ignored. This "brain drain" phenomenon is occurring in both the public
sector and the private sector, including the chemical, utilities, oil and gas,
healthcare, automotive, aerospace and defense industries.
Companies typically are not aware of the risk of lost
knowledge until the damage is done. For example, no one expected anything but
cost savings when a 1995 workforce reduction at Delta Air Lines sent many
experienced mechanics out the door. But problems arose when the less
experienced crews that succeeded them took longer to troubleshoot and repair
aircraft, causing flight delays, cancellations, angry customers and a serious
jump in Delta's cost-of-seat-per-mile. "It was a very expensive lesson," says
Jim Smith, director of performance and learning for Delta's Technical
Operations Division. So was the experience of a major credit-card company: A
new analyst, unfamiliar with how the company ranked prospects, mailed
solicitations to people least likely to respond rather
than most likely.
  An
ongoing study by the Accenture Institute for Strategic Change has identified a
number of consequences of knowledge loss, including compromised growth
strategies, reduced efficiency and costly errors. Even innovation suffers—it
may be a bit counterintuitive, but experience in doing things the old way is
often necessary to do them in a new and better way.
Take the case of a veteran extrusion systems expert at a US
chemical company. This employee had not only helped save the company millions
of dollars by boosting the efficiency of its manufacturing processes; he had
also helped create new products and revenue streams. When he retired, the
company realized that bringing his replacement up to speed would take a year.
The only way to sustain the pace of innovation was to rehire the old hand as a
"consultant."
Doing Things Differently
A few
pioneering companies have taken the lead in developing solutions to the problem
of knowledge loss. Delta learned from its experience in 1995, and the airline
handled things differently when the September 11 terrorist attacks made another
workforce reduction necessary. Companies as different as Royal Dutch/Shell
Group, Skandia, the National Aeronautics and Space Administration, and the
Tennessee Valley Authority have implemented programs that help retain critical
knowledge.
Three major considerations must guide a company's response
to the threat of lost knowledge.
Timing: How soon will the knowledge be lost?
Days? Months? Years?
When air traffic dropped dramatically
after September 11, Delta had to cut its workforce. But the company was
determined not to stumble as it had after its previous reduction in 1995. So
when 11,000 employees companywide agreed to take an early retirement or
severance offer, Delta had less than two months to identify which employees had
jobs for which no backups or replacements had been trained, especially those
with large internal and external networks—and then capture that knowledge
before it walked out the door.
Supervisors across the board worked with a team from
Delta's learning services unit to narrow the list of 11,000 down to those
veterans whose departure would represent a "critical job loss." Once these
outstanding performers were identified, they were interviewed about their roles
at the company. This way, Delta retained as much critical knowledge as possible
on very short notice.
In contrast, the Tennessee Valley Authority, the largest
public power company in the United States, has had more time to address the
problem. Management realized in 1998 that years of downsizing had left the
utility with a median employee age of 48. TVA surveyed its employees about
their retirement plans. Although participation was voluntary, 84 percent of the
workforce provided an intended retirement date (which they were free to
change).
The company first assigned a score to each of these
employees, quantifying the risk of lost knowledge, and then prepared staffing
and succession plans to capture the critical knowledge that would otherwise be
lost. The solution has included phased retirements (that is, moving these
employees to part-time work) and mentoring.
Type: Is the knowledge explicit and rule-based,
or tacit? Can it be documented? Must it be taught directly?
Knowledge can be divided into two broad categories: the kind
that is easily documented, and the kind that is not. The first kind is
relatively simple to deal with; the second is not. The design of knowledge-
retention initiatives will always depend on the type of knowledge being
transferred.
For example, a metals refinery uses a particularly
dangerous production process involving two tanks. It suffered a setback worth
millions of dollars in lost revenues when one of those tanks, which had
recently been rebuilt, malfunctioned as it came back onstream. A similar
problem had occurred 15 years earlier, the last time any tanks had been
rebuilt. The company, which had forgotten any lessons learned from that
previous experience, was now concerned about a repeat performance once the
unit’s other tank was rebuilt later that year. To avoid a similar problem,
knowledge needed to be captured immediately.
The plant manager gathered everyone involved with
maintaining and operating the sensitive equipment, and used a question-based
reasoning software called PHRED to help make their tacit knowledge explicit. "I
had always assumed people were withholding knowledge, but in reality they just
didn't have a forum to share it," the plant manager reflected afterward. "The
senior operators never had a way of sitting down with the younger guys and
transferring what they know."
Topography: Is the problem widespread in the
organization, or is it localized?
Practices for retaining
knowledge may be applied broadly or narrowly, depending on how the organization
views the problem. Siemens, for example, has tried to instill a broadly based
formal procedure for retaining critical knowledge. Managers are responsible for
identifying departing employees whose knowledge is both crucial and unique, and
for making extensive efforts to retain that knowledge.
Shell has emphasized the use of communities of practice to
connect widely dispersed employees in networks that enable them to pool their
knowledge. One such network brought together geologists, reservoir engineers,
petrophysicists and other scientists interested in turbidite structures. The
group meets weekly, but members have formed one-on-one relationships that make
knowledge transfer a daily event.¹ Comprehensive Solutions
Whether
it's in chemicals, aerospace or government, knowledge loss is a systemic
problem involving the entire employment lifecycle—recruiting, employee
retention and retirement. One-off solutions, such as creating a database,
introducing a mentoring program or using retirees as contractors, are merely
quick fixes. Comprehensive problems need comprehensive solutions. Seven
critical success factors make up a framework for successful knowledge
retention.
1. Identifying knowledge at risk
Understanding where an organization is most at risk requires processes to
identify which employees have the most critical knowledge. As noted, Delta, TVA
and Siemens have developed such systems.
2. Career development and succession
planning
A career development program builds knowledge that
professionals need to prepare for future roles. Shell’s chemical companies have
created a technical skills management process to identify their long-term human
capital needs and to help develop the skills required to, for example, bring
new plants online. Global skill-resource managers make sure that Shell has
people ready if vacancies occur in critical positions—in this case, process
engineers, project engineers and manufacturing control engineers. Meanwhile,
local skill managers focus on the short-term needs of each site, meeting with
technical employees to assess current and future career interests, offering
advice on skill development and new jobs.
"Our ideal situation is to have three people ready for each
of our critical positions," says Cary Wilkins, manager of global HR processes
for Shell Chemicals. "So if we have critical process engineering positions open
in three sites, ideally we would want nine people in the pipeline."
3. Knowledge transfer practices
At the heart of any knowledge-retention strategy are the actual practices
used to transfer knowledge. Among the many practices that contribute to
knowledge retention are after-action reviews, communities of practice,
mentoring programs, storytelling, expert referral services, interviews and
training.
The type of knowledge involved determines the practice
used. Tacit or cultural knowledge needs to be transferred through face-to-face
interaction, such as mentoring or after-action reviews. But practical, explicit
and rule-based knowledge doesn't need face-to-face interaction and can be
transferred through training programs or technology-based systems.
Siemens has identified five questions its managers must ask
when choosing a method for transferring valuable knowledge: How long will this
knowledge be relevant? What types of knowledge are involved? How much time is
there before the expert leaves the organization? What is the expert’s level of
motivation and capability for sharing knowledge, and the successor’s motivation
and capability for acquiring it? What are the costs of applying the specific
methods of knowledge retention under consideration?² 4. Using information technology to enable
knowledge capture, sharing and reuse
Most experiential
knowledge cannot be captured in a computer system in a form that is immediately
actionable. And because this type of knowledge is usually conveyed by
observation rather than documentation, the same process may be described
differently by different people—so even when this knowledge is successfully
captured in a computer database, the employee may not search using the correct
keywords and may never find the document. Despite these obstacles, IT still has
an important role to play in many knowledge-retention initiatives. For example,
Quaker Chemical Corporation has piloted an Intraspect software system in its
R&D labs. The system makes it possible for experts to collaborate to solve
customer problems and, at the same time, helps build a fully searchable
knowledge base of e-mail discussions and documents for use in the future.
5. Phased retirements
As
knowledge-retention and recruiting problems become more acute, companies are
looking for new ways to extend the tenure of their most valuable employees. For
example, TVA recently introduced an initiative called the Conditional Part-Time
Employment Program. This allows employees who qualify to work part-time,
drawing part-time pay, while retaining full benefits and continuing to accrue
pro-rated annual leave. One objective is to entice those nearing retirement to
stay on longer to mentor and train their successors.
6. Programs for effectively utilizing
retirees
A growing number of organizations are becoming
dependent on retirees as contractors or consultants. Many companies leave such
arrangements to the discretion of individual managers. But a few have created
more formal programs, like Monsanto Company's Retiree Resource Corps, to
actually encourage the part-time reemployment of retirees.
After downsizing in the 1990s, Monsanto management
recognized that too much essential talent was walking out the door. The Retiree
Resource Corps, which offers former employees the opportunity to work up to 999
hours per year, usually has about 300 retirees working on R&D, IT,
engineering or administrative projects. Salaries are negotiable.
"When retirees come back in the door, there's no training
needed. They know the way Monsanto works," says a former lab director. "But
when a college grad or Ph.D. walks into a new job here, you're looking at six
months before they become productive."
7. Building a retention culture
Organizations trying to retain the knowledge needed to sustain performance
must create a culture that makes knowledge capture, sharing and reuse normal,
everyday practice. As a first step, this means management must determine if the
current culture's values and norms undermine behaviors needed to preserve
knowledge.
When leaders at NASA's Jet Propulsion Laboratory explored
this issue, they found that reuse had a bad connotation in the NASA culture.
According to Jeanne Holm, the lab's chief knowledge architect: "Employees want
to say they figured it out themselves. That's one of our cultural problems and
our strengths. So when we talk to people we call it 'adaptation' or 'adoption'
of processes or technologies, not 'reuse.' "
Among the values most important to supporting a
knowledge-retention culture are shared sense of mission, trust and commitment
to the individual. Employees are much more likely to want to share their
knowledge if they feel emotionally committed to the organization's long-term
mission. Employees at NASA and TVA are often eager to share their knowledge
because of their emotional investment in their employer’s success.
 Because intellectual capital frequently is the primary source of
an individual’s value to an organization, sharing it demands a great deal of
trust. If people feel that they can survive in the company only by hoarding
valuable knowledge, they will not share it. Do employees believe that the
company is being managed in a way that considers their interests as well as
those of shareholders? The answer to this question has to be yes if management
expects people to help the company retain their critical knowledge.
Knowledge-retention solutions must be driven by each
company's business strategy—there is no one-size-fits-all solution. In fact,
the problem's severity may vary within the same company. One Shell manager
says, "The average age in some of our plants is rising, and in others it's
dropping. It depends on where you are in the cycle. It also depends on when
units came up and when you laid people off."
The need to retain knowledge is going to become more
critical. Baby boomers are aging. Technologies are becoming increasingly
complex and interdependent. Globalization means more widely distributed work
teams. Retaining organizational knowledge is not just a short-term management
problem. Like the quality movement, it implies a whole philosophy.
Not surprisingly, organizations that have already begun to
address the problem of knowledge retention have found culture to be the single
most important area—and the one most difficult to change. Altering values,
norms and practices takes time, and this creates a dilemma for companies under
the gun. Managers may feel that they simply don’t have time to change their
culture to support more knowledge sharing.
But they don't have a choice. It is impossible to compete
in a knowledge economy when your most valuable intellectual capital is
constantly walking out the door. Employing better workforce planning and
targeted knowledge-retention initiatives to address the brain drain now
threatening many industries is the only way to avoid losing key sources of
competitive advantage.
 ¹See Etienne Wenger,
Richard McDermott and William Snyder, Cultivating Communities of
Practice, Boston: Harvard Business School Press, 2002.
²See
"Retaining Valuable Knowledge: Proactive Strategies to Deal With a
Shifting Work Force," American Productivity & Quality Center
Report, April 2002.
David W. De Long is a research fellow
at the Accenture Institute for High Performance
Business. His current work focuses on two problems: knowledge retention
in the face of looming baby boomer retirements and managing organizational
change to get real business value from IT investments. He is based in
Cambridge, Massachusetts.
ddelong@world.std.com Thomas O. Mann is a partner in the
Accenture
Chemicals industry group. Mr. Mann, who has extensive experience in
collaborative commerce, leads workforce effectiveness initiatives, such as
knowledge management, eLearning, and research and development efforts. He is
based in Houston, Texas.
thomas.o.mann@accenture.com Back to
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