Organizational Memory Loss And Brain Drain
The brain never seems to lose a memory. What really happens is that the memory gets lost somewhere in the brain (except, of course, if the brain cells are dead). That's exactly what happens with organizational memory loss. Parts of the organizational brain do not know the experience or have access to the knowledge of other parts, and the knowledge is lost. No matter how advanced the knowledge in one part, if not communicated, transferred, and transformed to organizational learning, then it is apt to be lost.
Organizational memory loss occurs when one part of the organizational brain is oblivious to the knowledge that other parts possess. Memory loss is also noted when the same department or division forgets the knowledge it gained from previous experiences or projects. As a result, organizations tend to reinvent the wheel every time a new, yet in many respects similar, project is undertaken. This also means the organization will repeat the same mistakes, given that it has not learned from previous experiences. Many organizations that are skeptical of the business value of KM can hardly deny the losses they sustain as a result of losing valuable knowledge resources. Memory lost is knowledge lost, which requires investment to be recreated, jeopardizing the efficiency and quality of the value creation process, and the productivity of the organizational operations. Indeed, the Gartner Group forecasted that in 2001 organizations that lack KM programs will lag by 30 to 40 percent in speed of deployment of new products and services.
The main reason behind this is that organizations do not know what they know. Not knowing what you know as an organization would result in serious underutilization of knowledge resources, as strategic decisions get made without full appreciation of the actual ability of the organization to compete in a certain area of knowledge. It cuts both ways. In some situations, there is an overesti-mation of the depth or breadth of organizational knowledge that an organization possesses compared to the desired competitive position, resulting in impaired ability to attain that position. Discovering this at a time when things can still be saved is not enough since the cost of acquiring the requisite knowledge resources will undermine profits. On the other end of the spectrum are organizations that underestimate their knowledge and as a result lose many opportunities to capitalize on these resources. What makes this more eminent is that knowledge as a resource has a short life cycle and can be rendered obsolete in a short time if not grown and developed.
Examples abound. Look at your own organization. How many times has your division or department spent thousands of dollars to acquire the required information or knowledge, only to find out that another department has done most of the work before? How many times has a team adopted a solution that another team in the organization has tried and, finding that it does not work, perfected another? Repeating the same errors, looking for resources externally that are available somewhere else in the organization, and not being able to repeat your success are all manifestations of organizational memory loss.
Take Ford, for example. Deciding to replicate its unprecedented success with Taurus, Ford looked for the practices behind Taurus success. Though the procedures and processes were codified, that did not provide the reason why and how Taurus was so successful. There were other secrets that only those who worked on the project possessed. Ford found that the team who worked closely with the Taurus model, and thus had the requisite tacit knowledge, had left the company without passing this knowledge to any other employee. The knowledge behind Taurus's success was lost forever. The only way Ford could regain it was to invest again in creating that knowledge from scratch.3 Not wanting the Taurus experience to recur, Ford created the Best Practice Replication (B PR) program, with the main goal of collecting, verifying, and transferring best practices between the 53 plants of the organization with exponential profits. Ford's BPR program generated more than 2,800 best practices by 2000, with an actual added value of $886 million and a projected added value of $1.26 billion.4
In fact, the phenomenon of memory loss is very prevalent, particularly in big organizations. Departmental and divisional isolationism, as well as knowledge hoarding, have been behind many financial losses and poor performance. In a food processor company with 42 plants, it was found that although all the plants used essentially the same manufacturing processes and technologies, their practices differed greatly. Not only had each plant developed its own practices, but performance levels were so varied that there was a 300 percent difference in performance between the worst and the best performing plants.5 The different plants, and the organization as a whole, were learning from neither their mistakes nor their successes. No plant knew what the other plants knew.
The memory loss problem is compounded by another deficiency in the organizational brain - the brain drain, wherein valuable knowledge resources are lost with employees leaving the organization. It happens when management fails to capture the tacit knowledge of its employees by transferring it to explicit knowledge.
Only 10 to 30 percent of an organization's codified (explicit) knowledge in databases and manuals is the knowledge needed for them to operate the enterprise.6 The rest are tacit knowledge resources. This means that employees' brainpower, tacit knowledge, or human capital is the most important resource in the organization's value creation process. If employees remained with organizations forever, then there would be no real need to instill the critical knowledge of employees into the organizational knowledge base or transfer it to other employees. However, high turnover makes it inevitable that some knowledge workers will walk out with valuable knowledge resources that the organization will lose forever and have to reinvent again. An estimated 30 percent of the workforce in the U.S. private sector leaves in the first couple of years of employment. The figures are more alarming for government agencies, with an estimated 50 percent of the workforce retiring every year.7
Confusing knowledge with information, many organizations thought implementing robust information technology (IT) programs would enable them to capture the tacit knowledge of their employees. Information databases were kept sometimes of e-mail communications, and tools were provided to facilitate information flow across the whole organization. The result was a great disappointment. Information management and technology, though important enablers of KM, will not do the trick. People will not share their knowledge simply because they have e-mail, nor will they update the information resources in databases if not related and relevant to their jobs. The brain drain problem cannot be solved without understanding that knowledge creation is also a social process. That is what KM offers by explaining what knowledge is in the organizational context.
Defining organizational knowledge is one of the main contributions of KM. KM practitioners repeatedly stress the distinction between knowledge and information resources. By doing so, the relationship between knowledge and information, tacit and explicit knowledge, and hence KM and IT/information management is clarified. This is very important since there are still many organizations that mistakenly believe that to implement an IT infrastructure to connect people together, and to build a database, is to manage knowledge. This confusion stems from a misunderstanding of what knowledge is. So what is knowledge, anyway?
This article is part of eBook. To read the rest of the eBook (full version) please look at: capital steps