Technology Is Not Enough: Improving Performance by Building Organizational Memory

Knowledge management promises to improve business performance by using technology to capture and share the lessons of experience.1 Truly improving business performance, however, demands more than simply putting more knowledge into databases; it requires leveraging the many ways that knowledge can migrate into an organization and strengthen business performance. Distributed technologies, such as Lotus Notes or intranets, can be used for disseminating information and creating virtual forums that connect experts. But they are only one of many ways in which learning from a significant organizational experience can be captured and integrated into an organization’s operations. For example, an organization may be able to embed knowledge gained from an experience by altering work processes or a product’s architecture. By embedding learning, companies can reduce the information overload of their employees and improve the consistency and effectiveness of knowledge use throughout an organization.

One way to make organizational learning more tractable is to consider it as the development of an organization’s memory.2 The concept of organizational memory is not new; for some time researchers have pointed to various features of organizations as key components of memory.

These discussions, however, focus on organizational structure, physical layout, cultural values, or tacit routines—forms of memory that change only slowly over long periods and bear an indirect relationship to business performance. Managers need to know where important forms of memory reside. By defining the myriad ways to embed knowledge in an organization’s memory, we believe companies can leverage learning from key experiences and improve business performance.

Organizational Learning as Organizational Memory Development

To better understand how knowledge that develops from significant experience migrates into an organization, we examined learning from 22 projects in professional services, financial services, and manufacturing organizations. The projects ranged from new product development and roll-out initiatives to process improvement efforts to consulting services and development of financial solutions for investment banking clients. The companies were primarily Fortune 250 organizations that had global operations. We asked people what they had learned from their experience on these projects and where the knowledge gained had migrated within the organization. To capture both operational and strategic perspectives on learning, we conducted the interviews across several hierarchical levels (e.g., in a consulting firm, we interviewed the partner of the office, the partner managing the identified project, and the manager and consultants working on the project).3

We learned that organizations remember lessons from the past in a variety of ways. An organization’s memory resides in the minds of its employees and in the relationships that employees tap on an ongoing basis to accomplish work. Memory is also stored in repositories such as computer databases and file cabinets. Memory can also be embedded in work processes and in product or service offerings that have evolved over time and reflect lessons learned from an organization’s past experiences. In today’s knowledge-based economy, managers can improve performance by deliberately developing organizational memory and using the growing stores of knowledge to guide organizational activities and decision making.

Individual Memory and Organizational Memory

A crucial form of knowledge in organizational settings resides within the individual employees who enter and exit the workplace each day. Though often overlooked in efforts to codify and capture explicit knowledge, the explicit and tacit knowledge of employees is critical to an organization’s ability to solve problems and create new knowledge.

Employees primarily absorb this knowledge through social interaction—by working with those who are applying knowledge gleaned from past endeavors.4 An individual’s knowledge significantly affects organizational memory and the collective knowledge that drives individual performance during interaction with others.

While individual knowledge is an important part of organizational memory, it is always at risk of being lost. Without opportunities to learn from others, employees are in danger of intellectual stagnation. Ironically, the most knowledgeable employees are often in greatest danger of being in positions with fewer learning opportunities. Employee learning can be stunted (at least temporarily) when an organization solely exploits an individual’s current expertise in upcoming work rather than helping that person develop new or complementary skills. For example, companies often employ people on projects based on what they already know rather than on what they might be able to learn. As one team member in a law firm remarked, “You develop an expertise, the organization exploits this expertise in future projects, and your individual development stagnates.”

Employee turnover also endangers organizational memory, since people take what they know with them. Many claim that knowledge workers are best thought of as “volunteers” able to apply their knowledge elsewhere when a better opportunity arises.5 Since employee turnover in knowledge work is fairly high, firms often lose this form of organizational memory. As one manager put it, “It is the better people with the better knowledge who frequently find the better opportunities.” Many organizations are combating the problem with programs to capture tacit knowledge. For example, one approach is to videotape interviews with experts and make these tapes available to all employees. Alternatively, organizations are beginning to compensate experts financially and offer them new job arrangements. For example, one consulting firm is providing people with spare time and money to develop expertise in areas that interest them.

Personal Relationships

It’s rare for any single person to know enough to solve today’s complex problems. In most organizations, knowing how to find and apply relevant information efficiently is more practical than trying to master vast amounts of knowledge.

Managers sometimes assume that people turn to databases or policy and procedure manuals to obtain information. In practice, however, people usually rely upon a network of relationships for information and advice.6 Rather than turning to databases or policy and procedure manuals, they seek information from trusted and capable colleagues. In fact, people are about five times more likely to turn to friends or colleagues for answers than to other sources of information.7 In short, who you know significantly affects what you eventually know. However, technology can certainly be a tool for building relationships and facilitating the exchange of ideas among colleagues. For example, chat rooms allow physically distant employees to communicate with and learn from one another.

Employee relationships often develop after working in a project team or with a department liaison. Two important features are useful for building organizational memory. First, time spent interacting on work tasks establishes a sense of reciprocity and trust among colleagues. This social capital encourages employees to turn to colleagues to get useful assistance or advice about future initiatives. For example, we spoke with one manager who remarked, “Just because [a team member] knows something that I may need to know does not mean that he is going to share it with me in a helpful way. This is not because he is hoarding the information, but because he is busy and doesn’t have the time to share what he knows at the level of detail that I need. The only reason that he will take the time to tell me is because we have worked together, fought through a tough project, and developed a relationship that we each know we can rely on.” Second, by working closely together, colleagues build an understanding of each person’s particular knowledge and skills. This understanding allows employees to seek out the right peers for information in the future.

Databases

Distributed technology, such as Lotus Notes or intranets, is at the heart of knowledge management efforts.8 Most initiatives have concentrated on identifying relevant knowledge in various pockets of an organization in order to build a technical infrastructure to support knowledge capture and dissemination. Knowledge repositories often contain reports, memos, and other work documents containing lessons that can be shared among employees. Ideally, these technologies allow an organization to apply its collective intellect to any problem, regardless of time or geographic location.

At best, however, databases only complement the personal networks of those seeking answers to problems. No matter how robust the search functionality or how customized the database, a person’s network of human relationships often determines which knowledge they access. People usually take advantage of databases only when colleagues direct them to a specific point in the database. For example, it is common for people to ask other people for information and to be directed to a specific point in a database for lessons or tools. Alternatively, people might point out work products, such as legal documents developed for other cases or sales presentation materials, that could be reused with some modification in the current situation. Rather than engaging in an extensive search through an organization’s repository of knowledge, employees turn first to friends and peers to learn where to find relevant knowledge.

Still, knowledge repositories play an important role in preserving organizational memory. Learning from the experience of others and reusing materials that have been effective elsewhere improves the quality and speed of problem solving. Nevertheless, technology is only one form of memory that employees tap when solving problems—and its use is limited.

Work Processes and Support Systems

Experiential lessons become part of organizational memory by means of alterations in processes or support systems—for example, by changing incentives, evaluation processes, or planning and budgeting processes.9 As TQM has shown, embedding learning in an organization’s core processes or support systems has a long-term effect on employee behavior. But a company doesn’t have to embrace the TQM movement to embed learning: McDonalds is an organization that effectively incorporates knowledge into its practices. The company has “ ‘engineered in’ knowledge, designing machines that make it virtually impossible to overcook the hamburgers, underserve the amount of fries, or short-change the customer.”10

Many organizations have well-established methods for embedding learning into recurring processes. However, it is difficult to develop organizational memory from one-time learning events. Only a few organizations make an ongoing, systematic effort to learn from less structured events such as new product development or innovative financial transactions. For example, investment banks often pool experts to develop a unique financial solution for a client, yet they lose this innovative approach when the team that generated the solution disbands. An organization can often learn the most from this kind of event, particularly in a turbulent business environment that precludes long product life cycles.

Products and Services

An organization’s key product or service offerings constitute a powerful form of ongoing memory. In several organizations, we found that learning was embedded in product/service line extensions or entirely new service lines. Products or service offerings also tend to shape which skills and organizational capabilities a company will develop. As one manager explained, “Our service offerings dictate what we learn to a large degree. Although we joke about it, the notion of selling a project and subsequently learning how to deliver it is a potent source of learning for us.” Skills and knowledge demanded by service and product offerings influence both training strategies and experiential knowledge developed on the job. Furthermore, different key offerings determine ways of organizing, communicating, and problem solving that focus employees on certain information, knowledge, and skills, and not on others.

In addition to shaping an organization’s expertise over time, product or service offerings can result in blind spots. Organizations are designed to support the delivery of core offerings to valued market segments; when markets change, it is often extremely hard to adjust. Recall the story of IBM, which dominated the mainframe market but fell roughly five years behind competitors in bringing the technically simpler personal computer to market. The trajectory of improvements in features and functionality that are dictated by an organization’s best customers often results in unawareness about emerging service offerings in new markets.

How To Turn Experience into Working Knowledge

How can managers take advantage of the five kinds of organizational memory, each with its own set of opportunities and issues, so their companies can reap business benefits?

The first step for managers seeking to leverage learning is to determine which experiences are worthy of learning from. It is overwhelming and unproductive to try to learn from all situations. Identifying which experiences hold important lessons for others helps direct efforts to capture and disseminate knowledge toward the areas that will build organizational memory with a payoff in performance. Important learning events are often critical, one-of-a-kind business initiatives, such as consulting engagements during which unique approaches were taken that can be employed elsewhere in the organization. They are the most difficult to learn from, since daily pressures keep participants focused on surviving the present rather than planning for the future. If anything, employees will choose to learn from events that offer the fewest learning opportunities—ones where they are already confident they know answers and so do not have to take risks or work hard to learn. The main leadership challenge consists of establishing what needs to be learned and how the learning will drive organizational performance.

After identifying relevant experiences, managers must next determine ways to maximize their inherent learning potential. Managerial efforts directed toward people and relationships include offering structured ways to learn from experience and assigning staff to positions that will develop their skills. The final step is to embed into the organization the knowledge gained from the enhanced experience. Managerial efforts directed toward databases, work processes and support systems, and product or service offerings seek to ensure that the lessons of experience influence how work is done throughout the organization.

From Individual Experience to Organizational Knowledge

Employees should learn from experience in ways that benefit the organization’s future and their current project. Companies need to maximize individual learning and then make that learning available to other organizational members. The U.S. Army refers to this as creating “local value.” The Army’s rule of thumb is that efforts devoted to individual learning must produce value for the individual and for the effort that he or she is engaged in. Once individual learning occurs, lessons can be aggregated, validated, and synthesized to produce organizational learning.

The U.S. Army was the first large organization to implement after action reviews (AARs). In the Army and in some Fortune 100 organizations, the AAR has proved to be an effective, structured way to get people to capture learning from their experiences. The process allows groups to reflect on questions such as: “What was the intent?” “What actually happened?” “What did we learn?”

Organizations like Chrysler, Ford, and Analog Devices use the AAR to continually improve new product development. For example, at Analog Devices, each product development team works on one project with many interrelated tasks. Once a week, employees prepare a one-page review of their performance. Later, team members meet to compare, consolidate, and identify what they have learned and how this knowledge can improve their performance. Subsequently, the one-page reviews and the consolidated summaries are used during the six-week review of all product development projects. Team learning is consolidated and used to modify and improve the product development process itself. But at Analog Devices, the process does not stop there. The six-week reviews become the basis for a total review after the company introduces the products into the marketplace. Experiential learning results in modifications to the product development process and ensures that employees receive training that is directly related to their work. Constant improvement becomes a way of life.

From Personal Relationships to Organizational Know-How

Much of the important work in organizations is accomplished by teams. Strong relationships usually develop in project teams or other work groups assigned an organizational task. These relationships are easy to overlook, yet they provide a crucial component of an organization’s memory. In working on a project team, an employee has the opportunity to learn precisely how the knowledge of colleagues can be helpful in solving a problem. Unfortunately, most management interventions emphasize shared vision and process skills that help create a harmonious environment but do little to educate team members about each other’s skills and abilities.

The problem of “unshared knowledge” is a common one among newly formed work groups.11 Rather than engaging in discussions to learn about the backgrounds of individual members, most groups naturally focus on what its members have in common; common interests and experiences make it easier to converse with new acquaintances. However, the result is that groups rarely understand their teammates’ individual skills and abilities until late in a project (if at all). In the past, work relationships developed through interaction over time. Today, teams form and disband on a project-by-project basis, so managers must pay more attention to the way members develop knowledge about each other.

One way to develop that awareness is by focusing on task-based activities. These activities build harmony and provide opportunities for group members to demonstrate their skills and abilities. British Petroleum uses peer reviews to tap into the knowledge of group members. The concept is simple: Before engaging in any significant task, an individual or group invites peers to provide input. Because the emphasis is on performance, those with the most relevant knowledge and recent experiences are asked to participate. The process also supports reciprocity and trust building, which encourage the sharing of expertise. By employing this peer-review process, BP has reduced the cycle time for oil drilling and saved millions of dollars in the process.

For specific projects, jointly assigning team members to various tasks can be an effective way to develop learning relationships. Proponents of team learning often ignore the fact that most time spent on projects is not in meetings but on tasks. Giving two or more members the chance to collaborate can build relationships and improve the quality of ideas during team discussions. Several consulting organizations assign two or more people to work together when possible, a practice that contradicts conventional wisdom; usually, due to start-up and marketing costs, it is more efficient to assign one person to a project for six months rather than two people for three months. However, many of these firms recognize the importance of relationships in keeping morale high for future projects. They make what may appear to be a poor economic decision because of the longer-term payoff.

Finally, organizational initiatives broader than a team project promote networks of relationships. Communities of practice—informal groups of individuals that interact regularly around work-related issues and challenges—facilitate collaboration in professional services, R&D, and manufacturing.12 Though generally not visible on any organizational chart, they often play a critical role in sharing knowledge and solving problems. In many cases, these communities are effective forums for individuals with specialized knowledge to collaborate and learn from each other. In others, they provide means of developing strategic capabilities or technologies and facilitating change processes.

Communities of practice can be particularly useful for organizations that have made the transition from functional to cross-functional team structures. For example, the exploration division of Shell Oil changed to a team-based structure to overcome inefficiencies caused by cross-functional hand-offs. As a result, the division lost the depth of knowledge that accrues in a functional structure. By forming communities of practice, they were able to reintegrate the knowledge of these specialists for the relatively low cost of providing time, meeting rooms, and an intranet site. The specialist groups enjoyed meeting colleagues who thought as they did, and the organization benefited from more effective problem solving.

However, communities of practice pose challenges. For example, while technology can help support communities of practice, research and consulting experiences show that the social bonding among a group’s members is more important. Developing that bond takes effort and time. Most organizations’ performance management systems value either team or individual performance and do not easily accommodate or value the benefits that emerge from communities. To obtain those benefits, organizations must often make an investment for the community to develop and thrive. Such investments usually entail providing spare time and meeting space for these groups to convene and offering some form of technology, such as an intranet site, to allow community members to share knowledge between meetings. Finally, in these initiatives appointing one or two leaders can provide an opportunity for them to develop to their fullest potential. For example, communities may employ a leader to maintain membership lists, recruit outside speakers, and help in scheduling community meetings and activities.

Turning Databases and Other Technologies into Instruments of Learning

Organizations that effectively leverage information technology to support organizational memory do two things. First, they have the technology, policies, and procedures to ensure that lessons and reusable materials such as legal documents or sales presentations are screened by panels of experts (to ensure quality of data) and entered rapidly into distributed technologies so that others benefit from the knowledge. Second, they have begun to leverage the knowledge contained in databases and the technology that enables employees to engage in dialogue.

Consulting organizations have been among the earliest users of distributed technologies to house lessons, reusable documents and presentations, and methodologies. In the early 1990s, Andersen Consulting began to produce global best practices CD-ROMs and distribute them to consultants for use with clients. Over the years, the firm has developed an intranet site called Knowledge Space that provides consultants with various forms of knowledge, including methodologies and tools, best-practice examples, previous exemplary engagements, and standard marketing presentations for a wide range of service- and industry-focused offerings. In addition, the site hosts online communities that allow experts engaged with a particular concern to connect and to start a conference center to support virtual teamwork.

Any technology designed to improve business performance must support the way a given community accomplishes its work. Consultants, for example, spend most of their time in client settings. When knowledge repositories are housed on an intranet, downloading tools or presentations can be cumbersome. To support its consultants in the environments where they work, Ernst & Young developed knowledge repositories called PowerPacks that can be downloaded to individual computers. These are highly filtered databases, which contain leading client deliverables, best practices, skill profiles of experts in any given practice, and articles or conference references. These PowerPacks are tailored to how the consultant works and support this work in several ways. Access to knowledge is instantaneous. The communities using the knowledge can customize the display and organization of the databases. All the materials in the PowerPacks are evaluated for their applicability.

Finding ways to identify expertise to solve problems is a critical capability. An assumption underlying knowledge repositories is that, as time passes, consultants encounter problems similar enough that solutions generated in one area are appropriate in others. This is not always true because problems may be novel or complex. In such situations, an organization needs an expert to handle the problem as efficiently as possible.

Many organizations leverage online communities of practice and other forums in order to find experts. One of the greatest points of leverage in promoting organizational learning exists at the executive level. In 1995, the U.S. Army started a program to promote collaboration, learning, and information exchange among its newly promoted one-star generals. Traditionally, upon promotion to the rank of Army general, a person received two commemoratives—a belt and a handgun. As a sign of changing expectations, the Army began offering newly appointed generals a laptop computer configured to promote a virtual learning community among these globally distributed executives.

The promotion to one-star general represents a significant increase in responsibility in the Army. These generals become involved in long-term planning and strategic decision making, skills that they have not necessarily honed by this point in their career. By creating an electronic community for the generals, the Army hopes to provide opportunities for them to learn from each other. In addition to enhancing the effectiveness of this group, the Army anticipates that collaboration via an electronic medium will become standard practice among its “executives.”

Learning from Work Processes and Support Systems

Many organizations have sophisticated ways to improve repeatable work processes based on continuous improvement and total quality management (TQM) practices. However, the quickly shifting work processes of today make TQM difficult to achieve. As a result, organizations must find ways to ensure that learning is not forgotten as soon as a project is disbanded or changes occur. Unless executives exert some effort, daily pressures make it unlikely that lessons will filter into the organization. After all, team members are swamped with their own work and have few incentives to help when other teams ask for advice.

At Chrysler, product development teams capture lessons learned and translate them into suggested modifications to the product development process. Each team is expected to improve its own performance and to incorporate learning to enhance product development throughout the company. As the teams move through various stations, such as paint or interior design, they capture lessons and future possibilities based on scientific advances and direct them back to the specific station. As they progress through each station, teams submit suggestions for improvements to a panel of experts. Accepted suggestions become embedded in the work practices and processes of the specific department. As a result, when team members leave, their learning is not lost.

Xerox developed a distributed database called the Eureka system to capture knowledge about how to fix and service copiers. Those who service Xerox machines refer to process manuals that help them evaluate and repair machines; however, service technicians often confront situations that are not covered in the manuals, or they discover better ways to service machines. They are encouraged to submit their ideas and observations to a Tiger Team (a recognized panel of experts in the organization) for evaluation and validation. The board adds the most promising tips to the manual. As the tips accumulate, they are reviewed to determine how the service process should be modified and/or the whole product redesigned. Personal recognition partially motivates service technicians to participate, because their name is associated with the documented suggestion. Those credited with the most tips may be promoted to the Tiger Team—a highly valued position achieved through peer recognition.

Product Development and Service Delivery as a Learning Experience

Learning from the process of developing products or by providing services is perhaps the ultimate way to build organizational memory. When managers understand how the company’s main offerings shape future competencies, they can concentrate on enhancing capabilities, and avoid building skills that won’t be of value in the future.

Take, for example, the case of a professional services firm that was developing a service line in telecommunications consulting. During one project, the consulting team discovered a way to identify and assign a value to inefficiencies in billing and collection processes (a core process in any telecommunications organization). The same consultants soon used this approach again in another high-profile telecommunications organization.

As word of success spread to other offices, several partners and managers specializing in telecommunications began inquiring about this approach. Unfortunately, no one had documented the details of the service offering, and the four key people employed in the initial work had left the firm. As a result, the consulting firm lost the ability to sell this new service. There was no organizational memory of the process, the tools, or the key selling points. Other consultants in this firm did not even try to deliver this offering to their clients, preferring to revert to more familiar methods.

A consumer products company demonstrates how creating a product promotes the development of organizational memory. After each new product development effort, the firm conducts project debriefings that cover operational problems, learning in terms of new materials or available products, and the project’s financial performance. This company then takes the debriefing process one step further. First, the reviews focus on identifying knowledge that should shape the next development effort (e.g., scientific or engineering advances not yet implemented). Second, the organization analyzes the skills and infrastructure needed for its new product initiatives and plots these needs against the skills perceived to be relevant from a competitive perspective for future offerings.

Targeting, Structuring, Embedding

Many organizations are turning to knowledge management to improve business performance. Inundated by vast stores of information, organizations must do more than accrue and store knowledge in order to improve their profitability. Managers must provide structured learning processes for individuals and groups so that newly acquired knowledge can be integrated into daily activities.

The first step is to target where learning needs to take place: What areas are strategically important? The second step is to provide a structure that encourages individuals and groups to reflect upon and share what they have learned from their experiences. The third step is to build organizational memory by embedding the knowledge cultivated into databases, work processes and support systems, and products and services. Capturing and sharing knowledge through distributed technologies is not the only, or even the most important, form of organizational learning today. By strengthening all five forms of organizational memory, companies can ensure that valuable experiential learning informs collective (and thus individual) processes that will continue to change as operations evolve according to market demands.