Why knowledge is power

by 15 May 2007

When long-term members of staff leave an organisation, they also take with them organisational knowledge. Melissa Yen speaks with Professor Wayne Brockbank about knowledge transfer and why it will become increasingly important

Employees are a valuable source of business knowledge, skills and experience. However, the ageing of the population and escalating competition for talent are combining to intensify the issue of how companies go about transferring knowledge from one generation to the next.

Wayne Brockbank, clinical professor of business and director of the Center for Strategic HR Leadership at the University of Michigan’s Ross School of Business, says that organisations should see the issue as a window of opportunity to gain a competitive advantage through successful management of the issue. “As the speed of information generation, processing and dissemination accelerates, the mandate for speed in knowledge transfer will become more pronounced,” Brockbank says. “Knowledge transfer will be increasingly seen as a competitive advantage only if companies succeed at knowledge transfer before their competitors.”

HRs role in knowledge transfer

Knowledge is a fundamental part of the human side of business, and Brockbank says HR should play a central role in conceptualising the knowledge requirements of individual workers and of the company as a whole. HR must therefore establish the mechanisms and processes by which organisations can create and sustain knowledge management as a key competitive advantage.

“HR’s role is to ensure that firstly, the importance of knowledge transfer is recognised and valued by senior management. Secondly, that the system of knowledge transfer mechanisms is in place to allow knowledge transfer to occur and that the corporate culture encourages and rewards learning in general, as well as intergenerational knowledge transfer. Finally, they must ensure that knowledge transfer occurs on an ongoing basis.”

However, while HR is responsible for the maintenance of knowledge transfer mechanisms, the onus should not rest entirely with the HR department when it comes to the success of such mechanisms. All parties involved should be held accountable in getting the most from the experience and being proactive in their approach to their careers. “I believe strongly that the onus should, in fact, be on the shoulders of the junior staff. It should be clearly communicated to them that their careers are primarily their responsibility,” says Brockbank.

Know-how for HR

In order to understand the importance of knowledge transfer, Brockbank says it is useful to distinguish between three types of knowledge held by organisations: technical, industrial and institutional.

Technical knowledge is knowledge that focuses on a specific area of expertise, he explains. It is usually generic in that it can be transferred from one company to another and, in many cases, from one industry to another. Examples include finance, electrical engineering, writing skills, sales and benefits administration.

Industry knowledge focuses on knowledge that is unique to a given industry, and includes knowledge of customers, competitors, suppliers and industry specific supply-demand logic.

Institutional knowledge is specific to a given company or organisation. “It focuses on knowledge that makes the whole greater than the sum of the parts and maximises shareholder value while providing integrated business solutions. Such knowledge includes working in and between company teams, understanding how to access internal information and decision makers, leveraging corporate values and culture, and integrating company activities around customer requirements,” he says.

Each of these types of knowledge must be passed to the next generation, Brockbank says, with the most importance being placed on institutional knowledge. “Institutional knowledge is unique to the organisation and is, therefore, very difficult to imitate. It is centrally important since it contains the collective ways of thinking and behaving that gives organisations an identity in the minds of employees, customers and shareholders.”

On the other hand, technical knowledge is more easily accessed through books, classes and consultants, while industry knowledge is accessible through trade shows, customer visits, reports from industry analysts and industry associations. Institutional knowledge is gleaned by long-term association with the company, its employees and key customers. Therefore, Brockbank says the most effective organisations ensure older employees play an important role in transferring each of these knowledge types, particularly in the transfer of institutional knowledge.

Organisations that will lead in dealing with the critical agenda of knowledge transfer will expand their definition of knowledge transfer to include: the transfer of knowledge from people in one generation to those in the next; from one team or department to another; from one business unit to another; and from the marketplace to the company as a whole by bringing the specific needs of customers to the hearts and minds of employees.

Tricks of the knowledge trade

In many companies, implementing an intensive and proactive knowledge transfer process requires a fundamental culture change. Part of the problem associated with implementing and facilitating many knowledge transfer activities, according to Brockbank, is that they tend to be viewed as part of an implicit reward system that is allocated to older employees who have “paid their dues.” As a result, he believes this ultimately inhibits these practices from being applied to knowledge transfer outcomes.

“Many of these activities require that senior staff allocate some of their time away from their personal assignments and allocate it to building the knowledge of younger staff members. Therefore, it is necessary to formally and informally reward senior staff members who are involved in these activities through short-term and long-term financial incentives, visible recognition and organisational status symbols,” he says.

Another major factor that can inhibit the abilities of knowledge transfer in many companies is due to HR departments that inadvertently discourage risk taking by junior staff members, Brockbank says. “Instead of putting them in challenging, sink-or-swim situations, they provide safety nets which inhibit junior staff from intellectual as well as emotional stretch. In high performance companies, junior folk are encouraged to take risks in learning from senior staff and then applying such learnings to their individual jobs.”

This raises an important issue faced by HR, in the form of a “paradigm split”. As Brockbank explains, an HR department must decide whether they are to make people happy or satisfied so that they become productive, or if they are to help people to be productive so that they become happy or satisfied. Part of the challenge for HR therefore lies in choosing from these two role assumptions.

Essentially, it is all about balance between the two, Brockbank believes. “In my experience, the HR field is about an even split between these two approaches. HR professionals that follow the first approach carefully monitor whether employees (in this case capable junior staff) are happy and satisfied,” he says. “They tend away from placing pressures on the capable junior staff that might place great stress on them. Such stress might originate in giving them highly challenging work (that parenthetically happens to be a major source of learning and knowledge transfer).”

Brockbank says that challenging work is difficult, stressful, threatening, high risk, and nerve wracking by definition. However, HR professionals that follow the second approach and are more willing to provide junior staff with challenging work, with the risk of losing them in the process, are actually effectively allowing the “cream to rise to the top.”

Another trap is that not all knowledge that can be transferred should be transferred. “HR must focus on the transfer of knowledge that is most central to competitive advantage, and not on the transfer of knowledge with which HR is most familiar or which is the easiest to transfer.”

In order to successfully undertake these initiatives, HR professionals must understand the priorities for transferring each type of knowledge: technical, industrial, and institutional. To prioritise information, Brockbank suggests that HR prioritise knowledge along two dimensions. “Knowledge must be critical; that is, it must directly translate into products and services for which customers are willing to pay a lot of money. Knowledge must also be scarce; that is, it must not be widely available or easily imitated. If many companies share a given knowledge, then its value disintegrates into commoditised value.”

Brockbank says that where technical, industrial and institutional knowledge generate substantial cash flow from customers, knowledge becomes a critical source of competitive advantage. Therefore, it is such knowledge that HR should focus its intergenerational knowledge transfer activities.

“These priorities should be based on the relative importance of each type of knowledge in a balance that will ensure competitive advantage – now and into the future,” he says. “To be able to make such judgements HR professionals must know the strategic fundamentals of the business and the knowledge foundations on which those fundamentals are based. In some organisations, HR professionals need greater knowledge themselves concerning what knowledge needs to be transferred and how to transfer it.”

Finally, it is essential that HR professionals treat knowledge transfer mechanisms as an integrated system. Brockbank believes that too often HR takes a “hobby-horse” approach that detracts from HR’s contribution. It is important that HR professionals avoid picking one or two practices and apply them to only one definition of knowledge. “Multiples mechanisms should be applied to transfer all three types of knowledge. It is through this integrated approach that HR contributes to the creation of sustainable competitive advantage,” Brockbank says.

Knowledge management in practice

There are several effective practices to transfer knowledge from older and more experienced staff members to those who are younger. Wayne Brockbank says each practice should be developed and used as part of an overall process of knowledge management. HR must use several or all of these mechanisms at a time and treat them together as an integrated system.

On-the-job training: Place younger employees on work teams that include older and more experienced employees.

Task force involvement: Involve younger employees on specialised task forces that include older and more experienced employees

Meeting attendance: Selectively invite younger employees to sit through important meetings which they might not otherwise attend. This gives them exposure to key business issues and company values.

Transfers: Transfer younger employees across functions so that they gain exposure to different company activities and how these activities work together.

Specific developmental assignments: Give more experienced employees the explicit charge to teach classes or provide one-on-one tutoring to younger staff.

Mentoring: Assign more experienced employees to work with younger staff in developing technical, industry and institutional knowledge.

Performance management: Have more experienced employees work with younger staff on how to improve their performance in each knowledge area.

Staffing: Focus on hiring and promoting employees who have evidenced the ability to learn quickly.

Shadow leadership: Have more experienced employees follow younger staff as they do their work (eg leading meetings) and provide real-time feedback and recommendations.

Challenging assignments: Give the younger staff members tough, visible assignments that will stretch them. The best of the younger staff will naturally seek out the assistance that they need from more senior staff members.