When employees leave, vital institutional knowledge may be lost forever. Here are ways to improve your corporate memory.

In 1994, a large consumer products company was forced to delay the introduction of a major new product because of technical design problems. As if that weren’t bad enough, during the delay a rival launched a similar offering. The result: when the company finally solved the issue, it wasn’t able to make up for lost time and grab market share from the already-established competitive product. Estimated cost of delaying the launch and failing to achieve market dominance? A whopping $1 billion.

by Anne Field Harvard Business School Working Knowldege

But the bad news didn’t end there. An internal review turned up a painful revelation: The company actually had developed the solution—fifteen years before. The information had simply been buried and forgotten, the victim of turnover and retirements.

When employees leave, they take vital knowledge with them. Without a process in place to capture that knowledge and transfer it to their successors, it winds up lost forever. As a result, those who follow them in the job take a longer time to get up to speed, important discoveries and insights disappear, and the company’s ability to act quickly and intelligently is crippled.

"Without adequate knowledge continuity between employee generations, organizational ‘forgetting’ drains intellectual capital and squanders the knowledge asset," says Hamilton Beazley, chairman of the Strategic Leadership Group in Arlington, Va., and formerly a professor of organizational sciences at George Washington University. Companies need to have effective methods for transferring employee know-how. That’s where the concept of knowledge continuity management comes into play.

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Knowledge is the new capital, but it’s worthless unless it’s accessible, communicated, and enhanced.
—Hamilton Beazley, Strategic Leadership Group

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If the idea sounds familiar, it should. Knowledge continuity management is an offshoot of the field of knowledge management. Where knowledge management concerns capturing and sharing know-how valuable to colleagues performing similar jobs throughout a company, knowledge continuity management focuses on passing critical knowledge from exiting employees to their replacements.

At its base, knowledge continuity management is about communication—about employees understanding just what it is that they know, what others need to know, and what information needs to be shared, and then methodically passing on that knowledge to peers. But while the idea itself is simple, setting up an effective knowledge continuity management program is a complex undertaking, involving a mix of technical, organizational, and management steps, and requiring a major commitment from the top.

The challenge

For companies to succeed in the Information Age, contends Beazley, who coauthored Continuity Management: Preserving Corporate Knowledge and Productivity When Employees Leave, they must have a comprehensive system for keeping critical knowledge in the family, to make sure those who are exiting hand an intact baton on to their successors—ensuring that those new workers can hit the ground running when they start. And management has to make those efforts an integral, ongoing part of operations.

"Knowledge is the new capital, but it’s worthless unless it’s accessible, communicated, and enhanced," Beazley says. Ensuring that this knowledge gets transferred could become one of the most crucial issues facing companies today.

Why? Because in the revolving door of today’s corporate America, the problem of knowledge loss is liable to get a lot worse. Downsizings, an increasingly mobile workforce, and greater use of contingent workers have already made high turnover a fact of life in most companies.

But those factors are only the tip of the iceberg. It’s the looming retirements of baby boomers that constitute "an impending knowledge crisis," says Beazley. More than 17 percent of baby boomers holding executive and managerial positions are expected to leave their posts by 2008, according to a recent study by the Bureau of Labor Statistics. That’s for all industries. The situation in some sectors is even worse. By the year 2010, for example, as many as 60 percent of experienced managers will retire from the oil and gas industry alone, according to the Oil and Gas Journal.

The more critical a job is to the company, the more important it is that it be part of a knowledge continuity management system. You also need to consider such questions as how significantly poor productivity in the job would hurt coworkers or the company and the complexity of the knowledge needed to perform the job successfully. The more sophisticated and complex the knowledge a worker possesses, the more difficult it is to pass on—and the more crucial it is that it be passed on.

Setting up your program

Here are some steps you can take to ensure that mission-critical expertise doesn’t leave your company when workers do.

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I’m a product of every other partner I worked with through the years.
—Steve Baldwin, Deloitte Consulting

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Create a knowledge profile. Knowledge profiles, ideally accessible through a portal, constitute the knowledge DNA of the organization. Each profile describes the critical operational know-how required to do a particular job. You create them by designing a questionnaire that all key employees answer while they’re still with the company and by requiring employees to regularly update their answers.

Beazley recommends that the company or unit first assign a team of employees knowledgeable about each relevant job classification to develop the master set of questions that will identify the knowledge to be captured in the profile. Each profile consists of four sections that contain current operating data (market share, sales, or other key metrics, and key data and information sources), operational knowledge (including front-burner issues the employee should be familiar with from day one, projects pending, and key customers), basic operational knowledge (core job activities, objectives, and functions), and background operational knowledge (including completed projects, unexploited ideas, and members of the incumbent’s knowledge network).

After that’s completed, select a smaller group of peers from a particular job classification—for example, four or five accountants from a thirty-person department—and have them fine-tune the questions to more closely fit their jobs, advises Beazley. They can also come up with answers to basic questions, like job objectives or key statistics, to save employees time when they’re filling out the questionnaire.

Foster mentoring relationships. Another tactic is to set up formal mentoring relationships. Consider what Deloitte Consulting has done. Three years ago, the consulting firm set up a senior partner program that matched up successful executives nearing the end of their tenure with younger partners. The dual goal was to delay the departure of older, experienced consultants and to make sure they passed on key skills and knowledge to others before they did retire.

"We want to avoid brain drain," says Steve Baldwin, a senior partner at Deloitte Consulting who works closely with a half-dozen younger consultants. In some cases, he and his mentees have signed knowledge transfer agreements stipulating their goals, areas to develop, and specific activities to pursue. In other cases, "we just have a heart-to-heart at dinner," he says. About 70 percent of his time is spent on mentoring relationships. "I’m a product of every other partner I worked with through the years," he says.

Encourage communities of practice. Two years ago, Northrop Grumman introduced an initiative to set up communities of practice throughout the corporation. Now, for instance, if a structural engineer needs more information on stress analysis, he can join the appropriate group to get what he needs.

"We see it as one of many ways to help people share information with others," says Gerry Garcia, knowledge management project manager. Some of the meetings are face-to-face; others take place via the Internet.

Ensure that passing knowledge on is rewarded. To get employees to fully cooperate in a knowledge continuity management program, you need to show them it’s in their best interests to do so. After all, why should someone pour her heart and soul into a system for sharing information that’s going to be used after she’s left the company? What’s more, what if she gives away too much information and finds herself deemed expendable?

The answers depend on your company’s performance evaluation and compensation system. Successful implementation of a knowledge continuity program requires giving rewards for sharing knowledge—raises, promotions, and so on. "Knowledge continuity should become part of an organization’s culture," says Beazley.

Protect people’s privacy. You also have to encourage employees to be honest. And to do that, they have to be assured that the information they provide won’t be shared with just anyone. That probably means restricting access to specific employees, like corporate attorneys or certain colleagues. And it means avoiding questions that are too personal.

Decide whether you’re interested in recorded knowledge as well. Of course, there’s a difference between the know-how and expertise stored in people’s heads—Beazley’s primary concern—and information residing in reports and other documents. Easy access to that type of knowledge is important too, so you may want to shape your knowledge continuity management program to include it. One idea is to describe in the knowledge profile where the most critical documents are stored.

Two years ago, using an off-the-shelf software program, project managers at Northrop Grumman designed a system for safeguarding and storing documents so they wouldn’t get lost when employees left. Now, as part of their regular daily routine, engineers store all their reports and other written materials in the central database. "Before, if a person left, we typically would find ourselves trying to dig stuff out of their local computer, without much success," says project manager Scott Shaffar.

Start small. As with any major project, your best bet is to begin with a pilot program and expand when you’re ready. If you get no further than one pocket of the company or capture only part of incumbents’ critical knowledge, you’ll still be ahead of the game. "Some knowledge continuity is better than none," says Beazley.

Ultimately, by going through the process, employees will gain a deeper understanding of their jobs and what it is they need to know in order to succeed, as well as how best to communicate that knowledge to others.

Reprinted with permission from "When Employees Leave the Company, How Can You Make Sure Their Expertise Doesn’t?," Harvard Management Communication Letter, April 2003.

See the latest issue of Harvard Management Communication Letter.

Anne Field, based in Pelham, N.Y., writes for a number of major business publications.

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