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THE PERFECT STORM IN THE WORKPLACE: WHAT EMPLOYERS COULD’VE, SHOULD’VE, DIDN’T DO – AND WHAT THEY HAVE TO DO NOW

 Knowledge capture, knowledge capture, knowledge capture

By Arnold Kransdorff, aka Mr Corporate Amnesia

The warning signs have been around for at least four decades but no one took any notice of the underlying handicap. In fact, employers indulged themselves with the flexible labour market, using its opportunity to change their workplaces to better adapt to the high-change marketplace. It worked for a while and employment even rose to impressive heights but, unexpectedly, productivity started to become more difficult. The experts puzzled: Why would more available and work-savvy replacements lead to stagnating output? The experts continue to puzzle, suggesting all sorts of reasons bar the one that Covid-19 is highlighting and now imposing brutishly on the place where employers and their employees earn their livings.

Consider the build-up to the current workplace. Pre-Covid-19, around 26% of UK employees, including professionals and top decision makers, changed their employer every year (Work in Numbers, 2018, AAT & LV quoted by the BBC, 2017), now much higher. In the US, the other big flexible labour economy, the average was even more with individual workers heading for 14 different paymasters during their working lifetimes (Work Institute, 2018 Retention Report, 2018 & Department of Labor, 2018, Bureau of Labor Statistics, 2018). Whatever the pandemic contributed, UK employers have got to add another 38% of UK workers intending to change their employer in the next 12 months while the mid-Covid quit-rate in the US is now 24% higher than it was before the pandemic.

The figures confirm a never-been-higher measure of workplace disturbance alongside the even more troubling forfeiture of never-been-higher levels of corporate-specific knowledge and experience. Ipso facto, much of the special way companies source their earnings through their workers will be going, or will have gone, elsewhere – and more than many employers will have to start virtually from scratch in many of their departmental activities.

Imagine the scenario where procedural-type practices and relationships will have to be re-hired, re-invented, re-taught and re-learned by so many in umpteen unfamiliar environments. Could it one day be described as business and industry’s long Covid? 

The missed opportunity

In this, employers, the experts and the academics serving the business community have missed a huge issue – and opportunity – relevant to workers’ output. Non-specific business education/training and wider workplace awareness from multiple employers may well be useful but it is corporate-specific knowledge and experience that is the more important. What widespread short-tenure employment has done is continually interrupt and remove the special way employers actually do their business. No sooner than individuals start to be useful, so they leave. And every time this happens, corporate momentum slows. At another level it used to be called the Brain Drain. Now it’s The Great Resignation, The Great Reshuffle or The Turnover Tsunami. With so many employees doing what the Australians call walkabout, difficult times are ahead for all employers with depleted workplaces. The business quickstep – one step forward, one step back – has become the new corporate dance, and we’re not very good at what is known as Experiential Learning.

The extra way employers have been trying to reduce high staff turnover is though non-traditional incentives, everything from the provision of discounted wine deliveries to employees’ homes every month, free child day-care to an allowance of fitness items such as running shoes and membership of gyms and sports clubs. To address the knowledge issue, it has been customary to use little-use apprenticeships and mentoring. Elsewhere, the standard induction/onboarding processes only provide terms of employment-type information and formal introductions to future colleagues, with uncommon overlapping conversational access between exiting senior individuals and their replacements, all of which – as the record shows – have done almost nothing to reduce either staff turnover or knowledge loss. In the sharing game, both contributor and beneficiary all suffer from endemic short, selective and defensive memory recall alongside the widespread predisposition by new employees to disclaim ownership and responsibility for others’ previous practice. It’s an explanation for the repeated mistakes, reinvented wheels and other unlearned lessons that pepper the workplace and undercut productivity.

Except for some press coverage on the more expressive subject of corporate amnesia, the tightly related issues of high staff turnover and related huge knowledge loss are – puzzlingly – widely overlooked by most individual practitioners and business academics. They are arguably two of the most important factors that impact on business, and thus national productivity.

Instead of flogging a dead horse ….

Instead of depending on lame efforts to reduce high staff turnover, there IS a logical restorative measure; it’s the skilled knowledge transfer between key exiting individuals and their replacements.

For this to happen requires a more knowledgeable appreciation of knowledge itself. Among the several types of this prime corporate asset resides two basic variants – operational skills such as technical competence and the type of knowledge that makes this know-how more resourceful in its own distinctive environment. It’s important because they’ve always been inter-dependent for optimum effectiveness but only relatively recently recognised. The former is called explicit knowledge, the know-how that we’re all taught to undertake a specific task, while the latter is its non-technical companion, tacit knowledge, first identified by Michael Polyani in 1958, and acknowledged by practitioners Peter Drucker as “techne” in 1993 and as “operacy” by Edward de Bono in 2006, among others. By at least 1991, the top KM academic, Ikujiro Nonaka, had described it as “the source of competitive advantage” and that “about 90% of the knowledge in any organization is embedded and synthesized in tacit form. In terms of the explicit and tacit’s transferability, the former is relatively easy to record and communicate, while the tacit is more difficult, mainly because of the personal nature of its cognizance that is context, co-worker and organisation-specific, derived from subjects like cultural ideals, values, ideology, language, prejudices, customs and rituals, and other indigenous management strengths and weakness. Left to individuals to record themselves, even senior decision makers are notoriously poor communicators who find both autobiography and the subject of tacit knowledge difficult to articulate. Uncommunicated, little of it appears in email databanks or reports and, consequently, of course, impossible to retrieve after the employers’ swing doors have finished turning. So one would think …

As Nonaka has noted, both the explicit and the lubricating tacit are deeply buried in the employers’ historical experience. Given the difficulties individuals have in verbalising testimony, the more effective approach is to apply the extraction technique known as Oral Debriefing using a skilled facilitator who has the ability to “peel onion skins” – i.e. keep asking probing questions when the narrated evidence is imprecise. If employers feel uncomfortable allowing an outsider to do the job, there is now a step-by-step TOOLKIT for employers to do the knowledge transfer themselves, which explains the issues around knowledge ownership, how to encourage knowledge sharing among employees (who are normally proprietorial about owning their knowledge), and how to best capture this elusive main corporate asset. The acquired verbatim debrief can then be passed down to successors through either transcript, audio or video format, providing the means for employers and their new-blood employees to also better learn from their actual corporate experience through the usual process of reflection – but now with the benefit of the retrieved evidence that would otherwise be lost. Therein lies the answer to smoother progress and productivity growth in our short-tenure labour market.

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 COVID-19 EXCLUSIVE: THE NO-BRAINER FIX FOR BORIS JOHNSON’S BIG PROBLEM – HIS POOR DECISION MAKING

 Why “Data, not dates” is fundamentally flawed & how other managers could also profit

 By Arnold Kransdorff, aka Mr Corporate Amnesia

Stand back from Boris Johnson’s main decisions around Covid-19 and his strategy is obvious. Caution reigns, as the Prime Minister’s reaction to almost everything pandemic has illustrated. Except for a successful vaccination drive, he has set the UK apart with a proportional performance that compares poorly alongside other countries near and far. Has the astronomical cost in lives and hard cash been a sensible strategy, especially in a fast-moving situation?

“Data, not dates” has been his standard stated approach to almost all his determinations, chalking up recurring difficulties with the country’s infection rates, his imposed lockdowns and the catalogue of attendant issues ranging from foreign travel corridors, education, care homes, mass testing, PPE, contact tracing, masks and eat-out-to-help-out, among others. Throughout the outbreak, advice has been taken from a small group of chosen experts whose decisions have been similarly circumspect. This shared approach would seem rational but how so?

Consider the less obvious evidence of this common position ….

Reactive vs proactive decision making  

The fact that Covid-19 infections rates were, and are still, changing daily, means that ALL delays in addressing it and related events are – by definition – automatically behind the curve. Unavoidable might be the obvious retort but the outcome is nevertheless fatally flawed, an approach to decision making that is described as reactive in nature – i.e., based on responding to events after they have happened. But reactive decision making on its own encompasses several unhelpful features. Rigidly sticking to it limits the opportunity to introduce good judgement or common sense and it works to prevent the most valued of all managerial and decision-making skills – the ability to effectively learn from corporate experience, self-evidently called experiential learning (EL). This form of decision making is associated with proactive decision making, which focusses on eliminating problems before they have a chance to appear, a skill that provides the valued ability of would-be good managers and decision makers to be ahead of the curve. With proactive decisions entirely dependent on the skilled reflection and application of the familiar evidence from which defensive decision making stems, there has been precious little of this crucial way of turning ordinary decision making into good and better decision making. In Covid-19’s case, this should also have included more deliberate scrutiny of pre-Covid-19 plagues and others’ continuing experiences. Perhaps the most neglected was the detail of the UK’s sponsored dummy run of an influenza epidemic in 2016 – codenamed Exercise Cygnus – and the largely unheeded biological security strategy that was published in 2018 to specifically address a pandemic threat.

In essence, the extra input would have allowed the UK’s decision makers to take better advantage of past corporate practice, whether that experience was successful or not, even to avoid misdeeds along the way. More simply stated, it would have helped to remove the need to repeatedly re-invent the corporate wheel, a strategy that makes those with better outcomes better experiential learners of their special environments and circumstances. As it stands, the UK now has a hard figure to illustrate the real cost of its so-called  corporate amnesia – a goodly proportion of an estimated £394 billion in 2020/21, an eye-watering number that excludes what’s happening in the Government’s other evidence-shy activities.

“….. English exceptionalism?”

The necessity of more immediate good and better decision making is a clear pre-requisite in any situation but the fact that many of UK’s fast-moving Covid-19 decisions were taken too slowly and without much proximate experiential learning confirms a fundamental weakness in governance and specifically in decision making  – and, according to Sir Chris Ham, the immediate past chief executive of the independent public health think tank, the King’s Fund – “a misplaced belief in English exceptionalism”. Mr Johnson has stubbornly insisted that the process of learning the lessons of Covid-19 would be left to a Public Inquiry at a later time. Sadly, too late for that which has past but what about the rest of Covid’s on-going activity, the next pandemic and what’s been happening in the rest of the economy for decades ….?

Not uncoincidentally, the UK’s learning deficit with Coronavirus also resonates with the country’s non-public sector, where decisions in wider commerce and industry are generally made only when problems become acute. Occasioned by the very flexible labour market, employees now have tenures averaging only around five years (less in the US) – and equally absent memories/awareness of their new employers’ unique and hard-won practices. Like the management of Covid-19, this means little or no experiential learning at the corporate level.

Corporate amnesia is surely the business equivalent of long-Covid. So, what price the best way to fill the irregularly-imposed knowledge gaps? To continue the allegorical virus depiction, the so-called herd immunity fix can come from skilled knowledge transfer between key exiting operatives of important divisions and their un-familiarised replacements. It becomes a timely first-hand, straight-from-the-horse’s-mouth, record that can keep on reminding new bloods that they have a responsibility to address their employers’ otherwise missing prior experience. It’s the way to do experiential learning in the very flexible, flexible labour market.

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OUR SLOWING PRODUCTIVITY, THE EXPERTS CHALLENGED. HAS NERO BEEN FIDDLING WHILE ROME BURNS?                                             

For some time now the experts have been admitting they don’t know why the West’s productivity growth has been slowing. One of their guesses is that technology, one of the major propellants in the past, is temporarily passing commerce and industry by. In place of this, some academics have resorted to complex working papers examining the effect of known population ageing and with an increasing number looking at the quickening retirement of baby boomers, some are finding evidence that the loss of their knowledge and experience is a part-contributor to the decline.

But have they missed a massive parcel of largely unacknowledged knowledge loss arising from the biggest change in workplace practice for more than 50 years?

With the mention of this decampment of know-how deriving from the retirement of baby boomers, it’s not clear from the way the academics have used their standard growth accounting framework if they’ve taken into account the other mass exodus of knowledge and experience from the REST of the working population. This derives from organisations’ OWN, SHORT-TERM and UNIQUE knowledge and experience that absconds as a direct consequence of the very flexible labour market.

If yes, then the academics’ conclusion that productivity growth will continue to slip by another 1.8% by the end of the next decade (http://www.nber.org/papers/w22452) is serious enough. If not, their sums are a GROSS underestimate.

While the study from the eminent National Bureau of Economic Research (NBER) efficiently summarises the overall effects of populating ageing, the data does not tell the full story of the stated knowledge loss or its full impact. The fact that their identified know-how ‘walkout’ comes from baby boomers is an obvious conclusion because their time frame of retirements is easily identifiable alongside its accelerating pace. But while the researchers have correctly concluded that knowledge loss could interact with ageing to affect the overall responsiveness of the economy, the data falls seriously short of its conclusion; it is not specific enough, comprehensive enough and the academics’ understanding of the effects of knowledge loss and the disruptive effect of short jobs tenure is seriously lacking.

That said, how credible is the NBER’s suggestion that knowledge loss from the workforce is a part-explanation for productivity’s decline? Their supposition confirms the same conclusion by an isolated few other US academics, some business publications and this author. Elsewhere, the link has been made with high employee turnover generally when Vince Cable, MP, the recent British coalition Government’s Business Secretary, admitted that the flexible labour market DOES contribute to low productivity (Resolution Foundation, 2014). Moreover, there is a timely coincidence between much of the time period that productivity has been under pressure and the advent of the flexible labour market in the 1980s.

The real measure

On this basis, it is only the extent of the knowledge loss that is in question, and its unappreciated effect. Whilst the conceded departure of baby boomers’ knowledge and experience is important in its own right, it refers to the LONG-TERM awareness that they bring to their employer. Compared with flexible working’s shorter-term and institute-specific knowledge and experience that is lost on a daily, weekly and monthly basis by the rest of the working population, this is a TRIFLE. Short-tenure working in today’s workplace means that individuals, including top decision-makers (and incidentally the baby boomers themselves caught up in this workplace revolution) now change their employer on average every four-to-five years, even less in the US.

When individuals leave, they take with them up to 90% of their employers’ distinctive knowledge and experience (source: F. Bonner, American Society for Training & Development, 2000), leaving only their paper trail. More accurately, what actually disappears is the vital tacit knowledge component of their tenure – the know-how of getting things done in their employers’ special environment – that is typically unrecorded and, arguably, important in mobilising more effectively the usually recorded explicit data and information. Compound the effect over time and the retained level of the institutions’ own unique knowledge and experience is homeopathic.

At this level of retention, the typical business can only boast of an equivalent shorter organisational memory (OM) that, in turn, reflects in a compensatory inability to learn efficiently from their own experiences in every departmental grouping. The NON-learning impact of short employer tenure is that institutions largely give up the traditional way most progress in achieved – i.e. organically, one experience on another.

The only redeeming feature of all this knowledge loss and the interruption of corporeal momentum is that this intellectual expertise does not all depart at the same time. The overlap does mitigate but attempts at retention then falls prey to exiting individuals’ short, selective and defensive memory and replacements’ abilities at accurate recall. The reality is that time and jobs disruption only adds to the rolling stop-start journey of interrupted progress.

Corporate amnesia and Alzheimers

The irony about all this loss of knowledge and experience is that while flexible working liberally spreads this intellectual capital around the workforce generally, the individual employing institution is left with what I’ve identified as corporate amnesia, symptomatic of the corporate equivalent of Alzheimers. In environments of high jobs turnover, the outcome is most visible in the continuing occurrences of repeated mistakes, re-invented wheels and other unlearned lessons that litter the workplace, all derived from poorer decision-making grounded in abbreviated bodies of domestic evidence. On a rolling industrial scale such as the flexible labour market allows, the knowledge loss is truly immense alongside the other complications of continual jobs disruption, the departures of the organisations’ USP (unique selling point), the unregulated dilution of corporate cultures and the disappearance of corporate loyalties. Led by the knowledge loss, they are no friends of productivity and, collectively, are plausibly the biggest contributors to its composition.

Given that flexible working’s raison d’etre was to provide commerce and industry with an easier way to cope with rapid change – it does – what has also happened is an actual Devil’s compromise and, truly, one of those unintended consequences of Adam Smith’s invisible hand. It is now clear that the flexible labour market was an imposed revolution carelessly monitored by Government, cheerfully exploited by employers, ignored by business educators and now additionally manipulated by valued employees who job-hop as a way of uplifting their income. And all this with a deadly sting in its wealth-creating tail that almost everyone didn’t realise was going to be so painful.

The fact that it’s been happening for more than 35 years must raise the uncomfortable question why it’s taken so long to acknowledge, albeit that the recognition still only refers to the fractional knowledge loss by baby boomers.

The bottom line

An attempt to calculate the magnitude of lost output, which provides academics’ with an indication of the possible missing number in their calculations, was made in 2005 by the international management consultancy, Proudfoot Consulting. They estimated that wasted productivity accounted for between 5.9% and 9.7% of GDP in several individual OECD countries’ (see below). Apart from my own meta-analysis reviews and observational studies of productivity’s lost cost, NO other similar formal academic research has yet been undertaken.

With this broad-sweep signal in hand of the underlying problem – and also the opportunity – several other mainstream institutions have stepped up to the plate to register their concern that the outlook is grim if productivity is not revived.

For one, Harvard Business School’s US Competitiveness Project (http://www.hbs.edu/competitiveness/Documents/problems-unsolved-and-a-nation-divided.pdf) records that productivity growth is stuck below long-term levels, hitting negative territory in the last three quarters. Alongside the graph (below) showing how underlying productivity growth has been progressively declining since the 1950s, the project’s co-leader, Professor Michael Porter, explains the seriousness of the situation: “A nation can only compete successfully and pay rising wages through high value of output per worker and per dollar of capital invested. Porter’s view, which exposes the lifeblood of the capitalist West, is that America’s competitiveness problems took root long before the 2008 downturn, adding: “Since those problems remain unsolved, it should not be surprising that the average annual economic growth (1.6%) during the current recovery is slower than during any recovery since the late 1940s.”

Another top-flight institution is equally pessimistic (McKinsey Global Institute, “Can long-term global growth be saved?” January 2015) saying that the rapid population growth and the expansion in the working-age population have run their course, and a demographic drag is set to replace the demographic dividend (see graph below). It adds that only a substantial increase in productivity growth is capable of fully counteracting waning demographic tailwinds, estimating that productivity growth will have to reach 3.3% a year – 80% faster than its average rate during the past half century in order to compensate fully for slower employment growth.

So, if the iceberg of organisation-specific knowledge loss does have a role in reducing productivity, what to do?

For all the time productivity has been seen as problematical, it is mostly Government that has stepped into the breach, with continual to upgrade infrastructure and particularly education, which – as the evidence shows in the never-higher availably of business tutelage – has fallen short, both in the vocational and tertiary fields. An increasing number of employers have got the message that they’ve got to do something but it is evident that their knowledge loss has not been addressed; even the teaching of decision-making remains a one-size-fits-all methodology suited to the out-of-date inflexible work environment.

Usefully, McKinsey Global Institute’s research points to the NON-Governmental – i.e. the bottom-up, employer-specific – solution which, crucially, requires a combined effort between institutions and educators. Their research indicates that around three-quarters of productivity growth normally comes from the broader adoption of existing best practices or catch-up improvements. The remaining one-quarter comes from technological, operational, or business innovations that go beyond today’s best practices and push the frontier of the world’s GDP potential.

How to CONNECT discontinuity

In the world of innovation this is management speak for Experiential Learning (EL), a part of the Knowledge Management (KM) function that works to APPLY the past to the present and future. For the MGI’s requirements to happen, it is necessary for employers to address their own knowledge loss by capturing important know-how – and importantly their tacit knowledge – before it walks out of the front door. This would allow replacement employees to make themselves aware of the MGI’s specified prior best practice as well as being inventive, which requires preceding awareness to originate and, in order to survive workplace disruption, endure. Such capture should include long-term and short/medium-term OM, which involves different approaches to acquire and share.

With the employers’ more comprehensive evidence base in hand, new employees must, then, be better able to apply this know-how with their own and others’ prior experience, which is where the educators need to switch on their afterburners. Conventional decision-making requires better-quality reflective practices that can salvage the organic way of making progress. The theory and practice of Experiential Learning (EL) is a formalised discipline that business education does not enthusiastically teach, the acknowledged models for which include methodologies devised by the likes of its main proponent, Ohio’s Case Western Reserve University’s Professor David Kolb, and others.

Without the ability to more comprehensively reflect and apply, decision-making is unable to accommodate flexible working’s disruptive influence, leaving outcomes to little more than intuition, untested judgment, political expediency, subjective thinking, unnecessary experimentation and delay, all the constituents of lower productivity. Recognise anything?

If knowledge and experience are important, their loss to individual organisations must also be important. So, across the board they must be especially important. Has Nero been fiddling while Rome burns? With the productivity metric becoming increasingly important to mainstream corporate durability, it is time for employers, business education and the experts to step up and do what the market economy is supposed to do. Address the issue ….. 

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