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04 Feb. 2015 | Comments (0)
Across the globe, there is a tsunami of Baby Boomer retirements. This is good news for them and for the younger colleagues who will take their place. But what does this mean in terms of losing business-critical, experience-based knowledge — what we call deep smarts? One organization reported that the next anticipated wave of almost 700 retirements would mean the loss of over 27,000 years of experience. If that know-how and those skills (or better ones) can be hired on the open market — no problem. Or if the succession planning has been meticulous and a highly qualified successor can step right into the vacancy — terrific.
But in dozens of recent interviews with CTOs, CIOs, and top HR managers in preparation for writing our new book Critical Knowledge Transfer, we found that managers often don’t know what they have lost until after the expert leaves — and by then, it may be difficult to recover. In after-the-fact stories, we heard about critical losses in four areas in particular: relationships, reputation, re-work and regeneration. And the price tag associated with such losses were estimated to be as much as 20 times the more visible, tangible costs of recruitment and training.
First, consider relationships. Built up over years, they allowed a seasoned expert to pick up the phone and get a response from a customer’s CEO or a timely bit of analysis from an expert in a different field. “Smart people know other smart people,” a CTO commented to us. “When ‘Al’ suddenly left because of a family emergency, he left us his electronic file of contacts — but just names, email addresses, and phone numbers. We don’t really know when to use them, how reliable they are, what expertise they have. Without Al’s knowledge about why, when, and how to contact them, it’s just a list.”
That’s inconvenient, but not usually fatal. But we also heard about situations when corporate reputation took a hit because an incoming replacement didn’t have the high level of experience and skills expected. An engineer, whom we’ll call Amit, recalled being flown at great expense to a customer site to fix a problem that a relatively junior engineer had bungled. In fact, the customer had asked for Amit by name and was very disappointed to hear that he was retiring. Amit knew the client’s equipment, failure modes, and the work-arounds he could put in place until he could get a new part. “The new guy just didn’t have that experience,” he noted.
And what about re-work? We certainly don’t believe that a clone of the departing incumbent would be desirable, even if it were possible. Fresh thinking is often very valuable. But when the incoming successor has to spend time understanding product lines or critical processes, learning informal norms and ways to get things done, figuring out how organizational units interact — that’s all time-consuming, wasteful re-work. One company completely revamped their internal financial reporting system, spending almost $6 million over two years, only to find that the system did not fit the practices of their widespread businesses. The investment was made without the guidance of an IT director who had been with the company 30 years but had left and then died shortly afterwards. “The new IT director,” the CIO explained to us, “simply didn’t ask the right questions of the vendor. He asked if they could do it — but not how they were going to do it. He didn’t understand how most of our overseas businesses work. [The departed director] would never have made that mistake. We’re going to have to start over almost from scratch. And it’s not even the vendor’s fault. It’s ours.”
Perhaps the most expensive knowledge to lose is the capability for regeneration, the capability to bring out the next new product. Innovation springs from fresh thinking, true. But it is also often built on years of experience and expertise with designing and producing a particular kind of product. When Boeing decided to build the Dreamliner 787 airplane, management anticipated it would be the most revolutionary jetliner created in 60 years. The success of this enormously complicated project depended on the expertise held in the heads and hands of Boeing engineers. However, with about half of the company’s top technical staff eligible for retirement in the next several years, Boeing management realized that it was essential to design a disciplined process for gathering detailed insight, knowledge, and experience in developing airplanes. As CTO John Tracy told us, “You can’t just write down how to create a new airplane and leave a page or two of instructions for the people after you. You need strategies and methods for capturing and sharing complex, unique, and hard-earned experience.”
You can never extract and transfer all the deep smarts that an expert has accumulated, but it’s important to identify what needs to be captured before it walks out the door. In-depth succession planning, knowledge-sharing programs, even just questioning the experts before they leave the organization are imperative steps to ensure that your organization’s deep smarts stay within the walls of your organization.
The four costs we’ve described are by no means the only ones associated with lack of knowledge transfer — but they are widespread and surprisingly pervasive. They put your company at risk, both immediately and in the future. Managers cannot afford to ignore them.
This blog first appeared on Harvard Business Review on 12/02/2014.