Institutional Knowledge Guide for 2024: Why Not Sharing It Is Costing Your Company Money

I’ve never been great at documenting my work processes and how I do things. I didn’t understand the value of institutional knowledge. In fact, before I joined 360Learning, I relied entirely on daily to-do lists, a “Downloads” folder that’s never been cleared, the search bar on my Google Drive and Slack, and a ton of catch-up meetings.

That, unfortunately, wouldn’t fly at 360Learning. As a remote company, we enforce decentralized, asynchronous, but transparent work. This means information needs to be available to people working at their own pace, in their own time zones. Because our CEO believes synchronous communication kills productivity, we also don’t use Slack. This only works if everything—from processes to decisions, down to how we label things on Salesforce or Marketo—is documented properly and easily accessible for every team member.

It took some adjusting, and I thought I’d hate it, being a “creative, non-type-A” person. But I didn’t know what I was missing. Now I can never go back to working in the dark, not knowing where to find the crucial information I need when I need it.

As it turns out, sharing and documenting institutional knowledge is not only key to your company’s growth; you’ll lose money if you don’t do it properly—even if your team uses Slack and doesn’t work remotely. Here’s why.

What is institutional knowledge?

Institutional knowledge, sometimes known as tribal knowledge, is your company’s collective memory. It encompasses all the job-related facts and information that live in each individual employee’s head.

Learning and Development and Human Resources teams can combat the constant erosion of this valuable information by converting their employees’ individual knowledge bases into shared institutional knowledge. Developing a process to preserve and share this knowledge democratizes information and helps create a culture of learning inside your company.

Types of institutional knowledge

Institutional knowledge plays an important role in preventing the loss of valuable insights when team members transition. There are two major types of institutional knowledge to understand - explicit knowledge and tacit knowledge

1. Explicit knowledge

Explicit knowledge is tangible information that can be easily stored in documents, manuals, or training material. It includes facts, descriptions, and information that can be written down and shared with teammates. Examples include company policies, procedures, and best practices. For instance, the technical process of setting up an email marketing campaign can be easily documented and replicated.

2. Tacit knowledge

Tacit knowledge is derived from personal hands-on experience and is often hard to document and share. Tacit knowledge most often comes with time. If we think about that same example of setting up an email marketing campaign, an example of tacit knowledge could be how to phrase subject lines in a way that gets people to open the email. Tacit knowledge can be difficult to share, but it’s made easier by continuous and collaborative learning among peers.

Examples of institutional knowledge

Deep smarts of experienced employees

What is it: Deep smarts refer to the critical, experience-based institutional knowledge that employees accumulate over time.

Example: An experienced employee who understands the preferences of a particular client and the historical perspectives on company strategy. This knowledge is not easily replaceable and helps the company run smoothly.

Company-specific nuances

What is it: Institutional knowledge about the unique aspects and preferences within a company, especially in creative or specialized roles.

Example: An experienced graphic designer who knows the ins and outs of the company's style preferences and has insights into what kind of visuals resonate the most with their target audience.

Information flow and efficiency

What is it: When different parts of a company keep their information to themselves, it can slow down how well the company works as a whole. Making sure that all parts of the company can easily access and share information is important for efficiency and effectiveness.

Example: If the marketing team launches a new discount offer but doesn't inform the customer support team, the support staff might be unable to assist customers who call with questions about the offer, leading to customer dissatisfaction.

How sharing institutional knowledge affects your bottom line

Employees spend 4.6 years at a job on average before moving on to a new company. When they leave, they take everything they know with them: from the preferences of a particular client to their historical perspective on company strategy to the operation of that one finicky copy machine.

While each of these info bites may seem small, the cumulative financial impact of losing all this information over time is enormous. It’s frustrating for other employees, it slows productivity, and it creates confusion and miscommunication that could have dramatic repercussions for the company. It also makes it very difficult for L&D teams to equip employees with the institutional knowledge they need to do their jobs.

The stakes are high. Failing to create a system to preserve institutional knowledge can have a real effect on your company’s bottom line. Here are some ways that letting this valuable expertise slip away could cost your business thousands or even millions of dollars.

When employees go, their expertise and institutional knowledge leaves with them

When long-time employees leave your company, they walk out the door with thousands of dollars in hard-won knowledge and expertise. This is a financial hit with far-reaching implications.

The critical, experience-based institutional knowledge that employees accumulate over time is what Harvard Business Review calls “deep smarts.” Deep smarts are very difficult to replace. A new employee may be able to perform the essential duties of the person they are replacing, but without personal mentoring, they have no way to replicate their predecessor’s relationships, ideas, or approaches to work.

More of your job depends on deep smarts than you think. The Panopto Workplace Knowledge and Productivity Report shows that 42% of valuable company knowledge is unique to the individual employee. That’s the knowledge they alone possess. Letting that information essentially evaporate is a costly mistake. If an employee leaves the company, that’s 42% of their work that colleagues can’t effectively cover and 42% that a new hire will have to try to learn from scratch.

The company will pay dearly in training and productivity to recapture that lost institutional knowledge (some of which may be gone forever). Panopto estimates that the average new hire will spend 200 hours trying to either chase down this lost information or “reinvent the wheel” trying to recreate lost processes and data.

There are other potential risks: Customer relationships can be damaged, essential tasks can be overlooked, and innovation may be lost. Harvard Business Review estimates that the cost of losing an employee can be up to 20 times higher than the average costs related to recruitment and training.

This very real issue is about to become even more significant. The workforce is currently experiencing a silver tsunami as baby boomers retire and leave the workforce. Ten thousand baby boomers are retiring (the average age of retirement in the United States is between 61 and 65) every day, and this trend will continue until the year 2030. As retirees leave the workforce, they are taking decades of institutional knowledge with them.

But there is a way to get ahead of the tsunami: Ask employees to document their essential duties and their experiential knowledge before leaving the company. Collect important information about their roles, relationships, and experiences in the company so that no critical information lives in only one person’s brain. At 360Learning, we do this using Trello, and we train every employee on exactly how to document everything in their onboarding process. And of course, we use our own platform for all onboarding and training.

Information silos hurt productivity

Information silos crop up when institutional knowledge is concentrated in one person or department and not available company-wide. So, while the sales team might know the latest demographic numbers for new users, the marketing team has no idea. When information doesn’t flow freely through the company, employees can’t do their jobs properly, which leads to huge losses in productivity.

Information silos create inefficiency. Employees have to spend time finding or learning information that already exists elsewhere. Panopto’s study found that employees spend an average of 5.3 hours a week looking for information they need to do their jobs.

By extrapolating that number over the course of a year, Panopto calculates that the average small business of under 1,000 employees will lose $2.4 million in productivity due to insufficient knowledge sharing. That number grows with the size of the company. A company of 30,000 employees could be losing $72 million just from workday inefficiency.

Those are huge numbers, but consider that 5.3 hours a week is nearly an entire workday wasted on hunting down information instead of working. That’s a lot of time spent waiting around that could be used on more productive work.

Information silos inevitably pop up as companies grow. Employees aren’t intentionally hoarding knowledge; they just don’t know who needs it and how to get it to them. According to a Gartner survey, more than 50% of digital workers struggle to find the information needed to effectively perform their jobs.

Knock down these silos. Give employees a better system for sharing institutional knowledge throughout the company. A company-wide collaborative learning system helps democratize information by making it available to everyone who needs it.

At 360Learning, we built a collaborative learning platform that breaks down information silos. The platform gives companies an easy and efficient system for sharing institutional knowledge. Employees can easily access and contribute to company-wide knowledge by creating courses and training material for colleagues. The platform also makes it easy to spot knowledge gaps across the organization by encouraging employees to identify learning needs through forums and feedback.

Training is costly and ineffective

Training is less practical when L&D departments have to create each new course and training resource from scratch. Instead of tapping into experienced employees’ institutional knowledge, they must turn to expensive third-party resources. This leads to more generic training. Which resource is going to better address the company or department-specific nuances of a topic: a mass-produced training course or an actual employee who’s worked in your company for five years? For example, imagine an experienced designer who knows the company style guide inside-out and knows exactly what type of banner advertisements perform best. The training course they design for new hires on their team is a lot more valuable than a generic one.

The problem is particularly apparent when it comes to onboarding, where employees need to quickly learn the skills and information to do their job productively. Panopto found that new hires typically receive about 2.5 weeks of formal training, but it can take up to six months for an employee to fully ramp up to a new role. Without dedicated knowledge resources, they will spend that time scrambling to find the information they need, ineffectually trying to teach themselves new processes, or simply performing their role incorrectly.

An education system built on institutional knowledge transfer can help shorten ramp-up time and get employees working more effectively faster.

Frustrated employees are leaving

When employees don’t have access to all of the information they need to do their job, they can feel frustrated and ineffective. This job dissatisfaction often leads to employee turnover: Unhappy employees simply don’t stick around.

It can be very costly when employees quit. Not only do you lose those deep smarts discussed above, but you also have to deal with the costs associated with lost productivity and hiring a replacement. Data from the Society for Human Resource Management (SHRM) estimates that the total cost to hire a new employee can be three to four times the position's salary. That means if you're hiring for a job that pays $60,000, you may spend $180,000 or more to fill that role.

This cost is often avoidable. Among the most common and preventable reasons employees leave are work environment, career development, and work-life balance.

When faced with work delays due to lack of information, 81% of Panopto survey respondents reported frustration. People simply will not stay in jobs where they feel ineffectual or believe their careers are stagnating.

To prevent these losses, increase employee engagement and development by using a better knowledge-sharing system. Employees with access to a wide variety of training materials can do their jobs better while also learning critical new skills.

How collaborative learning helps with institutional knowledge

Most employees are willing to share their unique institutional knowledge with colleagues; they just need the right platform. You can preserve institutional knowledge simply by giving your workers the right tools and approach to share their knowledge.

Enhanced knowledge transfer

Collaborative learning makes it easier for employees to share institutional knowledge and expertise. This ensures a smooth transmission of institutional knowledge, as veteran employees actively contribute to the learning experiences of newer team members and vice versa. 

Accelerated learning curve for new employees

Collaborative learning significantly shortens the learning curve for new hires by providing direct insights and practical knowledge from seasoned colleagues. This approach empowers newcomers to adapt quickly to their roles and contribute meaningfully to the organization. Aircall used 360Learning’s collaborative learning approach and platform and found they were able to onboard new employees faster with less managerial oversight needed.

Increased employee engagement

Active participation in knowledge-sharing activities underpins collaborative learning This fosters a sense of belonging and teamwork. It also contributes to higher job satisfaction levels, creating a motivated and cohesive workforce.

The best way to distribute institutional knowledge is by creating a culture of collaborative learning from day one. Make it clear that sharing internal knowledge is crucial to the company as well as to individual growth. Make it part of your company’s DNA by measuring it with metrics and OKRs, especially for team managers or HR or L&D teams. The best way to do that is by using a platform that simplifies information sharing.

Learn how to share institutional knowledge at your company our collaborative learning platform: