Institutional knowledge
Management & Mindset

Why Not Sharing Institutional Knowledge is Costing Your Company Money

I’ve never been great at documenting my work processes and how I do things. 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 memory. Developing a process to preserve and share this knowledge democratizes information and helps create a culture of learning inside your company.

Why 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 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 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 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 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 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 turning 65 (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. (We use Trello, and the training is part of our onboarding process.) Collect important information about their roles, relationships, and experiences in the company so that no critical information lives in only one person’s brain.

Information silos hurt productivity

Information silos crop up when 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 job.

employees waiting for information

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 Deloitte, 72% of employees say they cannot find the information they need within their existing information systems.

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.

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’ 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. A study by Aberdeen Group found that businesses that improved their onboarding process could see a 17% increase in revenue per employee.

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. The Work Institute’s 2019 Retention Report estimates that losing an employee costs a U.S. company an average of $15,000 in lost productivity. They also estimate that it costs up to one-third of the employee’s salary to find a suitable replacement. So if you lose an employee who makes $60,000 a year, it could cost your company $35,000 before work resumes as normal.

This cost is often avoidable. The same report found that employers could have retained 77% of employees who quit their job. Among the most common and preventable reasons employees leave are work environment, career development, and work-life balance.

frustrated employees leaving

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.

A more efficient system for sharing institutional knowledge is a powerful way to stanch these losses by boosting employee engagement and development. Employees with access to a wide variety of training materials can do their jobs better while also learning critical new skills.

The key to institutional knowledge is Collaborative Learning

Employees aren’t purposely guarding their unique knowledge. Most are happy to share what they know with colleagues—they just need a platform. You can preserve institutional knowledge simply by giving your workers the right tools to share their knowledge.

Create 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. Include metrics and OKRs, especially for team managers or HR or L&D teams, to facilitate that internal knowledge sharing.

And perhaps most importantly, use a platform that makes information sharing easy and scalable. Make it simple for veteran employees to share what they know and for new employees to find what they need.

Learn more about sharing best practices at scale with our Collaborative Learning Platform:

share best practices collaborative learning platform