Knowledge transfer in organisations

I have previously written about my favourite ESG metric, voluntary employee turnover. It indicates the mood and motivation of the key source of profits in every company, its employees. An increase in voluntary employee turnover leads to higher costs through recruiting activities and a loss of institutional knowledge and thus productivity. But institutional knowledge can be preserved if existing employees are willing to share their knowledge with co-workers while they are still employed. How can companies foster a culture of internal knowledge sharing to reduce the costs of employees leaving for greener pastures elsewhere?

Giada di Stefano and Maria Rita Micheli found an interesting subject pool to develop and test a theory about knowledge transfer in organisations: The European Organisation for Nuclear Research (CERN). Not only is the CERN one of the pre-eminent research centres of the world and sometimes in the press because of weird people claiming the CERN’s particle accelerators could create a black hole that destroys our entire planet. It is also a large group of scientists working together and in competition with each other to find out the details of the laws of nature that govern our universe. This academic scientific process has both competitive elements (research teams racing each other to be the first for major breakthroughs in analysis or modelling) and collaborative (publication of results and the data for everyone to check and review). At the same time, employee turnover at CERN tends to be quite large since many scientists are there for their PhD thesis or as postdocs on term-limited contracts.

What the study of CERN scientists found was then also replicated with 389 volunteers from non-scientific backgrounds in a lab experiment. It sounds trivial, but it needs emphasising. People who identify as part of an organisation tend to share knowledge with their co-workers while people who have less identification with the organisation take their expertise with them. More importantly, if people in an organisation compete with other people in the same organisation for bonuses, promotions and others, they tend to share their knowledge with outsiders rather than their co-workers. Creating individual goals that effectively pit one employee against others in the same division or team reduces the team spirit and effectively undermines an organisation's ability to keep proprietary knowledge to itself. Employees who are frustrated in such a system will not only not share their knowledge and experience with colleagues, but rather leave and take their knowledge with them to a competitor than share it with colleagues.

This once again shows how carefully balanced incentives need to be in organisations. Move too much towards competition between employees through individual sales goals or similar and you will create a cut-throat environment where everybody becomes a mercenary, simply looking for his or her own benefit. Move too much to a communal environment where the team is everything and the problem of free-riders develops where underperformers rely on others to do the hard work and reach the team goal. What an organisation needs is a bit of both but not too much of either.