Walking Away With the ‘Family Jewels'
Critical business knowledge resides in employees' minds; Don't let it get away.
By Mike Kust

Honestly, it's not a pleasant thought: employees walking away with the basis of your competitive advantage – knowledge, the “family jewels” of every firm. I'm not talking about the theft of intellectual property. That's far too obvious. It's the undocumented knowledge of your businesses that's at risk when employees leave the company.

According to the Delphi Group, a whopping 70 percent of a company's knowledge resides solely in employees' heads. This means knowledge of customers, of the social network of interpersonal internal contacts, of the industry and of processes. It's know-who. Know-what. And, of course, know-how. And it's all quite valuable. Some sources say that $6 out of every $7 of market value among S&P 500 companies is accounted for by knowledge assets; intellectual capital typically constitutes 75 percent of the total balance sheet of companies, and the economic value of knowledge is responsible for 46 percent of the U.S. gross domestic product.

Beyond the continuing elimination of positions through layoffs, company restructurings and mergers, the problem will swell as the rate of retirement of workers with the most experience accelerates. Next year the first of the enormous Baby Boomer demographic cohort (those born between 1946 and 1964) will turn 60 and start to leave the workforce en masse. The trend toward voluntary attrition and early retirement programs will only compound the difficulty. And, to make matters worse, there's a looming shortage of well-educated personnel to backfill these positions. The Employment Policy Foundation predicts that in about six years, the demand for baccalaureate level employees will exceed supply by 3.6 million workers.

Recognize, however, that the issue is not limited to the more mature employees in your company.  According to the U.S. Department of Labor, the median employment tenure for management occupations is a scant 6.0 years, and for sales occupations, it's only 2.8 years. With that level of managerial and sales turnover, it's easy to understand why companies are increasingly interested in treating the “disease” of “corporate amnesia.” Its symptoms include the inability to attain business goals, a reduction in the quality of decision making, poorer customer service, a decline in efficiency, a lower level of innovation, a slower reaction to marketplace events, and the repetition of mistakes made in the past. (Thankfully, corporate amnesia is a kind affliction. Because no one remembers what they have already forgotten, the emotional pain is lessened. Regrettably, it's at the cost of business gain.)

So what's a company to do?  Let's start by describing what doesn't work. This would include tactics like exit interviews, in which an about-to-depart employee is asked to “tell me everything you know”; like video-taped “oral histories,” in which a subject matter expert is asked to extemporaneously expound her or his wisdom to a camera ad infinitum; and like “data dump your PC,” in which an employee is asked to move all of her or his files to a local area network server for the greater good of the organization. From a knowledge management perspective, such tactics are reactive and ill-structured; and, from an interpersonal perspective, they are potentially threatening and intrusive to the employee.

The solution for protecting the “family jewels” begins by understanding that knowledge is of two types: explicit knowledge, which is the documented written insight residing in reports and presentations; and tacit knowledge, which is the undocumented experiential insights residing in employees' minds. Solving this problem requires that both be addressed, albeit differently.

For explicit knowledge, the task is to collect, organize, authenticate and disseminate critical content.  Access should be easy and there should be rewards for those who regularly deposit and those who regularly withdraw from it.

For tacit knowledge, successful approaches involve linking employees so that knowledge is freely and systematically shared within and across organizational boundaries. Exemplary organizations build communities of practice -- cross-functional groups focused on a single domain. They also create expertise locators, to allow one employee to find another with a specific skill; and engage in mentoring, succession planning and organizational “storytelling” activities to ensure that insights from one generation are passed along to the next.

Protecting the “family jewels” isn't an activity that should be started when an employee is about to depart. It's an activity that must be done continuously throughout the employee's entire tenure.  At its center, it involves encouraging employee knowledge-haring behaviors. To do so, best practice organizations align employee recognition and reward with that goal. Companies have, for example, established coveted and prestigious knowledge awards; created “halls of fame” to recognize outstanding knowledge behaviors; developed expertise certification designations; and incorporated knowledge-based criteria within performance evaluation and incentive compensation systems.

Your options are twofold:  actively protect or passively relinquish the “family jewels.”  Choose wisely.

Mike Kust is Chief Knowledge Officer, Carlson Marketing Group (MKust@carlson.com).