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When Knowledge Left the Building

A recent study of generations in the workforce examines the effect on companies when workers with institutional knowledge leave.

February 14, 2014
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Related Topics: Succession Planning, The Latest, HR Administration, Talent Management, Workplace Culture
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Worker leaving keyhole

Having a succession plan for talent is one thing. Having a succession plan for the information workers possess is another. And if you haven’t planned for the latter, you’ve got another think coming.

What happens to an organization when its best, brightest, most experienced and knowledgeable employees walk out the door? What do they take with them, and what do employers lose?

Part of it is the organization’s institutional knowledge or history. Keep in mind that not all employee turnover is “bad” turnover, but regardless if the move’s good or bad for the organization, employees who leave take a substantial amount of work, business and operational knowledge with them that’s difficult to replace or duplicate if internal systems to retain or document this knowledge are nonexistent.

It’s possible that by the year 2018 we may see as many as five generations working side by side. Employers face substantial challenges dealing with generational differences. In 2012, in a human resources study done for the University of Texas at El Paso, the subject of institutional knowledge was blended into a larger generational study.

Part of the study (editor’s note: The author performed the study), which involved a survey of almost 400 Generation X (1965 to 1979) and millennial (1980 to 2001) employees regarding their attitudes about their job, the value of their job, management’s view and the work being done to document the work that was done in the event they left.

Lost in Transition

What do companies really lose in terms of knowledge when these generational cohorts leave their employment sooner than expected? We all know of several metrics to calculate various forms of employee turnover and their respective costs. But very few metrics or measures exist to quantify the loss (or value) of institutional knowledge, continuity and history. What we do know is that these costs manifest in the turnover, recruitment, replacement and training costs that many organizations face.

Multiple generations working side by side in the workplace not only affect the makeup of an organization, but also how these same organizations address engagement, values, sustainment, tenure, and build toward the retention and transfer of institutional knowledge. Today, as the oldest baby boomers (1946 to 1965) prepare for retirement, some Gen Xers and many millennials are not remaining employed long enough to learn from their older colleagues. A 2012 study by PayScale, called “Gen Y on the Job,” found the median tenure for millennials to be two years compared with five for Gen X, seven for baby boomers and 10 for silent generation workers. As a result, the institutional knowledge, history and business continuity possessed by the silent generation and baby boomers might vanish with Gen Xers and millennials retaining little or no knowledge. The inability to retain and transfer institutional knowledge could result in a steady increase in employee turnover and further loss of institutional knowledge, translating into higher costs and lower institutional efficiency.

Survey Methodology and Results

A total of 148 employees consisting of clerical, para-professional and technical staff at the University of Texas at El Paso, completed the 2012 survey on institutional knowledge. The respondents were Gen Xers and millennials. About 60 percent of the respondents were female, and almost 9 out of 10 were Hispanic.

The majority of the respondents possess a bachelor’s degree, and some have a graduate degree. About 60 percent of the workers live in the El Paso area. Between both cohorts, the Gen X and millennial employees earned an average annual salary from $25,000 to $55,000.

In terms of their work experiences, 80 percent of the Generation X and 70 percent of the millennial employees indicated their satisfaction in working at UTEP. They enjoyed their respective work environments, believed they had great benefits, an excellent educational assistance program and some stability in their jobs. Seventy-three percent of Gen Xers and only 50 percent of the millennial employees stated that they intended to remain working with their employer.

However, both generations had ambitions to test the job market in a few years. In fact, both groups did not believe that they would continue to work at UTEP for the next three years. In terms of community, the majority of both generational group respondents were satisfied where they lived and considered El Paso their home. Some millennial employees said they would leave the city if given the right opportunity vs. a smaller number of Generation X employees.

In general, the respondents indicated that they would leave their employer, but not because of any generational attribute but for other reasons, such as low pay, lack of promotional opportunities, office politics and  the ability to find better benefits outside of their current employer.

—Andrew M. Peña

Organizations must have plans in place in order to ensure continuity. For example, in an effort to address the loss of institutional knowledge, the U.S. Office of Personnel Management recommended that government agencies focus on identifying leadership skills among their existing employees in an effort to create a pipeline of new leaders going forward. Small organizations must also implement a plan of knowledge transfer in order to survive the loss of experienced employees.

Another way to address the risk of losing knowledge as a result of boomer retirements is to exercise a workforce assessment, documenting and identifying critical knowledge held by existing employees. What some successful organizations have done is enlist the assistance of existing and departing retirees to serve as mentors instead of simply showing them the way out the door. These retention methods have proven to be successful in curtailing the loss of institutional knowledge and transferring it to younger generations.

A 2006 study of knowledge retention and employee turnover in the U.S. electric power industry found that valuable and skilled knowledge of silents and boomer workers would be difficult to replace. This study was geared toward finding ways to minimize the effects of the loss of institutional knowledge from those leaving and find ways to work on retaining the knowledge before they left.

The study found that the aging workforce was a critical and current human resources issue for the electric power industry because of the potential loss of knowledge that would result from employee retirements. The research suggested ways to transfer knowledge, such as observation of work units, employee communications, review or work processes, finding other ways to get the work done and adopting technology.

For any organization, the retention of the institutional knowledge is an important attribute in the recruitment and retention of employees. This is especially important for some highly skilled positions, such as in the technology fields. In these cases, the greater threat is the difficulty in quantifying and replacing these employees. While many managers worry about the level of turnover, the more important statistic should be the level and capacity of knowledge the people leaving possess. Organizations routinely sustain the loss of employees, but when those employees are highly skilled, possessing knowledge not readily replaceable, the organizations suffer.

How to Soften the Blow

There are steps organizations can take to reduce the level of institutional knowledge that they lose when a skilled employee leaves. Specialized training, documentation of processes and job-sharing are a few of the ways to combat this loss. One of the more effective methods of softening the blow when older or more-experienced workers leave is having them serve as a mentor and trainer, which allows them to pass on their knowledge to others within the organization. In order to prepare for the loss of institutional knowledge and plan for knowledge transfer, organizations must develop strategies to ensure business continuity.

The 2012 survey of Generation X and millennial employees at UTEP asked a number of questions dealing with institutional knowledge. Respondents were asked about the value of their institutional knowledge and perception of the loss that the institution would suffer if they left. They were also asked about the business process and continuity, and other skills that they had acquired while working at the institution, and what outcomes (including gains or losses) would the institution realize if they left.

The majority of both generations surveyed said that they believe what they learned at the organization was important and had value, and that losing that knowledge if a worker left would be a critical issue if management was not proactive about addressing it. Both generational groups said that their supervisors and managers would be hard-pressed to find replacement employees with similar skills or knowledge. The institution did not have either a tacit or explicit formal plan to transfer knowledge. Though the responses were not surprising and had a bit of humility tied into their responses, it did bring up the question of what organizations are doing to retain, acquire or transfer this knowledge before they leave.

Additional research or studies may be necessary to really understand the importance of institutional knowledge and the methodologies by which to retain or acquire it. Aside from several articles on the subject, there’s not much published on this topic. On a larger scale, I believe that if efforts aren’t made to address the retention of Generation X and millennial employees, we could possibly see a large gap in the loss of institutional knowledge, continuity and history that the older generations had or made available. This knowledge may be difficult to replace. Hopefully, additional work on this subject will bring this issue to the forefront and lead to effective implementation of plans to preserve institutional knowledge.

UTEP is not alone in addressing the loss of institutional knowledge. Many organizations — both public and private — could be dealing with the same issue. Rather than focus on what was lost, those organizations should turn their attention to the retention of this type of knowledge. And more so, those organizations should continue developing strategies to transfer (and document) institutional knowledge so that the “gap” that’s created when these younger employees leave work sooner than expected is minimized by these strategies.

After all, the cost of losing millennial workers is steep.

A 2013 study conducted by consultancy Millennial Branding and career networking site Beyond.com found that 87 percent of companies report it costs between $15,000 and $25,000 to replace millennial-age employees when they leave.

“The millennial generation has learned to be two things during the recession: resilient and nomadic,” said Rich Milgram, CEO of Beyond.com, in a written statement about the study. “As the job market improves, the level of confidence will improve along with it and cause many in this age group to re-evaluate their current situation, possibly seeing value in seeking greener pastures.”

Andrew M. Peña is assistant vice president for human resources at New Mexico State University in Las Cruces. To comment, email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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