HR Management, HR Policies & Procedures

Knowledge Loss: Turnover Means Losing More Than Employees

The HR Daily Advisor recently sat down with Ari Bixhorn, Vice President of Marketing, at Panopto to discuss the loss of company knowledge when employees leave an organization.

Source: Rafik / iStock / Getty

HR Daily Advisor: According to your research, the average turnover at organizations is 16%, with an average 2-year turnover time even at companies with great employer branding. This results in a lot of knowledge regularly leaving a company. How does that influence a company’s bottom line?

Bixhorn: Every time employees walk out the door, they’re taking their institutional knowledge with them. And in an era where everyone is a subject matter expert in something, that puts most businesses in a precarious position.

Whether a company’s employee turnover is above or below average, your workforce becomes at least temporarily less efficient every time someone leaves. In our research, we found that on average, 42% of the skills and expertise required to capably perform in a given position will be known only by the person currently in that position. In other words, should that person leave, their remaining colleagues won’t be able to do 42% of their work, and someone hired into that role will need to learn 42% of it from scratch.

That has real consequences. According to our research, the average new hire will spend almost 200 hours working inefficiently (asking colleagues for information and waiting for responses, forging ahead by trial and error, and/or “reinventing the wheel” to duplicate the work of his or her predecessor). These inefficiencies lead to employee frustration, unnecessary delays in work products, and an overall loss of productivity that can significantly impact a company’s bottom line.

HR Daily Advisor: How does it influence a company’s engagement?

Bixhorn: We’ve all had those moments when something we’re working on gets stuck waiting for input from another team member. Or worse, those moments when a project stalled because a key member of the team took a new position and was no longer available to contribute. When faced with challenges like these, 81% of respondents report feeling frustrated, and 25% report feeling overwhelmed. That wouldn’t be a problem if it happened only occasionally. But delays like these are actually quite common.

In our survey, 60% of respondents reported that it was difficult, very difficult, or nearly impossible to obtain information vital to their job from their colleagues. Employees in our survey spend an average of 5 hours per week waiting to get in touch with people who have the unique knowledge they need. For 1 in 10 workers, it’s not unusual to wait twice that long. During that time, work may be delayed, suspended, or even canceled altogether, further fueling employee frustrations.

Nevertheless, the report also revealed a potential solution. The way an organization manages knowledge matters to its employees, as they depend on unique knowledge to be productive. Sixty-three percent of employees report that they would prefer to work for organizations in which unique knowledge is preserved. Sharing knowledge therefore offers an opportunity to boost employee engagement within their companies.

HR Daily Advisor: What happens when lost knowledge is permanently lost?

Bixhorn: Knowledge is permanently lost when people leave an organization, taking their institutional knowledge with them. If that expertise isn’t preserved and shared for those remaining with the company to reference, rebuilding will very likely be a slow, inefficient, and frustrating process for all involved. In our study, we calculated the average U.S. enterprise-size business may be wasting $4.5 million in productivity annually just due to failing to preserve and share knowledge and, thereby, making new hire onboarding more inefficient.

But while employee transitions are an easily-identifiable cause of lost knowledge, there’s another far greater problem that most organizations haven’t even considered: the challenge of day-to-day accessibility. Most often, when one of your employees is stuck waiting for insights from a colleague, the cause isn’t because that colleague has moved on. Rather, he or she is simply in meetings all day; or off-site, working with a customer; or located in a different office halfway around the globe. In these cases, the knowledge isn’t lost forever, but because it can’t be immediately accessed when needed and instead takes a day or two to share, work stalls and productivity is wasted.

It’s a small loss that adds up quickly—according to our research, a firm with 1,000 employees can expect to lose $2.4 million in productivity annually due to these day-to-day inefficiencies, and a firm with 30,000 employees might expect to lose $72 million annually.

HR Daily Advisor: How can companies retain that knowledge despite high turnover and short employment periods?

Bixhorn: Employers should not wait for frustration to set in or key subject matter experts to depart. Instead, organizations should seek to create what we call a “culture of teaching”—setting the expectation that employees will document and share their expertise. Many organizations make this a part of the learning process itself, asking that each time an employee creates a new process, establishes a more efficient workflow, or otherwise discovers some knowledge that would be useful to others, that he or she makes an effort to preserve that information so that it will be easily accessible for coworkers.

In practice, this preservation of institutional knowledge can be done in many ways. Employees might contribute to a wiki or other intranet portal. They might hold brown-bag meetings or host Slack channel discussions. And increasingly, firms are using video to document employee expertise—videos are often faster to create than text, are easier for others to follow along and learn from, and can be recorded with ease using an employee’s own smartphone or laptop. One fast-growing analytics company found that video-enabled social knowledge sharing helped its engineering team stay abreast of new product updates better than had ever been possible with e-mail updates and monthly meetings.

Organizations should also examine the manner and quality of their formal training initiatives, searching for ways to cultivate the unique knowledge needed to do a particular job and get new hires up to speed.

HR Daily Advisor: Your research discusses that 58% of employee knowledge is “standard” and 42% is “unique.” Can you explain for our audience the difference and what the importance of unique knowledge is?

Bixhorn: In nearly every job, there are two fundamental types of employee knowledge. “Standard knowledge” refers to the fundamentals of the position—the things you’d expect anyone qualified for the role to know. For example, it would be reasonable to assume any accountant would be familiar with GAAP principles, or that any graphic designer would be familiar with Photoshop. Standard knowledge typically comes from a combination of experience, formal training, and academic education and is generally easier to replace.

“Unique knowledge,” on the other hand, tends to disproportionately draw from our own individual personal and professional experiences as they add up over our lives and careers. Some unique knowledge may come from a formal setting—an instructor or professor includes some useful detail in a lesson that isn’t typically taught elsewhere—but most is self-taught. Sometimes unique knowledge is created outright, as when a company brings on a new tool or process and an employee is assigned to learn it from end to end. The software developer who wrote the code for a particular piece of functionality in your product or the team that deployed your customer relationship management database would be rich with this kind of knowledge. Other times, unique knowledge is simply the product of learning on the job and finding new ways to be more efficient or effective. Negotiators may discover better-than-usual success with a novel twist on an old strategy. Or finance teams may find a more efficient way to process accounts payable that results in more on-time payments.

Whatever the case, unique knowledge is instrumental in tackling the complex problems and unexpected challenges that employees encounter at work more or less every day. In our research, unique knowledge comprised 42% of the total knowledge the average employee uses in his or her current role. But while standard knowledge comprises the larger share, employees in our survey understandably placed far greater value on their unique knowledge, with 81% of respondents indicating that unique knowledge is the hardest type of expertise to replace.

Check back for tomorrow’s Advisor, where we will conclude this interview with a discussion of employee frustration over being unable to access company knowledge.