When someone learns how to do their job – not the nuts-and-bolts of the procedures, but the important and intangible components of producing – they are building institutional knowledge. Institutional knowledge is cumulative as it is built into the process and improved upon over time.
Basic components of Institutional knowledge:
- Relationships: who does one go to to get information or permission in order to advance a project.
- Execute: what tasks do the job truly entail?
- Documentation: where does the job information get recorded
- Deadline: when does a job need to get done by?
- Meaning: why is that job an important part of the process? How does it all fit in?
- Expectations: what is the measuring stick for performance?
True Institutional Knowledge is learned through experience and has value
Real wisdom can be found within the elders of our society and trades. The institutional knowledge behind apprenticeship ingrains the craft in the craftsman. Their practice in that field is now inherent and is as close to their teacher’s methods as is humanly possible.
New ways of doing things are “not better, but different”; new technology should not automatically be considered better. The institutional knowledge that was commonplace in the past may now be rare.
When someone quits, the organization becomes less effective
As institutional knowledge leaves the company, it struggles as less people can run it effectively. Other expected effects are:
- another organization will benefit from the new hire.
- the person gets paid more because of their institutional knowledge they bring.
- institutional knowledge was used as a foundation to start (potentially multiple) new businesses.
The organization realizes the loss of institutional knowledge, even if most organizations do not prevent it.
Large amounts of knowledge may be dormant
In the craft, “icebergs” of institutional knowledge may be out of use or considered dated. Researchers might be after a small portion of how to do one aspect of their craft. By tapping an old expert or simply digging deeper into the field, they uncover large swaths of information. Comparing the old ways against the new may lead to looking at the old ways with renewed fondness.
Institutional knowledge can be considered a hidden asset – a resource with economic value leading to future economic benefits. It is accumulated through experience but does not show on the balance sheet. The loss of institutional knowledge, either by attrition or lack of use, is an expense incurred by a firm or field.