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What is Institutional Knowledge? What Do We Lose When Employees Leave

In today’s business world, organisations have watched and experienced talent leave due to the ‘Great Resignation’. Whatever company leaders do, it appears that team members will leave in search of better opportunities, which makes it even more critical than ever to pay close attention to the institutional knowledge that will inevitably be lost when employees resign. 

Skill sets, expertise, and experience are essential for a successful business. Still, they must also innovate and evolve in response to market demands, so retaining institutional knowledge is increasingly crucial. If finding people with the knowledge you require is becoming more complex, an excellent place to start is to focus on retaining and developing the knowledge and people you already have. 

What is Institutional Knowledge? 

The combination of expertise, values, work processes, strategies, experiences, information, and data possessed by an organisation’s employees is called institutional knowledge. It is the collective knowledge of an organisation and its employees. 

Institutional knowledge refers to employees’ critical information about their jobs and the organisation. It is their understanding of how to do their job — what key activities are their responsibility, who they must collaborate with to complete them, and how to do them. 

But, when a seasoned employee resigns or leaves your organisation, they take that knowledge with them, and their colleagues who remain or replace them become overwhelmed and face a difficult situation. They are saddled with the responsibilities of learning the duties of the departing employee and determining the best way to complete those duties. In addition, these team members are forced to make decisions that may necessitate specialised knowledge, such as quality standards and processes – creating and delivering reports. However, they may become extremely frustrated if they are not provided with knowledge management documentation on how to do those things. 

So, what does an organisation lose when a seasoned employee leaves? 

Whenever a worker resigns, the business incurs numerous costs. First, the organisation must increase its efforts to recruit and train new employees. Furthermore, high turnover rates may make it difficult to attract top talent, as top candidates desire to work in an environment that values employee satisfaction. This may also imply that processes are lost as experienced professionals leave, and inexperienced talent attempts the task independently. The organisation then tends to suffer some setbacks such as; 

1. Loss of productivity:

Staff turnover results in the loss of experienced and trained personnel who are familiar with the organisation’s policies and goals and their individual roles in achieving these goals. Employee productivity and overall organisational performance can suffer when there is a high turnover rate. However, new employees may need some time to learn their roles, resulting in many inexperienced employees, eventually leading to lower employee productivity. Organisations with fewer employees may find it particularly difficult to replace workers, as workers may fill a variety of different specialised roles; this can pose a severe problem for small businesses, affecting their performance and productivity. 

2. Reduced employee morale

seeing colleagues leave the organisation has a negative impact on employee morale. The greater the frequency of resignations from the organisation, the lower the overall organisational confidence. To explain, it leaves other employees wondering why there have been so many resignations. Your employees may not express their insecurities directly, but they will be affected. Indeed, some may believe that there are better opportunities available elsewhere or that your company is dealing with a severe problem that they are unaware of. Their morale will eventually deteriorate, and high disengagement rates will begin. Organisations face doom when employees lose morale and begin to disengage. However, you must constantly monitor your employees’ morale and motivation as a leader. Prolonging the situation will harm the organisation in the long run and result in significant losses. 

3. Institutional Knowledge Loss

Long-serving employees understand the business’s culture, the quirks of clients and bosses, and which strategies work best with each colleague at work. Practical experience of products, strategy, clients, processes and customer needs is lost when an employee leaves. Much of this tribal knowledge is never recorded. Employers would be wise to invest both time and money in attracting and retaining the best employees. It is preferable to give a raise to a high-performing employee or to invest in additional training and development rather than to watch your employees leave. 

4. Cost of training 

Regardless of whether you hire an extremely experienced talent or upskill an existing employee, the cost of training is inevitable. Training employees is an expensive investment. In response to the highly competitive labour market and growing skills gap, many employers are investing in training and development for current employees or offering training as an incentive to retain and attract talents. However, money isn’t the only resource you spend on employee training; there’s also accountability for the number of hours. What if the staff leaves before the organisation reaps the benefits of its training investment? Who bears the loss.? It is evident that the organisation lose money and time invested in a such employee when they leave the organisation. 

It’s tricky not to be worried about the departure of important talent, as well as the institutional knowledge that goes with them, as experienced employees leave in the coming years. Quite a lot can be lost if an organisation like yours does not make an effort to retain knowledge, which includes everything from industry expertise to procedural best practices. However, building an ecosystem in which institutional knowledge is preserved, transferred, and continuously expanded requires starting early and prioritising programs such as knowledge management libraries, video content, and mentorship. Every organisation’s best hope is to avoid institutional memory loss and stay on track for expansion and growth. 

Organisational memory, like human memory, can grow or deteriorate. Developing a strategy for preserving institutional knowledge benefits short-term business resilience as employees leave and can contribute to higher engagement and lower turnover, boosting long-term innovation and growth. 

At Workforce Group, we value the opportunity to assist businesses in developing a practical strategy for preserving institutional knowledge for productivity and continuity. You can take advantage of our premium content digitization to preserve what is institutional knowledge within your organisation. 

If you require further clarifications or need the services of our senior and experienced consultants, please reach out to us at hello@workforcegroup.com. 

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