After Retirements and Layoffs, Why Knowledge Management is More Important than Ever

In recent years, the corporate landscape has experienced profound changes. As retirements and layoffs surge, companies grapple with the immense challenge of retaining their institutional knowledge. This article explores the pivotal role of knowledge management amid these shifts, highlighting its significance in safeguarding critical organizational insights and championing a resilient company culture.

Dramatic Shifts in the Workforce

Has your organization been going through waves of retirements and downsizing? You would not be alone. These three trends have produced significant changes in the workforce:

Retirements: Coming out of the pandemic, the retired share of the U.S. population was nearly 1.5 percentage points above its pre-pandemic level. According to the US Federal Reserve, more than half of that increase was attributed to “excess retirements” that would likely not have occurred in the absence of the pandemic. That elevated rate has likely reduced the number of long-tenured employees at your firm, making their institutional knowledge and memory rarer. Those that remain may not stay as long as you might think, as more Americans now want to retire early. More than a third of workers younger than 54 aspire to retire by age 55.

Downsizing: Expectations of an economic slowdown and poor financial results over the last 12 months have led many companies to downsize. According to the Forbes Layoff Tracker, over 200,000 employees were laid off in significant job cuts in the first half of 2023. Many of these were knowledge workers, as major cuts swept across technology (Google 12,000; Meta 10,000; Microsoft 10,000), financial services (KPMG 1,900; Ernst & Young 3,000; Farmers Insurance 2,400), and biotech/pharma (Biogen 1,000; Novavax 500).

Turnover: While the voluntary quit rate has dropped 11% over the last 12 months, it is still higher than pre-pandemic levels, according to the US Bureau of Labor Statistics. Job openings continue to be strong, tempting your high-performing employees.

The Dwindling Pool of Institutional Knowledge

As a knowledge management leader, you likely see the impact: vast amounts of institutional knowledge have recently departed your organization. This has set up the dual challenge of years, if not decades, of expertise, problem-solving solutions, and innovative thinking walking out the door, leaving a tangible void. At the same time, the need to onboard and train inexperienced new employees is added to the overstressed workload of those who remain.

The challenges that remain are:

1. The outflow of expertise: It’s not just about the number of employees departing; it’s the depth of their knowledge that’s concerning. These individuals possess unique insights derived from years of on-the-job experience. Their in-depth understanding of company products, services, and clients must be more quickly replicated or replaced. Unfortunately, this is knowledge that isn’t always documented.
2. Gaps in documentation: While some companies have taken steps towards documenting processes and protocols, the more tacit and experiential knowledge rarely gets recorded. This means employees who retire or are laid off take the undocumented wisdom and know-how they’ve acquired over the years. This absence of documented knowledge creates a vulnerable point in the continuity of operations.
3. The onboarding challenge: With the departure of experienced employees, companies are left with the daunting task of onboarding new hires. Without seasoned mentors and comprehensive documentation, the learning curve for these newcomers becomes steeper.
4. Increased workload and stress on remaining employees: The remaining employees must take on added responsibilities due to the gaps left behind, and at the same time, they become the default mentors and trainers for the new hires. This additional burden can lead to burnout, further attrition, and a potential decline in service quality.

The Urgency of Prioritizing Knowledge Capture

In the wake of layoffs, budget cuts, and other organizational challenges, it might seem counterintuitive to prioritize knowledge management. Some may argue that the horses have already left the barn, so why fix the gate? A firm suffering dramatic knowledge loss should prioritize knowledge capture.

Drawing inspiration from an old Chinese Proverb, “The best time to plant a tree was twenty years ago. The second-best time is now,” we’re reminded that past missed opportunities shouldn’t deter current action. Even if optimal conditions existed in the past, the present moment still holds immense potential.

Here are three compelling reasons why now is always the right time for knowledge management.

1. The pain is acute enough to generate executive action

Your executive leadership knew that the loss of institutional knowledge would be an outcome of their downsizing decision, and mitigating the cost and consequences of that loss would have been considered in the timing and structure of the layoffs. Similarly, managers typically are aware of a subject matter expert’s impending retirement, but few do anything to capture and document their knowledge. Some of the costs of institutional knowledge loss are shown in the below infographic.

Evaluating the repercussions is crucial if your company has experienced significant departures due to retirements or layoffs. Assess the progress of innovation projects. Gauge the proficiency of new salespeople in capturing and maintaining business. Have there been declines in customer service quality? Observe the morale: how are your tenured employees managing onboarding newcomers and maintaining operations? Beyond these immediate concerns, consider the long-term ramifications: missed opportunities for patents, abandoned innovation projects, or even product recalls stemming from undocumented procedures. You likely won’t need to go too far across your network of directors and managers to collect impactful stories.

Who Really Owns Knowledge Management?

Initiating a discourse on the effects of retirements and layoffs can be sensitive and politically charged. Having robust support, or “air cover,” is crucial from the executive tier. This leads to an important question: who owns knowledge management at your company?

Strategy, technology, or R&D executives often oversee knowledge management in many enterprises. However, the repercussions of knowledge loss reverberate across various departments, including sales, customer service, operations, manufacturing, and marketing. A pivotal insight here is the integral role of executive ownership. With their backing and active involvement, effective knowledge management might be attainable.

It’s essential to underscore the strategic importance of knowledge management. By investing in it, companies can safeguard against present challenges and fortify themselves against potential future turnovers, whether from voluntary departures, retirements, or organizational downsizing.

How Some Organizations Thrive Amidst Turnover

It’s worth noting that some organizations handle employee turnover much better than others and are seemingly built to withstand and strive with turnover. Examples are professional service firms (accounting, consulting, law) with aggressive college recruiting and an “up or out” promotion system. Elite military units thrive with regular officer rotations. Organizations that handle turnover well are characterized by anticipation, documentation, and knowledge management. Unfortunately, many companies used to low turnover left poorly documented roles and processes and had no company-wide knowledge repository. Those companies are highly susceptible to employee turnover, leading to a downward performance spiral. Knowledge management – a proactive approach to capture the enterprise’s and its employees’ collective knowledge- is critical to why some organizations handle turnover well.

2. Onboarding and Training: A New Approach

During periods of high employee turnover, the responsibility of training newcomers inevitably falls on the shoulders of existing staff. They are often already stretched thin, grappling with expanded roles and limited resources. This results in decreased productivity, declining morale, and ineffective training.

Instead of viewing training as an ongoing, ever-present burden, consider it an opportunity. Document roles, processes, and other organizational knowledge, turning a repetitive task into a ‘document once used repeatedly’ system. Get it from the training employee once, and repurpose it often. This gives a win-win-win: current employees only need to go through it once, and incoming employees can self-learn asynchronously, creating a baseline of institutional knowledge capture.

While documentation can expedite onboarding, it doesn’t eliminate existing employees’ critical role in integrating new members into the company culture and workflow. However, it will streamline the introduction to company policies, hierarchies, terminologies, systems, market trends, and more.

Knowledge capture for training is a subset of the broader concept of knowledge management. Yet, it’s a pivotal step towards securing buy-in from various organizational tiers. A forward-thinking knowledge manager will aim to document deeper, more nuanced insights over time. This might include extracting knowledge from veteran employees or subject matter experts in various domains such as technology, processes, or markets. Drawing from my tenure at a global chemical company, techniques like video interviews, panel discussions, white papers, and lectures proved invaluable. Given the diverse company cultures and individual personalities, offering multiple avenues for knowledge documentation is essential.

Note that this is not just for individual contributors and subject matter experts. Incoming senior managers and executives can also benefit, allowing for the extraction of advanced knowledge ranging from market insights to strategic orientations.

3. Challenges and Considerations in Knowledge Capture

Successfully capturing knowledge involves confronting two central challenges: resources and organizational culture. Addressing these challenges head-on can make your knowledge management initiative more successful.

• Resources: Capturing organizational knowledge requires both commitment and people. Don’t underestimate the resources necessary for setting up formats, getting buy-in, editing and revising content, and capturing and editing videos. You will also need a knowledge management system where content can be easily retrieved. This is not a quick fix; expect at least a year to lay down the knowledge foundation and develop the system.
• Culture: The perception of knowledge management after downsizing is crucial. Employees might perceive it as a precursor to further cuts, leading to participation reluctance.

Much of this point will apply to knowledge management regardless of attrition. What’s different in your pitch is that you will leverage the angst of training and onboarding as a trojan horse to get comprehensive and rapid adoption of knowledge capture practices at your company.

4. Fostering a Knowledge-Centric Culture

A sudden and impactful loss of institutional knowledge can catalyze the company’s cultural transition to value institutional knowledge and understand the importance of knowledge management. Though downsizing often addresses immediate financial constraints, it frequently aims at repositioning the company for future growth. Culture change may be one of the objectives of restructuring.

Your role as a knowledge management advocate involves championing a culture emphasizing collaboration, knowledge sharing, and systematic capture. The objective? To ensure the organization’s longevity, nurture a culture that withstands employee flux and propels innovation.

This may be a far cry from your current culture, especially if there has been a downsizing. It’s a natural human response for employees to be apprehensive about their future and become more guarded, restricting information flow and viewing new initiatives skeptically. Such an atmosphere can lead to silos, especially when resources seem scarce. It will take senior leadership commitment and patience to lead culture change.

Resiliency is one of the many benefits of knowledge management, but it will likely resonate with your leadership in the aftermath of knowledge loss.

Embracing Knowledge as the New Currency

In a world where change is the only constant, companies must realize that knowledge isn’t just power—it’s the new currency. The era where institutional knowledge was a luxury has passed. Today, as the workforce sees rapid turnover, retirements, and layoffs, knowledge is critical to maintaining continuity, ensuring quality, and fostering innovation.

Embracing a knowledge-centric approach is about preserving the past and building a solid foundation for the future. It’s about equipping the organization with the tools and culture to navigate future challenges and leverage opportunities. In the face of dramatic workforce shifts, investing in knowledge management is akin to investing in the company’s lifeblood.

As leaders, the responsibility falls on us to champion this cause. The benefits of a well-structured knowledge management system are manifold, but perhaps its most significant contribution is safeguarding an organization’s essence. A company isn’t just its products, services, or balance sheets—it’s its people’s collective wisdom, experiences, and insights.

While the corporate terrain is filled with uncertainties, one thing remains clear: an organization that values, captures, and leverages its institutional knowledge will always stand resilient, ready to face the future, no matter the challenge.

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About the Author

Tom Weyenberg

A seasoned expert in the chemical industry's strategy and insights domain, Tom has collaborated with Bloomfire to create a cutting-edge knowledge management and market insights system.

The Cost of Institutional Knowledge Loss Infographic

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