Organizational Learning

Abstract

Organizational knowledge is a concept that represents the sum total of all of the knowledge and experience that members of the organization both possess and bring to the table as they engage in the work of the organization. Organizational learning is the process developed by an organization with the goal of increasing the overall amount of organizational knowledge available, and of making sure that this organizational knowledge is applied in the most timely and effective ways possible.

Overview

Organizational learning can be thought of as an aggregation of the process of individual learning by members of a larger group—the organization. As individuals acquire experience at various tasks, the accumulation of this experience eventually produces knowledge. When many individuals are working together in an organization, their acquisition of individual experience and the subsequent production of knowledge at the level of the individual also benefits the organization, because the organization acquires experience and knowledge at the same time as the individuals who compose it do. Seen in this way, organizational learning can seem as an almost natural process that occurs without the need for intentional drive to motivate it, almost like sediment accumulating on the ocean floor. Yet there is also a deliberate aspect to organizational learning, because organizations can choose to focus their knowledge management efforts in ways designed specifically to improve their own learning capacity.

An organization might recognize that one of its weaknesses is in being able to retrieve and analyze sales data for transactions using foreign currency. The organization could either continue to operate "as is," in this area, or it could implement changes in its practices to make such information easier to get a hold of and to analyze (Wellman, 2013). This type of thinking about the ways in which one thinks, whether at the level of an individual or of an organization, is known as metacognition, or "thinking about thinking."

Applications

Organizations operate within an environment characterized by constant change, whether due to the weather, the economy, social and political developments, or some combination of these factors. Because the environment is perpetually in flux, organizations cannot afford to approach that environment with the same ideas and thought processes used years or even decades ago. Instead, organizations must continue to build their knowledge by using information acquired through experience operating in the ever changing world. An organization that continues to learn by acquiring experience and analyzing it to produce knowledge will be better equipped to deal with changing circumstances (Gino & Staats, 2015).

Another major motivation for organizations to optimize their learning is to help them stay ahead of their competitors. Many types of organizational knowledge pertain to ways in which the organization can operate more efficiently and more effectively (Argyris, 2012). For example, a company that operates a chain of coffee stores might focus entirely on constant expansion into new markets, while its competitor, who possesses many more years of experience in the coffee business, may have learned to take a slower approach and conduct thorough market analysis of every region it considers moving into, before committing to the move. This methodically analytical, go slow approach could help the more established company avoid rushing into economically unstable regions just for the sake of short-term expansion. In this way, the older company’s ability to put its own knowledge to more effective use helps the company to outperform its competition in the long run, by avoiding the unnecessary expense of opening stores in areas where there will not be enough business to sustain them at a profitable level (Cameron & Spreitzer, 2012).

Knowledge management is an umbrella term used to describe all of the different ways that an organization manipulates knowledge, from acquiring it and organizing it to distributing and storing it. Generally speaking, the more adept an organization is at knowledge management, the greater will be that organization’s aptitude for organizational learning.

The experience curve describes a theoretical model that explains the tendency for overall production costs to decrease as the volume of production increases. In other words, the experience curve shows how an organization learns how to operate more efficiently and more effectively, the more it engages in a particular type of production. Often, it may not be immediately clear how the savings are being achieved, but the reality of the savings is beyond question.

Viewpoints

The fundamental mechanism of organizational learning is change. This does not refer to any kind of gradual evolution that occurs randomly and without direction. The change at the heart of organizational learning is caused by the process of the individuals who make up the organization acquiring experience through the course of their regular work on the organization’s behalf, and sharing that experience with others in the organization (Anderson, 2010). As this experience accumulates it is also analyzed by various sectors within the organization (e.g., the finance department, the marketing department, the research and development department) and the product of this analysis is knowledge.

An example of such knowledge in the scenario discussed above might be the realization that coffee stores do not do well when they are located in zip codes that have experienced more than seven percent unemployment within the last three years. This piece of information is no doubt interesting, but it does not really mean much unless it is put to use by the organization to make a change in its behavior. This is the type of change that is central to organizational learning. Perhaps the more experienced coffee chain, after realizing the importance of the seven percent unemployment metric for predicting the success of its location, would decide to change its business practices to exclude from consideration and potential location that has experienced greater than seven percent unemployment in the last three years. This change would be the result of organizational learning—that is, observing information in the real world, analyzing that information and making predictions about it, and then adjusting company behavior based on those predictions (Boonstra, 2013).

Single and Double Loop Organizations

Because organizational learning is a field that lends itself to multiple layers of abstraction, there have been several theories developed to try to explain the different mechanisms used by organizations to acquire, store, process, and transfer knowledge. Some of these are the single and double loop theories, which analyze the ways in which organizations respond to failure. Single loop organizations that experience a failure in their efforts respond by adjusting the methods used in those efforts and trying again to see if the change produces a success. An example of this might be a company that tries to increase sales of its products by advertising on the radio, only to find this method ineffective. The company might decide to try again, but using television advertising instead of radio.

Conversely, a double loop organization in this situation would be unlikely to try a different advertising medium, and more likely to reconsider whether the product being marketed was actually viable in the marketplace. This is because double loop organizations, upon experiencing failure, tend to reconsider the overall goal of their efforts rather than question the methods used.

While these two different types of organizational learning may seem very different, they actually exist at different times and at different levels of most organizations, and can even be employed side by side under some circumstances (Godwyn & Gittell, 2012).

Learning Curves

A learning curve in the context of organizational knowledge management is a graph that represents how an organization’s performance of a task improves over time, as the organization gains experience at performing the task. Often this improvement is due to the organization discovering ways that it can perform the task more efficiently, though other factors may also play a role. The factors that play the most significant role in an organization improving its performance typically fall into one of three categories: individual, structural, and technological. Technological changes are enabled by advanced in technology (Iyengar, Sweeney & Montealegre, 2015). The classic example is of a sales force, in the days before the Internet, receiving personal digital assistants that enable them to collect and share their sales data much more quickly and easily. Individual changes are also fairly straightforward, as these include the experience acquired by individual members of the organization while they perform their duties.

The more complex concept is that of structural change (Eddy, 2014). This refers to adaptations the organization makes in response to information it receives, because these changes affect the structure of the organization’s operations and processes. Each of these factors is at play in every organization as it interacts with its environment, but the particular nature of an organization influences the degree to which it responds to information. This explains why different organizations exhibit faster or slower responses to the information they receive, and why some organizational responses are more effective than others.

Different theorists have tried to explain variations in organizational performance using a variety of models.

The models that have garnered the most attention are those developed by John F. Muth, Bernardo A. Huberman, and Christina Fang. Muth’s main area of focus was on adaptations that increase an organization’s cost effectiveness. Huberman continued this general approach, but sought to simplify the number of steps used in the analysis conducted by the organization. Fang’s model explores the propagation of credit throughout the organization as part of the analytical process, making it possible for the organization to more accurately identify information that will help improve institutional processes (Lewis, 2015).

Explicit and Tacit Knowledge

Not all types of information and knowledge that are used in organizational learning are equally accessible. Many researchers acknowledge the distinction between knowledge that is explicit within the organization, and that which is tacit. Explicit knowledge consists of information that the organization "knows that it knows." This is information that the organization is aware of and deliberately tries to put to good use, whether it is sales data, transcripts of focus groups discussing the relative merits of potential products in development, or responses to an annual employee satisfaction survey. The foremost quality that makes explicit information easier to deal with is that the organization knows it exists and has a place to keep it so that it can be put to good use.

This is not the case with tacit knowledge. Tacit knowledge is the organization’s set of unwritten rules; those who need to know a particular rule are aware of it, but these rules are not written down anywhere, and might even be at odds with the company’s official position statements. An example of tacit knowledge might be the fact that every scientist working for company X’s research and development department knows that the only way to get a research proposal approved is to have someone from marketing included as a co-author of the proposal (Burke, 2014). This is not the company’s official policy, and the company might prefer not to have this information about its internal workings made public knowledge, but it remains a "fact of life" known to all of the company’s employees that are affected by it.

Companies that wish to take fullest advantage of their learning opportunities must make every effort to pay as much attention to tacit organizational knowledge as they do to knowledge that is explicit. Tacit knowledge is often possessed by those members of the organization with the longest tenure or the deepest insight into the hidden machinations of the institution. As such, it tends to be some of the most precious information that the organization possesses, and this means that it is vital to try to capture it before it disappears, either through the departure from the organization of those in possession of it or through its tendency to fade away as more pressing matters confront the organization and demand its collective attention (Argote, 2013).

Terms & Concepts

Experience Curve: The experience curve is an idea that emerged in the 1960s. It describes a theoretical model that explains the tendency for overall production costs to decrease as the volume of production increases.

Explicit Knowledge: Explicit knowledge is clearly articulated by the organization and is part of the organization’s official image and purpose; an example of this might be the organization’s mission statement or corporate charter, both of which are on record and available to anyone who wishes to consult them.

Knowledge Management: Knowledge management is an umbrella term used to describe all of the different ways that an organization manipulates knowledge, from acquiring it and organizing it to distributing and storing it. Generally speaking, the more adept an organization is at knowledge management, the greater will be that organization’s aptitude for organizational learning.

Learning Curve: A learning curve is a visual representation of the relationship of acquiring experience to acquiring skill, and it is used with both individuals and organizations. As the amount of experience with a new task or process increases, the subject’s aptitude at performing the task also increases. In other words, both people and organizations get better at doing things as they get more practice. This even applies, somewhat recursively, to the process of learning itself. The more an individual or an organization engages in learning, the better it becomes at learning—it learns how to learn.

Organizational Metacognition: This idea describes how an organization thinks about its own learning process. Many organizations that prioritize learning try to find organizational learning methods that are more effective than others, so they can give themselves an advantage over competitors. This type of reflective thinking about how one learns and what resources would be the best fit with one’s learning style, is typical of metacognition at the organizational level.

Tacit Knowledge: Tacit knowledge is that organizational knowledge which is unspoken but known to all. An example of tacit knowledge could be seen at a company where there is an unspoken rule that no one is promoted to vice president without serving at least six months at the company’s London office. This is not an official rule that is inscribed somewhere, but it is an unwritten requirement that everyone in the company knows about.

Bibliography

Anderson, D. L. (2010). Organization development: The process of leading organizational change. Los Angeles, CA: Sage.

Argote, L. (2013). Organizational learning: Creating, retaining, and transferring knowledge. New York, NY: Springer.

Argyris, C. (2012). Organizational traps: Leadership, culture, organizational design. Oxford, UK: Oxford University Press.

Boonstra, J. J. (2013). Cultural change and leadership in organizations: A practical guide to successful organizational change. Chichester, UK: John Wiley & Sons.

Burke, W. W. (2014). Organization change: Theory and practice. Los Angeles, CA : Sage.

Cameron, K. S., & Spreitzer, G. M. (2012). The Oxford handbook of positive organizational scholarship. New York, UK: Oxford University Press.

Desai, V. (2015). Learning through the distribution of failures within an organization: Evidence from heart bypass surgery performance. Academy of Management Journal, 58(4), 1032–1050. Retrieved January 3, 2016 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=108801068&site=ehost-live

Eddy, P. L. (2014). Connecting learning across the institution. San Francisco, CA: Jossey-Bass.

Gino, F., & Staats, B. (2015). Why organizations don’t learn. Harvard Business Review, 93(11), 110–118. Retrieved January 3, 2016 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=110320478&site=ehost-live

Godwyn, M., & Gittell, J. H. (2012). Sociology of organizations: Structures and relationships. Thousand Oaks, CA: Pine Forge Press.

Iyengar, K., Sweeney, J. R., & Montealegre, R. (2015). Information technology use as a learning mechanism: The impact of it use on knowledge transfer effectiveness, absorptive capacity, and franchisee performance. MIS Quarterly, 39(3), 615–A5. Retrieved January 3, 2016 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=108873991&site=ehost-live

Lewis, H. (2015). Organizational learning: Individual differences, technologies and impact of teaching. Hauppauge, NNY: Nova Science.

Wellman, J. L. (2013). Organizational learning: How companies and institutions manage and apply knowledge. Houndmils, UK: Palgrave Macmillan.

Suggested Reading

Döös, M., Johansson, P., & Wilhelmson, L. (2015). Organizational learning as an analogy to individual learning? A case of augmented interaction intensity. Vocations and Learning, 8(1), 55–73.

Evans, S. D., & Kivell, N. (2015). The transformation Team: An enabling structure for organizational learning in action. Journal of Community Psychology, 43(6), 760–777.

Jain, A. K., & Moreno, A. (2015). Organizational learning, knowledge management practices and firm's performance: An empirical study of a heavy engineering firm in India. Learning Organization, 22(1), 14–39.

Mena, J. A., & Chabowski, B. R. (2015). The role of organizational learning in stakeholder marketing. Journal of the Academy of Marketing Science, 43(4), 429–452.

Schilling, M. A., & Fang, C. (2014). When hubs forget, lie, and play favorites: Interpersonal network structure, information distortion, and organizational learning. Strategic Management Journal, 35(7), 974–994. Retrieved January 3, 2016 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=96312592&site=ehost-live