Understanding the value of knowledge
In the mid-1990s, Delta Airlines Inc. sought to restructure their costs by cutting almost $2 billion from their operating expenses and eliminate up to 15,000 jobs. Delta made small adjustments throughout the organization, such as replacing linen cocktail napkins with paper napkins, eliminating dozens of small offices, and reducing employee benefits. While Delta was making these reductions, they continued to receive awards for outstanding customer service. To stay on track and meet their three-year reduction plan, Delta stepped up their pruning while trying to maintain the high level of customer service they had been recognized for in the past. To Delta, it was business as usual – until it wasn’t. Suddenly, Delta faced an enormous amount of customer complaints. Lost luggage, flight delays, cancellations, airplanes taking significantly longer to repair, even the disappearance of in-flight meals. Delta soon realized that they made a serious calculation error when they started to eliminate jobs. In their haste to meet the deadline, Delta forgot one crucial element in their organization: employee institutional knowledge. In the short term, Delta had significant savings by eliminating many of their experienced and highly paid employees (mostly mechanics), but in the long term, this left the organization with less-experienced employees. As a result, these employees lacked the institutional knowledge to address and solve organizational problems expeditiously. Delta’s lesson is two-fold: institutional knowledge is invaluable and with the departure of those experienced employees, the organization lost employees who knew how to collaborate and get work done on time and efficiently.
Knowledge is power. Knowledge is defined as information, data, or facts about something. To us, the more knowledge we have, the smarter we are – or at least how we want to be perceived by others. Knowledge has a value – it is human capital – and we can sell our knowledge. Organizations recognize this value. Knowledge is the most crucial element for organizational success and competitive advantage. Most employees recognize that their knowledge has value. Some employees exploit this for personal gain (e.g., recognition, promotions, job security, etc.) while others do not realize the value of their knowledge. However, employees must recognize that not all knowledge is equal. While knowing how to accomplish a simple task may satisfy the needs of the organization in the short term, it may not be viewed as a long-term critical element to the organization’s competitive advantage. Therefore, not all knowledge is equal. Some forms of knowledge have higher value than other types of knowledge.
TYPES OF KNOWLEDGE
There are two primary types of knowledge: explicit and tacit. Explicit knowledge is knowledge that can easily be transferred to others. In other words, it can be easily articulated, codified, or captured in a table, diagram, or other written format. When you are reading a manual or watching a documentary, you’re experiencing the transfer of explicit knowledge. You can take in what you are hearing or seeing and learn about it. For example, you can read a book or watch a documentary, and the information within these sources can be easily transferred to you. Tacit knowledge, however, is knowledge that is more difficult to transfer to others, usually captured through years of experience. It can be personal, hidden or elusive knowledge. Intuition, which is the ability to understand something without the need for conscious reasoning, is an example of tacit knowledge. It is difficult to explain to others how or why you may experience an instinctive feeling. Humor is another example of tacit knowledge. How do you explain humor to someone? It is difficult to teach a sense of humor to someone. While both tacit and explicit knowledge are essential, the ability to know how to accomplish a task (explicit) and the ability to know how to solve an organizational problem through years of experience (tacit), are very different. Thus, tacit knowledge, unlike explicit, provides a business value to an organization.
Employees that possess tacit knowledge are often viewed as more knowledge-valued over those employees that only posse explicit knowledge
VALUATION OF KNOWLEDGE
All employees want to be valued by their organization. Employees often forget the real value they bring to the organization. This need is often validated when the employee feels that they are the “go to person” within their organization. For many employees, there is no greater satisfaction than knowing that they are valued by their organization for their knowledge and experience. In most environments, employees that are knowledgeable and possess experience are held in high regard with management. For most employees, their knowledge can be classified as explicit knowledge. The knowledge loss that happens when the employee leaves the organization is not significant enough for the organization to recognize the human capital – the value – that the employee provided to the organization. On the other hand, the tacit knowledge that employee possesses gives them the opportunity to solve problems and create a significant competitive advantage for the organization. However, employees often are not aware of this valuable knowledge or how it can be valuable to their organizations or others. Therefore, employees need to assess their knowledge capacities and work to expand their tacit knowledge. When the organization realizes the wealth of tacit knowledge the employee possesses, the organization will recognize the value of the employee. It is a win-win situation.
Of course, it is only possible for an organization to recognize the value of the tacit knowledge their employees possess when they understand the business value that this type of knowledge can bring to the organization. In the case of Delta Airlines, they learned their lesson the hard way. According to Salvatore Parise, Rob Cross and Thomas H. Davenport, after the 9/11 terrorist attacks, Delta had to substantially reduce their workforce to remain competitive. This time around management made sure that the tacit knowledge did not depart with their employees. Sometimes, organizations must go through situations like Delta to realize the true human capital and value that their employees and their knowledge contribute to the organization.