Knowledge Management and Employee Turnover: KM Strategies

Introduction: The Knowledge-Based Economy

A new knowledge-based economy of learning individuals, organizations, and economies has evolved from the machine-based economy that dominated the developed world throughout the twentieth century. The emergence of a new type of firm is signaled by the familiar symptoms of corporate change, such as devolution of managerial responsibilities, more flexibility and skill in the workforce, greater recourse to outsourcing, and increased networking both inside and outside the firm — all in the service of transforming knowledge into business value (Vickery and Wurzburg, 1996).

Any attempt to produce a single model of "the new firm" is made impossible by the continuing importance of understanding the firm in the context of its organizational culture and history. The strategic decision-making of even the most progressive firms is still strongly influenced by the fact that firms are social phenomena whose identity is shaped and determined by the individuals within the organization. Far from acting independently of one another, employees, management, and hourly workers are profoundly affected by their own history and by the behavior of other firms in their industry. For example, in automobile or aircraft production, where many technologies are shared, firms also depend on their management of long-term relationships with specific suppliers to maintain their competitive advantage and their own uniqueness. Because of the mutually beneficial nature of these relationships, inter-firm alliances and customer networks can be major components in the matrix of knowledge assets that give a successful firm its competitive edge.

In this competitive and interdependent environment, how does an organization respond to the turnover of employees who possess much of the company's institutional identity and information? If the company is to continue on an uninterrupted path toward effectiveness in the marketplace, that knowledge must be managed and maintained within the organization even when key people choose to pursue other employment options. According to Business Week (2000), Daniel H. Schulman had lofty goals when he joined AT&T as a junior marketer in 1981. His plans included climbing to the top of the corporate ladder, where he could look forward to a hefty salary, a chauffeur-driven limousine, and membership at the Baltusrol Golf Club. But after Schulman finally reached the pinnacle as head of the company's $24 billion Consumer Services Division, he exited to become president of Internet startup priceline.com, Inc.

In the paradigm of the workplace of twenty years prior, Schulman would have been seen as throwing away everything he had worked for at AT&T for nearly two decades. But in the era of the Internet, his move represented advancement. Priceline.com offered him a $100 million multiyear compensation package. More importantly, AT&T could not compete with priceline.com when it came to generating excitement. "You think about all the times in history you might have wished for a frontier to explore," said Schulman. "The Net is one right here and now for our generation" (Business Week, 2000).

Unfortunately for AT&T, Schulman was not the only defector among its key executives. A dozen executives left the company after the arrival of new chairman C. Michael Armstrong in late 1997 — and they continued leaving in a steady stream well after his transition period ended. Some, like Schulman, were drawn to startup opportunities. Others were impatient with AT&T's slow progress in transforming itself from a traditional phone company into an agile Internet player. In the presence of such competitive forces and the increased mobility of talented employees, the need for knowledge management has become increasingly imperative.

According to Beazley et al. (2002), in an environment experiencing high levels of turnover, managing a company's knowledge creates a number of valuable and specific benefits. Through KM, the organization is able to:

AT&T's Dilemma

The elevated rate of turnover at AT&T began just as the organization entered a crucial stage in its 123-year history. New CEO Armstrong's goal was to expand AT&T's offerings from standard phone connections to state-of-the-art services such as high-speed Internet access, global business networks, and wireless voice and data services. He also spent $110 billion on cable TV acquisitions (Business Week, 2000). His next step was to integrate those operations into an effective and profitable business. At the same time, he had to fend off competition from regional Bell companies entering the long-distance market, while addressing the steady departure of key managers and executives.

While Armstrong acknowledged that his executives were prime targets for startup headhunters, he did not consider it a serious problem. Nevertheless, the company's strongest managers were highly sought after. "There is terrible demand on the AT&T talent pool," Armstrong said. "The key question is whether the core executive strength is still there, and I feel very confident today that it is" — a claim that at least some Wall Street analysts agreed with (Business Week, 2000).

According to Beazley et al. (2002), when there is a direct successor to a departing employee, the task of knowledge management is simpler. The new hire directly replaces the departing employee, enabling a direct transfer of knowledge with minimal lag time. However, when succession is indirect — such as through downsizing, or when a lengthy period elapses during which the vacated position is filled on an ad hoc basis — knowledge transmission becomes more problematic. For this reason, Beazley recommends that each position have a specification sheet on record. These informational files hold key data and requirements for the position. In this way, whether the succession is direct or indirect, the incoming employee can maintain consistent connection with the institutional history of the role. These data files are termed knowledge profiles, and can be created through third-party assessment tools such as:

By using these formalized third-party surveys, the organization can create specific opportunities for knowledge transfer among its personnel.

Conclusion

Reward systems may be used to motivate employees to engage in knowledge sharing. For example, Context Integration, a Web consulting firm, rewarded its employees for collaborating with colleagues via a company-wide database (Koudsi, 2000). Employees could pose questions, provide answers to others' questions, share ongoing research, and find colleagues working on similar problems. Employees accumulated points used in their performance evaluations, with the number of points earned contributing to their overall rating and compensation. Incentive programs such as this provide a context for encouraging interaction, collaboration, knowledge sharing, and diffusion (Droege and Hoobler, 2003).