Learning Organizations: Theory, Measurement, and Application

Introduction to Learning Organizations

Given such rapid and increasingly complex changes across the world in business and technology, how can companies ensure that they will be able to keep pace and succeed in the future? What is the best way to face these major continuous transitions, which not only impact work but also families, communities, and society as a whole? One suggestion comes from the field of organizational learning, which explores and analyzes different methods to design and build organizations in order to effectively meet their goals and mission, motivate employees to attain their full potential, and bring about positive change in the world. In a learning organization, employees continually create, acquire, and transfer knowledge — helping their company adapt to the unpredictability of the future faster than their rivals.

One of the most frequently cited definitions of a learning organization is that of Pedler, Burgoyne, and Boydell (1991, p. 1): "an organization which facilitates the learning of all its members and continuously transforms itself." Senge (1990) defines the learning organization by focusing more on the contribution of employees: "A group of people working together to collectively enhance their capacities to create results that they truly care about" (p. 18). Garvin (1993) offers the definition of "an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights."

Organizational learning is a broad term that traces its roots to the beginnings of sociology. Starting as early as Max Weber and continuing to the present, historians have been interested in the development of new industries, technologies, and research and development as institutionalized learning mechanisms. Industrial economists have used organizational learning to determine the effect of productivity and industrial structures. Company management has relied on this method to examine the correlation between learning and innovation at the strategic management level for new product development, and the concept of "learning curves" has been used extensively in management education (Dodgson, 1993). More recently, human resource management (HRM) has turned to organizational learning to enhance knowledge and thereby determine a company's core capabilities. As strategic management theories move closer toward resource- and knowledge-based perspectives, researchers are focusing more on the internal workings of firms to identify sources of competitive advantage and create value. Knowledge helps organizations effectively use, maneuver, and alter a variety of organizational resources (Kang, Morris, & Snell, 2007).

Dimensions and Characteristics of Learning Organizations

Interest in organizational learning has steadily increased over recent decades. Marsick and Watkins (2003) identified seven dimensions common to all learning organizations: (1) develop continuous learning alternatives; (2) further inquiry and discussion; (3) support group efforts and team learning; (4) offer strategic leadership opportunities; (5) encourage a collective vision; (6) interconnect the organization and its environment; and (7) establish systems to capture and share learning. Organizations that adopt and implement these characteristics are found to have continuous improvement in performance.

According to Demers (2007), people in a learning organization have no difficulty speaking up about what is on their mind. If and when they make a mistake, they are not afraid to admit it. They understand that change is an integral part of the improvement process and that this only comes through ongoing trial and error. Employees typically feel comfortable discussing their work challenges and disagreements, and they eagerly share information about what does or does not function correctly. The organization welcomes differences of opinion, and employees are open to different methods of accomplishing their work. They support new ideas, are interested in alternative options, and find time to review the status of their work.

A learning organization often discovers varied working methods, experiments with new products and services, implements a formal process for conducting and evaluating these experiments, and frequently develops prototypes or simulations when attempting new ideas. The firm maintains an established means for gathering information on competitors, customers, and economic, social, and technological trends, and it compares its performance against companies considered best in class. It productively engages in positive conflict and debate during discussions, welcomes dissenting views, and identifies and debates underlying assumptions that may influence key decisions.

When new employees are hired, their orientation includes adequate training. All employees receive training for periodic updates, changes to new positions, and launches of new initiatives. Education and training are valued, and time is purposely set aside for learning. Experts from other departments and outside the organization, as well as customers and suppliers, share information and quickly communicate new knowledge to established decision makers.

Measuring Organizational Learning Capability

Once a company determines that learning is an essential part of its mission and goals, it must have a means for continually measuring its organizational capability. Many companies have not yet reached this point, either because they have only recently shifted their focus or because they do not know the best way to evaluate their progress in attaining learning characteristics. Much of their information is based on anecdotal evidence.

A study conducted by Goh (1998) with over 1,000 employees across seven public and private sector companies concluded that organizational practices in the following areas discriminate between firms that learn well and those that do not: (1) business planning and performance measurement, establishing clarity of purpose; (2) leadership skills that encourage learning and sharing while creating a culture of achievement and development; (3) communication methodologies for the transfer of knowledge and learning; (4) teamwork that leverages individual learning; (5) new product and/or service development processes emphasizing experimentation; and (6) proactive management of learning. Tannenbaum (1997) conducted research in the service, manufacturing, military, private, and nonprofit industries and found that the key factors encouraging learning climates were: (1) people are knowledgeable about the "big picture"; (2) task assignments give individuals the opportunity to apply learned skills; (3) errors are tolerated; (4) employees are accountable for learning; (5) situational barriers to learning are minimized; (6) new concepts and approaches are valued and encouraged; (7) supervisors and co-workers offer support to apply learning; and (8) policies and practices support the efficient utilization of training. Tannenbaum found that each learning organization emphasized different aspects depending on its specific operating environment.

One way to measure these parameters is through a balanced scorecard. This is a strategic planning and management system used by global businesses, government agencies, and nonprofit organizations to ensure that their activities align with organizational vision and strategy, improve internal and external communications, and monitor performance against strategic goals. Kaplan and Norton (1996) originated the framework to add strategic non-financial performance measurements to traditional financial metrics, offering management a more "balanced" view of organizational performance. The scorecard establishes a framework that provides performance measurements while also helping planners identify what needs to be accomplished and measured, enabling organizations to execute their strategies decisively. As Kaplan and Norton (1996) describe it:

The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation (p. 76).

Kaplan and Norton (1996) explain that with the balanced scorecard, the organization is viewed and measured from four perspectives: learning and growth, customer, financial, and internal business practices. The learning and growth perspective encompasses employee training and corporate cultural attitudes related to employee and organizational self-improvement. In a learning organization, people — as the primary repository of knowledge — are the most important resource. In the present environment of rapid technological change, it is essential for knowledge workers to remain in a continuous learning mode. Metrics must be put in place to help managers direct training funds where they can be most useful.

Kaplan and Norton (1996) emphasize that learning is not the same as training. It includes factors such as mentoring and tutoring within the organization, as well as openness of communication among workers that gives them the opportunity to seek assistance on a problem when needed. It also includes technological tools, or what the Baldrige criteria call "high performance work systems." The internal business process perspective provides metrics that help managers assess how well their business is running and whether its products and services conform to customer requirements. Poor performance is a leading indicator of future decline, even when the present situation appears positive. Kaplan and Norton also recognize that timely and accurate financial data will always be a priority, but it must be balanced with the other three perspectives.

Another measurement framework was developed by Goh (1998), who identified five major organizational characteristics and management practices essential for learning within an organization: (1) clarity and support for mission and vision, providing a foundation of empowerment that encourages decision-making and innovation; (2) shared leadership and involvement, in which employees frequently participate in organizational decisions and leaders are viewed as coaches and facilitators offering constructive criticism; (3) a culture that encourages experimentation and prompts people to ask, "How can this be done better?"; (4) the ability to transfer knowledge across organizational boundaries, where learning is shared among departments and internal mechanisms foster the exchange of knowledge and expertise; and (5) teamwork and cooperation, enabling employees to work together to solve problems, improve processes, and foster innovation. Goh (1998) also identified the need for two major supporting foundations: effective organizational design and appropriate employee skills and competencies.

Based on these five characteristics, Goh (1998) developed a survey to assess an organization's learning capability. Elements of an organization — such as its structure, tasks, decision-making processes, reward systems, and communication processes — can either encourage or discourage learning and information exchange. This insight allows one to assess how well an organization's design clarifies goals, encourages experimentation, and promotes teamwork and information sharing. The resulting organizational learning survey contains 21 questions divided across the five sub-scales, developed through a literature review of over 100 articles on the concept and practice of organizational learning.

References

Demers, D. L. (2007). Organizational change theories: A synthesis. Thousand Oaks, CA: Sage.

Dodgson, M. (1993). Organizational learning: A review of some literature. Organization Studies, 14, 375–394.

Garvin, D. (1993). Building learning organizations. Harvard Business Review, 71(4), 78–91.

Garvin, D. A., & Edmondson, F. (2008). Is yours a learning organization? Harvard Business Review, 86, 109–116.

Goh, S. C. (1998). Toward a learning organization: The strategic building blocks. S.A.M. Advanced Management Journal, 63(2), 15–20.

Kang, S.-C., Morris, S., & Snell, S. A. (2007). Relational archetypes, organizational learning, and value creation: Extending the human resource architecture. Academy of Management Review, 32(1), 236–256.

Kaplan, R. S., & Norton, D. P. (1996). Using the balanced scorecard as a strategic management system. Harvard Business Review, 74(1), 75–85.

Marsick, V. J., & Watkins, K. E. (2003). Demonstrating the value of an organization's learning culture: The Dimensions of Learning Organizations Questionnaire. Advances in Developing Human Resources, 5, 132–151.

Pedler, M. J., Burgoyne, T., & Boydell, T. (1991). The learning company: A strategy for sustainable development. London: McGraw-Hill.

Senge, P. M. (1990). The fifth discipline: The art and practice of the learning organization. London: Century Business.

Tannenbaum, S. I. (1997). Enhancing continuous learning: Diagnostic findings from multiple companies. Human Resource Management, 36(4), 437–452.