When Organizational Memory Becomes An Obstacle to Future Growth

Tacit knowledge is the sum of experience and hard-won wisdom. Waves of layoffs and rounds of mergers or acquisitions have frequently laid waste to such stores of insight about how to actually get things done, especially as the regional has morphed into the national, continental and global. Some of the problems encountered by large institutions may be the result of such loss: JP Morgan's $6 billion  'London Whale' trading loss occurred when the person running the risk management function had to take several months off for medical reasons; Toyota, BP, Hewlett Packard and numerous others have suffered from various all-too-public crises due, in part, to the loss of or failure to effectively convey institutional memory.

As if that weren't concern enough, members of the Baby Boom generations are starting to reach age 65 in large numbers. For all of the criticism that generation has earned, its entrepreneurial spirit and accumulated wisdom will not simply vanish without some impact on the residual organizations they founded or for which they labored.

Initiatives to capture, organize and make such knowledge available to successors have begun, with mixed success. The rise of astonishing technological memory has made the transfer easier, but the deeply entrenched human inclination to believe that one's predecessors can be out-performed and that whatever they knew is now out of date is hard to eliminate.

There is another issue with which enterprises must contend as change continues to roil the global economy and working populations shift geographically, culturally as well as genealogically. As the following article explains, organizational memory can also hold institutions back by creating a safe harbor from which it is perceived to be too dangerous to venture. This is either because the organization rewards stability or because it penalizes failure or both. Fear of innovation, despite its cliched status as this age's raison d'etre, may also play a role in denying the impetus to grow via change.

Processes, objectives, people and goals may evolve over time, but if the context within which decisions are framed and the world view that shapes them remains static or the leaders managing the enterprise become unwilling to contemplate the potential obsolescence of the forces that made them initially successful, then the risk of paralysis increases. GE is one example of a company that continues to morph as it continually experiments to find the right mix for whatever conditions it sees coming.

The challenge for all institutions is to manage that tension between too little respect for the past and too slavish devotion to it. There is no one answer, but simply being aware of the pitfalls and opportunities of each is a good place to start. JL

Vijay Govindarajan and Srikanth Srivinas comment in Harvard Business Review:

Your company's organizational memory might be holding it back.

Consider the following parable:
Two monks — one old and one young — were walking to a village far from their monastery. Along the way they saw a beautiful, young woman waiting at the edge of a stream, too afraid to cross. The young monk reminded himself of his vow not to touch women and continued walking. But to his amazement, the elder monk sped right past him while carrying the young woman, safely across the stream, on his back! When the old monk put her down on the other side of the stream, she thanked him with a respectful bow. The old monk, in turn, gave her a bright smile, and continued walking.
The young monk considered and reconsidered the old monk's action back at the stream. He could not stop churning. His thoughts grew angrier and angrier. Finally, hours later, he ended up shouting at the old monk, "You broke your sacred vows! You are not supposed to touch a woman! How can you forgive yourself? You should not be allowed back in the monastery!"
Surprised at his outburst, the old monk replied calmly, "I dropped her hours ago. Why are you still carrying her?"
Like the young monk, many organizations carry a heavy burden, and for far too long. The result — obsolete policies and practices, outdated assumptions and mind-sets, and underperforming products and services. This organizational memory creates biases that get embedded in planning processes, performance evaluation systems, organizational structures and human resource policies. This becomes a big burden when non-linear shifts occur.
Examples of the burden of such organizational memory include Blackberry — it could not forget about the physical keyboard when the world had moved on to touch screens, and Microsoft — it could not forget about the desktop as the key computing device when the world had moved on to mobile devices on the one hand and cloud-based services on the other.
How can established organizations be more like the elder monk — and transcend the clutches of the burden of organizational memory when there is a need to respond to non-linear shifts?
Let us look at how Infosys succeeded in this transformation. Infosys initially provided only IT services. However, they noticed that their most demanding clients were frustrated by having to work simultaneously with multiple service firms, each lacking full accountability. They realized that in this frustration lay the seeds of a non-linear shift — and that they would either have to respond quickly and master the shift or become victims of it. They perceived the need for an organization that would provide management consulting services, redesign operations, and write specifications for new IT systems; then develop, test, install and maintain it; perhaps even accept responsibility for executing routine client operations such as transaction processing.
They also realized that the current organizational memory would be a burden for this new reality. So they created a parallel world with different people and distinct processes.

They focused on three key areas:

1. Strategy Making — Instead of linear extrapolation from the past using rigorous data analysis, they focused on anticipating non-linear shifts by bringing in non-traditional voices such as, for example, key clients, and youth (who would have little, if any, organizational memory).
2. Accountability — Instead of focusing on on-time, to spec, within budget delivery, they focused on disciplined experiments with the primary emphasis on learning rapidly, thus eliminating the defensiveness inherent in traditional organizations.
3. Organizational Design — Instead of optimizing the way individuals collaborate through job specifications, work processes and organizational design, they formed special teams with a good mix of "outsiders" to challenge assumptions and bring a fresh set of skills and competencies.

All these changes helped Infosys overcome the burden of the organizational memory of a very successful IT services company, while retaining all of the essential elements that were responsible for its success. As a result of this successful transformation, Infosys grew 25-fold over the decade from 2000 to 2010 — from $200 million to $5 billion.
If you too sense big non-linear shifts in your markets, remember that "organizational forgetting" may be essential to meeting the challenges successfully.