From the April 2000 issue of Entrepreneur

A competent employee has left your company, and amid the confusion, you realize you've lost something irreplaceable: that person's knowledge and experience. You're facing a knowledge gap that could have been avoided by asking yourself a few questions: How am I encouraging our employees to share their knowledge of products and procedures? How am I documenting it for future reference?

Heather Hesketh, 29, saw this knowledge gap from the employee perspective when she was a technical writer for a manufacturer of scientific devices. "It took me six months to get up to speed when I started," she says. "They showed me the room that had all the documents I would need, and that was it. I'm sure the person before me had a system, but I didn't know what it was."

Today, Hesketh is president of Raleigh, North Carolina-based hesketh.com, the Web consulting firm she founded in 1994. She's been lucky and hasn't lost any of her seven full-time employees . . . yet. "Losing people-ugh," she laments. "I hate to see that happen, but that day will come."

Hesketh, who is an avid notetaker, is anticipating turnover by having her employees document everything they do, information that's stored on the company's intranet as a sort of history lesson. It's her way of preserving the past and preparing for the future. "In our business," Hesketh says, "we can't afford to have some people who are so pivotal that if we lose them, we get stuck."

Getting "stuck" isn't that far-fetched these days. According to statistics compiled by the Bureau of National Affairs, roughly 13.2 percent of permanent full-time U.S. workers changed jobs in 1998. The turnover this creates is costly. Says Frances Summers, president of Insights for Business, a human resources consulting firm in Medford, Oregon, "It costs an average of $9,100 to find and train a new permanent employee," Summers says. "And this is in direct costs that don't include the cost of recruiting, management time, and signing bonuses, which can make the figure even higher."

In The Know

Passing on knowledge and information to employees is the oil that keeps the entrepreneurial gears turning, no matter what type of business you have. "Part of the reason many small businesses fail is that they don't focus on those areas where they have world-class knowledge," says Vijay Govindarajan, a professor of international business at the Tuck School of Business at Dartmouth College. Integral to this knowledge is your staff. If you own a software business and one of your talented programmers moves on, can her replacement pick up where she left off?

"If your employees aren't encouraged to share knowledge and information, it's not getting passed on. So when good performers leave, they take their knowledge with them," says Morten Hansen, assistant professor of business administration at Harvard Business School.

A field called knowledge management (KM) focuses on the ways companies use knowledge and information. Experts have found that companies, just like people, have their own ways of communicating. Some people prefer to communicate on paper, while others like to speak face-to-face. Some companies place the majority of their information on intranets, where employees can access it and apply it to a broad customer base, while others emphasize verbal interaction between co-workers, and projects are tailored to each client.

Entrepreneurs need to understand there's a difference between knowledge and information, Govindarajan says. Information, he says, is the "know what" of a company, the readily accessible data at employees' fingertips. But knowledge is a company's "know how," its history, mission and creativity. "About 80 percent of the interesting things about a company aren't on a computer," Govindarajan says. "Employees can't get the 'know how' and 'know why' there. That's tacit knowledge, the things that cannot be written."

As you add new employees, what are you giving them that will help them understand your company's big picture? Many companies depend on mission statements-those manifestoes infused with purpose and lofty ideals-to relay a sense of purpose, printing them in the employee manual or posting them online. But do they do their job? "Spending a lot of time on mission statements without the strategy to back them up is a waste of time in the age of information overload," says Amy Newman, principal and co-owner of Organization Blueprint Inc., a training and consulting firm based in Floral Park, New York. She says companies don't realize that communicating their mission takes more than just whipping up a document and expecting employees to read it. "Some databases are ghost houses," she says. "Employees often miss the most important pieces of information. Who wants to read a mission statement online? Make the information come to life."

The Paradox Of Technology

"Recruiting and getting employees up to speed in terms of company culture-our vision and mission-is one of the things I worry about the most," says Joel Maske, 32, CEO of Isyndicate, a San Francisco-based Web content syndication company that has grown from 12 to 85 employees in 1999 alone. Maske says that even though his company gathers and spreads information electronically to over 175 corporate customers, nothing beats face-to-face communication within the office. "It's the big paradox of high tech: You think e-mail is the answer. But I'm a big believer in face-to-face interaction." Isyndicate's office has no walls, and employees work in "pods," groupings of four to six desks. The nature of the market makes this necessary. "It's fast moving, and we need to be on top and share readily," he says.

When it comes to training new employees, Maske prefers the old-fashioned approach: He seeks out team leaders who can not only train, but can tell new employees stories about how the company started. There's a written history as well-a weekly intranet newsletter called The Jackalope! that contains details of projects as well as staff photos. "I want everyone to understand the company and where we're heading," Maske says. "I want people to know that we're committed to the long term."

Creating Your Own Strategy

Whether you have one employee or one hundred, you should have a knowledge management strategy with a good balance of face-to-face and online communication. The tangible end of your business-project rundowns, product details, costs-can be stored easily on a database. It's such intangibles as brainstorming sessions and individual expertise that young companies need to figure out how to document. Newman suggests CEOs start by answering three questions: What is our competitive advantage? What is the most important knowledge our company needs to own and retain? What are our priorities for retaining and building the knowledge that differentiates us in the marketplace?

Next, decide how employees can contribute to the knowledge base and draw from it. "Entrepreneurs must make sure that employees are developing a rich way of discourse," Hansen says. "and they should devote resources to it."

One way to ensure that employees are continuously learning from each other is to ask experienced employees to speak openly about their experiences in the company-for example, how they have handled difficult client situations, Newman says. Having an informal proundtable discussion links the present to the past and reveals how employees feel about their work and the company itself. You might find, too, that your workers are sticking around longer.

Hesketh says that interviewees often reveal that they aren't being given their current employer's big picture, and there's no real opportunity to share knowledge. "They tell me they think they'll learn more if they have an opportunity to interact with others in my company. They'd rather have that than formal training or classes."

Be aware that things will change as your company expands. "As you grow, you must think hard about the best way of sharing knowledge, and that depends on the type of business you have," Hansen says.

For Hesketh, who is hiring a new employee every two months, face-to-face communication is increasingly a challenge, especially since some of her employees work flexible schedules and the nature of the job requires a lot of conversation. Between in-person strategy sessions, the employees use an internal mailing list to share ideas and industry trends. "Virtual communication is logical for us, and I don't see it as replacing face-to-face contact. I'm encouraging communication, whether it's virtual or in-person. I don't want to build walls."

Deciding how to document your workers' knowledge will make life easier as you grow and help your staff adjust as employees come and go.

Next Step

WEB SITES:

BOOKS:

  • Corporate Memory: Strategies for Knowledge Management (International Thomson Publishers) by Annie Brooking
  • Value-based Knowledge Management: Creating the 21st Century Company: Knowledge-Intensive, People Rich (Addison Wesley Longman Inc.) by Rene Tissen, Daniel Andriessen, and Frank Lekanne Deprez

ARTICLE:

  • Morten T. Hansen, Nitin Nohria, and Thomas Tierney's "What's Your Strategy for Managing Knowledge?" in Harvard Business Review, March-April 1999

Contact Sources

Insights for Business, fax: (541) 855-2324, insights@internetcds.com

Isyndicate, (415) 896-1900, http://www.isyndicate.com

Organization Blueprint Inc., (516) 328-8129, http://www.orgblueprint.com