Over the last decade, companies have become increasingly aware of the value of managing their organizational knowledge, and researchers have investigated those processes extensively.1 Indeed, the ways in which organizations learn and have stocks of knowledge that underlie their capabilities can be a powerful tool in explaining the behavior and competitiveness of companies. Yet something is missing in the current discussions of organizational knowledge: Companies don’t just learn; they also forget.

Organizational forgetting is a critical and common phenomenon, but one that is not well understood. Forgetting, like learning, is not simple: It may be accidental or purposeful, detrimental or beneficial, but in all cases it can significantly affect the competitiveness of a company. Thus, along with organizational learning, businesses also need to manage processes to ensure that they forget any knowledge that must be discarded — and not forget knowledge that should be retained. In short, the management of organizational forgetting is a crucial task for at least two important reasons.

First, the involuntary loss of organizational knowledge is costing companies millions of dollars every year. Lost knowledge means forsaken capabilities and potentially decreased competitiveness. When a company finds itself in the situation of having to reinvent or buy knowledge it once had, resources are wasted. In that situation, not only is the time and money spent developing those skills lost, but there is also an opportunity cost. In a highly competitive market, effectively managing forgetting can mean the difference between success and failure.

Second, organizational learning frequently depends upon processes of organizational forgetting. That is, companies that want to transform themselves not only must acquire new capabilities, but they also must often forget old knowledge that traps them in the past. Furthermore, businesses must purposefully forget other types of knowledge, such as bad habits learned from a partner.

Dealing effectively with such situations requires the careful management of organizational forgetting. In this article, we present a new construct for companies to determine how best to remember the knowledge they should retain and forget the knowledge they shouldn’t. Based on an extensive multiyear study (see “About the Research”), the framework presented here can help managers understand and manage organizational forgetting both productively and effectively.

About the Research »

1. C. Fiol and M. Lyles, “Organizational Learning,” Academy of Management Review 10, no. 4 (1985): 803–813; B. Levitt and J.G. March, “Organizational Learning,” Annual Review of Sociology 14 (August 1988): 319–340; and A.S. Miner and S.J. Mezias, “Ugly Duckling No More: Pasts and Futures of Organizational Learning Research,” Organization Science 7, no. 1 (1996): 88–99.

2. M. Douglas, “How Institutions Think” (Syracuse, New York: Syracuse University Press, 1986).

3. R.M. Cyert and J.G. March, “A Behavioral Theory of the Firm” (Englewood Cliffs, New Jersey: Prentice-Hall, 1963); and R.R. Nelson and S.G. Winter, “An Evolutionary Theory of Economic Change” (Cambridge, Massachusetts: Belknap Press of Harvard University Press, 1982).

4. P. Martin de Holan and N. Phillips, “Organizational Forgetting,” in M. Easterby-Smith and M.A. Lyles (eds.), “The Blackwell Handbook of Organizational Learning and Knowledge Management” (Malden, Massachusetts: Blackwell, 2003), 393–409.

5. E. Darr, L. Argote and D. Epple, “The Acquisition, Transfer and Depreciation of Knowledge in Service Organizations: Productivity in Franchises,” Management Science 41, no. 11 (1995): 1,750–1,762.

6. N. Dixon, “The Neglected Receiver of Knowledge Sharing,” Ivey Business Journal 66, no. 4 (2002): 35–40; and D. Leonard and S. Sensiper, “The Role of Tacit Knowledge in Group Innovation,” California Management Review 40, no. 3 (1998): 112–132.

7. O. Martinez, “El Banco Central se Meuve: Modificación en la Carta Orgánica y Control de Cambios,” Clarín, Friday, Jan. 4, 2002, Sección Economia.

8. I. Nonaka, “The Knowledge-Creating Company,” Harvard Business Review 69 (November–December 1991): 96–104.

9. B. Hedberg, “How Organizations Learn and Unlearn,” in “Handbook of Organizational Design, Vol 1,” eds., P.C. Nystrom and W.H. Starbuck (Oxford: Oxford University Press, 1981), 3–27; and R. Bettis and C.K. Prahalad, “The Dominant Logic: Retrospective and Extension,” Strategic Management Journal 16, no. 1 (1995): 5–14.

10. T. Peters, “Liberation Management: Necessary Disorganization for the Nanosecond Nineties” (New York: Knopf, 1992).