When many experienced mechanics left Delta Air Lines Inc. in the mid-1990s, the company was able to reduce compensation costs in the short term, but the remaining, less-experienced employees took much longer to diagnose and repair airplanes. The result: flight delays and cancellations, unhappy customers and an overall increase in Delta’s cost-per-seat mile. After the 9/11 terrorist attacks, Delta had to substantially reduce its workforce to remain competitive. This time, though, management was keen to ensure that critical knowledge wasn’t departing with the 11,000 employees who were leaving.1 In addition to retaining those who were high performers or were in positions with few backups, Delta also focused on employees identified as “go to” people during crises as well as workers who had substantial relationships both inside and outside the organization.2 In doing so, management recognized that critical knowledge loss is not simply what the departing employees know about their job tasks, but also who they know and collaborate with to get work done on time.

As Delta has learned, knowledge loss resulting from employee turnover is becoming a critical issue that cannot be ignored. In terms of broad demographics, aging baby boomers present a major challenge, with nearly 20% of the American workforce holding executive, administrative and managerial positions set to retire by 2008.3 In certain sectors, these departures are nearing crisis proportions. In the oil and gas industry, for example, the average employee age has risen dramatically — current estimates suggest that roughly 60% of experienced managers will retire by 2010.4

In addition, critical knowledge loss also occurs more subtly via job mobility and alternative work arrangements. Specifically, substantial but often unrecognized knowledge loss takes place when established employees quit or contract employees (representing one in six American workers5) move to another organization. In a recent survey of 5,000 executives, 46% indicated that they expected to remain in their positions for only two to five years.6

These dynamics represent a large and growing concern that most companies have failed to address. In a recent study, only half of the organizations surveyed had identified a list of critical skills needed for future growth. Moreover, more than one-quarter viewed defining critical skills as “unimportant.”7 But the cost of losing important expertise can be enormous. General Mills Inc., for example, has estimated that the departure of just one experienced marketing manager could cost millions of dollars from the loss of critical marketing and client knowledge.8

Not Just “What” but “Who”

Many forward-thinking institutions have taken action, but their efforts have tended to be ad hoc and reactive. The typical approach is to capture and store what a departing person knows by codifying electronic files and reports, conducting subject-matter interviews and capturing lessons learned or best practices from projects in which the employee played a lead role. Although sometimes helpful, such measures often lead to two substantial problems.

First, just because knowledge has been captured and stored in a database or a process manual does not mean it will ever be found, interpreted in the right way or given enough credibility to be used. Moreover, the key problem with these retention approaches is that they capture only a small fragment of what made an individual successful and knowledgeable to begin with. Departing employees take many kinds of knowledge with them: subject-matter expertise, organizational memory of why certain key decisions were made and awareness of past company projects (the results of which may never have been documented).

Second, retention approaches often focus on a person’s knowledge independent of the network of relationships critical to getting work done. As work has become more complex and interdependent, individuals rarely accomplish anything of substance on their own; they rely on both coworkers and external parties. Yet few knowledge-retention approaches focus on this relational or network-based aspect, and so they capture only a portion of the knowledge that made a person successful and that must be transferred to colleagues to avoid disruptions in work.

At one pharmaceutical company, for example, a few key scientists possess not only important technical expertise about their therapeutic areas but also critical relationships with academia that help the organization remain at the forefront of research. Senior management has estimated that if those scientists left, the time required to re-create their capabilities — both their individual expertise and the trusted contacts they have with key scientific advisers — would be at least five years.

In short, when employees leave they depart with more than what they know; they also leave with critical knowledge about who they know. Studies have repeatedly demonstrated that such relationships are crucial sources of information and performance in organizations.9 The fact is that an employee who has been with a company for 10 or so years can’t simply be replaced by another individual — even by someone with very similar skills — without incurring disruptions in the web of formal and informal relationships that get work done. Coworkers require time to understand a new person’s true expertise and determine when to seek out that individual. And it takes even longer to develop trust in the newcomer’s intentions and capabilities. Thus, the departure of key people — not just those high in the hierarchy but also central to the inner workings of a network — can significantly affect the relationship structure and consequent functioning of an organization.

How, then, can companies uncover these important interpersonal relationships to avoid critical disruptions? In our work, we have used an approach called organizational network analysis, or ONA, also known as social network analysis. Based on qualitative and quantitative research with 20 organizations, we have found that ONA can help reveal the critical relational fabric of a company that must be considered in any knowledge-retention strategy. Specifically, we have found the approach helps to (1) identify key knowledge vulnerabilities by virtue of both what a person knows and how that individual’s departure will affect a network and (2) address specific knowledge-loss issues based on the different roles that employees play in the network. (See “About the Research.”) In particular, ONA can highlight the unique knowledge held by three important types of employees: central connectors, brokers and peripheral players. (See “Three Key Network Roles: Central Connector, Broker and Peripheral Player.”) Each of these roles has different knowledge-loss risks that need to be addressed. (See “Knowledge-Retention Strategies by Network Role,” p. 34.)

When Central Connectors Leave

Central connectors are people who have a high number of direct information relationships, typically because they have a high level of expertise in one or more areas. (Occasionally, though, people might assume a central-connector role due to other factors, such as job redesign or organizational politics.) To appreciate the importance of central connectors, consider the information network of a key group of employees in a government intelligence agency. (See “The Importance of Central Connectors,” p. 35.) What happens with the removal of the most highly connected people (specifically, the top 10% of employees receiving requests for information)? Should those key individuals depart, then other employees on the periphery of the network would have a much more difficult time communicating with their coworkers. In fact, the overall connectivity of the network would drop by 46%, and there would be a 50% fall-off in cross-divisional relationships, which are considered critical to gathering and acting on intelligence in a prudent and timely fashion.

The loss of centrally connected employees can also have a substantial economic impact. At a financial services organization, for example, each person estimated the typical amount of time saved per month as a result of resources, information and help received from coworkers. This approach allowed the company to quantify the value of its network by multiplying the time savings by a fully loaded compensation figure for each employee. The analysis revealed that a handful of centrally connected people were contributing a great deal of timesaving value to the organization. The most central person in a 73-person network, for instance, generated savings of $21,300 per month compared with a total monthly savings of $103,500 across the entire network.

Because of their hublike positions in a network, central connectors are very aware of their coworkers’ expertise. When they do not have an answer, central connectors usually know who does, and have sufficient social capital to get a response quickly. With their depth of expertise and central position in a network, central connectors pose two types of knowledge risks.

Loss of Deep, Network-embedded Expertise Critical to Operations

Often, the knowledge that central employees possess is so-called “deep smarts” — expertise based on experiences, intuitive judgments and the ability to analyze problems from different perspectives.10 In the petroleum industry, for example, geoscientists with deep smarts are highly valued for their decades of experience prospecting for oil and gas. According to a vice president of exploration, “The rule of thumb has always been that 10% of your people find you about 90% of your hydrocarbons.” The most effective central connectors are trusted, have credibility and are willing to help. They make day-to-day work possible for many others and are often the “go to” people in crisis situations.

(Reprint #:47409)

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