Organizational learning is the process of creating, retaining, and transferring knowledge within an organization. An organization improves over time as it gains experience. From this experience, it is able to create knowledge. This knowledge is broad, covering any topic that could better an organization. Examples may include ways to increase production efficiency or to develop beneficial investor relations. Knowledge is created at four different units: individual, group, organizational, and inter organizational.

The most common way to measure organizational learning is a learning curve. Learning curves are a relationship showing how as an organization produces more of a product or service, it increases its productivity, efficiency, reliability and/or quality of production with diminishing returns. Learning curves vary due to organizational learning rates. Organizational learning rates are affected by individual proficiency, improvements in an organization's technology, and improvements in the structures, routines and methods of coordination.[1]

Relevance

Organizational learning happens as a function of experience within an organization and allows the organization to stay competitive in an ever-changing environment. Organizational learning is a process improvement that can increase efficiency, accuracy, and profits. A real-world example of organizational learning is how a new pizza store will reduce the cost per pizza as the cumulative production of pizzas increases.[1] As the staff creates more pizza; they begin to make pizzas faster, the staff learns how to work together, and the equipment is placed in the most efficient location leading to cheaper costs of creation. An example of a more formal way to track and support organizational learning is a learning agenda.

Organizational learning is an aspect of organizations and a subfield of organizational studies. As an aspect of an organization, organizational learning is the process of creating, retaining, and transferring knowledge. Knowledge creation, knowledge retention, and knowledge transfer can be seen as adaptive processes that are functions of experience.[2] Experience is the knowledge that contributes to the procedural understanding of a subject through involvement or exposure. Research within organizational learning specifically applies to the attributes and behavior of this knowledge and how it can produce changes in the cognition, routines, and behaviors of an organization and its individuals.[3]

Individuals are predominantly seen as the functional mechanisms for organizational learning by creating knowledge through experience.[4] However, individuals' knowledge only facilitates learning within the organization as a whole if it is transferred. Individuals may withhold their knowledge or exit the organization. Knowledge that is embedded into the organization, in addition to its individuals, can be retained.[5] Organizations can retain knowledge in other ways than just retaining individuals, including using knowledge repositories such as communication tools, processes, learning agendas, routines, networks, and transactive memory systems.[6][7]

As a subfield, organizational learning is the study of experience, knowledge, and the effects of knowledge within an organizational context.[8] The study of organizational learning directly contributes to the applied science of knowledge management (KM) and the concept of the learning organization. Organizational learning is related to the studies of organizational theory, organizational communication, organizational behavior, organizational psychology, and organizational development. Organizational learning has received contributions from the fields of educational psychology, sociology, economics, anthropology, political science, and management science.[9]

Communities of learning

Organizations gain knowledge in one of the four organizational communities of learning: individual, team, organizational, and inter-organizational. Organizational learning "involves the process through which organizational communities (e.g. groups, departments, divisions) change as a result of experience." An example of organizational learning is a hospital surgical team learning to use new technology that will increase efficiency.[10]

History of study

The origin of the focused study of organizational learning can be traced to the late 1970s, when researchers studied it from a psychological viewpoint. Key advances in the field include:

Knowledge

Knowledge is an indicator of organizational learning. Organization learning happens when there is a change in the knowledge of an organization.[12] Researchers measure organizational knowledge in various ways. For example, some researchers assess knowledge as changes in an organization's practices or routines that increase efficiency.[27] Other researchers base it on the number of patents an organization has.[28] Knowledge management is the process of collecting, developing, and spreading knowledge assets to enable organizational learning.

Nature of knowledge

Knowledge is not a homogenous resource. Although it is related to data and information, knowledge is different from these constructs. Data are a set of defined, objective facts concerning events, while information is a value-added form of data that adds meaning through contextualization, categorization, calculation, correction, or condensation.[29] Knowledge is the applied version of information, a combination of information within experience, framing, value, contextualization, and insight. Experience is knowledge that is generated through exposure to and application of knowledge. Knowledge originates within and is applied by units of an organization to evaluate and utilize experience and information effectively. Knowledge can become embedded within repositories, routines, processes, practices, tools, and norms, depending on the relationship between information, experience, and knowledge.[30]

Two distinct forms of knowledge, explicit and tacit, are significant in this respect. Explicit knowledge is codified, systematic, formal, and easy to communicate. Tacit knowledge is personal, context-specific, subjective knowledge.[31]

Measuring learning

Organizational learning tracks the changes that occur within an organization as it acquires knowledge and experience. To evaluate organizational learning, the knowledge an organization creates, transfers, and retains must be quantified.

Researchers studying organizational learning have measured the knowledge acquired through various ways since there is no one way of measuring it. Silvia Gherardi measured knowledge as the change in practices within an organization over time, which is essentially learning from experience.[27] In her study, she observed an organization acquire knowledge as its novices working at building sites learned about safety through experience and became practitioners. George Huber measured knowledge as the distribution of information within an organization. In his study, he noted that "organizational components commonly develop 'new' information by piecing together items of information that they obtain from other organizational units."[34] He gives the example of "a shipping department [that] learns that a shortage problem exists by comparing information from the warehouse with information from the sales department."[34]

An increasingly common and versatile measure of organizational learning is an organizational learning curve demonstrating experience curve effects. A learning curve measures the rate of a metric of learning relative to a metric for experience. Linda Argote explains that "large increases in productivity typically occur as organizations gain experience in production."[4] However, Argote also notes that organizations' rates of learning vary. Argote identifies three factors that affect these rates: increased proficiency of individuals, improvements in an organization's technology, and improvements in its structure (such as its routines and methods of coordination).[4] Some organizations show great productivity gains while others show little or no gains, given the same amount of experience.[4]The experience curves plot the decreasing unit cost versus the total cumulative units produced, a common way to measure the effect of experience. The linear-linear input form on the left is transformed into the log-log form on the right to demonstrate that the proficiency increase correlates with experience.

Theoretical models

Attempts to explain variance of rates in organizational learning across different organizations have been explored in theoretical models. Namely the theoretical models conceived by John F. Muth, Bernardo Huberman, and Christina Fang.

Context and learning

An organization's experience affects its learning, so it is important to also study the context of the organizational climate, which affects an organization's experience. This context refers to an organization's characteristics, specifically its "structure, culture, technology, identity, memory, goals, incentives, and strategy."[12] It also includes its environment, which consists of its competitors, clients, and regulators.[12] While this context establishes how knowledge is acquired by the organization, this knowledge modifies context as the organization adapts to it.[12] The leader-initiated cultural context of learning has inspired key research into whether the organization has a learning or performance orientation,[36] an environment of psychological safety,[37] the group's superordinate identity,[38] and group dynamics.[39] Research into these concepts like Edmondson's study (1999) shows that an organization operating under a context promoting curiosity, information sharing, and psychological safety encourages organizational learning.[37] "Group learning dynamics" is the subject of how groups share, generate, evaluate, and combine knowledge as they work together.[4]

Organizational forgetting

Knowledge acquired through learning by doing can depreciate over time. The depreciation rate is affected by the turnover rate of individuals and how knowledge is stored within the organization. Organizations with higher turnover rates will lose more knowledge than others. Organizations with knowledge embedded in technology rather than individuals are more resistant to organizational forgetting.[1] Examples: In the Liberty Shipyard study, in shipyards where relative input was reduced, individual unit cost increased even with increasing cumulative output. In shipyards with no relative input reduction, individual unit cost decreased with increasing cumulative output.[1] In a study of airplane manufacturing at Lockheed, unit costs declined with experience, but this effect weakened over time.[40]

Processes

Three key processes that drive organizational learning are knowledge creation, knowledge retention, and knowledge transfer.

Knowledge creation

Knowledge creation specifically concerns Experience that can be embedded within the organization. Experience is knowledge generated by direct exposure to the subject. This direct exposure is through tasks involving the needs, processes, and environment of the organization. Explicit and tacit knowledge are reinforced and become contextualized when the organization gains knowledge. While experience can produce outputs in data, information, or knowledge, experience in the form of knowledge is useful since this can be transferred, retained, and tacitly or explicitly utilized within organizational processes. Knowledge creation connects to creativity and its relationship to experience.[5][41][42] Compared to knowledge transfer and knowledge retention, knowledge creation has not received much research attention.[43]

Dimensions of experience are aspects of experience that impact the form and function of knowledge creation.[44][45][46][47][48]

Knowledge transfer

Knowledge transfer concerns the mechanisms by which experience spreads and embeds itself within the organization. Knowledge transfer can be evaluated using various metrics, including learning curves that demonstrate process improvements over time by comparing the decrease in labor hours to complete a unit of production with the cumulative units produced over time. Wright's identification of organizational learning curves preceded more complex outcome considerations[4] that now inform measures of knowledge transfer. While knowledge may transfer tacitly and explicitly as direct experience, organizations can introduce processes and knowledge management systems that facilitate this transfer. Researchers investigate the context of various factors and mechanisms affecting knowledge transfer to determine their beneficial and detrimental effects.

Factors of knowledge transfer include the dimensions of the knowledge described in the prior section, as well as the contexts in which it occurs and mechanisms through which it can occur:

Knowledge retention

Main article: Knowledge retention

Knowledge retention concerns the behavior of knowledge that has been embedded within the organization, characterized by the organizational memory. Organizational memory, quantified by measures such as cumulative knowledge and the rate of decay over time, is impacted by experience, processes and knowledge repositories that affect knowledge retention.[68][77][40] Knowledge repositories are of key significance as they are intentional remedies to increase retention. Repositories can include the organization's rules and routines,[80] altered by the processes of routine development[81] and routine modification.[82] Transactive memory systems[83] are additional methods by which knowledge holders within the organization can be identified and utilized, subject to their development[84][85] and performance.[4][86] Organizations that retain the bulk of their knowledge in individuals are vulnerable to lose that information with high turn over rates. In a study of organizational learning in the automotive and fast food industries, Argote found that high turn over rates lead to lower productivity and decreased organizational memory.[1]

Applications

Applications of organizational learning research and contexts for organizational learning facilitation and practices are numerous. Experience curves can be used to make projections of production costs, compare performance across units, identify the effects of various processes and practices, and make informed financial decisions about how to allocate resources. Utilizing knowledge transfer and retention concepts to recognize, maintain, and reclaim embedded knowledge can help organizations become more efficient with their knowledge. Organizational learning theories and knowledge management practices can be applied to organizational design and leadership decisions.

Knowledge management practices

Various knowledge management concepts and practices are the relevant products of organizational learning research. Work on knowledge transfer applies to knowledge retention and contributes to many of the applications listed below, including the practices of building learning organizations, implementing knowledge management systems, and its context for inter organizational learning and the diffusion of innovations.[4]

Development of learning organizations

Learning organizations are organizations that actively work to optimize learning. Learning organizations use the active process of knowledge management to design organizational processes and systems that concretely facilitate knowledge creation, transfer, and retention. Organizational metacognition is used to refer to the processes by which the organization 'knows what it knows'. The study of organizational learning and other fields of research such as organizational development, System theory, and cognitive science provide the theoretical basis for specifically prescribing these interventions.[87] An example of an organizational process implemented to increase organizational learning is the U.S. Army's use of a formally structured de-brief process called an after-action review (AAR) to analyze what happened, why it happened, and how it could be improved immediately after a mission. Learning laboratories are a type or learning organization dedicate to knowledge creation, collection, and control.[88]

Learning organizations also address organizational climate by creating a supportive learning environment and practicing leadership that reinforces learning.[89] Creating a supportive learning environment and reinforcing learning depends on the leadership of the organization and the culture it promotes. Leaders can create learning opportunities by facilitating environments that include learning activities, establishing a culture of learning via norms, behaviors, and rules, and lead processes of discourse by listening, asking questions, and providing feedback. Leaders must practice the individual learning they advocate for by remaining open to new perspectives, being aware of personal biases, seeking exposure to unfiltered and contradictory sources of information, and developing a sense of humility.[90]

Knowledge management systems

While learning processes depend on the context for optimizing knowledge transfer, the implementation of knowledge management systems incorporates technology into these processes. Knowledge management systems are technologies that serve as a repository, communication, or collaboration tool for transferring and retaining knowledge.[4] Embedding knowledge in technology can prevent organizational forgetting[91] and allow knowledge to transfer across barriers such as distance, organizational unit, and specialization. Knowledge management systems alone are not necessarily successful, but as a communication tool they tangibly reinforce individuals' ability to spread and reinforce their knowledge.[4]

Diffusion of innovation

Organizational learning is important to consider in relation to innovation, entrepreneurship, technological change, and economic growth, specifically within the contexts of knowledge sharing and inter organizational learning. As one of the key dynamics behind the knowledge economy, organizational learning informs our understanding of knowledge transfer between organizations. Heterogeneous experience yields better learning outcomes than homogenous experience, and knowledge diffusion spreads heterogeneous experience across organizations.[65][92] Diffusion of innovations theory explores how and why people adopt new ideas, practices and products. It may be seen as a subset of the anthropological concept of diffusion and can help to explain how ideas are spread by individuals, social networks, and organizations. Innovation policy, economic development initiatives, educational program endeavors, and entrepreneurial incubation and acceleration could all be informed by organizational learning practices.[citation needed]

Knowledge protection

Digital transformation means that not only machines and IT but also people are digitally interlinked.[93] Knowledge cannot be directly secured same way as information is protected.[94]

Barriers and enablers to organizational learning

Corporate amnesia

In case no systematic approach has been applied when creating organizational memory systems, there is a risk of corporate amnesia. Environment of organizational amnesia leads to avoiding mistakes at all cost. Companies should create an environment where learning from mistakes is allowed in order to avoid them happening again.[95]: 366, 372, 390  Corporate amnesia is said to be a double-edged sword – it helps to move on by forgetting the wrongdoing, but at the same time it creates a danger of repeating the same error all over again.[96]

Developing organizational memory

Organizations need to have an organizational memory, a documentation of their milestone events. That documentation needs to be accessible for all involved to have the ability to learn as an organization.[95]: 365  Because organizations have a routine of forgetting what they have done in the past and why, organizational memory systems should be created to make the knowledge explicit so that the transparency, coordination and communication in the organizations increase and it becomes possible to learn from past mistakes.[95]: 372–373  OL grows through processes but the essential material is individual's memory, culture and experience. Individual learning is the first level in OL. Transfer process to OL is synthesized by "what people learn (know-what) and how they understand and apply this learning (know-how).[97] While learning is the know-how, memory could be perceived as a storage area. Memory plays an active role in a learning process. In a transfer mechanism, mental models are an excellent way to share knowledge and to make it independent from individuals.

Organizational memory is an agglomerate of individual's memory, composed by data, information and knowledge. For those three levels of learning, five retention facilities are available:[98]

The big deal of organizational memory is its availability to be used and re-used. It could represent a competitive advantage but its value is often underestimated because of the complexity to calculate it, even though sometimes employee's, customer's, supplier's, capital's and top management's memory values are budgeted.[99]

Organization's memory needs technological solutions on its side. Technology is often associated with information or communication technology (IT) which relates to different software solutions that support the organization's memory and ease the transfer of knowledge .[100] Technology can be a barrier if it is not accepted or there is not enough understanding of new technologies. Technology can open for example new ways of communicating, but it is different to find a shared acceptance for its utilization.[101]: 550 

IT is an enabler for codifying and distributing data and information as well as both tacit and explicit knowledge.[100] A. Abdulaziz Al-Tameem also states that the interaction between humans and IT enhances OL. Different repositories are used within organization to store corporate knowledge as an extension for the memory. Maintaining organizational memory is enabler for efficient and effective processes and routines but most of all for profitable business.[100] Traditionally, IT was regarded solely as a tool to support human learning. In contrast, with the advent of machine learning in organizations, IT based on machine learning algorithms is now viewed as a further type of organizational learner that learns side-by-side along human learners and can offer its own contributions to organizational learning. To this end, today's organizations form complex systems of interrelated human and machine learning that requires coordination and rises a wide range of new managerial issues.[102]

The role of organizational culture

Culture is considered as the holding strength between members of an organization. Culture brings a representation of past learning and an instrument to communicate it through the organization.[103]

Finding shared vision is important to enable the adaptation of new systems and technologies that can be accepted by the organization and its members. Sharing a culture and encouraging knowledge sharing allows more efficient transfer of knowledge in organization between its levels.[101]: 547  Sharing information between different cultures can be limited due to varying norms and it can end up in one or both sides hoarding knowledge [101]: 543 

Willingness to inquire can also be related to differences between culture groups or culture of multicultural organizations in general. Status, modesty, fear of embarrassment, etc. contribute to the interaction we decide or do not decide to initiate.[101]: 546  It has been studied that organizational culture is one of the most important enablers in knowledge sharing. When the information is not shared due to hoarding based on cultural differences it becomes a major barrier in business.[101]: 547 

Different influential factors regarding characteristics of an organizational culture (especially in knowledge-centered cultures) affect the processes of knowledge management.[104] these can include:

Virtual environments

Organizations are evolving, which is sometimes causing interpretation of experiences more complex. Team members that are geographically apart,[105]: 266  may only have an option to learn virtually through electronic devices instead of face-to-face.[106] Communities of practice in virtual environments can create tacit knowledge shared between the different factors such as individual members, rules accepted and technologies used. Technology in this case affects the identity and learning patterns of the community.[101]: 549  Building routines in a virtual team and the use of sophisticated technology such as video meetings, creates trust and psychological safety that enables learning.[107]: 148 

Barriers in organizational learning from 4I framework

Developed by Crossan, Lane and White (1999) the 4I framework of organizational learning consists of four social processes; intuiting, interpreting, integrating and institutionalizing. It is proposed by Crossan et al. (1999)[108] that organizational learning is a dynamic and iterative process between exploration and exploitation (March 1991)[109] with feed forward flowing from individual level to organizational level and feedback from organizational to individual. A pivotal characteristic of the framework is the relationship and interplay between action and cognition that it assumes and portrays. It is a framework that was developed to specifically address the phenomenon of strategic renewal.[108]

J. Schilling and A. Kluge (2009) have contributed to the M. Crossan, H. Lane and R. White (1999) 4I framework of organizational learning by identifying the barriers to the learning process. There is a wide variety of barriers in every level of each learning process identified as actional-personal, structural-organizational and societal-environmental.[110]

Actional-personal barriers include such as individual attitudes, thinking, and behavior. Structural-organizational barriers are based in organizational technology, strategy, culture and formality of regulations. In addition to the 4I model, environment is also considered as relevant at all individual, group and organization levels and that is why societal-environmental barriers are also considered. Intuition process barriers are related to individual's lack of motivation or such as what is the freedom in the organization to 'think out of the box'. Societal-environmental barriers of intuition process relate e.g. to the unclear success criteria of the branch of the organization or to cultural misunderstandings. Interpretation process barrier can be e.g. lack of status or a conflict in a relationship between innovator and the group. Integration process barriers that take place at the organizational level can be such as the willingness to maintain positive self-image or the fear of punishment. If the idea is against beliefs commonly held in the industry, the whole sector might reject the idea. A major barrier is, if there is no top management's support for the innovative idea. A barrier to institutionalization process is when something previously learned has been forgotten – an innovation or lesson has not been put to practice so that it would become embedded into the structure, procedures and strategy. Some teams or employees may not have enough skills or knowledge to absorb the innovation or there is not enough trust towards the innovation. Management may also have a lack of skills to implement the innovation.[110]

Other challenges

Several challenges may be identified during the organizational learning process. Milway and Saxton (2011) suggest three challenges related to goals, incentives and processes.[111]

Generational issues and employee turnover are also challenges that organizations might have to consider.[112]

See also

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