Jan 31, 2002 - Harvard Business Review, Vol.75, Nr.5 (Sept. ... Introduction ... Science. (Feb. 1991): N. pag . 6 Stata,
Building A Learning Organization
Susann Hübner Student ID# 160684 January 31, 2002 UNIcert IV
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Building A Learning Organization
“Learning is at the heart of a company’s ability to adapt to rapidly changing environment.”2 John Browne CEO of British Petroleum Company
This paper answers the question why it is so important for a company to be a learning organization. It clearly shows what defines a learning organization, what tasks have to be accomplished, and how it can be managed. Then, various measurement instruments will be presented which help to analyze the success of the learning process. The reasons why so many organizations fail to learn and the impact of organizational learning on the competitive environment will be discussed towards the end of the paper. It concludes with several simple steps that each company can take to start on their way to becoming a learning organization.
Key Words: Competitive Advantage Organizational Change Knowledge Learning
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Prokesch, Steven E. “Unleashing the power of learning: An interview with British Petroleum’s John Browne.” Harvard Business Review, Vol.75, Nr.5 (Sept.-Oct. 1995): p. 148.
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Table of Contents
Abstract and Keywords………………………………………………………………………..II Table of Contents……………………………………………………………………………..III 1. Introduction……………………………………………………………………………..…..1 2. What is a learning organization?……………………………………………………………2 3. Managing a learning organization…………………………………………………………..8 4. Measuring a learning organization…………………………………………………………10 5. Why do so many organizations fail to learn?………………………………………………11 6. The needs and outcome of a learning organization...………………………………………12 7. Summary and conclusion…………………………………………………………………..14 Bibliography……………………………………………………………………….…………IV
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1. Introduction Organizations facing uncertain, changing, or ambiguous market conditions need to be able to learn. In the absence of learning, companies – and individuals – simply repeat old practices. Change remains superficial, and improvements are either fortuitous or short-lived. The concept of organizational learning has received growing attention as one source of competitiveness in both academic and popular management literature over the past years. A few prospective executives, such as Ray Stata of Analog Devices, Gordon Forward of Chaparral Steel, and Paul Allaire of Xerox, have discovered the connection between learning and continuous improvement and have begun to refocus their companies around it. Scholars have jumped on the bandwagon, too, emphazising the importance of organizational learning and “knowledge-creating companies”3. For an effective implementation, managers first need to know what a learning organization is exactly. They need a reasonable, well-founded definition which must be functional and easy to apply. Next, there is the question of management which provides clear guidelines for practice filled with functional recommendations. Thirdly, the assessment of appropriate tools to measure an organization’s performance and the level of learning will be shown. Still, many businesses fail to learn how to learn and therefore remain competitively marginal. This paper will answer the question of why organizational innovations either do not occur or fail to survive. Peter Drucker once said: “Every enterprise is a learning and teaching institution. Training and development must be built into it on all levels – training and development that never stop.”4 He knew from the early on about the importance of continuous learning and knowledge workers who form the basis of a learning organization. Thus, the paper will finally deal in more depth with the issue of why there is a need for learning and what its outcome is.
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Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.78. Drucker, Peter. The essential Peter Drucker. N.p.: Harperbusiness, 2001, p.11.
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2. What is a learning organization? Over the years, a clear definition of organizational learning has not been found. Most scholars view it as a process that evolves over time and combine it with the acquisition of knowledge and improved performance. Nevertheless, they differ on important matters. George P. Huber, for example, believed that behavioral change is required for learning5, whereas others insist that new ways of thinking are enough. Some cite information processing as the mechanism through which learning takes place; others as Ray Stata propose shared insights, organizational routines, and even memory6. David A. Garvin constructed a fairly general definition: “A learning organization is an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.”7 There is a simple truth to start with. New ideas are necessary if learning is to take place. Sometimes they are created through flashes of insight or creativity. At other times they come from outside the organization. The source of the ideas does not matter, but one thing is certain: the ideas release organizational improvement. Without any changes in the way the work gets done, the ideas themselves will only provide a potential for improvement, but not a learning organization itself. It is therefore necessary to look at major tasks which should be performed by a company in order to show organizational learning.
Learning organizations have to accomplish five main activities: systematic problem solving, experimentation with new approaches, learning from their own experience and past history, learning from the experiences and best practices of others, and transferring knowledge quickly
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Huber, George P. “Organizational Learning: The Contribution Processes and the Literature”, Organization Science. (Feb. 1991): N. pag . 6 Stata, Ray “Organizational Learning – The Key to Management Innovation”, Sloan Management Review. (Spring 1989): N. pag. 7 Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.80.
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and efficiently throughout the organization. For each, a distinctive mind-set, tool kit, and pattern of behavior is necessary8. The task of the managers consists of creating systems and processes to support these activities and integrating them into the daily operations to make the learning more efficient. A deeper insight into the five tasks will help to understand the complexity of a learning organization.
Systematic problem solving. One of the underlying ideas of this activity is seen in the reliance on scientific methods, rather than guesswork, for analyzing problems. Deming called it the “Plan, Do, Check, Act” cycle9. For decision making,
the second idea, fact-based
management, is of great importance. It insists on data rather than assumptions as a background. A third idea uses simple statistical tools such as histograms, Pareto charts, correlations, and cause-effect diagrams to organize data and show their interrelationships. Employees must become more disciplined in their thinking and more attentive to details because accuracy and precision are essential for learning. Xerox mastered a way to develop an approach for problem solving on a company-wide scale in 1983. This six-step process is used in almost every decision (see figure 1). Employees are provided with tools of four different areas: idea generating and information collection, consensus reaching, data analyzing and displaying, and planning action. They are then trained in using these tools in training sessions and soon the new process strategy becomes common language and is applied to every decision to be made.
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Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.81. 9 Garvin, David A. (1993), p. 81.
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Figure 1: Xerox’s Problem-Solving Process10 Step 1. Identify and select problem
Question to be
Expansion/
Contradiction/
What’s needed to go to
answered
Divergence
Convergence
the next step
What do we want to change?
Lots of problems for One problem consideration statement, one desired state agreed upon
Identification of the gap Desired state described in observable terms
2. Analyze problem
What’s preventing us from reaching the desired state?
Lots of potential causes identified
Key cause(s) identified and verified
Key cause(s) documented and ranked
3. Generate potential solution
How could we make the change?
Lots of ideas on how to solve the problem
Potential solutions clarified
Solution list
4. Select and plan the solution
What’s the best way to Lots of criteria for do it? evaluating potential solutions
Criteria to use for evaluating solution agreed upon
Plan for making and monitoring the change
Lots of ideas how to Implementation and implement and evaluation plans evaluate the selected agreed upon solution
Measurement criteria to evaluate solution effectiveness
5. Implement the solution
Are we following the plan?
Implementation of agreed-on contingency plans (if necessary)
Solution in place
6. Evaluate the solution
How well did it work?
Effectiveness of solution agreed upon
Verification that the problem is solved, or
Continuing problems (if any) identified
Agreement to address continuing problems
Experimentation. This activity means the well-organized searching for and testing of new knowledge. Unlike problem solving, experimentation is usually not induced by current difficulties but by opportunity and expanding horizon. One major form of experimentation is ongoing programs which involve a continuous series of small experiments, designed to produce incremental gains in knowledge. Successful ongoing programs require an incentive system that favors risk taking. If employees do not feel that the benefits from experimenting exceed the cost, they will not participate.
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Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.81.
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Furthermore, these programs require managers and employees who are trained and skilled in the tasks needed to perform and evaluate experiments. These skills often have to be learned. They cover statistical methods, graphical techniques, and creativity techniques. The most effective training programs are strongly focused and feature only a small set of techniques tailored to the employees’ needs. For instance, the training of the design of an experiment is useful for a manufacturing engineer whereas creativity techniques are better suited for the design and development department. A second form of experimentation is usually larger and more complex than ongoing programs. Demonstration projects represent a sharp break from the past and introduce systemwide changes, introduced at a single site, with the goal of developing new organizational capabilities11. General Food’s Topeka plant was one of the first to introduce the idea of selfmanaged teams and high levels of worker autonomy. Often, success is achieved through learning by doing. All forms of experimentation seek to move from superficial knowledge to deep understanding. It is the distinction between knowing how things are done and knowing why they occur which makes a big difference. “Knowing how is only partial knowledge based on forms of behavior, standards of practice, and settings of equipment. Knowing why is much more fundamental. It links the causes with the effects and accommodates exceptions, adaptations, and unforeseen events.”12 Learning from past experience. Companies must review their failures and successes as well, assess them systematically, and prepare records of the lessons learned which are open and accessible to all employees. George Santayana, a famous philosopher, once said: “Those who cannot remember the past are condemned to repeat it.”13 11
Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.83. 12 Garvin, David A. (1993): p.84 13 Garvin, David A. (1993): p.85
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Unfortunately, too many managers fail to reflect on the past experiences and thus, let valuable knowledge escape. Sometimes failure is the best teacher and the knowledge gained from it is often necessary to achieve successes. A few companies such as Xerox, Arthur D. Little, and British Petroleum have established processes that require their managers to periodically think about the past and learn from their mistakes. In other companies, learning occurred by chance, as happened with IBM, rather than careful planning. IBM’s 360 computer series was based on the technology of a failed previous computer model. This learning process does not need to be expensive. Often it does not take much more than the manager’s time. Learning from others. Naturally, not all learning originates in reflection and self-analysis. Sometimes the most powerful insights come from outside the company’s environment. A lot of new perspectives are gained by looking even at completely different businesses. Milliken company calls the process of borrowing outside ideas SIS – “Steal Ideas Shamelessly”14. Robert C. Camp defined “an ongoing investigation and learning experience that ensures that best industry practices are uncovered, analyzed, adopted, and implemented”15 as benchmarking. It does not only require the thorough search for the best industry practice but also a careful study of one’s own practices and performance. Another way of gaining outside information is the communication with customers. They provide up-to-date product information, competitive comparisons, immediate feedback, and insights in changing preferences. This information is valuable for all levels in a company. Managers need to be open to criticism and attentive listeners. Only in such a receptive environment, organizational learning can occur and leads to success for the company as a whole. 14
Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.86. 15 Camp, Robert C. “Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance” ASQC Quality Press, (1989): p. 9.
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Transferring knowledge. Learning must be more than a local issue. Therefore knowledge needs to be spread quickly and efficiently throughout the whole organization. Reports and tours are the two most popular mediums to share ideas and enhance learning. The former cover a variety of topics, summarize findings, and describe important processes and events. In addition reports provide a checklist with things that should be done and those being avoided. They are often supported by videotapes to visualize the results. The latter are an equally popular means of transferring knowledge, especially for large multidivisional companies. Tours describe the policies, practices, and systems that were most relevant to that level of management. “It is very difficult to become knowledgeable in a passive way. Actively experiencing something is considerably more valuable than having it described”16. Therefore, personnel rotation programs become more and more common. With this powerful method, employees are transferred to different divisions, departments, or facilities. All levels of management can be involved. Knowledge is more likely to be transferred effectively when the right incentives are in place. The learning process will grow much faster if employees know that their ideas and plans will be evaluated and implemented and their learning will be applied. Now, that we have explored the meaning and the tasks of a learning organization, the question arises of how such an organization can be managed.
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Schank, Roger, and Childers, Peter. The Creative Attitude. New York: Macmillan, 1988, p. 9
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3. Managing a learning organization The beginning of an integrative learning model is the building of basic blocks. These blocks will assist managers and consultants to identify relevant organizational factors that influence learning. Research showed that there are four integrative dimensions of organizational learning:
(a) different system levels of learning (from individual to network), (b) different learning modes, such as cognitive, cultural, and action learning, (c) different learning types, and (d) different phases of collective learning process.17
These dimensions, see figure 2, can be regarded as basic cornerstones of an integrative conceptual framework and promotion of organizational learning.
Figure 2: A conceptual framework for the management of organizational learning18 Learning Process - Identification/Creation - Diffusion - Integration - Action
System Levels - Individual - Group - Organization - Interorganizational
Learning Models - Cognitive Learning - Cultural Learning - Action Learning
Learning Types - Type I: Single-loop - Type II: Double-loop - Type III : Deutero
Conceptual Framework For Organizational Learning
The management of organizational learning revolves around several issues. One of them is that different system levels, meaning from individuals over groups to the organization, and their interconnections must be taken into account. Through a process of learning how to deal with complexity and interdependent variables at different system levels, the problem of how to transfer learning from the individual level to a group or organizational level can be solved. There are, for example, individuals who differ in their learning capabilities and emotions arise
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Pawlowsky, Peter. “The Treatment of Organizational Learning in Management Science” Handbook of Organizational Learning and Knowledge, New York: Oxford University Press, 2001, p.75 18 adapted from Pawlowsky, Peter. (2001), p. 79.
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because of unstable situations; teams which function as social systems, and the relationships between the company and their suppliers and customers. All must interact within the organization and their relationship must be managed. Secondly, the management of learning modes is necessary because learning is not only understood as a cognitive programmed process but also dependent on emotions and the behavior of individuals. People not only have to understand the new knowledge, they must also feel that it is the right thing to adopt new thoughts and routines that come along with it. Knowing, feeling, and action have to be balanced. Therefore, it is necessary to invest in human capital but also to have trust in the employees that they are able to accomplish the changes. The different learning types are a third central issue in managing organizational learning. The responsibility of making simple correction to the outcome of actions should be delegated as far down in the organizational hierarchy as possible. That is the single-loop learning effect by making adjustments to given standards and actions. Double-loop learning implies that mismatches in the outcome are corrected by first examining and altering the governing variables, and then the actions. Management should select the appropriate learning type that is useful under different learning circumstances. The management of learning processes within the framework of phases is the fourth important cornerstone. In order to identify the phase of the learning process, a number of questions will help to find the right answer. The phase of the identification of information which is relevant for learning, or for the creation of new knowledge needs special attention. One has to ask e.g. what the best way is to combine existing knowledge and past experience in order to generate new knowledge. With respect to the second phase, the diffusion and exchange of knowledge either from the individual to the collective level, or at the collective level itself, it is necessary to analyse the flow of information within the organization, and the type of communication which seems to be most effective. The modification and integration phase of organizational 12
learning refers to the process by which new knowledge is integrated into the daily operations of the firm. It is necessary to question existing theories-in-use and eventually modify existing assumptions on the basis of new insights.19
4. Measuring Learning There is an old saying which is well known to managers: “If you can’t measure it, you can’t manage it.”20 This is true for learning as well as for other business activities. Traditionally, learning curves and manufacturing progress functions have been two ways to measure learning. Even though widely used, these variables are incomplete for firms who want to become a learning organization. They focus only on one measure of output (namely cost or price) and ignore other competitive variables which are influenced by learning such as quality, delivery, or new product launches. They do not take into consideration the fact that new technologies and the challenging world of competition are two important components for learning not just the total production volumes. Last and very important, the old learning variables do not tell us anything about the source of learning, or the levers of change. Analog Devices, a leading semiconductor manufacturer, developed a more sophisticated measure, called the “half-life” curve21. It measures the time it takes to achieve a 50% improvement in a specific performance variable. The logic is clear. Companies that take less time to improve learn faster than their competitors. Half-life curves are flexible, not confined to costs or prices, easy to operationalize, and they allow easy comparison among groups. Their biggest weakness, although, is the sole focus on results which will hinder the recognition of short term learning.
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Pawlowsky, Peter. “The Treatment of Organizational Learning in Management Science” Handbook of Organizational Learning and Knowledge, New York: Oxford University Press, 2001. 20 Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.89. 21 Garvin, David A. (1993): p. 89.
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5. Why do so many organizations fail to learn? According to Edward H. Schein, organizational learning failures may be caused, not by resistance to change, human nature, or poor leadership, but by the lack of communication among three “cultures”. First, the culture of operators evolves locally in an organization or unit and is based on human interaction. Operators may use their learning ability to work against management's efforts to improve productivity. Second, the engineering culture represents the design elements of the technology underlying the organization, and how the technology is to be used. Engineers, whose reference group is outside the organization, share common educational, work, and job experiences. They are preoccupied with designing humans out of systems rather than into them. Finally, the executive culture revolves around maintaining an organization's financial health and deals with boards, investors, and capital markets. As executives, whose reference group is also outside the organization, are promoted, they become more impersonal, seeing people more as a cost than as a capital investment. When organizations attempt to redesign or reinvent themselves, the cultures collide and failure occurs. Executives and engineers are task focused and assume that people are the problem. Executives band together and depersonalize their employees. Engineers as well cannot agree on how to make organizations work better while keeping costs down. Enough mutual understanding must be created among the cultures to evolve solutions that all groups can commit to. First, the concept of culture must be recognized. Next, managers have to acknowledge that engineers or executives alone cannot solve problems, but must work together. Third, managers are to conduct cross-cultural dialogues. Each culture must learn how to learn and to analyze its own culture.22
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Schein, Edgar H. “Three cultures of management: The key to organizational learning.” Sloan Management Review, Vol.38, Nr.1 (Fall 1996): 9-19.
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Other reasons for the failure of organizational learning are based on defensive routines and the complexity of systems. If managers think their company is too complex, they miss the opportunity to fundamentally improve its structure and induce learning. An inadequate and ambiguous outcome feedback hinders the company from learning as well. There need to be clear statements made about the performance of the last task. If feedback is misperceived, e.g. as pure negative criticism and not as suggestion for improvements, learning will be obstructed as well.
6. The needs and outcome of a learning organization Why is it attractive to become a learning organization? The overall advantage for a business is the possibility to discover what it is, where it wants to go, and to define the quality of life it wishes to pursue. In particular, the company wants to achieve superior performance and through it a competitive advantage. The key to success is the answer to the following question: how can the organization turn standard resources, i.e. resources that are available to them and all their competitors, into competencies, which are unique for them, and which cannot be copied by others? Organizational learning helps to avoid a decline because mistakes are recognized in the early stage and avoided in the future. Improved quality, innovations, a better understanding of the business itself, and the increased ability to manage changes are further important outcomes of a learning structure. A learning organization combines the essential elements of strategic and personal development. It creates a space for people to achieve tremendous business and personal results. It values the scientific method of hypothesis development, testing, and validation, as well as the personal development. One is able to understand certain risks, the diversity of 15
problems, and the need for an energized, committed work force more deeply. Organizational learning allows the employees to take on more responsibility and insight into the company and thus will improve their personal and spiritual well-being. Customer relations are also very important because a company cannot survive without their clientele. So there is the need for establishing long-lasting relationships and satisfied customers. Learning helps to find a different way of viewing the process of conducting activity in a business environment and of achieving change within that environment. The existing views and ways of understanding are not keeping up with the realities of the surroundings nor with a belief system which defines that environment. Expanding boundaries for a better information flow and the engagement in the community are another two ways to make the company better off – from the inside and the outside. The working conditions and the work environment will be improved through the concept of organizational learning. It is more fun to work in such a business because it provides a basis for creative ideas and gives people hope that things can be better. Learning organizations provide a safe place to take risks with new ideas, behaviors and the challenge needed to stretch beyond perceived limits. Everyone's opinions are valued and the amount that people can contribute is not determined by the position in the organization. Last but not least, organizational learning is needed because the times demand a practice of life-long learning.23
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http://world.std.com/~lo/WhyLO.html
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7. Summary and Conclusion This paper has tried to describe the foundation needed to build a learning organization. The idea is to acquire knowledge and put it into action to improve the company’s performance. Organizational learning comprises five complex activities which have to be managed effectively. New instruments serve the measurement of the learning process and monitoring improvements. Still, many organizations fail to implement this management structure even though it has been proven to be a very successful tool to keep up with the changing, competitive environment. Learning organizations are not built overnight. The most successful are companies who are products of carefully cultivated attitudes, commitments, and management processes. They have slowly evolved over time. Nevertheless, there are always some changes which can be made immediately. Any company that wishes to become a learning organization can begin by taking a few simple steps. The first step is the creation of an environment which is conducive to learning. There must be time for reflection and analysis, to think about strategic plans, analyse customer needs, and to invent new
products. Learning is difficult if employees are rushed. Therefore, top
management needs to free up the employees’ time. That time will be doubly productive if the workers possess the skills to use it wisely. Training in brainstorming, problem solving, evaluating experiments are just a few learning skills which are essential. Another important step is to open up boundaries and stimulate the exchange of ideas. This could be done by conferences, meetings, and project teams which either cross organizational levels or link the company and its customers and suppliers. The former General Electric CEO Jack Welch considers this to be such a powerful stimulant of change that he has made “boundarylessness” a cornerstone of the company’s strategy for the 1990s.
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Once managers have established a more supportive, open environment, they can create learning forums. These are programs or events designed with explicit learning goals in mind and can take various forms. Strategic reviews examine the changing competitive environment and the company’s product portfolio, technology, and market positioning. Systems audits review the health of large, cross-functional processes and delivery systems. Internal benchmarking reports identify and compare best-in-class activities within the organization. Study missions are dispatched to leading organizations around the world to better understand their performance and distinctive skills. Finally, symposiums bring together customers, suppliers, outside experts, or internal groups to share ideas and learn from one another.24 Together these efforts help to eliminate barriers that hinder learning and begin to move learning higher on the organizational agenda. They also suggest a shift in focus, away from continuous improvement toward a commitment to learning. Coupled with a better understanding of what a learning organization is and how it is managed, this shift provides a solid foundation for building a learning organization. The overall goal to become a company with the competitive advantage in a global environment can be achieved by restructuring the firm from within and using all the positive advantages of organizational learning effectively.
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Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-Aug. 1993): p.91.
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Bibliography 1. Argyris, Chris. On organizational learning. Cambridge: Blackwell Publishers, 1994 2. Camp, Robert C. “Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance” ASQC Quality Press, (1989): p. 9. 3. Dierkes, Meinolf, Berthoin Antal, Ariane, Child, John, and Nonaka, Ikujiro. Handbook of organizational learning and knowledge. New York: Oxford University Press, 2001. 4. Drucker, Peter. The essential Peter Drucker. N.p.: Harperbusiness, 2001. 5. ---. “A survey of the near future.” The Economist, (Nov. 3rd 2001): 3-22. 6. Garvin, David A. “Building a learning organization.” Harvard Business Review, Vol.71, Nr.4 (July-August 1993): 78-91. 7. http://world.std.com/~lo/WhyLO.html 8. Huber, George P. “Organizational Learning: The Contribution Processes and the Literature”, Organization Science. (Feb. 1991): N. pag . 9. Kleiner, Art, and Roth, George. “How to make experience your company’s best teacher.” Harvard Business Review, Vol.75, Nr.5 (Sept.-Oct. 1997): 172-177. 10. Moingeon, Bertrand, & Edmondson, Amy. Organizational learning and competitive advantage. London: SAGE Publications, 1996. 11. Nevis, Edwin C., DiBella, Anthony J., and Gould, Janet M. “Understanding organizations as learning systems.” Sloan Management Review, Vol.36, Nr.2 (Winter 1995): 73-83. 12. Prokesch, Steven E. “Unleashing the power of learning: An interview with British Petroleum’s John Browne.” Harvard Business Review, Vol.75, Nr.5 (Sept.-Oct. 1995): 146-168. 19
13. Schank, Roger, and Childers, Peter. The Creative Attitude. New York: Macmillan, 1988 14. Schein, Edgar H. “Three cultures of management: The key to organizational learning.” Sloan Management Review, Vol.38, Nr.1 (Fall 1996): 9-19. 15. Stata, Ray “Organizational Learning – The Key to Management Innovation”, Sloan Management Review. (Spring 1989): N. pag.
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