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Contents Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix Chapter 1: Using Organizational Memory to Improve Productivity . . . 1 Chapter 2: Experiential Learning: Just How Bad Are We?. . . . . . . . . . 35 Chapter 3: EBM’s 6-Stage Learning Cycle . . . . . . . . . . . . . . . . . . . . . 43 Chapter 4: How the Experiential Learning Baton Was Passed . . . . . . . 61 Postscript: Two Trillion-Dollar Examples That Illustrate the Point . . . 67 Appendix: Checkbooks and Boxing Gloves: The Author’s Story . . . . . 81 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

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Preface The urgency of the productivity challenge is great. The country that does this first will dominate the twenty-first century economically. —Peter Drucker

It might not appear so but knowledge management (KM) is still a relatively new field, first launched on an enthusiastic academic and business world out of a small Boston conference in 1993. Predicated on the belated realization of the premium value of knowledge, the gathering of a handful of academics and practitioners came about because of two overlapping developments in the way business had changed: globalization, which had brought great complexity to the marketplace, and the ubiquitous computer. Attendees thought the latter could help the former. Since then, universities have started courses on the subject, journals have grown up around it, and many large organizations have invested in it. It is a multi-billion-dollar market, often seen as a must-have and then, after the installation of some very expensive digital machinery, missapplied as just document management in place of hard-copy file storage. By the serious practitioners, it is linked to human resource management and incorporated with processes such as The Learning Organization, the information age, continuous improvement, transactive memory systems, knowledge transfer, action learning, and after-action reviews, among others. Typically techno-centric through electronic data systems, its employment is sometimes tied to organizational objectives, such as improved performance, competitive advantage, innovation, the examination of corporate culture, and developmental processes, but its practice is still uncertain—just like its multiple definitions. In universities, academics are mostly validating and teaching early theory, whereas out in industry and commerce, serious practitioners (of which there are still relatively few) are at sixes and sevens with the concept and its practice. In truth, knowledge management is still an immature discipline, begging for a bigger and better role. Academics know it is important; the chests of money they are

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spending on it makes this clear. But they do not know why exactly or, in the modern lingua franca, how to make it “rock.”

Peter Drucker’s Productivity Challenge This text explains both why and how and gives the subject an application pressing enough for organizational survival through two misconceived and underexploited processes. The urgent application is the late Peter Drucker’s declared crisis of productivity, without which lifeblood sales and competitiveness cannot be sustained, and the processes are the management of organizational memory (OM) and experiential learning. Productivity is often ignored or overlooked when times are good but when those times go belly up—as they are doing at the time of this writing—it becomes central to survival. For the two misconstrued processes, the ability to experientially learn is dramatically compromised without OM: the appetite for repeated mistakes, reinvented wheels, and other unlearned lessons—all hard-won and expensively paid-for by-products of KM’s underemployment—is huge. There is another reason for KM’s newfound importance, the result of a further decisive development in the way business does business. It is the flexible labor market, the single biggest change in workplace practice in 100 years. Employees have taken it up with gusto, so much so that the average tenure of workers (including managers) with their employer is now less than five years in many developed economies. To put a face on the consequential problem, there are few organizations that have employees in situ who can remember how their current employer handled the last recession and probably also such events as what the previous product launched was; when a prior large credit facility was arranged or how outside money was raised; equally, the process of how headquarters moved to another building, the entry to a new overseas market, and how a major client reacted when a new employee declared ignorance of the circumstances surrounding the installation of one of their machines, and so on. The flexible labor market’s considerable short-term benefits aside, employers’ swing doors and musical chairs have stripped organizations of most job continuity and introduced to institutions the phenomenon

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of corporate amnesia, so attempts to capitalize on one’s own unique competition-tested experience is either very difficult or impossible. In truth, employers, when their employees are replaced, have to depend on other employers’ experiences, which are rarely completely relevant. And because experiential learning is all about doing things more efficiently (i.e., cutting back on wasted effort) the process is Green. If this doesn’t ratchet up KM’s importance, consider the uncomfortable detail that managers in developed countries are turning in productivity growth scores that are lower than their counterparts achieved in the 1950s and 1960s (see Figure 1 in Chapter 1). These dates are before the introduction of formalized business education, which was supposed to “professionalize” the business of business to a mass audience. To put a figure on wasted productivity, the 2005 hard-cash estimate of squandered effort in the United States is equal to 7.6% of gross domestic product (GDP; see Table 1 in Chapter 1). If it costs this much in the world’s most productive and competitive economy, imagine what it is costing others as a percentage of their hard-earned GDP? But is not continuous improvement already a prime objective of KM, even of wider business education? If one can bring oneself to acknowledge that both are not all they are cracked up to be, such is the newfound importance to institutions of effective knowledge management, the practice of which is mostly tackled informally, defensively, and inexpertly. This text will outline how the approaches in use are flawed enough to be short-changing organizations. It will also explain how institutions are not helping their short-tenure employees to make good and then better decisions on their behalf.

Addressing the Limitations of Conventional KM Making much better use of hindsight—the subject of this text—is not rocket science, which makes it difficult to understand why it has not yet been better formalized as a learning tool for decision making. The process outlined here, called experience-based management (EBM), has a number of unique features that address the various limitations of traditional KM approaches to corporate decision making in the land of “here today and gone tomorrow.”

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• It introduces and clarifies the term “organizational memory.” Although other related terms are more frequently referred to (such as institutional or corporate memory, corporate experience, or even corporate/management history), the use of this lexicon is deliberate. Most other KM processes cheerfully claim to apply individuals’ “memory.” However, the memory used does not generally utilize anything other than current practice. For genuine experiential learning to be efficient, the evidential base should include all experience: both current and prior, institutional, personal, and where possible, others’ experience. For the agnostics who argue that prior experience is irrelevant because circumstances change, the author’s retort is that this is illustrative of a pervasive misunderstanding of how organizations mainly learn and progress. They do so organically. The fact that conditions are always changing is exactly why it becomes useful. Decision making is not a reflex skill, and the lessons derived from prior experience become an abstract dress rehearsal for real decisions to come. Thus, if education’s erudition is truly valued, the awareness of prior experience, especially organization-specific familiarity, is more beneficial than its ignorance. In essence, its awareness should not be misinterpreted as a pretext for repetition. The key to better decision making is in the application of OM. The designation used is to more accurately define OM in the context of experiential learning and decision making. • It directly tackles the negative consequences for employers of the flexible labor market and, even when employees do not move on, individuals’ inherent short, selective, and defensive memory, by incorporating a practical (and cost-effective) way of capturing short-, medium-, and long-term experiences before they are lost forever. The processes described make the organization’s evidential base permanently accessible to the rolling generations of managers. Instructively, and surprisingly, corporate amnesia is hardly acknowledged, let alone addressed, by many KM practitioners.

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• It incorporates into the wider learning process a part of intellectual capital (arguably the most useful component) that is often overlooked. The customary input is explicit experience and knowledge, the type of data, information, and old knowledge that is likely recorded in an institution’s digital data bank and/or is available elsewhere. This approach describes the means by which the more elusive and valuable tacit knowledge and experience can be captured and incorporated into a learning model. • As a general rule, KM’s conventional applications are to concentrate on avoiding mistakes. The EBM model focuses on decision making as a tool to improve on both success and failure. • Finally, EBM uses Professor David Kolb’s reflective process to formulate a distinctive “lessons learned” approach to decision making that can be passed along the short-lived generations of employees. It should be stressed that the mechanics of academically authenticated experiential learning à la Kolb, whose methodology is widely acclaimed as experiential learning’s most refined process, has not been tinkered with, save for adapting it to the modern workplace. In short, the author explains why, in today’s “walkabout” workplace, good decision making needs to shift away from being based on a generic one-size-fits-all skill to an institution-specific competence that employers have to coordinate themselves by making all of their experience available to their transient employees. It additionally provides business education and industry/commerce with a formalized, improved, practical, inexpensive, and continuous methodology with which to teach business and commerce’s most important competence. In a nutshell it takes the established process of KM to the next level and helps to professionalize decision making by taking it out of the land of practiced guesswork.

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CHAPTER 1

Using Organizational Memory to Improve Productivity Stem cells to cure diseases, photonic crystals for superfast optical computer chips, nanotubes for electronics, quantum cryptography for secure communications, and a biochip that uses water droplets as tiny test tubes—these are just five of the world’s impressive array of achievements to date. Who would have thought them possible just a few years ago? If there is one phenomenon that marks out the last century, and specifically the last 30 years, it is the rate of progress by scientists in fields such as medicine and technology. In both fields, the acceleration in their development has been extraordinary, thanks to one unique dynamic. Their evolution has been virtually seamlessly incremental, the building of one advance on another without much interruption.

Progress Is Despite Management A Harvard Business School professor’s notion about the managerial skills that got these remarkable endeavors to where they are today is no less important than the achievements themselves. Instead of attributing the performances to any matching management skills, Robert Hayes (exIBM and McKinsey employee) suggests that the achievements are despite management’s best efforts. Business pundits seem to be forever rediscovering the truths known to those who lived two generations earlier, he says (Hayes, 1984). He considered calling this the Hayes Law of Circular Progress until he discovered a similar proposition in an 1843 edition of the Edinburgh Review: “In the pure and physical sciences, each generation inherits the conquests made by its predecessors. But in the moral

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sciences, particularly the art of administration, the ground never seems to be incontestably won” (Hayes). What he is saying is that organizations and their managers generally do not learn well from experience, a statement illustrated by the pandemic of repeated mistakes, reinvented wheels, and other unlearned lessons that litter many parts of modern industry and commerce—all of which make productivity gains and associated competitiveness increasingly difficult to achieve (Kransdorff, 2006). Alongside the raft of statistics that confirm this observation, international management consultant Proudfoot estimates that the 2005 cost of wasted productivity in the United States was 7.6% of gross domestic product (see Table 1 for other countries’ costs; Groningen Growth and Development Centre and The Conference Board, 2004; Proudfoot Consulting, 2005). The fact that the United States is the world’s most productive country makes this a more tangible marker of wider managerial ability. The world’s productivity rankings contain another clue to needlessly high costs (Groningen Growth and Development Centre and The Conference Board, 2004). Using 2003 figures, for example, the variable position of nations showed that it cost more in France than in the United States to perform similar tasks. In France, the outlay was lower than in the United Kingdom; in the United Kingdom, the cost was less than in Spain; and in Spain, the cost was lower than in New Zealand. The difference in outlay between the United States and New Zealand was more than 40%. If one country can do it, why can’t another? Productivity’s importance is critical in several ways. At the end of the day, it is the ability to do things efficiently, and particularly more efficiently than others, that determines wealth. It is also one of the main requirements for businesses staying in business. In bull-market times, productivity is often seen as less than compulsory, but when the bear rears its ugly head—as it is doing at the moment—productivity is indispensable. In fact, short of government intervention (subsidies, interest rate cuts, etc.), the only way for organizations to survive without too much pain is to improve their productivity. Productivity’s shortfalls and Proudfoot’s calculation of the weighty display of innate inefficiency—assessed in a fat year—have their genesis in a number of puzzling oversights by both educators and employers who

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rob managers of the means that would make their decision making more akin to the way faster learning scientists work in high-tech.

No History, No Inheritance The omissions include the dismissive attitude toward the necessary component of seamlessness and continuity. History is a diverse medium that would otherwise bestow an inheritance on future managers/employees and a discipline within which is buried the detail of prior experience. One of the yardsticks for most other professions—music, architecture, art, soldiering, politics, and so on—is that their generic history is recognized and used as a separate field of learning. This is not so in business. Both business history (the more general historical study of the subject that builds a general appreciation of the contribution of single enterprises into the wider sector, industry, and national economic context) and corporate/management history (the memoir of individual companies or other institutional bodies) are studiously avoided as a serious teaching tool in most curricula as well as in the workplace, where subject companies’ main motivation for their own memoirs is public relations. Only the United States has given the genre any serious attention, albeit in a small number of top universities; Harvard is the only one where business history is a compulsory component of all first-year student teaching. In truth, history is the single biggest source of available knowledge, all too often perceived as obsolete because of its outdated character. Its brush-off is often characterized by the parroting of Henry Ford’s pronouncement that “history is more or less bunk” (Chicago Tribune, 1916), and its widely held derivatives “old lessons are misleading or irrelevant because times change” and “one must only look forward, not backward.”

Cliometrics and Case Studies Business education’s concession to times past is the use of economic history (whose use is declining) and case studies. The former is the application of economic theory to historical study using econometric measuring techniques called cliometrics, a combination of mathematical economics and statistics. Its purpose is to provide economic interpretations of

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history, à la Adam Smith’s 18th-century theory about free trade, which played an important part in the Industrial Revolution. While providing a valuable macro-perspective of how financial systems work, which may be practical for economists and important to academics, it is only of peripheral benefit for sharp-end businesspeople who have to deal with the micro-issues of running a company or other type of organization. When case studies are used, they are usually little more than summarized snapshots to explain the workings of some functional management discipline, an approach that inescapably disaggregates their interrelationship with other management factors and influences. The wider contextual picture illustrating the more complex and intimate nature of running a business and making real decisions is pointedly avoided (Kransdorff, 2006). With the exception of the United States and Japan, many of the examples used are more often other countries’ exemplars, giving any experiential learning a generalized and alien application. As learning opportunities, unfamiliar examples are less relevant than home-grown models. Distinguished Professors Henry Mintzberg and Joseph Lampel’s unflattering view of the device is that teachers “cannot replicate true managing in the classroom. Students with little or no management experience are presented with 20 pages on a company they do not know and told to pronounce on its strategy the next day” (Mintzberg & Lampel, 2001). Aside from history, several other omissions by educationalists are equally myopic. In spite of being the single most important skill of any manager, decision making is not taught as a dedicated subject in most curricula. It is as if one is educated in general subjects such as marketing, finance, and so on, and then it is assumed that how to make good decisions will follow by default.

Decision Analysis Theories This apparent inattention to an important discipline disguises a bewildering clutch of widely unused and mainly academically devised approaches to decision making that are available and categorized under the broadbased classification of Decision Analysis. They include techniques such as Analytic Hierarchy Process (AHP), Bayesian Updating, Outranking, Subjective Judgment Theory, Utility Assessment, Matrix, Cost–Benefit

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Analysis, and the Decision Tree—the last three being the most commonly known. Matrix, for example, utilizes a subjective weight assignment for alternative criteria, its main drawback being that it cannot account for interdependence between so-called best alternatives. Cost–Benefit Analysis, which provides a quantitative format for reckoning the range of benefits and costs surrounding a prospective decision, aggregates the effects over time using an approach called discounting, and arriving at a “present value” or “payback period.” In its simplest form, it is carried out using only monetary costs and benefits, but a more sophisticated approach tries to put a financial value on intangible costs and benefits, which makes the calculation highly subjective. Other criticisms include the imprecise techniques used to measure diverse benefits and costs and the fact that, to some, environmental concerns fall properly under the realm of ethics rather than economics. The Decision Tree is an abstract methodology in which alternative decisions and their implications can be evaluated via a genealogy-type visual aid. Its main criticisms include overfitting—when the tree matches random variations of the target values in the training data that are not replicated in other samples—and instability—when the tree fits the data well, predicts well, and conveys a good story, but then, if some of the original data is replaced with a fresh sample and a new tree is created, a completely different root-and-branch picture may emerge using completely different inputs in the splitting rules and, consequently, conveying a completely different story. However, as loyal as followers of any of these techniques might be, the historical shortcomings of industry and commerce confirm that good decision making is a far more practical discipline than these methodologies accommodate.

Ways of Learning × 35 Alongside decision making’s oversight is the neglect of another discipline known as experiential learning, which is self-evidently the process of learning from experience and, given its actual prior employment, arguably the most practical of all learning processes. This is associated with another clutch of associated methodologies. At least 35 in total, the list is

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tediously long but relevant for their breadth of scale, among them authentic learning; accelerating learning; adaptive learning; anticipatory learning; appreciative learning; celleration learning; cognitive learning; collaborative learning; competency-based learning; competitive learning; concurrent learning; constant learning; cooperative learning; creative learning; single-, double-, and triple-loop learning; high-impact learning; interorganizational learning; interpartner learning; innovative learning; leading learning; mechanistic learning; organizational learning; outcome-based learning; parenthetic learning; programed learning; self-directed learning; rote learning; situated learning; strategic learning; total quality learning; transformational learning; virtual learning; and virtuous learning. Most of them are obscure, the creation of inventive individuals, suggesting that the universal process of learning has become so fragmented into specialized branches that the practice has become disaggregated. The implication for generalists, such as managers, is that attention is drawn away from understanding the universal principles of learning and, in the case of business, of decision making. In truth, people have become so used to simply having data and information given to them that they have become unskilled at creating knowledge for themselves or their employers. Learning, and particularly the interrelated way of decision making, has gone astray, with its specializations paradoxically inhibiting its own organic development—much like the plethora of sophisticated toys now available to children, whose ability to play inventively has subsequently been degraded. If anything, academics’ and managers’ surplus of choice signifies the importance given to the process of acquiring knowledge, but their widespread neglect must also suggest a pervasive corporate confusion about which to use or their perceived ineffectiveness. One further long-term criticism of business education is the prevalent passive approach tutors use to impart information. This observation, key to the efficient application of experiential learning, is underscored by adult teaching specialist Dr. Stephen Brookfield’s observation that teachers overlook the need for reflection. His view is that students need “interplay between action and reflection,” proposing that curricula should not be studied in artificial isolation but rather that ideas, skills, and insights learned in a classroom should be tested and experienced in real life. Formal study is thus “reinforced by some appreciation of reality” (Brookfield, 1990).

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It is against this background that both business education and industry/ commerce are missing an important opportunity that involves the management of the institution-specific asset known as organizational memory (OM), the nuts-and-bolts equivalent of personal DNA. Although no single accepted definition of OM exists, its collective awareness provides the type of expertise that is both an organization’s adhesive and its lubricant—that is, it relates to all the routines and processes (formal or otherwise) that make an organization tick. Its value represents the capability of the firm and is perhaps the main ingredient of its resilience. In broad terms, it includes the individual’s understanding and accommodation of his or her’s employer’s individual corporate culture, management, communications, and decision-making style; the contacts and relationships between employees or teams of employees; the detail of job-related events; and the knowledge of tried and tested usage as it applies to the organization’s own market circumstances and special environment (socalled episodic knowledge). The qualitative application of OM is closely allied to memory, which is most commonly described as knowledge retention or the difference between having acquired knowledge and having to reacquire it. It is what is not forgotten, the reconstruction of experienced events.

Where OM Resides OM has two repositories: the institution’s archives and individuals’ memories, the former’s composition being prior data and information, specifically internally generated documentation to do with the organization’s activities. This includes intellectual property (patents; copyrights; trademarks; brands; registered design; trade secrets and processes, whose ownership is granted to the company by law; licensing; and partnering agreements), details of events, products and individuals (including relationships with people in outside organizations and professional bodies), relevant published reference material, and, importantly, institutioncreated knowledge. Its application is only possible if it can be accessed, necessitating effective retrieval systems in the case of archives and good memory recall in the case of employees, while its importance to an organization is entirely dependent on how well individuals can apply it. The same is applicable to the other repository, individuals’ memories.

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Conventional business instruction is largely a one-size-fits-all education that is designed to provide generalized skills within specific fields such as finance, marketing, strategy, and leadership. However useful and necessary is the provision of generic data and information, it is OM that, in a specific organizational context, greases the corporate wheels (Krandorff, 2006). Widely unmined, and the management of which is untaught, it is often called records or document management and is more often interpreted as just being the collection of one’s accumulated records and artifacts, which might include a sycophantic corporate history after 25, 50, or 100 years. This is true, but it is just the explicit part of OM—the “what” of know-how—the type of information that is codified in the abundant manuals, text books and training courses available. What is missing is the tacit or cognitive component, the type of knowledge that is not what most organizations end up capturing in their sophisticated and expensive electronic databanks. Sometimes known as coping skills or the nontechnical “how” of getting things done, it is a category first identified by Michael Polyani in 1958; what Edward de Bono, the inventor of lateral thinking, calls “operacy,” or the skill of action; and what Peter Drucker identified in the use of the word “techne” (Greek for “skill”; Polanyi, 1967; de Bono, 1981; Drucker, 1993). Much of it is implicit and ambiguous, acquired largely by experience that is functional and context/institution-specific. It typically exists only in the minds of individuals and is difficult to capture. It is through tacit knowledge that most erudition is gained.

The Tacit Way of Traveling One of the best descriptions of tacit knowledge’s makeup comes from David Snowden, former director of the Knowledge and Differentiation Programme at IBM Global Services. He uses the analogy of how best to get around London’s roads: One could use a map, which contains information with which to navigate using universal symbols and structures to observe, orientate, and then decide how to move. But using the services of a cab is faster, because the driver uses his tacit knowledge compulsorily acquired over 30 prequalification months cycling round the streets of London. To this I would add the knowledge from day-to-day experience of bottlenecks and throughways.

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For more tangible business illustrations of tacit knowledge’s meaning, the citation referring to the current predicament of the National Aeronautical and Space Administration (NASA) is instructive: “If NASA wanted to go to the moon again (as it is planning to do by 2018), it would have to start from scratch, having lost not the data, but the human expertise that took it there last time” (Brown & Duguid, 2000). Which is why officials at Los Alamos, where the atomic bomb was born, undertook the Knowledge Preservation Project (Los Angeles Times, 1995). In the wake of the U.S. government’s decision to stop testing nuclear weapons, there were concerns that the skills developed would atrophy, so, in the event that it had to one day resume testing, and perhaps actually use the weapon, retired weaponeers were brought back to the laboratory for video taped interviews intended to salvage knowledge about nuclear bombs that could not be gleaned from blueprints and archived documentation. Researchers recorded more than 2,000 videotapes. The rationale of John D. Immele, then-director of nuclear weapons technology at Los Alamos, was, “We don’t want to press the erase button on our memory and go back to where we were 50 years ago” (Los Angeles Times).

Difference Between Teaching and Learning A fuller appreciation of the difference between explicit and tacit knowledge is key to understanding the role of managers and their education. Unlike blue-collar skills, which are generally predetermined, repetitive, mechanical, and codified in manuals, administrative decision making is a competence borne out of a variable and difficult-to-predict macroenvironment alongside the interaction of numerous interrelated institutionspecific factors. Blue-collar skills are predicated on available explicit knowledge; white-collar skills are predicted mainly on the less-than-visible tacit experience. Explicit knowledge can be taught while tacit knowledge is best learned. The distinction is palpable. Teaching is instruction received. Learning is instruction acquired out of an abstracted process of critical reflection, reasoned deduction, and applied action, the evidential base for which is OM. To teach decision making without reference to institution-specific OM and specifically tacit knowledge is short-handing management.

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There are at least five reasons for OM’s importance to institutions, the first being the way modern industry and commerce has structured its workforce. Whereas individuals could once chalk up one or two different jobs in a working lifetime (this was still evident in the 1960s), average job tenure, even at management level, is now less than 5 years in many developed countries (Mintel, 2004). Employees’ experience is a factor of production that has been paid for at great expense, yet, because employers make little effort to capture it, it is readily discarded in the backwash of the biggest change in workplace practice for more than a century: the actively encouraged flexible labor market.

The Corporate Amnesia Phenomenon With job discontinuity now commonplace, employers lose their valuable OM at conveyer-belt speed. The phenomenon is called corporate amnesia, when organizations literally lose their memory (Kransdorff, 1998). The loss of one’s own memory ensures that institutions cannot efficiently evolve incrementally, which is the way most organizations progress. Experientially nonlearning and the commonplace 12 months that it takes for employees to be inducted are among the largest contributors to decisionmaking weakness and productivity shortfall. The second reason for the importance of institution-specific knowledge and experience is that individuals, even if they stay with their employer, have innately short, selective, and defensive memories. For conceptual advocacy, Harvard scholar Alan Kantrow observes that “when we go to work, we forget” (Kantrow, 1984). To Kantrow, managers’ choices and actions may find a ready place in memory, but the reasons and the intended significance of their deeds quickly float out of reach and beyond recall. He observes that while all organizations have some form of recall, their memory is frequently inaccurate: The style of a business presentation, the kinds of evidence that tend to sway decisions, the shared sense of what constitutes relevant information about a new market or product, the deep-seated visceral preference for certain lines of business—all these characteristics, and a thousand others like them, are the subtle products

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of memory. In no two organizations are they exactly the same, nor in any two parts of the same organization. Intuitively we know this. But on the job we usually disregard it. In particular individuals forget both the density and duration of the activity underlying the surface facts. We forget that, like an iceberg, nine tenths of the mass lies hidden, well below the normal waterline of vision. And we forget that the part we can see is not just “there” but is very much something built, something constructed or pieced together over time. (Kantrow, 1984) What Kantrow is referring to is the already mentioned tacit element of OM, the doubtful recall of which is ineffectual for both present and future employers. The third reason why OM is important is that no two organizations are the same. The approach necessary for one, even if it is in the same sector, is not the same for another, so to depend on the one-size-fits-all approach to management education as well as individuals’ experience with other employers is half baked. Each institution has its own special way of working that differentiates it from all other organizations, a characteristic that allows it to be competitive. Knowing that difference, specifically its specialized knowledge and the detail of its unique experiences, and then how to apply it to changing circumstances, allows walkabout employees to make decisions that do not have to rely on relearning the ropes. In corporate terms, tacit knowledge is a passive misnomer for active sharing of knowledge to make an organization more productive, whereas good decision making is truly environment specific, an observation that can be illustrated by Snowden’s imagery of London cabbies’ use of tacit knowledge.

Performance Is Not Always Transferable The basic skill of a taxi driver is driving. Taxi driving, though, is not universally applicable, for a London taxi driver will have to learn another type of driving—right-side driving—to earn a living in the United States. Equally, the additional tacit knowledge that makes the cabbie a better driver in London is quite irrelevant in New York. The logic is deafening. A decision maker, however good in one situation or location, is not necessarily of the same quality in another. This conclusion was borne out

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empirically by three academics from Harvard Business School who were investigating the phenomenon of corporate poaching, which represents a large proportion of executive and vocational churn in the mercurial labor market (Groysberg, Ashish, & Nitin, 2004). Contrary to popular belief, they found that after supposed “stars” moved from their old employers, their performances invariably plunged, as did the effectiveness and market value of their new paymasters. And the reason for this failure? Most companies overlook the fact that executive performance is not entirely transferable, because personal competencies inevitably include companyspecific skills, which are left behind. It is a conclusion that undermines the traditional belief of high-flyer infallibility and underlines the importance of institution-specific OM to good decision making. OM’s importance also comes in the newly coined ellipsis of Green, the equivocation of sustainable development around the subject of the environment where words like carbon neutral, climate change, and ecology rhyme with cutting out waste, which can potentially be recovered. As

Table 1. The Cost of Wasted Productivity COST (US$ BILLION)

% OF GDP

Germany

266.1

9.7

Spain

84.0

8.1

America

888.8

7.6

Britain

158.5

7.5

France

121.3

5.9

Source: Proudfoot Consulting, September 2005. Note: The study’s compilers found that the majority of senior executives—55%—thought that the key to raising productivity was to increase investment. No specific mention is made of doing things more efficiency. In the United Kingdom’s case, it was suggested that the government was aiming very low in its bid to boost productivity growth and that it had its sights on the wrong targets. The mention of government participation in productivity’s achievement is a reference to macrofactors such as the manipulation of interest rates and currency valuation, the use of which affects competitiveness not productivity. This suggests a basic misunderstanding of the role and importance of productivity, a notion explained by Peter Drucker, that it is managers, not nature economic laws or governments, that make resources productive. This idea is confirmed by the McKinsey Global Institute (MGI), whose research into the manufacturing sector shows a strong correlation between national productivity rankings and management practices. To depend on competitiveness without productivity is putting the cart before the horse (Dorgan & Dowdy, 2002; Drucker, 1991). And, as all horses know, pulling is easier than pushing.

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already indicated, the U.S. figure for wasted productivity is astronomical, with other countries even more excessive in terms of a percentage of GDP. In fact there are signs that the huge expense of mistakes repeated, wheels reinvented, and lessons unlearned within government and the civil service is also becoming a political issue in many countries (Dorgan & Dowdy, 2002). In the United Kingdom, for example, anecdotal evidence from press reports suggests high levels of voter anger at the enormous waste of taxpayers’ money in areas such as health, education, civil administration, criminal justice, immigration, computer-based projects, and so on. All of which center on poor decision making and a dearth of experiential learning that, in the contemporary environment of the United Kingdom at least, got little top-down direction from the omnipresent belief system of former Prime Minister Tony Blair who over 10 years dispensed the following “wisdom”: “A study of history provides so little instruction for our present day” (Blair, 2003). His view is “endorsed” further down the public-service food chain by Stuart Bishell—a former chief executive officer of Understanding Industry, a U.K. foundation dedicated to increasing links between business and education—with the following underwhelming viewpoint: “I do not believe that historical context is especially useful to students in understanding wealth creation and the position of industry and commerce in the economy and society of the 21st century” (Bishell, 1994).

Corporate Disenfranchisement Like iceberg-like corporate amnesia, there is something else happening in the wake of the actively encouraged flexible labor market, with potentially more serious consequences. With the relationship between knowledge and power intimately linked, the corporate body has, quite deliberately and entirely unwittingly, allowed its command to be displaced (Kransdorff, 2006). No longer are individuals an aggregate part of an established institution. Individuals are the institution for as long as they remain in situ. Then, when the face changes, as it is doing on average every 4 or 5 years in most developed economies, the institution changes, or more accurately, tries to change, bereft of its continuity and at the mercy of new brooms. Ordered evolution has become a shapeless revolution with

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little regard for the one corporate asset that represents the organization’s life form: its institution-specific knowledge and experience. It presages a mercurial world, with such things as corporate culture, ethos, values, and tried-and-tested usage struggling to maintain an even keel. Having chosen to operate in isolation to its own hard-won and expensively acquired experience, the motor of Western society’s wealth machine has largely disempowered itself. I am not suggesting that the flexible labor market be abandoned as a workplace strategy—it has some extremely valuable features. I am suggesting only that the management of OM and experiential learning will help to counterbalance the evident institutional disenfranchisement and give productivity its much-needed needed fillip. The outlined problems for knowledge management’s importance are, bizarrely, largely unaddressed and some even unnoticed by educators and organizations. As indicated, the instructional process that allows organizations to learn better organically is called experiential learning, a part of education that, like OM, is still largely misconceived and studiously underexploited in both business education and the workplace. In short, the vast majority of students are not specifically taught how to better learn from their employers’ own and special experiences. Even if their OM is made available, their performance is typically left to their own untutored resources. Nor do employers know how best to capture the valuable tacit element of their knowledge and experience, believing that whatever is in their digital databases is sufficient.

Interpreting Experiential Learning Classically, experiential learning is interpreted by most educationalists as blending theory and practice. The premise is that students complement classroom instruction with hands-on activities; they learn by doing. At one end of the spectrum, experiential learning for the Santa Cruz Waldorf School’s eighth-grade class is to put students through a “ropes course” using simple games and more complex, active problem-solving initiatives involving scenarios and dangerous missions. It mirrors the outward bound courses that many organizations undertake to engender bonding and problem solving. At the other end of the spectrum, experiential learning is the use of internships and other types of apprenticeships, while stu-

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dents at Canada’s Acadia University can join an on-the-job cooperative research and development program with private industry. At Australia’s Charles Stuart University, the process allows nurses and clinical science students to engage in problem-based or scenario-type learning. For others, it is touring museums or offering students educational opportunities at foreign universities to address spreading globalization. The nearest formal education comes to bringing the worlds of theory and practice closer is the methodology known as action learning, an approach pioneered by Professor Reg Revans in the early 1980s that uses a skilled facilitator to impose a discipline of self-reflection and analysis on team members of individual projects. Its aim is to enable managers to detect and prevent errors, accurately transfer information, or successfully achieve goals. Little used across industry and commerce, it addresses the institutional-specific aspect of decision making but not the problem of departed OM arising from modern-day, short-tenure employment or inherent short, selective, and defensive memories.

Pep Talks and Storytelling Prescribed education aside, experiential learning for employers is typically a short induction program, usually little more than the provision of a descriptive pamphlet of the organization, a pep talk or tour by a senior executive, or a mentoring program for more senior employees. When some form of reflection is used to examine performance, some organizations use a technique known as storytelling, where individuals are encouraged to relate their experiences through narrative witness, usually in some theatrical way, or through the use of the linguistic framework of metaphor (Denning, 2004; Klein, 1998). Alongside this is a branch of experiential learning that concentrates on others’ experiences. Called benchmarking, it is a tool whereby an institution measures its performance or processes against other organizations’ best practices, determines how those employers achieved their performance levels, and uses the information/knowledge to improve its own performance. It is usually lost on practitioners that, however imaginative the external experience is, it still has to be adapted to one’s own environment to be effective—making OM and its lubricating component, tacit knowledge, the critical arbiter.

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With the exception of museum visits and mentoring, the commonality among these applications is that the experiences to which the students or new employees indulge, or organizations examine, is of the present— the intention being to provide them with a familiarity of actual activities within a recent timeframe and within a particular discipline, their own employer’s or competitor’s environment. The point here is that the experiences are only accessible while individuals remain in situ or actually remember; once they join the flexible labor market, their experiences become lost to the organization, as does the dynamic between individuals, leaving the employer dependent on their new employees’ experiences with their employers past. Excluding benchmarking and action learning, the intended erudition is mostly informal, unstructured, tangential, and typically modest. At present, mentoring and benchmarking are perhaps the most effective ways of all the types of experiential learning. While all of these approaches are unquestionably preferable to just listening to a teacher in the classroom, the concept of experiential learning is being short-changed. As already indicated, it overlooks an area that is arguably just as valuable as a learning medium and which has become decisive as the wider workplace has adopted short job tenure as its raison d’être. Learning from prior practice within an organizational context is where the traditional definition and application of experiential learning falls short.

The Lessons of History Analogous to the erudition stemming from organization-particular lessons of history, this component of experiential learning is otherwise known as corporate or management history when transposed into books or other treatises. It is the part of experiential learning that addresses how individuals can better acquire their employers’ own hindsight that can, with the necessary know-how, then be applied to changing circumstances. Academics call this wisdom, insight, enlightenment, or 20/20 vision—having the quality of being sensible. For any employer, their OM characterizes their ability to perform and is the basis for decision-making excellence (Kransdorff, 1998). It has been paid for at great expense, yet it is subject to individuals’ innate forgetfulness alongside the Alzheimer-like effects of staff turnover.

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Why academia—or for that matter industry/commerce—has not more widely accepted the fuller portrayal of experiential learning as a dedicated business discipline is difficult to fathom, even despite corroborating research that acknowledges that an organization’s ability to collect, store, and use knowledge generated through its experience can have important consequences for its performance (Olivera, 2000). Is it a genuine oversight? Is it too difficult? Are managers too resistant? Or is it behind the common cry of “we know better”? In operational terms, relatively few resources are even targeted at its development, while organizations and managers are even now undecided about hindsight’s value. Given industry and commerce’s importance to all our lives and the fact that productivity growth is withering, it must surely rate as one of the 21st century’s more weighty imperatives so that organizations of all sorts (businesses, government, nongovernment organizations, charities, etc.) are more proficiently managed.

Defensive Unwillingness Having been involved in developing the subject for more than 20 years, I would suggest an even broader societal reason that is buried in Alan Kantrow’s cited explanation for institutional forgetfulness: an underlying reluctance to be objectively dispassionate about one’s performance. There is a substantial body of academic research that confirms the unwillingness of Western companies and their managers to examine objectively their decisions, especially their mistakes. Harvard Professor Chris Argyris explains that whenever a manager’s performance comes under scrutiny, the individual begins to feel embarrassed, threatened, and because they are so well paid, guilty: Far from being a catalyst for real change, such feelings cause most to react defensively. So, when their learning strategies go wrong, they become defensive, screen out criticism and put the “blame” on anyone and everyone but themselves. In short their inability to learn shuts down precisely at the moment they need it the most. (Argyris, 1991)

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This is explained as a particularly well-developed managerial ego. Commenting on the difficulties of teaching managers how to learn, Thomas Barry, a top U.S. industrialist1 describes the apparent amnesia evident in many of his top employees: “For many years I have been troubled by the inconsistent attitudes of high-achievement professionals who have superb intellects yet appear not to learn from experiences or colleagues.” His explanation is that companies attract “the stereotypical self-motivated, supercharged MBAs whose past successes build their defences against being incorrect, hence against any need to learn or change” (Barry, 1991). My additional explanation (not academically proven, I should add) is that in our education and in industry/commerce, and indeed wider society, we are socialized to encourage insecurity in the belief that it will generate fewer mistakes. As individuals’ defensiveness shows, it also discourages learning—the antithesis of the desired result—a condition that, in practice, reduces the skill of much decision making to little more than intuition, untested judgement, political expediency, subjective thinking, experimentation, and delay. Put differently, it is guesswork coupled with the ability to play the game of corporate politics well (Kransdorff, 2006). Business education should, surely, be designed to make decision making less uncertain and decidedly more professional.

The Cost of Forgetting To put a price tag on corporate forgetting is difficult but a team of U.S. academics has computed that project performance could be expected to retrogress to 52% of optimum output (Carlson & Rowe, 1976). In the United Kingdom, where low productivity is notoriously illustrated by the actual example of life imitating derision in Wakefield, West Yorkshire, where 16 workmen took nearly 4 months and £1,000 to change a light bulb in a street lamp and make its concrete post safe (The Sun, September 16, 2002). Alongside Proudfoot’s estimate of the cost of wasted productivity, cited earlier, a Capgemini research project found that British managers admitted that one in four of their decisions was wrong (one in three in the financial services sector; Capgemini, 2004); ironically these are outcomes that managers would likely not tolerate among their vocational subordinates. These performances suggest that the cost of experiential nonlearning in most countries outranks many of the other areas of

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managerial dysfunction in the workplace and should, therefore, attract more academic and workplace attention. The relationship between productivity and decision making is explicit, and it is pertinent to ask the following deeply discomforting question of the 5-decades-old system that purports to groom the inheritors (although started in the late 1800s in the United States, business schools only came into wider service in the 1960s): namely, that if business education is supposed to help managers sell their employers’ wares more efficiently, how is it that managers in the 1950s and 1960s achieved higher productivity growth scores without any formal business education? (See Figure 1; Groningen Growth and Development Centre and The Conference Board, 2004.) Figure 1. OECD’s productivity growth 1950–2003 %-age annual average growth 4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 1950–1960 1960–1970 1970–1980 1980–1990 1990–2000 2000–2003 Source : Groningen Growth and Development Centre and The Conference Board, Total Economy Database, August 2004, http://www.ggdc.net.

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In terms of productivity, the United States has held the top position for much of the 20th century and, even today, is far ahead of the Organisation for Economic Cooperation and Development (OECD) pack by a significant margin. With a few exceptions (mainly the countries that have come up from a low productivity base), the rest are mostly struggling to inch ahead. The inside story across the board, including the United States, is one of declining annual growth rates, indicating that the developed world is quickly running out of steam. It is useful to understand the difference between productivity and productivity growth. Productivity is the output produced per unit of labor, usually reported as output per hour worked or output per employee. Productivity growth is the increase in output not attributable to growth inputs such as labor, capital, and natural resources and it is driven by technological advances and/or improvements in efficiency. Over the long term, productivity improvements are the main contributor to rising living standards, otherwise called wealth. When productivity growth declines, the ability to compete weakens. When it falls into the red, it means that businesses are getting less than added value from their endeavors; new investment in many areas makes little sense and margins become increasingly difficult to achieve. For productivity growth, the average figures for 2000 to 2004—a period of marked global growth—showed that, among OECD countries, Italy, Luxembourg, Holland, Spain, and Switzerland had moved into negative territory (see Figure 2; Groningen Growth and Development Centre and The Conference Board, 2004). The significance of these statistics is that this was the first time in modern industrial history that the productivity momentum had reversed among so many developed economies at the same time and with so many others in stalling mode. In the multifaceted world of productivity, this untrumpeted collapse is a late warning sign of systemic trouble for developed-world industry and commerce. It is now also an eleventh-hour alert that has been threatening for decades, with all remedial measures giving the patients only provisional respite. In recent years management emphasis has been to maximize the efficiency of capital investment, specifically in technology. These tactics, however, have now virtually played themselves out. Workers employed in making and moving things accounted for a near majority of employees

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1950–1960

Switzerland

Italy

Luxembourg

Spain

1980–1990

Netherlands

1970–1980

OECD Average

1960–1970

Source: Groningen Growth and Development Centre and The Conference Board, Total Economy Database, August 2004, http://www.ggdc.net

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

% Average annual growth rate

Figure 2. Productivity growth not sustained

1990–2000

-2.0%

-1.0%

0.0%

1.0%

2.0%

2000–2003

1990–2000

2000–2003

L

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in the 1960s, whereas they now number less than one-fifth of the typical workforce, meaning that there are now too few employees in such jobs for their productivity to be decisive (Drucker, 1991). Employee numbers have been squeezed to the point where the human element of doing business has seemingly become almost mechanical. Interest rates in many developed economies may have come down from the high levels of the early 1990s but the capital factor is now so big that providers are demanding shorter-term returns. And although technology improvements look endless, the initial momentum that it provided for savings is ebbing quickly. The responsibility for productivity and productivity growth is traditionally ascribed to workers, or more precisely to workers’ apparent lack of skills. In reality, though, their skill base has never been higher, opening up the more credible alternative that it is managers who are not giving full value to their employers. The way they are making their determinations is conferring little upside potential, which means that it is the decision makers who are leaving experience-poor competitors to step into the developed world’s experience-rich shoes. Exactly as Japan did in the 1960s and as the so-called BRICK countries—Brazil, Russia, India, China (especially), and Korea—are threatening now. As their development demonstrates, their ability to experientially learn, especially from others, is remarkable.

Peter Drucker’s Challenge Although it might appear curious to point out the issue of productivity at a time when the standard of living has never been higher in many developed countries, its importance is not inconsequential. In a cutthroat global marketplace, productivity is the key to remaining competitive, an observation shown in the concern of management guru Peter Drucker when he described the urgency of the productivity challenge as “great. The country that does this first will dominate the twenty-first century economically. Unless this challenge is met, the developed world will face increasing social tensions, increasing polarization, increasing radicalization, possibly even class war” (Drucker, 1991). The noteworthy aspect about Drucker’s remarks is that they were made almost two

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decades ago, with progress in the productivity stakes since then making little headway. However defensive one is about business schools, the relevance and quality of established business education is in question. In the United Kingdom, the recent verdict in 2002 by the Council for Excellence in Management and Leadership is that “current management and business leadership development is a dysfunctional system” (Council for Excellence in Management and Leadership, 2002). And in the words of Stanford University’s Professor Jeffrey Pfeffer and Christina Fong’s same-year critical review of business education and its flagship degree: “Possessing an MBA neither guarantees business success nor prevents business failure” (Pfeffer & Fong, 2002). And for business academics James Bailey and C. Ford, “Business schools appeal to one another as scholarly communities through a plethora of academic journals that are utterly divorced from the challenges of everyday management” (Bailey & Ford, 1996). They contend that although a scientific approach may be useful for the study of management, it is not clear that it helps in teaching management: “The practice of management is best taught as a craft, rich in lessons derived from experience and oriented toward taking and responding to action” (Bailey & Ford, 1996). But, as H. J. Leavitt notes, “Business schools have been designed without practice fields” (Leavitt, 1989).

Productivity’s Top-Down Responsibility My own supplementary explanation is that modern business and business education thinks management is mostly about leadership, the instruction for which is typically to develop assertiveness, communication, employee motivation, and networking skills (Kransdorff, 2006). It is a subject that features highly in most curricula but not the key competence of decision making, which rarely appears as a dedicated subject. Alongside this, productivity is generally considered to be an operational issue for workface employees, whose skills need to be updated constantly to accommodate changing circumstances. In fact the onus for productivity is really management’s, for without better top-down decision making, any improvement in operational skills can easily get lost. Before skapegoating or upgrading subordinates, managers need to look to themselves to

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improve their own decision-making skills, which if Capgemini is right, are not giving full value to their employers (Capgemini, 2004). My conclusion is that business education is missing a huge opportunity by not better teaching the wider discipline of experiential learning, within which is buried the whole subject of OM. The criticisms of business teaching, including the MBA degree, go even further. For years business schools have been sidestepping industry’s preference for less theoretical instruction. In the United Kingdom the 1971 Owen Report into business schools voiced the tension between abstract and practical approaches to management (Advisory Panel on Management Education, 1971). A succession of other government and independent reports over the following two decades highlighted the continuing tug-of-war between practical and academic approaches, variously followed by initiatives such as the introduction of part-time or modular MBA programs and MBA courses for specific industries or organizations; the arrival of business instruction in hybrid institutions, such as polytechnics and colleges; and the imposed increase in levels of work experience prior to the commencement of the MBA (Constable & McCormick, 1992; Handy, 1987). In my view what appears to have happened is that industry pressure for more practice in the curriculum (exactly what experiential learning could bring to the table) was misinterpreted as a plea to raise entry qualifications and make existing business education more widely available. Few business schools saw it as direct criticism of the way in which they taught the business of business.

RAMBO: The MBA Alternative In fact, Henry Mintzberg’s disenchantment with wider business instruction led to his pioneering what has been dubbed the anti-MBA or the Real-Alternative MBA (RAMBO); its detractors describe it as a feminine RAMBO. With the help of the United Kingdom’s Lancaster University, he launched his International Master’s in Practising Management (IMPM) in 1996 to encouraging managers to become more reflective, which is, of course, the essence of experiential learning. The approach concentrates on the complexity of real managerial and organizational problems rather than on specialized knowledge in subjects such as marketing or finance,

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with students studying issues from within their organizations rather than general case studies. Alongside Lancaster University, IMPM has been introduced at McGill University in Canada, originally the Institut Européen d’Administration des Affaires (INSEAD) in France; the Indian Institute of Management in Bangalore, India; and with a group of academics from Hitotsubashi University, Kobe University, and the Advanced Institute of Science and Technology in Japan. In the IMPM, all students must be practicing managers and all must be sponsored by their companies, which include Alcan Aluminum Ltd., AstraZeneca PLC, Deutche Lufthansa, the International Federation of the Red Cross and Red Crescent Societies, Matsushita Communication Industrial Co. Ltd., Motorola, and the Royal Bank of Canada. Their collective penetration is still small and while it addresses the institutional-specific aspect of decision making by in-situ managers, IMPM (like action learning) does not deal with the issues of prior practice—the evidence of which has dissipated through corporate amnesia.

Familiarity, Exemplars, and Lessons When especially crafted as management tools, history—or OM and its coworker, experiential learning—provides several important elements in the unavailable educational mix (Kransdorff, 2006). First, they give individuals an inheritance and a familiarity of business that they would not otherwise acquire, qualities that would furnish employees with a head start in the life race that is their career. Secondly, these tools provide role models, which as entertainment and sports have shown, are great motivators. More importantly, they would also give individuals the opportunity to learn the lessons of prior businesspeople and organizations, giving employers a much more valuable manpower resource that is prior experience. Whether it is familiarity, exemplars, or lessons, all have benefits that are huge. But how best can OM be injected into wide practice? Through industry associations, management consultancies, employer-based management training, or business education proper? It is my view that the management of OM and experiential learning should not be constrained to any one instructional route but is probably

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best slotted into the discipline of KM, which now has a keen academic and management training focus and which conveys a more worthy intellectual asset than history (Kransdorff, 2006). For the sake of the discipline’s credibility, the lead should come from academia, for which there are also huge untapped resources of scholarship, from validation to injecting improved psychological processes and methodology, and upgrading digital indexing for cross-reference purposes. However, if the mortar board cannot or will not do it, the lead should come from nonacademics or industry directly. Given another generic lesson of business history—the idea that supply is invariably demand led and most academics are notoriously not particularly proactive—perhaps it is the latter that has to lead the way.

David Kolb’s Contribution This might explain the irony of why the subject of experiential learning, however deafening its logic, is not widely accepted within traditional academic business disciplines. In fact its efficacy has been recognized for almost a century (see Chapter 4 of this volume), with the most modern proponents being David Kolb, professor of organizational behavior at Weatherhead School of Management at Case Western Reserve University, and his associate Roger Fry who have taken the concept to its most developed stage by integrating multiple epistemologies into a formal theory of learning (Kolb, 1984). The model incorporates identifying an experience or problem situation, a reflective phase within which the learner examines the experience and draws erudition from that reflection and a testing phase, within which the new insights or learning is integrated with the learner’s own conceptual framework and applied to a new problem situation or experience. Where their model falls short in the modern workplace is in the reflection phase, which is dependent on accurate memory recall. As Kantrow has pointed out, this is frequently missing while the flexible labor market has served to compound the deficit (Kantrow, 1984). As such, OM also has to be captured before it becomes mindless. To accommodate the business world and the current working environment, my continuous learning spiral incorporates three extra stages: an up-front planning component to schedule a budgeted action strategy, one that

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requires a capture element, and another that translates any erudition into a lessons audit. Like business history, it is in the United States that experiential learning’s designation as a curricula subject is most prevalent, but it is still hesitant, with its use imprecisely self-described as providing the “application of theory to a real-world business problem,” a depiction that I would guess still applies to only current practice (Business School Admission, 2003).2 Less than a third of the 25 top-ranked MBA business schools offer the stated subject as a teaching method. Within this, averages of just 15% of students partake in their courses. In contrast, as Stephen Brookfield has noted, conventional education’s more one-dimensional emphasis is still on nontacit data and information, or so-called explicit knowledge. The lessons of history are still mostly uncollected in any diligent way, untaught as a technique of improving decision making, unused, and for the most part, lost.

Give Business Historians Their Head If scholarly knowledge management is the preferred route, then into which branch of academia should the teaching of experiential learning fall? My view is that it should be business history, even though its specialists have been only marginally successful in promoting their own discipline in most geographical areas outside the United States and Japan. For one, they are probably the best qualified at giving OM the necessary credibility, and secondly, such historians have been looking for a more constructive role for their labors for years. For industry practitioners, this reassignment should not have to displace archivists or librarians, who would still be required to maintain the institution’s records, but it would probably necessitate a new placement (a knowledge manager/director?) to oversee the efficient management of OM. For whoever takes on the role, there are a number of mindset issues to be aware of: • Because of the changed working environment, both academics and commerce/industry need to stop seeing knowledge as employee resident. Institutional revolving doors and musical

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•

•

•

• •

•

•

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chairs have given OM a fleeting character that prescribes value to the employer only if it is resident within the organization and available to itinerant employees to apply. Employers need to realize that supporting the flexible labor market at the same time as trying to reduce job turnover is like shouting into the wind. Better to deal with the inevitable discontinuity, corporate amnesia, and poor decision making separately. Academia and industry/commerce have to decide whether or not they really believe Henry Ford’s pronouncement that “history is more or less bunk” (it survives as one of the most often quoted aphorisms to debunk the subject; Chicago Tribune, 1916). If they agree, they need to explain why, for example, experienced employees are paid more than the inexperienced.3 OM and experiential learning have to be acknowledged as sensible management tools, with all parties more fully appreciating the close relationship between the evidence of precedent and better decision making. Organizations should realize that failure does not provide the only learning opportunity. Success can also be improved upon. To overcome innate managerial defensiveness about personal and corporate performance, employers need to encourage cultures that support objective reflection. Specifically, they need to see experiential learning as less of a threat and more of an opportunity by demonstrating a corporate maturity that extends beyond the defensive posture of the insecure. Industry/commerce should accept that higher productivity is as much an issue for management as it is for workface employees. In truth, high-skill employees are no substitute for poor decision making from above. The lessons of business and corporate history should not be the private musings of the elderly; ownership should be employerspecific, beginning with the next generation of managers. That way, the shortsighted will at last be able to listen to the longsighted.

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• If they are to lead the charge in experiential learning, academic knowledge management has to admit the wider definition of experiential learning into its orbit and historians have to also see themselves as knowledge practitioners. • Just as the detail of institutional-specific experience is essential to the preparation of conventional case studies, so too will it be central to experiential learning. As such, the device will need a continuing collaborative effort of business education and employers—arguably more than has existed in the past—if industry and commerce are to maximize the potential benefits. The bottom line is that if managers are not taught how to better benefit from their employer’s hindsight, the dialogue in one of English novelist J. L. Carr’s texts, “You have not had thirty years’ experience. You have had one year’s experience 30 times,” will continue to echo Robert Hayes’s cited observation about administrative nonlearning (Carr, 1972, p. 128; Hayes, 1984). To quote another academic, Professor Leslie Hannah, the United Kingdom’s first professor of business history, “History provides experience cheaply.” Or, if a real business person’s commentary is preferred, consider the words of J. G. Pleasants, a former vice president of Proctor & Gamble: “No company can afford the luxury of rediscovering its own prior knowledge. Understanding the company’s past can lead to adapting previous successes, avoiding old mistakes and gaining knowledge far beyond personal experience.”

The Rearview Mirror Analogy What they are all saying is that experience, its accurate recall and the ability to learn from one’s own employer’s OM is like the rear view mirror on a car. Without it, one has to continually crane one’s head to make navigational decisions. At best, drivers get themselves a stiff neck; at worse, they can have a fatal accident. Translated into business speak, their “lesson of history” is that in the world of continuous learning, OM is a factor of production that needs management, just like any other business asset. And the beauty of it is that the evidential base to allow all this to happen is close at hand. It is in the building, and it has already been paid for

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at great expense. All that has to be done is to capture it before it walks out of the front door and then inject it into managers’ decision-making processes. I have written two books on the subject, Corporate Amnesia and Corporate DNA (Kransdorff, 1998, 2006), that outline how to efficiently capture short-, medium-, and long-term OM and so allow institutions to retake ownership of their exiting knowledge and experience. The two underutilized formats that best suit the broader collection of institution-specific OM are corporate histories for long-term OM and oral debriefings for short- and medium-term OM. The former, constructed as a learning tool rather than for public relations, is more relevant to strategy and culture while the latter, the medium of narrative witness, is more applicable to operational issues and is ideal for capturing elusive tacit knowledge. In explaining the difference between explicit and tacit knowledge, the books also describe how to extract the latter component of OM from individuals, including a way of prechoosing the experiences from which to learn. Oral debriefings are otherwise called exit interviews and are traditionally only used to discover why employees leave.

Corporate History: “Only Good for Public Relations” Because the cooperation of subject companies is always necessary, the classic mindset that an organization’s history, or its long-term memory, is only good enough for public relations has to be changed. The books I described earlier outline how business historians, whether academic or otherwise, could improve their presentation of long-term OM to make it more functional for both academia and industry, just one suggestion being for researchers, writers, and the subject institutions that fund them to collectively create a code of conduct to combat the associated difficulties of perceived lack of credibility. Alongside this, they also explain why history, a deeply unfashionable word in modern education, is important. In an attempt to sidestep this apparent disfavor, I generally refer to history as organizational memory or the institutional equivalent of personal DNA, an attempt to do for corporate and business history what redefining human resources (HR) did for personnel in the 1980s. The outlined tools support the universal

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paradigm of progress being incremental and learning being continuous but importantly familiarizes managers with the mutable character of decision making within an organizational context. Done well, both oral debriefings and corporate/management histories are portable, permanent, and superlative induction tools, and when constructed around the objective of illustrating lessons learned in an institutional-specific context, they give walkabout employees an illuminative and better evidential base from which to make better decisions. The outlined formats need skill but are not revolutionary (nor are they expensive), and when carried out imaginatively and professionally, they become extremely efficient repositories of knowledge and experience that can be easily passed down, indexed, cross-referenced, and finally applied. My two books also outline how to convert OM into better decision making by adapting the reflective models created by David Kolb and others to the modern workplace. For easy differentiation from other methodologies, I have called the model experience-based management (EBM). And just in case highly paid managers will not believe the evidence of their decision-making skills, Corporate DNA has an entire chapter that records how often organizations make mistakes, and specifically the same or similar mistakes. The explicit choice of organizations in the United States, the United Kingdom, New Zealand, South Africa, and Israel provides illustrative comparisons of a wide range of modern industry with relevance to most economies, the common theme being the disconnect between experiential learning and quality decision making.

Much Too Much Work Two reservations I often hear are that the discipline would overwhelm decision makers and, anyway, why would individuals cooperate when their tacit knowledge is their most negotiable personal asset? To answer the first concern, Capgemini points out that, on average, each “businesscritical” decision currently takes managers more than two weeks to make (Capgemini, 2004). If executives complain that this is insufficient, I tactfully suggest a good time-management course. As for the other concern, it needs to be explained that the type of knowledge required has already been paid for. All the employer is asking is that the experiences

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within their corporate context be explained. To overcome any misunderstanding and encourage generalized acceptance of the discipline, the organization needs to make this clear at the time of employment, even include it in contracts of employment. In my experience the exercise rarely becomes an issue if handled sensitively and couched in language that professes a genuine desire to learn from individuals’ experiences (Kransdorff, 2006). Imagine a classroom where students are taught how best to learn experientially from their future employers and a workplace where organizations provide their tried-and-tested experience in ways that allow their transient managers to make fewer poor decisions. In particular, picture the scene where the effort to improve decision making is not just focused on problems but on decision making as a whole. Then envisage management making similar incremental progress in their decision making as the modern building-block technicians of medicine and technology. Is there not a better way to cut waste, professionalize the decision-making process, and improve productivity and competitiveness? Penultimately, let me flag up one of Corporate DNA’s quoted bits of research that would confirm another rudimentary lesson of business history and the lost value of OM: For new initiatives to have the best chance of being favorably received, always make the case in terms of hard cash. According to Capgemini, the business-critical decisions that managers make in medium-size companies number an average of 20 every year (Capgemini, 2004). Then, keeping in mind the research that at least one in four of the decisions made by British managers was wrong, reduce by varying degrees the number of poor decisions that an average 33 decision makers per organization might make at a rate that Capgemini computes is worth an average of £3.4 million (US$6.9 million) per decision (Capgemini, 2004). An independent actuarial calculation would, I contend, make the more efficient management of OM and experiential learning a cheap investment, even if the decision-making improvement was small.

Filling the Educational Gaps The management of OM—where students are taught how best to learn from their future employer’s experiences and a workplace where the

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knowledge of prior usage, whether successful or unsuccessful, helps transient managers make fewer poor decisions—would fill the educational gaps cited by Bailey, Ford, Leavitt, and Brookfield. It would also improve the reflective approaches used in Revans’s action learning and Mintzberg’s IMPM, and confirm managers’ oft-repeated admission after the fact that hindsight is a wonderful thing. Quintessentially, decision making is important for all our living standards. The record shows that in business, this skill is wanting in some considerable measure. For it to get better, management instruction needs to be more receptive to the untapped benefits of hindsight, which is another way of “working smarter,” Peter Drucker’s catchphrase first coined by the American industrial engineer Frederick Winslow Taylor 125 years ago (Drucker, 1991). If experiential learning is not about working smarter, then mediocrity, nay decline, is surely a destiny that awaits. It is time for business academics to give employers—and for employers to demand—more polished diamonds.

Notes 1. Former president and CEO of New York–based Rockefeller & Co. and president of Marlboro. 2. The Business School Admission Web site is devoted to information needed to help students gain admission into top MBA programs. 3. Henry Ford’s affirmation of experience’s lack of authority took 8 days of cross-examination in a successful court case for libel against the Chicago Tribune, which had described him as an “anarchist” and “ignorant idealist.”

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