The Loss Of Institutional Knowledge: What Organizations Lose Everytime An Employee Leaves

In the current business landscape, organizations have gotten used to the departure of valuable talent either by resignation or other means, and regardless of the efforts made by workplace leaders, employees are bound to always leave in search of better opportunities. This highlights the increasing importance of paying close attention to the institutional knowledge that is inevitably lost when employees resign.

Skill sets, expertise, and experience are crucial for a successful business, however, in order to adapt and innovate according to market demands, it is becoming increasingly vital to retain institutional knowledge. But what exactly is institutional knowledge, and why is it so important? 

You see, institutional knowledge refers to the combination of expertise, values, work processes, strategies, experiences, information, and data possessed by an organization’s employees. It represents the collective knowledge of the organization, its employees and also encompasses the vital information employees possess about their jobs and the organization, including their understanding of their responsibilities, key activities, collaborations required, and how to perform their tasks.

So when an experienced employee resigns or leaves the organization, they take their knowledge with them, leaving their remaining colleagues overwhelmed and facing challenges. As a result, these colleagues must now learn the responsibilities of the departing employee and figure out the best way to handle them. They may also need to make decisions that require specialized knowledge, such as maintaining quality standards and following specific processes, creating reports, etc, and in cases where there is no proper knowledge management documentation, they may become frustrated and struggle to perform these tasks effectively.

For organizations, there is a lot to lose with the departure of an experienced employee. Starting off with the significant costs involved in recruiting and training new hires, but more evidently, this can lead to a loss of processes and result in inexperienced individuals attempting tasks independently – potentially causing setbacks for the organization. Having mentioned that, below are some of the key setbacks organizations experience whenever an employee leaves:

1) Loss of productivity

High turnover rates result in the loss of experienced and trained personnel who understand the organization’s policies, goals, and their roles in achieving those goals. More often than not, this can lead to decreased employee productivity and overall organizational performance. Also, with new employees needing time to learn their roles, productivity drops significantly, especially in smaller organizations where individuals often handle multiple specialized roles.

2) Reduced employee morale

Whether organizations want to accept it or not, the departure of colleagues has a negative impact on employee morale, and the more frequent the resignations/terminations, the lower the overall confidence within the organization. As such, employees may wonder why there are so many resignations, leading to insecurity and decreased morale. Some may start looking for better opportunities elsewhere or assume that the organization is facing significant problems. 

3) Loss of institutional knowledge

Long-serving employees often possess valuable knowledge about the organization’s culture, clients, bosses, and effective strategies to work with colleagues. So in situations where they happen to leave, practical experience in products, strategies, processes, and customer needs are lost 

4) Training Costs

Irrespective of whether you hire highly experienced individuals or invest in up-skilling current employees, training expenses are unavoidable as they’re a significant investment that requires financial resources. With many employers focusing on training and development of employees as an incentive, the organization bears the loss in both money and time when an employee happens to leave before the organization reaps the reward of their investment

Conclusion

The departure of crucial talent and the accompanying loss of institutional knowledge are worrisome for organizations, especially as experienced employees are expected to keep leaving in the next few years. Therefore, every organization’s best strategy is to avoid the loss of institutional memory and remain on a path of expansion and growth.

At Reposebay, we can help you develop and execute the best talent strategy to preserve your institutional knowledge, so don’t hesitate to reach out to us in order to get everything HR handled for your business.

Organizational memory, like human memory, can either grow or deteriorate, therefore, developing a strategy to preserve institutional knowledge not only enhances short-term business resilience in the face of employee departures but also contributes to higher engagement and lower turnover, fostering long-term innovation and growth.