By Steve Trautman March 19, 2013

Provide a Clear Cost-Benefit Analysis in Your Knowledge Transfer Strategy [KT Strategy Series, 7 of 9]

Posted by Steve Trautman on Mar 19, 2013 12:12:38 PM

Your knowledge transfer strategy should include a clear cost-benefit analysis for the change you want to make from your organization’s knowledge transfer status quo to a program that meets your defined expectations. The first step is to consider the costs of a change. Be sure to include the time your experts will spend transferring knowledge to their peers. This can be as little as a few hours per week but we’ve found that ignoring this reality causes problems when it is time to execute the strategy. There is also going to be some overhead for setting up the system, potentially using internal or external help. Then think about benefits. The cleanest way I have found to get at the benefits is to assess opportunities and threats to your business and then derive potential returns from there. The main goal of knowledge transfer is to manage talent and knowledge risks, including risks of failing in your current business or failing to take full advantage of growth opportunities. Your cost/benefit analysis should be informed by a thorough understanding of the impacts those risks could have on your business.

Here’s a few ways to think about threats in context of a knowledge transfer strategy:

ASSESSING THREATS

  • Losing an employee(s) with unique, critical knowledge: This is a clear and too-frequent threat. In my field we hear hundreds of these stories involving aging workers or unexpectedly departing experts. Just last month I took two calls: the first was from an executive who said she has an employee who is the hub of a $30 million business—and he just gave his notice; the second was from a company with an expert employee at the hub of a $100 million business who had already retired, and the organization had to claw him back. Neither company had a plan for retaining the unique knowledge of these nor any other critical employees except to keep those employees on board at whatever cost.

  • Rework and mistakes: How typical are instances of rework in a given team? Can you document past financial losses due to the actions of employees lacking necessary knowledge and skills held elsewhere in your workforce? If these instances are frequent, that’s a threat.

  • Attrition: Turnover due to underutilized talent or marginalized workers is also a threat. Consider one of the two calls I mentioned above: when I asked this HR executive who worked for a global manufacturer why she was losing a $30 million dollar employee, she answered, “I don’t think we managed him very well. I think he felt kind of like he was stuck in a corner in the way that he was working with us, and he wanted to play in a bigger venue.” Through knowledge transfer this talented employee could have been tuning up scores of peers to execute his approaches globally in a matter of weeks or months, not years or decades. He could have prepared others to take over his current role while the company groomed him for something bigger. Instead, he felt isolated and frustrated by his narrow role—and left. Another example I often see is marginalized Gen Y-ers among teams dominated by seasoned Boomers. Most Boomers would have no problem sharing their knowledge with Gen Y-ers—if only they were shown how and given clear direction. Instead, Boomers experience the generational gap and feel they “don’t get” Gen Y-ers. Talented but underutilized Gen Y-ers are not trusted with “real work” and eventually leave to pursue opportunities elsewhere. Then the costly cycle repeats.

  • Safety incidents: Reducing safety incidents is always a hot button issue. For example, the data for many of our clients show that new hires get hurt more often than their more experienced peers and methodical knowledge transfer can measurably reduce these numbers. Consider this estimated dollar loss in your threat analysis.

  • Unprepared workforce: New business, current contracts, and customer loyalty is threatened if a workforce is unprepared. My company is working with a multinational engineering and large project development firm whose clients have literally told them: “Make no mistake; we will be interviewing the project managers who will oversee our new installations to determine their readiness.” This manufacturer is contractually obligated to ramp up, maintain, and deliver a certain degree of talent to their client. If the skill level slips—even in the face of aggressive capacity increase—100s of millions in contracts are at risk.

  • Increased costs: This is a threat I’ve recently seen come up especially in relation to outsourcing. For example, we have clients who outsource large departments and significant work offshore because they had originally believed it would reduce costs. In actuality, their costs have just shifted. Lacking a reliable knowledge transfer system, these clients have spent years “transferring” responsibilities to their outsource partners only to find the partners still do not understand expectations and cannot work solo. Before coming to us, one client had been exhausting their most talented employees by sending them on planes overseas to put out fire after fire after fire. The lack of productivity wasted time and increased operational costs—not to mention skyrocketing travel budgets.

  • Cultural risks: This can take many forms, but here are some common ones: 1. Cultures that emphasize years on the job over knowing the right way to do the job. “I’ve been here 20 years. I have clout. (But I don’t know how to do this new work.)” vs. “I’ve been here 10 weeks. I’m the only one who knows the right way to do this new work. (But I have no clout.)” 2. Strongly embedded cultures that smother culture change—this can threaten any organization seeking to modernize, globalize, or make improvements to the way they operate. 3. Cultures that have emphasized a “multi-hat wearing employee,” but now have leadership asking workers to specialize, often because today’s technical jobs demand it. Employees can feel like power and responsibilities are being reduced and they’re being pigeon-holed, lowering morale and slowing the pace of change. And 4. Cultures and compensation structures that actually de-incentivize knowledge sharing (e.g. if employee paychecks and bonuses are tied wholly to billable hours, then any time spent mentoring peers means money of out an experienced employee’s pocket.) Your knowledge transfer strategy should state these and other cultural risks as you find them.

ASSESSING OPPORTUNITIES

Understanding threats is important, but you should also look beyond threats to opportunities. A good knowledge transfer program will not only mitigate potential productivity and financial losses, it also can introduce ways to add revenue:

  • Innovation: For example, Nike used our 3-Step Knowledge Transfer Solution to create an environment that fosters innovation in their global footwear development team by increasing behaviors that lead to breakthroughs. I discussed this in detail in a previous post, but in brief, Nike used knowledge transfer to identify the skills and behaviors of their most innovative developers and to replicate these among peers. In a sense, their knowledge transfer program was used to “teach” innovation.

  • Gen Y Recruitment & Retention: Knowledge transfer has the very real opportunity to make a company more attractive to talented workers in the Gen Y population. With a structured knowledge transfer program, recruiters can easily show Gen Y-ers how the organization will invest in their skill growth and expedite their onboarding. This way the Gen Y-er is doing interesting, meaningful work sooner and can see their growth trajectory. It makes an additional carrot to dangle during recruitment, and reduces attrition once hired.

  • Poaching Top Talent in the Marketplace: A lot of companies’ strategy for filling headcount is to send headhunters to their competitors. It’s a benefit to be able to say, “We have a contemporary knowledge transfer program that will allow you to bring your big brain here and replicate yourself so that you can have a bigger impact on our company than you’re having now. You’re sort of lying fallow where you live. We can be your fertile ground.”

  • Opportunities for new markets, customers and products: A biotech client of ours, Edwards Life Sciences, was in a stage in their product-to-market cycle where they were getting FDA approval on a new heart value and needed to very quickly put a lot of qualified clinical specialists into the field. These specialists would provide training to surgeons who needed to experience the new product and become comfortable with it before recommending it to others. At least one other competitor was trying to beat Edwards to market with a competing product. It was a classic race of first-to-market: the faster Edwards could get substantial numbers of qualified specialists into the marketplace, the faster they could increase revenue. And, if Edwards was out there training in force first, more surgeons would imprint on their product and recommend it—so not only would Edwards get near term revenue, but they would also be beating the competition from a loyalty perspective. In cases like these, the cost-benefit analysis can be as simple as: the knowledge transfer cost for adding one new specialist in terms of X employee hours weighed against the revenue that one new specialist is estimated to bring in a given number of months—which in this case was many times the knowledge transfer cost.

  • Scaling up production or capacity: Growing businesses face the classic scale question: can we scale and take on additional markets, expanded product lines, or more and larger projects? Knowledge transfer can increase workforce capacity and decreasing an employee’s ramp time to productivity. Several years back we implemented our knowledge transfer process with an accounting software developer and their C.O.O. explained the benefit this way: “Eighteen months ago, when we would hire employees into our consulting services group, we would essentially have to bring them in 9 – 12 months before they were able to fly solo and generate billable revenue. Today,…we’re able to break people in within 90 – 120 days. So we’re able to hire later and bill sooner, and ultimately that has a higher R.O.I.”

SUMMARY: Every knowledge transfer strategy should include a cost/benefit analysis. To make informed decisions about your knowledge transfer investment, be sure your analysis provides a thorough assessment of your threats, but don’t forget to include your opportunities.

Topics: Outsourcing, Workforce Risk Management, Knowledge Transfer Strategy, Innovation in a Workforce, Change Management, Generational Gaps/Differences, Skilled Worker Shortage, Onboarding, Aging Workers

Steve Trautman

Steve Trautman

Steve Trautman is corporate America’s leading talent risk management and knowledge transfer expert. With two decades of application inside blue chips and Fortune 1000s, his pioneering work in the field of talent risk management and related knowledge transfer tools are now the nationally-recognized gold standard. He is known for a high energy style that combines humor, street smarts, and board room wisdom.

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