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 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.