Which Situation Best Reflects the Concept of Free Enterprise

The Idea in Cursory

As we all know, to stay ahead of competitors, companies must constantly enhance the way they exercise business. Merely more performance-improvement programs fail than succeed. That’s because many managers don’t realize that sustainable comeback requires a commitment to learning.

Subsequently all, how can organizations answer creatively to new challenges (shifts in customer preferences, marketplace downturns) without first discovering something new—so altering the way they operate to reflect new insights? Without learning, companies echo former practices, make cosmetic changes, and produce brusque-lived improvements.

To transform your company into a learning organization, Garvin recommends mastering v activities:

• Solving bug systematically

• Experimenting with new approaches to work

• Learning from past experience

• Learning from other companies and from customers

• Transferring cognition throughout your organization

Woven into the fabric of your visitor’south daily operations, these activities aid your organization brand indelible improvements that interpret directly into measurable gains—including superior quality, amend delivery, and increased market share.

The Idea in Practise

Garvin offers these suggestions for mastering five organizational learning practices:

Solving Problems Systematically

Don’t try to solve problems past relying on gut instinct or assumptions. Instead, generate hypotheses, gather data to test your hypotheses, and apply statistical tools (such equally crusade-and-effect diagrams) to organize data and depict inferences.

Experimenting

Systematically search for and exam new noesis. Use
small experiments
to produce incremental gains in knowledge. For case, specialty glass manufacturer Corning experiments continually with various raw materials and new formulations to increment yields and provide better grades of glass.

Use
demonstration projects
to produce noesis you can use for systemwide changes. General Foods experimented with cocky-managing teams at its Topeka plant with the aim of adopting this arroyo across the company later on.

Learning from Past Feel

Review your successes and failures, identify lessons learned, and record those lessons in attainable forms.

Example:

Boeing compared the development processes of its 737 and 747 planes (models that had serious technical problems) to those of its 707 and 727 (2 profitable programs). It and so compiled a booklet of lessons learned. Several members of the learning team were afterward transferred to two start-up programs—the 757 and 767. They produced the most successful, error-complimentary launches in Boeing’southward history.

Learning from Others

Look outside your immediate environs to proceeds new perspectives. Consider these sources:

• Other companies.
  Identify best-practise organizations (even in other industries), utilize site visits and interviews to study how they become work done, and generate ideas for improving your own practices.

• Your customers.
  Meet regularly with customers to gather knowledge about products, competitors, consumers’ preferences, and the quality of your service. Also notice customers using your products, to identify problems and generate ideas for improvement.

Transferring Noesis

New knowledge carries maximum bear upon when it’southward shared broadly. To transfer cognition chop-chop and efficiently throughout your organization, move experts to different parts of the company—across divisions, departments, and facilities—and so they can share the wealth.

Example:

Time Life’south CEO shifted the president of the company’due south music segmentation (who had orchestrated years of rapid growth and high profits through innovative marketing) to the book partitioning, where profits were apartment because of continued reliance on traditional marketing concepts.

Continuous comeback programs are sprouting up all over as organizations strive to improve themselves and gain an edge. The topic list is long and varied, and sometimes information technology seems as though a program a month is needed just to continue up. Unfortunately, failed programs far outnumber successes, and comeback rates remain distressingly low. Why? Considering nigh companies accept failed to grasp a basic truth. Continuous improvement requires a delivery to learning.

How, later on all, tin an organization amend without first learning something new? Solving a trouble, introducing a product, and reengineering a procedure all crave seeing the earth in a new light and acting accordingly. In the absence of learning, companies—and individuals—simply repeat old practices. Change remains cosmetic, and improvements are either fortuitous or short-lived.

A few farsighted executives—Ray Stata of Analog Devices, Gordon Forward of Chaparral Steel, Paul Allaire of Xerox—accept recognized the link between learning and continuous improvement and have begun to refocus their companies around information technology. Scholars besides have jumped on the bandwagon, beating the drum for “learning organizations” and “knowledge-creating companies.” In rapidly changing businesses similar semiconductors and consumer electronics, these ideas are fast taking agree. Yet despite the encouraging signs, the topic in big office remains murky, confused, and difficult to penetrate.

Meaning, Direction, and Measurement

Scholars are partly to arraign. Their discussions of learning organizations have often been reverential and utopian, filled with near mystical terminology. Paradise, they would have you believe, is only effectually the corner. Peter Senge, who popularized learning organizations in his book
The Fifth Discipline,
described them every bit places “where people continually expand their capacity to create the results they truly want, where new and expansive patterns of thinking are nurtured, where collective aspiration is prepare complimentary, and where people are continually learning how to acquire together.”^one
To accomplish these ends, Senge suggested the apply of five “component technologies”: systems thinking, personal mastery, mental models, shared vision, and team learning. In a like spirit, Ikujiro Nonaka characterized knowledge-creating companies every bit places where “inventing new knowledge is not a specialized activeness…it is a style of behaving, indeed, a mode of being, in which everyone is a knowledge worker.”^two
Nonaka suggested that companies use metaphors and organizational redundancy to focus thinking, encourage dialogue, and make tacit, instinctively understood ideas explicit.

Sound idyllic? Absolutely. Desirable? Without question. Just does it provide a framework for action? Inappreciably. The recommendations are far likewise abstract, and likewise many questions remain unanswered. How, for example, will managers know when their companies take become learning organizations? What concrete changes in behavior are required? What policies and programs must be in identify? How do you get from here to there?

Well-nigh discussions of learning organizations finesse these issues. Their focus is high philosophy and grand themes, sweeping metaphors rather than the gritty details of exercise. Three critical problems are left unresolved; yet each is essential for effective implementation. Kickoff is the question of
pregnant. We need a plausible, well-grounded definition of learning organizations; information technology must exist actionable and piece of cake to utilise. Second is the question of
management. Nosotros need clearer guidelines for practice, filled with operational communication rather than loftier aspirations. And third is the question of
measurement. We need meliorate tools for assessing an arrangement’s rate and level of learning to ensure that gains take in fact been made.

Once these “iii Ms” are addressed, managers will take a firmer foundation for launching learning organizations. Without this groundwork, progress is unlikely, and for the simplest of reasons. For learning to become a meaningful corporate goal, information technology must first be understood.

What Is a Learning Organization?

Surprisingly, a clear definition of learning has proved to be elusive over the years. Organizational theorists have studied learning for a long time; the accompanying quotations advise that at that place is still considerable disagreement (run into the insert “Definitions of Organizational Learning”). Most scholars view organizational learning as a procedure that unfolds over time and link it with knowledge conquering and improved functioning. But they differ on other of import matters.

Scholars have proposed a variety of definitions of organizational learning. Hither is a pocket-size sample:

“Organizational learning means the process of improving actions through better cognition and understanding.” —C. Marlene Fiol and Marjorie A. Lyles, “Organizational Learning,”
Academy of Direction Review,
October 1985.

“An entity learns if, through its processing of data, the range of its potential behaviors is changed.” —George P. Huber, “Organizational Learning: The Contributing Processes and the Literatures,”
Arrangement Science,
February 1991.

“Organizations are seen as learning by encoding inferences from history into routines that guide beliefs.” —Barbara Levitt and James Yard. March, “Organizational Learning,”
American Review of Folklore,
Vol. xiv, 1988.

“Organizational learning is a process of detecting and correcting error.” —Chris Argyris, “Double Loop Learning in Organizations,”
Harvard Business Review,
September–October 1977.

“Organizational learning occurs through shared insights, knowledge, and mental models…[and] builds on by cognition and experience—that is, on retentivity.” —Ray Stata, “Organizational Learning—The Key to Management Innovation,”
Sloan Direction Review,
Spring 1989.

Some, for case, believe that behavioral change is required for learning; others insist that new means of thinking are enough. Some cite information processing equally the mechanism through which learning takes place; others propose shared insights, organizational routines, even memory. And some think that organizational learning is mutual, while others believe that flawed, cocky-serving interpretations are the norm.

How can we discern among this cacophony of voices yet build on before insights? As a first footstep, consider the following definition:

A learning organization is an system skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.

This definition begins with a elementary truth: new ideas are essential if learning is to take place. Sometimes they are created de novo, through flashes of insight or creativity; at other times they arrive from outside the organization or are communicated past knowledgeable insiders. Whatever their source, these ideas are the trigger for organizational improvement. But they cannot by themselves create a learning organization.
Without accompanying changes in the way that piece of work gets done, only the potential for improvement exists.

This is a surprisingly stringent test for it rules out a number of obvious candidates for learning organizations. Many universities fail to qualify, as do many consulting firms. Even General Motors, despite its contempo efforts to amend performance, is found wanting. All of these organizations have been effective at creating or acquiring new cognition but notably less successful in applying that cognition to their ain activities. Full quality management, for example, is now taught at many business concern schools, yet the number using it to guide their own decision making is very modest. Organizational consultants propose clients on social dynamics and small-grouping beliefs simply are notorious for their ain infighting and factionalism. And GM, with a few exceptions (like Saturn and NUMMI), has had trivial success in revamping its manufacturing practices, even though its managers are experts on lean manufacturing, JIT production, and the requirements for improved quality of work life.

Organizations that exercise laissez passer the definitional test—Honda, Corning, and Full general Electric come quickly to mind—have, by contrast, become proficient at translating new cognition into new means of behaving. These companies actively manage the learning procedure to ensure that it occurs by design rather than by adventure. Distinctive policies and practices are responsible for their success; they form the building blocks of learning organizations.

Building Blocks

Learning organizations are skilled at five main activities: systematic problem solving, experimentation with new approaches, learning from their ain feel and past history, learning from the experiences and best practices of others, and transferring knowledge quickly and efficiently throughout the organization. Each is accompanied by a distinctive mind-set, tool kit, and pattern of behavior. Many companies practise these activities to some degree. But few are consistently successful because they rely largely on happenstance and isolated examples. By creating systems and processes that support these activities and integrate them into the material of daily operations, companies can manage their learning more finer.

one. Systematic problem solving

This showtime action rests heavily on the philosophy and methods of the quality movement. Its underlying ideas, now widely accepted, include:

• Relying on the scientific method, rather than guesswork, for diagnosing problems (what Deming calls the “Plan, Do, Cheque, Act” wheel, and others refer to every bit “hypothesis-generating, hypothesis-testing” techniques).

• Insisting on data, rather than assumptions, as groundwork for decision making (what quality practitioners phone call “fact-based management”).

• Using simple statistical tools (histograms, Pareto charts, correlations, crusade-and-effect diagrams) to organize data and depict inferences.

Well-nigh grooming programs focus primarily on problem-solving techniques, using exercises and practical examples. These tools are relatively straightforward and easily communicated; the necessary mind-set, all the same, is more difficult to establish. Accuracy and precision are essential for learning. Employees must therefore become more disciplined in their thinking and more attentive to details. They must continually enquire, “How do we know that’south true?”, recognizing that close enough is not skilful enough if real learning is to take identify. They must push across obvious symptoms to assess underlying causes, often collecting evidence when conventional wisdom says it is unnecessary. Otherwise, the organization will remain a prisoner of “gut facts” and sloppy reasoning, and learning will be stifled.

Xerox has mastered this approach on a visitor-wide scale. In 1983, senior managers launched the company’south Leadership Through Quality initiative; since then, all employees have been trained in small-group activities and problem-solving techniques. Today a six-step process is used for virtually all decisions (see the insert “Xerox’s Problem-Solving Procedure”). Employees are provided with tools in 4 areas: generating ideas and collecting data (brainstorming, interviewing, surveying); reaching consensus (list reduction, rating forms, weighted voting); analyzing and displaying data (cause-and-effect diagrams, force-field analysis); and planning actions (flow charts, Gantt charts). They and then do these tools during training sessions that final several days. Training is presented in “family groups,” members of the same department or business-unit team, and the tools are practical to existent problems facing the grouping. The result of this process has been a mutual vocabulary and a consistent, companywide arroyo to problem solving. Once employees have been trained, they are expected to use the techniques at all meetings, and no topic is off-limits. When a loftier-level grouping was formed to review Xerox’s organizational construction and suggest alternatives, it employed the very aforementioned process and tools.³

2. Experimentation

This activity involves the systematic searching for and testing of new knowledge. Using the scientific method is essential, and there are obvious parallels to systematic problem solving. Only dissimilar problem solving, experimentation is ordinarily motivated by opportunity and expanding horizons, not by electric current difficulties. It takes ii main forms: ongoing programs and one-of-a-kind demonstration projects.

Ongoing programs
normally involve a continuing serial of minor experiments, designed to produce incremental gains in cognition. They are the mainstay of most continuous improvement programs and are especially common on the shop flooring. Corning, for instance, experiments continually with diverse raw materials and new formulations to increase yields and provide improve grades of glass. Allegheny Ludlum, a specialty steelmaker, regularly examines new rolling methods and improved technologies to raise productivity and reduce costs.

Successful ongoing programs share several characteristics. First, they work hard to ensure a steady flow of new ideas, even if they must exist imported from exterior the organization. Chaparral Steel sends its starting time-line supervisors on sabbaticals around the world, where they visit academic and industry leaders, develop an understanding of new piece of work practices and technologies, so bring what they’ve learned back to the visitor and use it to daily operations. In large part every bit a result of these initiatives, Chaparral is one of the five lowest cost steel plants in the world. GE’s Impact Program originally sent manufacturing managers to Nihon to written report factory innovations, such equally quality circles and kanban cards, and then employ them in their own organizations; today Europe is the destination, and productivity comeback practices the target. The plan is i reason GE has recorded productivity gains averaging nearly 5%
over the concluding four years.

Successful ongoing programs also require an incentive system that favors take chances taking. Employees must feel that the benefits of experimentation exceed the costs; otherwise, they will not participate. This creates a hard challenge for managers, who are trapped between two perilous extremes. They must maintain accountability and control over experiments without stifling creativity by unduly penalizing employees for failures. Allegheny Ludlum has perfected this juggling act: it keeps expensive, high-impact experiments off the scorecard used to evaluate managers but requires prior approvals from four senior vice presidents. The result has been a history of productivity improvements annually averaging 7%
to 8%.

Finally, ongoing programs need managers and employees who are trained in the skills required to perform and evaluate experiments. These skills are seldom intuitive and must normally exist learned. They cover a broad sweep: statistical methods, similar design of experiments, that efficiently compare a big number of alternatives; graphical techniques, similar process assay, that are essential for redesigning work flows; and inventiveness techniques, similar storyboarding and role playing, that go on novel ideas flowing. The well-nigh effective grooming programs are tightly focused and feature a small set of techniques tailored to employees’ needs. Training in design of experiments, for instance, is useful for manufacturing engineers, while inventiveness techniques are well suited to development groups.

Sit-in projects
are usually larger and more complex than ongoing experiments. They involve holistic, systemwide changes, introduced at a unmarried site, and are often undertaken with the goal of developing new organizational capabilities. Because these projects represent a sharp break from the past, they are usually designed from scratch, using a “clean slate” approach. General Foods’s Topeka establish, i of the first high-delivery work systems in this country, was a pioneering demonstration projection initiated to introduce the thought of self-managing teams and loftier levels of worker autonomy; a more recent example, designed to rethink small-car development, manufacturing, and sales, is GM’s Saturn Division.

Demonstration projects share a number of distinctive characteristics:

• They are unremarkably the get-go projects to embody principles and approaches that the organization hopes to prefer afterwards on a larger calibration. For this reason, they are more transitional efforts than endpoints and involve considerable “learning past doing.” Mid-class corrections are common.

• They implicitly establish policy guidelines and decision rules for afterward projects. Managers must therefore be sensitive to the precedents they are setting and must send stiff signals if they expect to establish new norms.

• They oftentimes encounter severe tests of delivery from employees who wish to see whether the rules have, in fact, changed.

• They are normally adult by strong multi-functional teams reporting straight to senior direction. (For projects targeting employee involvement or quality of piece of work life, teams should be multilevel besides.)

• They tend to have only limited impact on the residue of the organization if they are non accompanied by explicit strategies for transferring learning.

All of these characteristics appeared in a demonstration project launched past Copeland Corporation, a highly successful compressor manufacturer, in the mid-1970s. Matt Diggs, then the new CEO, wanted to transform the company’s arroyo to manufacturing. Previously, Copeland had machined and assembled all products in a single facility. Costs were high, and quality was marginal. The trouble, Diggs felt, was too much complexity.

At the outset, Diggs assigned a small, multifunctional team the job of designing a “focused factory” dedicated to a narrow, newly developed production line. The squad reported directly to Diggs and took 3 years to consummate its work. Initially, the project budget was
$ten million to
$12 million; that effigy was repeatedly revised as the team constitute, through experience and with Diggs’s prodding, that it could achieve dramatic improvements. The final investment, a total of
$30 1000000, yielded unanticipated breakthroughs in reliability testing, automatic tool adjustment, and programmable control. All were achieved through learning by doing.

The team prepare additional precedents during the plant’due south start-upward and early on operations. To dramatize the importance of quality, for instance, the quality manager was appointed second-in-command, a pregnant motion upward. The same reporting relationship was used at all subsequent plants. In add-on, Diggs urged the plant managing director to ramp upwardly slowly to total product and resist all efforts to proliferate products. These instructions were unusual at Copeland, where the marketing department normally ruled. Both directives were quickly tested; management held firm, and the implications were felt throughout the organization. Manufacturing’s stature improved, and the company as a whole recognized its competitive contribution. One observer commented, “Marketing had always run the company, so they couldn’t believe it. The change was visible at the highest levels, and information technology went downward hard.”

Once the first focused manufacturing plant was running smoothly—it seized 25%
of the market in two years and held its border in reliability for over a decade—Copeland built four more factories in quick succession. Diggs assigned members of the initial project to each factory’s design team to ensure that early learnings were non lost; these people subsequently rotated into operating assignments. Today focused factories remain the cornerstone of Copeland’s manufacturing strategy and a continuing source of its cost and quality advantages.

Whether they are demonstration projects like Copeland’southward or ongoing programs similar Allegheny Ludlum’s, all forms of experimentation seek the same end: moving from superficial knowledge to deep understanding. At its simplest, the distinction is between knowing how things are washed and knowing why they occur. Knowing how is partial knowledge; it is rooted in norms of behavior, standards of do, and settings of equipment. Knowing why is more fundamental: it captures underlying cause-and-effect relationships and accommodates exceptions, adaptations, and unforeseen events. The ability to command temperatures and pressures to marshal grains of silicon and form silicon steel is an example of knowing how; understanding the chemical and concrete process that produces the alignment is knowing why.

Further distinctions are possible, every bit the insert “Stages of Knowledge” suggests. Operating knowledge tin can be arrayed in a hierarchy, moving from express agreement and the ability to make few distinctions to more than complete understanding in which all contingencies are anticipated and controlled. In this context, experimentation and problem solving foster learning by pushing organizations up the bureaucracy, from lower to higher stages of knowledge.

Scholars have suggested that production and operating knowledge can exist classified systematically by level or stage of understanding. At the lowest levels of manufacturing knowledge, little is known other than the characteristics of a good production. Product remains an art, and at that place are few clearly articulated standards or rules. An example would be Stradivarius violins. Experts hold that they produce vastly superior sound, merely no 1 tin specify precisely how they were manufactured because skilled artisans were responsible. By dissimilarity, at the highest levels of manufacturing knowledge, all aspects of product are known and understood. All materials and processing variations are articulated and accounted for, with rules and procedures for every contingency. Here an example would be a “lights out,” fully automated factory that operates for many hours without any human intervention.

In total, this framework specifies viii stages of knowledge. From everyman to highest, they are:

ane. Recognizing prototypes (what is a expert product?).

2. Recognizing attributes inside prototypes (ability to define some conditions under which process gives expert output).

three. Discriminating among attributes (which attributes are important? Experts may differ about relevance of patterns; new operators are often trained through apprenticeships).

four. Measuring attributes (some key attributes are measured; measures may be qualitative and relative).

5. Locally controlling attributes (repeatable performance; process designed by expert, only technicians can perform information technology).

6. Recognizing and discriminating between contingencies (production procedure can exist mechanized and monitored manually).

vii. Controlling contingencies (process tin can exist automated).

8. Understanding procedures and decision-making contingencies (process is completely understood).

3. Learning from past feel

Companies must review their successes and failures, assess them systematically, and tape the lessons in a form that employees find open and attainable. One practiced has chosen this process the “Santayana Review,” citing the famous philosopher George Santayana, who coined the phrase “Those who cannot call back the by are condemned to repeat it.” Unfortunately, besides many managers today are indifferent, fifty-fifty hostile, to the past, and by failing to reflect on it, they let valuable knowledge escape.

A study of more than 150 new products concluded that “the noesis gained from failures [is] often instrumental in achieving subsequent successes… In the simplest terms, failure is the ultimate instructor.”⁴
IBM’s 360 computer series, for example, i of the most pop and profitable ever built, was based on the technology of the failed Stretch computer that preceded information technology. In this case, as in many others, learning occurred past chance rather than by careful planning. A few companies, still, have established processes that crave their managers to periodically think about the past and acquire from their mistakes.

Boeing did so immediately after its difficulties with the 737 and 747 plane programs. Both planes were introduced with much fanfare and also with serious problems. To ensure that the problems were not repeated, senior managers commissioned a high-level employee group, called Project Homework, to compare the development processes of the 737 and 747 with those of the 707 and 727, ii of the company’s virtually profitable planes. The group was asked to develop a fix of “lessons learned” that could be used on futurity projects. Afterwards working for three years, they produced hundreds of recommendations and an inch-thick booklet. Several members of the squad were then transferred to the 757 and 767 start-ups, and guided by feel, they produced the most successful, error-free launches in Boeing’s history.

Other companies have used a like retrospective approach. Like Boeing, Xerox studied its product development procedure, examining three troubled products in an attempt to sympathise why the visitor’s new business initiatives failed so oftentimes. Arthur D. Niggling, the consulting visitor, focused on its past successes. Senior management invited ADL consultants from effectually the world to a two-day “jamboree,” featuring booths and presentations documenting a wide range of the company’s most successful practices, publications, and techniques. British Petroleum went fifty-fifty further and established the post-project appraisal unit of measurement to review major investment projects, write up case studies, and derive lessons for planners that were and so incorporated into revisions of the company’south planning guidelines. A five-person unit reported to the board of directors and reviewed six projects annually. The bulk of the time was spent in the field interviewing managers.⁵
This type of review is now conducted regularly at the project level.

At the heart of this approach, ane expert has observed, “is a mind-set that…enables companies to recognize the value of productive failure as contrasted with unproductive success. A productive failure is ane that leads to insight, understanding, and thus an addition to the commonly held wisdom of the organisation. An unproductive success occurs when something goes well, but nobody knows how or why.”^half-dozen
IBM’s legendary founder, Thomas Watson, Sr., plain understood the stardom well. Company lore has it that a immature manager, after losing
$x million in a risky venture, was called into Watson’due south office. The young man, thoroughly intimidated, began by saying, “I judge yous desire my resignation.” Watson replied, “Y’all tin can’t be serious. We simply spent
$x million educating y’all.”

Fortunately, the learning process demand non be so expensive. Case studies and mail-project reviews like those of Xerox and British Petroleum tin be performed with little cost other than managers’ time. Companies can as well enlist the help of faculty and students at local colleges or universities; they bring fresh perspectives and view internships and case studies as opportunities to gain experience and increment their own learning. A few companies accept established computerized data banks to speed upwards the learning process. At Paul Revere Life Insurance, management requires all problem-solving teams to complete brusk registration forms describing their proposed projects if they promise to qualify for the company’s award plan. The company and so enters the forms into its computer system and tin can immediately retrieve a listing of other groups of people who take worked or are working on the topic, along with a contact person. Relevant feel is so merely a telephone phone call abroad.

4. Learning from others

Of course, not all learning comes from reflection and self-analysis. Sometimes the most powerful insights come up from looking outside one’s immediate environment to gain a new perspective. Aware managers know that even companies in completely unlike businesses can exist fertile sources of ideas and catalysts for creative thinking. At these organizations, enthusiastic borrowing is replacing the “not invented hither” syndrome. Milliken calls the process Sister, for “Steal Ideas Shamelessly”; the hypernym for it is benchmarking.

Co-ordinate to one expert, “benchmarking is an ongoing investigation and learning experience that ensures that best industry practices are uncovered, analyzed, adopted, and implemented.”⁷
The greatest benefits come from studying
practices,
the way that work gets done, rather than results, and from involving line managers in the process. Almost annihilation tin can be benchmarked. Xerox, the concept’southward creator, has applied it to billing, warehousing, and automated manufacturing. Milliken has been even more artistic: in an inspired moment, it benchmarked Xerox’s approach to benchmarking.

Unfortunately, there is still considerable confusion nearly the requirements for successful benchmarking. Benchmarking is not “industrial tourism,” a series of advertizing hoc visits to companies that take received favorable publicity or won quality awards. Rather, it is a disciplined process that begins with a thorough search to place best-practice organizations, continues with conscientious report of i’s own practices and performance, progresses through systematic site visits and interviews, and concludes with an analysis of results, evolution of recommendations, and implementation. While time-consuming, the procedure demand not be terribly expensive. AT&T’southward Benchmarking Group estimates that a moderate-sized project takes 4 to half dozen months and incurs out-of-pocket costs of
$20,000 (when personnel costs are included, the figure is three to four times college).

Benchmarking is i way of gaining an exterior perspective; another, equally fertile source of ideas is customers. Conversations with customers invariably stimulate learning; they are, later all, experts in what they practise. Customers can provide up-to-appointment product information, competitive comparisons, insights into changing preferences, and immediate feedback about service and patterns of use. And companies need these insights at all levels, from the executive suite to the store floor. At Motorola, members of the Operating and Policy Committee, including the CEO, meet personally and on a regular basis with customers. At Worthington Steel, all machine operators brand periodic, unescorted trips to customers’ factories to discuss their needs.

Sometimes customers tin’t articulate their needs or remember even the most recent problems they accept had with a product or service. If that’s the case, managers must notice them in activity. Xerox employs a number of anthropologists at its Palo Alto Research Eye to observe users of new document products in their offices. Digital Equipment has developed an interactive process called “contextual inquiry” that is used past software engineers to observe users of new technologies equally they become about their piece of work. Milliken has created “first-commitment teams” that back-trail the first shipment of all products; team members follow the product through the customer’s production process to see how it is used and so develop ideas for farther improvement.

Whatsoever the source of outside ideas, learning volition only occur in a receptive environment. Managers tin can’t be defensive and must be open up to criticism or bad news. This is a hard challenge, just it is essential for success. Companies that approach customers assuming that “we must exist right, they have to exist incorrect” or visit other organizations sure that “they can’t teach u.s. anything” seldom learn very much. Learning organizations, by contrast, cultivate the art of open, attentive listening.

five. Transferring knowledge

For learning to be more than a local matter, noesis must spread quickly and efficiently throughout the organization. Ideas bear maximum impact when they are shared broadly rather than held in a few hands. A variety of mechanisms spur this process, including written, oral, and visual reports, site visits and tours, personnel rotation programs, pedagogy and training programs, and standardization programs. Each has distinctive strengths and weaknesses.

Reports and tours are by far the about popular mediums. Reports serve many purposes: they summarize findings, provide checklists of dos and don’ts, and draw important processes and events. They comprehend a multitude of topics, from benchmarking studies to accounting conventions to newly discovered marketing techniques. Today written reports are often supplemented past videotapes, which offer greater immediacy and fidelity.

Tours are an as popular means of transferring noesis, peculiarly for large, multidivisional organizations with multiple sites. The most effective tours are tailored to unlike audiences and needs. To introduce its managers to the distinctive manufacturing practices of New United Motor Manufacturing Inc. (NUMMI), its joint venture with Toyota, General Motors adult a serial of specialized tours. Some were geared to upper and middle managers, while others were aimed at lower ranks. Each tour described the policies, practices, and systems that were almost relevant to that level of management.

Despite their popularity, reports and tours are relatively cumbersome means of transferring knowledge. The gritty details that lie behind complex management concepts are difficult to communicate secondhand. Absorbing facts by reading them or seeing them demonstrated is i thing; experiencing them personally is quite some other. As a leading cerebral scientist has observed, “It is very difficult to become knowledgeable in a passive mode. Actively experiencing something is considerably more valuable than having it described.”⁸
For this reason, personnel rotation programs are one of the most powerful methods of transferring knowledge.

In many organizations, expertise is held locally: in a particularly skilled computer technician, possibly, a savvy global brand director, or a division caput with a rail record of successful articulation ventures. Those in daily contact with these experts benefit enormously from their skills, but their field of influence is relatively narrow. Transferring them to unlike parts of the organization helps share the wealth. Transfers may be from division to sectionalisation, department to department, or facility to facility; they may involve senior, center, or first-level managers. A supervisor experienced in just-in-time production, for instance, might movement to another factory to employ the methods at that place, or a successful partition manager might transfer to a lagging segmentation to invigorate it with already proven ideas. The CEO of Fourth dimension Life used the latter approach when he shifted the president of the company’s music division, who had orchestrated several years of rapid growth and high profits through innovative marketing, to the presidency of the book partitioning, where profits were apartment because of continued reliance on traditional marketing concepts.

Line to staff transfers are another option. These are most effective when they let experienced managers to distill what they have learned and diffuse it beyond the visitor in the grade of new standards, policies, or preparation programs. Consider how PPG used just such a transfer to advance its homo resource practices around the concept of high-commitment work systems. In 1986, PPG constructed a new float-glass plant in Chehalis, Washington; it employed a radically new applied science likewise as innovations in human being resource management that were developed past the found managing director and his staff. All workers were organized into small, self-managing teams with responsibility for work assignments, scheduling, problem solving and improvement, and peer review. Afterward several years running the manufactory, the institute managing director was promoted to director of human resources for the entire glass group. Drawing on his experiences at Chehalis, he developed a training plan geared toward outset-level supervisors that taught the behaviors needed to manage employees in a participative, self-managing environment.

As the PPG example suggests, education and training programs are powerful tools for transferring knowledge. But for maximum effectiveness, they must be linked explicitly to implementation. All besides often, trainers assume that new noesis will be applied without taking concrete steps to ensure that trainees actually follow through. Seldom do trainers provide opportunities for practice, and few programs consciously promote the application of their teachings after employees accept returned to their jobs.

Xerox and GTE are exceptions. Equally noted earlier, when Xerox introduced problem-solving techniques to its employees in the 1980s, everyone, from the top to the bottom of the organization, was taught in minor departmental or divisional groups led past their immediate superior. After an introduction to concepts and techniques, each group applied what they learned to a existent-life work problem. In a similar spirit, GTE’s Quality: The Competitive Border program was offered to teams of business organization-unit presidents and the managers reporting to them. At the beginning of the 3-day form, each team received a request from a company officer to prepare a complete quality plan for their unit, based on the course concepts, within lx days. Discussion periods of two to three hours were set bated during the program and then that teams could begin working on their plans. Subsequently the teams submitted their reports, the company officers studied them, so the teams implemented them. This GTE programme produced dramatic improvements in quality, including a recent semifinalist spot in the Baldrige Awards.

The GTE case suggests another important guideline: cognition is more than likely to be transferred finer when the right incentives are in place. If employees know that their plans volition be evaluated and implemented—in other words, that their learning will be applied—progress is far more than likely. At about companies, the condition quo is well entrenched; only if managers and employees come across new ideas equally being in their own best interest will they have them gracefully. AT&T has adult a artistic arroyo that combines strong incentives with information sharing. Called the Chairman’s Quality Award (CQA), it is an internal quality competition modeled on the Baldrige prize but with an of import twist: awards are given not only for accented functioning (using the same 1,000-indicate scoring system every bit Baldrige) but also for improvements in scoring from the previous year. Gold, silver, and bronze Improvement Awards are given to units that take improved their scores 200, 150, and 100 points, respectively. These awards provide the incentive for modify. An accompanying Pockets of Excellence plan simplifies knowledge transfer. Every year, it identifies every unit of measurement within the company that has scored at least 60%
of the possible points in each award category and then publicizes the names of these units using written reports and electronic mail service.

Measuring Learning

Managers have long known that “if you can’t measure it, you lot can’t manage it.” This maxim is as true of learning as it is of whatsoever other corporate objective. Traditionally, the solution has been “learning curves” and “manufacturing progress functions.” Both concepts appointment back to the discovery, during the 1920s and 1930s, that the costs of airframe manufacturing fell predictably with increases in cumulative volume. These increases were viewed equally proxies for greater manufacturing cognition, and most early on studies examined their affect on the costs of straight labor. Afterward studies expanded the focus, looking at total manufacturing costs and the impact of feel in other industries, including shipbuilding, oil refining, and consumer electronics. Typically, learning rates were in the 80%
to 85%
range (significant that with a doubling of cumulative production, costs barbarous to 80%
to 85%
of their previous level), although in that location was wide variation.

Firms like the Boston Consulting Grouping raised these ideas to a college level in the 1970s. Drawing on the logic of learning curves, they argued that industries as a whole faced “experience curves,” costs and prices that fell by anticipated amounts as industries grew and their full product increased. With this observation, consultants suggested, came an iron law of contest. To enjoy the benefits of experience, companies would have to rapidly increase their product ahead of competitors to lower prices and gain market share.

Both learning and experience curves are still widely used, especially in the aerospace, defense, and electronics industries. Boeing, for instance, has established learning curves for every piece of work station in its assembly plant; they assist in monitoring productivity, determining work flows and staffing levels, and setting prices and profit margins on new airplanes. Feel curves are common in semiconductors and consumer electronics, where they are used to forecast industry costs and prices.

For companies hoping to become learning organizations, however, these measures are incomplete. They focus on simply a single measure out of output (cost or toll) and ignore learning that affects other competitive variables, like quality, delivery, or new product introductions. They suggest but one possible learning commuter (total product volumes) and ignore both the possibility of learning in mature industries, where output is flat, and the possibility that learning might be driven by other sources, such as new technology or the claiming posed past competing products. Possibly most of import, they tell usa little nigh the sources of learning or the levers of change.

Another measure has emerged in response to these concerns. Chosen the “half-life” curve, it was originally adult by Analog Devices, a leading semiconductor manufacturer, as a fashion of comparison internal improvement rates. A half-life curve measures the time it takes to achieve a fifty%
improvement in a specified performance measure out. When represented graphically, the performance measure (defect rates, on-time commitment, time to market) is plotted on the vertical axis, using a logarithmic calibration, and the fourth dimension scale (days, months, years) is plotted horizontally. Steeper slopes so correspond faster learning (see the insert “The One-half-Life Curve” for an illustration).

The logic is straightforward. Companies, divisions, or departments that take less time to improve must be learning faster than their peers. In the long run, their short learning cycles volition translate into superior performance. The fifty%
target is a measure of convenience; it was derived empirically from studies of successful comeback processes at a wide range of companies. One-half-life curves are also flexible. Dissimilar learning and experience curves, they work on any output measure, and they are not bars to costs or prices. In add-on, they are easy to operationalize, they provide a elementary measuring stick, and they permit for set comparison among groups.

Notwithstanding even half-life curves have an important weakness: they focus solely on results. Some types of knowledge take years to digest, with few visible changes in functioning for long periods. Creating a total quality culture, for instance, or developing new approaches to product development are difficult systemic changes. Because of their long gestation periods, half-life curves or whatsoever other measures focused solely on results are unlikely to capture any short-run learning that has occurred. A more comprehensive framework is needed to runway progress.

Organizational learning tin can usually exist traced through three overlapping stages. The showtime stride is cerebral. Members of the organization are exposed to new ideas, expand their knowledge, and brainstorm to think differently. The second stride is behavioral. Employees begin to internalize new insights and change their behavior. And the third footstep is performance improvement, with changes in beliefs leading to measurable improvements in results: superior quality, better delivery, increased market share, or other tangible gains. Because cerebral and behavioral changes typically precede improvements in operation, a complete learning inspect must include all three.

Surveys, questionnaires, and interviews are useful for this purpose. At the cerebral level, they would focus on attitudes and depth of understanding. Take employees truly understood the pregnant of self-direction and teamwork, or are the terms however unclear? At PPG, a squad of human resources experts periodically audits every manufacturing institute, including extensive interviews with shop-floor employees, to ensure that the concepts are well understood. Have new approaches to customer service been fully accepted? At its 1989 Worldwide Marketing Managers’ Coming together, Ford presented participants with a series of hypothetical situations in which customer complaints were in disharmonize with short-term dealer or visitor turn a profit goals and asked how they would respond. Surveys like these are the first step toward identifying changed attitudes and new ways of thinking.

To assess behavioral changes, surveys and questionnaires must be supplemented past direct observation. Here the proof is in the doing, and in that location is no substitute for seeing employees in action. Domino’s Pizza uses “mystery shoppers” to assess managers’ delivery to customer service at its individual stores; Fifty.L. Bean places telephone orders with its own operators to assess service levels. Other companies invite exterior consultants to visit, nourish meetings, observe employees in activeness, and then written report what they have learned. In many ways, this approach mirrors that of examiners for the Baldrige Honor, who make several-day site visits to semifinalists to see whether the companies’ deeds match the words on their applications.

Finally, a comprehensive learning audit also measures functioning. Half-life curves or other performance measures are essential for ensuring that cognitive and behavioral changes have actually produced results. Without them, companies would lack a rationale for investing in learning and the assurance that learning was serving the organization’southward ends.

First Steps

Learning organizations are non congenital overnight. Most successful examples are the products of carefully cultivated attitudes, commitments, and management processes that take accrued slowly and steadily over time. Still, some changes tin be made immediately. Any company that wishes to become a learning organization can begin by taking a few simple steps.

The outset step is to foster an environment that is conducive to learning. At that place must be time for reflection and analysis, to think most strategic plans, dissect client needs, assess current work systems, and invent new products. Learning is difficult when employees are harried or rushed; it tends to exist driven out by the pressures of the moment. Only if top management explicitly frees upward employees’ time for the purpose does learning occur with whatever frequency. That time will be doubly productive if employees possess the skills to use it wisely. Training in brainstorming, problem solving, evaluating experiments, and other cadre learning skills is therefore essential.

Another powerful lever is to open up boundaries and stimulate the substitution of ideas. Boundaries inhibit the flow of information; they go along individuals and groups isolated and reinforce preconceptions. Opening up boundaries, with conferences, meetings, and project teams, which either cross organizational levels or link the company and its customers and suppliers, ensures a fresh flow of ideas and the chance to consider competing perspectives. General Electrical CEO Jack Welch considers this to exist such a powerful stimulant of alter that he has fabricated “boundarylessness” a cornerstone of the company’s strategy for the 1990s.

In one case managers have established a more supportive, open environment, they can create learning forums. These are programs or events designed with explicit learning goals in mind, and they tin can take a variety of forms: strategic reviews, which examine the irresolute competitive environment and the company’south production portfolio, technology, and market positioning; systems audits, which review the health of big, cross-functional processes and delivery systems; internal benchmarking reports, which identify and compare all-time-in-class activities within the system; study missions, which are dispatched to leading organizations around the world to meliorate sympathize their performance and distinctive skills; and jamborees or symposiums, which join customers, suppliers, outside experts, or internal groups to share ideas and learn from one another. Each of these activities fosters learning by requiring employees to wrestle with new cognition and consider its implications. Each can likewise exist tailored to business needs. A consumer goods company, for example, might sponsor a study mission to Europe to acquire more nearly distribution methods inside the newly unified Common Market, while a high-engineering visitor might launch a systems audit to review its new product development process.

Together these efforts assistance to eliminate barriers that impede learning and brainstorm to motion learning college on the organizational calendar. They also suggest a subtle shift in focus, abroad from continuous improvement and toward a commitment to learning. Coupled with a ameliorate agreement of the “three Ms,” the meaning, management, and measurement of learning, this shift provides a solid foundation for building learning organizations.

References

ane. Peter M. Senge,
The Fifth Field of study
(New York: Doubleday, 1990), p. 1.

2. Ikujiro Nonaka, “The Knowledge-Creating Company,”
Harvard Business Review,
Nov–December 1991, p. 97.

3. Robert Howard, “The CEO as Organizational Builder: An Interview with Xerox’s Paul Allaire,”
Harvard Business Review,
September–Oct 1992, p. 106.

4. Modesto A. Maidique and Billie Jo Zirger, “The New Product Learning Cycle,”
Inquiry Policy,
Vol. 14, No. 6 (1985), pp. 299, 309.

v. Frank R. Gulliver, “Postal service-Project Appraisals Pay,”
Harvard Business Review,
March–April 1987, p. 128.

6. David Nadler, “Even Failures Tin Be Productive,”
New York Times,
April 23, 1989, Sec. 3, p. 3.

7. Robert C. Camp,
Benchmarking: The Search for Industry All-time Practices that Lead to Superior Operation
(Milwaukee: ASQC Quality Press, 1989), p. 12.

8. Roger Schank, with Peter Childers,
The Creative Mental attitude
(New York: Macmillan, 1988), p. 9.

ix. Ramchandran Jaikumar and Roger Bohn, “The Development of Intelligent Systems for Industrial Use: A Conceptual Framework,”
Research on Technological Innovation, Management and Policy,
Vol. 3 (1986), pp. 182–188.

A version of this commodity appeared in the July–August 1993 event of
Harvard Business Review.