One of the IT revolution’s first victims was the layer of middle management that essentially served as an “information filter.” Why pay $70,000 a year to somebody in Cleveland to track how many chocolate bars move in the Midwest region when an ERP system can link central information stores directly to a nation of cash registers?
Information technology: 1, old-school inefficiencies: 0.
But what about the knowledge that your regional distributor always tries to piggyback a few million of those awful pistachio bars onto your order? The five minutes a mid-level manager spends bargaining with a troublesome vendor may never show up on an inventory form, but it can dramatically affect your bottom line.
While next-generation businesses are on top of data that can be reduced to 1s and 0s, they are stumbling over the challenge of “institutional knowledge,” the intuitive and undocumented whys and hows that determine an enterprise's ultimate success. And the pressure is perhaps greatest in the IT and e-business arenas, where even the most venerable organizations are basically making it up as they go along.
“There are no data points to manage from.… By the time you’ve tested your assumptions, the assumptions have changed,” says TechRepublic CEO Tom Cottingham.
Tom, who chose the topic for this first-ever TechRepublic-moderated discussion, speaks from personal knowledge. Two years ago, TechRepublic was a start-up with about 20 team members, most of whom had previously worked together; today we are recruiting for our 200th employee and have offices on both coasts, as well as telecommuting managers and staff across the country.
How have we kept everybody on the same page? It hasn’t been easy, and like most fast-growing companies, we’ve embraced the wisdom that the only constant in our reality is change. But we have learned a few things along the way.
- In the new economy, your people replace your institutional knowledge. “Companies once were built so that an incompetent manager couldn’t do that much harm,” Tom says. “But that layer is gone now. Now, all your people have to make things happen in real time.… They are the ones who understand why the company works.”
- Institutional knowledge—and the authority to act on it—lives below the level of senior management. We’re still working through this one ourselves, but clearly a company’s top executives can’t be expected to understand every business process, even when there’s no formal record of those processes. “’Business Management’ is an oxymoron,” Tom says. “I think our (senior management’s) role now is much more to remove barriers at the tactical level.”
- “It’s ridiculous to think that you can teach entrepreneurial behavior.” This quote from Tom sums up perhaps the greatest dilemma presented by the new, fluid nature of institutional knowledge: Your people at ground zero are the ones who really know what makes the company tick, but these may not be the same team members who are inclined to challenge assumptions and look for new answers. Obviously, not everyone can think strategically all the time; nothing would ever get done.
So, how do you organize your team to make sure the people with the right institutional knowledge are equipped to turn that knowledge into results? Do you create an organizational chart with a small, visionary senior management team backed up by a broad spectrum of entrepreneurial junior managers with highly specialized roles in the company?
Or is the answer to build out more aggressive compensation and bonus plans further down the management chain to keep top performers closer to the action? And how do you continue to reward functional managers who keep the gears turning but don’t fit the model of a new economy entrepreneur?
Hey, if it were easy, the NASDAQ would still be at 5000!
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Ken Hardin is a freelance writer and business analyst with more than two decades in technology media and product development. Before founding his own consultancy, Clarity Answers LLC, Ken was a member of the start-up team and an executive with TechRepublic.com and ITBusinessEdge.com.