The True Cost of Employee Turnover: Tribal Knowledge Loss

Gallup data shows 60% of millennials are open to new job opportunities, which is 15% more than other generations.

Imagine this scenario. You run a business. Information about processes, sensitive information and department manuals sporadically vanishes. Employees look for answers, but they’re not even sure what went missing.

It sounds like a hack, data breach, or catastrophic IT failure. But this situation is far more common and just as damaging.

It’s the impact of employees leaving. Turnover.

And without a system of proper documentation, training, succession planning and onboarding - the resulting loss of tribal knowledge can do long-term damage to any small business or large corporation.

Here’s why the loss of tribal knowledge is so pervasive, and how the available solutions that use technology and methodology fall short. 

The Bane of Our Existence

It’s hard to wrap this issue with a financial figure or conduct a study. But some studies have looked at the cost of ineffective knowledge systems. One approach for this is to calculate what it costs when employees must spend time looking for answers they need. International Data Corp. (IDC) did this and estimated the average enterprise wastes $2.5 to $3.5 million per year due to ineffective knowledge systems. They based this on the cost of employing 1,000 workers who search for nonexistent information, fail to find existing information, or recreate information that can’t be found. The same report estimated the opportunity cost for this spectacular misuse of time, noting the total would cost roughly $300,000 per week, equivalent to the annual salary of a top-end Wall Street trader. 

Instead of estimations, let’s review how prevalent the problem is. The knowledge loss issue is unbiased when it comes to industry, company size and existing systems. 

Sales - Whenever the top salesperson leaves a company, a portion of sustained company revenue leaves with them. There’s no incentive for sales reps to mentor others or document their success strategies. A drop in sales will occur until other reps (new or existing) decode the formula. 

Tech - Developers have a deep understanding of how a product or business works so their departure is that much more worrying. This creates serious delays and stumbles as everyone picks up the pieces. When Anthony Levandowski was fired from Google’s self-driving car team only to launch a similar project at Uber, an IP lawsuit ensued which is the legal side of knowledge loss and protection. 

Restaurants - Employee turnover is the biggest problem for restaurants, with the National Restaurant Industry reporting a 73% turnover rate for all employees in 2017. Service industry managers are lucky to get exit interviews, let alone a thorough transfer of knowledge.   

Federal Government - The Office of Personnel Management (OPM) cited retaining knowledge as their top priority in their 2018 federal workforce report. They cite the need for a succession plan to utilize a multi-generational pipeline (but fail to provide actionable guidance).

Security & Exchange Commission - The Inspector General’s office published a report about the SEC in 2018 which addressed their challenges with human capital management. Succession plans, and issues relating to competency and skills gaps were covered. All of which relate to institutional knowledge retention. 

Emergency Medical Services - The Journal of Emergency Medical Services cited several examples of knowledge loss in police, fire and EMT departments. The journal estimates 20 years of knowledge is lost when a leadership position is forced to resign because of an intolerable workload. It takes years for  departments to recover. 

Brain Drain and Job Hopping

Knowledge loss has become a trending issue because of two factors. The baby boomer generation is approaching mass retirement, and the millennial generation has a different mindset on the ideal career path. 

Baby boomers (those born between 1946 and 1964) are said to be retiring at a rate of 10,000 per day until 2030. This has social and economic implications, notably the amount of jobs opening up without information being properly transferred. More than 40% of baby boomers have worked for the same company for at least 20 consecutive years. The goal for baby boomers is job retention and pension collection. Meanwhile millennials have found the best way to elevate a career path is to job hop instead of waiting for a promotion. 

Companies have began addressing this pending retirement issue by offering “phased” retirements, so retirees work part-time as they transition out of the company. However, this can be troublesome if part-time hours and lower salary factor into pension plans, healthcare, social security, benefits or profit-sharing. Additionally, many retirees won’t even get a phased retirement opportunity as the idea has fizzled in recent years. A 2019 retirement survey by Transamerica found the majority of employers are not offering flexible schedules (20%), full-time to part-time capability (19%), or a switch to a less demanding position (15%). 

Firms have started to prioritize flexible work policies, employee wellness and professional development programs to address the job hopping issue. Still, Gallup data shows 60% of millennials are open to new job opportunities, which is 15% more than other generations. 

The Knowledge Base Solution (Technology)

If you search for an answer to this problem, the common suggestion sounds perfect - create a knowledge base. A system for saving information, which makes things easy to find and is organized so it becomes a collective system of record for the entire business. This addresses the issue but introduces new challenges. First, what does a knowledge base mean to you? There are several interpretations and several problems with each: 

  • Storage - Tools like Google Drive and Dropbox are used to store documents, files and important information. 

    • Problem(s): These tools are great but can suffer from poor searchability and lack of standards for what to save and where.  

  • Project Management - Many employees expect to find what they need within their project management software. The major project management tools promote features like “Docs & Files” which allow document sharing and are used for storage and discovery. 

    • Problem(s): Some project management tools claim to be knowledge bases, others have built separate knowledge base tools (Atlassian with Asana and Confluence). This demonstrates the lack of clarity in these solutions, they are focused on collaboration with knowledge base capability as a toss-in afterthought. 

  • Chat & Email - Another group of employees will expect to find what they need in chat apps, or email. Chat tools have built integrations with storage tools to help with this, but relying on any chat tool for is not ideal. 

    • Problem(s): They’re designed for collaboration and communication, not information storage or retrieval. Workers often search for something specific in chat or email history only to not find it or realize it wasn’t documented.

  • All-In-One Tools - Certain tools from the categories above claim to be all-in-one solutions, they claim to immediately replace other systems already in place. This would be ideal but in practice it doesn’t work that way. 

    • Problem(s): For instance, in large enterprises there are so many teams with varying needs it’s unlikely there can be one tool to rule them all. Additionally, going all-in on an all-in-one tool fails to address management and employee morale issues that could be the real cause of the dysfunction and “we have too many tools” complaints. 

  • Wikis - Wiki tools make a lot sense for knowledge base purposes. After all, the Wikipedia we all know and love is an encyclopedia for everything. A business version of Wikipedia seems like it would solve knowledge loss issues. 

90-9-1 (1).png

90-9-1 Principle

Problem(s): Most wiki tools don’t prioritize great design so they’re prone to low usage. They’re also prone to a social phenomenon called the "90–9–1" principle. This means 1% of users create content, 9% of users edit/modify content while the remaining 90% solely view content. It’s easy to get team members to use a wiki tool to find information, but to get them to write and create information as needed is far more difficult.

Further, all of the tools above suffer from inconsistent workflows and the lack of knowledge discovery. Different teams have natural differences with how they implement and operate software. There’s a growing sector of workflow and process management vendors because of this issue. 

It’s also difficult to use these tools to find answers when teams are not sure of what they’re looking for. One of the most common knowledge base tools, Microsoft’s Sharepoint, has a list of possible issues that prevent search effectiveness. These include permission, indexing and content approval settings, view filtering, missing metadata and more. 

 The Writing Culture Solution (Methodology)

We know Google and Facebook have addressed knowledge loss related to turnover and other issues by creating campus-style offices where employees never have to leave. This is an impractical tactic for any non tech giant. The most relevant and practical method is to install a system of writing, reading and sharing. Amazon and their CEO, Jeff Bezos, is an excellent example of this. The billionaire completely overhauled meetings, outlawed PowerPoints and preserved information. 

The Amazon system set a rule that a long-form document must be written for any initiative, project, process and any business venture. Ask any former Amazonian (even the co-founder of Topple, also a Jeff) and they’ll say this has a huge impact on how Amazon is able to roll out thousands of product lines each year. And compete in so many different spaces beyond e-commerce. 

So, how do you go about applying this solution? There’s nothing built-in to existing software that can help with overhauling how your team communicates. But we know successful and innovative companies have created a writing culture. No matter the size of your organization or your industry, you should be able to apply this method for success with software. That’s why we created Topple, to solve your tribal knowledge problem.