When tribal knowledge is a threat

AUG 20, 2014
"Knowledge is good” was the motto of fictional Faber College in the iconic 1978 film “Animal House.” Not even Delta Tau Chi troublemaker John Blutarsky could argue with the simple truth of the Faber motto, although he didn't acquire much of it during his seven years there. More than three decades later, we're not going to argue, either, except to say that while all knowledge is good, some kinds are better than others. Every company is made up of teams that, within established guidelines, devise their own methods of getting work done. These teams have deep insight into processes, as well as a wealth of technical and historical knowledge. This expertise, often acquired over many years, is known as “tribal knowledge.” In many ways, tribal knowledge is not only good but very good — a real asset to any business. After all, every company wants employees who have been around awhile, know what they're doing and get “it” done. However, an over-reliance on tribal knowledge can be harmful to the health of an organization, even one that has been humming along smoothly for years. That's because, although some teams have developed elaborate and efficient processes, those systems seldom are written down and are nearly impossible to audit. When team members leave, retire or move to other areas of the company, they take with them some of their tribal knowledge, leaving a hole that no one is equipped to fill.

ACUTE CHALLENGE

The challenge is especially acute within the highly regulated and quickly evolving world of financial services. One advisory firm I know has several billion dollars in assets under management and offices in multiple locations. It also gained a lot of new clients over the last few years. But the firm relied on just this type of tribal knowledge to run its operations, and discovered that many of its processes had become convoluted and outdated. Surprised, the firm struggled to grasp the extent to which it had become too dependent on tribal knowledge. To help its managers understand their situation, Forrester Consulting conducted a study on behalf of Xtrac Solutions, from which some stark conclusions can be drawn. Forrester surveyed 50 decision makers at U.S. financial companies with more than 500 employees. Among other questions, the survey asked respondents how they measure progress across seven critical financial process areas, including client account servicing, compliance testing, audits and financial operations. It found that a majority of firms have only a limited way of measuring progress or measure progress based largely on subjective assessment and tribal — rather than data-based — knowledge. Simply put, most financial services enterprises still rely too heavily on tribal knowledge to manage their critical finance and compliance processes.

THREE-STEP EXERCISE

A company can implement a three-step exercise to address the issue: 1. Assess process readiness. Start by asking some frank questions: Does the organization have a consistent approach to its most important processes? How much latitude do individual employees have to create their own workflow? If the short answers are “no,” and “a lot,” you are far from alone but in need of some help. 2. Pick one process to fix, and measure how it is currently done. Don't try to take on too much at once. The area you choose to address first should be one where you have a significant amount of organizational risk, such as new client integration. 3. Create an automated workflow. To the extent a process needs to be fixed, fix it. Then automate it by putting in place a workflow that captures best practices and makes every step in the process visible, documented and repeatable. Once a company has taken these steps, the challenge is to carry it forward across the most critical parts of the organization. Daniel R. Brownell is the president and chief executive of Xtrac Solutions, an independently operated company of Fidelity Investments.

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