This can be a big mistake for organisations as it is based on two flawed premises:
1. Permanent resource is permanent
2. Knowledge management and retention just happens.
Our contention is that relying solely on permanent resource for knowledge management and continuity is a high-risk approach and that organisations need to use a group of trusted suppliers as part of their knowledge management strategy.
Knowledge and continuity are the lifeblood of organisations and failure to manage knowledge efficiently has a major impact on organisations.
The permanent resource myth
The most recent surveys carried out by various HR Consultancies show that whilst voluntary staff turnover has reduced during the last few recessionary years it is increasing back to traditional numbers, particularly in areas such as IT and Finance.
According to HR experts XpertHR this headline number is currently running at 9.3%, down from a pre-crisis level of around 17%. When retirement, redundancy and restructuring programmes are added in the current staff turnover levels are added to the voluntary figure the current average staff turnover across sectors and levels of seniority are just under 16% down from the norm a few years back of around 25%.
Are we likely to see turnover levels returning to normal? It certainly looks like it according to market research company GfK NOP which believes that ¼ of all employees are looking for a new job in the next year. It would be reasonable to assume that if people have been put off moving jobs through a lack lustre job market a pent up demand will flow through the job market as soon as confidence starts returning – as seems to be happening right now.
So, in hard times a Company's workface is completely replaced every 6 or so years and in normal times every 4 years. Of course the situation is slightly different in the telecoms and Finance sectors and crucially – with more senior roles.
We find this particularly with CxO roles. Our own experience is that around 30% of our list of just over 100 CxOs move jobs each year. We thought this might have been unique to the Telco and Finance sectors until we started digging. A survey by Janco Associates suggests that across all industries around 4 years is the normal time for a CIO to be in position.
Knowledge transfer just happens
Doesn't it? Every organisation is good at knowledge management, surely? Well no, unfortunately. We have lost count of the times where we have been working with clients and documentation for fairly recent 'legacy' systems and processes either doesn't exist, is out of date or has been archived to an unknown location. In fact we have thought that the definition of a legacy system for many organisations is one where knowledge transfer hasn't taken place effectively over the last few years.
For knowledge management to be effective, there needs to be knowledge systems and processes in place and they need to be kept in place. We believe that outside of professional services organisations effective knowledge management is extremely rare. A Knowledge Management organisation, called KM4Dev , recently carried out a survey where, amongst a whole heap of other findings, 67% of respondent Managers from large organisations felt that their knowledge management and retention was ineffective.
So if staff turnover is high and knowledge management is ineffective then just making sure that important stuff is done in-house might be no guarantee that organisations hold on to really important knowledge and capability.
How can suppliers play a part in mitigating the risks?
Professional services organisations tend to be very good at knowledge management. Most specialist firms and consultancies have processes and systems in place where all assignment work is retained, learnings and knowledge is stored.
If organisations pursue a policy of working with a small number of core suppliers – alongside internal staff then continuity of knowledge and capability can be managed far better than with a fully outsourced or fully in-sourced approach.
It is really a commonsense approach. If you fully outsource then you risk losing all your strategic knowledge and capability; if you fully insource then you are dependent on knowledge management that is likely to be ineffective and permanent staff that aren't really permanent. If you pursue a middle path building on long term relationships with suppliers alongside in house teams then all risks can be managed.
The key is to resist the knee jerk temptation to 'bring it all in-house'.