9- Estimating the Benefit from Organizational Learning

One of the poll questions I often ask participants in my KM workshops is “Estimate what percent of your total knowledge (now) came from your formal schooling.” Almost all answers are below 50%. The average hovers around 20%, depending on the ages of the participants. Then I ask “Where did the 80% come from?” Their answers reveal three major sources: learning from doing/working, learning from study/reflection and learning from interaction/sharing with others.

But the shocking thing is this: while so much resources, time, planning, systems and institutional support systems were spent to gain 20% of our knowledge, we got the remaining 80% largely without planning, without technology and without systems and institutions. Let us admit it: we gained the 80% quite informally and unconsciously. “Unconscious learning” happens to us most of the time! If our learning while doing/working had been systematic and deliberate, the percentage would have been greater – the rationale for organizational learning and knowledge sharing (OL/KS)!

The causal sequence goes like this:
Knowledge worker learns (often unconsciously) while working => Her knowledge and expertise grows => Her salary expectation (and also the market value of her expertise) increases => Increase in her prospective future incomes

Next, let us explore what indicative or order-of-magnitue economic value of OL/KS we would get. The logic of the computations below is based on NPV computations mentioned in the previous blog, and the same M&E (monitoring & evaluation) framework we had been using in the past several blogs:

Let us invent a reference case: A 40-year old knowledge worker, with 20 years of working experience and earning $120,000 a year. She is able to command this salary level based on her excellent 20 years of work experience and track record.

Assuming she looks forward to 25 more years of productive employment, an estimate of her human capital is the present value of her income stream over the next 25 years. Assuming a flat salary profile (a deliberate underestimate) to age 65, 10% of gross pay going to cost of basic human necessities, and a discount rate of 5% p.a. then her human capital is worth over $1.63 million today. If she acquired 80% (from the poll above) of her expertise through work experience over the last 20 years, then the 20-year unconscious OL/KS was worth $1.3 million. (The rest is the money value of her formal education.)

Assuming a straight-line learning curve, then at age 40 the annual or incremental value of her largely unconscious learning from doing/working is about $65,000. That is over 6 months worth of salary. (I can email my Excel work file to anyone interested to know the computation details). For every $4 she was paid by her employer, she gained $2 worth of unconscious learning from working!

If she, or better, if the entire organization shifts to a conscious OL/KS learning mode, how much would this figure increase compared to the unconscious learning-from-doing mode? Would learning and knowledge sharing increase by 20%? or 50%?

Let us take 50% for the sake of illustration. This means that conscious OL/KS adds another $1 worth of learning for every $4 paid by her employer. Then the yearly incremental value of conscious OL/KS to her would be equivalent to 3 months’ salary, and the yearly benefit of a mature programmatic OL/KS to an organization could be estimated at 3 times its monthly payroll (or $1 benefit for every $4 that goes to the payroll budget).

These are merely order-of-magnitude guesses (it is all guesswork really).

What do you think?

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