Memory loss? Corporate knowledge and radical change
Nicholas J. Scalzo
An organization’s ability to collect, store and use knowledge it has generated through experience
can have important consequences for its performance. Storing and using stored knowledge
effectively can buffer the organization from the disruptive effects of turnover, facilitate
co-ordination, contribute to the development of innovative products, and may even serve to
rebuild an organization (Olivera, 2000, p. 811).
Seeking ways to keep their firms viable and sustain or enhance profitability, organizational
leaders are making changes in how their organizations are run, paying closer attention to
customer needs, and restructuring whole divisions and business lines. Many are using
voluntary early retirement options, and reductions in force to balance the ratio between the
work and staffing levels that may have grown to unprecedented levels during the late 1990s.
These initiatives have a direct impact on bottom-line expenses in the current and near-term
fiscal quarters. However, few leaders look at the long-term implications these initiatives will
have on their organization. Many times these initiatives create unintended problems.
One such problem is the loss of organizational memory (the knowledge and information from
the organization’s past which can be accessed and used for present and future
organizational activities). As long-tenured staffs begin to leave, they take with them their
knowledge, skills, and other valuable job-related information – components of the
organization’s memory that may become inaccessible to the organization. Additionally, this
loss may disrupt organizational memory systems as these components are part of
organizational knowledge that may be dispersed across actors, systems, and interactions in
organizations. Organizational leaders are realizing that more of what is valuable about how
to do the work resides in people’s heads. Olivera (2000) found turnover had an impact on
accessibility of the experiential knowledge within social networks. The organizational
knowledge literature posits the importance of knowledge to an organization’s ability to make
decisions, solve problems, meet competitive challenges, and ultimately be successful.
This case study was intended to expand our understanding of what happens to elements of
organizational memory systems during, and in the aftermath of, radical change initiatives (a
significant shift in structure, function, values, culture, strategy, power distribution, and
control systems). Specifically this study explored the tacit and explicit knowledge aspects of
organizational memory systems.
The impetus for this inquiry began with the events of September 11, 2001. With the terrorist
attacks and subsequent collapse of the World Trade Center towers, significant numbers of
employees were lost. One organization, the bond-trading firm Cantor-Fitzgerald, lost
approximately 700 employees, almost three quarters of its workforce. In a few hours,
successful organizations were catastrophically subjected to an event that violently
eliminated many of their physical and intellectual assets, creating a crisis of such
PAGE 60 j JOURNAL OF BUSINESS STRATEGY j VOL. 27 NO. 4 2006, pp. 60-69, Q Emerald Group Publishing Limited, ISSN 0275-6668 DOI 10.1108/02756660610677137
Nicholas J. Scalzo is based
at the Depository Trust and
New York, USA.
magnitude that their continued existence was questionable. How could these organizations
conduct business with many of their employees – along with the stored knowledge or
memory – gone?
Exogenous environmental factors where the environment overpowers the organization can
impose change on an organization. However, endogenous initiatives can also change the
conditions for survival. For example, relocating a significant part of a business to remote
locations, voluntary early retirements, reductions in force, restructuring, and other initiatives
can significantly change how work is done.
The primary research question for the study was, what happens to organizational memory
systems when radical organizational change occurs? Related research questions were:
B What aspects of organizational memory systems are accessed as an organization
undergoes radical change?
B What aspects of organizational memory systems are accessed in the aftermath of radical
B How is tacit knowledge accessed and shared as an organization undergoes radical
B How is tacit and explicit organizational knowledge accessed and shared in the aftermath
of radical change?
The conceptual framework for this study involved two constructs – radical organizational
change and organizational memory. Radical organizational change refers to a significant
shift in values, behavior, and how the organization performs the work required to meet
organizational needs. Radical change differs from routine changes experienced by
organizations in that routine change occurs through normal revisions or improvements to
work processes or efficiency initiatives over time. Radical change attempts to redefine the
organization’s structure, functions, values, culture, strategy, power distribution, and control
systems. Organizational memory is the knowledge and information from the organization’s
past, which can be accessed and used for present and future organizational activities.
Figure 1 shows the relationship between the two constructs, where radical organizational
change moderates organizational memory.
Organizational memory systems are defined as:
Sets of knowledge retention devices, such as people and documents, that collect, store and
provide access to the organization’s experience (Olivera, 2000, p. 815).
Figure 1 Radical organizational change and organizational memory
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Tacit knowledge is knowledge residing in the individual mind that is personal,
undocumented, learned through experience, intuitive, and difficult to articulate or codify.
Explicit knowledge is codified knowledge that can be put on paper, formulated in sentences,
or captured in drawings. Explicit knowledge can be found in files, notebooks, on
bookshelves, in computer databases and e-mails. Knowledge is important because people
in today’s organizations contribute to organizational success through their knowledge,
ideas, judgment, and collaboration. Employee knowledge that contributes to the formation
of organizational memory is needed in order for judgment in problem solving, idea
generation, and development of new products or services that lead to higher levels of
organizational performance. Becerra-Fernandez and Sabherwal (2001) view the knowledge
possessed individually and collectively by employees as perhaps the richest resource the
organization possesses. Effective knowledge management is a key to organizational
Until this study, research was limited to the impending loss of memory when one technical
expert retired from an organization or when a few people left an organization. Most
research does not take into account the impact of the loss of memory from many
individuals leaving concurrently. Even the literature that looks at the effects of radical
change neglects to focus on the impact on organizational memory when many individuals
leave concurrently. This study explored what happened when many people left the
The research was conducted in the operations division of a mid-sized financial services
organization with approximately 2,500 employees. This organization had undergone radical
organizational change (significant shifts in structure, functions, values, culture, strategy,
power distribution, and control systems) over a five-year period (1999-2004). Voluntary early
retirements, layoffs, and restructurings resulted in over 450 people in the operations division
leaving the organization.
Data collection and analysis methods
Three sources were used to collect the research data – individual interviews, observation,
and review of archival documentation. This ensured triangulation and contributed to the
trustworthiness of the research. All interviews were conducted at the research site, taped
and transcribed. The 16 interview participants all had deep knowledge of the organization’s
past and present structures, routines, processes, and culture. The second data collection
method was personal observations at more than 30 meetings and events (departmental staff
meetings, talent review meetings, employee survey results sessions, town halls, succession
planning meetings, business continuity meetings, six-sigma meetings and award
ceremonies, director and officer meetings) at the case study site. Observations took
place over a seven-month period (May-November 2004). Archival documentation in the form
of annual reports, employee and customer newsletters, organizational restructuring memos,
internal memos, announcements, industry articles, presentation and training material, and
results of past employee and customer surveys, produced between January 1999 and
November 2004, were used.
‘‘ As long-tenured staffs begin to leave, they take with them their knowledge, skills, and other valuable job-related information – components of the organization’s memory that may become inaccessible to the organization. ’’
PAGE 62 j JOURNAL OF BUSINESS STRATEGYj VOL. 27 NO. 4 2006
Nine themes emerged from the data:
1. Since the radical change initiatives began in 1999, leaders and managers at this
organization intentionally looked for ways to access the tacit knowledge that individual
employees possessed and convert it into explicit knowledge that could be shared and
retained. The leaders and managers used various forms of interaction to unfold tacit
knowledge and make it explicit.
2. People remained the primary source of information and knowledge during and after the
initiation of radical organizational change. Because of the staff reductions, the amount or
depth of expert knowledge and experience had decreased which caused people to seek
out multiple different staff members to obtain the information or knowledge required.
3. Use of internal and external social networks increased in the organization. Some social
networks had been disrupted; however, many of these social networks have regenerated
4. The increased use of computer-based information technologies increased.
5. Knowledge centers were created.
6. Other explicit or codified knowledge-retention devices – documents, manuals, internal
operating procedures, files, training manuals, etc. also flourished. Computer-based
information technologies, knowledge centers, and explicit knowledge retained in
documents and manuals have become more prolific and in many cases helped the
organization become more efficient.
7. Time to access information needed to solve problems increased. The number of
resources and length of time to obtain all the needed information and knowledge to solve
problems and make decisions in specialized situations has increased.
8. While there was some loss of specialized, historical, or experiential knowledge, the
organization was not handicapped. The data showed that a solid base of information and
knowledge still exists in the organization. There has been some loss of specialized,
historical knowledge because of people leaving or being transferred to other areas, but
according to the interview respondents and people in attendance at meetings and events
observed, the loss has not had any material impact on organizational performance or
9. Some of the knowledge lost was obsolete. The data show that some knowledge was in
decay, obsolete, and no longer needed by the organization. Archival documentation
reviewed for this study shows organizational performance and effectiveness is strong. In
fact, according to financial documents in the annual reports, the organization is more
efficient and profitable than in its history.
Conclusions and recommendations
This study provides organizational leaders, human resource practitioners, and scholars with
a greater understanding of how knowledge is accessed, shared, and retained when an
organization experiences radical change.
What happens to the tacit and explicit knowledge aspects of organizational memory
systems (OMS) during, and in the aftermath, of radical change? The OMS morphs – it takes
‘‘ Radical change attempts to redefine the organization’s structure, functions, values, culture, strategy, power distribution, and control systems. ’’
VOL. 27 NO. 4 2006 jJOURNAL OF BUSINESS STRATEGYj PAGE 63
on a new shape. The OMS components (individual people, social networks,
computer-based information technologies, knowledge centers, and other knowledge
retention devices) do not change. The OMS components that were used to access
information and knowledge while the organization was experiencing radical change are the
same ones in existence in the aftermath of the radical change initiatives. What has changed
is the degree or proportion of use of each of the components. For example, while social
networks were in use before, during, and after radical change initiatives, there was an
increase in the active use and frequency of social networks.
Moreover, the nature or makeup of organizational memory has changed as the organization
intentionally set out to specifically access and make more of the tacit knowledge explicit and
codified for use by the whole organization. In the aftermath of initiatives such as voluntary
retirement, layoffs and restructuring that resulted in the loss of many employees, the degree
of dependency on one component shifted to other components. The usual social
interactions or structurally coupled relationships were disrupted, changing the dynamics
and communicative action venues and patterns previously established. Using a puzzle
metaphor, Figure 2 illustrates how the configuration of OMS devices morphed in the
aftermath of radical organizational change.
As the organization was experiencing radical change, managers accessed tacit knowledge
through verbal communications and interaction by asking questions and bringing people
together to work on items, projects, or problems. Through the social interaction of working
together and the ensuing discussion, people became conscious of their tacit knowledge
and began to articulate this knowledge, thereby making it explicit to others.
Results of this study suggest that organizations undergoing radical organizational change
can successfully manage the process in order to retain the wealth of information and
knowledge that exists in the organizational memory. The findings showed that the subject
organization of this research study followed three key management practices throughout the
entire change process (ongoing communications, senior management commitment, and
planning) that enabled it to access, share, and retain its organizational memory while
undergoing radical change. These practices are reminiscent of Barnard’s (1938) Functions
of the Executive.
This is perhaps one of the more important aspects in the implementation of radical change
that helped maintain the organizational memory.
Use of clear, continuous, personal communication on a face-to-face or small group basis is one of
the primary characteristics of effective change programs (Goodman et al., 1996, p. 121).
Figure 2 Morphed OMS devices
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The findings demonstrate how constant communication can help an organization manage
change and the message about change so that the change and the rumors around it have
less of a negative impact on staff and customers.
The organization produced print materials on a regular schedule that kept people informed.
There was one publication devoted entirely to communicating what was happening with the
integration, the organization’s structure, merging of departments, the mission, vision, and
values. The publication talked about the culture, employee survey results, and action teams.
Progress was reported in each issue along with any new items of interest for employees. As
each change in structure was made, organizational change memos were issued to all
employees. These materials were provided to employees not just in print form but also using
computer-based information technology so they could be accessed from and retained in the
organizations’ memory for future use.
A regular publication to customers was also created and distributed detailing the
organization’s changes. Customers were notified of any changes that may affect how they
were served and who would serve them. New products and services were explained in the
publication. Information sessions were presented at industry conferences. Customer
surveys and focus groups were conducted to obtain feedback. These also became part of
the organizational memory system by being distributed and stored using the organizations’
computer-based information technology and knowledge center devices.
Senior management commitment
The chairman, senior management, and other members of management were strongly
committed to implementing changes and providing the resources necessary to prepare and
transform the organization. They were intimately involved in overseeing the staff reductions
in a way that would maintain the tacit and explicit knowledge aspects of the organizations’
memory through the implementation of cross-training initiatives and investment in training
designed to access, share, and store knowledge. They invested in delaying the departure of
individuals eligible for voluntary early retirement to ensure specialized knowledge was
transferred to others and became part of the organizational memory. This management team
invested heavily in the enhancement of the technology and knowledge centers necessary to
support the access, sharing, and retention of organizational memory.
Planning is another key lesson scholars and practitioners can take from this research study.
The organization planned each of the changes it was going to encounter. A transition team of
senior managers was put in place to purposely reflect upon and manage each step. They
were held accountable for meeting the deadlines and moving the ball forward. Where
responsibilities were changing, management planned the lead-time to make the switch.
Senior management put a great deal of thought and effort in the eventual reduction in staff
and took the precautions to ensure smooth transitions would be made. The organization
provided fair and equitable packages to displaced employees including outplacement
counseling, regardless of level. So that no department or unit would be caught short of
knowledge or expertise, due diligence was done prior to each staffing action. Where an
individual had specific knowledge valuable to the organization, that individual was held,
sometimes up to a year or more, until others could learn the job, function, or become part of
the individuals’ network. These actions provided purposeful access to and sharing of
experiential, historical, and specialized knowledge, which was then retained in the
‘‘ People remained the primary source of information and knowledge during and after the initiation of radical organizational change. ’’
VOL. 27 NO. 4 2006 jJOURNAL OF BUSINESS STRATEGYj PAGE 65
organizational memory system devices for future use by the organization. The result was
an organization that successfully managed radical change while retaining the relevant
Saving organizational memory
This research study did not seek to create or establish a new theory on memory. It sought to
understand what happens to organizational memory systems in an organization that is or has
undergone radical change initiatives. What was uncovered is different from what one would
expect from reading most of the literature that precedes this case study.
Much of the literature on memory, talks about the problems organizations had when people
left an organization and took the tacit knowledge they possessed with them. One study,
however, conducted by Casey (1994), showed that memory remained in the organization
even though there was a high turnover in staff. Similarly, in exploring this organization’s
experience, no one interviewed felt the loss had any detrimental impact to the operation or
that the knowledge that was lost caused the organization to ‘‘skip a beat.’’ And this was the
operations division of an organization that lost over 800 people in the past five years –
almost 25 percent of its staff. The findings showed that they did not lose much knowledge
when people left and the knowledge that did leave was not critical to the organization. The
organization has transformed itself from a ‘‘sleepy’’ industry utility to a fast moving, product
driven, customer-centric organization.
Additionally, management was persistent in its efforts to sustain organizational memory by
accessing tacit knowledge within the organization and, for the most part, codifying and
sharing or disseminating the knowledge within specific work units or departments and, in
some cases, making the knowledge explicit through documentation and training initiatives.
Preventing knowledge loss
Looking at these results causes one to wonder, how did this organization manage to lose
significant numbers of people and knowledge and have that loss have little or no impact on
the organization’s memory system? The answer lies in the industry type, degree of
automation, organizational forgetting, and planning for change.
Most of the literature discusses manufacturing, pharmaceutical, consulting, or
entrepreneurial organizations. This study examined a niche organization within the fast
paced securities industry. Trillions of dollars worth of trades are made every day and
processed at lightning speeds. The technology to handle those trades has to be cutting
edge and capable of handling ever-increasing peak volumes. Redundancy in system
capability is part of the infrastructure, and these duplicate systems function on real time. The
organizations in this industry are not the cottage industries of the past that manufacture and
sell automobiles, lumber products, airplane parts, household goods, or food products.
These organizations do not provide medical or drug research, social services, or
government services. These organizations are a totally different breed, and they are indeed
One area where they are different may be the number of people performing identical
functions. In the operations areas of the organizations that make up the industry (brokers,
dealers, money-center banks, exchanges, clearinghouses, and transfer agents) there are
many employees who perform the same function. A dividend area might have 30 or 40
people doing the exact same work, and a deposits area may have upward of 50 or 60 people
doing the exact same work. Work routines follow specific steps – there are specific
procedures to allocate dividend payments, process deposits, or handle a global corporate
action. The procedures for processing the work or transaction are the same each time,
whether the dividend payments are for a few million dollars on a regular day or for 5 to 6
billion dollars on a peak day. This may be one factor that explains why, when this
organization lost a portion of the staff performing the job, the loss of memory was
insignificant. A department may lose five people or more, but there are still 25, 35, 45, or 55
PAGE 66 j JOURNAL OF BUSINESS STRATEGYj VOL. 27 NO. 4 2006
still on the job, performing the same functions. The work is still being done – there are just
fewer people performing the job.
Degree of automation
Another key factor is automation. The financial and securities industries had the most risk as
the year 2000 approached. Many of the advances in automation and legacy systems can be
attributed to the potentially economic cataclysmic event of Y2K, which necessitated the
redesign or elimination of some legacy platforms and systems. To anticipate Y2K and to
mitigate risk, the organizations that make up the financial and securities industries spent
billions of dollars on computer system enhancements, hiring thousands of people to ensure
that the industry’s computer systems would be able to handle the change to Y2K. As a result,
many computer system programs that handled financial and settlement transactions were
updated with new capabilities or were totally rewritten. Each redesign, enhancement, or new
system created requires less manual intervention to process transactions. This creates less
need for people to manually process work and reduces the level of specialized or
experiential knowledge required to perform the job. ‘‘Automation has helped get around the
loss of a lot of people’’ one interviewee explained. Errors caused by variation are drastically
reduced, which in turn requires fewer people to conduct research and correct error
When information or knowledge is no longer valuable, retaining it can be counterproductive.
For example, suppose a team consists of only a few developers responsible for writing and
developing a computer program for a particular system. As new and better systems are
developed, the knowledge of the old system is no longer needed. As the developers of the
old system leave the organization with their expertise and specialized knowledge, there is no
loss to the organization – the old system had become obsolete and no longer served a
useful purpose to the organization or the industry. In cases such as this, specialized
historical knowledge and experience is lost, but since that specialized historical knowledge
and experience no longer has value to the organization, it matters not.
Another factor why the apparent loss of some knowledge, experience, or memory in this
organization’s case is not detrimental may be that some industry products and business
functions are in decay and are disappearing or already obsolete. Again, as the people
performing those antiquated processes leave, there is no longer any organizational value in
the historical knowledge, experience, or expertise that people performing those functions
possessed. The knowledge is no longer needed for the organization’s survival.
Planning for change
As mentioned earlier, the senior management team of this particular organization
purposefully planned its transformation from an industry utility to a product-driven,
customer-centric organization. Senior management took the time to comprehend and plan
the change initiatives that would impact people (the early retirements and layoffs, voluntary
severances, and restructuring of departments and business units) and anticipated the
impact on the operation and knowledge. For example, the lists of candidates eligible for the
early retirement were reviewed and the information, expertise, and knowledge that they
‘‘ Through the social interaction of working together and the ensuing discussion, people became conscious of their tacit knowledge and began to articulate this knowledge, thereby making it explicit to others. ’’
VOL. 27 NO. 4 2006 jJOURNAL OF BUSINESS STRATEGYj PAGE 67
possessed were assessed. In certain situations where expertise or knowledge was at risk,
the individual’s date for leaving the organization was extended.
For reduction in force, each individual targeted for reduction was reviewed from a due
diligence perspective. Questions were asked as to why a particular individual or group of
individuals were selected for reduction. The subjects’ knowledge and expertise were
assessed along with the impact to the unit or department. When restructuring departments,
an assessment was made to understand the impact that the action would have on the work
and to ensure that the right profile of staff was in place to perform the functions of the
department. These planning actions affirm that organizations that anticipate radical change
and implement ways to store and use knowledge effectively are better prepared to minimize
the negative effects of turnover.
Protention generates success and growth
Study results show that protention in thinking was a critical contributor to this organization’s
successful management of radical change and its ability to access, share, and retain
information and knowledge in organizational memory. In describing present-time
consciousness, Varela (2002) discusses protention, which has a future orientation and
consists of anticipations of what is yet to come. Organizational awareness requires
present-time consciousness. Data from interview respondents, archival documents, and
observation presented evidence of management awareness and future-oriented behaviors.
Consideration of time is important to organizational change. Croswell (1996) indicated that
time invested is a variable that influences the development of organizational memory and
subsequent organizational learning.
Organizational leaders took the time to plan for the changes, communicate with the staff, and
develop the resources needed to generate the explicit knowledge needed for the future of
the organization. This was accomplished through protention in thinking and an awareness of
Awareness . . . serves as a catalyst for planned change, transformational leadership, and
sustainable development (Croswell and Holliday, 2004).
Through awareness and protention in thinking, organizations can counterbalance the
potential negative effects of radical organizational change on organizational memory.
Implications for practice
This research provides information for practitioners who may be helping their organizations
transform through radical change and are concerned about the potential loss of information
and knowledge resident in organization memory systems. Organizations undergoing radical
change can successfully manage the process in order to mitigate the degree of loss and
retain the wealth of information and knowledge that exists in the organizational memory.
This case study points to some important practical lessons that may assist others as they
embark on radical change initiatives. The following actions can be taken to create a blueprint
or best practices for how to manage radical organizational change and preserve the tacit
and explicit knowledge aspects of organizational memory:
B Have a senior management team whose collective present-time consciousness is
oriented toward the future of the organization and who see the organization as generative
B Have a senior management team with strong commitment intentionally plan each aspect
of the radical change, considering and anticipating the impact that each action will have
on the organization and its people.
B Assess who possesses information or knowledge needed for the current and future
activities of the organization, and take actions to access, share, codify, and retain that
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B Establish formal apprentice or mentoring relationships and training initiatives to help
disseminate individual tacit knowledge among other individuals and convert the tacit
knowledge into explicit knowledge.
B Leverage automation systems to increase the use of computer-based information
technologies and knowledge centers.
B Use ongoing and frequent communications to manage expectations and keep
B Prepare business continuity programs that result in replication of process, procedures,
B Assess what information and knowledge has decayed, is obsolete, and ‘‘let it go.’’
Barnard, C.I. (1938), The Functions of the Executive, 13th ed., Harvard University Press, Cambridge,
Becerra-Fernandez, I. and Sabherwal, R. (2001), ‘‘Organizational knowledge management: a
contingency perspective’’, Journal of Management Information Systems, Vol. 18 No. 1, pp. 23-55.
Casey, A. (1994), Collective Memory in an Organization: Content, Structure and Process, The George
Washington University, Washington, DC.
Croswell, C.V. Jr (1996), ‘‘Organizational learning in nonprofit organizations: a description of the action
patterns of a professional association’s governing network and leadership role in turbulent times’’, UMI
Number: 9634624, UMI Dissertation Services, Ann Arbor, MI.
Croswell, C.V. Jr and Holliday, S.B. (2004), ‘‘The new science of awareness: triggering the emergence of
consciousness in living systems’’, The International Journal of Knowledge, Culture, and Change
Management, Vol. 4.
Goodman, M.B., Holihan, V.C. and Willis, K.E. (1996), ‘‘Communication and change: Effective change
communication is personal, global and continuous’’, Journal of Communication Management, Vol. 1
No. 2, pp. 115-33.
Olivera, F. (2000), ‘‘Memory systems in organizations: an empirical investigation of mechanisms for
knowledge collection, storage, and access’’, Journal of Management Studies, Vol. 37 No. 6, pp. 811-32.
Varela, F.J. (2002), ‘‘Present-time consciousness’’, in Shear, J. (Ed.), The View from Within: First-person
Approaches to the Study of Consciousness, Imprint Academic, Bowling Green, OH.
About the author
Nicholas J. Scalzo earned his Doctorate at The George Washington University. His areas of expertise include organizational change, organizational memory, and team performance. He is a Director in Human Resources for the Depository Trust and Clearing Corporation (DTCC). This article is adapted from his dissertation, ‘‘Radical organizational change and organizational memory systems: a qualitative case study in tacit and explicit knowledge.’’ Nicholas J. Scalzo can be contacted at: [email protected]
VOL. 27 NO. 4 2006 jJOURNAL OF BUSINESS STRATEGYj PAGE 69
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