How to Avoid the Loss of Institutional Knowledge When Long-Time Employees Quit

“Everyone’s replaceable.” This is a truth that many people learn the hard way--even though their contributions to their employer may be vital, they themselves are not.

But just because an employer can replace an employee, this doesn’t mean that it’s always in the company's best interest. Replacing an employee is incredibly expensive: on average, the cost of replacing a worker is, at minimum, 30 percent of that employee’s annual salary. This number increases depending on the type, level, or tenure of the employee in question.

Replacing an administrative employee can cost between 50 to 80 percent of the position’s annual salary; replacing a manager-level employee can exceed 100 percent of the employee’s annual salary. Included in these estimates are both separation costs (severance pay, unemployment insurance claims costs, etc.) and replacement costs (time and money spent recruiting a new employee).

More concerning, however, is the cost of replacing all the knowledge employees take with them when they leave. Think about it. The amount of institutional knowledge a long-time employee (one with 10+ years of service) has accumulated, both in terms of industry expertise and understanding of their employer’s processes and procedures, is invaluable. When tenured employees leave an organization, companies often experience what feels like a “knowledge vacuum,” which can leave the employees who remain and the employee’s replacement scrambling to fill the gaps.

How to Avoid the Loss of Institutional Knowledge

So what can employers do to avoid the vacuum?

1. Make Documenting Processes an Ongoing Priority

Employees who have been in the same role for years are usually so well-versed in their job functions they can perform them without ever needing to consult a manual or process guideline. They've also likely developed shortcuts that allow them to do their jobs more quickly and efficiently. This is a great thing for employers because it means these staff members are operating at their peak productivity levels. The problem, however, is that these process improvements and shortcuts aren’t usually recorded anywhere besides the employee’s memory.

To avoid losing all of this information, employers should consider making periodic documentation or process updates part of employees’ job descriptions, and providing standardized templates for employees to use to record the information. Doing so ensures that new employees are provided with current and accurate manuals that they can use while they learn their new positions, making for a more gradual learning curve.

2. Encourage Collaboration and Cross-Training

Employers who strive to create an environment that fosters collaboration, coworking, and cross-training usually have an easier time facilitating the transfer of knowledge from experienced to newer employees. Some companies accomplish this through formal mentoring or shadowing programs, while others focus instead on creating opportunities for employees to work on special projects with tenured employees.

3. Keep Tabs on Who Might Be Leaving Soon

Knowing the makeup of the employee population is key to effective workforce management. First and foremost, employers should always be aware of which employees are approaching retirement and begin thinking about how they will cope with that eventuality well before the day those workers become eligible for retirement. Depending on the level an employee is in within the organization, employers may want to plan even further out, using strategies like succession planning.

But retirement isn’t the only reason long-time employees leave a company, which brings us to our last strategy for avoiding the loss of institutional knowledge.

4. Make Sure Your Long-Tenured Employees Feel Valued

The number one reason Americans leave their jobs is because they don’t feel appreciated by their employers. This is especially true for employees who have been with their companies for years and years. In addition to providing opportunities for employees to move up within the company, employers should make a point to recognize work anniversaries and other milestones with special incentives or celebrations.

Preparing for and preventing a knowledge vacuum takes time and effort, but it’s much better than the alternative: having to start from scratch with a new employee.

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