What Is Organizational Learning (And Why Is It Important?)

With a new emphasis on learning and development programs, it’s easy to focus on individual learning. But what is organizational learning?


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what is organizational learning?

Here’s a common situation: your sales have flatlined in the last two years because you’re still doing business the same way you did when you first opened your doors twenty years ago. Sound familiar? There’s something missing.

The sophisticated ideas and processes that you need to inject some life into your business can be summed up in two words: organizational learning. But what is organizational learning, and why does your business need to do it?

What Is Organizational Learning?

Organizational learning is a buzzword used to describe the process of transferring knowledge within an organization. As your business gains experience, it should improve over time. You, your team, and your organization should be creating a broad base of knowledge during this time, covering any and all topics that could improve the way you do business. For example, you should learn more about your ideal customer, or create more efficient processes for running your business.

In general, the experts talk about four different types of knowledge that exist and grow within an organization. They divide them up into “communities” of learning.

  • Individual
  • Group
  • Organizational
  • Inter-organizational

Individual Learning

Obviously, this is the smallest learning community– a community of just one. When an individual worker learns new skills or ideas, productivity and performance generally improve. In order to maximize the benefit of this individual learning to the organization, the worker who learns the new skill must share it with coworkers. Otherwise, that skill leaves with the worker. If the employee moves on to another job, the knowledge moves on with them, and the organization is stuck in place.

Group Learning

Groups, or teams of employees, can also learn new skills together. When people spend the majority of their time working on a team with specific coworkers, those teams tend to coordinate in such a way that they learn as a group. The group members develop something that psychologists call “social psychological awareness.” This means that each person perceives themselves as a part of the group, and one group member’s actions affect the group as a whole.

A good example is a team of surgeons. You’ve probably seen hospital dramas where a team of doctors work on a patient together. Everyone contributes ideas and solutions, they work on the surgery together, and they either save or lose the patient as a team. If one of the doctors has experience with a particular medical problem, then they bring it into the surgery so the team now has that experience, not just that one doctor.

Organizational Learning

Wait, isn’t this entire article about organizational learning? Well, yes. Technically, all four of these communities of learning contribute to the organization as a whole. But this one type gets its own special designation.

So what are we talking about here? Well, organizational learning is the organization’s process of gaining knowledge related to its function and using that knowledge to adapt to a changing environment and increase efficiency.

The organization as a whole needs to learn and adapt for long term success.

A great example of a company that employs organizational learning is Toyota. According to The Toyota Way by Jeffrey Liker (2004), this company looks at every problem as an opportunity to identify root causes and develop countermeasures. They use a method called “the five whys.” It goes like this:

  • There is a puddle of oil on the floor —-> Clean up the puddle.
  • WHY is there a puddle of oil on the floor? Because the machine is leaking oil. ——> Fix the machine.
  • WHY is the machine leaking oil? Because the gasket has deteriorated. ——> Replace the gasket.
  • WHY has the gasket deteriorated? Because we bought inferior gaskets. —–> Order different gaskets next time.
  • WHY did we buy those gaskets? Because we got a good price on them. —–> Change the purchasing guidelines.
  • WHY did we choose gaskets based on price rather than quality? Because we evaluate purchasing agents based on short-term cost savings. —-> Change our evaluation criteria.

Do you see how the organization as a whole has learned from this experience? Individual managers might have been the people to ask those “WHYs,” but they transferred the knowledge to their organization by changing policies and procedures based on what they learned.

Inter-organizational Learning

This is the broadest type of organizational learning, and it’s most common in franchises or large businesses with multiple locations. For example, a franchise might learn how to operate their store by studying the franchise business model.

Why Is Organizational Learning Important to Your Company?

So what’s so important about organizational learning anyway? Companies already do training and professional development. Isn’t that enough?

Sorry, boss, but no. If it’s not already clear from what we’ve discussed thus far, organizational learning is necessary if you want your business to compete in a changing environment.

This business environment is changing faster than ever. The twenty-first century brought with it exciting new technology, changing the way people operate.

At no time in history has the business environment changed faster than it’s changing right now. The twenty-first century brought with it exciting new technology, changing the way people oeprate. We rarely shop, drive, cook, learn, or communicate without some sort of digital assist anymore. If you want your business to stay appealing to your customers, you have to adapt to their new ways of doing things.

And not only have these new technologies changed the ways in which people do business, but the technologies themselves are constantly changing. So are the norms surrounding the use of those technologies.

Look at social media, for example. There was once a time when a business didn’t need an online presence at all. Then for a while, a simple website and email address were enough to be cutting edge. Then you needed social media accounts on Facebook and Twitter.

Next, it was important to share updates with your followers multiple times a day. Eventually, it wasn’t enough to tweet updates about your business, you had to ask engaging, personal questions of your followers and share your own stories as well.

A few years ago, experts warned against discussing politics or any polarizing issues online. Today, big companies get attention by taking a stand on issues or even making fun of politicians.

The bottom line is your organization needs to continually learn in order to adapt to a changing environment. It’s not enough for individuals within your organization to learn new skills. The organization as a whole needs to learn and adapt for long term success.

How Can Managers Promote Organizational Learning?

There are a number of steps managers can take to promote organizational learning.

Create knowledge

The first step toward learning is creating, or taking in, knowledge and information. Managers should constantly seek to uncover new knowledge about their business, customers, and environment. They can do this by conducting surveys, performing market analyses, networking with colleagues in their industry, and studying competitors.

Retain the knowledge

Once managers have created, or obtained the knowledge, they need a system for retaining it within the organization. It should be recorded or stored in a place where it will be accessible to other employees in the future. Many companies achieve this goal by using an intranet. (The organizational learning gurus would call these “knowledge management systems.”)

Transfer the knowledge

Finally, the knowledge must be transferred out of the individual community and into the organizational community as a whole. Some methods for transferring knowledge are simple, like conducting training or writing articles to share online. But it’s important to also use the information to inform your business processes.

Remember our Toyota example above? The managers who solved the problem of the leaky oil gasket didn’t just find out why the gasket was leaking. They used that information to change the way that they purchase gaskets in the future. By using knowledge to inform decision-making and change processes, managers can transfer their individual knowledge to the organization as a whole.

Think of organizational learning as the comprehensive knowledge structure of the organization. Individual managers or groups of employees learn something new. They share that knowledge with the organization, which then uses it to change its practices. This is how organizations adapt to a changing environment. And it’s how businesses thrive in the long term.


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