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?

Here’s a common situation: your sales have flatlined in the last 2 years because you’re still doing business the same way you did when you first opened your doors 20 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 2 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 that describes 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 how you do business.

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 how 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 in organizational learning theory talk about 4 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 continuous learning community — a community of just 1. When an individual worker learns new skills or ideas, productivity and performance generally improve. To maximize the benefit of this individual learning to the organization, the worker who learns the new skill should share it with coworkers.

Otherwise, that skill leaves with the worker. If the employee moves on to another job, the new knowledge moves on with them, and the business is stuck in a cycle of retraining.

Group learning

Groups, or teams of employees, can also learn new skills together. When people spend the majority of their time collaborating with other coworkers, those teams tend to coordinate in such a way that they learn as a group.

In group learning, workers develop something that psychologists call “social psychological awareness.” This means that each person perceives themselves as a part of the group, and 1 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 1 of the doctors has experience with a particular medical problem, then they bring them into the surgery so the team can benefit from their expertise.

For many businesses that already encourage collaboration, this can be an excellent learning strategy to ensure a sound knowledge base stays within the organization.

Organizational learning

Wait, isn’t this entire article about organizational learning? Well, yes. Technically, all 4 of these communities of learning contribute to the organization as a whole. But this 1 type gets its own special designation.

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

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

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

An example of a company that uses organizational learning

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’s a form of systems thinking that 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 business as a whole has learned from this experience? Individual managers might have been the people to ask those “WHYs,” but they transferred the new 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 the most common learning strategy in franchises or large businesses with multiple locations.

Inter-organizational learning tends to blend group learning with the more management-led organizational learning process. For example, a franchise might learn how to operate their store by studying the franchise business model.

In fact, this learning process is sometimes referred to as “collaborative learning.” This learning strategy often offers a competitive advantage by retaining essential and unique company knowledge while ensuring overall operational standards are met.

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, an organization learning strategy is necessary if you want a competitive advantage and sustainable growth.

At no time in history has the business environment changed faster than it’s changing right now. The 21st century brought with it exciting new technology, changing the way people operate.

We rarely shop, drive, cook, learn, or communicate without some sort of digital assistance anymore. If you want your business to stay appealing to your customers, you must adapt to their new ways of doing things.

Organizational change isn’t just a “nice to have.” It’s an essential strategy for growth, retention, and customer experience. Let’s take a moment to consider the benefits of maintaining organizational knowledge from the 2022 LinkedIn Annual report:

• Upskilling often leads to promotions for employees, which leads to 2x higher retention — and fewer hiring costs
• Opportunities to learn and grow rank as the #1 factor for improving organizational culture
• 49% of executives are concerned that employees do not have the right skills

Learning about technology as an example

Consider how technology and norms around using it have rapidly transformed common business practices, and it’s easy to see why organizational knowledge and continuous learning are critical.

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.

Your organization’s leadership needs to continually learn in order to adapt to a changing environment.

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’s leadership 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 and business leaders can take to promote organizational learning as 1 of their organizational goals.

Create knowledge

The 1st step toward developing a strategic learning process is knowledge creation. Leadership 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.

Tapping into human relations is important — don’t just focus on hard numbers. Ask open-ended questions to employees, consultants, and customers to create a well-rounded knowledge base.

Retain the knowledge

Once human resources or 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 new organizational knowledge must be transferred from the individual community and into the organizational community as a whole.

Some methods for transferring information 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 how they purchase gaskets in the future.

Individuals can transfer knowledge to the organization

By using the new knowledge base to inform decision-making, design efficiency routines, and change processes, managers can transfer their individual knowledge to the organization as a whole.

Think of organizational learning as the comprehensive knowledge-sharing structure of the organization. Individual managers or groups of employees are all learners and can become assets. They share that information with the business, 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.

This article has been updated.