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The knowing-doing gap: How smart companies turn knowledge into action

by Jeffrey Pfeffer and Robert I Sutton, Harvard Business School Press, 2000.

Abstract

Many organisations talk about the importance of learning, intellectual capital and knowledge management, but they often fail to take the next vital step of transforming knowledge into action. The paradox is that companies know too much and do too little. This book identifies the causes of the "knowing-doing gap" and shows how to close it. Firms that turn knowledge into action avoid the "smart talk trap" and use plans, meetings and presentations to inspire deeds, not as substitutes for action. They eliminate fear, abolish destructive internal competition, measure what matters, and promote leaders who understand the work people do in their firms.

(Summarised by Kevin Barham in December 2005)

(These book summaries aim to represent some of the key aspects of what the author has written. They do not necessarily represent the views of the summariser or of Ashridge. Equally the author of the book summarised must not be held responsible for any misperceptions of the summariser. A summary does not have space for all the illustrative cases which provide the richness of a book and there is no substitute for reading the whole book. There is an element of simplification in a summary so that the message may seem more obvious than it necessarily is, though the most powerful ideas are often simple and obvious in their essence.)

Introduction

The so-called knowledge advantage is a fallacy. So say Jeffrey Pfeffer and Robert Sutton (professors of organisational behaviour at Stanford University). It’s not that knowledge is not important. It’s that most companies know, or can know, the same things. They all talk about the importance of learning, intellectual capital and knowledge management, but many fail to take the next vital step of transforming knowledge into action. The paradox is that companies know too much and do too little.

Pfeffer and Sutton say they carried out the research on which this book is based to understand why so many managers seem to know so much about organisational performance, say so many smart things about it, and work so hard, but are often trapped in organisations that do so many things they know will undermine performance. Knowing what to do and being smart are not sufficient.

So what causes the "knowing-doing gap" and how can it be closed? The authors describe the major problems that create the gap and how they can be overcome. They include:

The common tendency for talk to be used as a substitute for action
The use of memory as a substitute for thinking
Allowing fear to prevent acting on knowledge
Inappropriate measurement systems
Destructive internal competition.

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Talk substitutes for action

Many organisations and managers would rather talk, conceptualise and rationalise about problems than confront them directly. In many organisations, people are more likely to get ahead by talking smart than doing smart and productive things. One of the main barriers to turning knowledge into action is the tendency to treat talking about something as equivalent to actually doing something about it. While talking about what to do may be a necessary first step toward taking action, it isn’t enough.

In some organisations, there seems to be an unspoken belief that once a decision has been taken, no additional work is needed to make sure it is implemented. It is as if talking makes things real. A decision, by itself, changes nothing however.

Decision-making is most likely to be used in lieu of action where there are few mechanisms to track the implementation of agreed-upon actions, when people like each other and disagreements are masked by public agreement, and where there is little sense of urgency because short-term earnings are acceptable.

An even worse problem occurs when managers act as if talking, writing and analysis are their main tasks. It is a particular problem in large organisations, especially where many senior managers are financially-oriented and out of touch with how work is done in their firms. Managers often devote a great deal of time to impressive presentations rather than spending time on the ground trying to learn about and improve work processes.

Preparing documents is another substitute for action. "Action" in some firms consists of meetings, conversations and the generation of reports. These often have little effect on implementing what the firm knows or turning knowledge into action. The authors point to Xerox Corporation’s TQM approach which bogged down in producing and discussing written documents. The Xerox case shows one way to overcome the tendency to substitute talk for action: Impose a real deadline with real measures.

Some firms use mission statements to substitute talk for action. While the authors believe that such statements can play a valuable role, they say there are too many organisations where having a mission or values statement written down is confused with implementing those values. Such organisations act as if going through the process of developing and publishing a statement is enough to help the firm perform better. Managers act as if these statements had magical powers. They sometimes ignore problems, even in the face of hard evidence, because they are inconsistent with the espoused mission and values.

People, too, frequently confuse planning and having a plan with implementing the plan and learning something. The authors found there is little connection between how much effort an organisation devotes to planning or how well it does planning and how well it performs. Planning can facilitate knowledge development and action but does not do so invariably and often does the opposite.

So why is so much emphasis placed on what people say and so little on what they do or enable others to do? Surely managers who enable things to get done will be better rewarded? In fact, the authors say, people who are all talk often receive more rewards than they deserve for a number of reasons:

People naturally form impressions of each other. It is a natural human tendency to assess and evaluate and managers must make recurring judgements as part of their work. We form our impressions of others based on how well they perform and contribute or by how smart they seem or sound. Often, the latter is the only data immediately to hand and smart talk is confused with good performance. It is easier to assess how smart people sound than how well they can manage, especially in large, complex organisations in which accomplishments may not be very visible.
Negative people often seem smarter. One of the best ways of sounding smart is to be critical of others’ ideas.
People who talk a lot often have more stature. Talk is often valued in organisations because people who say more are more likely to be judged by others as influential, high status or leaders. Talking more than others is a way to win the "conversational marketplace". People who want to get ahead in organisations often learn that what matters is sounding smart in front of their peers. Once people achieve high status, they are expected to talk even more. "Dominating the group’s air time" is a way to show they are in charge.
Some business schools and management consulting firms reinforce the view that prestige is achieved by winning in the "conversational marketplace", not by being best at turning smart ideas into organisational action. The essence of the education process is talk – learning how to sound smart in case discussions or to write smart things. At the end of the day, what many consultants provide is advice – talk – and only occasionally do they get involved in implementation.

The emphasis on talking smart and talking a lot reflects an unstated but widely held belief that smart talk happens now, smart actions happen later. Talk is valued because the quantity and quality of talk can be assessed immediately but judging leadership or management capability involves a time lag. Many organisations’ performance appraisal and career progression systems demand that managers appraise people more rapidly than they can reliably assess how well they are doing in terms of job performance. Some organisations also move people around before they have to suffer the consequences of their actions.

Another way to impress others is by using complex language and ideas – the "mystique of complexity". It is hard to explain what a complex idea means for action when you understand it and others don’t. On the other hand, people often use impressive sounding terms but don’t really understand what they mean. (The authors complain about "learning organisation", "balanced scorecard", and "chaos theory" among others). It is even worse when managers use complicated talk as a basis for designing organisational structures or work procedures.

The flawed logic behind all this is that competitive advantage is built by doing things that are difficult to imitate; that complex things by their nature are more difficult to imitate; and that competitive advantage is therefore built by doing complex things. There is a belief that simple prescriptions cannot possibly be of value because if they were useful, everyone would be doing them. The only rare things worth doing must be things that are rare because of their complexity.

This confuses ease of understanding with ease of implementation. Ideas like decentralisation, delegation of decision-making or treating people with respect and dignity are easy to understand but quite difficult to accomplish in practice.

Complexity interferes with turning knowledge into action because for knowledge to be implemented, usually it must be understood by large numbers of people dispersed in scattered locations. Simple, clear, logical principles can be communicated more readily and be more easily implemented in a consistent fashion than complex ones.

Organisations that avoid using talk as a substitute for action do one or more of the following:

Have career systems that promote people to senior leadership positions who have an intimate knowledge of the organisation’s work processes because they have performed them themselves and have grown up with the organisation.
Have a culture that values simplicity, common sense and clear, direct language and does not reward unnecessary complexity.
Use language that is action oriented and have follow up processes to ensure decisions are implemented. (General Electric’s Work-Out cultural transformation process as introduced by Jack Welch in 1989 is suggested as an excellent example.)
Do not accept excuses and criticisms for why things can’t be done, but rather reframe the objections into problems to be overcome rather than reasons why not to try. Organisations that turn knowledge into action have an urgency to do so.

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Memory as a substitute for action

Organisations that fail to implement performance knowledge often act as if the present were a perfect imitation of the past. The ways in which people are socialised, promoted and rewarded in organisations mean they soon act like imitations of their predecessors. They use memory as a substitute for thinking and often do what has always been done without reflecting – even when they realise they are confronted with a new problem.

Existing practices are rarely questioned or examined for their continuing validity. People who question old ways of doing things are often rebuked or ignored. A strong organisational memory can be a double-edged sword that can both produce and undermine performance.

Organisations become trapped by their history when the company has such a strong identity that anything new is viewed as being inconsistent with "who we are". There may be pressures to be consistent with past decisions, to avoid admitting mistakes, and to show perseverance.

People also have strong needs for "cognitive closure" – the desire for a firm answer to a question and aversion to ambiguity. They freeze on past knowledge and avoid evidence that questions what they believe – especially when they are tired or under time pressures, or when discomfort or fear make it difficult to process information.

People carry expectations from the past about what is and what is not possible, and what can and can’t be done, into the future. Organisations are also trapped when people make decisions based on precedent – on implicit, untested and inaccurate models of behaviour and performance. Because they are not surfaced or conscious, these cannot be refuted with data or logic.

One of the most powerful interventions to free people from the unconscious power of "implicit theory" is to make people think carefully about and surface the assumptions implicit in their practices.

The authors identify three ways in which organisations can avoid using memory as a substitute for action:

They can start a new organisation or subunit that is designed to have a distinctive character and to be free of the constraints and history of the parent organisation. This is the most reliable way but also the most expensive and requires great time and effort. (The example of GM’s Saturn division is described in some detail.) Starting a new subunit does not guarantee that a break from the past will occur and new organisations soon start their own precedents. Recruiting the right people into the new subunit is essential if the unit is going to operate differently.
Existing organisations can use dramatic means to make people aware of problems with doing things in old ways, make it difficult to use the old ways, and create new ways of doing things. There needs to be a sharp interruption in what people are doing, thinking and feeling – something happens to get their attention and convey that reliance on precedent is doing harm. Unless something occurs that makes it difficult to go back the old ways, they will cling even more tightly to what they have done in the past. This approach needs leaders who take the time to understand the work people do, who reduce status differences between themselves and other people in the organisation, and who create a feeling of shared fate.
Organisations can be built and managed so that their people constantly question precedent and resist developing automatic reliance on old ways of doing things. A rare example of this approach is AES, a global independent power producer, that has consciously pursued management practices designed to ensure that precedent never becomes too important and that people learn and try new things. These practices include radical decentralisation and giving people the opportunity to take on totally new activities for which they have little or no formal preparation. The latter is encouraged by the firm having virtually no central staff. The CEO believes that the more competent the central staff functions, the worse it is for the organisation as it makes the rest of the organisation too dependent on them – people closest to where the work is done will take less responsibility for that work.

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Fear prevents acting on knowledge

Creating dramatic breaks with the past is easier in an atmosphere of trust and safety. Fear makes it difficult to question the past and break free from precedent. Getting beyond precedent requires courage and driving fear out of the organisation.

Fear and distrust of management remain problems in many workplaces despite all the talk about enlightened management practices. There are still firms that view fear as a desirable management technique. Fear creates knowing-doing gaps because it causes people to repeat past mistakes. Acting on one’s knowledge requires a person to believe they won’t be punished for doing so, and that taking risks based on new information and insight will be rewarded, not penalised. Many managers also believe that unless people are under pressure and fearful for their futures, they won’t perform.

Fear inhibits the ability to turn knowledge into action because people are afraid to be the one to deliver bad news about the firm, even if they are not to blame. Unless managers actively encourage the surfacing of bad news, people will avoid bring negative information to light, even if it is essential for turning knowledge into action. People will also avoid making suggestions for improvement if it means implying something is wrong.

For all these reasons, fear leads to a focus on the short term and on individual self-preservation rather than the collective good.

Organisations can counter these negative effects and drive out fear and inaction if they:

Praise, pay and promote people who deliver bad news to their bosses.
Treat failure to act as the only true failure; punish inaction, not successful actions.
Encourage leaders to talk about their failures, especially what they have earned from them.
Encourage open communication.
Give people second chances.
Banish people – especially leaders – who humiliate others.
Learn from (and even celebrate) mistakes, particularly where they involve trying something new.
Don’t punish people for trying new things.

Driving out fear during hard times is a particular challenge. It means giving people as much information as possible about what will happen to them and when it will happen. Tell them in detail why actions, especially those that upset them, have been taken. Give them as much influence as possible over what happens and when and how. And convey sympathy and concern for the disruption, emotional distress and financial burdens that people face.

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When measurement obstructs good judgement

Measures and the measurement process, especially badly designed or unnecessarily complex measurement systems, are among the biggest barriers to turning knowledge into action. "What gets measured gets done, and what is not measured is ignored".

Various cases researched by the authors show how measurement systems and practices produce knowing-doing problems:

Such systems can, for example, lead to a focus on short-term financial performance. Because of difficulties in maintaining growth and meeting the stockmarket’s expectations, Hewlett-Packard (at the time of writing) was being torn between its values and beliefs and a set of short-term financial pressures, made real by measurement practices emphasising present results at the expense of being prepared for the future.
Measurement systems are sometimes overly complex. The authors take the Balanced Scorecard to task here. They approve of the fact that the BSC, in addition to measuring financial performance, emphasises preparation for the future. However, Citibank’s experience with the BSC indicates that, while it is great in theory, it has some problems. It is too complex, with many separate parts, and too many indicators dilute the attention of employees. The system is also often highly subjective in implementation leading people to believe the ratings are biased and not fully under their control. It sometimes misses elements of performance that are more difficult to quantify but may be critical to organisational success in the long term. The authors conclude that effective measurement systems need to be simple enough to focus attention on key elements and fair enough so that people believe they can affect the measures.
Another problem concerns end-of-process measures versus in-process indicators. General Motors, for example, used too many end-of-process measures – measures that told people how well they had done – and not enough in-process indicators that helped them understand what was going right and what was going wrong. Learning was inhibited because GM was measuring the wrong things and not gathering data that would allow managers to control the process. Real control and improvement do not come from having a plethora of outcome measures but from measures that give people immediate and understandable information about how they need to act.

Although people in these (and other) organisations understood the negative consequences of their measurement systems, these practices persisted. The authors believe that this is because many companies use an oversimplified model of human behaviour which suggests that individuals are "atomistic" and economic rather than social creatures. The focus is on measuring each individual on the assumption that individual results are the result of individual decisions and actions and that individual outcomes and behaviours are under the control of these individuals. But, as the authors point out, organisations are systems in which behaviour is interdependent and people’s behaviour and performance are influenced by other people. Individual performance in an interdependent system will always be difficult to measure.

Stockmarket concerns also create pressures for measurement practices that are relevant to shareholders’ interests but may be irrelevant for the ultimate success of the business. In particular, it encourages uniformity of measurement practice. As there is much less uniformity of business conditions, culture and strategy among firms, this leads to measurements that have little connection to the business issues facing a specific organisation.

The authors have found that organisations in which measurement systems help, rather than undermine, the ability to turn knowledge into action apply a simple principle. They measure things that are core to their culture and values and intimately tied to their basic business model and strategy, and use these measures to make business processes visible to all employees.

Measurement practices that turn knowledge into action therefore have the following properties:

The measurements are relatively global in scope, focus less on assessing individual performance, and more on factors critical to organisational success.
The measures are focused more on processes and means to ends and less on final outcomes. This results in measures which facilitate learning and provide data that can better guide decision making and action.
The measures are tied to and reflect the business model, culture and philosophy of the firm.
The measures result from an ongoing process of learning from experience and experimentation. The view is that the measurement system can always be improved. Measures evolve to serve a fundamental core operating philosophy that is more constant.
The measurement system uses relatively few metrics. They emphasise a small set of measures crucial for supporting the organisation’s business model, philosophy and culture.

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Internal competition

Competition inside firms is sometimes thought to promote innovation, efficiency and higher performance. Management practices that produce internal competition are very common and seemingly unremarkable. (These include forced distributions of performance evaluations so only a few people can earn the highest evaluation; employee of the month awards; or published rankings of individual or unit performance.) These practices, however, turn friends into enemies and undermine the ability of the firm to turn knowledge into action.

As a variety of cases presented by the authors show, internal competition undermines organisational loyalty and teamwork. It hinders the sharing of knowledge and prevents the spread of best practice within the organisation..

Internal competition is likely to prevail and be harmful when people have incentives to avoid helping others and when leaders act as if performance comes from the sum of individual actions rather than interdependent behaviours like co-operation and knowledge sharing. It will also occur when management acts as if employees are competing in a "race" with each other where there are only a few winners and many losers. Also, if people feel they are constantly under scrutiny or being compared to others, it may distract them from their work. Firms make the problem worse when they select leaders who strongly value competition and have a history of beating peers in what are seen as zero-sum contests.

The authors suggest a variety of ways to overcome destructive internal competition:

Hire and reward people partly based on their ability and willingness to work co-operatively.
Focus people’s energy on defeating external competition, not on fighting each other.
Avoid compensation and performance measurement systems that create internal competition. Use measures that assess co-operation.
Build a culture that defines individual success partly by the success of the person’s peers.
Ensure leaders model collaborative and information sharing behaviours.
Promote top managers who have a history of building groups where members collaborate.
Use power and authority to make people and units share information and work collaboratively to enhance overall performance.

The authors provide in-depth case studies of organisations that have shown themselves able to overcome the knowing-doing gap, including: BP, Barclays Global Investors, and the New Zealand Post. The common lessons from these organisations for turning knowledge into action are: Don’t get stuck in the past. Re-examine every policy and practice to see if it makes sense. Don’t be afraid to do what your managers think is best, even if it goes against conventional wisdom. Involve people so the organisation accesses all the knowledge and skill inside it and so that people are motivated to help each other.

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Turning knowledge into action

In the final chapter, the authors provide eight guidelines for action:

Why before how – philosophy is important. Operating on the basis of a general business model, a set of core values, and an underlying philosophy avoids the problem of becoming stuck in the past or caught in ineffective ways of doing things just because that was the way it was done before.
Knowing comes from doing and teaching others how. This gives a deeper level of knowledge and eliminates the knowing-doing gap.
Action is more important than elegant plans and concepts. Don’t let planning, decision making and meetings become a substitute for implementation.
Allow mistakes. There is no doing without mistakes. Accept mistakes as long as people own up to them.
Drive out fear. Fear starts (or stops) at the top – look for leaders who inspire respect, not fear. Make power differences less visible and fear-inducing by removing obvious signs of hierarchy.
Fight the competition, not each other. Don’t confuse motivation with competition.
Measure what matters. Measure what can help turn knowledge into action. In particular, measure the knowing-doing gap itself and do something about it.
What leaders do and how they spend their time and allocate resources matters. The most important task of leaders is not necessarily to make strategic decisions, it is to help build systems of practice that more reliably turn knowledge into action. Leaders create environments, reinforce norms, and help set expectations, through what they do, not just their words.

The authors conclude by acknowledging that they themselves have provided a lot of talk and that the insights they offer are insufficient to solve the problem. Knowing about the knowing-doing gap is different from doing something about it. The message to the reader concerned about such problems in their organisation is that action must occur.

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