Organizational Learning

Organizational learning occurs when organizations acquire feedback and apply this knowledge to make meaningful changes in policy and procedures. Much of this learning is derived from organizational failures, varying in intensity across the organization. In many cases, failure is the impetus for learning. Without recognizing, learning from, and enacting change based on failures, organizations can perpetuate problems that ultimately lead to more serious consequences. Organizations that recognize failures and promptly attend to them are less likely to experience a full-blown crisis. Still, crises are often inevitable. Thus, organizations experiencing crisis typically undertake a highly visible learning process. The learning process advances through three stages: (1) direct or indirect experience, (2) meaningful change, and (3) healing.

Organizational failures, either minor or severe, create opportunities for reevaluating management procedures and policies at every level. By recounting the actions that preceded the failures and assessing the relevant policies and actions, organizations can adapt and recover based on failure and advance their capacity to avoid or cope with crises. While this learning is often based on direct experiences, organizations can also learn indirectly or vicariously by viewing the experiences of similar organizations. This entry discusses how organizations learn through direct and indirect experience, the role of failure in an organization’s decision to enact changes, and the importance of emotional healing after a crisis.

Direct Experience

Direct experience occurs when an organization faces the consequences of its own failures. In cases of organizational crises, direct experience extends from the inception of the crisis through postcrisis recovery. Learning from direct experience requires the organizations to glean meaningful lessons while enduring the crisis. The trials and errors of crisis response generate the feedback needed to enact meaningful changes to the organization. Two common barriers to organizational learning from direct experiences are overlearning and underlearning. Overlearning occurs when organizations experience failures that produce near misses. Near misses allow organizations to dodge the dire consequences of failure through chance or good fortune. This good fortune is often misconstrued as resilience. Hence, organizations that nearly experience profound failure are sometimes emboldened rather than informed by the near calamity. For example, NASA failed to act on a series of recurring failures in multiple space shuttle launches before the 1986 Challenger disaster.

Underlearning transpires when failure is recognized and explained away. For example, British Petroleum experienced several serious failures prior to the 2010 Gulf of Mexico oil spill disaster. Although theses failures revealed consistent problems in British Petroleum’s management philosophy, the organization treated them as unrelated events. The result was a tragic failure with severe consequences for Gulf Coast residents and wildlife.

Thus, learning alone is not a means for organizational advancement. Rather, organizations must be willing to reconsider their existing policies and procedures at all levels in response to failure. Overreaction is also a potential form of overlearning. Organizations can experience a failure and move immediately to systemwide change when such wide-scale innovation is not warranted. Overreaction is most common when organizations fear litigation. For example, warning messages are sometimes added to products in such an extensive manner that they become obtrusive, unrealistic, or incomprehensible.

Indirect Experience

Organizational learning is not restricted to directly experiencing failure. Rather, learning can occur vicariously for organizations that are attentive to the crises and challenges experienced by similar organizations in their industry. This process of observing and responding to the failure of similar organizations is often a manifestation of the issue management or environmental-scanning procedures undertaken by many organizations. Observing the failures and the successful and unsuccessful responses of comparable organizations can provide helpful lessons that can guide similar organizations to enact strategies for avoiding analogous failures. For example, the widespread and highly visible criticism Nike endured over accusations that its products were made in sweatshop labor conditions inspired similar sportswear companies to reconsider the conditions under which their international workforce labored. The industry changes were revolutionary and enduring.

Meaningful Change

Meaningful change occurs when the errors observed through experience are analyzed and converted to lessons and shared throughout the organization to inspire changes in routine procedures. To do so, the changes must be accurate, constructive, and lasting. Meaningful change is accurate insofar as organizations fully acknowledge the magnitude of the failure. Accuracy refers to the degree to which the organization is able to glean the appropriate lessons from failure. Changes enacted by the organization are constructive when they inspire the behavioral changes needed to address the failure. Changes are lasting when they become a part of organizational policies, routines, and assessment activity.

When organizations are confronted with major failures that reach the crisis level, meaningful change requires organizations to accept a new normal. The response of many organizations facing a crisis is a longing to return to normalcy. Crises, however, reveal a compelling inadequacy within the organization to manage the ever-changing threats within the organization’s environment. Meaningful change can only be enacted when organizations accept this fact, embrace the lessons available, and adjust to the new normal revealed by the crisis.

Structural Change

Embracing the new normal instigated by a crisis typically requires observable structural changes to the organization. An organization may make structural modifications through personnel changes in leadership, adjusting its mission, ceasing operations in selected areas, and reallocating resources, to name a few. If organizational leaders are dismissed, new leaders must emphasize a new, more fitting vision for the organization. If the existing leadership is maintained, those individuals must lead their organizations through a renewal process where the organization embraces a new normal. Major failures often expose outmoded elements of the organization’s mission and core values that have not kept pace with changes in the organization’s environment. Structural changes may address areas where the organization is overextended—lacking the resources to avoid failure or having failed to dedicate the resources to address minor failures.

The learning opportunities embedded in major failures also give organizations a chance to reassess their crisis management plans. Although many organizations have crisis management plans in place, many fail to test and update their plans. Over time, many of these plans dilapidate, leaving the organization increasingly unprepared for a major failure. Crises draw attention to this lack of preparation and force organizations to dedicate time and other resources to updating and implementing better plans based on what was learned from the crisis. Thus, recognition of vulnerability and a more advanced crisis management plan are also examples of structural changes that occur due to organizational learning.

Learning and Emotional Healing

Organizational learning also addresses the emotional aspects arising from failure. When organizations fail, emotions such as helplessness, anger, frustration, sadness, and fear may arise. In response, the learning process involves a degree of emotional healing. Healing allows organizational stakeholders to move beyond the crisis and reconstitute themselves. The trauma of failure can debilitate some workers, leaving them less effective than before the problems arose. Thus, emotional learning requires a degree of healing. The meaningful changes undertaken by the organization can serve as an important first step toward this healing. Ideally, an organization’s stakeholders should retain the vital lessons from failure, while forgetting or moving beyond the debilitating emotions associated with the failure.

Emotional recovery for stakeholders is based, in part, on the explanations provided through the organizational learning process. The explanation process can provide stakeholders with a clear sense of how the failures occurred, what has been done to address them, and how these changes will diminish the possibility of repeated failures. Enhanced crisis management plans can also give stakeholders the confidence that there is something meaningful they can do if they foresee or experience such failures in the future.

An Example of Organizational Learning

The attacks on the World Trade Center on September 11, 2001, were horrific. The number of people killed or injured, however, may have been worse if not for the organizational learning that occurred after a terrorist bomb was detonated below the North Tower in 1993, killing 6 people and injuring more than 1,000. After the 1993 attack, the buildings’ managers learned many lessons about their existing crisis management plan and evacuation strategy. In response to those lessons, the signage for evacuation was improved, and updated crisis management plans were distributed to proprietors in the buildings. As the crisis began in 2001, occupants of the buildings below the level where the planes hit were able to evacuate in a more orderly and efficient manner than the people who faced the 1993 bombing. Moreover, many of the employees in the buildings had experienced the 1993 crisis and had learned from it. In the end, the 9/11 crisis at the World Trade Center was a major tragedy that might have been even more devastating had the managers of the building not learned and responded to important lessons from the 1993 attack.

Conclusion

Organizations that commit themselves to constant learning and change are able to adapt with their environments to account for evolving threats and weaknesses. As such, organizational learning creates an opportunity for continuous improvement and heightened resilience. All failures create the potential for learning and meaningful change. When major failures evolve into crises, organizations are frequently forced to recognize a new normal where previous policies and procedures are no longer seen as effective. Thus, severe failure can force meaningful change onto organizations. Recognizing failure is no guarantee that organizations will learn helpful lessons and enact positive change. A near miss, for example, can cause overlearning, where organizations falsely assume that their organization’s resilience, not good fortune, spared them from the crisis circumstances. Conversely, organizations underlearn from failure when they explain away the problematic patterns without enacting meaningful change. Although organizational learning is a valuable concept for understanding the means by which organizations adapt to their dynamic environments, the concept is limited in its capacity to assist organizations in learning the right lessons from failure. Identification of the right lessons from a given crisis is largely limited by the context of the failure.