Effective Knowledge Exchange between Coworkers Improves Business Performance
Managers can significantly boost business performance by providing opportunities for coworkers to engage in the structured exchange of knowledge. Recent experimental evidence highlights the most promising forms of knowledge sharing within a company.
Facilitating effective knowledge exchange between employees is a major challenge faced by many companies in various industries. The challenge is even greater if coworkers are not located in the same office building or work remotely from home. As many firms are currently switching to home office solutions in a response to the coronavirus pandemic, keeping up effective knowledge sharing among colleagues should be a priority of managers.
Firstly, why is knowledge exchange so important?
It is widely acknowledged by both businesses and academia that knowledge spillovers among coworkers have positive effects. Usually, there are substantial differences in the productivity of employees within a firm, and if a more productive employee passes on her techniques and best practices to a less productive colleague, the overall firm productivity will increase. However, the conditions under which this exchange of knowledge arises often remain unclear. This is the starting point for a group of the US-based economic researchers (Jason Sandvik, Richard Saouma, Nathan Seegert and Christopher Stanton) who empirically investigate this question and draw on potential implications for managers.
Secondly, what does currently limit knowledge sharing between coworkers?
It would be desirable for companies to have their best performing employees regularly share their knowledge and best practices with their colleagues, yet there are economic costs that limit such knowledge exchange. First, employees might lack the incentives to share information with their peers. For example, it takes time and effort for highly productive individuals to reflect on their best practices and pass these on to their coworkers, but there is usually no monetary reward for doing so. Second, there are so-called initiation costs referring to the barriers faced by workers when seeking assistance. You can think here of physical distance, feelings of shame when asking others for help, and often not knowing whom to ask a particular question. Altogether, these factors limit beneficial knowledge sharing.
Thirdly, what is the best way to stimulate knowledge exchange within a firm?
In their new study, Sandvik et al. show which mechanisms managers can use to most effectively initiate knowledge sharing. Using a field experiment, they test three potential practices to distill the most promising form of knowledge exchange for companies. The first is to set up structured meetings, during which randomly allocated partners discuss their work practices. Their objective is to reduce initiation costs and allow for knowledge spillovers, particularly if high-productivity employees are matched to lower-productivity colleagues. These meetings follow the structure of a self-reflective worksheet providing a guideline, which everyone was asked to prepare in advance. The focus is on giving advice to the partner and the results are handed over to management. A second practice represents monetary pair incentives to raise joint output. These monetary incentives reward the most successful pairs of coworkers at the end of each week. To avoid negative feelings towards colleagues, the pairs are not informed about the performance of their competitors. In monetary terms, the weekly prizes equaled to $50 for each winning team. The third practice is a combination of the first two measures above.
Main results of the study
The results of the study might be surprising to some but are straightforward. The practice with the largest effect on productivity is structured meetings. Adopting such meetings on a regular basis led to a significant and persistent increase in workers’ performance by 25 percent during the experiment and by 20 percent in the longer term. In comparison, monetary pair incentives worked well during the experiment with a productivity increase of 13 percent, but were not significant in the long-run. Finally, the combination of the two measures proved to be slightly better overall, increasing productivity by 26 percent in the short-run and 22 percent in the long-run. Although this combination narrowly outperformed the two individual practices themselves, the researchers found that the total effect was largely driven by the effect of the structured meetings. All of these results were reached in comparison with a control group that continued their business as usual. A limitation to these results is the setting of a sales company, in which they were obtained, but the productivity-increasing effect of the structured meetings could be externally valid as well.
Recommendations for managers
In conclusion, managers could foster knowledge exchange among coworkers through specific practices. Based on the results above, we can infer three hands-on recommendations: First, reduce contracting costs by incentivizing knowledge exchange. Second, stimulate targeted interactions between coworkers to mitigate initiation costs. And third, set up structured meetings as the means of choice to ensure constant knowledge sharing. Given the major disruptions of the normal working life, which many firms and employees are currently experiencing in the context of the coronavirus pandemic, these insights are potentially of even greater importance.
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Sandvik, J., Saouma, R., Seegert, N., and C. Stanton (2020): “Workplace Knowledge Flows“, NBER Working Paper No. w26660. Available here