ORGANIZATIONAL LEARNING

The importance of learning in organizations has been recognized since the early twentieth century. Organizational learning was implicitly applied by Henry Ford in developing the Model T. This work demonstrated the existence of learning curves, whereby the time and cost needed to assemble products decreased by a constant percentage—usually 20 to 30 percent—for every doubling of output.

The phenomenon of learning curves, also called experience curves, progress curves, or learning by doing, became very popular in the 1960s and 1970s. At that time, many managers were held up to (and fired for not reaching) the 80 percent mark, meaning, with each doubling of output, costs were expected to decrease to 80 percent of the prior cost level. This overly simplistic view of learning curves resulted in disgruntlement with them in the 1980s.

Modern scholars realize that, although the learning curve is present in many organizations, there is great variation in the slope of those learning curves. The disparity in organizational learning rates clearly indicates that productivity rates are not guaranteed to improve as experience increases. Other factors are at play.

The goal of much research on organizational learning is to determine which characteristics of an organization cause it to be able to continually learn and adapt to new circumstances. Those that are able to do so are called "learning organizations" because they are uniquely capable of improving themselves by learning from experience. Peter Senge popularized the concept of the learning organization in his 1993 book The Fifth Discipline, and he identified the following as its core ingredients:

1. Mental models—everyone sets aside old ways of thinking.
2. Personal mastery—everyone becomes self-aware and open to others.
3. Systems thinking—everyone learns how the whole organization works.
4. Shared vision—everyone understands and agrees to a plan of action.
5. Team learning—everyone works together to accomplish the plan.

Organizations that meet Senge's criteria offer work settings in which members develop their abilities to learn and are encouraged and helped to make that learning continuously available to everyone else. These organizations have value-driven organizational cultures that emphasize information sharing, teamwork, empowerment, participation, and learning. Importantly, the leaders of learning organizations set an example for others by embracing change and communicating enthusiasm for solving problems and growing with new opportunities. Jack Welch, formerly the CEO of General Electric, communicated his enthusiasm for the learning organization when he stated in General Electric's 1999 annual report that this was the company's only competitive advantage.

The imperative for improved learning derives from the emerging global, knowledge-based economy, which focuses on collective, entrepreneurial learning to create continual innovations in products, processes, and services. It is driven by the continuing growth of new technological knowledge. This, in turn, leads to newly definable markets for this knowledge and to changing organizational and network structures, thus enabling organizations to apply new technology in both old and new markets.