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Why organizations in unstable times should listen to their own employees

Organizations that want to successfully adapt to a fast-paced, rapidly changing environment should utilize the knowledge of their own employees. This is the finding of research conducted by Mirjam Goudsmit, a researcher in the field of strategic management at Radboud University. Her research is in the Australian Journal of Management.

In highly turbulent times, internal knowledge proves to be more useful for organizational adjustments, explains Goudsmit. She bases her research on developments within companies in four Eastern European countries during the transition from a planned economy to a market economy between 1999 and 2002, but the insights also offer guidance for companies in times of unpredictable change with a major impact, such as geopolitical tension or major technological shifts.

Valuable internal knowledge

In their research, Goudsmit and her colleagues, George Shinkle (University of New South Wales) and Aldas Kriauciunas (Michigan State University), distinguish three sources of knowledge: employees, top management and external parties such as consultants and foreign partners.

"Our research shows that employees have very valuable insights, especially about what needs to change in a highly turbulent environment. They know what is going on and what the biggest challenges are for solutions in day-to-day activities. And top managers know how to implement those changes in the organization."

Interference

In a highly turbulent context, external sources appear to be less effective in providing knowledge about what and how to change the organization, according to Goudsmit.

"We think this is because they have less insight into daily practice and what is needed internally," she says. "Moreover, there is a lot of uncertainty and ambiguity in this environment. As a result, they are generally less able to respond quickly to what the organization needs, because this changes frequently and unexpectedly, which is more likely to cause interference.

"The so-called focus of attention is very important at such times: where does the knowledge source have priority? That's when internal knowledge can really make a difference. Employees identify the areas where there are problems, and managers know the fastest routes within the organization to implement change. Internal resources are needed to make the change a success."

The dynamics of knowledge

Goudsmit continues, "When the environment changes significantly, companies must change with it in order to survive. But it is often unclear where an organization can obtain the right knowledge to do this. Knowledge is not a static given, but a dynamic resource. In uncertain times, it is important to update knowledge to keep it current and relevant to specific challenges. The effectiveness of this depends on the nature of the turbulence and the change you are implementing.

"Although external knowledge can certainly be valuable in times of instability, companies should not underestimate the internal knowledge they have in-house if they want to successfully adapt the organization."