Experts divide such critical know-how into two parts: explicit and tacit knowledge. The explicit kind refers to information that can be easily explained and stored in databases or manuals. Tacit knowledge is much harder to capture and pass on because it includes experience, stories, impressions and creative solutions. Tacit knowledge is also much harder to get from people because it accumulates over years of experience, and a scientist or salesperson may not even know how to verbalize it.

Dorothy Leonard, professor emerita of business administration at Harvard Business School and coauthor of Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom, argues that companies and government agencies should concentrate on re-creating tacit knowledge, rather than focusing only on transferring it (see a recent column by Leonard, "How to Salvage Your Company’s Deep Smarts," at www.cio.com/050105). For example, if an experienced scientist plans to retire in a year, the pharmaceutical company where he works should have a younger researcher shadow the scientist and work side by side. "In this way, the younger scientist will learn not just the facts, but the method of diagnostics," Leonard says. "Databases are not a complete waste of time, but it’s a mistake to believe they are transferring knowledge."

In some cases, it’s easy to see that the loss of a key employee, or group of employees, will affect a company’s strategy and bottom line. At engine manufacturer Rolls Royce, for example, managers—when faced with the impending retirement of a veteran systems engineer—calculated that the engineer’s retirement would cost the company $400,000 in the first year, says Colin Cadas, team leader for design technology at the U.K.-based company. Cadas based the calculation on the number of employees whose productivity is affected when the system is down and the average time the system is unavailable. Using that calculation, managers could then justify the knowledge acquisition activity before the engineer (the primary troubleshooter for that system) left. The process also guaranteed increased training for younger engineers before the retiring engineer left the company. "For every knowledge retention project we do, we have those involved work out the business value to the organization," Cadas says.

Stop the Bleeding

Rolls Royce faced a crucial test in April 2003, when British Airways and Air France ended service of the Concorde supersonic jet, citing diminishing passenger numbers and rising maintenance costs. Rolls Royce, which had maintained the supersonic Olympus engines since the planes started jetting rock stars and business titans across the Atlantic in the 1970s, realized it needed to act quickly. And managers knew this specialized knowledge was crucial to securing future opportunities in hypersonic propulsion. So they set out to find the people with this experience, some of them already retired or moved away.