The Impact of Lost Knowledge

The following examples provide a preview of the dramatic impact of lost knowledge.

(Note: When we first put this compendium of knoweldge loss stories together, we had yet to experience the 2010 Gulf of Mexico spill.  Sadly, this more recent BP event may provide yet another example of the impact of not having critical knowledge where you need it when you need it.)

BP Loss of Knowledge Contributes to Massive Oil-Pipeline spill

BP learned the hard way why capturing key knowledge from subject matter experts before they leave is critical. When Senior Corrosion Engineer Richard C. Woollam left, BP lost valuable intellectual capital, namely his knowledge, experience, and expertise.   

BP realized just how valuable Woollam’s knowledge was on February 25, 2006, when corrosion in the Prudhoe Bay pipeline caused a “small leak” in a quarter-inch hole in the pipe. BP discovered the leak five days later on March 2, after 250,000 gallons of crude oil spilled across 1.93 acres. The spill, the largest ever on Alaska’s North Slope, forced BP to shut down the pipeline and the Prudhoe Bay oilfield, the largest U.S. oilfield. Overnight, 8% of domestic oil production was shut down due to “extensive corrosion”.

Audits showed that by the time this massive oil-pipeline spill was discovered, the job of BP's senior corrosion engineer had been left unfilled for more than a year.  This vacancy, and others, hindered BP's ability to maintain a ‘strategic view’ of its corrosion prevention activities, the audit found. A BP spokesman said Friday that a replacement for the senior corrosion engineer has yet to be found...”

Analysis: Congress probes BP corrosion –Donna Borak, UPI Energy Correspondent Sep 6, 2006

BP audit: Key job vacant before spill - Brad Foss, AP Business Writer, Fri Sep 8, 2006

Congress Investigates Alaska BP Pipeline Leak -  Scott Horsley, NPR Morning Edition, Sep 7, 2006

Boeing knowledge loss throws 737 and 747 assembly lines into chaos

After Boeing offered early retirement to 9000 senior employees during a business downturn, an unexpected rush of new commercial airplane orders left the company critically short of skilled production workers. The knowledge lost from veteran employees combined with the inexperience of their replacements threw the firm’s 737 and 747 assembly lines into chaos.  Management had to shut down production for more than 3 weeks, forcing Boeing to take a $1.6 billion charge against earnings.

Jeff Bond, In the Eye of the Storm - Washington CEO, as noted in David Delong Lost Knowledge

NASA loses the knowledge to get to the moon

NASA Manager confesses – “If we want to go to the moon again, we’ll be starting from scratch because all of that knowledge has disappeared.” 

NASA Officials Warn of Aging Workforce, Washington Post, March 7, 2003

Nuclear weapons industry at risk of losing the knowledge to safely design and test nuclear weapons

Leaders in the US nuclear weapons industry are concerned about losing the knowledge needed to safely design and test nuclear weapons because of the retirement of so many veteran nuclear scientists and engineers.  

Los Alamos, NM -- When John Richter retired from Los Alamos National Laboratory three years ago, he took with him nearly the equivalent of China's entire experience with nuclear weapons... As wizards like Dr. Richter retire, they are taking with them invaluable expertise about just what makes bombs work.

There are only about 50 people in the U.S. who, like Dr. Richter, possess both the know-how to make a nuclear weapon and the "fudge-factor" -- the memory of last minute tweaking and intuitive short-cuts that made some of the nation's 1,000 or so nuclear weapons tests work.

"Nuclear-weapons design was then [when Dr. Richter was a young apprentice Ph.D. at Los Alamos] taught in a kind of medieval apprenticeship. Dr. Richter hung around one or two bomb designers to see how they did it. 'You worked for those guys until you didn't need them anymore,' he says. "The quicker you did that, the quicker you could do more things on your own."

John Fialka, "Cold Warheads: Los Alamos Lab Tries to Stem the Decline of Bomb Know-How", The Wall Street Journal, August 2, 2000

And Why Manage Knowledge?, Richard E. Combs

General Mills says loss of marketing knowledge costs the company millions

Mark Bailey, director of staffing and recruiting for General Mills, explained it best when he said “When we calculate the cost of replacing an employee, we factor in way more than the direct recruiting costs and lost production while the job is vacant.  Some people are just much more painful to lose than others.  Take for example, our marketing managers.  People who are hired on this tract take five to six years to get to the top of their game.  If they leave, we lose everything they have leanred about our consumers and how to effectively market products to them.  If we lose one, we estimate it actually costs the company millions of dollars.”  

Lynne Lancaster and David Stillman, When Generations Collide

The potential loss of employees in the next few years is staggering.  Here are a few comments noted in Lost Knowledge by David DeLong

“We could lose as much as 50% of our total population in the next 5-10 years, where the average employee has 25 years of experience,” says senior executive of a major oil company.

75% of the US Defense Department’s civilian workforce of 675,000 people are expected to retire between 2002 and 2008. 

“Within the next five years, at least 50% of our engineers across the company will be retirement eligible” says HR leader in a US chemical company

The oil and gas production industry can expect to lose more than 60 percent of it’s employees  by 2010.

So to will the aviation industry.  One major airline, for example, recently lost more than 1200 veteran maintenance technicians to early retirement. “That’s more that 25,000 years of specialized experience fixing some the world’s most sophisticated airplane’s that’s gone out the door. “

What is the impact? 

David Delong continues the discussion noting, “The challenge facing many organizations is not only the loss of their most experienced employees, but also many of these professionals and managers are taking with them new types of critical expertise and experiential knowledge that didn’t exist a generation ago.  In the context of the new economy, future leaders are likely to face not simply a labor shortage, but a knowledge shortage, as organizations bleed technical, scientific, and managerial know-how at unprecedented rates.  And what is the effect on productivity of losing all this expertise?  Examples range from silly and expensive to life threatening and downright scary.” Here are a few examples.

A technician making control boards on a radar equipment assembly line at Texas Instruments took early retirement and immediately parts coming off the line began failing QA tests.  A team of expensive engineering consultants can only validate that the unit is producing boards built to specifications.  Finally with the assembly line down, exasperated managers brought the retired technician back, and she quickly diagnosed the problem as faulty documentation of an assembly procedures.  The veteran technician had always ignored the incorrect instructions because she knew how to produce a control board that worked.  But before this knowledge is recovered the unit lost over $200,000 in sales revenues and almost lost its next contract with a major customer.

When an ethylene reactor exploded at a petrochemical plant on the Texas Gulf Coast an investigation found that the unit’s engineer and the operators in the control room at the time of the accident had all been in the job less than a year.  Retirements and turnover had left the plant with inexperienced personnel, and not surprisingly , the explosion was attributed to operator error.  Having less experienced people working in increasingly sophisticated computer-controlled production operations increases the risks of serious and costly mistakes.