Directory UMM :Data Elmu:jurnal:T:Training And Education:Vol42.Issue4-5.2000:
Organisational learning
in small learning
organisations: an
empirical overview
Harry Matlay
The author
Harry Matlay is Reader in SME Development with
the University of Central England Business School,
Birmingham, UK.
Keywords
Learning organizations, Small firms,
Knowledge management, Strategy
Abstract
Much has been written, in recent years, on the subject of
learning organisations and knowledge-based businesses.
Most research in this area, however, focuses upon large
businesses. In this type of firm, it appears the concepts of
``organisational learning'' and ``learning organisation'' can
be, and often are, used interchangeably to describe
learning-based individual and collective development.
Until recently, issues relating to organisational learning
in small businesses were mostly ignored or marginalised.
This paper sets out to redress the balance. It reports a
study of organisational learning in the small business
sector of the UK economy. Research data, collected over
the 1996-1998 period, through telephone surveys, indepth interviews and case studies, were analysed through
quantitative and qualitative methods. The results indicate
that although learning can occur in the majority of small
businesses in the sample, only a minority of these manage
new knowledge strategically to sustain and advance their
competitive advantage.
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Education + Training
Volume 42 . Number 4/5 . 2000 . pp. 202±210
# MCB University Press . ISSN 0040-0912
Introduction
``Learning organisations'' are currently the
focus of considerable academic and
practitioner attention. An abundance of
related literature has emerged, grounded in a
broad range of interrelated disciplines:
continuing professional development,
vocational education and training,
organisational theory, industrial economics,
economic history, business, management and
development studies (Matlay, 1998; Keep,
1997; Moingeon and Edmondson, 1996).
Furthermore, ``organisational learning'' has
been recognised as a valid research topic on
its own and is supported by a growing number
of dedicated academic and practitioner
journals.
The continuing popularity of ``learning
organisations'' can be attributed to a number
of pertinent factors. As a concept, learning
organisations first gained popularity amongst
high profile, innovative organisations that set
out to increase their market share through
highly successful, learning-based human
resource and knowledge management
strategies. In terms of sustainable competitive
advantage, these organisations proved more
responsive to technological and socioeconomic changes (Matlay, 1997, p. 3). The
publicity generated by these ``success stories''
propelled the concept of learning
organisations to the forefront of strategic
management thought (Dodgson, 1993;
Kanter, 1989). By the late 1980s, influential
academics, policy makers and practitioners
promoted organisational learning as a
strategic element in the quest for sustainable
business competitiveness (Moingeon and
Edmondson, 1996; Senge, 1990; Garratt,
1987). At the same time, the profound impact
that rapid technological change was having on
business activities highlighted the need for a
flexible and multi-skilled workforce.
Individuals at all levels of organisational
hierarchy were increasingly expected to learn
new and often radically different ways of
reacting to competitive pressures (Rothwell,
1992; Womack et al., 1990). As a dynamic
and integrative concept, organisational
learning was perceived to include analytical
and critical aspects that had the potential to
unify individual, team and corporate values
into highly successful competitive strategies.
Thus, the competitive advantage (both actual
and perceived) attributable to learning
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Harry Matlay
organisations is likely to further promote this
dynamic and multi-disciplinary concept.
Learning organisations
Origins and evolution
The origins of the ``learning organisation'' can
be traced back to the ``organisational
development'' movement of the late 1960s
and early 1970s (Matlay, 1998). As a
management tool, ``organisational
development'' was popular for about two
decades, a period during which it proved not
only fashionable but also revolutionary. In a
trend-setting mode, this school of
management promised to deliver a great deal
in terms of competitive advantage, during a
period of growing political uncertainty and
socio-economic change. Most contemporary
observers hailed it as the panacea to all the
problems and challenges posed by rapid
technological advances (Pedler, 1994).
However, as the pace of technological
innovation increased during the late 1970s
and early 1980s, it became obvious that the
extent and intensity of organisational change
had far exceeded the predictions of
contemporary economic forecasters. In a
growing number of innovative businesses,
knowledge management and support systems
proved inadequate in coping with the influx of
pertinent data. At most levels of
organisational hierarchy, employees were
increasingly called upon to deal with growing
volumes of internal and external information
mostly outside their control and expertise. As
a direct result, a new type of business
philosophy began to develop and take over
from the outdated organisational
development movement, one that placed
learning at the core of sustainable competitive
advantage (Starkey, 1996).
It should be noted that in the UK,
``organisational learning'' only gained wider
recognition with the notable success of Peter
Senge's The Fifth Discipline (Senge, 1990).
This widely acclaimed and much quoted book
ensured that the principles of organisational
learning and recommendations for its
implementation would reach a wide audience
that included, amongst others, academics,
policy-makers, business leaders, educators,
trainers, consultants and managers. Apart
from direct corporate benefits in terms of
competitive advantage, the organisational
learning movement also promised indirect
gains through its potential impact upon
educational, training and human resource
development paradigms (Matlay, 1998). Yet
more than 20 years later the theory and
practice of learning organisations remains
confused, fuzzy and difficult to penetrate or
implement (Scarbrough et al., 1998; Goh and
Richards, 1997; Hitt, 1996; Garvin, 1993).
Concepts and definitions
Even though the concept of organisational
learning has achieved prominence amongst
interested parties, considerable confusion still
exists in relation to the definition and use of
the term (Matlay, 1998). Most of the learning
organisation definitions available in a wide
range of relevant publications appear to be
complementary rather than fundamentally
original or conceptually different (Matlay,
1997). Pedler et al. (1991, p. 1) defined a
learning organisation in terms of continuous
transformation and improvement through the
learning activities of all its employees.
According to Dixon (1994, p. 5), continuous
organisational transformation can only take
place through intentional learning processes
at individual, group and system level. The
quality as well as the continuity of individual
and collective learning in an organisational
setting is deemed crucial to the development
of a learning organisation (Lank and Lank,
1995). However, de Geus (1998, p. 71),
points out that the ability of a workforce to
learn faster than their counterparts in other
organisations constitutes the only sustainable
competitive advantage at the disposal of a
learning organisation. It is generally agreed
that the primary focus of a learning
organisation should be the way in which it
values, manages and enhances the individual
development of its employees in order to
ensure its continuous transformation
(Scarbrough et al., 1998, p. 2).
Probst and Buchel (1997, p. 16) conclude
that there are considerable theoretical,
empirical and practical difficulties involved
in defining and mapping the learning
organisation in a way that is both conceptually
consistent and widely acceptable. There are
a number of approaches to defining
organisational learning. Generally, these
offer both a theoretical discussion of the
topic and a pragmatic view of its
practical implementation. Interestingly,
these approaches tend to emphasise a
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Harry Matlay
learning-based interaction between individual
employees and the organisation that employs
them (Pautzke, 1989: Morgan, 1986;
Hedberg, 1981). To add to the fuzziness of
definitional approaches, ``learning
organisation'' and ``organisational learning'' ±
as generic terms ± are often used
interchangeably (Romme and Dillen, 1997,
p. 68). The main argument is offered by
Weick (1991), who argues that these terms
are synonymous as both originate from the
psychological concept and usage of
``individual learning''. Typically, most
definitions relating to work-based learning are
linked to this basic analogy (see Argyris and
Schon, 1978).
The theory of learning organisations tends
to distinguish between two types of definition:
normative and descriptive. Normative
definitions identify specific prerequisites
which learning organisations must fulfil
(Pearn et al., 1995; Dixon, 1994; Senge,
1990; Bomers, 1989; Hayes et al., 1988). For
example, Garvin (1993, p. 81) decrees that a
learning organisation creates, acquires and
transfers knowledge in order to modify its
behaviour in line with competitive strategies.
Descriptive definitions acknowledge the fact
that all organisations learn, consciously or
otherwise (Kim, 1993; Levinthal and March,
1993). Work-based learning in learning
organisations is actively encouraged,
stimulated and rewarded, mostly as part of
specific human resource strategies (Matlay,
1997, 1998). Conceptually, it appears that
two important aspects distinguish learning
organisations from one another: first, the
relationship between individual and collective
learning and, second, the distinction between
single- and double-loop learning.
Learning in organisations: theory and
practice
Most influential writers on the topic of
learning organisations differentiate between
individual and collective learning (Romme
and Dillen, 1997; Huber, 1996). As larger
business entities rely upon the performance of
various categories of employee, work-based
individual learning becomes an important and
necessary condition of sustainable
competitive advantage. Collective learning in
this type of organisation takes place in
addition to learning processes occurring at
individual level. Importantly, however,
although collective learning can occur
independently of each individual, it cannot
take place if all the employees in an
organisation are prevented from learning
(Romme and Dillen, 1997; Kim, 1993). Both
individual and collective learning can be
significantly hindered by a multitude of stressrelated problems (Matlay, 1998). In small
businesses, the crucial role that owner/
managers invariably play in the daily
operation of their firms often results in
individual learning and development at
managerial level. As a direct result, the need
for collective learning is significantly reduced
or even displaced entirely (Matlay, 1999).
A learning organisation could also be
defined or measured in terms of the sum total
of accumulated individual and collective
learning (Hyland and Matlay, 1997). Indeed,
some pertinent research studies in this field
were based upon the detailed analysis of
learning practices and their effect upon
overall business competitiveness (Huber,
1991; Sterman, 1989). Learning at work can
be seen as a product of corporate values,
internal competition and personal ambitions
(Harrison, 1993). Organisational factors,
such as working conditions, management
styles and employee relations play an
important role in shaping learning and
knowledge management processes specific to
each business entity. It appears that only
fragments of the knowledge gained through
individual learning are actually recorded or
disseminated, either formally or informally,
for corporate use. Knowledge emerging from
collective learning is much more complete
and is usually recorded formally for corporate
access and benefit (Matlay, 1997, p. 4).
Some commentators stress the conflict of
interest that can exist between individual and
organisational learning (Probst and Buchel,
1997; Starkey, 1996). It appears that those
researchers who favour personal development
also recommend the acquisition of
``transferable'' skills. This is more likely to be
the case in large organisations with internal
labour markets that offer opportunities for
both personal development and corporate
progression (Thomson and Mabey, 1994). It
is now widely acknowledged that that microand small businesses do not offer
development opportunities commensurable
with those of larger organisations (Storey,
1994). Progression is very limited and
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Harry Matlay
Education + Training
Volume 42 . Number 4/5 . 2000 . 202±210
employees are more likely to leave
employment and start their own firms
(Matlay, 1996). Consequently, small business
owner/managers prefer their employees to
acquire firm-specific, non-transferable
knowledge, which is both easier to manage
and curtails individual opportunities in the
external labour market (Matlay, 1998).
Work-based learning is closely controlled by
small business owner/managers who fear that
their competitors would poach their key
employees. Bomers (1989) argues that
organisational learning is most likely to be
handicapped in organisations where most of
the knowledge and skills are dependent upon
fewer individuals. As most small businesses
fall into this category, organisational learning
in this type of firm is likely to occur
sporadically, as a reactive strategy, rather than
as a proactive drive to enhance the quality of
the workforce (Matlay, 1997; Kim, 1993).
Carley's (1992) concept of ``learning
deterioration risks'' through employee
turnover placed organisational learning in the
context of hierarchical structures and their
effect upon knowledge acquisition,
management and transfer. The complex
hierarchical structures exhibited by larger
organisations renders them less vulnerable to
personnel turnover and related skills drainage.
Conversely, small firms, with simpler and
flatter managerial structures, are more at risk
from staff turnover and related knowledge
deterioration and loss. In larger organisations,
new knowledge and skills are routinely
transferred to line managers and management
teams. Hierarchical organisations also lose
some knowledge as it is filtered through
complex communication channels across
various structural levels. In order to minimise
learning deterioration risks through personnel
turnover, organisations need to maintain
reasonably complex hierarchies and internal
markets. However, some researchers found
that complex hierarchical forms tend to
hinder individual as well as collective learning
taking place in organisations of all sizes
(Romme, 1996; Pedler et al., 1991; Mills,
1991). Furthermore, the emergence, in recent
years, of leaner and flatter organisations did
not significantly affect the quantity, quality or
intensity of organisational learning (Matlay,
1997; 1998).
Leavitt and March (1988) argue that
experiential learning forms an important part
of work-based knowledge acquisition.
Instances of individual learning from daily
activities have been documented in most
learning organisations, regardless of their size
or type of economic activity. Similarly, where
learning curves were used to monitor
individual development, these provided
evidence of intended, incidental or accidental
learning (Matlay, 1998). This type of learning
generates knowledge mainly from ``trial-anderror'' decision-making processes.
Experiential learning is seen to make a
significant contribution to the knowledgebased competitive strategies of fast growing
organisations (Porter, 1980; 1985). An
organisation's cumulative knowledge
embodies much of its competitive advantage.
Knowledge-based competitive advantage is
unique to each organisation and cannot be
replicated by other firms (Barney, 1986).
With the advent of globalisation,
organisations are increasingly forced to
operate within a highly competitive ``global
village''. Knowledge acquisition, management
and transfer strategies are currently viewed as
the most important differential at the disposal
of an organisation in its quest for sustainable
competitive advantage (Matlay and Fletcher,
2000).
Conceptually, a distinction is sometimes
made between ``single-loop'' and ``doubleloop'' learning (e.g. Hatch, 1997; Fisher and
Torbert, 1995; Rein and Schon, 1994;
Argyris, 1994). Single-loop learning involves
trial-and-error situations that result in the
consolidation or correction of existing
organisational processes. According to Fiol
and Lyles (1985), single-loop learning is
mostly encountered in organisations that
incorporate repetitive or routine procedures.
Paradoxically, however, this type of learning
is less effective at unskilled or semi-skilled
levels (Fisher and Torbert, 1995). In
Morgan's (1986) view, single-loop learning
mostly involves causal inferences related to
actual or probable errors, the correction of
which might alter the knowledge base of an
organisation. Conversely, double-loop
learning involves evolutionary changes in the
operational rules that underline organisational
activities (Rein and Schon, 1994; Argyris,
1990; 1992). In this context, cognitive
processes and insights generate new frames of
reference and effective decision-making
processes (Argyris, 1994).
It appears that the vast majority of large
organisations rely upon single-loop learning
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Harry Matlay
and that instances of double-loop learning are
relatively rare (Senge, 1990). March (1997,
p. 371) explains this behavioural pattern by
arguing that the budgetary controls favoured
by larger organisations tend to compare actual
to expected outcomes and subsequent target
deviations are recorded as variances.
Budgetary feedback generates single-loop
learning based upon analysis of previous
actions, using the resulting knowledge to
improve future performance. Most small
business owner/managers prefer informal
management styles that rely heavily upon
their perception and evaluation of previous
outcomes. Single-loop learning tends to
reinforce an owner/manager's need to control
most, if not all, aspects of organisational
activity. Only a small number of owner/
managers in growth-oriented, small
businesses rely upon double-loop learning as
a competitive strategy. Unfortunately, it
appears that instances of double-loop learning
prove to be the exception rather than the
norm (Matlay, 1998).
Research sample and methodology
The research study upon which this article
is based took place during 1996-1998. It
was designed to combine three different
analytical approaches. First, it incorporated
a telephone survey of 6,000 organisations,
which were randomly selected from the
1996 edition of the Yellow Pages Business
Database of Great Britain. The telephone
survey achieved a response rate of 89 per
cent and collected a variety of quantitative
data on organisational learning. A sub-sample
of 600 owner/managers was selected for
in-depth, face-to-face interviews. The
qualitative data generated by these interviews
provided valuable insights into the learning
and knowledge management strategies
employed by small business owner/managers
in their quest for sustainable competitive
advantage. In addition, 60 matched case
studies were conducted in order to compare
and contrast learning-related processes and
their outcomes in closely matched growing,
stagnating and declining organisations.
The data generated by these research
methods were used to triangulate and
corroborate the overall results of the
wider study.
Size distribution and composition of the
research sample
The telephone survey involved a sample of
6,000 businesses, randomly selected from the
1996 edition of the Yellow Pages Business
Database of Great Britain. For standardisation
purposes, the European Commission's
(1996) size definition was used to provide the
basis for longitudinal analysis and
comparison. The research sample comprised
2,211 (36.85 per cent) manufacturing firms
and 3,789 (63.15 per cent) businesses from
the service sector (Table I). The research
sample was dominated by 5,383 (89.72 per
cent) micro-businesses that employed fewer
than ten individuals. The sectoral spread of
micro-businesses showed a significant
concentration in services (63.53 per cent)
while just over one third (36.47 per cent)
were manufacturing firms. There were 457
small businesses with a payroll of between 11
and 49 employees. Amongst these, 263
(57.55 per cent) operated in the service sector
and the balance of 194 units (42.45 per cent)
were active in the manufacturing sector. The
predominance of service organisations was
also noticeable amongst medium-sized and
large businesses: 87 and 19 respectively were
operating in this sector and 42 and 12 in
manufacturing. The size distribution of the
research sample closely reflected the overall
composition of the contemporary UK
economy (Matlay, 1998).
Before the interviews commenced, the
respondents were offered a working definition
of learning organisations, using terms familiar
to owner/managers. When asked whether they
belonged to a learning organisation, all the
owner/managers claimed to do so. Further
questions on the type and incidence of
learning in these firms confirmed the owner/
managers' claims (Table II). Only 2.36 per
cent of micro-businesses relied on formal
learning, as compared to 10.92 per cent of
small and 21.34 per cent of medium-sized
organisations. The number of firms reporting
formal means of learning increased in
proportion with their size. Similar trends were
observed in relation to mixed, formal and
informal learning ± only 13.80 per cent of
micro-businesses relied on this type of
learning. In small- and medium-sized
organisations, the incidence of mixed, formal
and informal learning increased to 21.97 per
cent and 38.79 per cent respectively.
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Harry Matlay
Table I Size distribution and composition of the research sample
Size band
Size definition
Number of
employees
A
B
C
D
Micro-business
Small business
Medium-sized
Large business
1-10
11-49
50-250
251+
Manufacturing
(n = 2,211)
Services
(n = 3,789)
1,963
194
42
12
3,420
263
87
19
Note: n = 6,000
Table II Type and incidence of organisational learning
Size band
Size definition
Number of
employees
Formal learning
(per cent)
Informal
learning
(per cent)
A
B
C
Micro-business
Small business
Medium-sized
1-10
11-49
50-250
2.36
10.92
21.34
83.84
67.11
39.87
The respondents were also questioned about
the locus of organisational learning in their
firms (Table III). In the majority of cases,
owner/managers were identified as the
gatekeepers of learning processes. In microbusinesses, 98.62 per cent of organisational
learning took place at owner/manager level
and in 12.81 per cent of firms other managers
were also involved in work-based learning
processes. Interestingly, in micro-businesses,
no other type of employee (unskilled, skilled
or semi-skilled) was mentioned in relation to
organisational learning. In contrast,
organisational learning in small businesses
involved owner/managers (97.25 per cent),
line managers (27.55 per cent) and skilled
employees (6.68 per cent). In medium-sized
firms, although owner/manager engagement
remained high (96.47 per cent), the
involvement of other categories of personnel
grew significantly: line managers (57.67 per
cent), skilled personnel (16.17 per cent) and
unskilled employees (4.34 per cent).
The quantitative data generated by
telephone interviews were validated by
the qualitative data obtained during 600
semi-structured, face-to-face interviews and
Mixed learning
Total
(per cent)
(per cent)
13.80
21.97
38.79
100.00
100.00
100.00
60 case studies. It appears that in micro- and
small businesses most work-based learning
was incidental and it occurred sporadically
throughout routine daily tasks. It would often
pass unnoticed and unrecorded. Only a
fraction of the knowledge generated by
organisational learning was communicated,
verbally or in writing, to owner/managers, line
managers or colleagues. Typically, ``incidental
knowledge'' was used short-term and mainly
within the narrow confines of individual
functions or jobs. This type of knowledge was
allowed to deteriorate or be replaced by newer
information, without due regard to quality or
relevance to wider issues. Employees faced
the choice of reacting to new situations or
trying to manage the influx of incidental
knowledge. Both choices were usually
compromised by time constraints and
customer pressures.
At owner/manager level, it often proved
more expedient to ignore the potential
benefits of organisational learning and opt for
short-horizon knowledge management
strategies. Time constraints and
administrative pressures significantly reduced
these owner/managers' ability to evaluate or
Table III The locus of organisational learning within the research sample
Band code
A
B
C
Number of
employees
Size definition
1-10
11-49
50-250
Micro-business
Small business
Medium-sized
Locus of organisational learning
Line
Skilled
Owner/manager
managers
employees
(per cent)
(per cent)
(per cent)
98.62
97.25
96.47
207
12.81
27.55
57.67
0.00
6.68
16.17
Unskilled
employees
(per cent)
0.00
0.00
4.34
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Harry Matlay
initiate learning-based business strategies. In
a few small businesses, learning processes
were intentional. These were the direct result
of proactive human resource strategies
designed to collect, manage and update
knowledge that would sustain and improve
competitive advantage. Importantly, a large
proportion of such ``intentional knowledge''
was recorded and communicated across the
firm. The perceived learning reciprocity and
unity of purpose also contributed positively to
the motivation and morale of the workforce.
Owner/managers in these firms encouraged
proactive learning processes and promoted
behaviour patterns that resulted in strategic
knowledge management throughout the
workforce. In their view, strategic knowledge
management contributed significantly to the
competitive edge and overall success of their
businesses.
In total, 60 businesses were matched up in
pairs of similar economic activity, age, size
and location. The impact of learning
strategies and knowledge management upon
organisational goals and outcomes was
analysed and compared using comparative
case study methodology. Significantly, all the
firms participating in matched interviews
reported considerable pressures arising from
an increase in demand attributed mainly to
favourable economic circumstances. Skill
shortages and hard-to-fill vacancies affected
both newer and long-established small firms.
Cumulatively, these difficulties seemed to
impair a firm's ability to respond to the
increase in demand for their products and
services. More importantly, there were
considerable delays in the fulfilment of
contractual obligations, and the overall
quality of goods and services as well as of
after-sale support was negatively affected.
Increased levels of economic activity
imposed steep learning curves in all the firms
in the sample. Managerial and supervisory
staff felt particularly under pressure by
growing demands upon their time, skills and
knowledge. Initially, owner/managers
attempted to cope with the growth in demand
by offering longer working hours rather than
through recruitment of additional personnel.
It soon became obvious, however, that
prevailing economic circumstances presented
significant opportunities for growth. Very few
respondents could ignore the growth potential
inherent in favourable macro-economic
conditions. Importantly, however, none of the
respondents in the sample was prepared for,
or could have sustained, demand-related
growth within the constraints of existing
human resource strategies.
During the initial growth period, firms that
exhibited incidental learning processes scored
short-term successes by working longer hours
in order to ``mop up'' the extra demand for
their products or services. As a short-term
strategy, incidental learning was less timeconsuming and more cost-effective than
intentional learning. In contrast, firms that
relied on intentional learning strategies were
slower and more deliberate in their efforts to
fulfil growing demand. In the medium- and
long-term, intentional learning processes
proved more successful in sustaining
competitiveness and organisational growth.
As a short-term solution, incidental learning
did not contribute significantly to
organisational growth, mainly due to its
limited effect upon human resource
development strategies. In contrast,
intentional learning influenced considerably
the direction, extent and delivery of a firm's
proactive human resource development
strategy.
Concluding remarks
Notably, all the 6,000 respondents who
participated in the telephone survey claimed
to belong to learning organisations. However,
much of the learning reported was incidental
and it occurred sporadically throughout
routine tasks. The frequency of formal
learning in these firms increased in direct
proportion to their size. The incidence of
mixed, formal and informal learning followed
similar patterns. Only a fraction of incidental
knowledge was communicated, verbally or in
writing, to other individuals or to the owner/
manager. In a minority of firms, learning
processes were intentional, aimed at
obtaining, managing and transferring new
knowledge that would promote and sustain
organisational competitiveness. Importantly,
most of the knowledge that emerged from
intentional learning was recorded and
disseminated to other employees.
Knowledge management ± in terms of
acquiring, transferring and using learningbased new information ± did not feature high
on the agenda of most of the small business
owner/managers in the sample. Furthermore,
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Harry Matlay
the implications for individual and collective
development inherent in knowledge
management eluded most owner/managers
who were too busy reacting to changes in the
market place. The short-term competitive
strategies of ``reactive'' owner/managers
ultimately resulted in the deterioration and
loss of much of the new knowledge acquired
through incidental learning in the workplace.
In contrast, ``proactive'' owner/managers used
intentional learning processes as part of
competitive strategies that relied significantly
upon planned individual and collective
development and effective knowledge
management.
The results of this research study confirmed
that learning, both incidental and intentional,
was taking place in most of the small
businesses in the sample. Importantly,
however, only a minority of small business
owner/managers managed learning and the
resulting knowledge in a proactive and
strategic way to sustain and advance their
competitive advantage.
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210
in small learning
organisations: an
empirical overview
Harry Matlay
The author
Harry Matlay is Reader in SME Development with
the University of Central England Business School,
Birmingham, UK.
Keywords
Learning organizations, Small firms,
Knowledge management, Strategy
Abstract
Much has been written, in recent years, on the subject of
learning organisations and knowledge-based businesses.
Most research in this area, however, focuses upon large
businesses. In this type of firm, it appears the concepts of
``organisational learning'' and ``learning organisation'' can
be, and often are, used interchangeably to describe
learning-based individual and collective development.
Until recently, issues relating to organisational learning
in small businesses were mostly ignored or marginalised.
This paper sets out to redress the balance. It reports a
study of organisational learning in the small business
sector of the UK economy. Research data, collected over
the 1996-1998 period, through telephone surveys, indepth interviews and case studies, were analysed through
quantitative and qualitative methods. The results indicate
that although learning can occur in the majority of small
businesses in the sample, only a minority of these manage
new knowledge strategically to sustain and advance their
competitive advantage.
Electronic access
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available at
http://www.emerald-library.com
Education + Training
Volume 42 . Number 4/5 . 2000 . pp. 202±210
# MCB University Press . ISSN 0040-0912
Introduction
``Learning organisations'' are currently the
focus of considerable academic and
practitioner attention. An abundance of
related literature has emerged, grounded in a
broad range of interrelated disciplines:
continuing professional development,
vocational education and training,
organisational theory, industrial economics,
economic history, business, management and
development studies (Matlay, 1998; Keep,
1997; Moingeon and Edmondson, 1996).
Furthermore, ``organisational learning'' has
been recognised as a valid research topic on
its own and is supported by a growing number
of dedicated academic and practitioner
journals.
The continuing popularity of ``learning
organisations'' can be attributed to a number
of pertinent factors. As a concept, learning
organisations first gained popularity amongst
high profile, innovative organisations that set
out to increase their market share through
highly successful, learning-based human
resource and knowledge management
strategies. In terms of sustainable competitive
advantage, these organisations proved more
responsive to technological and socioeconomic changes (Matlay, 1997, p. 3). The
publicity generated by these ``success stories''
propelled the concept of learning
organisations to the forefront of strategic
management thought (Dodgson, 1993;
Kanter, 1989). By the late 1980s, influential
academics, policy makers and practitioners
promoted organisational learning as a
strategic element in the quest for sustainable
business competitiveness (Moingeon and
Edmondson, 1996; Senge, 1990; Garratt,
1987). At the same time, the profound impact
that rapid technological change was having on
business activities highlighted the need for a
flexible and multi-skilled workforce.
Individuals at all levels of organisational
hierarchy were increasingly expected to learn
new and often radically different ways of
reacting to competitive pressures (Rothwell,
1992; Womack et al., 1990). As a dynamic
and integrative concept, organisational
learning was perceived to include analytical
and critical aspects that had the potential to
unify individual, team and corporate values
into highly successful competitive strategies.
Thus, the competitive advantage (both actual
and perceived) attributable to learning
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Harry Matlay
organisations is likely to further promote this
dynamic and multi-disciplinary concept.
Learning organisations
Origins and evolution
The origins of the ``learning organisation'' can
be traced back to the ``organisational
development'' movement of the late 1960s
and early 1970s (Matlay, 1998). As a
management tool, ``organisational
development'' was popular for about two
decades, a period during which it proved not
only fashionable but also revolutionary. In a
trend-setting mode, this school of
management promised to deliver a great deal
in terms of competitive advantage, during a
period of growing political uncertainty and
socio-economic change. Most contemporary
observers hailed it as the panacea to all the
problems and challenges posed by rapid
technological advances (Pedler, 1994).
However, as the pace of technological
innovation increased during the late 1970s
and early 1980s, it became obvious that the
extent and intensity of organisational change
had far exceeded the predictions of
contemporary economic forecasters. In a
growing number of innovative businesses,
knowledge management and support systems
proved inadequate in coping with the influx of
pertinent data. At most levels of
organisational hierarchy, employees were
increasingly called upon to deal with growing
volumes of internal and external information
mostly outside their control and expertise. As
a direct result, a new type of business
philosophy began to develop and take over
from the outdated organisational
development movement, one that placed
learning at the core of sustainable competitive
advantage (Starkey, 1996).
It should be noted that in the UK,
``organisational learning'' only gained wider
recognition with the notable success of Peter
Senge's The Fifth Discipline (Senge, 1990).
This widely acclaimed and much quoted book
ensured that the principles of organisational
learning and recommendations for its
implementation would reach a wide audience
that included, amongst others, academics,
policy-makers, business leaders, educators,
trainers, consultants and managers. Apart
from direct corporate benefits in terms of
competitive advantage, the organisational
learning movement also promised indirect
gains through its potential impact upon
educational, training and human resource
development paradigms (Matlay, 1998). Yet
more than 20 years later the theory and
practice of learning organisations remains
confused, fuzzy and difficult to penetrate or
implement (Scarbrough et al., 1998; Goh and
Richards, 1997; Hitt, 1996; Garvin, 1993).
Concepts and definitions
Even though the concept of organisational
learning has achieved prominence amongst
interested parties, considerable confusion still
exists in relation to the definition and use of
the term (Matlay, 1998). Most of the learning
organisation definitions available in a wide
range of relevant publications appear to be
complementary rather than fundamentally
original or conceptually different (Matlay,
1997). Pedler et al. (1991, p. 1) defined a
learning organisation in terms of continuous
transformation and improvement through the
learning activities of all its employees.
According to Dixon (1994, p. 5), continuous
organisational transformation can only take
place through intentional learning processes
at individual, group and system level. The
quality as well as the continuity of individual
and collective learning in an organisational
setting is deemed crucial to the development
of a learning organisation (Lank and Lank,
1995). However, de Geus (1998, p. 71),
points out that the ability of a workforce to
learn faster than their counterparts in other
organisations constitutes the only sustainable
competitive advantage at the disposal of a
learning organisation. It is generally agreed
that the primary focus of a learning
organisation should be the way in which it
values, manages and enhances the individual
development of its employees in order to
ensure its continuous transformation
(Scarbrough et al., 1998, p. 2).
Probst and Buchel (1997, p. 16) conclude
that there are considerable theoretical,
empirical and practical difficulties involved
in defining and mapping the learning
organisation in a way that is both conceptually
consistent and widely acceptable. There are
a number of approaches to defining
organisational learning. Generally, these
offer both a theoretical discussion of the
topic and a pragmatic view of its
practical implementation. Interestingly,
these approaches tend to emphasise a
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Harry Matlay
learning-based interaction between individual
employees and the organisation that employs
them (Pautzke, 1989: Morgan, 1986;
Hedberg, 1981). To add to the fuzziness of
definitional approaches, ``learning
organisation'' and ``organisational learning'' ±
as generic terms ± are often used
interchangeably (Romme and Dillen, 1997,
p. 68). The main argument is offered by
Weick (1991), who argues that these terms
are synonymous as both originate from the
psychological concept and usage of
``individual learning''. Typically, most
definitions relating to work-based learning are
linked to this basic analogy (see Argyris and
Schon, 1978).
The theory of learning organisations tends
to distinguish between two types of definition:
normative and descriptive. Normative
definitions identify specific prerequisites
which learning organisations must fulfil
(Pearn et al., 1995; Dixon, 1994; Senge,
1990; Bomers, 1989; Hayes et al., 1988). For
example, Garvin (1993, p. 81) decrees that a
learning organisation creates, acquires and
transfers knowledge in order to modify its
behaviour in line with competitive strategies.
Descriptive definitions acknowledge the fact
that all organisations learn, consciously or
otherwise (Kim, 1993; Levinthal and March,
1993). Work-based learning in learning
organisations is actively encouraged,
stimulated and rewarded, mostly as part of
specific human resource strategies (Matlay,
1997, 1998). Conceptually, it appears that
two important aspects distinguish learning
organisations from one another: first, the
relationship between individual and collective
learning and, second, the distinction between
single- and double-loop learning.
Learning in organisations: theory and
practice
Most influential writers on the topic of
learning organisations differentiate between
individual and collective learning (Romme
and Dillen, 1997; Huber, 1996). As larger
business entities rely upon the performance of
various categories of employee, work-based
individual learning becomes an important and
necessary condition of sustainable
competitive advantage. Collective learning in
this type of organisation takes place in
addition to learning processes occurring at
individual level. Importantly, however,
although collective learning can occur
independently of each individual, it cannot
take place if all the employees in an
organisation are prevented from learning
(Romme and Dillen, 1997; Kim, 1993). Both
individual and collective learning can be
significantly hindered by a multitude of stressrelated problems (Matlay, 1998). In small
businesses, the crucial role that owner/
managers invariably play in the daily
operation of their firms often results in
individual learning and development at
managerial level. As a direct result, the need
for collective learning is significantly reduced
or even displaced entirely (Matlay, 1999).
A learning organisation could also be
defined or measured in terms of the sum total
of accumulated individual and collective
learning (Hyland and Matlay, 1997). Indeed,
some pertinent research studies in this field
were based upon the detailed analysis of
learning practices and their effect upon
overall business competitiveness (Huber,
1991; Sterman, 1989). Learning at work can
be seen as a product of corporate values,
internal competition and personal ambitions
(Harrison, 1993). Organisational factors,
such as working conditions, management
styles and employee relations play an
important role in shaping learning and
knowledge management processes specific to
each business entity. It appears that only
fragments of the knowledge gained through
individual learning are actually recorded or
disseminated, either formally or informally,
for corporate use. Knowledge emerging from
collective learning is much more complete
and is usually recorded formally for corporate
access and benefit (Matlay, 1997, p. 4).
Some commentators stress the conflict of
interest that can exist between individual and
organisational learning (Probst and Buchel,
1997; Starkey, 1996). It appears that those
researchers who favour personal development
also recommend the acquisition of
``transferable'' skills. This is more likely to be
the case in large organisations with internal
labour markets that offer opportunities for
both personal development and corporate
progression (Thomson and Mabey, 1994). It
is now widely acknowledged that that microand small businesses do not offer
development opportunities commensurable
with those of larger organisations (Storey,
1994). Progression is very limited and
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Harry Matlay
Education + Training
Volume 42 . Number 4/5 . 2000 . 202±210
employees are more likely to leave
employment and start their own firms
(Matlay, 1996). Consequently, small business
owner/managers prefer their employees to
acquire firm-specific, non-transferable
knowledge, which is both easier to manage
and curtails individual opportunities in the
external labour market (Matlay, 1998).
Work-based learning is closely controlled by
small business owner/managers who fear that
their competitors would poach their key
employees. Bomers (1989) argues that
organisational learning is most likely to be
handicapped in organisations where most of
the knowledge and skills are dependent upon
fewer individuals. As most small businesses
fall into this category, organisational learning
in this type of firm is likely to occur
sporadically, as a reactive strategy, rather than
as a proactive drive to enhance the quality of
the workforce (Matlay, 1997; Kim, 1993).
Carley's (1992) concept of ``learning
deterioration risks'' through employee
turnover placed organisational learning in the
context of hierarchical structures and their
effect upon knowledge acquisition,
management and transfer. The complex
hierarchical structures exhibited by larger
organisations renders them less vulnerable to
personnel turnover and related skills drainage.
Conversely, small firms, with simpler and
flatter managerial structures, are more at risk
from staff turnover and related knowledge
deterioration and loss. In larger organisations,
new knowledge and skills are routinely
transferred to line managers and management
teams. Hierarchical organisations also lose
some knowledge as it is filtered through
complex communication channels across
various structural levels. In order to minimise
learning deterioration risks through personnel
turnover, organisations need to maintain
reasonably complex hierarchies and internal
markets. However, some researchers found
that complex hierarchical forms tend to
hinder individual as well as collective learning
taking place in organisations of all sizes
(Romme, 1996; Pedler et al., 1991; Mills,
1991). Furthermore, the emergence, in recent
years, of leaner and flatter organisations did
not significantly affect the quantity, quality or
intensity of organisational learning (Matlay,
1997; 1998).
Leavitt and March (1988) argue that
experiential learning forms an important part
of work-based knowledge acquisition.
Instances of individual learning from daily
activities have been documented in most
learning organisations, regardless of their size
or type of economic activity. Similarly, where
learning curves were used to monitor
individual development, these provided
evidence of intended, incidental or accidental
learning (Matlay, 1998). This type of learning
generates knowledge mainly from ``trial-anderror'' decision-making processes.
Experiential learning is seen to make a
significant contribution to the knowledgebased competitive strategies of fast growing
organisations (Porter, 1980; 1985). An
organisation's cumulative knowledge
embodies much of its competitive advantage.
Knowledge-based competitive advantage is
unique to each organisation and cannot be
replicated by other firms (Barney, 1986).
With the advent of globalisation,
organisations are increasingly forced to
operate within a highly competitive ``global
village''. Knowledge acquisition, management
and transfer strategies are currently viewed as
the most important differential at the disposal
of an organisation in its quest for sustainable
competitive advantage (Matlay and Fletcher,
2000).
Conceptually, a distinction is sometimes
made between ``single-loop'' and ``doubleloop'' learning (e.g. Hatch, 1997; Fisher and
Torbert, 1995; Rein and Schon, 1994;
Argyris, 1994). Single-loop learning involves
trial-and-error situations that result in the
consolidation or correction of existing
organisational processes. According to Fiol
and Lyles (1985), single-loop learning is
mostly encountered in organisations that
incorporate repetitive or routine procedures.
Paradoxically, however, this type of learning
is less effective at unskilled or semi-skilled
levels (Fisher and Torbert, 1995). In
Morgan's (1986) view, single-loop learning
mostly involves causal inferences related to
actual or probable errors, the correction of
which might alter the knowledge base of an
organisation. Conversely, double-loop
learning involves evolutionary changes in the
operational rules that underline organisational
activities (Rein and Schon, 1994; Argyris,
1990; 1992). In this context, cognitive
processes and insights generate new frames of
reference and effective decision-making
processes (Argyris, 1994).
It appears that the vast majority of large
organisations rely upon single-loop learning
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Harry Matlay
and that instances of double-loop learning are
relatively rare (Senge, 1990). March (1997,
p. 371) explains this behavioural pattern by
arguing that the budgetary controls favoured
by larger organisations tend to compare actual
to expected outcomes and subsequent target
deviations are recorded as variances.
Budgetary feedback generates single-loop
learning based upon analysis of previous
actions, using the resulting knowledge to
improve future performance. Most small
business owner/managers prefer informal
management styles that rely heavily upon
their perception and evaluation of previous
outcomes. Single-loop learning tends to
reinforce an owner/manager's need to control
most, if not all, aspects of organisational
activity. Only a small number of owner/
managers in growth-oriented, small
businesses rely upon double-loop learning as
a competitive strategy. Unfortunately, it
appears that instances of double-loop learning
prove to be the exception rather than the
norm (Matlay, 1998).
Research sample and methodology
The research study upon which this article
is based took place during 1996-1998. It
was designed to combine three different
analytical approaches. First, it incorporated
a telephone survey of 6,000 organisations,
which were randomly selected from the
1996 edition of the Yellow Pages Business
Database of Great Britain. The telephone
survey achieved a response rate of 89 per
cent and collected a variety of quantitative
data on organisational learning. A sub-sample
of 600 owner/managers was selected for
in-depth, face-to-face interviews. The
qualitative data generated by these interviews
provided valuable insights into the learning
and knowledge management strategies
employed by small business owner/managers
in their quest for sustainable competitive
advantage. In addition, 60 matched case
studies were conducted in order to compare
and contrast learning-related processes and
their outcomes in closely matched growing,
stagnating and declining organisations.
The data generated by these research
methods were used to triangulate and
corroborate the overall results of the
wider study.
Size distribution and composition of the
research sample
The telephone survey involved a sample of
6,000 businesses, randomly selected from the
1996 edition of the Yellow Pages Business
Database of Great Britain. For standardisation
purposes, the European Commission's
(1996) size definition was used to provide the
basis for longitudinal analysis and
comparison. The research sample comprised
2,211 (36.85 per cent) manufacturing firms
and 3,789 (63.15 per cent) businesses from
the service sector (Table I). The research
sample was dominated by 5,383 (89.72 per
cent) micro-businesses that employed fewer
than ten individuals. The sectoral spread of
micro-businesses showed a significant
concentration in services (63.53 per cent)
while just over one third (36.47 per cent)
were manufacturing firms. There were 457
small businesses with a payroll of between 11
and 49 employees. Amongst these, 263
(57.55 per cent) operated in the service sector
and the balance of 194 units (42.45 per cent)
were active in the manufacturing sector. The
predominance of service organisations was
also noticeable amongst medium-sized and
large businesses: 87 and 19 respectively were
operating in this sector and 42 and 12 in
manufacturing. The size distribution of the
research sample closely reflected the overall
composition of the contemporary UK
economy (Matlay, 1998).
Before the interviews commenced, the
respondents were offered a working definition
of learning organisations, using terms familiar
to owner/managers. When asked whether they
belonged to a learning organisation, all the
owner/managers claimed to do so. Further
questions on the type and incidence of
learning in these firms confirmed the owner/
managers' claims (Table II). Only 2.36 per
cent of micro-businesses relied on formal
learning, as compared to 10.92 per cent of
small and 21.34 per cent of medium-sized
organisations. The number of firms reporting
formal means of learning increased in
proportion with their size. Similar trends were
observed in relation to mixed, formal and
informal learning ± only 13.80 per cent of
micro-businesses relied on this type of
learning. In small- and medium-sized
organisations, the incidence of mixed, formal
and informal learning increased to 21.97 per
cent and 38.79 per cent respectively.
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Harry Matlay
Table I Size distribution and composition of the research sample
Size band
Size definition
Number of
employees
A
B
C
D
Micro-business
Small business
Medium-sized
Large business
1-10
11-49
50-250
251+
Manufacturing
(n = 2,211)
Services
(n = 3,789)
1,963
194
42
12
3,420
263
87
19
Note: n = 6,000
Table II Type and incidence of organisational learning
Size band
Size definition
Number of
employees
Formal learning
(per cent)
Informal
learning
(per cent)
A
B
C
Micro-business
Small business
Medium-sized
1-10
11-49
50-250
2.36
10.92
21.34
83.84
67.11
39.87
The respondents were also questioned about
the locus of organisational learning in their
firms (Table III). In the majority of cases,
owner/managers were identified as the
gatekeepers of learning processes. In microbusinesses, 98.62 per cent of organisational
learning took place at owner/manager level
and in 12.81 per cent of firms other managers
were also involved in work-based learning
processes. Interestingly, in micro-businesses,
no other type of employee (unskilled, skilled
or semi-skilled) was mentioned in relation to
organisational learning. In contrast,
organisational learning in small businesses
involved owner/managers (97.25 per cent),
line managers (27.55 per cent) and skilled
employees (6.68 per cent). In medium-sized
firms, although owner/manager engagement
remained high (96.47 per cent), the
involvement of other categories of personnel
grew significantly: line managers (57.67 per
cent), skilled personnel (16.17 per cent) and
unskilled employees (4.34 per cent).
The quantitative data generated by
telephone interviews were validated by
the qualitative data obtained during 600
semi-structured, face-to-face interviews and
Mixed learning
Total
(per cent)
(per cent)
13.80
21.97
38.79
100.00
100.00
100.00
60 case studies. It appears that in micro- and
small businesses most work-based learning
was incidental and it occurred sporadically
throughout routine daily tasks. It would often
pass unnoticed and unrecorded. Only a
fraction of the knowledge generated by
organisational learning was communicated,
verbally or in writing, to owner/managers, line
managers or colleagues. Typically, ``incidental
knowledge'' was used short-term and mainly
within the narrow confines of individual
functions or jobs. This type of knowledge was
allowed to deteriorate or be replaced by newer
information, without due regard to quality or
relevance to wider issues. Employees faced
the choice of reacting to new situations or
trying to manage the influx of incidental
knowledge. Both choices were usually
compromised by time constraints and
customer pressures.
At owner/manager level, it often proved
more expedient to ignore the potential
benefits of organisational learning and opt for
short-horizon knowledge management
strategies. Time constraints and
administrative pressures significantly reduced
these owner/managers' ability to evaluate or
Table III The locus of organisational learning within the research sample
Band code
A
B
C
Number of
employees
Size definition
1-10
11-49
50-250
Micro-business
Small business
Medium-sized
Locus of organisational learning
Line
Skilled
Owner/manager
managers
employees
(per cent)
(per cent)
(per cent)
98.62
97.25
96.47
207
12.81
27.55
57.67
0.00
6.68
16.17
Unskilled
employees
(per cent)
0.00
0.00
4.34
Organisational learning in small learning organisations
Education + Training
Volume 42 . Number 4/5 . 2000 . 202±210
Harry Matlay
initiate learning-based business strategies. In
a few small businesses, learning processes
were intentional. These were the direct result
of proactive human resource strategies
designed to collect, manage and update
knowledge that would sustain and improve
competitive advantage. Importantly, a large
proportion of such ``intentional knowledge''
was recorded and communicated across the
firm. The perceived learning reciprocity and
unity of purpose also contributed positively to
the motivation and morale of the workforce.
Owner/managers in these firms encouraged
proactive learning processes and promoted
behaviour patterns that resulted in strategic
knowledge management throughout the
workforce. In their view, strategic knowledge
management contributed significantly to the
competitive edge and overall success of their
businesses.
In total, 60 businesses were matched up in
pairs of similar economic activity, age, size
and location. The impact of learning
strategies and knowledge management upon
organisational goals and outcomes was
analysed and compared using comparative
case study methodology. Significantly, all the
firms participating in matched interviews
reported considerable pressures arising from
an increase in demand attributed mainly to
favourable economic circumstances. Skill
shortages and hard-to-fill vacancies affected
both newer and long-established small firms.
Cumulatively, these difficulties seemed to
impair a firm's ability to respond to the
increase in demand for their products and
services. More importantly, there were
considerable delays in the fulfilment of
contractual obligations, and the overall
quality of goods and services as well as of
after-sale support was negatively affected.
Increased levels of economic activity
imposed steep learning curves in all the firms
in the sample. Managerial and supervisory
staff felt particularly under pressure by
growing demands upon their time, skills and
knowledge. Initially, owner/managers
attempted to cope with the growth in demand
by offering longer working hours rather than
through recruitment of additional personnel.
It soon became obvious, however, that
prevailing economic circumstances presented
significant opportunities for growth. Very few
respondents could ignore the growth potential
inherent in favourable macro-economic
conditions. Importantly, however, none of the
respondents in the sample was prepared for,
or could have sustained, demand-related
growth within the constraints of existing
human resource strategies.
During the initial growth period, firms that
exhibited incidental learning processes scored
short-term successes by working longer hours
in order to ``mop up'' the extra demand for
their products or services. As a short-term
strategy, incidental learning was less timeconsuming and more cost-effective than
intentional learning. In contrast, firms that
relied on intentional learning strategies were
slower and more deliberate in their efforts to
fulfil growing demand. In the medium- and
long-term, intentional learning processes
proved more successful in sustaining
competitiveness and organisational growth.
As a short-term solution, incidental learning
did not contribute significantly to
organisational growth, mainly due to its
limited effect upon human resource
development strategies. In contrast,
intentional learning influenced considerably
the direction, extent and delivery of a firm's
proactive human resource development
strategy.
Concluding remarks
Notably, all the 6,000 respondents who
participated in the telephone survey claimed
to belong to learning organisations. However,
much of the learning reported was incidental
and it occurred sporadically throughout
routine tasks. The frequency of formal
learning in these firms increased in direct
proportion to their size. The incidence of
mixed, formal and informal learning followed
similar patterns. Only a fraction of incidental
knowledge was communicated, verbally or in
writing, to other individuals or to the owner/
manager. In a minority of firms, learning
processes were intentional, aimed at
obtaining, managing and transferring new
knowledge that would promote and sustain
organisational competitiveness. Importantly,
most of the knowledge that emerged from
intentional learning was recorded and
disseminated to other employees.
Knowledge management ± in terms of
acquiring, transferring and using learningbased new information ± did not feature high
on the agenda of most of the small business
owner/managers in the sample. Furthermore,
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Volume 42 . Number 4/5 . 2000 . 202±210
Harry Matlay
the implications for individual and collective
development inherent in knowledge
management eluded most owner/managers
who were too busy reacting to changes in the
market place. The short-term competitive
strategies of ``reactive'' owner/managers
ultimately resulted in the deterioration and
loss of much of the new knowledge acquired
through incidental learning in the workplace.
In contrast, ``proactive'' owner/managers used
intentional learning processes as part of
competitive strategies that relied significantly
upon planned individual and collective
development and effective knowledge
management.
The results of this research study confirmed
that learning, both incidental and intentional,
was taking place in most of the small
businesses in the sample. Importantly,
however, only a minority of small business
owner/managers managed learning and the
resulting knowledge in a proactive and
strategic way to sustain and advance their
competitive advantage.
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