Scholars continue to acknowledge that more study is required to not only define and conceptualise the learning organisation but to produce a body of knowledge that can address the effective implement issues which currently affect those organisations seeking to tie its implementation with increased performance. (Schein, 1996; De Geus, 1997; Garvin, 2000; Argyris, 2004). Marr and Spender explicitly expressed the problem for academic writers, which results in a problematic relationship with practitioners, when they stated that while many corporations had accepted knowledge was becoming an ever more vital strategic asset, indeed for some sectors perhaps even the main source of competitive advantage. This view was not enabled due to an inability to realise this belief on the ground. Even if academics were to produce a commonly accepted definitional and conceptual framework for learning, the application test for practitioners would still persist (2004).
While inventive perceptions into learning theory do appear from academia, lessons from operation also offer a useful source of advancement. Garvin (2000) accepted that the extensive work associated with the implementation of the learning organisation sits with those given responsibility for its realization. There are considerable operational challenges for any organisational program of extensive scope and this becomes exaggerated when dealing with initiatives seeking to advance towards the concept of the learning organisation as they are so difficult to measure effectively. This review will evidence that the current literature shows some advances towards an enhanced understanding of the learning organisation and additional some useful knowledge in relation to its potential effects on organisational financial performance.
In this literature review, a definitional outline is presented that evidences that despite more than four decades as a viable area of academic research, an effectual definition of the learning organisation has proved difficult to produce. Epistemological constructions of the learning organisation have been increasingly suggested but remain peripheral. While collective acknowledgment of the matters related with difference has informed the search for a more unifying learning hypothesis. A continued interest by academic writers in definition similarity is discussed and corrective approaches are considered.
There are potentially considerable costs for an organisation if it is unable to manage and assimilate change transformations. And related to the successful implementation of change is learning, with many writers suggesting that a vital part of any successful change management initiative is learning. The consequences of enhanced organisational learning and the development of the learning organisation when managing change in an environment of ever increasing global change and the literature linking the two are discussed later in this review.
Given the range of choices available to senior management when considering the next organisational performance program, it is vital that a persuasive business case exists supporting the implementation of learning organisation initiatives if they are to be selected above other, perhaps more conceptual defined packages. Thus business leaders will require data to inform their decisions when selecting from the range of suggestions when each purports to hold the promise of enhanced organisational performance. Given this it is truly unfortunate that there is an acknowledged shortage of experimental research to support or challenge the suggested value of learning. As will be stated in this review, there continues to be a need for more empirical information relating to the learning organisation and the potential worth offered by the learning organisation is revised, with a particular section addressing its value in connection with enhanced financial performance.
One noticeable constant over the period of scholarly interest in the area of organisational learning has been interest and inquiry into the concept of action research. Most early and influential thinkers in the field of learning, organisational learning and the learning organisation were also occupied with the concept of action research. The initial investigative link has been continued and extended by contemporary researchers. In this review elements of current action learning research will be considered for relevance to the challenges threatening contemporary organisations and learning action necessities are reviewed with organisational paradigms.
Organisational learning and the learning organisation – issues of definition
Argyris provided an initial definition for organisational learning which considers the action as a series of reactions to various inputs when he states that "Organisational learning is a process of detecting and correcting error" (1977; p. 116). The study of this tendency to advance from simple reactive responses and to correct for more beneficial results has stimulated learning research for many years and continues to provoke inquiry.
Argyris and Schön (1974) developed the concepts of Model I and Model II theories-in-use which then formed the basis for their investigations with organisational learning, learning organisations and action research. The importance of this work to the field can be seen as it is still being actively explored by modern academics such as; Eraut, 2000; Dealtry, 2005; Lopez, et al, 2005; Turner, et al, 2006). Another building on the earlier concepts Zuber-Skerritt (2005) who has endeavoured to identify the characteristics mutual to both action research and action learning. This work further reflects the continued research into a subject to unify theory and practice that was an influential part of the early years of learning research.
Argyris (1996) has updated his work on the theories-in-use as the guides which govern behaviour. Employees and organisations operating under Model I use simplistic feedback correction loops known as single-loop learning. Alternatively, Model II structures use double-loop learning feedback which enables more informed actions. Unfortunately in seeking to improve organisational performance most researchers still propose that many organisations function with Model I theories-in-use. Eraut (2002) stated that limited perception yields insufficient organisational responses to modern environmental challenges. According to Eraut the deep-rooted Model I constructs can only be displaced and exchanged if organisations undertake a programme which involves a real pursuit for feedback, which is the activity that differentiates Model II learning from less productive methods.
Knowledge sharing, an important element required for effective organisational learning, is less likely to occur without an organisational focus on communication. According to McAleese and Hargie (2004) communication needs to be raised to the correct level of importance in the organisation. But organisations operating with Model I theories-in-use enable only limited communication. Action learning, of the type suggested by Argyris (2002), seeks to merge the concept of learning with that of action. For organisational knowledge to grow, innovative concepts must be communicated within and across organisational functional units. If business leaders have the expectation that organisational learning must be enabled then the environment must support Model II learning which is a concept dependent upon an environment supporting inter-team knowledge sharing.
However, despite it being widely accepted by both academics and practitioners that Model II learning is a requirement of the modern organisation, Argyris (1996) and others still maintain that Model I learning accounts for much of the deficient environments found in unsuccessful organisations. Argyris has asserted that leaders continue to employ insufficient approaches for realising effective learning initiatives. While many large organisations maintain internal learning development departments or corporate universities (such as Motorola and McDonalds) to deliver formal instruction they do so in a many that does not produce learning that drives business performance. Dealtry (2005) highlighted the fundamental importance of integrating Model II learning principles into the working structures of these corporate universities. By assimilating Model II models into this learning development activities as well as throughout functional departments, the organisation further emphasise its commitment to learning in relation to improved performance.
Since Model II learning is thought to be superior to Model I for multifaceted analysis, why do organisations continue with single-loop operations rather than adopting double-loop systems? This question can be partially answered by considering the complexity and costs related with the implementation of double-loop learning initiatives. As is often seen to be the case when attempting to operationalize a concept that is thought to bring with it both performance advantage and effectiveness its bedfellow is complexity and an inability to measure its return effectively. Argyris (2002) stated that many organisations which embrace the concepts of double-loop learning are unable to produce it, due to being blind to their incompetence and are unaware of that blindness. He goes further to claim that this is so common as to be a recognisable anti-learning pattern. The anti-learning weaknesses of organisations prevent the understanding required to implement and sustain double-loop learning systems.
The work of Argyris and Schön has been the basis of organisational learning scholarship virtually since its inception and seem likely to continue to influence researchers over the coming years. The continued claims for the positive qualities of the learning organisation and action-imparted learning, will encourage researchers to continue to examine organisational learning. And, as more evidence is provided to support the benefits of knowledge development and sharing, practitioners will have abundant interest in proposing organisational learning programs as the answer to performance improvements in difficult operational environments. This will be particularly the case as empirical support increases in relation to learning projects and organisations can more positively make decisions about learning initiatives.
Organisational learning and the learning organisation – Evolving thoughts
In order to establish a definitional basis for organisational learning, Fiol and Lyles (1985) suggested it was a process of thought attempted to improve the actions of an organisation by developing knowledge and understanding. The authors, however, do acknowledge the problem of distinguishing learning from change which can occur spontaneously and not as a result of design. Their belief is that accidental learning is no alternative to deliberate and methodical improvements to organisational learning in its pursuit of sustainable performance improvements.
To identify areas of agreement and to distinguish variances among dominant positions, Fiol and Lyles (1985) suggested four circumstantial factors required for effective organisational learning to occur. The likelihood that learning will occur is affected by the presence and quality of these factors; a corporate culture favourable to learning, strategy that countenances flexibility, a structure that permits both innovation and vision, and the environment. Reflecting on these factors we can see that for Fiol and Lyles the learning organisation is deeply affected by organisational culture and therefore dependent upon it.
Unfortunately, for those organisational leaders seeking to do so, establishing a positive learning culture is one of the most challenging facets of an organisational learning program. Bartlett and Ghoshal (1998) have suggested that the most difficult part of establishing a learning organisation is the creation of a culture where individuals share information. This is particular so in a working environment where it is often the case that knowledge is a major source of individual, team or functional power. But even though a culture of knowledge sharing can be a difficult thing to initiate it must be assimilated into the organisational values for learning to grow and for the performance benefits to accumulate. Without knowledge sharing and transfer organisational learning can still occur accidentally but supportable learning requires planning. Pham and Sweirczek (2006) argue that organisational leaders, when they are truly acting as leaders should, will approve and promote a culture that stimulates knowledge sharing and mutual learning. The organisational values must unmistakably support, acknowledge and voice the value of learning in order to support its growth and influence on performance.
Organisational learning and the learning organisation – Culture
In its simplest form culture can be considered as a collection of accepted assumptions commonly held within a group that are not just held by the existing members but which will also be imparted to those that join the group (Schein, 1990). Within the learning organisation knowledge sharing, between individuals, teams and functions, is seen to be a necessary cultural norm. In relation to this Kumar (2005) states that such a cultural conceit must be allied to operational processes and structure so as to enable the flexible nature of learning as it is transferred from the individual, to the team, and then to the broader organisation. In this way Kumar believes that for an organisation to be truly described as a learning organisation everyone in that organisation needs to be connected. A culture that promotes the transmission of learning and knowledge across and between organisational lines, in a way that successfully eliminates perceived organisational restrictions, is a mark of a learning organisation.
Other scholarship, such as the work of Fang and Wang (2006) has agreed with Fiol and Lyles' in that the cultural element of learning is indispensable to performance. This is because learning and culture have the ability to boost competitiveness and therefore should be added to any list of areas which are thought to have the potential to create competitive advantage and improve performance, such as business models, organisational structure, and management style.
In order to produce a culture which supports and drives learning an understanding of, and commitment to, learning initiatives must pervade the entire organisation. Trust in the value of the learning initiatives must be, and be seen to be, present in the senior management, however, it is also important that all levels in the organisation have a shared enthusiasm to knowledge sharing and individual learning, as top down learning directives do not create conditions where a true learning organisation can grow. According to Power and Waddell (2004) learning initiatives which are developed in organisations without suitable cultural backing have a significantly reduced likelihood of success. To develop into a learning organisation it is necessary for culture and learning to be integrated. However in real organisations it is often the case that organisational learning and culture can be seen to be in contention.
Organisational learning organisation and the learning organisation - Change
Marquardt and Reynolds (1994) stated that the modern business environment is global, chaotic, and extremely competitive. Large organisations operating today have to operate in global markets and face radically new challenges. Competition comes not only from national rivals within an internal marketplace but from the best organisations across the world. These organisations are required not only to survive but also to grow and deliver sustainable returns to investors in a continually changing marketplace. Alterations in products and situations are requiring organisations to increase learning abilities. The aptitude for organisations to assimilate new knowledge must grow if they are to flourish in the modern business climate.
Loermans (2002) emphasised the importance of active and motivated organisational learning in order to accommodate the forces of an evolving environment. The proposition was that change in the global business environment required rapid learning, and with the rate of change continuing to intensify, there is increasing pressure on learning at the organisational level. As a result of enhanced changes in the global marketplace, consumer expectations have required organisations to offer improved products. Prahalda and Hamel suggest that if organisations are to compete on a global scale and provide value to their customers, they must introduce a culture of continuous improvement which can only be empowered by learning (1994).
Cohen and Levinthal (1990) identified learning as a decisive aspect of an organisation's ability to absorb and process data in a manner critical to better decision-making. They refer to this ability to absorb capacity as being critical to an organisation in its effort to innovate. Absorptive capacity typifies the ability to identify the importance of new knowledge, integrate it, and apply it for performance improvement and financial gain. As the margin for organisational mistakes grows ever smaller due to increased competition, companies need to consider the potential of a low level of absorptive capacity in their decision-making processes.
Organisations with lesser absorptive capacities are seen as underprepared when seeking to integrate rapidly changing information and apply this new knowledge for performance enhancement or competitive advantage. Schein (2000) also asserted the importance of creativity and originality when functioning within the contemporary business environment. He states that the capacity to create new organisational forms, structures and processes, and to innovate in both technical and organisational spheres, is becoming an increasingly vital aspect of an organisations ability to remain competitive.
Organisational learning and the learning organisation - Value
Striking and persuasive arguments for the effectiveness of the learning organisation have been suggested by an selection of academic writers such as; Argyris & Schön, 1974; Senge, 1990; Nonaka, 1991; Schein, 1993; Garvin, 2000 and as a consensus gathered for the value of learning to an organisation, so outlay on learning development initiatives increased. Many organisations are continuing with learning initiatives despite what other scholars would see as an absence of research to support a business validation. But what is required in this area is the continued work of academic writers in this area as it is only with the increase in meaningful data to knowledge about the learning organisation that practitioners will be able to advance proposals to organisational leaders which correctly allows them to allocate financial support for knowledge initiatives that will drive organisational performance and bottom-line improvements.
While convincing statements have been offered, there remains a prospect for applicable research to support the value intentions of academics in learning organisation theory. Ellinger et al. (2002) recognised a central issue challenging supporters of learning programs when he drew attention to the fact that organisations that adopt the strategies associated with a learning organisation are supposed to achieve improved performance. This was that few empirical studies have studied the relationship between learning organisation theory and an organisation's financial performance and that without a business case linking learning to improved financial performance, other functional improvement initiatives with a more identifiably positive financial return will likely be taken up by organisational leaders.
However, even though empirical data is still lacking, the list of academic writers willing to advocate the learning organisation as a route to enhanced financial performance continues to grow. King (2001) stated that organisations committed to learning can convert new knowledge into financial performance improvement and a learning organisation can be considered as one that emphases on developing and processing data to improve financial results. Ellinger et al. (2002), stated a progressive relationship between learning and financial performance was required to lend credibility to the business case for acceptance of learning organisation practices. More work is required to collect satisfactory data concerning the associations between learning and financial performance and when managed and executed properly, learning initiatives may offer important financial benefits to a company. Further work by Kaleka and Berthon (2006) proposed that organisational learning performs a significant function in relation to financial performance through an organisation’s enhanced ability to evaluate new information, make more rapid decisions and grow financial returns.
Despite some of the reservations around the lack of empirical support a substantial share of academic writers suggest that attention to the concepts of the learning organisation has the potential to generate positive financial improvements. Vat (2006) accepted that while the deficiencies of some of the learning organisation research has to be acknowledged it is still very much the case that the organisations which will outdo their competitors will be those that realise how to exploit their employees’ ability to learn. So despite some of the doubts learning proposition that involves all organisational levels offers a persuasive argument.
More organisational leaders seem to be accepting of the possibility of the enhanced performance possibilities offered by superior learning alignment. Ketter (2006) asserted that the recognition of learning value by organisational leaders provides a understanding framework for human resource development management to promote organisational learning initiatives. Where senior management recognise learning as an essential driver of organisational performance, this assists development specialists to run the learning function with a clear appreciation of its potential influence on business performance.
Learning supports organisations to more successfully determine unstable market conditions and adjust as required. Jantunen (2005) determined that organisations with a strong commitment to learning refresh their products on a more regular basis, resulting merchandise that is more aligned with market conditions, creating increased sales and enhanced profits. In addition, Jantunen suggests that organisations with better developed knowledge sharing and transition abilities are able to reinvigorate and exploit the corporate assets already in place to develop products required by new markets. Without exact knowledge processing and transference procedures used to attain and assimilate new information, organisations are less able to use current knowledge for competitive advantage and enhanced financial performance.
While the value of a learning orientation within an organisation is widely acknowledged there remains an acceptance that there is room for a further significant academic contribution to create a collection of research aimed at recognising and operationalizing the association between the learning orientation and financial performance (Baker and Sinkula, 1999; Sørensen, 2002). Convincing financial confirmation of the value of learning could provide practitioners with necessary information to develop the learning orientation of their organisations. This remains a requirement as without a conclusive business case, strengthened by quality research, organisations are will continue to resist investing scarce resources in initiatives to work towards the implementation of the learning organisation concept.
Organisational learning and the learning organisation - Action
The concept of theory and practice unified as advocated by Argyris and Schön (1974) is much more easily offered than applied. Assimilating theory with action successfully has exasperated academics and practitioners for many years. The value of knowledge transition and learning remains largely untouched unless rendered into actionable outcomes. Praising the accord of knowledge with action, Spender (2005) proposed that obtaining value from knowledge management means developing the way new knowledge is transferred into becoming part of the organisation’s practices, for value is truly only added to the organisation through a change in practice. To experience the advantages of the learning organisation the intellective improvements are required to be transported into viable action.
Acknowledgements of the prospects in learning research are substantial and academics have much to undertake to provide practitioners with satisfactory data on the value of learning organisations. Garvin (1993) identified that scholars needed to accept some of the responsibility for the deficiencies in the understanding of and capacity of practitioners to implement learning organisation theory and this continues to be the case. Other scholars have pointed out the utopian nature of much of the research discussions around the concept of the learning organisations as unhelpful in seeking to advance the theory in a practically useful way.
More work is clearly needed by the academics to develop actionable hypotheses and to gather persuasive empirical data explaining the benefits of the learning organisation. Garvin (1993) described the path proposed researchers as naïve and without of an agenda grounded in realistic action and offered a criticism by referring to theory based commendations as far too abstract, leaving too many questions to be muddled over by those responsible for implementation.
Dick (2006) accepts there has been an unacceptable distance between theory and action in the field of organisational learning but trusts that implementation and research are becoming more closely associated and will continue to grow closer. He concedes, however, that although steps have been taken to theoretically align concepts with implementation issues the field has found real progress in this area difficult to achieve. As a result more research is required to analyse and formulate theories based on observations which can lend credence to the suggestion that the learning organisation is a route to enhanced organisation performance.
Organisational learning and the learning organisation - Measurement
In agreement with Garvin's remarks and Dick’s request for more research, this review has found there continues to be inadequate research evidencing the benefits of the learning organisation to organisational performance and financial outcomes in particular. For the benefit of learning initiatives to be fully recognised the collection of empirical evidence needs to increase. A helpful methodology to assist this can be found in the work of Watkins and Marsick (1999). The authors operationalise seven concepts that they suggest need to be present in a learning organisation and from this create the Dimensions of the Learning Organisation Questionnaire (DLOQ).
In addition to the efforts on the part of Watkins and Marsick to promote and validate usage of the DLOQ, it has been used in a number of studies by other researchers in a variety of contexts. This includes the work of McHargue (2003); Yang et al 2004; Davis, 2005; Dymock 2006; Lien, et al 2006; and Rose et al, 2006. Davis (2005) used the DLOQ to evaluate learning in firms as profiled by marketing and human resources staff. While Dymock and McCarthy (2006) confirmed the usability of the DLOQ in an Australian manufacturing company.
So as the learning organisation field continues to mature, the metrics for assessment are being developed. Ketter (2006) has stated that incorporation of strategic knowledge initiatives into long range outlooks is creating the valuable information required to assess organisational learning effectiveness. In addition as the learning and development function becomes more assimilated with organisational strategy, the types of measurements available to are increasing. Learning and development specialists need to continue to appraise which measurements best evidence the value the learning initiatives with the same exactness as the financial measures used to regulate value in other business functions.
In addition to measurement processing the organisational culture must enhance and value data generation, collection, reporting and transmission. Hammer et al. (2007) highlighted how important is a supportive organisational culture and how accurate valuation and hence more informed decision-making are vital tools to sustain an organisational learning strategy. As new measurement mechanisms are developed, it is important that organisational leaders confirm processes are able to manage the data and that the culture is encouraging to measurement improvement and reporting.
Each of the seven constructs used in the DLOQ is thought to operate collectively to advance the process of continuous learning and transformational change. It has been suggested by numerous scholars that a learning organisation is essentially a progression in which employees are dedicated to intellectual growth and using their new knowledge to facilitate performance improvements; Argyris & Schön, 1974; Schein, 1990; Bartlett and Ghoshal 1998; Garvin, 2000 and Argyris, 2004. In a progressive learning setting, actions based on the seven DLOQ constructs, generate organisational growth which motivates continuous individual learning and transformational learning all the way through the organisation.
Organisational learning and the learning organisation - Financial performance
A major motivation for this review is a combination of the recognised lack of empirical evidence to support the financial worth of learning and the persuasive need for it. Bassi, et al (2002) maintain that improved evidence about the value of learning initiatives should inform the organisational decision making processes. The authors state that senior management within organisations will be more likely to make higher levels of learning initiative investments when they are properly appraised with the evidence that such expense will result in positive financial returns. To make informed and knowledgeable decisions about learning programs organisational leaders must have accurate evidence concerning the value proposals of learning initiatives.
Another study that supported the need for further research to more clearly understand the possible relationship between organisational learning and financial performance was that undertaken by Prieto and Revilla (2006). They stated there continued to be little research that comprises reliable conclusions about the positive effect of organisational learning competency on business performance. A discrepancy that is widely acknowledged by a range of scholars working on the concepts of organisational learning and the learning organisation, including; Slater and Narver, 1995; Baker and Sinkula, 1999; Baldwin and Danielson, 2002; Prieto and Revilla, 2006. A particular sample of the few research papers to have investigated prospective correlations between learning and financial performance are considered further in this section of the review.
In their study intended to examine the prospective influence of organisational learning on financial performance, Prieto and Revilla (2006) suggested the discovery of a causality route along which organisational learning capacity affects non-financial performance but with the additional step that those non-financial performance indicators affected by learning capacity had an effect on organisational financial performance. On this basis the authors contended that those firms able to adequately develop learning initiatives that can sustain continuously learning stand an enhanced chance of understanding market changes and seizing opportunities to address these changes, which should result in improved financial performance.
Furthermore, Prieto and Revilla asserted that organisations with a superior learning capacity are able to organise and co-ordinate their traditional assets and proficiencies in new and unique ways, thus providing greater value for their customers, stakeholders and investors than can less learning orientated competitors. They advocated the position that an organisation with effective learning initiatives and culture makes a positive contribution to the financial performance of that organisation. However, while they do not go so far as to make a direct connection between organisational learning and financial performance, an indirect association was suggested in which learning was certainly linked with non-financial performance indicators and non-financial performance, which in turn, was presented as being related to financial performance.
Prieto and Revilla (2006) thought that it was a possibility that a direct link between organisational learning capacity and improved financial performance might be possible but had not been revealed in their work due to the continuous loop character of the learning process. They suggested that future research might best address this problem by using a longitudinal approach to perceive the development of learning capacity and organisational financial performance over a longer time period. Researchers in this area will need to pursue varied methods of investigation in seeking to improve the understanding of the organisational learning and financial performance relationship if a fully picture is to emerge. Bassi et al., (2002) agreed with the statement that the benefits of learning initiatives will require time and will be potentially more insightful in prolonged research studies. Therefore, future organisational learning research founded on longitudinal inquiries will likely disclose new data to supplement cross-sectional enquiry.
Unlike the previous work discussed here, the work of Ellinger et al. (2002), reported a direct positive correlation between a high degree of organisational learning capacity and financial performance. They stated that the positive relation between the learning organisation concept and financial performance suggested there is a return for organisations that advance initiatives and strategies constant with the theories of the learning organisation. Commenting on this study Baldwin and Danielson (2002) state that the results were important and supportive. However, they note that only so much can be drawn from the one research study and repeat the familiar statement that more research is required to better appreciate the degree to which a persuasive and case for the learning organisation as a cause of improved financial performance exists.
Given the dominant place of financial measures, it is probable that non-financial mechanisms will need to be included to support monetary data instead of supplanting financial metrics. Baldwin and Danielson (2002) described that recognition of the importance of organisational learning runs the risk of nurturing unthinking observance. The possibility of organisational learning as a road to enhanced financial performance can be a very attractive proposition and lead to the acceptance of such learning without the necessary empirical support. This can mean some organisations developing organisational learning initiatives without the advantage of proper data to confirm and clarify the financial value of the learning processes.
It may be heartening to note that an apparently increasing number of organisations seem to have an instinctive belief in the value of learning but empirical to evidence to support instinct will assist both the academic and practitioner bodies. Organisational resources will likely continue to be scarce and there are no signs of a slacking of the internal competition that exists for these resources waning. Therefore, learning initiatives must establish a credible business case to contend with other functional initiatives for project backing. Baldwin and Danielson (2002) highlighted this aspect of the corporate world stating that learning will be seen by organisational decision-makers as essential only in that it contributes more efficiently and successfully to performance than would be case of the same resources were to be invested in another project. They also believe that a business case to for the organisational learning value proposal is vital to the evolution of learning initiatives but that fortunately evidence to support such value is amassing, albeit at a slow pace.
Further support for the value of learning is provided by the work of Bartel (2000). In this appraisal of a variety of types of case studies, Bartel concluded that the value of learning to an organisation is currently being underestimated. He stated the analysis indicated that organisational return on investments from learning and development initiatives may be much higher than previously supposed. Furthermore that until the benefits are better understood organisational leaders are unlikely to realise the true potential of learning initiatives.
The research of Ellinger et al. (2002) maintained and further developed that of Bartel (2000). Their study suggested a positive relationship between learning organisation initiatives and measures of financial performance. While there are some reservations about how much weight can be placed on this single study as more such positive relationships between organisational learning practices and financial performance are revealed it is likely that leaders will see this as providing the data required to make better decisions concerning investment in the development of organisational learning capacity.
In a study by Zahra et al (2000), the authors suggest that higher levels of organisational learning produce research and design, innovation, and product quality returns which should be drivers of improved financial performance. Furthermore, the study identified enhanced organisational learning as having a strong linkage to time to market features, which were further identified as important measures of operative efficiency. The authors suggested that real competitive advantage was the result of being able to react faster than your competitors and therefore if such agility was derived from organisational learning this was where financial gains could be made. The work of Zahra et al., (2000) went some way to enhancing the understanding of the ways in which learning contributes to business performance. By positively impacting on a variety of time to market issues, learning was able to show itself a major factor in improving financial performance.
Fortunately, given the real need for empirical data to support the value of learning initiatives, the number of such studies which explore the relationship between organisational learning and to financial performance is slowly increasing. Bassi et al., (2002) recognised that if formal learning initiatives do create value for organisations, then the results need to be reflected in financial performance. Therefore in their research, they confirmed the view of a positive correlation of improved financial performance with greater commitments to organisational learning.
Bassi et al. (2002) identified a pattern when reviewing the market performance of the companies in the study over a three year period 1996 - 1998. Organisations with learning expenditures in the top half of those studied showed a 37% increase in market value. However, the market value of organisations that invested less than the average on training increased only 20%. Therefore, the data demonstrated that organisations with greater than average investments in training experienced 86% greater increase in market value than organisations with less than average training expenditures. Moreover, organisations that placed greater than average importance on learning produced returns 45% higher than the broader market.
In addition to indicating a positive relationship between learning and market performance, Bassi et al. (2002) also highlighted a positive relationship between learning and other financial measures including gross profit margin, income per employee, and the ratio of price to book value. The authors found the results of their study convincing enough to make the suggestion that government agencies which formulate corporate reporting regulations should include policies necessitating organisations to report on training spend. These connections between organisational learning and financial performance, if factual and maintainable, could go a long way to promoting a more substantial role for organisational learning initiatives and the specialists in the field in relation to the economic strategy of large corporations.
Bassi et al. (2002) suggest that the association links for research and development (R&D) investment and financial performance are consistent with those of organisational learning. That is that the performance boost gained from research and development spending is equivalent to that on spending on learning initiatives. This is encouraging news for the value of organisational learning initiatives but there are difficulties with such a statement. On of the main ones is that, as Bassi et al (2002) admit, an adequate accounting infrastructure to record meaningful learning data does not exist. And it is really only with the creation of such suitable mechanisms to capture organisational learning data that it will make the step towards being recognized as a key strategic initiative. As empirical evidence increases to link organisational learning to financial performance, companies may elect to introduce their own reporting structures to allow for the publication of information on learning investments in attempts to have it recognized for its ability to create value, but a consistently excepted model of measurement across various organisations and sectors seems a long way off.
In a study by Yeo (2003), it was found that disproportionate focus on the near future was a potential factor hindering effective organisational learning and therefore limiting its contribution to financial performance. Yeo stated that such narrow-minded considerations could undermine the more important longer-term initiatives which are more likely to contribute to sustained financial performance.
By placing an unreasonable amount of focus on short timeframe financial measurements and lessening attention on the long term position, financial performance results are not likely to seem to be supported by organisational learning initiatives. This can be seen as organisational learning initiatives are of a nature to need time to bed-in and produce results. It is often the case that such a program may take a matter of years to fully reach its potential. However with financial performance measures being assessed in weeks, months or quarters the association between the two will be extremely difficult to differentiate.
Murray (2003) came to similar conclusions as Yeo on the reasons for the lack of supporting empirical evidence for the value of organisational learning to improved financial performance. He suggested that the focus on organisational metrics on short term performance meant that few organisations had the competencies to exploit and develop the management or personal learning measurements needed to evaluate the impact on long term competitive advantage. According to Yeo and Murray then, organisational leaders should be encouraged to extend planning, design, implementation and monitoring measurements to timeframes that allow for the impact of longer term initiatives.
Although some constituents of the learning organisation need to use extended timetables to fully develop positive contributions, other advantages of learning can be revealed in cross sectional analysis. In a sample of two hundred Australian companies, Power (2004) claimed to have revealed a relationship between organisational learning and financial performance. His work suggested that the learning organisation concept demonstrates a moderate to strong link with three of the indicated measures of organisational performance used in this study: knowledge performance, financial performance and customer satisfaction. While Power agrees with the assessments of the earlier works of Ellinger et al (2002), that suggest there is a real link between organisational learning and financial performance and maintains that although the associations relating learning to financial performance are there, more analytical analysis is required to decisively identify the relationships:
While these studies have established some positive links between the learning organisation and performance, they both conclude that more research is needed in the area before any definitive claims can be made. At this point then the research appears to be encouraging but the evidence required to convince operational managers of the performance significance of the learning organisation is still to be discovered. However despite some reticence on the matter the work of Power (2004) in discovering that a statistically significant, and moderately strong correlation does exists between organisational learning and financial performance should be viewed as welcome and a green-light to continue to work on this area.
Power (2004) also postulated that while quantitative analysis has provided some support for the presence of a positive link between organisational learning and financial performance, the qualitative aspects of his and other studies are even more promising. In his study when respondents were questioned on the matter of learning 85 per cent indicated that it was an important part of work strategy at their organisation. The results of the Power research indicate a significant majority of those surveyed considered individual and organisational learning essential to effective operations. Such a strong response provides very positive data for organisations and learning specialists considering instigating or enhancing organisational learning programs. After determining that a link exists and in summarizing the results Power concluded that the learning organisation has a relationship to financial performance that can be stated as statistically significant. Even though this research and analysis confirmed a positive relationship between the learning organisation and financial operations, Power understandably suggested that more work is required to appreciate these associations between learning and financial performance.
Additional empirical evidence to support learning was revealed by Carter (2005). The author produced a statistically significant association between learning and financial performance in this study by demonstrating a strong relationship between organisational learning and supply chain financial performance. Carter's work established that by improving supplier implementation metrics through learning initiatives, organisations experience greater financial performance as compared to organisations with lesser learning programs.
The research of Skerlavaj and Dimovski (2006) also suggested that learning initiatives offer positive contributions to financial performance. The authors sought to test the hypothesis that better organisational learning leads to better financial performance. There work produced results which they claim verified the belief that organisations that invest more resources in attaining higher level organisational learning create an advantage in both financial and non-financial terms. Skerlavaj and Dimovski back the position that investments in learning initiatives produce positive financial improvement gains.
In summarizing their work, Skerlavaj and Dimovski (2006) claimed to have demonstrated the importance of organised efforts to achieve strategic organisational learning. As such learning was vital to the overall business strategy of the modern organisation that is seeking a competitive advantage. The results of Skerlavaj and Dimovski appear to make a convincing case for the inclusion of organisational learning strategies in corporate strategic planning. It seems correct that the authors reach the conclusion that companies with a high level of organisational learning may be achieving an advantage over their competitors but it could also be true that paying insufficient attention to organisational learning may also be negatively impacting on financial performance and therefore competitive advantage.
Chapter III Conclusions and Recommendations
Conclusions
Organisations face growing and complex competitive forces from national and international firms. Operational advantages are forever being explored and instigated in a variety of functions. Enhancing a company's learning orientation is an example of a program that may deliver noticeable benefits to the financial performance of the organisation.
There exists consentual opinion among researchers such as Jantunen, 2005; McGrath et al., 2006; Niederman et al 2006 that increasing the learning effectiveness and expertise of an organisation will also produce positive financial results.. However, before practitioners can confidently invest resources in the implementation and maintenance of enhanced organisational learning, judgment in support of the value of learning must be reinforced by comprehensive empirical research. If learning is positively related to financial performance, then confirmation of the relationship needs to be established through relevant research, Davis, 2005; Kumar, 2005; Tanriverdi and Zehir, 2006.
To realize the benefits of organisational research that is being suggested by researchers organisational leaders should attempt to implement a sufficient number of learning initiatives within their company so as to position themselves at the higher end of companies with learning programs in their respective sectors. This does not mean to say they should go as far as to attempt to bring into being the concept of The Learning Organisation as this is extremely difficult to create and may not be worth the investment given the sector they operate in.
Power (2004) advised that organisational leaders should work to establish and support the appropriate level of learning within their companies, so as to enhance the financial performance of their firms, this was as an alternative to relying upon unintentional learning to offer developments. While this may seem obvious it is a pragmatic conclusion that falls some way short of the wholesale approach of creating the Senge envisaged Learning Organisation but is probably the correct course of action for the majority of organisations.
Another very important consideration to keep in mind is that not everything about the link between organisational learning and financial performance improvements can and perhaps needs to be articulated in terms of financial measurements. While financial evaluations are very necessary to give a picture of the real value of organisational learning, Carrie (1995) sustains that performance measurement of organisational learning should not be limited to financial metrics. This is essential to keep in mind when judging the value of learning, not all of it can be measured in hard numbers. Too often learning specialists are pushed into attempting to prove the value of the work by using the tools of another profession and sometimes the fit is not correct. With this is mind we have to remember to consider both the long term value of learning initiatives, which are often difficult to measure using financial metrics, and the benefit to organisational culture, brand and employee relations that investment in organisational learning can achieve.
Operating under the constraints of purely financial measures, leaders are unable to capture a portion of the broader and multi-faceted contribution offered by organisational learning. Other key benefits of learning such as improved communication and teamwork are intangibles that may find it difficult to be expressed in the end of year financial statements (Carrie, 1995). With this in mind it should be remembered that any comprehensive analysis of the learning organisation should include less tangible performance constituents in addition to financial assessments.
Recommendations
Inquiry into organisational learning and the learning organisation is at a crossroads. Clear and working definitions for many of the learning concepts are still matters of some debate and yet to be developed. Despite this, however, consensus continues to grow for the integral value of learning to the organisation. Much of the hope for, and interest in learning organisations is built upon subjective feelings of its value and unfortunately, there remains a considerable lack of empirical evidence to support the contention that learning initiatives are the road to improved organisation performance and sustained competitive advantage.
Despite some of the holes in the research examined here there is sufficient scholarly support for learning and the real possibility that it could still lead to a worthwhile collective of research data. This coupled with the high potential of learning combined and the extremely high levels of spend on learning initiatives means that it will continue to be a fruitful area for research in the coming years.
The value potential offered by the learning organisation is accepted by many in the scholarly community. However, sufficient empirical research needs to continue to be conducted and the supporting evidence supplied. Without such a body of work the benefits of the learning organisation are likely to remain conceptual, rather than practical. However, the clear deficiencies in the current research will attract more researchers to the field and therefore validation of the supposed benefits will likely increase.
Chapter IV: Methodology
This chapter describes the rationale for selecting systematic review as a methodology, as well as the procedures employed by the study. Three phases make up this systematic review procedure: 1. design of a search strategy; 2. establishment of a selection criteria and a quality appraisal standard; 3. data analysis and synthesis;
The Systematic Review Process
A systematic review can be considered a type of research project, with defined research questions and methodology. The systematic review methodology helps to identify studies in a particular area, to establish and appraise which studies will be selected for the review, to extract, analyse and synthesize the evidence in the selected studies, and to describe the findings about the current state of knowledge. These techniques have been employed in this paper in order to determine what is known and not known about the usefulness of the concepts of organisational learning and the learning organisation to the achievement of competitive financial advantage in the modern workplace.
Search strategy
The first stage of the systematic review is to determine a search strategy, which will determine the documents that will be analysed in the review. The search strategy is composed of the search strings, keywords, and sources of information such as databases and other sources of information, including books and articles, that will form the resources used to retrieve the data that will be analysed and synthesised in the systematic review.
Databases
Two main databases were selected for this review. These two databases were, ABI/INFORM Global and Business Source Premier, which were explored, while another two JSTOR and SwetWise Online Content, were examined quickly to determine if they provided any additional sources of information not retrieved by the first two main databases. The choice of databases for a complete analysis was based on their relevance for the literature investigated. ABI/INFORM Global and Business Source Premier constitute two of the main sources of information for business and management literature, and thus contain the major publications dealing with the concept of organisational learning.
Other sources of information
In addition to articles retrieved in the database search, books cited in important articles on the concept of organisational learning and the learning organisation were also considered for inclusion in the review. This was felt to be necessary as several important citations in this review comprised of books. A systematic review of the field would be incomplete without their inclusion.
Keywords
A list of keywords relevant for this review was identified through the initial scoping study and through the literature considered in the introduction of this report. These keywords formed the basis for the development of the search strings.
Search String
The review considered two sets of search strings: a comprehensive search string and a tight search string. These were combined in different ways to explore the ABI/INFORM Global and Business Source Premier databases, related to the particular research question being addressed.
The tight search string considered only a few of the major keywords (learning, organisational learning, the learning organisation, competitive advantage and financial performance) in order to uncover any potential articles that were not considered before.
Results from the Search Strategy
The use of the above search strings in the databases produced extensive results. Some restrictions were then applied to the database results, since the general results included articles that were not relevant for this study. A main restriction was to limit the search to academic articles (scholarly journals or periodicals in ABI/INFORM and Business Source Premier, respectively).
2 - Selection Criteria
The second phase of the systematic review is the establishment of a set of selection criteria that will define which of the articles produced by the search strategy would be included in the review. Two stages of selection were conducted based on particular inclusion and exclusion criteria: one that assessed titles and abstracts and one that evaluated the papers as a whole. In addition, a quality assessment was defined to attest that the literature selected expressed credible data.
Selection Criteria for Titles and Abstracts
The criteria for including articles based on their titles and abstracts were as follows:
- Subject – organisational learning, the learning organisation; sources then had to address either of the above as well as organisational performance.
- Method – both qualitative and quantitative studies are important in the field reviewed
- Nature of research – both theoretical and empirical publications can inform the review question, although different emphasis should be placed on the publication, depending if it provides empirical evidence or theoretical arguments.
- Time – while the focus of the review in connection with learning and financial performance will be on relatively recent studies the work of the initial period on organisational learning and the learning organisation still remain extremely influential and thus studies from this time will form an important part of the review.
- Geographical Area – there appears to be no reason for excluding specific geographic areas from consideration
The hits from ABI/INFORM Global, Business Source Premier, JSTOR and SwetWise Online Content were first scrutinized using these restrictions in order to remove articles that did not pertain to the focus of this study, and also to eliminate duplicates from the different databases. As a result a large number of the original hits were eliminated at this step.
Section Criteria for Full Text Papers
The articles that remained were scrutinized based on the paper as a whole. At this stage, papers could still be eliminated according to topic as sometimes it was difficult to establish based on the abstract alone if the papers expressed a particular approach or perspective on the concept. As a result, several articles passed the selection by abstract, and only through reading the article as a whole was it possible to reject it based on topic.
Moreover, articles that pertained to the review literature often pass the title / abstract selection criteria, but were eliminated when examined in full. This occurred because, even though in this study the terms organisational learning , the learning organisation and financial performance can be used in a variety of ways. Therefore, it was necessary when not clear in the abstract to read the article in full to establish the meaning of the terms.
Quality Appraisal
A final criterion for excluding articles from this review refers to their quality. Two issues about quality were considered. First, the practitioner literature was originally selected for this study as it was believed that a comparison between the theoretical perspectives that inform the academic and practitioner literature was relevant. However, when reading in full, it became clear that the practitioner literature was, in general, not of sufficient quality, nor did it bring anything new to the study. Hence, after analysing in full a portion of the practitioner literature, it was decided that practitioner literature would mainly be excluded from the study.
A second issue about quality refers to the remaining articles that were selected after the abstract and full paper selection. These were scrutinized in relation to the quality of the journal in which they had been published. As a result papers could still be eliminated from this study if the journal in which they had been published was not deemed to be of suitable quality.
3 - Data Analysis and Synthesis
The final phase of the systematic review is to analyse the data contained in the articles selected for the study, either as a result of the database search or as a result of cross-referencing the selected articles.
ChapterV: Limitations and ideas for future research
Opportunities for additional research to investigate the relationships between organisational learning and financial performance are numerous. Most of the studies considered were cross-sectional and as such considered only learning concepts at a point in time. A number of researchers accept that learning organisations require considerable time and investment to create (Armstrong and Foley, 2003; Argyris, 2004; Baker and Sinkula, 2005; Senge, 2006). Given the extended time investment required to develop the learning organisation, a greater portion of the research should explore learning and financial performance relationships over time. Longitudinal studies could capture some benefits and features that cross-sectional designs would likely miss. By considering the learning and financial performance over longer periods of time, the internal company learning initiatives may have the duration required for program and benefit development.
Other demographic variables could be introduced and evaluated in the learning models to produce useful research. For example, educational background, gender, national origin, could be introduced to generate interesting and valuable results. Categories could consequently be used as analysts to assess multidimensional learning and financial constructs.
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