Is knowledge retention impacted by voluntary early retirement schemes?A look at the impact of voluntary early retirement schemes within Australian universities.A study by Jon LevyINTRODUCTIONAccording to ATO in the last ten years fifteen universities acrossAustralian have undertaken voluntary retirement schemes, a move thatis new to the Australian higher education sector. Although there arevarious reasons as to why universities may be undertaking theseschemes, the first that comes to mind is the cost and alleged lowerperformance of mature employees according to the Business Life Cycle(Worth 1995) and which has been shown to be primary reason forvoluntary retirement schemes in American universities (Appelbaum2003).Despite the view of the Business Life Cycle theory which claims thatperformance does not keep growing with age after a centre stage whilesalary does, one of the key factors that is impacted by the removal ofolder employees is the tacit knowledge that has been stored with themover their time working at the university. Various authors (Appelbaum2002, 2003, Cameron 1994, Schmitt et al. 2001, Sitlington & Marshall2011) have examined the importance of tacitly stored organisationalknowledge and the importance of maintaining it with the business as itcan both be crucial and may be hard to replace.As such this poses a question, if universities are letting go of some oftheir more experienced and longest serving employees, just how muchknowledge are they losing? Is this knowledge loss something that willimpact the university in the future and what can the university do toconserve as much knowledge as they can when undertaking voluntaryretirement schemes? Or are voluntary early retirement schemes justnot the right answer for universities?Universities across Australia that have undertaken voluntary early retirement within the last 10 years.Data gathered from law.ato.gov.auRESEARCH QUESTIONThe aim of this research is to investigate if there is a link betweenvoluntary early retirement schemes and knowledge loss in theAustralian higher education sector. This will be determined byanswering two major research questions, which are:1. How do voluntary early retirement schemes affect the knowledgeretention in Australian universities?2. How to better retain knowledge after implementing voluntary earlyretirement schemes in Australian universities?LITERATURE REVIEW:KNOWLEDGE & DOWNSIZINGPressure to become profitable and globally recognised institutions hasresulted in universities across the world undertaking behaviours thatare more commonly linked to private businesses (Appelbaum 2002,Harman & Treadgold 2007). This move towards a corporate model ofuniversities has resulted in division between the faculties who aremore focused on providing quality education and research and theadministration which is more concerned with retaining profitability(Harman & Treadgold 2007). Aside from the division between facultiesand administration that has resulted from this corporate model,various authors have discussed how the corporate model has pusheduniversities to undertake downsizing schemes in order to become morecompetitive (Appelbaum 2002, 2003, Cameron 1994, Harman &Treadgold 2007, Li & Qin 2011).According to information from the Australian Tax Office during the lastten years there has been an emergence of universities undertakingvoluntary early retirement schemes (VERS). Although this movement isnew to Australia and as such little to no literature exists covering thetopic, there is a vast amount of existing literature that covers VERSwithin American higher education institutions. Appelbaum (2003)discusses in depth both the positives and negatives of VERS inAmerican higher education sector, stating that VERS are commonlypromoted for their ability to reduce headcount in a low trauma methodand are able to move younger employees up the corporate ladder.However Appelbaum (2002) views VERS as negative and quotesCameron (1994) claiming VERS “can be compared to throwing agrenade into a crowded room, closing the door and expecting theexplosion to eliminate a certain number of people.” Appelbaum (2003)also states that there are three major faults with VERS, first theyactually cause trauma as studies such as Paul & Townsend (1992) showthat the remaining workers are overstressed & overworked from havingto take over the roles of the departed while not possessing theirknowledge of the role. Secondly the VERS may either result in too fewor too many people leaving the company, if it is the first then thecompany still retains their dire financial situation, if it is the secondthen they will be understaffed. Thirdly the wrong people may leave theorganisation, a study by Paul and Townsend (1992) found that the mostproductive employees were the ones that were more likely to takeVERS because they believed that they would be more likely to find ajob elsewhere (Appelbaum 2002, Paul & Townsend 1992).From the literature surrounding voluntary retirement schemes it isclear that a key issue that arises from voluntary retirement schemes isthe retaining staff and the organisation not performing at optimumfollowing voluntary retirement schemes. This could be because theremaining employees do not have the years of experience andorganisational knowledge that their former counterparts did(Appelbaum 2002) and thus do not have the knowledge to completetheir newly inherited tasks, or it may be because the strongerperformers left and the remaining employees cannot maintain theorganisation (Appelbaum 2002, Paul & Townsend 1992).LITERATURE REVIEW:RETAINING KNOWLEDGE?Several authors have proposed methods to reduce the impact ofretirement schemes. Sitlington and Marshall (2011) advise that timeshould be made during the process of the retirement schemes toprovide both counselling and training to the employees so that theorganisation can have a strong focus on knowledge retention during theVERS period in order to minimise employee stress and knowledgewalkout.Arif (2009) explores this idea of knowledge retention by offering asolution through
the use of the knowledge pyramid.Arif broadly provides a solutionExpertise
stating that knowledge that isstored as either knowledge orexpertise by employees canleave with them but if it is storedas information or data it willremain with the company, thusthe solution is to codify theknowledge. However Li andQin (2011) expand on thisby offering a four stepprocess on how to retainknowledge.First, universities must establish a hardware platform and improvehardware facilities. Second, they must actively encourage employees toparticipate and actively contribute to the knowledge database. Thirdlyand extending on from the second point, the university must constructan organisational culture based around knowledge sharing and lastly theuniversity itself must actively engage employees and improve theprogram (Li and Qin 2011). Schmitt et al. (2011) also provide a modelthat can be used to best retain knowledge, Schmitt et al. (2011) believethat if during a voluntary early retirement scheme there exists a highlevel of collaboration between employees, a strong network of tiesbetween departments, a stable leadership structure and both perceivedand distributive justice given to those that survived the downsizing andthose that retired (respectively); then the organisation (in this caseAustralian universities) will be able to retain more knowledge and bebetter off after the VERS, this will be one of the major models thisresearch focuses on.KnowledgeInformationData
The Process of Codifying KnowledgeCONTRIBUTION TO THEORYSchmitt et al.’s Model for Knowledge Retention during DownsizingCONTRIBUTION TO PRACTICEThe research hopes to contribute to the practice by providingevidence to HR managers within Australian higher educationinstitutions that improperly managed VERS can result in knowledgeloss. This research is also aimed at promoting knowledge managementwithin Australian higher education institutions and as such theresearch is aimed at both school managers and academics that maywish to promote knowledge management while their institution isundertaking VERS.This research hopes to contribute to the literature by providing anAustralian perspective to a situation that has already occurred in theUnited States, is now occurring across Australia and will more thanlikely continue to be adopted by other higher education institutionsacross the world due to the corporatisation of universities. Althoughthe current existing literature examines the impact of voluntaryretirement across a wide range of industries within Australia (Sitlington& Marshall 2011), only American literature has examined its impact onhigher education institutions. To add to this, the rise of voluntaryretirement schemes within Australian higher education institutions is acontemporary issue that has only begun to occur within the last tenyears thus very little research exists in the way of the Australian VERSand their impact on knowledge management. Thus the aim of theresearch is to cover this gap in the literature.REFERENCESAppelbaum, Steven H., and Eric Patton. 2002. ‘Downsizing The University: Bonne Chance!’. International Journal OfEducational Management 16 (3): 126-136. Emerald.Appelbaum, Steven H., Eric Patton, and Barbara Shapiro. 2003. ‘The Early Retirement Incentive Program: ADownsizing Strategy’. Jnl Euro Industrial Training 27 (1): 22-35. 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