2.

LEARNING ORGANIZATION

This chapter gives an overview about evolutional development of organization

models, reaching to the model where learning does not happen by chance but where
exist focused effort to advance organizational learning deliberately and capabilities,
that are consistent with organization’ objectives, are continuously developed. Then,
different definitions of the learning organization are presented, subsequent with
characteristics of the learning organization.

When organizational learning, as discussed in the previous chapter, was a construct to

describe and explain certain learning processes or types of learning activity, the
learning organization is a particular type of organization or organization with
particular characteristics. As Love and Heng (2000) write, the term “learning
organization” refers to organizations designed to enable learning, that is, having an
organizational structure with the capability to facilitate learning, and to organizations
within which learning is already occurring. The learning organization as an
evolutionally new model is supposed to be the adequate response for fast-changing
operational environment.

2.1. Evolution of organization models

Throughout industrial era, in response of increasingly complex, dynamic, and

technologically sophisticated environment, organizations have also undergone
remarkable changes, becoming more complex but at the same time more flexible.
Evolution of organization models has been slow but steady liberation of employees’
potential and removal of restrictions. Several writers (for example McGill et al. 1993)
have looked to evolution of organization models as evolution of attitudes toward
change and how to cooperate with it, in other word, learning.
Subsequently is a look at the evolution of organization models through approaches to
change and learning, associated policies, practices, and possibilities for action.

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2.1.1. The first model

Until the 1970s, early 1980s, when in the western world economic progress was
relatively steady and fairly predictable the oldest of organization models dominated.
McGill et al. (1993) call it as “the knowing organization” thanks to the belief that
there exists only the one best way to do things and this best way was either known or
knowable. Such organizations are often known as bureaucratic or tayloristic
organizations. Characterizing features of such organizations are importance of statute
and high standardization of procedures, rules and regulations. A manager's primary
responsibility is to control employees' behavior by enforcing the rules.

Knowing organizations change only in reaction to changes in their environment and

changes are not the product of learning. Often, those changes have little to do with the
root causes of business problems. Here we can find analogue with single-loop
learning, discussed in the section 1.6.1. McGill et al. (1993) consider the first
organization model to be "learning disadvantaged” due to their high level of control,
enforced conformity, routine behaviors, and risk-avoidance. These organizations can
be successful so long as the business environment remains relatively static, i.e. they
can be successful as long they don't need to learn.

Rowden (2001) adds the planning of strategic change to the model, what focused
almost solely to senior management. The main task of executives was preparing
excellent plans in order to result strategic change. Reality, however, proved that plans
frequently stayed on the shelf and the desired changes were often much more complex
than originally imagined.

2.1.2. The second model

The next, implementation focused model that emerged in the late 1970s and early
1980s was an attempt to overcome the limitations of the previous, planning-
dominated approach. At last, it was recognized that coming up with great plans was
not sufficient. The second model therefore added additional focus to implementation.
Middle managers were now included to the strategic planning process and wider
communication concerning strategic direction was introduced (Rowden 2001). Still,

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there was minimal consideration of whole complexity of issues, affecting change
initiatives. Capacity to learn remains limited, since change as such was not anticipated
or, as pointed out by McGill et al. (1993), is appreciated only when it is consistent
with core values or ruling myth.

2.1.3. The third model

In the next step, from late 1980’s, employee commitment and involvement was more
encouraged. The need for continuous improvements becomes clearer for both
managers and followers due accelerating pace of change. Now, in addition to
emphasis upon planning and implementation, the creation of readiness for change in
the organization is also recognized (Rowden 2001).

Change and learning appear in increasing extent. Improvement of quality becomes a

hot issue. Better solutions are searched in all levels through company-wide programs.
However, programs are sometimes at cross-purposes and lack systemic integration.
"The solution of the month" produces many ironic victims of change programs. The
main problem with change initiatives, next to low level of integration, is their focus in
past.

2.1.4. The fourth model - learning organization

Each version of strategic change efforts emerges from the problems encountered in
the previous version. Today, the next organizational model has emerged to
compensate the limitations of the earlier versions – the learning organization. The
phrase “learning organization” refers to a very significant movement in organization
development and was popularized by Peter Senge in his landmark book "The Fifth
Discipline: The Art and Practice of Learning Organization", first published in 1990.
The origins of organizational learning theory what is the basis for the conception of a
learning organization, may be tracked to as far back as the first half of last century. In
1980s and 1990s, the conception of Total Quality Management has also played an
important role in developing approaches to company learning.

The conception of a learning organization is an attempt to create more human and

participative work environment in a modern organization with a culture and structure
that provide more flexibility and innovation, required for successful operating in

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today’s fast-changing business environment. We can take the conception of a learning
organization as a framework to an organization that is capable to use the real potential
of all its members. Starkey (1996, 2) describes this conception as the search for a
strategy to promote individual self-development within a continuously self-
transforming organization. Marsick and Watkins (1999, 208) stress to the importance
of extending capacity to use learning as strategic tool to generate new knowledge in
the form of products, patents, processes and services, and to use technology to capture
knowledge.

The potency of the learning organization consist in the matter that it tries to enfold
into integrated system very different aspects of organizational sciences and human
behavior. Rowden (2001) refers that the idea that learning organization has its roots in
such studies as organizational learning, organization development, organizational
theory, systems theory, strategic planning and strategic management, quality
improvement movement. Within the conception there are linked learning, training,
development and company performance and competitiveness.

According to McGill (1993), the biggest differences between a learning organization

and its antecedents are the most evident in their approaches to change. In a learning
organization change is an input that leads to learning. By viewing each change as a
hypothesis to be proven and by examining the results of each experiment, a learning
organization ensures that change enhances its experience, and thus promotes learning.
Lähteenmäki (2001) also shares the point of view that the conception of a learning
organization is closely related with ideas of change management, but also with
discussions about effective leadership.

Most of the available literature on learning organizations describes case studies of

private sector manufacturing companies, often with origin from USA. But public
sector and non-profit organizations like public transportation, health authorities, local
councils and schools everywhere also have to deal with rapid change. There is no
cause to believe that the concept of the learning organization can’t be implemented
both in private and public sector. Dowd (1999) is convinced that learning
organizations can be any size and can include any function. Learning organizations
can be corporations, small businesses, schools, hospitals, government agencies, a

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nonprofit organization, or a family. Dowd summarizes: “A learning organization can
be any collection of people working together to accomplish objectives that they
cannot achieve as well alone.” This view coincidences with the one of Senge et al.
(1999, 45) who see the five learning disciplines as a foundation for every
organization, no matter how large or small.

Most of the literature available about a learning organization carries an orientation to

the top managers. It means that usually it is assumed that movement to a learning
organization starts from the top, since top managers have the biggest chance to
influence creating a supportive and participative organizational culture that helps
creating a learning organization. Starkey (1996, 3) states that the quality of leadership
determines the organization’s ability to learn. This statement regards hierarchical
power of the leaders as the very important factor for organizational learning. Senge
(1996, 311) stresses the importance of leadership as well, being convenient that
learning organizations will remain a distant vision until the leadership capabilities
they demand are developed.

The conception of a learning organization will, obviously, be most attractive for

companies operating in sectors or markets of heavy competition. But even for
companies currently relatively safe from competition is recommended to pay attention
to this conception, since it is hard to believe that favorable conditions will last for a
long time.

Learning organization should not be taken as a ready concept for organizational

improvements but rather as an ideal to be achieved. It provides a picture of how things
could be within an organization. Learning organization is not a state of affairs to be
achieved, but a dynamic "work in progress" (King 2001). It may be suggested taking
the conception of a learning organization as general direction for developing an
organization, a way of thinking, avoiding dogmatizing certain approach in fashion at
the moment. So a learning organization “is not the new “one best way”, but a new
metaphor for an “old” problem, the search for practical solutions for how organi-
sations and its members balance the requirements of adaptation with the necessity to
improve adaptability” (Geppert 2000, 189). This means also that strategies for moving

19
towards a learning organization may be very different even in the same national
culture.

In summary, learning organization is the adequate organizational structure for a fast

changing environment, which is especially due to its capability to anticipate change. It
provides new ways to manage in the circumstances of almost permanent economic
uncertainty and turbulence that dictates need for rapid adjustments to a market
environment. A starting point in creating a learning organization seems to be when an
organization starts to recognize the need for change.

A critique of a learning organization is usually concentrated on the fact that there still
does not exist certain approach that is already proved in practice. Such critics,
however, is somewhat limited itself, since it is hard to believe that there exist one
approach for all organizations, regardless of their size, field of industry, culture,
location etc. Senge also suggest to be open in choosing methods and stresses to
practicability: “Regardless of what theories, methods, and tools are employed, they
must be practical; they must enable work on important issues; and they must have
potential to lead to significant progress on those [learning initiatives and learning
capabilities] issues.” (Senge 1999, 45)

Roos et al. (1997, 16) have pointed to the problem that learning organization is too
much focused to the mechanism of knowledge development, while knowledge
leveraging is out of view. Senge obviously agrees with such concerns by remarkably
deeper focus on practical implementation issues of the conception in his subsequent
books to the mostly theoretical “The Fifth Discipline”.

2.2. Definitions of learning organization

There is still a considerable disagreement among theorists about what kind of

organization has to be called as the learning organization and a wide variety of
approaches are present. Confessore (1997) describes learning organization as an
environment where organizational learning is structured so that teamwork,
collaboration, creativity, and knowledge processes have a collective meaning and are
valued.

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Senge (1990, 14) defines learning organization as “an organization that is continually
expanding its capacity to create its future”. According to Senge, in the learning
organization, new and expansive patterns of thinking are nurtured, collective
aspiration is set free, and the organization is continually expanding its capacity to
create its future. “Learning” in his context does not mean acquiring more information,
but expanding the ability to produce the results people truly want in life (Senge 1990,
142).

Garvin (1993) gives us the following definition: “A learning organization is an

organization skilled at creating, acquiring, and transferring knowledge, and at
modifying its behavior to reflect new knowledge and insights.” This definition,
however, does not encompass the notion of organizational results (King 2001). Thus,
King (2001) building his definition on Garvin, focus to the model on developing and
using information and knowledge capabilities in order to create higher-valued
information and knowledge, to change behaviors, but also improving results: “A
learning organization is one that creates, acquires, and communicates information and
knowledge, behaves differently because of this, and produces improved
organizational results from doing so”.

Another well-know definition, provided by Pedler et al. (1991, 2), describes a

learning organization as “an organization that facilitates the learning of all of its
members and continuously transforms itself”. This definition includes continuous
learning and the development of potential in all the people who work with the
company and self-development of the company as a whole organization, including the
integration of each individual’s learning with that of the company as a whole (Pedler
1995). There is, however, not explained how learning occurs and what strives to the
learning and transforming.

Management consulting company David Skyrme Associates (David Skyrme

Associates 2003) has developed the following definition: “Learning organizations are
those that have in place systems, mechanisms and processes, that are used to
continually enhance their capabilities and those who work with it or for it, to achieve
sustainable objectives - for themselves and the communities in which they

21
participate.” They draw out the following important points to note about learning
organizations: they are adaptive to their external environment, continually enhance
their capability to change and adapt, develop collective as well as individual learning
and use the results of learning to achieve better results.

As can be seen in this small sample of definitions, there is a clear indication that a
learning organization leverages learning and information in order to adapt. Different
authors recommend different approaches, but the end result is quite similar in all
cases: adapting and innovating to maintain performance through individual and
collective learning.

2.3. The characteristics of the learning organization

The following section is dedicated for the learning organization’ characteristics. In the
beginning of section is given an overview of partially different, partially overlapping
opinions from various authors about the conditions that must be presented in a
learning organization. After that, there is proposed a new structure of the
characteristics. The nature of all comprehensive characteristics is opened.

2.3.1. A review of literature

The idea of a learning organization is more or less as an ideal and a desirable goal that
is rather difficult to articulate in practice. Thus, theorists are trying to emulate those
elements that are deemed characteristic of a learning organization. So far, there does
not exist generally admitted understanding, which elements are essential for a learning
organization. However, there is unanimity between scholars that a learning
organization is a complex association and interdependencies between characteristics
exist.

Confessore (1997) determines three conditions that are present in a learning

organization:
1. Individuals have opportunities to exploit their work environment to increase
their individual knowledge bases;

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 2. There are opportunities for individuals to work collaboratively and share and
create new knowledge; and,
3. There are mechanisms to ensure that these activities are valued, encouraged,
and integrated into daily practice.

Watkins and Marsick (1993) identify six features that are characterizing a learning
organization:
1. Creating continuous learning opportunities.
2. Promoting inquiry and dialogue.
3. Encouraging collaboration and team learning.
4. Establishing systems to capture and share learning.
5. Empowering people to a collective vision.
6. Connecting the organization to the environment.

Senge, in his landmark book “The Fifth Dicipline” (1990) identifies five disciplines
that are critical to organizations today if they are to cope with the rapid changes
taking place in the world. Those five disciplines are:
1. Systems thinking.
2. Personal mastery.
3. Mental models.
4. Building a shared vision.
5. Team learning.

Senge pays especially great attention to the systems thinking as this is supposed to
link all the others and is a cornerstone for developing new kind of organizations.
System thinking according to Senge (1990) refers to a certain conceptual framework,
which makes the pattern of the events clear, and enables to change those patterns if
needed. Members of an organization think of all organizational processes, activities,
functions and interactions with the environment as part of a system.
Personal mastery is the discipline of continually clarifying and deepening our
personal vision, of focusing our energies, of developing patience, and of seeing reality
objectively (Senge 1990, 7). This is applicable to each member of the whole
organization.

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Mental models are the internal images which impact people in their understanding of
the world and how they act. People have to make these models explicit to be analyzed
and exchanged. For that open communication with each other without fear of
criticism or punishment is needed.
Building shared vision as the extension of personal visions (Senge 1990, 235) is the
key for gaining commitment of all members of the organization, in order to make
them excel and learn by themselves.
Team learning is the process of aligning and developing the capacity of a team to
create the results its members truly desire (Senge 1990, 236). It involves mastering
the practices of dialogue and discussion, the two distinct ways that teams converse
(Senge 1990, 237). People sublimate their personal self-interest and fragmented
departmental interests to work together to achieve the organization's shared vision.

Another well-known set of characteristics of a learning organization is presented by

Pedler, Burgoyne and Boydell (1991):

1. Learning approach to strategy, what means that company policy and strategy
formation, together with implementation, evaluation and improvement, are
consciously structured as a learning process.
2. Participative policy-making to give for all members of the company a chance
to take part, to discuss and contribute to major policy decisions.
3. Informating - the state of affairs in which information technology is used to
inform and empower people.
4. Formative accounting and control to ensure that systems of accounting,
budgeting and reporting are structured to assist learning.
5. Internal exchange - all internal units and departments see themselves as
customers and suppliers.
6. Reward flexibility - the exploration of new, alternative ways of rewarding
people.
7. Enabling structures - roles are loosely structured, in line with the needs of
internal customers and suppliers. Departmental boundaries can flex in
response to changes.
8. Boundary workers as environmental scanners.

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 9. Inter-company learning - learning activities with customers and suppliers,
including joint training, sharing in investment, in research and development
and job exchanges.
10. Learning climate - managers see their primary task as facilitating members'
experimentation and learning from experience. Mistakes are allowed.
11. Self-development opportunities for all - resources and facilities for self-
development are made available to all members of the company.

Porth et al. (1999), comparing different approaches, found that at least three
characteristics of a learning organization consistently emerge:

1. Employee development and continuous learning within the organization,

focusing on topics such as how individuals learn, stages of the learning
process, cognitive styles, and obstacles to learning.
2. Information sharing and meaningful collaboration stress beside the theme of
information processing and sharing also that organizational change is a shared
responsibility and that innovation and change require employee participation
and involvement.
3. Team building and shared purpose with a strong sense of community as
fundamental to the learning organization.

2.3.2. The new set of characteristics.

In this thesis, the new suggestion for structuring the characteristics of a learning
organization is introduced. The new set of characteristics synthesizes existing theories
but also integrates some new emphasis in order to provide a better way to profile an
organization’s learning capability. The proposed set of eleven characteristics,
fostering organizational learning and its outcomes, is as follows:

1. Learning approach to strategy enables that formation, implementation and

improvement of company strategy are consciously structured as a learning
process instead of implementing set solutions. Holmberg (2000) writes that
learning strategy is an appropriate alternative to the programmatic strategies
(like, for example, is TQM) what are characterized by imitation, imported
methods, top-down decision-making and limited focus. Deliberate small-scale
experiments and feedback loops are built into the planning process to enable

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 continuous improvement in the light of experience (Pedler et al. 1991, 18).
McGill et al. (1993) look at a strategy as an outcome of the learning process.

2. Supportive leadership and participative policy-making ensure that all

members of the company have a chance to take part, to discuss and contribute
to major policy decisions. Supportive leadership means showing concern for
everybody’s needs and problems. Through better involvement accompany
increasing commitment and satisfaction with work that lead to better results.

3. Shared vision and values that unify individual efforts to achieve both
personal and organizational goals and guide people. According to Senge
“shared vision is vital for the learning organization because it provides the
focus and energy for learning. While adaptive learning is possible without
vision, generative learning occurs only when people are striving to accomplish
something that matters deeply to them. In fact, the whole idea of generative
learning -“expanding your ability to create”- will seem abstract and
meaningless until people become excited about some vision they truly want to
accomplish” (Senge 1990, 206).

Here we must stress the differences between written vision statement and truly
shared vision. Senge (1990, 206-229) is convenient that shared vision is much
more than only a bulk of words in the paper. Writing a vision statement can be
a first step in building shared vision but, alone, it rarely makes a vision “come
alive” within an organization. Shared visions must emerge from personal
visions. It does not occur if top management is going off to write their vision
statement. Shared vision gives to employees the feeling of taking part in the
vision of the company. It means that an organization that want to build a
shared vision must continuously encourage their members to develop their
own personal vision which is blended into a shared vision.
A clear set of core values helps focus and motivate behavior, they provide the
basic normative foundation of a business unit (Tuschman and Nadler 1996,
149).

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4. Free vertical and horizontal flow of information enables a continuous
information exchange, needed for organizational learning and empowering
people. Free flow of information and knowledge inside an organization is an
important prerequisite to encourage new ideas and innovation.

5. Supportive organization structure that enables flexibility and speed in

organizational learning and implementing its outcomes. The organization's
structure is based on the need to learn. As tasks, needs, and people change, the
structure changes so that customers and employees alike face minimal
inconveniences (McGill, 1993). Supportive organizational structure means
decentralized hierarchies, loosely formal job roles and existence of internal
customers and suppliers. Departmental and other boundaries are seen as
temporary structures that can flex in response to changes (Pedler et al., 1991).
Sensible amount of strategic rotation of employees between various divisions
and functions must foster effects of the free flow of information within the
organization.

6. Supportive corporate learning culture facilitates and fosters efficient

organizational learning. It includes opportunities for education, training and
development of the whole workforce at all levels. Garvin (1993) suggests
starting to build a learning organization from fostering an environment that is
conducive to learning. He stresses the importance of time for reflection and
analysis, to think about strategic plans, dissect customer needs, assess current
work systems, and invent new products. Supportive learning culture includes
training in brainstorming, problem solving, evaluating experiments, and other
core learning skills (Garvin, 1993).

7. Teamwork and team learning as the critical link between the learning
individual and the learning organization. With continuous learning and an
ongoing reflection on results, a team can shift its orientation from knowing to
learning, thereby increasing its ability to produce the desired business results
(Ober et al. 1996). Huber (1991) formulates the outcome of team learning as a
change in the range of the team’s potential behaviors. Edmondson et al. (2001)
describe three essential characteristics, which are typical for teams that learn

27
 the new procedure most quickly. They were designed for learning; their
leaders framed the challenge in such a way that team members were highly
motivated to learn; and the leaders' behavior created an environment of
psychological safety that fostered communication and innovation.

8. Experimenting and risk taking is activity that involves the systematic

searching for and testing of new knowledge. Garvin (1993) suggests that
experimentation must be motivated by opportunity and expanding horizons,
not by current difficulties (Garvin, 1993). To encourage experimentation, fear
of failure must be eliminated and management must be committed to
continuous experimentation as a means of institutionalizing learning (McGill,
1993).

Drucker (1999, 83-85) argues that genuinely new and different is not “flash of
genius” but a result of continuous improvements that are organized as a
regular part of every unit within the enterprise, and of every level of
management. Innovation as such, does not mean only new technical solutions.
Roos et al. (1997, 40) have defined innovation as the ability to build on
previous knowledge and generate new knowledge. This ability is fundamental
for the renewal of the company.

9. Learning reward system that keeps organizational learning a systematic

process that recognizes and reinforces learning. Intellectual diversity and
dissents are not only accepted but also encouraged in order to improve
experience (McGill, 1993). Punishments for failures are also eliminated.

10. Environmental scanning to observe changes and trends in external

environment, learning from best practices of other companies (including
competitors) in the same and also other industries. Customers and suppliers
are engaged in learning activities.

11. System thinking is a tool to guarantee systematical approach and seeing

existing processes, activities and functions in mutual interactions. It enables to
see the “structures” that underlie complex situations (Senge, 1990, 69).

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Systems thinking means organizing complexity into a coherent story that
illuminates the causes of problems and how they can be remedied in enduring
ways (Senge, 1990, 128).
Roos et al. (1997, 14) also warn that managers should learn not to concentrate
too much on the visible aspects of the company, just because they are easily
recognizable.

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