1.

ORGANIZATIONAL LEARNING
The Chapters 1 and 2 focus on the theoretical part of this thesis. Chapter 1 deals with the different elements of organizational learning. It starts with the overview of learning theories, and then continues with insights into individual, team and organizational learning, proceeding with different definitions of organizational learning. Furthermore, different levels of organizational learning are introduced, which are single-loop learning, double-loop learning and deutero-learning. Finally, the learning culture as initiating or obstructing factor for organizational learning is under observation.

1.1. Learning theories

The accelerating pace of changes in operational environments of business organizations has created increasing need to find adequate ways to adapt with continuously changing situations. Ability to learn is seen as a major source to stay competitive in changing environment. Stata (1996) argues that the rate at which individuals and organizations learn may become the only sustainable competitive advantage, especially in knowledge-intensive industries. Garvin (1993) points out that in the absence of learning, companies and individuals simply repeat old practices. So the increasing need for learning has raised the interest toward the learning theories. Learning (Columbia Encyclopaedia 2003) in psychology is the process by which a relatively lasting change in potential behavior occurs as a result of practice or experience. Starkey (1996) defines learning as the creation of useful meaning, individual or shared. Learning generates knowledge which serves to reduce uncertainty. Beach (1980) describes learning as "the human process by which skills, knowledge, habit and attitudes are acquired and altered in such a way that behavior is modified".

Schuck (1996) defines learning as a social experience, built upon interaction and dialogue with significant others in a context where people are willing to share their ideas with others. She considers traditional training methods to be limiting since they only teach what to think but the best solutions often occur when different points of view are integrated into the dialogue. Therefore she shares the idea that people must learn how to learn. Conceptually, we can say that learning may be treated as a technical processing of information but also as a social act of sensemaking. In the latter approach learning is a collective activity in which the focus is on asking questions and engaging in dialogue in order to continuously improve the capacity to process existing knowledge and creating new knowledge. According to Schein (1993a), learning is not a unitary concept, there are at least three distinctly different kinds of learning that require different time horizons and that may apply to different stages of an organizational change process: knowledge acquisition and insight, habit and skill learning, and emotional conditioning and learned anxiety.

Kim (1993) differentiates two meanings of learning: the acquisition of skill or know-how, which implies the physical ability to produce some action, and the acquisition of know-why, which implies the ability to articulate a conceptual understanding of an experience. Nonaka (1991) distinguishes two kinds of knowledge: explicit knowledge and tacit knowledge. Explicit knowledge can be expressed in words and numbers and can be transmitted between individuals formally and systematically. Tacit knowledge is highly personal and hard to formalize, it is not easily visible and expressible, therefore difficult to share with others. Tacit knowledge has two dimensions technical, what includes personal skills or crafts, often referred as know-how and cognitive dimension consisting beliefs, ideals, values and mental models.

The distinction between tacit and explicit knowledge suggests four basic patterns for creating knowledge in any organization: 1. From tacit to tacit. 2. From explicit to explicit. 3. From tacit to explicit. 4. From explicit to explicit. In the knowledge-creating company, all four of these patterns exist in dynamic interaction, akin of spiral of knowledge. The illustrative figure of different modes of the knowledge creation can be found in Appendix 1. When most scholars share the common view that learning is needed, there is as yet no comprehensive and integrated theory of organizational learning (Probst and Bchel 1997, 15). Rather different opinions exist on how organizations learn, how organizational learning process can be influenced and who are the agents of organizational learning. Researchers distinguish three different levels of learning individual, team and organization, but linkage between individual, group and organizational learning is not uniquely understood. Lhteenmki (2001) indicates that there is no clear understanding in what way does organizational learning differ from individual learning, because the two learning processes have not been systematically and empirically compared. Instead, it has simply been assumed that a somewhat analogous process exists in both of them.

1.2. Individual learning

First, there appears to be a question about the importance of individual learning for organizational learning. Kim (1993) writes that it is at once obvious and subtle obvious because all organizations are composed of individuals; subtle because organizations can learn independent of any specific individual but not independent of all individuals. Marquardt (2002) describes individual learning as the change of skills, insights, knowledge, attitudes and values acquired by a person through self-study, technology-based instruction, and observation. Some organizational researchers (e.g. Argyris) concentrate mainly to individual learning, stating that the main actor in organizational learning is always the

individual. Nonaka (1991) says that new knowledge always begins with the individual. Probst and Bchel also write that learning by individuals is a prerequisite of organizational learning (1997, 15). Although it is clear that organizational learning occurs through individuals, we cannot take organizational learning as simply a sum of the learning acquired by each of its members. Organizations differ in that respect from individuals in that they develop and maintain learning systems that not only influence their immediate members, but are subsequently transmitted to others by such means as an organization's history and norms (Fiol and Lyles, 1985).

1.3. Team learning

Several authors (e.g. Senge 1990, Pawlowsky 2000) have pointed out the importance of team learning to achieve learning at organizational level. Pawlowsky (2000) takes team learning as a gateway to organizational learning i.e. bridging the transfer of individual learning to organizational knowledge that can then be shared by all. Senge (1990) express probably the most radical views when speaking about the importance of team learning. He sees the team learning as one of the foundations for the learning organization. Senge declares that not individuals but teams are the fundamental learning unit in modern organizations. Though stressing the importance of personal mastery, Senge (1990, 10) looks at the team learning as inevitable for organizational learning by stating that unless teams can learn, the organization cannot learn. Ober et al. (1996) share the result-orientated view stating that team learning must be directly linked to results. They see result orientation to be important to enhance a team's ability to function, make decisions and deal effectively with important business issues. Senge (1990) and Argyris (1990) see the need for creative tensions and productive conflicts to encourage team learning but warn about underlying structures in teamwork that prevent them from reaching their goals and to experiment with new structures and behaviors. Argyris (1990) points to the need in organizations to learn

how to deal with organizational defenses such as skilled incompetence, organizational defensive routines and fancy footwork.

1.4. Organizational learning an overview

When the subject of individual learning has rather deeply researched over a time, the organizational learning, which draws upon the integration of the sum of individuals learning to create a whole that is greater than the sum of its parts, is far less understood (Starkey 1996, 2). We can say that all organizations learn, whether they consciously choose to or not, because it is a fundamental requirement for their sustained existence (Kim 1993). But organizational learning is both quantitively and qualitatively distinct from the sum of the learning processes of individuals. (Probst and Bchel 1997, 16) Stata (1996, 318) describes several aspects how organizational learning differs from individual learning: First, organizational learning occurs through shared insights, knowledge, and mental models. Thus organizations can learn only as fast as the slowest link learns. Change is blocked unless all of the major decision makers learn together, come to share beliefs and goals, and are committed to take the actions to change. Second, learning builds on past knowledge and experience that is, on memory. Organizational memory depends on institutional mechanisms (e.g. policies, strategies, and explicit models) used to retain knowledge. Of course, organizations also depend on the memory of individuals. But relying exclusively on individuals risks losing hard-won lessons and experiences as people migrate from one job to another. Probst and Bchel (1997) write that organizational learning is unique to an institution. Organizational learning takes place through the medium of individuals and their interactions, which together constitute a different whole, with its own capabilities and characteristics (Probst and Bchel 1997, 17).

Rheem (1995) referring a solid research gives four basic types of organizational learning: Competence acquisition to cultivate new capabilities in either teams or individuals. Experimentation to try out new ideas. Continuous improvement to master each step in a process before moving on to the next. Boundary Spanning to scan other companies' efforts, by benchmarking their progress against competitors' and by pursuing information from sources outside the organization. Stata (1996, 318) look at the organizational learning as an umbrella that unify systems thinking, planning, quality improvement, organizational behavior, and information systems.

1.5. Definitions of organizational learning

Scholars have proposed a variety of definitions of organizational learning. According to Argyris (1977), organizational learning is a process of detecting and correcting error. Probst and Bchel (1997, 167) go further, defining organizational learning as the ability of the institution as a whole to discover errors and correct them, and to change the organizations knowledge base and values so as to generate new problemsolving skills and new capacity for action. Probst and Bchel (1997, 24) perform the following characteristics in the process of organizational learning: Change in organizational knowledge, Increase in the range of possible actions and Change in intersubjective constructions of reality.

By the definition of Fiol and Lyles (1985), organizational learning means the process of improving actions through better knowledge and understanding. DiBella and Nevis (1998, 28) define organizational learning as the capacity or process within an organization to maintain or improve performance based on experience. They look at

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the organizational learning as to a social process whereby some insight or knowledge, created either by an individual working alone or by team, becomes accessible to others (DiBella and Nevis 1998, 26). Huysman (2000) gives the definition where the focus is on collective knowledge construction: Organizational learning is the process through which an organization constructs knowledge or reconstructs existing knowledge. Garca and Va (2002) start from individual but also stress to collective pattern, writing that organizational learning can be understood as a collective phenomenon in which new knowledge is acquired by the members of an organization with the aim of settling, as well as developing, the core competences in the firm, taking individual learning as the basic starting point. As we can see, in spite of different accents in definitions all scholars describe organizational learning as a process resulting better knowledge base and improved performance.

1.6. Different levels of learning

Several writers draw distinctions between different levels of learning. Senge (1990) differentiates adaptive and generative learning, Argyris and Schn (1978) present the division between single-loop learning, double-loop learning and deutero-learning, Fiol and Lyles (1985) identify lower-level and higher-level learning. The higher is the organizational learning level, the better is its quality. Probably the most frequently used model to describe organizational learning levels is the one presented by Argyris and Schn. 1.6.1 Single-loop learning The first organizational learning level by the distinction of Argyris and Schn is single-loop learning. Single-loop learning solves the presenting problems (1990, 92). It occurs when people attempt to correct the mismatches between actions and intended outcomes simply by changing their actions when the governing values or assumptions that underlie those actions are not open to change. Single-loop learning asks a onedimensional question to elicit a one-dimensional answer. It addresses a difficulty but

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ignores a more fundamental problem, i.e. why the mismatch or error existed in the first place. Single-loop learning is present when goals, values, frameworks and, to a significant extent, strategies are taken for granted.

Actions

Mismatch or Errors

Change the Action

Figure 1. Single-loop learning. Source: Argyris 1990, 92. 1.6.2. Double-loop learning Double-loop learning takes an additional step or, more often than not, several additional steps. It occurs when, in addition to detection and correction of errors, the organization is involved in the questioning and modification of existing norms, procedures, policies, and objectives. In other words, double-loop learning asks questions not only about objective facts but also about the reasons and motives behind those facts. Kim (1993) writes that double-loop learning provides opportunities for discontinuous steps of improvement where reframing a problem can bring about radically different potential solutions. So we can say that organizational problem-solving capability is increasing when double-loop learning takes place.

Governing Values

Actions

Mismatch or errors

Single-Loop Learning Double-LoopLearning

Figure 2. Double-loop learning. Source: Argyris 1990, 92. 12

1.6.3. Deutero-learning The third, and highest organizational learning level of the model from Argyris & Schn is deutero-learning, which can be regarded as learning to learn. The members of an organization ask more and more fundamental questions about their organization, reflect on and inquire previous contexts for leaning. Schn writes that this model of organizational learning refers to the organizational capacity to set and solve problems and to design and redesign policies, structures, and techniques in the face of constantly changing assumptions about self and environment. There can occur all three levels in organizational learning but the second and the third learning level are assumed to be of critical importance to enhance the survival and success of organizations.

Embedded Tradition System

Governing Values

Actions

Mismatch or errors

Single-Loop Learning Double-Loop Learning Deutero-learning

Figure 3. Deutero-learning. Source: Nielsen 1996, 36. Quoted in Seo 2003.

1.7. Learning culture

Several writers have put great emphasize on importance of organizational and management culture as a facilitator or inhibitor of organizational learning. Schein (1994) proposes to increase the realization of the need to change and learn (what he calls Anxiety 2) so that it is greater than fear of change and learn (or Anxiety 1), or even better, if Anxiety 1 can be reduced. Achieving such a situation, he identifies the following elements needed for a learning culture: An equal concern for all of their stakeholders - customers, employees, suppliers, the community, and stockholders. No one group dominates the

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thinking of management because it is recognized that any one of these groups can slow down and destroy the organization. Shared belief that people can and will learn, and value learning and change in its own right. Pro-active and pragmatic world view, having the shared belief that the world around is malleable, that people have the capacity to change their environment, and that ultimately they make their own fate. Enough diversity in the people, the groups and the subcultures to provide creative alternatives. Open and extensive task related communication at the organizational level. Systemical thinking in terms of multiple forces, events being over determined, short-run and longer range consequences, feedback loops and other systemic phenomena. Linear cause and effect thinking will prevent accurate diagnosis and, therefore, undermine learning. Teamwork and increasing dependency on each other.

Argyris (1990) distinguishes two contrasting types of cultures in organizations: Model I theory-in-use and Model II theory-in-use. Model I instructs individuals to seek to be in unilateral control, to win, and not to upset people (1990, 13). This model is designed to keep individuals unaware of their counterproductive actions and leads to defensive routines in an organization. The governing values of Model II theory-in-use are valid information, informed choice, and responsibility to monitor how well the choice is implemented (1990, 104). Using Model II leads to a reduction of misunderstanding, error, self-fulfilling prophecies, and self-sealing processes (1990, 106), resulting people to be more constructive. Comparison of the two models of theory-in-use is presented in Appendix 2.

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