Experimentation in Learning Organizations

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Excerpt from Experimentation in Learning Organizations: A Management Flight Simulator Approach
Abstract: Managers real life experiences will need to be supported by new learning tools, as external environments and internal dynamics of organizations become more complex. This need for simulated managerial experience has come from a trend towards fewer hierarchical levels organizations. Managerial competency that was once achieved by progressing through the many layers needs to be obtained through other means. This article shows how management flight simulators can enhance learning by allowing managers to compress time and space, experiment with various strategies, and learn from simulated deployments by reflecting on the outcomes. We focus on three aspects of the use of such simulators 1) the design of a generic learning process - learning laboratories - to address service quality management issues in a variety of industrial settings; 2) how dimensions of this learning can be operationalized and measured; and 3) an experimental study that shows the transfer aspect of learning and how different learning strategies affect the way in which participants transfer learning across domains.
Keywords: Learning organizations, transfer, gaming, system dynamics, behavioral decision making, simulation
1. Introduction
Organizational decision making is highly complex and managerial choices are far from trivial. The fact that people have a hard time learning from real-life experiences compounds the problem, especially when the decisions and their consequences are separated in time and space. In the Us, for example, one of New England's largest banks provides an illustration of how difficult learning from experience can be. The banks aggressive pursuit of ship-owning clients in the seventies led to huge losses in shipping portfolios in the early eighties. Massive losses led the bank to liquidate its entire shipping portfolio. At the same time, however, they aggressively expanded into risky real estate developments. In the late eighties, their real estate ventures resulted in quarterly losses of up to one billion dollars. These losses eventually caused the banks ultimate demise in 1991. Although shipping and real estate markets share many structural features and are unstable for similar reasons, this bank was apparently unable to learn from their mistakes in shipping and repeated them in real estate (Bakken, 1990).
This example not only highlights how difficult it is to learn causal relations in one decision environment, but also shows that decision makers do not easily draw appropriate lessons from failures. Certainly, people must simplify their decision environments into manageable chunks, lest decision making be impossible (Simon, 1956: 1978).
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