The Trouble with Tribal Knowledge: How to Document Your Accounting Process

February 7, 2024 Theresa Rex

The trouble with tribal knowledge

There's a certain moment that we've all had at work, whether the work we do is in the C-Suite or on the front lines of entry-level operations. It's the moment when you go from being the "newbie" to an official member of the team. Maybe it's the day you find yourself answering procedural questions instead of asking them. Maybe it's the night before a critical presentation and you find yourself sleeping like a baby instead of wondering that you missed something. It's the moment you realize that you're a part of the whole at work. It facilitates the productivity that only comes from the confidence that you can be autonomous in your work: you know what you're doing, because you know how it's done at your organization – whatever "it" is. Learn how tribal knowledge can halt improvement in companies, especially in the accounting department.

It's not a bad way to move through the workday. The cliché "well-oiled machine" is well-worn for a reason. But what about when each part functions as its own whole within the same company? What if the machine of your organization is made of separate parts that all operate as everyone "knows" they should, but that knowledge is obscured within the organization – or even fundamentally flawed?

That's tribal knowledge, and it can be a big problem – especially for accounting departments if you don't know how to spot it, capture it and correct it.

Creating a Tribal Knowledge Definition Is the First Step Toward Process Documentation

how to document your accounting process

It's easy to get a sense of what tribal knowledge is because you know it when you encounter it. Sometimes it masquerades as indispensability: if an entire department would fall apart without that one individual who knows how to fix every glitch, hiccup and sticky situation when no one else can determine the source of the issue, that can indicate tribal knowledge, and that's just one common trouble with it, there are many more.

Other times, it's a full-on silo, usually constrained even further by a bottleneck that forms when one team or department has to oversee this process or that because they "know how it's done" but can't or won't share that information with the others that rely on it. Commonly, it makes itself known when it's time to scale: as more talent comes aboard, leaders are perplexed to find that it's taking longer and longer to do less and less.

But how do you define tribal knowledge? Knowing exactly how to describe it is crucial because you can't defeat something you can't really name. Six-sigma methodology has it nailed down pretty well, understandably. The method is the gold-standard in process improvement, so it makes sense to start there when you're looking for a "tribal knowledge" definition:

"Tribal knowledge is any unwritten information that is not commonly known by others within a company. This term is used most when referencing information that may need to be known by others in order to produce quality product or service. The information may be key to quality performance but it may also be totally incorrect."

This helps create a useful three question test for leaders looking to identify and capture tribal knowledge in order to prevent any kind of trouble, increase efficiency in and universalize disparate, messy, or near-mythical accounting processes.

When encountering information like this, leaders need to ask:

  • Does the process rely on the individual or team to know that "that's just how it's done" and lacks a universal system to document the accounting process?

  • Do others need access to or rely on the process being performed to maintain work quality and output?

  • Is the rationale behind the specifics of how the process is performed difficult to identify or even crumble under scrutiny?

If you're able to answer these questions in the affirmative, don't despair. While it's certainly not good news, the battle to identify and capture tribal knowledge in your company is half-won already.

When Companies Fail to Scale: Why Small-to-Medium Businesses Are the Most Affected

small business owner stressed after company up-scaling attempot

If hearing all of this immediately recalls images of enormous, labyrinthine organizations that have become so vast that the right hand rarely knows what the left is doing, it would be hard to blame you. It can be surprising to learn that it's small-to-mid sized businesses (SMBs) are the most likely to have issues with tribal knowledge. The truth is, if you aren't sure what to look for, nascent companies and businesses that are just starting to scale are almost guaranteed to have it baked right in.

The same qualities that are required for helming an SMB tend to leave scrappy start-ups and growing family empires vulnerable to the gatekeeping, bottlenecking and accounting processes that live in murky gray boxes tribal knowledge tends to create: the willingness to wear many hats; the resourcefulness and the need to "make it work, no matter what", for instance. By necessity, SMBs build upon a foundation that favors the ability to learn as you go. Even Facebook's early motto reflects that – remember "Move Fast and Break Things?"

[INFOGRAPHIC] Outsourcing is the Competitive Edge for Startups

But when those same companies have found stable footing and begin to see their first employees depart and welcome fresh talent or see themselves in a position where rapid growth that can accommodate at-scale functionality is critical, they get a crash course in tribal knowledge.

What happens, after all, when that indispensable "keeper of the keys" retires or moves on to new opportunities? If the documentation of the knowledge they're bringing with them doesn't exist, where will that leave the person or team of people that needs to replace them? In a rapid-scale model, costly interruptions are more likely to be caused by the need for this knowledge to be transferred quickly and accurately by as few as one "expert" to an incoming class of entry-level talent. Can that really happen if the only record of the processes your new recruits need to master – as soon as possible! – exist solely inside the mind of a single person?

Read More: Looking For A New AP Clerk? Here Are Your Options

From this perspective, it's easy to see why companies of this size are most susceptible to the problems of tribal knowledge. After all, there's a reason that Facebook changed its motto to "Move Fast With Stable Infrastructure".

The Trouble with Tribal Knowledge in the Finance and Accounting Department

accountant telling tribal knowledge in the finance and accounting department

The finance and accounting departments of companies are notorious epicenters of tribal knowledge. Everything from spreadsheet naming conventions to the shared folder that holds the data bookkeepers use at monthly close is too often known only to a select few. In SMBs, that select few may even be a single person. It facilitates the kind of dependency that's anathema to efficiency and can even bring entire departments to a screeching halt.

If it's impossible to complete something as simple as a 3-way match simply because the only accounts payable specialist that knows how to populate invoice numbers into the corresponding spreadsheet has a dentist appointment, that's a very big problem.

That example is a small and relatively sunny example of the mayhem tribal knowledge can cause in accounting departments. Imagine if that same accounts payable specialist were to give their two week notice tomorrow, or – as so many qualified accounting professionals are poised to do – retire from the workforce for good? Generations exist in the workforce in more than one sense of the word: few people stay in the same job for more than 5 years, and even fewer accountants have a tenure that long at a single company. When you combine the typical turnover in workplace "micro-generations" with the looming wave of Baby Boomers heading into retirement, it's clear to see why capturing tribal knowledge before it disappears for good is more urgent than ever.

How Outsourcing Captures Tribal Knowledge – And Improves Results

outsourcing company working on advantage plan that captures tribal knowledge

Documenting your accounting process isn't just a nice best practice. Given everything we know about the way tribal knowledge works and how it slows or even paralyzes growth makes universal, accessible documentation absolutely critical.

Finance leaders have a key role in the process, especially when tribal knowledge around accounting processes functions as the actual foundation those processes are built upon. It requires a change not just in the mechanics of the work your team will do – moving away from it means driving a substantive change in company culture. It's a big job, but it can be broken down into steps that are much easier to digest:

  • Identify the knowledge keeper or keepers: Find out who the "indispensable" workers are. Whether it's the general ledger accountant who has been with the company from day one, or that one employee that everyone calls when they encounter a glitch, they'll be your most valuable asset for the rest of the process.

  • Work to know what they know: People rarely gatekeep knowledge out of malice. Subject matter experts are invaluable, so ask them to function as a consultant as you work to capture what they know.

  • Become a knowledge archivist: Here's your biggest action item in your knowledge capture strategy – documentation. Work with your SME to determine why a process is performed the way it is. If it can be improved, you'll discover that during this step. Then, crucially, write it all down.

  • Make it all accessible: The entire point of knowledge capture is its subsequent distribution, after all. Making what you've learned accessible to the people who need it empowers your entire team to work proactively, productively and accurately.

Tribal knowledge capture and accounting process documentation can be done easily, effectively and seamlessly when you bring a qualified third party in to help with what can otherwise be a daunting and time-consuming task. Finance and accounting outsourcing doesn't just improve efficiency while providing an opportunity to reinvest money into your organization – with the right partner, knowledge capture and a system that lets you document your accounting process, including universal documentation, are baked directly into the relationship.

Explore Process Improvement in Depth: Improving Your Accounting Processes Through Outsourcing

It's commonly referred to as the knowledge transfer stage, a term that describes the process before the launch of your outsourced project where subject matter experts from the client company "pass the torch", so to speak, thoroughly outlining how to do what they themselves do best. At the same time, the provider works to clearly document your accounting process or processes for future use in training and troubleshooting.

Learn More About The Finance and Accounting Outsourcing Process: Outsourcing Step-By-Step: Taking The Mystery Out Of FAO

Essentially, that's what's at the heart of capturing tribal knowledge: getting it all out in the open and looking at it from all sides. A positive – if unintended – consequence of this is process improvement through outsourcing. As each process is placed under a microscope, better ways to perform them are identified and new efficiencies can be unlocked.

At Personiv, we understand how crucial process improvement can be to creating a more efficient finance department. It's why you'll find Six-sigma yellow belts leading teams of skilled accounting professionals here in Manila – and even here at home. We apply our "everything can be improved" mindset to each and every accounting team we build for our clients, whether that team is made up of a single accountant, or 50.

We can help you capture tribal knowledge, thus suppressing any trouble it could cause to your organization. We can also help your organization document its accounting process, this, coupled with tribal knowledge that is well-captured can turn a major threat into an opportunity — and we can start today.

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