When Institutional Knowledge Isn’t Factored in a Job Cut Initiative

A report by the U.S. Government Accountability Office showed leaders within the Securities and Exchange Commission (SEC) are concerned recent job cuts may have unwittingly eliminated key institutional knowledge.

The SEC lost nearly 18% of its staff in 2025 due to downsizing efforts, including deferred resignation offers and early retirement buyouts. The report found:

• More than half of the remaining employees said departing employees had either unique knowledge or specific subject matter expertise.
• More than a third reported they or their colleagues had taken on additional work or responsibilities to ensure the SEC could continue to carry out its mission.
• Remaining employees did not expect to meet standard annual goals, with at least one manager reducing output goals by 20% due to lost personnel.

The SEC job cuts and resignations reflect a wider trend of experienced employees leaving, driven by shifting corporate priorities, burnout, and a growing sense that their expertise is undervalued amid cost-cutting and structural changes, said Tom McMullen, a senior client partner at consulting firm Korn Ferry.

In the case of resignations, it can call out employee perceptions of fairness — or a lack of it.

“Experienced talent doesn’t just leave for more — it leaves when the deal no longer feels fair,” he said. “Many of these experienced employees carried disproportionate weight through recent disruptions and are now reassessing what they want from work.”

Exodus of Expertise

According to Mike Siano, the director of thought leadership and advisory services at workforce agility and talent management platform Cornerstone OnDemand, experienced employees carry knowledge and context that simply doesn’t live in any system.

“When they leave, organizations lose judgment that took years to build,” he said. “Teams are then left with gaps that are invisible until something goes wrong.”

McMullen added cost-cutting and flatter structures can signal that experience is expendable, while career plateaus and cultural shifts — like leadership changes or new strategies — can create disconnection.

The job market also has trained people to job-hop for advancement, and staying loyal often means staying stagnant in terms of compensation and title, said Jennifer Barnes, the CEO of Optima Office, an accounting, C-suite and HR services firm.

In addition, artificial intelligence (AI) and rapid technology shifts are accelerating these transitions, said Siano.

“Experienced employees are willing to adapt,” he said. “What they are not willing to do is absorb more ambiguity and risk without corresponding transparency, investment and influence over how their roles evolve.”

The broader message? People don’t just leave jobs — they leave signals about what the organization values, McMullen said.

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“The ripple effect is real. When experience walks out, productivity doesn’t just dip — it compounds downward.” 
— Tom McMullen, Korn Ferry

Short-Term Savings, Long-Term Consequences

Oftentimes, job cuts are made to save the organization money. In actuality, it can cost up to twice the amount of someone’s annual salary to replace an employee, when factoring in costs for recruiting, onboarding, ramp time and the drag on surrounding teams.

Additional research showed the real cost when companies lose their more experienced workers:

• 80% of critical knowledge is not documented, according to AI and technology platform Sugarwork.
• Employees can lose more than five hours per week trying to locate or recreate information, according to learning platform Panopto.
• Only 20% of organizations feel confident in their leadership bench strength, according to DDI, a global leadership company.

There also is an immediate hit on productivity and morale when these workers are gone.

“Less experienced employees take longer to reach effectiveness and mistakes increase, creating a drag on output,” McMullen said. “Remaining staff often absorb extra work, fueling burnout and disengagement. The ripple effect is real. When experience walks out, productivity doesn’t just dip — it compounds downward.”

The loss of knowledge is substantial, Barnes said, because these experienced employees hold the “why” behind the “what.”

“They know why certain processes exist and which clients have specific quirks,” she explained. “The replacement hire [or person covering for the departed worker] might be technically competent, but they’re operating blind for months or even years.”

Why Institutional Knowledge Is a Critical Asset

Whenever there is someone who can be considered a “single point of business failure” because of what they do or what they know, an organization should have a mitigation strategy in place, said Kevin Tamanini, DDI’s vice president of professional services.

Documentation is key, he said. Start by having the person chronicle their knowledge area, including what that entails, its purpose, why it’s critical to the business and what it’s connected to (e.g., decisions and actions within teams, customers or across groups).

“It’s important that leaders set expectations with associates that having redundancy of skills and knowledge is an essential part of an organization’s long-term success,” Tamanini said. “When leaders enable someone to become that single point, they aren’t doing their jobs as leaders to set the right expectations and build the skills in others.”

Capturing institutional knowledge should be intentional, noted McMullen, For example:

• Offer mentorship and apprenticeship programs, success planning for key roles, and phased retirement programs to help transfer expertise before it’s lost.
• Provide playbooks, decision logs and after-action reviews to preserve not just actions but reasoning.
• Embed job shadowing, rotations and teach-back practices into daily work.
• Reinforce usage of these programs and tools with incentives.

“The mindset shift is key,” McMullen said. “If knowledge isn’t captured or transferred, it walks out the door.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Career Growth
• Organizational Performance