It acts like a lens that filters our interpretation and understanding of our personal experiences and communication and places boundaries around our behavior. In this way it delimits our performance and, thus, our results. In an organization, tacit knowledge is made up of the collective mindsets of everyone in the organization. Out of its experience, the organization assumes a unique set of beliefs and assumptions through which it collectively filters and interprets how it sees the world and reacts to it. Although the collective mindsets of an organization remain largely implicit, or unspoken and taken for granted, they still have a great impact on the collective perceptions and behaviors of the members.
Tacit knowledge can be both good and bad for an individual or an organization.
Holding commonly understood values and assumptions allows us to function quickly and reliably without debating each issue or forming a new process for each action. But when the environment changes or the process becomes inefficient, neither individuals nor organizational leaders may be able to recognize the need for change. The speed of change in this knowledge era requires that we place greater importance on the systemic renewal of the tacit knowledge for the sustainability of the firm. Renewing tacit knowledge means finding ways of making meaning from knowledge. In order to create value in intellectual capital, we must understand how knowledge is formed and how people and organizations learn to use knowledge wisely.