Innovation: A Strategic HR Imperative
Many of us have had great ideas or visions. But our dilemma is really: What do we do with them? In our HR management role, how do we get more ideas and visions from all employees? And how do we turn these into reality? Too often we think of innovation as the responsibility of a product team or a business unit. Innovation springs from the minds of creative individuals working in an environment that spawns and encourages innovation.
HR leaders need to understand the critical importance of innovation today and how to contribute to your organization’s Innovation mandate by attracting and keeping the most innovative people, constantly improving their skills and creating a culture of innovation. This will enable your organization to differentiate itself. These are a part of the role of HR.
What is Innovation?
Before we can understand how we can help our organizations with its innovation agenda, we need to understand the meaning of innovation. What is innovation? For many of us, innovation means the introduction of new technology and inventions—such as the internet, cell phone, etc. It is true that innovation led to the development of these new products but innovation is much more than that. Innovation goes beyond technology and requires collaboration from many areas to come together to achieve success. Innovation is a collaborative process; where people in many fields contribute to the implementation of new ideas.
David Neeleman, founder and CEO of JetBlue started a new airline at a time when the marketplace was flooded with airlines. He said; “Innovation is trying to figure out a way to do something better than it’s ever been done before.” To accomplish this his edge was innovation.
The lone inventor is a myth. During the life of Thomas Edison he patented 1,093 inventions. However, he did not work alone to develop these inventions; this is a bit of a misconception. His team of talented workers assisted him all hours of the day and night. They had the skills to take his ideas through an innovation process in order to bring them from concept to reality. His laboratory at Menlo Park was referred to as an “Invention Factory.”
The Impact of HR on Innovation
“Dave Ulrich, professor of business at the University of Michigan, has long argued that HR leaders should assume a more vital, strategic role inside their companies, rather than merely keeping busy with everyday stuff like: policies, payroll, and picnics. Ulrich says that HR leaders should strive to build and strengthen the unique set of organizational capabilities that give an organization its competitive advantage. In essence, this means developing a particular mix of resources, processes and values that makes it hard for rivals to match what your organization does.
IBM completed a survey of global HR leaders in 2011. The results showed an agreement among Human Resource leaders that driving creativity and innovation is their number one business challenge, yet only 50% of these HR executives indicated that they are doing anything about it.
Similarly, while a majority of 70 percent said HR plays a significant or somewhat significant role in fostering innovation at their organizations, 71 percent said they don’t use any screening tools designed to bring in creative and innovative candidates. Additionally, 53 percent don’t tie performance-management systems to driving innovation and 53 percent don’t even have a formalized suggestion system in place.
According to Susan Meisinger, former President and CEO of the Society for Human Resource Management, “The takeaway for me in all this is we all think these things matter, but most of us are not doing something about it.” Secondly, she adds, “It is difficult; if it were easy, we’d all be doing it.”
There are 3 things that HR Professionals can do to foster innovation:
- Hire for innovation
- Create a culture of innovation
- Train and reward for innovation
1. Hire for Innovation
Hiring for innovation requires that we identify people who can “think outside the box.” Let’s not assume that everyone is equally innovative, but instead let’s recruit people for their innovation capabilities. Are they inquisitive? Are they locked into one viewpoint or willing to consider others? Are they open to new ideas, new concepts? These questions have a lot to do with how people are recruited and how their skills are improved to welcome innovation.
Seth Waugh, CEO of Deutsche Bank Americas, advises, “You must have people with that hunger to always learn, who are always open and who think about things in a different way.”
Intuit, a manufacturer of financial management software including Quicken, ensures their culture is sustained through their hiring process by making sure that every new employee understands their “Customer Evangelist Culture” that has resulted in tremendous customer loyalty and market share growth.
Another example of a culture that drives innovation is Apple. What makes Apple so unique and competitive is that on top of their great products, they also seem to have a great culture, and it’s this culture that drives their innovation, and hence their superior products.
It’s interesting that even though Apple has been around since the 1970’s, it hasn’t developed the rigidity that is so apparent in many long established companies, yet they have changed their CEO over the years and grown considerably. They have somehow managed to retain a casual working environment and resisted any real push for policies and procedures or dress codes or time sheets. They continue to create a common desire, energy and enthusiasm to develop great products and to overcome their competition.
Today, Apple has about 35,000 permanent employees, yet continues to retain a culture of innovation through their HR practices. They hire, reward and recognize employees for a common desire, energy and enthusiasm to create great products. They encourage employees not to be afraid to fail. There is no punishment for this.
2. Create a Culture for Innovation
The ability to help create, protect and build organizational culture is a critical role for HR to play, as it is a major driver for innovation. However, management needs to support, plan for and nurture an innovation culture for innovation to be successful.
Not too long ago I attended a major corporate event for a large global client. All of the media had been invited to attend this special event. The chief executive came on stage. He described his well-thought-out, incredibly detailed vision for changing his organization. He said, “Innovation will be the cornerstone on which we build our future. For too long, we have relied on our great brand, loyal customers, and dedicated employees to carry us through various difficult times. But the world is changing, and our customers and shareholders are counting on us to deliver new products and services. Our competitors haven’t recognized this fact. This gives us an edge. So from this day forward, I commit to create a culture of innovation. We will be known as the company that reinvented our industry.” There was huge applause from the audience and excitement built around the prospect of the new vision.
The next day, a huge plaque was hung in the corporate lobby that boldly proclaimed, “Core Value No. 1: Innovation.” And you could tell that the CEO believed this with all his heart. He had seen the light. The stock price rose. And there was a renewed optimism among all levels of employees. Everyone in the company got a T-shirt, and on it was the statement, “Core Value No. 1; Innovation.” And then something happened. Nothing! Nothing happened! Nothing at all! The CEO was right. He had the key driver correct, but he failed because he didn’t think about how to develop the culture to be more innovative nor did he implement an innovation process to move ideas from concept to reality. Furthermore, he didn’t try to find out how other innovative organizations were doing it. He only saw innovation as a competitive advantage for his industry without making the investment to learn and develop the infrastructure for innovation. I think most organizations are there right now.
An Unsupportive Culture is the Number One Obstacle to Innovation
An IBM Global CEO study in 2008 cited an unsupportive culture as the number one obstacle to innovation. Organizations that have a culture that supports innovation are often customer focussed, value-driven and strategic. They ensure that their operating strategies are developed through interactions with their: employees, customers, partners, vendors, suppliers and consultants. They review market trends and identify, through benchmarking, what is required to out-perform their competition.
A recent study by the Harris Group indicated that Executives see a culture of innovation as crucial to not only growing their business (95%) and profitability (94%) but also for attracting and keeping talent (86%).
HR and Culture
The most powerful force in business is culture. While corporate culture is not necessarily the responsibility of HR leaders, the people who are hired and the training and cultural imperatives placed on the business are done so through the role of HR, so HR leaders can have a big impact on whether or not the organization is culturally attuned to innovation.
The Boston Consulting Group, McKinsey & Company and Booz Allen Hamilton completed studies, in 2007 on Innovation. On the positive side, the results indicated that it remains a high priority for most corporate leaders around the world; they recognize it as a key growth driver. Unfortunately, they also found that there is a broad belief that most organizations don’t have the leadership, systems, or tools to successfully and consistently innovate. As well, they found no statistically significant connection between the amount of money an organization spent on innovation and its financial performance.
Cultural Barriers to Innovation
There are many barriers to creating a culture of innovation. Research has identified these three critical ones:
- Lack of Leadership Support
- Innovation driven by time and money
- No strategy for innovation
- The absence of a culture that supports innovation
- Not engaging all employees
Daniel Muzyka, Professor of Entrepreneurship and Dean of the Sauder School of Business at the University of British Columbia add an additional barrier to innovation as being, “a constant examination of quarter by quarter results versus longer-term planning.” He says that this, “creates a culture that is not supportive of innovation.”
It is very difficult for management today to build successful innovation processes in organizations. This is because management is often encumbered with constant short-term, bottom-line oriented pressures as well as a shorter term to accomplish change. The decreasing lifespan of executive teams diminishes the focus on the long-term innovation process and tends to increase the focus on sustaining the status quo and existing product line. That’s a dangerous move in volatile markets.
To move outside of this realm, organizations will need to re-evaluate how management performance is measured; the extent to which adding new products and services is included in the measurement of management’s performance and how much time in management meetings is spent on innovation versus day-to-day business. Performance measures need to give consideration as to whether or not employees are given the time and resources to experiment, generate ideas, explore these and make presentations to management? Or is this done on an ad hoc, more haphazard basis.
For example, Google ensures their culture of innovation remains strong by giving their engineers time to invent. They spend 20% of their time working on projects they feel passionate about. And their performance reviews consider how they spent this time. Other characteristics of Google’s innovation culture are:
- They aren’t afraid to take calculated risks; they hire for taking risks.
- They have developed a very flat organizational structure to foster innovation.
- All employees have easy access to face-time with senior management to present their ideas.
- They desire to get new products up quickly as a prototype so that customers can play with them, feel them and provide feedback on them. In this way, they can quickly improve them, re-launch them and make them great. If they wait until it’s perfect before launching their experience has shown that they will: lose market share, increase development costs, and in some cases, never get to launch a product that the customer actually wants. Striving for perfection before releasing innovation can be a killer.
As HR leaders, how often do you prototype new and/or improved Human Resources initiatives? How many of you allow your employees to take calculated risks? What is your organizational culture for innovation? Do you give employees time to innovate? Is it part of their job responsibilities?
Creating Your Innovation Culture
To begin an initiative for innovation here are some steps to take:
- Create a steering committee made up of individuals from different positions but also representing different experiences, levels and generations.
- Define a purpose and mandate for the steering committee (essentially, to oversee the cultural change required to create an innovation environment)
- Complete a cultural assessment to identify the current culture for innovation within your organization as compared to the “ideal” environment, as identified by all staff.
- Identify the strategies to close the gap between the present and the ideal innovation culture. These might include a kick-off event to help celebrate the development of the innovation culture.
3. Train and Reward for Innovation
I started by telling you that there are 3 things you need to do to help foster innovation in your organization. The first is to understand the importance of hiring for innovation. The second is to understand how to create a culture of innovation. Now we’re ready for the third – the importance of training and rewarding for innovation.
Reward for Innovation
The right rewards system provides a powerful force for reinforcing commitment, directing employee professional growth, and shaping the corporate culture to be more innovative. HR departments must look at the reward mechanisms in place and ask if they are doing the right things to develop the employees and culture of the organization. This should include: compensation strategies, performance management tools, and other targeted recognition and reward programs.
I am always amazed when I see organizations with programs that recognize, how long an employee has been coming in on time, or have been with the organization for a long period of time. Yet few organizations reward employees for exceptional contributions. Performance reviews are also a concern of mine in this area. Few organizations are measuring the right things when it comes to promoting the development of innovative-minded employees. HR managers should take a hard look at how they are trying to develop these critical resources.
For example, BMW’s continued success is its strategic focus on developing customer-friendly innovations, coupled with an approach to innovation management that is unique within the automotive industry. One of their keys is a constant focus on the culture of innovation – making professional innovative processes a key strategic and cultural constituent of every area of the company.
This focus on culture is a guiding principle within BMW. They believe that if a company knows what it stands for and what are its strengths, it can more easily develop and implement a clear strategy. They believe that to be innovative, it is necessary to give up the idea that a company can do everything equally well. On the contrary, it seems more likely that a company that tries to do everything equally well will be unable to make full use of its strengths.
BMW ensures that all departments are focussed on innovation. While some organizations focus only on manufacturing, BMW also focuses innovation on every department within the organization including sales and marketing, human resources and product development. They also recognize that the results achieved by a company in the past are only of limited importance. The innovativeness of a company therefore always depends on future business development (which is not yet known), potential, expected growth or in other words, specific ideas about future prospects.
Just about everyone working for the Bavarian automaker — from the factory floor to the design studios to the marketing department — is encouraged to speak out. Ideas bubble up freely, and there is never a penalty for proposing a new way of doing things, no matter how outlandish.
BMW’s management structure is flat, flexible, entrepreneurial — and fast. This helps innovations to be developed quickly to improve internal processes and for the marketplace.
The McKinsey Quarterly, 2008 said, “Leading companies for innovation make innovation a formal agenda item at regular leadership meetings. That signals to employees the value management attaches to innovation.”
Question: How many of you, who are in a management position, have seen innovation as an agenda item at your management meetings? How many of you have seen management updates on the implementation of innovation strategies?
Seth Waugh, CEO of Deutsche Bank Americas, said, “Culture is a critical factor in promoting innovation. Business leaders stimulate innovation by offering incentives to workers, creating an environment, and setting expectations.”
Train Leaders to Ask Staff
As management you should be asking all employees, “What are you working on? What is the potential, the applications this might have in the future? What are your challenges? How can I help? How might people use it?” Such questions will engage employees to become actively involved in innovation rather than asking the traditional questions which impose a time constraint.
As HR leaders, helping your organization to achieve more innovations, to create the culture to support innovative thinking and to hire, train and reward is a major undertaking. It can seem daunting to know where to begin. However, the most important first step is just that – to take that first step. It is a large and exciting change process. Even a small initiative can help to demonstrate the possibilities of a more robust effort. Lead your organization through this journey. I have led others through this journey and you can too!