10 Human Resources management policies to support innovation Creating a Company Culture for Continuous Innovation

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1 10 Human Resources management policies to support innovation 10.2 Creating a Company Culture for Continuous Innovation Keywords Culture analysis; Innovation; Knowledge management; Knowledge sharing; Leadership; Organisational culture Learning Objectives This module presents the relationship between organisational culture and innovation and the ways for creating and developing an organisational culture able to sustain continuous innovation. By the end of this module you will be: - aware of organisational culture s importance in fostering innovation; - able to analyse the company s organisational culture; - able to elaborate a plan for shaping the organisational culture in order to support creativity and innovation in the company. Estimated time: 2 hours Introduction The main characteristic of the environment a company moves in is that nothing is constant, except change. Globalisation, emerging markets, changing needs on existing markets, development of production technology, information and communication technology are all characteristics of the environment we are very familiar with. But can we really cope with them? They demand continuous change, not only in adaptation, which on a long-term basis cannot maintain the competitive advantage, but also a proactive approach: new ideas, creativity and innovation. This means creating changes, not simply adapting to them. Innovation should manifest itself in all activities of the company: development of technologies, new products and services, marketing campaigns, selling techniques, new methods of organisation, new techniques of management, etc. Having a specialised team for innovation in the company is not enough. Innovation should be part of the daily activity and remit of all employees, regardless of their position. Management has to create, maintain and develop the spirit of innovation and include innovation in the daily activities at all levels and fields through the company culture. InnoSuTra 1/

2 What Organisational Culture for Innovation Is? Organisational culture is made up of the values, beliefs, underlying assumptions, attitudes and behaviours shared by the people in an organisation. Culture plays an important role in the company s success. According to Schein 1 organisational culture has 3 levels: 1. Artefacts: These are at the surface, visible to the eye and represent those aspects which can be easily discerned: language, technology, products, physical environment, style of dressing, manners, symbols. 2. Espoused Values: These are situated beneath artefacts and concern conscious strategies, ideologies, goals and philosophies. They are not visible, but they are conscious. 3. Basic Assumptions and Values: These constitute the core of the culture, and are difficult to discern because they exist at an unconscious level. Yet they provide the key to understanding why things happen the way they do. They refer to the environment, the reality, human nature, human action, interpersonal relationship, etc. Organisational culture is often compared with an iceberg because the most important part of it is not visible it lies under the surface (norms, unwritten rules, shared assumptions, taken for granted beliefs, values etc). But these elements primarily shape the individual and organisational behaviour and support or inhibit the innovation in the company (Fig. no. 1). Artefacts Artefacts language, language, technology, technology, products, products, style style of of dressing, dressing, physical physical environment, environment, manners, myths, stories manners, myths, stories Espoused Espoused Values Values conscious conscious strategies, strategies, goals goals and and philosophies philosophies Basic Basic Assumptions Assumptions and and Values Values norms, norms, unwritten unwritten rules, rules, shared shared assumptions, assumptions, taken taken for for granted granted beliefs, beliefs, values values existing existing at at unconscious unconscious level level Figure 1: Levels of Organisational Culture 1 viewed at InnoSuTra 2/

3 Now it is your turn! In the boxes below you will find features of the company culture which foster or inhibit innovation. Put each box into the right column. To move a box click on it, then with the left button of your mouse pull it into the column. After you have finished, click on Check answer button to see the correct answers. The interactive animation is available in the online guide only ( ). The main characteristics of the culture supporting innovation are: There is a common and shared vision of the future for all employees Creativity and high performance are among the most important shared values Monitoring changes in the markets and adapting to them is a high priority, as it ensures that business processes are aligned to satisfying customers needs Employees are open and supportive to changes and the implementation of new ideas Generation and implementation of new ideas, improvements in the work organisation and organisational processes are normal, day-to-day activities at all organisational levels Management considers and treats human resources as a strategic resource of the company Continuous development is a high priority both for the company and the employees Human resource development expenses are considered investments which pay off in the medium and long term There is a healthy level of competition between individuals and project teams, pushing creativity and performance to higher levels There is a reasonable balance between recognising individual and team performance Networking and sharing knowledge is a company-wide and continuous activity. Please stop and think: What are the most important assumptions and values in your company? Classify them in two categories: those fostering innovation and those inhibiting it Why Is Organisational Culture Important for Innovation? We have already seen that organisational culture can influence employees attitude towards innovation and their participation in innovative activities. Culture can boost or freeze the innovation process. According to innovation guru Stephen Shapiro: InnoSuTra 3/

4 A culture of innovation can be a company s primary source of competitive advantage, and it can pay off steadily over the years. Any high-performance culture is difficult to replicate, but innovation is in a class by itself. Once embraced by employees, innovation becomes a way of life. It ensures that all the human capital is in step and striving to produce outcomes of value for the organisation Where to Use Your Knowledge Concerning Organisational Culture? The main problem with the culture is that the most important elements influencing behaviour in the organisation cannot be seen. Only a thorough and deep analysis reveals these elements. You may use your knowledge about organisational culture in the following situations: If there are general problems of productivity, performance, commitment, attitude to work and innovation, etc. and there is no particular reason for them (e.g. technology, organisation, lack of skills, low salary levels), then it is almost sure that the roots of the problem lie in the organisational culture, in employees and/or managers values and assumptions that shape the behaviour. When things are going all right, but management would like to make improvements, to the company culture to provide better support for the innovation process. Please stop and think: What is the situation in your own company concerning innovation. Have you experienced problems, which could be caused by the fact that the organisational culture does not suit the strategic goals and/or the innovation philosophy of the company? How to Create an Organisational Culture for Innovation? Leadership behaviour is the most important factor in shaping organisational culture. But this is a shared responsibility among all leaders of the company and while the behaviour of the top management is decisive, it is not alone enough. To foster innovation, the managers must take a proactive role in shaping the organisational culture that supports innovation-focused behaviours. Of course, changes cannot be expected from one day to another. Changing culture is a long process and managers must be consequent in applying the established measures. 2 viewed at InnoSuTra 4/

5 The steps for changing organisational culture are presented in Figure 2. The process of changing organisational culture. Click on each step to see details of its content. The interactive animation is available in the online guide only ( ). Present organisational culture Desired organisational culture A. Analysis of the present organisational culture B. Definition of the desired organisational culture C. Action Plan for achieving the new organisational culture D. Implementation of the Action Plan Figure 2: The process of changing organisational culture A. Analysis of the organisational culture Would you like to make any kind of changes? First, you must know where you stand, this means that first the features of the present culture should be analysed. The analysis of the organisational culture can be performed by survey using questionnaires and interviews. You can download a checklist helping you to pay attention to all the important elements of the organisational culture 3 in the survey by clicking here. The interactive animation is available in the online guide only ( ). Now it is your turn! Based on the checklist prepare a short questionnaire for analysing the culture of your company or team. 3 viewed at InnoSuTra 5/

6 B. Definition of the desired organisational culture You already have the starting point and now you need the goal. Where would you like to arrive? The next step of the change process is defining the new organisational culture. The managers and employees of the company should be motivated and committed to the final objective to be able to implement successfully the change. For this reason, the best way for defining the new organisational culture is to involve the companies key personnel (both managers and employees), organising workshops from the bottom to the top of the organisation. Now it is your turn! What would be the most important elements of your company s/team s culture in order to support innovation? Make a list of 5-8 elements of the desired culture (values, philosophy, beliefs, norms, etc.) C. Elaboration of an action plan to implement the new culture The differences between what you would like to have and where you stand at the present, constitute the basis for the improvement plan. According to Stephen Shapiro the most important measures to achieve a culture of innovation, are 4 : 1. Make everyone accountable: Because a few individuals at the top cannot possibly plan all of a company s activities, give employees a set of rights, responsibilities and rewards that make them accountable for their own actions. 2. Encourage employee innovations, and reward them accordingly: Companies are often fast to turn to outside help, when in fact they already have the capabilities/inspiration/knowhow within their organisation to do the job. 3. Replace rigid processes with clear business objectives: Too often innovation is stifled because companies define business processes in great detail, then hand those designs to the line that is expected to execute them from memory. 4. Challenge employees to compete: When challenged by external (or sometimes internal) organisations, groups are kept on their toes. 5. Focus on your core strengths and outsource: Another way of using innovation to stay competitive is by focusing on competitive differentiators and relegating everything else to partners who have that expertise already. The particular measures for creating an organisational culture for innovation depend on the results of the previous steps. Other possible measures for changing organisational culture might be 5 : 4 viewed at InnoSuTra 6/

7 Establishing a shared vision and common goals to achieve: creating the vision of a desired future, related not only to the business, but also to innovation and employees innovative behaviour. Improvement of internal communication: informing employees of all important issues concerning the company including vision, strategic goals, policies, results, foreseen changes, projects, etc. Involving employees in important decisions and planning: employees participation in the elaboration of the vision, making important decisions concerning the production/service process, new technologies and developments, planning and implementing changes, is the best way to break resistance to changes, and to get commitment to achieve the goals. Job enrichment: including elements related to innovation, improvement of daily work routines, of the processes and work organisation in the content of simple jobs. Each person must be accountable to his/her line manager for increasing the effectiveness of his/her own and the team s work and contributing with new ideas to it. Changing management style from dictative to supportive: Dictative management style is contrary to innovation because it treats employees as simple executors of management decisions. The manager should support each employee to develop his/her competences and creativity and to use them at work. Allowing employees the right to make mistakes may increase their effort to come up with new ideas and suggestions, try out new processes etc. Making continuous development a shared value in the company: Development of employees knowledge and skills is very important for the innovation process. Managers should encourage employees to embrace self-development and provide the conditions for this (e-leaning, intranet resources, free access library, workshops for exchanging experiences, etc.). As human resources are the most important assets of the company, all training costs must be considered as an investment for its future success. Supporting teamwork: Teamwork is a basic requirement for innovation, thus managers/project managers should be trained and supported in building innovative, high performance teams and employees to work effectively in teams. It is very important that each team has well-defined norms supporting innovation and in line with the organisational culture. Sharing knowledge: Making the knowledge and experiences accumulated in the organisation available to everybody (knowledge management) is a basic requirement for further development. The main tools and techniques for this are: the intranet with a shared knowledge base (e.g.: best practices, publications, research results), regular 5 For more ideas concerning development of the organisational culture for innovation, especially in relation to knowledge management the case study presented in chapter InnoSuTra 7/

8 meetings and workshops for problem solving and exchange of experiences, presentations of projects and conferences, newsletters on topics of interest, etc.) Now it is your turn! Based on the previous exercises, establish the elements of your organisational or team culture that should be changed. Choose 2-3 top priority elements, and elaborate the change program for them. D. Implementation of the measures to achieve the desired organisational culture The success of the implementation mainly depends on three elements: - continuous communication from the beginning of the change process - involvement of the employees - monitoring the results and making changes in the action plan, if needed Case study An automotive enterprise set up a project team for improving knowledge management in the company. But soon they had to realise that members of the organisation were not willing to contribute to the project. It was obvious that there was an underlying organisational culture problem. As a result, they carried out an organisational culture analysis. The methods used to analyse the current culture were: - Questionnaires: These were distributed personally by the heads of the departments, and a very good return ratio of approximately 40% was reached. - Interviews: The verbal questioning took place in the form of semi-structured interviews with 7 executives and 15 employees (heads of departments and groups as well as other opinion leaders). With the use of semi-structured interviews the team pursued two goals: a) to obtain comparative answers, and b) to get more detailed information. - Observation: This method is used for supporting or verifying the results of other methods. Members of the project team participated in meetings and discussions involving executives and other leading staff. The definition of the organisation culture and the establishment of measures took place in workshops with executives and other opinion leaders. The most important development measures were: - Info corners should be established as a central meeting place for the employees. Apart from general news and facts about the organisation, the place could also be used as a central location for idea management. This meant that suggestions could be delivered and inspected there and/or the best ideas presented there to encourage the creativity of the employees. InnoSuTra 8/

9 - A common communication tool for the heads of departments could be the implementation of an incentive tour for executives (e.g. one weekend per year) focusing on the maintenance and development of social and interpersonal relationships. The same type of activity could be organised at lower hierarchical levels, too. - Organisation of regular discussion platforms using regular discussions (e.g. monthly) between groups and/or departments, especially for units which do not cooperate very often, made the elimination of interface problems and the creation of a structure of a mutual understanding more possible. - Presentation of project experiences that focused not on the project itself, but the positive and negative experiences during the course of the project (e.g. presentation of the three largest errors and the three best ideas). - Organisation of knowledge transfer days when current and final projects from all fields were presented, allowed all units/departments to be informed about projects and fostered the generation of new ideas and/or new knowledge in another context. - Coaching for young employees increased their ability to act quickly. This required the training of coaches, who could also be seen as the future generation of executives Summary of the Module This module presents the importance of organisational culture in sustaining continuous innovation. Values, company strategy, philosophy, policy, written and unwritten norms, beliefs and shared assumptions of the organisation s members shape their behaviour, their attitude and commitment to innovation and performance. Most of these elements are not obvious or visible. For this reason, organisational culture must be analysed using questionnaires, interviews and observation. The company must have a clear picture of what type of organisational culture suits and sustains continuous innovation. The best way to establish the features of the desired culture is by involving managers and employees. The measures for creating the new culture are established by taking into account the differences between the present and the desired state of the culture. This may involve the establishment of a vision, mission, values, changes in the content of the jobs, improving teamwork, the sharing of knowledge, management style, etc. Communication and involvement of all employees are two basic requirements for the success of an organisational culture change project. 6 viewed at InnoSuTra 9/

10 In this module, you have learnt about the elements of the organisational culture, which shape the behaviour in an organisation and methods for altering them. Now you are able to: - analyse the existing organisational culture and recognise the elements that influence managers and employees behaviour - prepare an action plan to change the elements of the organisational culture which inhibit innovation in the company. You have also learned that knowledge sharing is a very important element of an organisational culture supporting innovation. BIBLIOGRAPHY Sources Armstrong, M. (2003): A Handbook of Human Resource Management Practice, Kogan-Page, London Schein, Edgar: Three Levels of Organizational Culture viewed at The Culture Connection: Creating a Company Culture That Fosters Innovation (Review of the book 24/7 Innovation by S. Shapiro) in viewed at Erich Hartlieb, Josef Tuppinger, Reinhard Willfort: A Knowledge-oriented Change of Organisations Model and Practical Examples in viewed at viewed at Further Reading Farson, R. & Keyes, R. (2002). The Failure-Tolerant Leader. Harvard Business Review 80 (8): Horibe, Frances (2001): Creating the Innovation Culture: Leveraging Visionaries, Dissenters & Other Useful Troublemakers John Wiley and Sons Canada Ltd. Milton, Nick (2005): Knowledge Management for Teams and Projects, Chandos Publishing (Oxford) Ltd InnoSuTra 10/

11 Websites Innovation speaker, author and consultant, Stephen Shapiro s website, with ideas concerning the development of an innovative organisation, articles on innovation and company culture. A portal with articles concerning innovation, organisational culture, strategy, change management, human resource management, strategy. Website of a management consulting company focusing on strengthening individual and organisational performance. It contains news, articles, case studies, research results concerning organisational culture, team management and change management. Free downloadable articles concerning organisational culture, news about events, seminars, books, training and payable resources concerning organisational culture. Website of a virtual consulting organisation having experience in organisation change & development, culture change and cultural inquiry, strategic & business planning, management & team development, human resources, and finance & systems. It contains articles, case studies and check lists on the above mentioned topics. GLOSSARY Knowledge management: Knowledge management is any process or practice of creating, acquiring, capturing, sharing and using knowledge, wherever it resides, to enhance learning and performance in organisations. (Source: Armstrong, M. (2003): A Handbook of Human Resource Management Practice, Kogan-Page, London, p. 160) Organisational culture: Organisational culture refers to the basic tacit assumptions about how the world is and ought to be that a group of people share and that determines their perceptions, thoughts, feelings, and, their overt behaviour. (Source: Schein, Edgar: Three Levels of Organisational Culture, viewed at ) Outsourcing: Outsourcing means contracting a specialised company for performing auxiliary activities that might be performed in-house but are not core activities to the contracting company. (Source: What is Outsourcing? viewed at ) InnoSuTra 11/

12 Semi Structured Interviews: A semi-structured interview is a method of research used in the social sciences. While a structured interview has a formalized, limited set questions, a semi-structured interview is flexible, allowing new questions to be brought up during the interview as a result of what the interviewee says. The interviewer in a semi-structured interview generally has a framework of themes to be explored. viewed on InnoSuTra 12/