5 Ways HR Can Help Organizational Innovation Thrive
When you think of ‘organizational innovation’, the first companies that might come to mind are big names like Amazon, Apple, Google and Coca-Cola. Many might attribute the companies’ product and financial positions to their innovation.
In truth, the common factor between these organizations is that their people strategy is aligned with fostering a culture of innovation.
Contents
Why organizational innovation?
What is organizational innovation?
HR’s key role in organizational innovation
How HR can embed innovation within the organization
Why organizational innovation?
Organizational innovation is critical for companies to keep up with an ever-changing market. Technological disruptions, macroeconomic fluxes, and even changes in the labor market can disrupt and impact business profitability.
Companies that don’t continue to innovate could get left behind (think Blockbuster, Kodak, Xerox, Myspace and Blackberry). But those businesses that continue to embrace organizational innovation can not only deliver value to their customers but also can attract top talent, build organizations that embrace an innovative culture and keep employees engaged.
And HR is the key driver in building a culture of innovation with the existing employees and in the recruitment of top talent to support this culture.
The need for organizational innovation in today’s changing landscape
A study by Mckinsey found that 84% of CEOs see innovation as critical to growth. Besides that, as we’ve seen in recent times, a failure to innovate can lead to stagnation of a business and even liquidation.
During the pandemic, most companies focused on maintaining business continuity, but the pandemic also led to rapid shifts in how we work, customer demands, and new opportunities arising from a changed (and continues to change) landscape.
In fact, research has shown that businesses that focus on growth and innovation during crises tend to overtake competitors that lay people off.
Post-pandemic and as new crises arise, organizations will continue to be faced with the need to innovate and adapt. These present opportunities (and challenges) to leverage off of and drive innovation.
What is organizational innovation?
Organizational innovation is the practice of receiving and implementing new ideas, strategies, and methods to create new products and services. The purpose of organizational innovation is to create value and must lead to growth for the business.
Some organizations innovate just for the sake of it – but true innovation is that spark of creativity that keeps the organization moving forward and adds value to its key stakeholders.
Organizational innovation:
- Gives you an advantage: It’s an improvement from the previous process, product, or service.
- Reduces complexity: It makes life easier for everyone – customers, people in the workplace, and key stakeholders.
- Generates new ideas: This involves coming up with and listening to innovative ideas and using strategic planning and decision-making to develop new ideas.
HR’s key role in organizational innovation
Roles that are considered key to innovation often include jobs in the fields of data, automation, AI, robotics, etc. But HR is the most important component for organizational innovation.
According to research conducted by KPMG, success is not determined by a company’s R&D budget. Instead, KPMG’s research shows that there is no significant relationship between financial performance and innovation. Additionally, technology also doesn’t play the most important role either.
Instead, studies have shown that the success of organizational innovation strategies is dependent on how prominently they are focused on people and human capital. These include:
- Hiring, engaging, and incentivizing top talent for innovation
- Creating a culture of innovation by encouraging and rewarding entrepreneurship and risk-taking
- Developing employees’ innovation skills.
HR is the perfect strategic business partner within the business to help develop and sustain a culture of innovation and attract and incentivize key talent for innovation.
Not only does HR hold the key to organizational innovation, but Human Resources has successfully demonstrated how to embrace innovation.
How HR can embed innovation within the organization
1. Culture is key to organizational innovation
When looking at innovative companies (From Pixar to Proctor & Gamble, from Tata to Toyota, Apple and Google), the key to innovation is culture. HR can play a critical role in creating a culture of innovation.
Encourage risk-taking
Organizational innovation can only thrive if employees are allowed to take risks and, more importantly, are allowed to fail. Often, leaders are not comfortable with accepting failures, but a cautious approach to anything new for fear of failure will quickly stifle innovation.
HR needs to support leaders and guide them on how to embrace risk-taking and view failure not as something to be frowned upon but rather as an opportunity to learn what matters most to customers.
What HR can do:
- Enable employee discretion: One of the ways that HR can encourage risk-taking is by helping managers create a space for employee discretion. Employees should be allowed to display initiative and flexibility in their work. Train managers to develop coaching skills to allow for this.
- Innovation initiatives: Create initiatives to make risk-taking easier, such as implementing an ‘innovation day’ or a ‘hackathon’ or even Dragon Den style competition to encourage innovation.
- Reward risk-taking: As an example, the Tata Group runs an annual wayward called InnoVista awards. It awards groups of employees across the organization for implementing the most innovative and successful ideas.
- Avoid punitive performance reviews: How are performance reviews conducted? With authenticity? Or do managers simply go through the motions and tick the box? Also, punitive performance reviews will reduce innovative behaviors in employees. Instead of saying, “You don’t take enough risks, and that’s why you’re struggling,” say, “Remember, it’s okay to take informed risks. Not every decision will lead to a successful outcome, but some of them will, so keep trying!”
- Create psychological safety: By reinforcing the appropriate values and communication styles, HR can play a big role in creating psychological safety in the workplace. Without psychological safety, risk-taking and innovation will not manifest in the workplace.
Build processes to support innovation
HR should provide the ‘vehicle’ for innovation to take place by creating the process and policies to support innovation in the organization. This may sound counterintuitive, but processes give employees the structure needed to innovate within. When coming up with a new idea or concept, what are the parameters within which an employee is supported to operate within? A clear process will enable employees to safely ideate and test concepts.
As an example, Nordstrom created an innovation lab to generate and test ideas, while Dow has a talent allocation framework to put together teams with the right blend of innovative skills.
What HR can do:
- Provide a safe environment where employees can freely generate ideas. This could be a physical space for innovation or a collective of creative thinkers and leaders that foster an environment of creativity and collaboration with clearly defined rules.
- Help dedicate time to creativity. Business as usual often leaves little space for devoting time to thinking creatively, which means that it needs to be built into the working day. As an example, the HR team at BetterUp instituted “no-meeting Fridays” to build in periods of time that are conducive to creative flow. The company also identified ‘inner work’ days where the office closes, and employees stop ‘outer work’ (e-mails and calls) to focus on reflective practices like reading, walking, and mindfulness.
Include innovation in KPIs and track innovation metrics
Incorporating innovation into employees’ job descriptions and Key Performance Indicators will help reinforce the behavior. As innovation is part of an employee’s goals, they will be driven to adopt them. Additionally, tie innovation to performance reviews.
Innovation can also seem to be an intangible concept, but it is important to determine its impact on the organization. Tracking innovation metrics can help HR quantify its impact on business outcomes.
Metrics HR can track:
Some metrics HR professionals can track to assess the impact include:
- Employee engagement
- Time dedicated to innovation
- Number of people who received training on innovation skills
- Surveys to determine if innovation is entrenched in the organization
2. Define rewards and recognition
How is innovation rewarded? Tying salary and bonus to innovation is one of the primary ways to do this. However, also encourage innovation by allowing employees to pursue their ideas.
Amazon introduced a “Just do it Award“. The award recognizes employees who display innovation and bias for action in the workplace. And this is their reward – an oversized shoe. One oversized shoe. And this is the most coveted award in Amazon – which just goes to show it does not always have to be monetary and that recognition plays an impactful role.
What HR can do:
- Link career opportunities to innovation. For example, provide scholarships or short-term assignments on innovative projects.
- Create a non-monetary innovation award or incentive. Recognize employees that display innovative behaviors, irrespective of it it has led to success or failure.
3. Hire for innovation and build internal capabilities
If you want to have organizational innovation, you have to attract top employees. Having an innovative organization will make you more attractive to the best employees on the market. Don’t forget to further develop your existing employees. Developing innovation skills while supporting career growth can help the organization better utilize the existing workforce.
AT&T created the AT&T university, which focuses on leadership and management skills. In partnership with Udacity and Georgia Tech, they created an Online Master of Science in Computer Science degree. This not only encouraged employees to sign up to get a degree but also carved out new career pathways due to the new skill acquisition.
What HR can do:
- Structure your interviews to assess for innovation. This might be to ask for examples of instances where the candidate displayed innovative behaviors or to present a case study that requires them to display their most innovative selves.
- Build career development frameworks that encourage cross-departmental and career growth.
4. Focus on diversity and inclusion
Companies that have a higher-than-average diversity rating have 19% increased innovation revenues, according to a study by the Harvard Business Review. Additionally, a recent McKinsey study found that more ethnically and racially diverse companies outperform their less-diverse peers by 36 percent when it comes to financial targets.
The research suggests that having a diverse set of experiences, perspectives, and backgrounds is crucial to innovation and the development of new ideas.
What HR can do:
- Ask yourself these questions when understanding how diversity and innovation are in your company: Does the organization manage diversity in a mature way? Do the leadership value and embrace difference? Does it appreciate the diversity of thought and culture?
- Build a culture where every employee’s thoughts and ideas matter. An inclusive work environment provides a space where people feel safe to show their real personality and their talents and can freely express their opinions. This is essential when building a culture of innovation. Help team managers to enable everyone to be heard within their teams by encouraging those that generally don’t voice their opinion to voice their opinions in a supported environment.
5. Promote collaboration
Innovation thrives when there is collaboration. This was evidenced during the pandemic when companies needed to create connections between people across broader virtual networks, resulting in a significant increase in innovation efforts.
Virtual and remote working also enabled innovative companies to help employees build and sustain the ties necessary to generate new ideas. This also resulted in companies widening the pool of minds that come up with great ideas.
What HR can do:
- Challenge the status quo around ‘this is the way we do things’ and expand the idea of collaboration within your organization and across processes.
- Make collaboration possible either within a virtual environment or the physical environment. For example, by creating a dedicated space where people can move away from their day-to-day work environment and encourage face-to-face interaction or virtual get-togethers that are dedicated sessions for brainstorming and communication.
Key takeaway
The role of HR in creating organizational innovation will only increase in importance in the coming years. The emergence of new HR roles, such as Human Machine Teaming Manager, People Data specialist, and Digital Evangelist, shows just where the function of HR is moving. For companies to stay ahead of the game, HR must take its rightful seat in driving innovation culture across the organization.
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