Building Creative Hot Spots: It’s Where HR and Innovation Meet

By Susan R. Meisinger

If you Google the words “leadership, innovation, growth” you’ll get about 50 million hits, give or take a few million.

There are links to scholarly journals, business magazines, management books, leadership books, conferences, and seminars — all of which try to explain how to do it: how to be a great leader who creates a culture of innovation which drives an organization’s growth.

Many of the links are to consultants who have their own proprietary approach that they assert will help leaders and organizations put into place processes that will build an innovative culture in a disciplined way, leading to growth and profitability. Still more links are to company websites, which proclaim that this is what they do best: they have the secret sauce and have the perfect recipe for a company that’s more innovative than its competitors.

But there’s a dirty little secret that leaders don’t like to share.

Innovation is short lived

As a leader, you never feel like you’ve solved the challenge of being innovative. The global economy is changing at such a pace that even if we think we’ve created a culture of innovation, or we’ve had great success in the past, we know that our success is likely to be short-lived. There’s just too much change going on; too many moving parts in the world around us.

In fact, if you look at Fast Company’s 2010 list of the 50 most innovative companies, you’d find that two-thirds of the companies on the 2009 list — just a year earlier — didn’t make it to the 2010 list.

In IBM’s 2010 Global CEO Study, the challenge of constant change is reflected in the study’s findings: creativity was selected as the most crucial factor CEOs felt would be required for future success. Survey responses from more than 1,500 Chief Executive Officers from around the world disclosed that they believe that creativity will be needed to navigate an increasingly complex world. They felt that it will be more important than rigor, management discipline, integrity, or even vision.

The importance of innovation and creativity becomes even more critical as businesses dig out from a long lasting recession, with higher domestic unemployment rates for longer periods of time than we’ve seen in decades.

Companies which downsized over the last few years are now left with workers who are exhausted and frightened to take risks or make bold moves. Employees learned the benefit of keeping their heads down and working even harder in their effort to avoid layoff. “If I don’t make waves, maybe they won’t remember I’m here and lay me off, too.”

As businesses hunkered down in an effort to survive the economic downturn, the focus became risk avoidance, not new business launches. Increased productivity and efficiency were the drivers for management; innovation may have happened as a result, but it wasn’t the priority.

Driving innovation is finally the focus again

As the economy has begun to recover, corporations are trying to be judicious in their staffing levels, and more disciplined with their risk assessments (some of which are driven by reporting requirements for public companies). At the same time, the challenge of innovation and growth is moving up on the agenda, and a returning priority for many organizations.

Consider the results of a survey conducted by Bersin & Associates in November of 2010. The needle was moving: 34 percent of all HR and business leaders cited “driving innovation” as one of their top three talent challenges, up from only 14 percent earlier in the same year.

For many, the economic recovery and growth in global markets will offer new opportunities.

For example, as the global economy expands, the pressure for new sources of energy will also grow, creating viable markets for new energy technologies. The continued emphasis on sustainability has created entire new markets for green products. And domestically, the aging population and rising costs of health care will drive innovation in the medical field.

For some businesses, the recession and slow recovery, combined with instant access to competitive price information over the Internet, have led to fundamental changes in consumer behaviors. Buyers are more price-sensitive and have more leverage with easy access to pricing information.

Consumers are more cautious with their spending, and much more willing to rely on low cost providers of goods and services. According to Nielsen research, for example, while more than half of online consumers surveyed said they purchased more store brands during the economic downturn, fully 91 percent said they will continue to do so when the economy improves.

Old jobs out, new ones in

As Lynda Gratton, a Professor of Management Practice at London Business School has noted, recessions “are typically times of both destruction and new creation — so over the next decade with regard to the future of work, we can expect many ‘old’ jobs to be destroyed, but a whole set of new ones to be created.”

So how can leaders help drive a culture of innovation and growth?

It can be helped along by turning to some of the proven tools already available for maximizing the return on human capital. Bringing in the right talent, to the right culture, with the right incentives, linked to the right goals. This is human resource management 101.

But it requires a focus on the end objective — a more innovative organization — as you leverage the tools of talent management and organizational design. And it might require reminding your own human resource department of the end objective.

In a recent survey conducted by HRE Online, HR professionals were asked about what HR was doing on this subject of innovation and growth. The results suggested that HR executives may not be leveraging their HR expertise to really help.

In response to the survey, a large majority said that HR plays a significant role in fostering innovation at their organizations. But it’s hard to understand how they know they’re actually doing it, since a large majority also reported that the performance evaluation for HR leaders wasn’t based, in any way, on the ability to foster innovation.

And although there are tools available to professionals to help foster innovation, most don’t use them: more than two-thirds — 71 percent —didn’t use screening tools designed to bring in creative and innovative candidates, half — 53 percent — didn’t tie performance- management systems to driving innovation, and half — 53 percent — didn’t have any formalized suggestion system in place.

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Most disappointing? More than a third said that HR leaders in their organization did not participate in brainstorming sessions related to business and product innovation.

So what can HR leaders bring to the innovation table?

3 factors in building creative “hot spots”

In addition to the traditional HR functions of talent acquisition and development, performance management, employee engagement and rewards and recognition, HR should focus on how an organization operates; how work really gets done and how information is shared. HR can play a key role in designing work, work groups and the flow of information in ways that result in more communication and cross pollination of ideas.

Informal employee social networks exist in every organization. Human nature leads people to share interests and work together even when they’re not required to do so. People develop friendships at work, and talk about what they’re working on over lunch or a game of golf. But rather than assuming this communications will occur informally and organically, leaders need to take a more disciplined approach and consciously look for ways to facilitate the communication by focusing on how work is organized and information exchanged.

The importance of internal social networks and communities to drive innovation was highlighted in Lynda Gratton’s 2007 book “Hot Spots.” Professor Gratton focused on how some companies were able to benefit from creative “hot spots,” where people came together and created new, innovative advances. She found three factors that promoted the creation of “hot spots:”

  1. A cooperative mindset, where there’s trust and a willingness to share information and ideas; this means creating a culture where the emphasis is on “we,” not “I”;
  2. The ability for information to be shared across boundaries, or outside of the typical silos that exist within every organization;
  3. A pressing business need or challenge — which Gratton calls an “igniting purpose.” The example provided is the CEO of Indian car maker Tata, who asked “Why can’t we make a 100,000-rupee car?” which led to the new Nano for the Indian market. At $3,000, it’s now the cheapest car in the world.

But rather than rely on chance to create a “hot spot,” internal networks and communities can be — and should be — maximized and legitimized as part of the management structure, designed for the generation of new ideas. Organizations should always be designed and developed with an eye towards creating ways for people with different ideas, backgrounds, and areas of expertise to interact with each other.

Clearly, HR has a role to play in ensuring that this happens.

Excerpted from Elements of Successful Organizations: Achieving Strong Leadership, Smart Management, and an Engaged Workforce from the Workforce Institute at Kronos. Copyright 2011 by Kronos Incorporated. Reprinted with permission from The Workforce Institute at Kronos Incorporated.