3 Reasons Innovation is more Important than Employee Engagement
October 24, 2016
I’m a firm believer in the value of innovation as a key to long-term growth and success. Take P&G for instance. The company’s R&D practices used to be very siloed and closed off, costing the business millions of dollars annually due to that sentiment. Now it requires 50% of new R&D ideas to come from outside the company, and it wants to increase it to 80%. That’s a powerful shift and a reason why the company still stands strong year after year.
Here are some of the key reasons I see innovation as more valuable than employee engagement.
- Innovation brings actual value that business leaders understand and appreciate
- HR is in a critical area to support innovation at the front lines and organization-wide
- Innovation in an HR context is a huge competitive advantage
Check out this video where I tell a story about the first time I realized the importance of innovation over simple engagement, earning my company millions of dollars through a single idea.
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Innovation as an HR Competency
When I talk about innovation and HR, I’m talking about how HR can help the organization create new innovation, not just innovating within an HR context.
Innovation is a curious thing. In a research report published by the International Board of Innovation Science, Dennis Stauffer explored what separates wildly successful companies from the rest. Here’s a quote from the article that sheds light on the extent to which innovation drives value:
The research with entrepreneurs is especially noteworthy because it revealed the dramatic impact that this measure of innovativeness has on value creation. When those founders who scored highest on the Innovativeness Index were compared to those who scored lowest, the ventures of the high scorers averaged 34 times as much profit, 70 times as much revenue and employed 10 times as many people. They were also dramatically more likely to be one of the exceptionally high performers that investors call a “home run” (defined in this study as having achieved at least a million dollars in annual profits).
If we’re honest, all of us would be interested in those kinds of returns. Yet, paradoxically, we are doing things on a daily basis to kill the innovation our employees could create by wasting time, creating frustration, and limiting their best performance. Let’s examine two of the more common ones as well as their more engaging counterparts.
Read more on this topic in my article How HR is Killing Innovation.
HR’s Pivotal Role in Innovation
One of the issues I’ve always had with the broader discussion around innovation is that it’s almost always in reference to product innovation. We all know there’s nothing wrong with product innovation in itself, but there are other opportunities for organizations to improve service delivery with innovation as the driving force.
Recently I finished reading a book called Cultural Transformations: Lessons on Leadership and Corporate Reinvention. It was a great book for several reasons, but one quote really hit home for me:
When executives change their leadership culture, they are rewarded with significant, sustainable outcomes, including… genuine organizational innovation for not only products but also the organizational systems required to sustain innovation.
Those “organizational systems” he refers to? That is the infrastructure that enables the organization to create value for customers. Unlike product innovation, which typically happens in the R&D department, this innovation can span across marketing, finance, and even HR. The building blocks of the organization, its processes and systems, are all opportunities to improve.
There are two easy ways to test the waters of innovation with relatively low risk: experimentation and recognition.
The Importance of Experimentation
One of the slides that appears in almost every one of my talks is focused on HR leaders being scientists–in other words, are you willing to test, try, experiment, and measure to find the right approach for your specific organization?
I think it’s critical for HR leaders to have this kind of approach. Experiment with new ideas frequently. It doesn’t have to be an earth-shattering test. Marketing professionals use simple measures called “A/B tests” to compare two similar items to determine which is more appealing. It could be something as simple as the color of a button or the size of the font, but tweaking and testing these smaller features can lead to impressive long-term gains.
Find something that you can test and give it a shot. Here are a few examples of ways other companies have tested their own approach:
- Present high-fidelity training and low-fidelity training to two separate employee groups. Measure results and performance and determine if there is a need to pay a premium for high-fidelity training or if both get similar results. (AT&T)
- Train your employees to an internal standard level and compare them with their untrained peers. Is there an improvement, or did the training return no value for the time/money invested? (Waddell & Reed)
- Take a segment of your workforce and create a hiring program that aligns with your sales and growth forecasts. Evaluate the impact on recruiting and workforce planning. Was there increased efficiency or effectiveness based on the preparation? (Under Armour)
Using Recognition to Boost Innovation
It might not be your job as an HR leader to recognize employees, but it is your job to design/build the system that your employees and managers use. We know that recognition improves employee engagement, and innovation provides an opportunity to target those employees that are dreaming up new ideas and methods to improve the business.
The outcomes for submitting ideas can be as simple as peer/social recognition or it could include financial incentives and rewards. Whatever the case, be sure to create a system and culture of recognition that makes employees want to find smarter ways to work. Don’t just attempt to motivate your people—inspire them.
Think about it: if our learning, talent, and hiring practices are better than a competitor’s, we have an advantage in the marketplace. Our people at all levels are more effective and the organization is more agile as well. This is where HR’s true organizational value lies.
I’d say that recognizing the employees’ ideas is an integral part of the entire recognition process. Would we say to an employee, “Thanks for your efforts, now take your ideas and get back to work?” Probably not.
Taking the time to consider suggestions and implement the ones that make sense is a way to keep your employees interested and continuously innovating the way they work every day. Again, this has incredible value beyond the “engagement” metric that most companies rely on.
A Personal Example of Investing in Innovation
A while back I contributed to a campaign on Indiegogo. I’ve only done this a few times in recent years, so it was definitely something intriguing that caught my eye. Several things that drew me to the specific project:
- It represented the first innovation in this particular type of product in more than 30 years
- It’s a pain point I personally have struggled with for some time
The sheer amount of ideas flowing through crowdfunding sites like Indiegogo, Kickstarter, RocketHub, and others is astounding. The ability for someone to put an idea out there and garner support (or not) is one that organizations could leverage for employee engagement.
Innovation as a Business Metric
How many employee-generated ideas do you implement in a given year? One? One hundred? One thousand? Because it matters to them, and it’s an opportunity to improve the business and engagement.
Last year I read The Idea-Driven Organization and thoroughly enjoyed the book. The main concept of the book was the power of listening to employee suggestions, giving them serious consideration, and implementing them when feasible.
It’s fundamental, really. We all know that we should be listening to our employees. That goes without saying. However, the next step is actively soliciting input and then acting upon it. Instead of ignoring or fearing employee input, go the extra mile to encourage them to provide suggestions. The authors share a story that I think is a powerful reminder of this.
Employees at a bar had the opportunity to provide input on their jobs through submitting ideas. There were few, if any restrictions on the type of ideas, so one might expect them to pick some that made their work easier.
But it turns out that was often associated with an improvement in the customer experience as well. For instance, instead of having to carry a massive carton of empty bottles down to the cellar when it filled up, they installed a chute at the back of the bar for empty bottles to slide down to the cellar unassisted. This decreased the risk of workplace injuries from walking down stairs with heavy objects, improved customer service by not pulling away a service employee during a busy shift, and allowed bartenders to monitor and discard the empty bottles unassisted.
Even if nothing else came from these ideas other than the improved customer service results, it would be worthwhile. Yet it also improved the engagement levels of the employees by eliminating a non-value- added task from their daily work.
A former employer of mine had what we called “The Big Ideas Database.” It was a grandiose title for a spreadsheet, but it also helped to frame the mindset when submitting ideas. Any employee could share an idea through the web form and it would be considered by leadership for implementation. Because they had a voice and an actively listening audience, employees were actually excited about sharing ideas via the platform as a way to drive innovation and continuously serve customers better.
I’d love to hear from you. Does your organization see innovation as something that HR and talent leaders can help to enable? How do you recognize, reward, and support employees on the front lines so they can innovate and create new value?