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Understanding the Role of HR in Organizational Innovation

Posted on October 28th, 2020 Read time: 9 minutes

Group of people with big ideas working together

For startups, speed is the great equalizer. It’s what allows tiny teams working out of a garage (or perhaps a co-working space) to compete with century-old conglomerates with infinitely more resources. Without the distractions of maintaining complex business operations — or the need to work within entrenched internal processes — startups can focus solely on getting new ideas to market quickly. And when they win, so do consumers.

Savvy executives now view innovation as critical to sustained success. They’ve learned that the risks that accompany innovation (e.g., losing market share, disrupting services to good customers, or temporarily sacrificing productivity) are often worth taking. These leaders are intimately aware of the stories of companies like Blockbuster, AOL, and others that resisted change and paid the price, and they’re determined to avoid similar mistakes.

That’s a good thing because the threat of those innovative companies disrupting their respective industries will still be there in 2020 and beyond. Only it won’t come from tiny teams of developers working in garages and co-working spaces. It will come from progressive, forward-thinking companies like Amazon, Google, Facebook, and Uber that have speed and agility built into their DNA.

These companies are redefining commerce, and they are destroying (or consolidating with) any company standing in their way. For businesses that hope to survive, creating a culture of innovation is a corporate imperative and developing an agile business structure is essential.

But if fostering innovation and agility is the answer, how does it become a constant? Being strategic with processes and human resources practices is a great start.

 

Decision-Making Through Strategic Thinking

Business leaders today are constantly bombarded with data, business intelligence, and the opinions of their colleagues. More information is always good, but this nonstop flood of details often runs opposite of those leaders’ instincts. The best leaders are able to consider these inputs carefully and ensure that things continue to function while pursuing multiple business objectives at once.

Operations must remain smooth, and leaders have to regularly assess the purpose and core capabilities of their organizations to ensure that resources are effectively aligned with their most pressing goals. At the same time, leadership can’t stop striving to innovate. Ignore any one of these business considerations, and the consequences could be severe. Without a strategic approach to decision-making that prioritizes innovation, companies risk:

* Failing to focus effectively.

Sometimes, even great companies forget to focus on their strengths. Ford, for example, was struggling in the wake of its acquisition of Jaguar, Volvo, Aston Martin, and Land Rover in a bid to compete within the luxury car market. In the process, it had stopped focusing on improving models that had historically been top sellers, such as the Ford Taurus.

After a series of poor designs sent customers fleeing, that model was ultimately discontinued. Ford found itself searching for someone who could restore the company to its former glory. In 2006, Ford recruited former Boeing executive Alan Mulally to serve as CEO. Aside from reviving the Ford Taurus, he focused on innovating around the company’s core products and sold off those luxury assets. In the years that followed, Ford became one of the industry’s great comeback stories.

* Failing to recognize pressing threats.

Nokia Corp. has proven itself to be one of Europe’s most innovative and resilient companies, and today it is considered a pioneer in the development of 5G infrastructure. However, the Finnish telecommunications company learned some hard lessons along the way.

Nokia dominated the cellphone industry in 2007, but company leaders underestimated the impact that software evolution would have on mobile devices. Hoping the strength of its brand would be enough to fend off competition from companies like Apple and Microsoft, Nokia chose to stay the course with hardware innovation while its rivals focused on building smartphones that integrated powerful software. Everyone knows how that turned out: Android devices and iPhones are now ubiquitous, and Nokia is focusing on other markets.

* Failing to capitalize on transformative opportunities.

Blockbuster, the video rental chain that’s now defunct, is perhaps the most famous cautionary tale regarding disruption. Sadly, it had a golden opportunity to avoid that fate. At its apex in 2000, Blockbuster CEO John Antioco accepted a meeting with Reed Hastings, the founder of struggling rival Netflix.

When the latter offered to sell his company for $50 million, Antioco thought it was a joke. A decade later, Blockbuster filed for bankruptcy while Netflix was on its way to becoming one of the world’s most powerful companies. At one time, Blockbuster seemed unbeatable — and then it stopped innovating. The rest is history.

As these examples illustrate, business innovation doesn’t happen because it’s wished into existence. True innovation requires smart, talented people who aren’t afraid to think differently and challenge the status quo. And these people don’t just appear — they have to be identified and molded.

That’s why true innovation starts in your human resources department.

 

HR’s Role in Building a Culture of Innovation

Talented people have the power to turn ordinary companies into industry leaders. Your HR team leads the efforts to attract those people into your organization and maximize their talents, but that directive goes beyond making sure their companies appeal to a wider array of candidates. HR plays a critical role in building a trusting environment for everyone — one that promotes learning and iterative improvement and normalizes risk-taking. In other words, creating an environment that’s necessary for successful innovation.

At IES, our HR team has taken this mindset to heart in several ways:

1. We strategically communicate with leadership and staff about the strengths of our culture and our desire to become a more market-driven organization.

2.  We practice a “team of teams” approach to prepare our company for the increased city, state, and federal legislative activity. This team is cross-functional and includes IT and risk management. As a result, decisions and actions move faster than a traditional HR team process.

3.  We moved from a slower performance management model to one that is designed to meet the needs of agile organizations, objectives, and key results. Objectives are generally targeted in quarter sprints instead of year-to-year goals, which gives more urgency and focus.

4.  We rely on new technology to speed up the execution of deliverables, and we’re currently exploring ways in which AI can provide insight into our talent and performance.

5.  Finally, we continue to acknowledge that all risks cannot be avoided. A perception that HR can’t make mistakes can cause HR teams to delay progress on initiatives because of their focus to mitigate risk in one area before moving on.

 

More and more, HR departments are embracing agile methodology into their practices to enable organizational innovation. The agile methodology, which began as an approach to software development, has become deeply ingrained in modern corporate philosophy. As the pace of business continues to accelerate, agility is what allows companies to keep up.

Agile companies are able to anticipate and respond to customer needs and changing market dynamics proactively rather than reactively. In this new paradigm, traditional HR practices must evolve to meet the needs of internal stakeholders while also accounting for compliance, reporting, risk mitigation, and numerous other factors.

But is it even possible to find a balance between the demand for speed and flexibility and the simultaneous need for caution and compliance — particularly in highly regulated industries? It is, but only if innovation becomes a core business objective for HR teams. That means HR teams must be given the same opportunities to take risks (and to fail) that other business units are afforded.

While most business leaders understand that some risks can’t be avoided, many companies have a perception that HR teams can’t make mistakes. This perception can cause HR departments to avoid or delay implementing initiatives that are critical to organizational progress — or to avoid the adoption of new tools that might involve a significant learning curve.

HR must move fast. And when you’re moving fast, execution isn’t always perfect. But agile companies don’t strive for perfection; they work toward iterative improvement. After all, that’s how innovation happens.

 

Why Agile Business Decision-Making Starts in HR

While it’s up to the C-suite to empower HR teams with the tools and resources they need to create a culture of innovation, business leaders must also ensure they’re promoting business agility within HR practices. Here are some steps my team at IES has used to foster innovation and agility:

Step 1. Continually revisit the company’s mission, vision, and values. 

Companies that are truly mission-driven — as opposed to profit-driven — tend to attract the best talent. Why? Because the most talented professionals, especially among younger generations, are also mission-driven. They certainly care about making money, but they also know that teams focused on a single goal tend to produce profits.

Take Tesla, for example. Many consider CEO Elon Musk to be among the brightest engineering minds on the planet, but it’s not his intellectual prowess that turned Tesla into the most valuable carmaker on the planet. It’s the company’s relentless focus on its mission: to accelerate the world’s transition to sustainable energy. That focus has allowed Musk and his team to attract people who are perhaps even smarter than him — and just as driven — to his cause even though rivals like Ford or Toyota might offer higher salaries and better perks.

Keeping big-picture objectives and benchmarks in mind doesn’t just set the tone for day-to-day work. It also helps simplify the process of making business decisions, such as what innovations and agile principles to embrace. For HR, this can mean integrating those company mission and value indicators into training programs, job descriptions, interview/screening processes, and performance management.

Those are just a few of the ways HR teams can help everyone — from the C-suite to the newest intern — understand your company’s purpose. By regularly reminding colleagues what they’re trying to achieve, HR can help businesses overcome any obstacles that stand in the way.

Step 2. Ensure everyone understands the organizational business strategy.

The unprecedented shift toward remote work has been easy for some companies and difficult for others. If your company is relying on a geographically dispersed team, then keeping employees on the same page is incredibly important. But what does that mean beyond ensuring that employees are focused on the company mission?

It means making sure that the corporate strategies and OKRs are communicated to team members and tracked by all team members through a performance management system. Tech companies are credited for the rising popularity of the OKR methodology, which connects company and team objectives with three to five measurable metrics to assess progress. This performance-management and strategic-thinking tool allows stakeholders to visit objectives routinely to see what’s on track, what’s at risk of not being completed on time, and what is behind schedule.

In agile organizations, teams can learn about the threats organizations face so they can get their resources and responsibilities in order to handle everything in a timely manner. Because the pace moves so quickly in an agile organization, a decision to stop moving on a given goal could be the right decision because the objective is no longer relevant — or another objective replaced it.

Agile organizations have to move quickly by breaking up large strategic objectives into smaller objectives, adopting a faster cadence for check-ins on the progress of those smaller tasks.

Step 3. Educate them on the continued importance of culture.

In theory, innovation can help push companies where they want to go. But not every organization has the cultural resources in place to embrace innovation. The sooner your HR team can understand this shift in mindset and embrace it, the quicker it can take hold.

I try to give my team concrete, actionable reasons why innovation is so essential and outfit them with the tools they need to make it happen. Because these pivots can happen slowly, getting my team onboard helps everything take shape and turns them into advocates for the change. If they believe, they can help shape the initiatives needed to bring innovation along faster than usual.

Step 4. Identify competency gaps and show why each role matters.

Every company can improve in some areas. If innovation is your ambition, however, you likely need to improve in multiple areas quickly and demonstrate how those shifts contribute to the greater good. It’s up to HR to understand the competency, skill, and knowledge gaps within an organization and to come up with solutions for addressing those gaps and quantifying success.

In an agile organization, there isn’t time to wait for training programs to develop those competencies. HR departments must embrace new approaches like networks of teams, on-demand learning, and contingent workforces.

HR should have a full inventory of the competencies that already exist within your organization. Current employees are often best equipped to close gaps or fill vacancies, especially when moving quickly is critical. Your best employees have already proven that they’re a cultural fit for your organization and demonstrated an ability to add value in a way that most new hires simply cannot. HR teams should seek to identify high-potential employees early so that they can ensure those employees have the proper training to take on new roles within the company should the need arise.

Sometimes, you won’t need to move employees to new roles to position them to add value to your company. Especially when it comes to innovation projects, it’s often necessary to assemble temporary teams around a specific objective. In those cases, HR must be able to convey the benefits of working on a short-term project to both the employees and the company.

Some projects may require skills and experience beyond the capabilities of your in-house team. In those cases, HR departments should have the resources necessary to find the right people for the job. More than ever before, HR teams are finding that talent by engaging freelancers, contingent workers, and part-time employees either through online platforms, staffing agencies, or their own private talent pool.

The role of HR in organizational innovation can’t be overstated, and that role will only take on greater importance in the coming years. For companies that hope to attain or maintain leadership positions in their industries, investing in HR should be a primary objective.

During times of great change — good or bad — contingent workers can be just the type of resource an HR team can deploy to bridge potential gaps during unique times. Download our whitepaper, “Manage Your Contingent Workforce Through a Crisis,” for tips and insights about why a contingent workforce is one of the tools an HR team has at its disposal to help companies navigate times of upheaval or great innovation.

 

Written by: Tania Fiero , Vice President of Human Resources

Tania Fiero is the vice president of human resources at Innovative Employee Solutions (IES), a leading nationwide employer of record that specializes in payrolling and contractor management services for today’s contingent workforce. Founded in 1974 in San Diego, IES has grown into one of the city’s largest women-owned businesses and has been named one of its “Best Places to Work” for 10 years in a row.

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