The Fear of Organizational Innovation Thinking and How To Overcome It - an HR Industry Case Study

It has taken a decade for social media to finally deliver on its promise of democratising the work place. We might not have the paperless office but we certainly have free social media that poses a huge problem for the revenue, profitability and very existence of organizations offering professional services. The problem now for these organizations is not when to change but what to and how.

Yet, professional services organizations find it extremely difficult to implement innovation as it requires strategic, tactical and behavioural change with a strong internal focus and to align those elements can be an Herculean or Sisyphian task, whichever way you like your Greek myths served up!!.  

This difficulty was highlighted recently when I was invited to a meeting with the MD of one of Asia-Pacific’s leading HR services companies. The MD is passionate about innovation and recognizes the HR recruitment market is changing rapidly.

LinkedIn, launched in December 2002 – 2 years before Facebook - has changed business models for the talent management and HR industry irreversibly.  Organizations have now experienced and trust the benefits and reliability of LinkedIn’s search and referral functions, providing direct access to an enormous on-line talent pool at almost no cost sitting at their computers waiting for opportunities. This has spurred organizations that have traditionally used external HR services for talent management and acquisition to develop their own internal HR functions and capabilities, resulting in a sharp contraction and decline in market revenue. One of this organization's clients over the last 24 months has reduced its HR spend by 50% from US$30million to US$15million and is proposing to reduce it a further 50% over the next 12 months as they become more comfortable with LinkedIn's platform and its capabilities. As the MD so rightly states this is not only a reduction in his company’s revenue, it represents a significant contraction of the Australian HR market itself.

Defining the business problem for this organization is not too difficult. It is staring the organization in the face - loss of revenue due to the emergence of a reliable almost free on-line technology platform that has commoditised talent management and acquisition and its associated services!  

What is required for an organization to survive and thrive in this situation is strategic innovation in its business model, tactical operational change in capabilities and processes and, specifically in its leadership and management, behaviourial change to implement the strategic innovation.  The MD is cognisant of these elements and is leading workshops and thinking around innovation, exploring and prototyping new service offerings.

Our discussion is interrupted by one of his most important senior executives, who has been invited to join us for the conversation.  A seasoned HR veteran with 35 years experience, this senior executive is responsible for client service and operations and has been a high performing stalwart of the organization year in, year out. He has long term and extremely successful relationships with clients that go back decades. He is so successful some clients are continuing to use him against their own organization’s policy of reducing external consultant fees.

The conversation turns to the personal views of these two executives on innovation within their  industry.  Innovation is not something the HR industry focuses on generally, the client service executive informs me. It requires a risk mentality and an important component of an HR Director’s function is to mitigate human risk in a business, not to facilitate innovation - a risky business. The senior executive, client services and operations, says he cannot recall when he had a call from a client seeking candidates for a leadership and innovation role.  In his view, HR Directors seem to hold little interest in the topic.

As the conversation is drawing to a close, he turns to his MD and as an aside says

“Many of my external consultant friends are having a very hard time surviving at the moment. I am so lucky I chose to be a permanent internal consultant when I started. The value of being an internal consultant is you get to know over a long period of time what works and what doesn’t and you use that knowledge.  So, Mr MD, I encourage you and Ralph to do all the innovation thinking you need but please have it worked out by the time you get to me. I just haven’t got time to do all that experimenting stuff.”

Both the MD and I quickly look at one another across the room.  He has just struck a big hurdle to his plans to innovate and I know he knows. A senior executive in his organization has revealed he has little appetite for innovation and is a potential impediment to it.

Where a market has been savagely disrupted requiring organizations to change rapidly like the HR industry, existing organizational thinking and skills, practices and capabilities are often no longer adequate for the market innovation that is occurring. This causes stress and uncertainty for senior managers who often over decades have received recognition and promotion for working efficiently and productively through prescribed organizational processes.  So when innovation is needed, requiring a different mindset, they are often ill prepared, inadequately informed, finding themselves between a rock and a hard place.

This doesn’t have to be the case.

Almost without exception, innovation is spoken about organizationally without definition or context and this creates real problems. Organizations are built on embedded processes seeking compliance. Organizational decision-making based on process adherence kills creativity and innovation because it is based on conformity – the coffin of creativity.

Organizational creativity must by its very nature ignore process and find context to produce innovation. This is quite simple, yet often ignored or just not understood.

There are only three essential contextual elements required to kick start innovation.

• Careful framing of its purpose by the leader in the organization,
• A coherent well articulated strategic innovation framework designed by managers themselves that they can understand, own, buy into and have their efforts rewarded for doing so

and

• Leadership that communicates clearly its innovation successes as they occur.

Once the organization has those elements in place, impediments to innovation are generally political and primarily cognisant and motivational in context.

Get the conversations and the communications around innovation right and on the same page and these blockages can be removed quickly, surfacing a powerhouse of unrealised human capital – creativity in the organization's employees at all levels - just ready to be harvested for the common good and growth of the organization.

Miss exploring any of these elements thoroughly and you will have the perfect climate for innovation impediment and failure - something the organization will find very hard to bounce back from under its current leadership.

At the completion of our meeting, the senior manager, client service and operations, suddenly proposes a Board Room Luncheon for the HR Directors of his major clients where I am to present on the topic of the future of innovation in HR. 

Creativity is an innate human mindset that simply requires context to have meaning. We work with it every day and all it ever takes is a simple contextual clarifying conversation and the door flies open!!

As Mohammad Yunus, Nobel Prize winning economist, says "Show me a problem and I will show you a business opportunity!"