Breaking Through Organizational Impediments To Innovation - 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 service driven organizations. The problem now for services organizations is not when to change but what to and how. This means organizational innovation is no longer an imperative. It is a must do.

Yet, organizations find it extremely difficult to implement innovation as it requires strategic, tactical and behavioural change and to align those elements can be an Herculean task.  

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 has responsibility across all divisions for revenue, is passionate about innovation and recognizes the HR market is changing rapidly.

LinkedIn was launched in December 2002 – 2 years before Facebook - and has changed business models for the HR industry irreversibly.  Organizations have now experienced and trust the benefits and reliability of LinkedIn’s search and referral functions and it is providing this service at almost no cost.  This has spurred organizations that have traditionally used external HR services to develop internal HR capabilities resulting in a sharp contraction in market revenue in the short term in recruitment service fees. One of the senior executive’s main clients over the last 12 months has reduced its HR recruitment 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 the platform and its capabilities. As he so rightly says this is not only a reduction in the company’s revenue, it represents a significant contraction of the Australian HR industry 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 has commoditised the market and its services!  What is required for an organization to survive and thrive in this situation is strategic innovation in the business model and tactical innovation, specifically in its leadership and management behaviours, to implement the strategic innovation plans.  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. She has long term and extremely successful relationships with clients that go back decades.  It is revealed she is so successful some clients are continuing to use her against their own organization’s policy of reducing external consultant fees.

The conversation turns to their personal views on innovation within their own industry and business.  Innovation is not something the HR industry focuses on generally.  It requires a risk mentality and an important component of an HR Director’s function is to focus on the side of reducing the human risk and costs to business, not to facilitate innovation. The senior executive, client services and operations, remarks she cannot recall when she had a call from a client seeking candidates for a leadership and innovation role.  In her view, HR Directors seem to hold little interest in the topic.

As the conversation is drawing to a close, she turns to her colleague 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. You and Ralph do all the innovation thinking you like 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 she is fearful of innovation.

Where a market has been savagely disrupted requiring organizations to change rapidly like the HR industry, the existing organizational thinking and skills practices 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 proscribed 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.

The problem is almost without exception innovation is spoken about without definition or context and this creates real problems. Organizational decision-making based on process adherence kills creativity and innovation because it is based on conformity – the coffin of creativity.

 Organizational creativity must ignore process and find context to produce innovation.

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

Careful framing of its purpose by the leader in the organization, a coherent well articulated strategic innovation framework managers at all levels can understand, 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 HR capital – creativity in the organizations 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 management.

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

All it ever takes with innovation is a simple contextual clarifying conversation and the door always flies open!!