Performance Management Changes Are Often the Missing Link with Innovation

I was seated at an innovation conference for lunch, when the Research and Development leader of a major U.S. active sportswear maker told me he had a confession.

His organization was successful at creating new ideas, selecting the best ones to advance, and project- managing those ideas, but their innovations often stalled because the organization’s bureaucracy outside of R&D didn’t support innovation.

Finance, human resources and operations were the worst, he complained. Knowing I was an H R executive, he asked for some suggestions.

“Have you lobbied the executive team to change your performance management system to align the organization behind your innovation strategies and reward innovation?”, I asked

“Haven’t thought of it,” he confided.

That is a common problem. While many organizations are working feverishly to improve their innovation by using new methodologies and technologies (such as crowdsourcing) to generate new ideas, they fail to change their performance management systems to support innovation.

Our research and consulting at InnovationOne has uncovered that many companies fail to understand the importance of changing their performance management system to set expectations for and to reward and accelerate innovation.

When companies fail to change their performance management systems, the result is that many important innovative ideas don’t move forward, or get neglected in the bowels and bureaucracy of the organization.

We have found that organizations that are continually successful with innovation make significant changes to their performance management systems.

Many organizations trying to improve their innovation have performance management systems promoting accountability, achieving goals, meeting customer needs, and ensuring compliance to orders from above.  All good. But what is missing is articulating and reinforcing the behaviors that encourage innovation.

Innovative organizations need to change their performance management systems to create organizational cultures that do the following:

  • Build alignment to the organization’s innovation strategies
  • Encourage and reward curiosity, questioning and new ideas
  • Allow employees access to critical information about changes in the marketplace, customer expectations, comparative organizations, new technologies, and new social and economic trends.
  • Reinforce and recognize employees when they do the following:
    • share expertise
    • seek the input of external experts and collaborators
    • build upon each other’s ideas
    • collaborate
    • succeed at innovation and market success

You can tell when innovative organizations make this shift, in part, by the behaviors of their executives.

Their executives not only communicate the company’s marketing strategies and financial goals, they also speak about their innovation strategies.  These executives share their insights on changes in the market, with customer demands, and with what’s new. They invite employees to participate in the company’s innovation. The executives, themselves, take part in in employee Q&A sessions, and reward innovation teams.

3M has a long and well-deserved reputation for innovation. It has been able to take a successful innovation in one of its business sectors and transfer the know-how to another.  Legendary 3M CEO, Bill McKnight, set the following edict: it should never take more than three calls to get the information you need from another 3M employee. It was a clear message to 3M scientists, engineers and experts: share your expertise; don’t hoard it. 3Mers tell me this culture endures today.

Companies that make this change also make investments in changing the leadership style of their middle management and project team leaders. They transition from authoritative styles of leadership to agile leadership. Of course, they align the team to the company’s strategies, set challenging goals, and hold employees accountable. But they also put a premium on creating innovative environments, encouraging suggestions and collaboration, providing ongoing developmental and performance feedback, and empowering their teams to excel.

Companies making similar transitions with their performance management systems see that the innovative ideas that come out of design thinking and crowdsourcing don’t end with the innovation team.  They flourish in a culture that rewards innovation and knows how to move it forward for more prototyping, experimentation and to the market place. They make sure important support functions such as H R, finance and operations, are aligned and support innovation.

By all means, keep creating new ideas and crowdsourcing. Hold a hackathon.

But if you’re serious about having an organization that innovates continually, look at your performance management system and the behaviors of your leaders. The success of commercially launching your next small or big innovation will depend on it.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and is a Managing Partner of InnovationOne. He consults on innovation, global talent management, developing agile leaders and teams, and other strategic initiatives. Questions? Please e-mail Victor at victorassad6@gmail.com or visit http://www.victorhrconsultant.com. For innovation visit http://www.InnovationOne.io

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