The Impact of Disengagement on Innovation, Creativity, Productivity, and Profitability

 
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“Today more than ever, we must cultivate the creative and innovative potential of every employee in the organization. Everyone in the organization must be capable of thinking creatively and be willing to try new approaches which transcend their own roles, departments, and processes.” —Andrew Papageorge, Chief Innovation Strategist, GoInnovate!

It is hard to imagine that a disengaged workforce that spends the bulk of its time being distracted and dissatisfied will ever be a catalyst for the creativity and productivity in an enterprise. It is equally hard to imagine an employee who feels disconnected and unappreciated spending time thinking about ways to improve his or her workplace, products, or service. And it is harder still to imagine a disengaged manager spending the necessary time to figure out how to better engage employees.

Innovation within the organization (also known as intrapreneurship) refers to the actions and initiatives that transform organizations through strategic-renewal processes. Firms that consistently demonstrate durable corporate innovation are typically viewed as dynamic entities prepared to take advantage of new business opportunities when they arise with a willingness to deviate from prior strategies and business models to embrace new resource combinations that hold promise for new innovations.

In general, corporate innovation/intrapreneurship flourishes in established firms such as Google, Facebook, Netflix, Starbucks, Nordstrom, and 3M, and it’s seen when engaged and motivated individuals are free to pursue actions and initiatives that are novel to the firm. Innovation initiatives are not limited to private enterprise—the boards of nonprofits, universities, nongovernment organizations (NGOs), and even government leaders must embrace principles of intrapreneurship. As Steven Brandt of Stanford University once said, “Ideas come from people. Innovation is a capability of the many.”[1]  However, as pointed out by Michael H. Morris, Donald F. Kuratko, and Jeffrey G. Covin in their book, Corporate Entrepreneurship & Innovation,[2] to be successful, entrepreneurial activity must be carefully integrated into the organization’s overall strategies.

There have been numerous articles and books written over the years advocating the importance of “unleashing the entrepreneurial potential” of individuals by removing constraints on entrepreneur­ial behavior (see for example, Gary Hamel’s Leading the Revolution, Gifford Pinchott’s Intrapreneuring,[3] and my 2012 book Harvesting Intangible Assets). Employees engaging in entrepreneurial behavior are the foundation for organizational innovation. In order to develop a culture of “corporate innovation,” organizations must establish a process through which individuals in an established firm pursue intrapreneurial opportunities to innovate without regard to the level and nature of currently available resources. However, keep in mind that in the absence of proper control mechanisms, firms that manifest corporate-innovation activity may “tend to generate an incoherent mass of interesting but unrelated opportunities that may have profit potential, but that don’t move [those] firms toward a desirable future.”[4] Therefore, those factors that drive corporate intrapreneurial activity to produce high levels of innovation perfor­mance are likely contingent upon a firm’s ability to judiciously use control mechanisms for the proper selection and effective guidance on entrepreneurial actions and initiatives.[5]

In spite of the potential for corporate innovation to create value by contributing to improved organizational performance, many established companies overlook the critical importance of engagement and thus do not encourage entrepreneurial behavior, because executives worry about the images of chaos that innovation can portray. In addition, there are often structural impediments in place that prevent it from occurring, most of these being the product of bureaucratic routines that have outlived their usefulness. Developing an engaged culture that is capable of cultivating employees’ interest in and commitment to effective entrepreneurial behavior and the innovation that can result from it is the product of effective efforts by managers at all levels.

There are a multitude of studies that emphasize the connection between truly engaged workers and better customer service, higher levels of creativity and productivity, higher sales margins, higher quality products, increased attention to safety, and lower turnover rates.[6] What businesses have also recognized, and research has supported, is that innovation within a company is one of the primary drivers of company success, determined through growth. The more interesting element to this equation is where that innovation is coming from: engaged employees. A Gallup Management Journal study found employees who were “engaged” indicated they “strongly agreed with the statement that their current job ‘brings out [their] most creative ideas.’” [7] The reverse was true for those who indicated they were actively disengaged employees—in other words, the very disengaged individuals in the survey were the least likely to find their current job brought out their creative ideas.  Research also shows that engaged workers are more likely to foster a collaborative and innovative atmosphere among fellow employees by reacting positively to creative ideas of others on their team.

For decades, workers were expected to know their jobs, do their work, keep their heads down, and only “bother” management with questions to avert a crisis. If a problem arises, know how and when to solve it, and don’t interfere with the supervisor’s valuable time. That mantra needs to shift if we are going to improve engagement in a way to drive more innovation and shareholder value. Employees at all levels need to be liberated to ask the “whys” and the “what ifs.” They need to be able to ask (without retribution or punishment), “Why am I doing my job the way I am doing it?” and “Is there a better way?” and “What would it take to change and why?” Empowering your teams to ask questions also demonstrates humility by the leadership team by admitting that they don’t know all the answers, and it gives permission to the workforce to begin to organize its thinking around the unknowns instead of the knowns, which will foster greater creativity, innovation, and productivity. People are likely to be more engaged when they are empowered to think for themselves and permitted to question the “status quo” within reason and without the fear of retribution. Fostering curiosity is an elixir and a cure for disengagement and complacency.

Creating a Proper Environment Supporting Corporate Innovation

Today’s leaders must take responsibility to direct their managers to inspire their top performers to create a work environment that is highly conducive to engagement as the clear path toward creativity and innovation. Within such an environment, employees have the opportunity to step up to the plate, which can be either the fuel of their engagement or the oil of their frustration. Conditions in the internal culture dictate the perceived costs, benefits, and incentives associated with taking personal risks, challenging current practices, and devoting time to unproven approaches. Credible innovation is more likely in companies where all individuals’ entrepreneurial potential is sought and nurtured and where organizational knowledge is widely shared. The managerial challenge becomes that of using workplace-design elements to develop an “innovation-friendly” internal environment.

As research on corporate innovation has evolved, numerous researchers have acknowledged the importance of internal organizational dimensions to promoting and supporting an environment for creativity and engagement.  This research has identified five specific dimensions that are important determinants of an environment conducive to intrapreneurial behavior including top management support, work discretion/autonomy; rewards/reinforcement; time availability; and organizational boundaries. These underlying organizational dimensions are required for individuals to perceive an innovation-friendly environment.

Measuring Readiness: Diagnosing The Internal Environment

A firm’s internal entrepreneurial climate should be assessed to evaluate in what manner it is supportive for entrepreneurial behavior to exist and how it is perceived by the managers. When attempting to inventory the firm’s current situation regarding the readiness for innovation, managers need to identify parts of the firm’s structure, systems, and culture that both inhibit and facilitate entrepreneurial behavior.

One example of an assessment instrument that can be used is the Corporate Entrepreneurship Climate Instrument (CECI),[8] which was developed around the five dimensions mentioned earlier: (1) management support, (2) work discretion/autonomy, (3) reinforcement, (4) time availability, and (5) organizational boundaries. In addition, the instrument measures the degree to which a firm’s culture supports entrepreneurial activity. Low scores in one specific dimension of the CECI suggest the need to focus on that particular dimension for improvement in order to enhance the firm’s readiness for entrepreneurial behavior and eventual successful corporate innovation. This provides an indication of a firm’s likelihood of being able to successfully use a corporate-innovation process. It highlights the specific dimensions of the internal work environment that should be the focus of ongoing design and development efforts.

Measuring Results: Assessing Your Firm’s Entrepreneurial Intensity

Organizations differ with respect to the levels of entrepreneurial activity they are capable of achieving, and boards should monitor the enterprises’ capability and access to resources in these areas. Extending this thought a bit, we can say that organizations have different levels of entrepreneurial intensity (EI), which focuses on two basic questions: (1) How many entrepreneurial initiatives is the company pursuing (frequency of entrepreneurship)? and (2) To what extent do those initiatives represent incremental or modest steps versus bold breakthroughs (degree of entrepreneurship)? The degree of entrepreneurship indicates the extent to which an organization’s efforts are innovative, risky, and proactive. This helps assess the actual results from innovative efforts.

When developing measures for EI scores, it is important to know that norms for entrepreneurial intensity differ across industries. For example, the computer and information-technology industries tend to be quite entrepreneurially intense, while the consumer-foods industry is much less so. This is not to suggest that ever-increasing amounts of EI will always result in superior firm performance. Firms should view the pursuit of EI in relative rather than absolute terms, in that there is no absolute standard of EI that organizations should seek to develop.

Preparing The Organization

Executive leaders must create an understanding of the innovation process for their employees. Key decision makers must find ways to explain the purpose of using a corporate-innovation process to those from whom entrepreneurial behaviors are expected.

Understanding and supporting a corporate-innovation process should not be left to chance. My experience suggests that executives need to develop a program with the purpose of helping all parties who will be affected by corporate innovation to understand the value of the entrepreneurial behavior that the firm is requesting of them.

 

[1] Steven C. Brandt, Entrepreneuring in Established Companies (Homewood, IL: Dow-Jones-Irwin, 1986), 54.

[2] Michael H. Morris, Donald F. Kuratko, and Jeffrey G. Covin, Corporate Entrepre¬neurship & Innovation 3rd edition (Cengage/South-Western, 2011).

[3] Gary Hamel, Leading the Revolution (New York: Penguin Group, 2000); Gifford Pinchot and Ron Pellman, Intrapreneuring in Action (San Francisco: Berrett-Koehler, 1999).

[4] G. Getz and E.G. Tuttle, “A Comprehensive Approach to Corporate Venturing,” Handbook of Business Strategy 2, no. 1 (2001): 277–279.

[5] J.C. Goodale, D.F. Kuratko, J.S. Hornsby, and J.G. Covin, “Operations Manage¬ment and Corporate Entrepreneurship: The Moderating Effect of Operations Control on the Antecedents of Corporate Entrepreneurial Activity in Relation to Innovation Performance,” Journal of Operations Management 29, no. 2 (2011): 116–127.

[6] Kevin Kruse, “Why Employee Engagement? (These 28 Research Studies Prove the Benefits)” Forbes, September 4, 2012, http://www.forbes.com/sites/ kevinkruse/2012/09/04/why-employee-engagement/.

[7] Jerry Krueger and Emily Killham, “Who’s Driving Innovation at Your Company?” Gallup Business Journal, September 14, 2006, http://www.gallup.com/businessjour-nal/24472/whos-driving-innovation-your-company.aspx.

[8] R.D. Ireland, D.F. Kuratko, M.H. Morris, “A Health Audit for Corporate Entrepreneurship: Innovation at All.Levels,” Journal of Business Strategy 27, no. 2 (2006): 21–30; Michael H. Morris, Donald F. Kuratko, and Jeffrey G.

Cassie Peterson