How innovative behaviour needs a framework to thrive

But too many rules can stifle the freedom to try new things

Consider the engineering industry and how difficult it could be to bring new systems, processes and materials to market – in other words, to innovate – if there were no standards.

For innovation to flourish, a framework of standards is needed. This may seem counter-intuitive because innovation is all about creativity and freedom. But without that framework defining and bordering the innovative space, without a room in which to sit and feel safe, innovation becomes near impossible.

The same is true within an organisation. If there is great clarity for a workforce around where the business is heading and how it is expected to get there, then individual staff members will feel more inclined to innovate towards that goal.

Likewise, if employees have a strong understanding and appreciation of the HR system, of how that system is intended by management to retain and reward and drive the business towards its goals, they will also be more likely to innovate within that business. This much we know from past research.

The logical conclusion from the above is that a business that clearly communicates its performance-based rewards to its staff will benefit from a more innovative workforce.

That was one of the key hypotheses when Karin Sanders – a professor and head of the school of management at UNSW Business School – and a team of colleagues around the globe collected data from 2741 employees and 383 supervisors in 55 organisations across 11 countries.

But interestingly, it proved incorrect.

'Innovation is not only for people in research and development, but is the case for every employee'

– KARIN SANDERS

Uncertainty avoidance

 "The results did not show a significant relationship between performance-based rewards and innovative behaviour," says Sanders, who is also director of the Centre for Innovation and Entrepreneurship at UNSW Business School.

"But the results showed that performance-based rewards had a positive effect on innovation when 'HR strength' is strong, and the 'uncertainty avoidance' of a country is low."

HR strength, as defined by Sanders, is the employees' understanding of the HR function within the business as it is intended by management. A high level of HR strength indicates a good understanding of the HR function throughout the organisation. And in this case, performance-based rewards have a strong positive effect on employees' innovative behaviour.

What about uncertainty avoidance? That is a rating that indicates the level of uncertainty and ambiguity that people within a particular country, or a specific society or community, are able to cope with comfortably.

According to Sanders, Australia is quite a risk-averse nation, so it is relatively high on the uncertainty avoidance scale. Germany, Denmark and Finland are also high. Singapore, Indonesia and Israel are low in terms of uncertainty avoidance.

What does any of this have to do with innovation within organisations? Plenty, Sanders says.

Overly prescriptive rules

In the forthcoming paper, Performance-Based Rewards and Innovative Behaviour, of which Sanders is the lead author, the relationship between innovative behaviour, performance-based rewards, HR strength and uncertainty avoidance is explained.

There is not a strong relationship between performance-based rewards and innovative behaviour, but in businesses with a high level of HR strength the relationship is stronger than in businesses that do not communicate their HR purpose effectively with staff. So HR strength boosts the power of the relationship between performance-based rewards and innovative behaviour.

The level of uncertainty avoidance in a country also has an effect on the relationship. In nations with lower levels of uncertainty avoidance, performance-based rewards create greater innovative behaviour.

But in countries such as Australia, with its higher uncertainty avoidance, the relationship between performance-based rewards and innovative behaviour is weaker.

"You can explain uncertainty avoidance in negative and positive outcomes," says Sanders, who is originally from The Netherlands.

"Because there are clear rules and everyone knows to follow the rules, that gives people a safe feeling. On the other hand, it's not giving any space for thinking outside of the box and for having conflict. When I came to Australia I was shocked by the conflict avoidance."

So while a strong framework creates an environment in which innovation can occur, an overly prescriptive set of rules removes the freedom it requires to thrive.

OK to make mistakes

 "More and more it is important that people are innovative in their daily work lives," Sanders says. "It has almost become a regular inclusion in job descriptions that innovation is required. Even if the requirement is not explicit, it is implicitly understood.

"For instance, I expect from all members of the school of management that if they see where we can improve, they mention it or work on it.

"Innovation is not only for people in research and development, but is the case for every employee. Even if you're working in a McDonald's restaurant and you feel your work is the same every day, innovative behaviour is becoming more important. So how do we explain and understand drivers for such behaviour"

We presently don't know enough about innovative behaviour and what makes it happen, Sanders says.

'Staff need the psychological safety of the knowledge that they can experiment, that it is OK to take some risk and that mistakes are allowed?'

– KARIN SANDERS

"Finding a way to explain innovative behaviour is, in my opinion, one of the single most important issues in business. Once that is achieved, we have a means of making sure as a management or leadership team that we can enhance innovative behaviour in the workforce."

The research paper provides guidance towards practical tools for today's business managers, Sanders says. If you are in a high uncertainty avoidance country, for instance, it is now clear that it is important to be strong in your messaging that it is OK to make mistakes.

"Staff need the psychological safety of the knowledge that they can experiment, that it is OK to take some risk and that mistakes are allowed," she says. "Don't just assume they know that, because the society they live in tells them that risk and mistakes are bad."

The need for structure

Other staff also need to be trained to not respond in the negative when somebody suggests something new. In other words, they must be trained to stop killing ideas and instead learn to nurture and encourage experimentation.

An organisation's leadership, particularly in countries with a high level of uncertainty avoidance, must put greater effort into communicating the long-term goals of the business. They must obsess over letting individual staff members know how and where they fit in to the strategy and what is expected of them.

Finally, Sanders says, don't abandon structure in a bid for more innovative behaviour.

Sometimes people have the idea that for innovative behaviour, you need to give people as little structure as possible because the lack of structure will mean they have more space to be creative.

"But that is not the case. People need structure. They need a framework to operate within. That is exactly what is clear from this study, that you need to have some structure and standards. Then people will have the most open mind for new elements."

The study was co-authored by Karin Sanders (Sydney, Australia), Frances Jørgensen (Vancouver, Canada), Yvonne van Rossenberg (Bath, UK), Helen Shipton (Nottingham, UK), Xiaobei Li (Shanghai, China), Ying Wang (Sydney, Australia), Ricardo Rodrigues (London, UK), Rita Cunha (Lisbon, Portugal), Anders Dysvik (Oslo, Norway), and Sut I Wong (Oslo, Norway).