{"id":1261,"date":"2020-04-07T16:26:00","date_gmt":"2020-04-07T14:26:00","guid":{"rendered":"https:\/\/insights.ieseg.fr\/?p=1261"},"modified":"2024-03-13T15:47:35","modified_gmt":"2024-03-13T14:47:35","slug":"designing-hr-practices-that-stimulate-innovation","status":"publish","type":"post","link":"https:\/\/insights.ieseg.fr\/en\/resource-center\/management-society\/designing-hr-practices-that-stimulate-innovation\/","title":{"rendered":"Designing HR practices that stimulate innovation"},"content":{"rendered":"\n

Based on an interview with Antonio Giangreco<\/a> and on his article \u201cCrowding-out or crowding-in? Direct voice, performance related pay, and organizational innovation in European firms\u201d<\/em><\/a> (Human Resource Management, 2020), co-written with Edoardo Della Torre (Universit\u00e0 degli Studi di Bergamo) and Meysam Salimi (Universit\u00e0 degli Studi di Brescia).<\/p>\n\n\n\n

Giving employees voice is key to company innovation. A new study explains how HR reward schemes need to be designed, carefully balancing individual and collective incentives, so as to reinforce, and not stunt, the effects of employee voice.<\/p>\n\n\n\n

Employee voice: a key factor for innovation<\/h2>\n\n\n\n

Decathlon’s wildly successful ‘2-second tent’ is a famous example of employee innovation, of the kind that help companies keep the lead in such a competitive market as the sports-goods sector. \u201cA loyal and engaged workforce often lies behind company innovation,\u201d says I\u00c9SEG Professor Antonio Giangreco. To get the most added value from their workforce, companies need to give their employees voice and open communication channels. Through this, employees will feel involved in company decisions and be empowered. Giangreco adds, \u201cStrong employee voice increases company capacity to innovate.\u201d<\/p>\n\n\n\n

Giangreco and his colleagues Edoardo Della Torre and Meysam Salimi found further evidence to support employee voice effects on innovation. They looked at how Human Resource Management (HRM) practices \u2013 such as reward systems \u2013 can be set up to foster both employee voice and innovation.<\/p>\n\n\n\n

Rewarding employees<\/h2>\n\n\n\n

When it comes to recognizing employees for their hard work, there are two types of reward. Some rewards are collective which means that they are offered to all the employees \u2013 like profit sharing \u2013 and are associated with a supportive organizational culture. Other rewards are individual \u2013 like commission or brokerage payments \u2013 and are often associated with a controlling organizational culture. The impact of these forms of incentive is different: collective incentives reinforce both the extrinsic and intrinsic motivation of employees to innovate, whereas individual incentives reinforce extrinsic motivation, which leads to task-focused behaviors, and reduce intrinsic motivation to innovate.<\/p>\n\n\n\n

To better explain why these two types of reward might influence employee voice and company innovation, Giangreco draws parallels to intrinsic and extrinsic motivations in society. \u201cIn many countries, tax breaks encourage companies to donate to charity. A external reward for donating may encourage further donations from those companies that are already intrinsically motivated by charity initiatives\u201d The team proposed that supportive incentives stimulate donation in the same way that collective reward systems might stimulate employee voice and innovation. He adds, \u201cOn the other hand, some countries offer an unemployment salary, which \u2013 instead of encouraging the unemployed to look for a job \u2013 can actually discourage job searching.\u201d Here, the team parallel this employment-stunting behavior to individual reward systems that they supposed to have a similar stunting effect in firms.<\/p>\n\n\n\n

Individual reward systems stunt innovation<\/h2>\n\n\n\n

In their study, Giangreco and his co-authors analyzed data from more than 22,000 European companies related to company innovation, individual and collective rewards, and direct employee voice, which occurs through direct channels between employees and managers (rather than the indirect voice mediated by unions and committees, etc.). In this context, direct employee voice is thought of as a form of inherent motivation, which may be affected by the reward system.<\/p>\n\n\n\n

Their analysis confirmed that companies that have policies promoting direct employee voice have more capacity to innovate. In addition, in companies that encouraged employee voice and had individual reward systems in place, the relationship between employee voice and innovation was weaker. Giangreco notes, \u201cHere, we see that the prospect of the individual reward kicks out the intrinsic motivation that should be provided in having strong employee voice and involvement in decisions.\u201d<\/p>\n\n\n\n

In these circumstances, the individual reward appears to counteract the empowerment employees get by being given a voice. This stunts innovation. In motivation crowding theory this is called the \u2018crowding out\u2019 effect. The opposite of this is \u2018crowding in\u2019, which occurs when employees are intrinsically motivated and feel supported to work towards the greater good of the company. This stimulates innovation.<\/p>\n\n\n\n

Combined reward systems stimulate innovation<\/h2>\n\n\n\n

So how to stimulate innovation through reward systems? The team found that when companies employ both collective and individual reward schemes, the relationship between employee voice and innovation is stronger. However, this was not the case with collective reward schemes alone. Giangreco says, \u201cWhen both collective and individual reward systems are implemented, they create synergies and work better together.\u201d<\/p>\n\n\n\n

Innovation success with employee voice: Decathlon<\/h2>\n\n\n\n

Giangreco noted that the HR practices in place at international sports retailer Decathlon, are a golden example of how to foster innovation through employee voice. \u201cDecathlon offers every employee the opportunity to develop a new product, it has a flat hierarchical structure with an open communication scheme. This gives employees cohesion and a sense of membership. They also get to see their ideas recognized.\u201d<\/p>\n\n\n\n

He concludes that, in organizations like Decathlon, we see a virtuous circle. Employees are keen to get involved and help innovate. He says, \u201cEmployees also have freedom to fail \u2013 this is key. Mistakes are not stigmatized. They need to be encouraged to try as without trying there is no success and no innovation.\u201d Other organizations, where mistakes are stigmatized, end up in a vicious circle. Giangreco points out: \u201cIf employees are scared of making a mistake, they won\u2019t share knowledge and ideas. They won\u2019t use their voice, and the company will struggle with innovation.\u201d<\/p>\n\n\n\n

The researcher stresses that companies with stunted innovation need to strengthen their employee voice and improve communications between employees and management. They then need to think hard about the HR reward system in place and adapt it to make the most of having strong employee voice.<\/p>\n\n\n

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Practical applications<\/p>\r\n\t\t

\u201cCompanies need to be very careful when they develop HR practices and introduce reward systems,\u201d says Giangreco. \u201cIt is important to foster employee voice to increase innovation. But, companies must be aware that, adopting individual reward systems alone, can quash the beneficial effects that a strong employee voice can have on innovation.\u201d He adds, \u201cA system that gives employees voice and has collective and individual rewards works best.\u201d Overall, the study provides managers with more complete information about the potential synergies and \u201cdeadly combinations\u201d in the design of a human resource management system.<\/p>\n<\/div>\r\n<\/div>\n\n

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Methodology<\/p>\r\n\t\t

The authors analyzed information from more than 22,000 European firms in Eurofund\u2019s 3rd European Company Survey (ECS), 2013 database. They used this to measure company innovation, direct employee voice and collective and individual reward systems in place, and test their hypotheses.<\/p>\n<\/div>\r\n<\/div>","protected":false},"excerpt":{"rendered":"

Based on an interview with Antonio Giangreco and on his article \u201cCrowding-out or crowding-in? Direct voice, performance related pay, and organizational innovation in European firms\u201d (Human Resource Management, 2020), co-written with Edoardo Della Torre (Universit\u00e0 degli Studi di Bergamo) and Meysam Salimi (Universit\u00e0 degli Studi di Brescia). Giving employees voice is key to company innovation. … Designing HR practices that stimulate innovation<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":852,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[485,488],"tags":[412,353,18,395,420],"article-type":[12],"acf":[],"yoast_head":"\nHR practices that stimulate innovation<\/title>\n<meta name=\"description\" content=\"Giving employees voice is key to innovation. 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