Cultivating innovation through human resources management

In this era of globalization, innovation in organizations is truly an imperative for survival. One such innovative force is coined Corporate Entrepreneurship (CE), defined as the practice of developing innovative business ideas, processes or practices to improve the organization’s profitability.

There are four major kinds of CE: corporate venturing, which encourages employees to begin a business within a business; intrapreneuring, which helps employees develop entrepreneurial mindsets; organizational transformation, which involves reconfiguring resources to develop a new and sustainable source of income; and industry rule-bending, which advocates paradigm shift to create wholly new markets.

Despite variety, entrepreneurship consistently includes innovation. It hopes to gain more—better financial returns and long-term economic value—by developing risky or unproven business ventures.

Research

All that is known about CE comes from studies conducted in highly developed countries with more stable economies. Little is known about local organizations situated in a transitional economy such as the Philippines, and their efforts to become innovative.

To fill this gap, Prof. Divina M. Edralin of De la Salle University recently conducted a study that sought to understand the role of human resources management (HRM) in promoting mindsets, behaviors and practices necessary for a flourishing CE culture in top Philippine corporations. The study specifically evaluated employee perceptions on how HRM practices promoted innovation within the organization through recruitment and selection, training and development, compensation, performance management, and employee relations. Data were gathered through survey from 20 Philippine corporations belonging to the manufacturing and service industries and involving around 1,200 managers or management representatives, supervisors and rank-and-file employees.

Findings

Cultivating strong employee relationships, above other HRM practices, continue to be the most influential and significant innovation driver.

For recruitment and selection, investing in people with both experience and the right fit contributes to overall CE. Members of the rank and file and management representatives agreed that new recruits must share the same value systems and beliefs held and fostered by the company to contribute to their culture of innovation.

Essential training and development practices include encouraging employees to take responsibility for their own career and personal development. Also, companies should foster a culture of growth and leadership strong enough to allow the emergence of its own future leaders.

Effective employee relations practices emphasize the importance of visible alignment between the managers’ beliefs and company values. Creating a team-oriented culture focused on mutual respect and a deep understanding of the company’s business strategies successfully cultivates innovativeness among employees.

On compensation and benefits, employees and managers agreed that companies should properly acknowledge and adequately compensate for overtime, as well as offer incentives or variable pay. Hand in hand with a more structured benefits package, performance management practices that recognize results with enthusiasm encourage innovation.

Promoting innovation

The study emphasized the importance of selecting employees with beliefs, behaviors, and mindsets aligned to the company’s own set of values. Finding the right fit will benefit both the company and new hires in the long run. It is also essential for training managers, management representatives and supervisors to strengthen their core competencies and commit to building strong entrepreneurial mindset and culture among members of the rank and file.

How employees relate to their managers and establish lasting relationships with one another are the building blocks of an effective and efficient working environment. Given our highly collectivist culture that values quality social relations, Philippine businesses are more than capable of enriching their own working culture and promoting innovation.  What will help would be investing in activities and programs that provide opportunities for informal interactions, which may pave the way for cultivating positive and enduring relationships.

(The article is based on D.M. Edralin’s 2010 research entitled “Human Resource Management Practices: Drivers for Stimulating Entrepreneurship in Large Companies in the Philippines,” published in DLSU Business & Economic Review. Kyra took up AB Communications at the Ateneo de Manila University and is currently pursuing a graduate degree at the University of the Philippines. For comments or queries, e-mail us at [email protected].)