Culture and climate for innovation

Introduction

Virtually all companies talk about innovation,and the importance of “doing” innovation,many actually try to “do it”, and only a fewactually succeed in doing it. The reality is thatinnovation, for the most part, frightens organi-sations because it is inevitably linked to risk.Many companies pay lip service to the powerand benefits of innovation. To a large extentmost remain averse to the aggressive invest-ment and commitment that innovationdemands. Instead they dabble in innovationand creativity. Even though innovation isdebated in senior level meetings as being thelifeblood of the company, and occasionalresources and R&D funds are thrown at it,often the commitment usually ends there.However, becoming innovative demands morethan debate and resources; it requires anorganisational culture that constantly guidesorganisational members to strive for innovationand a climate that is conducive to creativity.

Innovation is holistic in nature. It coversthe entire range of activities necessary toprovide value to customers and a satisfactoryreturn to the business. As Buckler (1997)suggests, innovation “is an environment, aculture – almost spiritual force – that exists ina company” and drives value creation. Inno-vation maybe viewed as three fairly distinctphases which are often viewed to be sequen-tial but in reality are iterative and often runconcurrently. The first is the idea generationphase which is typically the fuzzy front end. Alot of the ideas from this stage typically do notproceed onto the second stage, because oftennumerous problems show up, ranging fromfeasibility to compatibility with strategicdirection. At the second stage most frequentlyencountered is the structured methodologyphase which typically consists of some type ofstage-gate system. Most large companiesdeploy some variation of a structuredmethodology. The stage-gate system consistsof hoops which the new idea must pass inorder to demonstrate its feasibility and com-patibility with the organisation’s objectives.The third stage is commercialisation. Thisphase consists of actually making the idea anoperational feasibility. In others words, theproduct is produced so as to allow extractionof value from all that has been created in theearlier phases.

Although innovation cannot be touched,heard, tasted or seen it can be felt. It is

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European Journal of Innovation ManagementVolume 1 · Number 1 · 1998 · pp. 30–43© MCB University Press · ISSN 1460-1060

Culture and climate forinnovation

Pervaiz K. Ahmed

The authorPervaiz K. Ahmed is Unilever Lecturer in Innovation Management at the University of Bradford, Bradford, UK

AbstractNotes that many companies pay “lip service” to the ideaof innovation and stresses that becoming innovativerequires an organisational culture which nurtures innova-tion and is conducive to creativity. Considers the nature oforganisational climate and of organisational culture,focusing on factors which make for an effective organisa-tional culture. Looks at the interplay between variousorganisational factors and innovation and suggestselements which promote innovation. Concludes that themost innovative companies of the future will be thosewhich have created appropriate cultures and climates.

probably best described as a pervasive attitudethat allows business to see beyond the presentand create the future. In short, innovation isthe engine of change and in today’s fiercelycompetitive environment resisting change isdangerous. Companies cannot protect them-selves from change regardless of their excel-lence or the vastness of their current resourcebasin. Change, while it brings uncertainty andrisk, also creates opportunity. The key driverof the organisation’s ability to change is inno-vation. However, simply deciding that theorganisation has to be innovative is not suffi-cient. That decision must be backed byactions that create an environment in whichpeople are so comfortable with innovationthat they create it.

Culture is a primary determinant of inno-vation. Possession of positive cultural charac-teristics provides the organisation with neces-sary ingredients to innovate. Culture hasmultiple elements which can serve to enhanceor inhibit the tendency to innovate. Moreoverthe culture of innovation needs to be matchedagainst the appropriate organisational con-text. To examine culture in isolation is amistake, and to simply identify one type ofculture and propose it as the panacea to anorganisation’s lack of innovation is to com-pound that mistake.

Innovation cultures and innovationclimates

Visiting companies like 3M, Hewlett-Packard, Sony, Honda, The Body Shop, oneis left with a feeling that is not often encoun-tered in ordinary companies. This “feeling”often defies definition yet despite its intangi-bility contains organisational concreteness asreal as the machinery on the shop-floor. Thisfeeling usually is found rooted in the prevail-ing psyche of each organisation. A companylike 3M feels dynamic while some of its coun-terparts feel rather staid and unexciting. Thefeel of the organisation reflects both its cli-mate and culture. The term climate histori-cally stems/originates from organisationaltheorists such as Kurt Lewin (leadershipstyles create social climates), Douglas Mcgregor (theory X and Y) , who used theterm to refer to social climate, and organisa-tional climate respectively. The climate of theorganisation is inferred by its membersthrough the organisation’s practices, procedures and rewards systems deployed and

is indicative of the way the business runs itselfon a daily and routine basis. In one sense it isthe encapsulation of the organisation’s truepriorities.

Humans are active observers of the envi-ronment in which they live. They shape theenvironment and are shaped by the environ-ment in which they exist and from which theyinfer organisational priorities. From thisunderstanding they align themselves toachieve their own particular ends. At timesthese personal ends may coincide with thoseof the organisation or they may conflict.Understanding and perceptions of the envi-ronment act as guiding mechanisms. Thepractices and procedures that come to definethese perceptions are labelled climate. Scheider et al. (1996) define four dimensionsof climate:(1) Nature of interpersonal relationships

• is there trust or mistrust?;• are relationships reciprocal and based

on collaboration, or are they competi-tive?;

• does the organisation socialise new-comers and support them to perform,or does it allow them to achieve andassimilate simply by independenteffort?;

• do the individuals feel valued by thecompany?

(2) Nature of hierarchy• are decisions made centrally or

through consensus and participation?;• is there a spirit of teamwork or is work

more or less individualistic?;• are there any special privileges accord-

ed to certain individuals, such as man-agement staff?

(3) Nature of work• is work challenging or boring?;• are jobs tightly defined and produce

routines or do they provide flexibility?;• are sufficient resources provided to

undertake the tasks for which individu-als are given responsibility?

(4) Focus of support and rewards• what aspects of performance are

appraised and rewarded?;• what projects and actions/behaviours

get supported?;• is getting the work done (quantity) or

getting the work right (quality) reward-ed?;

• on what basis are people hired?

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Volume 1 · Number 1 · 1998 · 30–43

The parameters listed above help to defineclimate. It is primarily from these sources thatemployees draw inferences about the organi-sational environment in which they reside andunderstand the priorities accorded to certaingoals that the organisation espouses.

Closely allied to the concept of climate isculture. Organisational culture refers todeeply held beliefs and values. Culture istherefore, in a sense, a reflection of climate,but operates at a deeper level. Whereas cli-mate is observable in the practices and poli-cies of the organisation, the beliefs and valuesof culture are not visible at that level but existas cognitive schema which govern behaviourand actions to given environmental stimuli.To illustrate the inter-linkage, 3M has thepractice of setting aside a certain amount oftime for employees to do creative work ontheir own initiatives. To support this, specificseed funding is provided, and the individualsare encouraged to share and involve andbecome involved in each other’s projects.These practices and support (climate) makeindividuals believe that senior managementvalues innovation (culture). Culture thusappears to stem from the interpretations thatemployees give to their experience of organi-sational reality (why things are the way theyare and the how and why of organisationalpriorities.)

If the notion of innovation culture is to beuseful, it is important to be clear about whatwe mean by the term. Failure to specify itclearly leads to confusion and misunderstand-ing. The question, what is innovation culture,is pertinent yet complex. The reason for this ispartly to do with the way the concept of cul-ture has evolved and partly to do with theinherent complexity within the concept itself.It is perhaps important to remember that theconcept of corporate culture has developedfrom anthropological attempts to understandwhole societies. The term, over time, came tobe used to other social groupings, rangingfrom whole nations, corporations, depart-ments and even teams within businesses.

There are a multitude of definitions ofculture but most suggest culture is the patternof arrangement or behaviour adopted by agroup (society, corporation, or team) as theaccepted way of solving problems. As such,culture includes all the institutionalised waysand the implicit beliefs, norms, values andpremises which underline and govern behaviour.

Furthermore, culture can be thought of ashaving two components: explicit or implicit.The distinction between explicit and implicitcomponents of culture is important in that itallows a better understanding of how toanalyse and manage it. Explicit culture repre-sents the typical patterns of behaviour by thepeople and the distinctive artefacts that theyproduce and live within. Implicit componentof culture refers to a values, beliefs, normsand premises which underline and determine,the observed patterns of behaviour (i.e. thoseexpressed within explicit culture). The dis-tinction is necessary because it serves tohighlight that it is easier to manipulate explicitaspects when trying to fashion organisationalchange. For example, in trying to make thecompany customer oriented it may be possi-ble to elicit certain actions and behavioursfrom employees through relatively simpletraining in customer satisfaction techniquesbut not necessarily effect any change inimplicit culture. A change in implicit culturewould necessitate altering the value set of theindividual members to the extent that itbecame an unconscious norm of action,rather than guided by procedural or otherorganisational control routines. The degreeand extent to which this happens is dependenton the strength of the culture.

The strength of culture depends primarilyon two things:(1) Pervasiveness of the norms beliefs and

behaviours in the explicit culture (theproportion of members holding stronglyto specific beliefs and standards of behav-iours).

(2) Match between the implicit and explicitaspects of culture.

Another way of looking at culture is in termsof cultural norms. Creating culture throughuse of words is however seldom enough.Essentially norms vary along two dimensions(O’ Reilly, 1989): (1) The intensity: amount of approval/disap-

proval attached to an expectation.(2) Crystallisation: prevalence with which the

norm is shared.

For instance when analysing an organisation’sculture it may be that certain values are heldwidely but with no intensity, e.g. everyoneunderstands what top management wants,but there is no strong approval/disapproval.By way of contrast, it may be that a givennorm such as innovation, is positively valued

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in one group (marketing and R&D) andnegatively valued by another (say manufactur-ing). There is intensity but no crystallisation.It is only when there exist both intensity andconsensus that strong cultures exist. This iswhy it is difficult to develop or change culture.

Strong cultures score highly on each of theabove attributes. Moreover, really strongcultures work at the implicit level and exert agreater degree of control over people’s behav-iour and beliefs. Strong cultures can be bene-ficial as well as harmful, depending on thecircumstances in which the organisation findsitself. The value of strong cultures is that byvirtue of deeply-held assumptions and beliefsthe organisation is able to facilitate behavioursin accordance to organisational principles. Acompany that can create strong culture hasemployees who believe in its products, itscustomers, and its processes.

However, organisations need also to bewary of a strong culture. As well as being astrength, it can in circumstances be a hin-drance. To effectively use culture over thelong term, organisations need to also possesscertain values and assumptions about accept-ing change. These values must be driven bythe strategic direction in which the companyis moving. Without these a strong culture canbe a barrier to recognising the need forchange, and being able to reconstitute itselfeven if the need is recognised. Supporting thisapparently contradictory facet of culture,Denison (1990), in a longitudinal study foundevidence that suggests incoherent and weakcultures at one point in time were associatedwith greater organisational effectiveness in thefuture, and that some strong cultures eventu-ally led to decline in corporate performance.Clearly, balance and understanding of contextis important. Cultures with strong drive forinnovation and change can lead to problemswhen market circumstances and customerrequirements demand predictability andconforming to specifications. John Scully’srescue of Apple Computers from the innova-tive but less predictable culture created bySteve Jobs is a good example of the weaknessof a strong culture.

Generally we can say that because culturecan directly affect behaviour it can help acompany to prosper. An innovative culturecan make it easy for senior management toimplement innovation strategies and plans..The key benefit is that often it can do thingsthat simple use of formal systems, procedures

or authority cannot. Moreover, given thenature of culture and climate, it is clear thatsenior managers play a critical role in shapingculture, since they are able to give priority toinnovation, as well as make efforts, in terms ofrewards for instance, to guard against compla-cency. Employees take the priorities set bywhat management values, and use these toguide their actions. The challenge for man-agement then is to make sure that the employ-ees make the right type of attributions, sinceany mismatches or miscommunication quiteeasily leads to confusion and chaos.

Organisational culture and effectiveness

Having examined the issue of defining cul-ture, it is necessary to check the attributes thatmake for its effectiveness. The topic of cultureand effectiveness is of central importance, yetthe area is beset by a formidable set ofresearch problems. According to Denison andMishra (1995), any theory of cultural effec-tiveness must encompass a broad range ofphenomena extending from core assumptionsto visible artefacts, and from social structuresto individual meaning. In addition, the theorymust also address culture as symbolic repre-sentations of past attempts at adaptation andsurvival, as well as a set of limiting or enablingconditions for future adaptation. Even thoughattempts at integration have been made thereis still very limited consensus regarding auniversal theory, and a great deal of scepti-cism exists about whether culture can ever be“measured” in a way that allows one organisa-tion to be compared with another.

Empirical evidence: culture effectivenessThe empirical work on organisational culturecan be traced back early to the work of classi-cal organisation theorists such as Burns andStalker (1961), Lawrence and Lorsh (1967),Likert (1961). In more recent times a vastbase of popular literature on the subject wasstarted by writers such as Peters and Water-man (1982) in espousing a theory of excel-lence, which purports to identify culturalcharacteristics of successful companies.

Numerous studies have produced evidencewhich highlights the importance of culture toorganisational performance and effectiveness.To cite a handful of exemplary studies, Wilkinsand Ouchi (1983) discuss the concept of“clan organisation and explore the hypotheti-cal conditions under which clans would be

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more efficient organisational forms. Gordon(1985) highlighted that high and low per-forming companies in the banking and utili-ties industries had different culture profiles.Kotter and Heskett (1992) present an analysisof the relationship between strong cultures,adaptive cultures and effectiveness. Mostrecently Deshpande et al. (1993) link culturetypes to innovativeness. Deshpande et al.,using a synthesis of over 100 previous studiesin organisational behaviour, sociology andanthropology, define four generic culturetypes: market culture, adhocracy culture, clanculture and hierarchical culture. Their studyappears to suggest that a certain variety ofcultures are more able to enhance innovative-ness than other types. Market and adhocracycultures score highly for high performancecompanies, exhibiting a statistically signifi-cant relationship. A study by Goran Ekvall(1993) in Sweden further supports the linkbetween culture and innovativeness.

More generally, Dennison and Mishra(1995) identify four cultural traits and valuesthat are associated with cultural effectiveness.These are briefly defined below:(1) Involvement is a cultural trait which is posi-

tively related to effectiveness. Involvement ofa large number of participants appears tobe linked with effectiveness by virtue ofproviding a collective definition of behav-iours, systems, and meanings in a way thatcalls for individual conformity. Typicallythis involvement is gained through inte-gration around a small number of keyvalues. This characteristic is popularlyrecognised as a strong culture. Involve-ment and participation create a sense ofownership and responsibility. Out of thisownership grows a greater commitment tothe organisation and a growing capacity tooperate under conditions of ambiguity.

(2) Consistency is a cultural trait that is positive-ly related to effectiveness. Consistency hasboth positive and negative organisationalconsequences. The positive influence ofconsistency is that it provides integrationand co-ordination. The negative aspect isthat highly consistent cultures are oftenthe most resistant to change and adapta-tion. The concept of consistency allowsus to explain the existence of sub-cultureswithin an organisation. Sources of inte-gration range from a limited set of rulesabout when and how to agree and dis-agree, all the way to a unitary culture with

high conformity and little or no dissent.Nonetheless in each case the degree ofconsistency of the system is a salient traitof the organisation’s culture.

(3) Adaptability, or the capacity for internalchange in response to external conditions, is acultural trait that is positively related toeffectiveness. Effective organisations mustdevelop norms and beliefs that supporttheir capacity to receive and interpretsignals from their environment and trans-late them into cognitive, behavioural andstructural changes. When consistencybecomes detached from the externalenvironment, firms will often develop intoinsular bureaucracies, and are unlikely tobe adaptable.

(4) Sense of mission or long term vision is acultural trait that is positively related toeffectiveness. Interestingly this contrastswith the adaptability notion, in that itemphasises the stability of an organisa-tion’s central purpose and de-emphasisesits capacity for situational adaptabilityand change. A mission appears to providetwo major influences on the organisa-tion’s functioning. First, a mission pro-vides purpose and meaning, and a host ofnon-economic reasons why the organisa-tion’s work is important. Second, a senseof mission defines the appropriate courseof action for the organisation and itsmembers. Both of these factors reflectand amplify the key values of the organi-sation.

Denison and Mishra (1995) propose that foreffectiveness, organisations need to reconcileall four of these traits. The four traits togetherserve to acknowledge two contrasts: the con-trast between internal integration and exter-nal adaptation, and the contrast betweenchange and stability. Involvement and consis-tency have as their focus the dynamics ofinternal integration, while mission and adapt-ability address the dynamics of external adap-tation. This focus is consistent with Schein’s(1985) observation that culture is developedas an organisation learns to cope with the dualproblems of external adaptation and internalintegration. In addition, involvement andadaptability describe traits related to anorganisation’s capacity to change, while theconsistency and mission are more likely tocontribute to the organisation’s capacity toremain stable and predictable over time.

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The individual and innovation culture

People play a role in organisational culture.Organisations need to consider the type ofemployees that can most effectively driveinnovation. From a diverse range of research(psychology to management) it has beenfound that a core of reasonably stable person-ality traits characterise creative individuals. Aselect few of these are listed:

Personality traits for innovation• high valuation of aesthetic qualities in

experience• broad interests• attraction to complexity• high energy• independence of judgement• intuition• self-confidence• ability to accommodate opposites• firm sense of self as creative

(Baron and Harrington, 1981)• persistence• curiosity• energy• intellectual honesty

(Amabile 1988)• internal locus of control (reflective/intro-

spective)(Woodman and Schoenfeldt, 1990)

Although there appears to be general agree-ment that personality is related to creativity,attempts to try and use this inventory type ofapproach in an organisational setting as pre-dictor of creative accomplishments is fraughtwith dangers, and is hardly likely to be anymore useful than attempts at picking goodleaders through the use of trait theoryapproaches. Nevertheless it does highlight theneed to focus on individual actors, and to tryand nurture such characteristics or at leastbring them out, if necessary, in an organisa-tional setting..

Cognitive factors and innovationCognitive factors also appear to be associatedwith the ability to innovate. Research appearsto indicate a number of cognitive factors areassociated with creativity. For example, med-ical psychology indicates differences in cogni-tive processing, ascribing left cerebral cortexto rational thinking, and the right brain tointuition.

Cognitive parameters affecting idea pro-duction are given below:

• associative fluency• fluency of expression• figural fluency• ideational fluency• speech fluency• word fluency• practical ideational fluency• originality

(Carrol, 1985)• fluency• flexibility• originality• elaboration

(Guildford, 1983)

Personal motivational factors affectinginnovationAt the individual level numerous motivation-related factors have been identified as driversof creative production. The key ones arepresented below:

Intrinsic versus extrinsic motivationIntrinsic motivation is a key driver of creativi-ty (Amabile, 1990; Baron and Harrington,1981). In fact extrinsic interventions such asrewards and evaluations appear to adverselyaffect innovation motivation because theyappear to redirect attention from “experi-menting” to following rules or technicalitiesof performing a specific task. Furthermore,apprehension about evaluation appears todivert attention away from the innovationbecause individuals become reluctant to takerisks since these risks may be negatively evalu-ated. Contrarily, in order to be creative, indi-viduals need freedom to take risks, play withideas and expand the range of considerationsfrom which solutions may emerge.

Challenging individualsOpen ended, non-structured tasks engenderhigher creativity than narrow jobs. Thisoccurs by virtue of the fact that peoplerespond positively when they are challengedand provided sufficient scope to generatenovel solutions. It appears that it is not theindividual who lacks creative potential but it isthe organisational expectations that exert aprimary debilitating effect upon the individ-ual’s inclination to innovate (Shalley and Oldham, 1985).

Skills and knowledgeCreativity is affected by relevant skills such asexpertise, technical skills, talent etc. Howeversuch domain-related skills can have both

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positive as well as negative consequences.Positively, knowledge enhances the possibilityof creating new understanding. Negatively,high domain-relevant skills may narrow thesearch heuristics to learnt routines and there-by constrain fundamentally new perspectives.This can lead to functional “fixedness”.

At a more macro-level Schneider et al.(1996) suggest that organisations may attractand select persons with matching styles.Organisational culture, as well as otheraspects of the organisation, may be difficult tochange because people who are attracted tothe organisation may be resistant to acceptingnew cognitive styles. When a change is forced,those persons attracted by the old organisa-tion may leave because they no longer matchthe newly accepted cognitive style. Amongother things, this culture-cognitive stylematch suggests that organisational conditions(including training programs) supportive ofcreativity will be effective only to the extentthat the potential and current organisationalmembers know of and prefer these conditions.

Structure and innovation

Although most research appears to agree thatinnovation is influenced by social processes,research in this area thus far has taken a backseat to research on individual differences andantecedents. Generally it can be said thatinnovation is enhanced by organic structuresrather than mechanistic structures. Innova-tion is increased by the use of highly participa-tive structures and cultures (e.g. high perfor-mance-high commitment work systems(Burnside, 1990). For instance, an ideachampion must be made to feel part of thetotal innovation; at the very least he/she mustbe allowed to follow the progress of the inno-vation. This builds involvement via ownershipand enhances attachment and commitment atthe organisational level. There is also a strongcase here to let the individual lead the projectin a total sense from beginning to end.

Organic structures promote innovation• freedom from rules;• participative and informal;• many views aired and considered;• face to face communication; little red tape;• inter-disciplinary teams; breaking down

departmental barriers;• emphasis on creative interaction and aims;

• outward looking; willingness to take onexternal ideas;

• flexibility with respect to changing needs;• non-hierarchical;• information flow downwards as well as

upwards.

Mechanistic structures hinderinnovation• rigid departmental separation and func-

tional specialisation;• hierarchical;• bureaucratic;• many rules and set procedures;• formal reporting;• long decision chains and slow decision

making;• little individual freedom of action;• communication via the written word;• much information flow upwards; directives

flow downwards.

Cultural norms for innovation

Bearing in mind that the external contextimpacts heavily upon innovation and recipro-cally, the intrinsic creativity inherent in theorganisation defines its ability to adapt to, andeven shape the environment, we can ask howcan culture promote innovation? Indeed doesculture hinder or enhance the process ofcreativity and innovation? The answer is thatit simply depends on the norms that are wide-ly held by the organisation. If the right typesof norms are held and are widely shared thenculture can activate creativity. Just as easily, ifthe wrong culture exists, no matter the effortand good intention of individuals trying topromote innovation, few ideas are likely to beforthcoming .

A variety of research (Andrew, 1996; Filipczak, 1997; Judge et al., 1997; O’Reilly,1989; Picken and Dess, 1997; Pinchot andPinchot, 1996; Schneider et al., 1996; Warneret al., 1997), appear to point to the same set ofcritical norms involved in promoting andimplementing innovation and creativity.

Norms that promote innovation are pre-sented below.

Challenge and belief in actionThe degree of which employees are involvedin daily operations and the degree of “stretch”required.

Key attributes:• don’t be obsessed with precision;

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• emphasis on results;• meet your commitments;• anxiety about timeliness;• value getting things done;• hard work is expected and appreciated;• eagerness to get things done;• cut through bureaucracy.

Freedom and risk-takingThe degree to which the individuals are givenlatitude in defining and executing their ownwork.

Key attributes:• freedom to experiment;• challenge the status quo;• expectation that innovation is part of your

job;• freedom to try things and fail;• acceptance of mistakes;• allow discussion of dumb ideas;• no punishment for mistakes.

Dynamism and future orientationThe degree to which the organisation is activeand forward looking.

Key attributes:• forget the past;• willingness not to focus on the short term;• drive to improve;• positive attitudes towards change;• positive attitudes toward the environment;• empower people;• emphasis on quality.

External orientationThe degree to which the organisation is sensi-tive to customers and external environment.

Key attributes:• adopt customers perspective;• build relationships with all external inter-

faces (supplier, distributors).

Trusts and opennessThe degree of emotional safety that employ-ees experience in their working relationships.When there is high trust, new ideas surfaceeasily.

Key attributes:• open communication and share

communication;• listen better;• open access;• accept criticism;• encourage lateral thinking;• intellectual honesty.

DebatesThe degree to which employees feel free todebate issues actively, and the degree to whichminority views are expressed readily andlistened to with an open mind.

Key attributes:• expect and accept conflict;• accept criticism;• don’t be too sensitive.

Cross-functional interaction andfreedomThe degree to which interaction across func-tions is facilitated and encouraged.

Key attributes:• move people around;• teamwork;• manage interdependencies;• flexibility in jobs, budgets, functional areas.

Myths and storiesThe degree to which success stories aredesigned and celebrated.

Key attributes:• symbolism and action;• build and disseminate stories and myths.

Leadership commitment andinvolvementThe extent to which leadership exhibits realcommitment and leads by example andactions rather than just empty exhortation.

Key attributes:• senior management commitment;• walk the talk;• declaration in mission/vision.

Awards and rewardsThe manner in which successes (and failures)are celebrated are rewarded.

Key attributes:• ideas are valued;• top management attention and support;• respect for beginning ideas;• celebration of accomplishments e.g.

awards;• suggestions are implemented;• encouragement.

Innovation time and trainingThe amount of time and training employeesare given to develop new ideas and new possi-bilities and the way in which new ideas arereceived and treated.

Key attributes:• built-in resource slack ;

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• funds budgets;• time;• opportunities;• promotions;• tools;• infrastructure e.g. rooms, equipment etc;• continuous training;• encourage lateral thinking;• encourage skills development.

Corporate identification and unityThe extent to which employees identify withthe company, its philosophy, its products andcustomers.

Key attributes:• sense of pride;• willingness to share the credit;• sense of ownership;• eliminate mixed messages;• shared vision and common direction;• build consensus;• mutual respect and trust;• concern for the whole organisation.

Organisational structure: autonomy andflexibilityThe degree to which the structure facilitatesinnovation activities.

Key attributes:• decision making responsibility at lower

levels;• decentralised procedures;• freedom to act;• expectation of action;• belief the individual can have an impact;• delegation;• quick, flexible decision making, minimise

bureaucracy.

Corporate missions, philosophystatements and innovation culture

Having a clear corporate philosophy enablesindividuals to co-ordinate their activities toachieve common purposes, even in theabsence of direction from their managers(Ouchi, 1983). One effect of corporate state-ments is their influence in creating a strongculture capable of appropriately guidingbehaviours and actions. However there is alsoa degree of doubt as to whether statements ofcredo have any value in driving the organisa-tion forward. Most statements encounteredoften are of little value because they fail tograb people’s attention or motivate them to

work toward a common end (Collins andPorras, 1991).

Despite these concerns , Ledford et al.(1994) suggest that if correctly formulatedand expressed, philosophy statements canprovide three advantages. First, the state-ments can be used to guide behaviours anddecision making. Second, philosophy state-ments express organisational culture, whichcan help employees interpret ambiguousstimuli. Third, they may contribute to organi-sational performance by motivating employ-ees or inspiring feelings of commitment.Importantly it is worth bearing in mind thatthe statement does not have to move moun-tains to make a cumulative difference in firmperformance. If the individual employeesbecome just a little bit more dedicated toinnovation, exert just a little bit more efforttowards creativity goals, care a just a little bitmore about their work, then the statementmay produce a positive return on the invest-ment needed to create it.

So what makes a statement effective?According to Ledford et al. (1994), an effec-tive statement consists of four basic guidingprinciples to bring a statement to life:(1) Make it a compelling statement. Avoid

boring details and routine descriptions.(2) Install an effective communication and

implementation process.(3) Creates strong linkage between the

philosophy and the systems governingbehaviour.

(4) Have an ongoing process of affirmationand renewal.

Leadership and innovation culture

Leading edge organisations consistentlyinnovate, and do so with courage. It is the taskof organisational leaders to provide the cul-ture and climate that nurtures and acknowl-edges innovation at every level. Notwithstand-ing the fact that leadership is critically impor-tant, it is nevertheless insufficient on its ownto build a culture of continuous improvementand innovation. To build a culture of innova-tion, many innovation champions must beidentified, recruited, developed, trained,encouraged and acknowledged throughoutthe organisation.

In order to build a successful and sustain-able culture of innovation, leadership needs toaccomplish two broad tasks. First leadersneed to be acutely sensitive to their

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environment and acutely aware of the impactthat they themselves have on those aroundthem. This sensitivity enables them to providean important human perspective to the task athand and is critical because it is only withinthis awareness that the leader can begin tobridge the gap between “leaderspeak” and thereal world of organisational culture. Thesecond factor is the ability of leaders to acceptand deal with ambiguity. Innovation cannotoccur without ambiguity, and organisationsand individuals that are not able to tolerateambiguity in the work place environment andrelationships reproduce only routine actions.Innovative structures for example cannot haveall attendant problems worked out in advance.Leaders need to build a deep appreciation ofthis fact, otherwise there will be a tendency tocreate cultures of blame. Tolerance of ambi-guity allows space for risk taking, and explo-ration of alternative solution spaces which donot always produce business results. Thishedges against constant deployment of triedand tested routines for all occasions. TomPeters comes close to the mark in highlightingthat most successful managers have an unusu-al ability to resolve paradox, to translate con-flicts and tensions into excitement, highcommitment and superior performance.

Characteristics that distinguish highlyinnovative firms against less innovative com-panies are as follows:• Top management commits both financial

and emotional support to innovation, andthey promote innovation through champi-ons and advocates for innovation.

• Top management has to ensure that realis-tic and accurate assessments of the marketsare made for the planned innovation.Highly innovative firms are close to the endusers, and are accurately able to assesspotential demand.

• Top management ensures that innovationprojects get the necessary support from alllevels of the organisation.

• Top management ensures that structuredmethodology/systems are set in place sothat each innovation goes through a carefulscreening process prior to actual imple-mentation.

The above suggests that senior managementplay a pivotal role in enhancing or hinderingorganisational innovation. If senior manage-ment are able to install all of the above typesof procedures and practices then they

effectively seed a climate conducive to innova-tion. It is important to note that it is not suffi-cient to only emphasise one or few practices.Climates are created by numerous elementscoming together to reinforce employee per-ceptions. Weaknesses or contradictions, evenalong single dimensions, can quite easilydebilitate efforts. For example, if rewards arenot structured for innovation but are given forefficient performance of routine operations,then no matter how seductive the other cuesand perceptions are, employees are likely torespond with caution and uncertainty. This isparticularly the case because perceptions ofthe climate are made on aggregates of experi-ence.

Additionally, management create climatenot by what they say but by their actions. It isthrough visible actions over time rather thanthrough simple statements that employeesbegin to cement perceptions. It is only whenemployees see things happening around them,and to things that push them towards innova-tion, that they begin to internalise the valuesof innovation. At innovative companies, thewhole system of organisational function isgeared-up to emphasise innovation (who getshired, how they are rewarded, how the organi-sation is designed and laid out, what processesare given priority and resource back-up, andso on).

Leadership, innovation andempowerment

Empowering people to innovate is one of themost effective ways for leaders to mobilise theenergies of people to be creative. Combinedwith leadership support and commitment,empowerment gives people freedom to takeresponsibility for innovation. Empowermentin the presence of strong cultures that guideactions and behaviour produces both energyand enthusiasm for consistent work towardsan innovative goal. Employees themselves areable to devise ways that allow them to inno-vate and accomplish their tasks. The onlyserious problem with empowerment occurswhen it is provided in an organisation withouta strong value system capable of driving activ-ities in a unified and aligned manner to thesuper-ordinate goals of the organisation. Inthese conditions, empowerment is little lessthan abdication of responsibility, and whenresponsibility and power is pushed down-wards, chaos typically ensues.

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Even with empowerment, innovativeactions can be incapacitated. Often peopleencounter organisational barriers whichinhibit innovation. Some typical organisation-al barriers encountered are listed below:• self-imposed barriers;• unwarranted assumptions;• one correct answer thinking;• failing to challenge the obvious;• pressure to conform;• fear of looking foolish.

Killer phrases also abound, a few of which arelisted below:• “it will cost too much”;• “we have never done things that way”;• “if it’s that good, why hasn’t someone

thought of it before?”;• “has it been done somewhere else?”;• “yes, but …”• “it can’t be done that way”;• “it’s impossible”;

etc.

Actions that need to be addressed in order forthe empowerment to contribute to innovationare listed below:

Establish meaningful “actions”boundaryFor employees to be creative and innovativethey need to understand the primacy of theinnovation agenda, and need to understandhow far they are being empowered to achievethese ends. Successful companies need todraw “actions” boundary through a process ofexplicitly defining the domain of action andthe priority, and the level of responsibility andempowerment provided to reach these ends.Most often such transmission occurs throughmission and vision statements. Devised cor-rectly, these statements can act as powerfulenablers. Incorrectly, they can be just aspowerful disablers breeding cynicism anddiscontent.

Define risk toleranceEmployees need to know the level of risks thatthey can take safely. This helps them to definethe space within which they are allowed to actin an empowered manner, and the occasionswhen they need to approach organisationalratification for engaging in actions. For exam-ple, employees need to understand how muchtime they can spend on their pet projects, andhow much effort they need to ensure that their“routine” operations are not made sub-optimal.

They need also to understand the penalties ifinefficiencies creep into aspects of their task.In this way, understanding of risk providesclear definition of the priority and space forinnovative actions. Without knowing that risktolerance exists within the organisation,employees tend not to be willing to try andinnovate, or engage in activities that are adeparture from tradition.

The best way for leaders to define the actionspace, is not to be so precise as to discourageinnovation, but to stipulate a broad directionwhich is consistent and clear. This means thatas leaders they must be capable of acceptingambiguity, and able to place trust in employ-ees’ ability to stretch out to goals rather thanprescribe details of specific actions which stifleand smother creative actions.

Structure involvementInvolvement is not something that just occurson its own. Senior management need to designinto their organisations ways of buying involve-ment. Involvement requires emotional encour-agement, as well as an infrastructure to createpossibilities of involvement. Organisationaldesign and layout can be used to create a physi-cal environment to enhance interaction.Awards and special recognition schemes areother mechanisms to encourage “buy-in” intoinnovation as a philosophy and way of organi-sational life. Establishing specific mechanismsfor structured involvement such as qualitycircles is yet another device to encourage activeparticipation into the programme. Withoutdirect structures to induce innovation, leader-ship commitment to innovation remains anempty exhortation and produces empty results.

AccountabilityA very common problem in empoweredinnovation is that everyone is encouraged toparticipate in cross-functional processinvolvement, to an extent that almost every-body loses track of who is accountable forwhat. The result of unrestricted and uncon-trolled empowerment is chaos. As newprocesses are put in place then new forms ofbehavioural guidance must be provided andmust be accompanied by redefinitions ofresponsibility. While empowerment, on thesurface, looks like an unstructured process, inreality it is anything but that. It is in fact aclear definition of domains in which the indi-viduals are allowed to exert creative discre-tion, and the responsibility that they must

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execute while engaging in their total task asemployees of the organisation.

Action orientation rather thanbureaucracy orientationTo ensure that innovation occurs, leadersmust ensure that there are no bureaucraticbottlenecks which suffocate attempts at inno-vation. One primary culprit of this is overlybureaucratic procedures for rubber-stampingapproval or reporting requirements. Facedwith such obstacles, a lot of employee initiatives fail. In fact a large proportion ofsuggestion schemes appear to fail not becausethere is a lack of ideas but because of theprotocols, and the failure of the protocols toprocess with sufficient speed either afavourable or unfavourable response.Employee innovativeness is not always thestumbling block – often it is the organisationalprocesses and structures which are so burden-some and unwieldy that they create high levelof unresponsiveness. Through leadershipcommitment to re-engineer out unfruitfulelements of bureaucracy, processes and struc-ture can lay the foundation for a climate ofinnovation.

Characteristics of innovation climatesand cultures

Despite the interest in the field of innovation,much of the research evidence concerningmanagement practices about innovationcultures and creative climate remains unsys-tematic and anecdotal. As mentioned earlier,the importance of culture has been empha-sised by organisational theorists such as Burnsand Stalker (1961), who present a case fororganic structures as opposed to mechanisticstructures. In popular literature, Peters andWaterman (1982), similarly present argu-ments which suggest that in order to facilitateinnovation, work environments must besimultaneously tight and loose. Burlgemanand Sayles (1986) highlight the dependencyof innovation with the development andmaintenance of an appropriate context withinwhich innovation can occur. Judge et al.(1997) in presenting findings from a study ofR&D units compare cultures and climatesbetween innovative and less-innovative firmsand argue that the key distinguishing factorbetween innovative and less innovative firms isthe ability of management to create a sense ofcommunity in the workplace. Highly

innovative companies behave as focusedcommunities whereas less innovative compa-nies units behave more like traditionalbureaucratic departments. They suggest fourmanagerial practices that influence the mak-ing of such goal-directed communities.

Balanced autonomyAutonomy is defined as having control overmeans as well as the ends of one’s work. Thisconcept appears to be one of central impor-tance. There are two types of autonomy:• strategic autonomy: the freedom to set

one’s own agenda;• operational autonomy: the freedom to

attack a problem, once it has been set bythe organisation, in ways that are deter-mined by the individual self.

Operational autonomy encourages a sense ofthe individual and promotes entrepreneurialspirit, whereas strategic autonomy is more todo with the level of alignment with organisa-tional goals. It appears that firms that aremost innovative emphasise operational auton-omy but retain strategic autonomy for topmanagement. Top management appear tospecify ultimate goals to be attained but there-after provide freedom to allow individuals tobe creative in the ways they achieve goals.Giving strategic autonomy, in the sense ofallowing individuals a large degree of freedomto determine their destiny, ultimately leads toless innovation. The results of strategic auton-omy are an absence of guidelines and focus ineffort. In contrast, having too little opera-tional autonomy also has the effect of creatingimbalance. Here the roadmaps become toorigidly specified, and control drives out innov-ative flair, leading eventually to bureaucraticatmospheres. What works best is a balancebetween operational and strategic autonomy.

Personalised recognitionRewarding individuals for their contributionto the organisation is widely used by corpora-tions. However, while recognition can takemany forms there is a common distinction:rewards can be either extrinsic or intrinsic.Extrinsic rewards are things such as payincreases, bonuses and shares and stockoptions. Intrinsic rewards are those that arebased on internal feelings of accomplishmentby the recipient. For example, being personal-ly thanked by the CEO, or being recognised

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by the peer group, being awarded an award ortrophy.

Innovative companies appear to rely heavi-ly on personalised intrinsic awards, both forindividuals as well as groups. Less innovativecompanies tend to place almost exclusiveemphasis on extrinsic awards. It appears thatwhen individuals are motivated more byintrinsic desires than extrinsic desires thenthere is greater creative thought and action.Nevertheless, it has to be stated that extrinsicrewards have to be present at a base level inorder to ensure that individuals are at leastcomfortable with their salary. Beyond the basesalary thresholds it appears that innovation isprimarily driven by self-esteem level ratherthan external monetary rewards. It appearsthat extrinsic rewards often yield only temporary compliance. Extrinsic rewardspromote competitive behaviours which dis-rupt workplace relationships, inhibit opennessand learning, discourage risk-taking, and caneffectively undermine interest in work itself.When extrinsic rewards are used, individualstend to channel their energies in trying to getthe extrinsic reward rather than unleash theircreative potential.

Integrated socio-technical systemHighly innovative companies appear to placeequal emphasis on the technical side as well asthe social side of the organisation. In otherwords, they look to nurture not only technicalabilities and expertise but also promote asense of sharing and togetherness. Fosteringgroup cohesiveness requires paying attentionto the recruitment process to ensure social“fit” beyond technical expertise, and alsoabout carefully integrating new individualsthrough a well-designed socialisation pro-gramme. Less innovative firms on the otherhand appear to be more concerned withexplicit, aggressive individual goals. Lessinnovative firms tend to create environmentsof independence, whereas innovative onescreate environments of co-operation. Highlyinnovative companies also appear to placemuch more reasonable goal expectations, andtry not to overload individuals with projects.The prevalent belief being that too manyprojects spread effort too thinly, leadingindividuals to step from the surface of one tothe next. These conditions create time pres-sures which militate strongly against innova-tiveness.

Continuity of slackSlack is the cushion of resources which allowsan organisation to adapt to internal and exter-nal pressures. Slack has been correlated posi-tively to innovation. Judge et al. (1997) notethat it is not just the existence of slack but theexistence of slack over time that appears tohave positive impact upon innovation. Theyfind less innovative firms have slack but thesefirms appear to have experienced significantdisruptions or discontinuities of slack in theirpast or were expecting disruptions in thefuture. Therefore innovativeness seems to belinked with both experience and expectationsof slack resources. It can be hypothesised thatslack, and future expectations of uninterrupt-ed slack, provide scope for the organisationand its members to take risks that they wouldnot take under conditions of no slack, orinterruptions in slack. Organisationally, thiswould appear to indicate the need for generat-ing a base-line stock of slack in a variety ofcritical resources (such as time and seedfunding for new projects).

Conclusion

In attempting to build an enduring company, itis vitally important to understand the key roleof the soft side of the organisation in innova-tion. Companies like IBM and Apple saw theirfortunes overturned because of their inabilityto focus upon innovation, and more important-ly to understand the importance of culture andclimate in innovation. Apple Computers, afterthe departure of Steve Jobs, encountereddramatic failure despite its focus upon innova-tion. One of the reasons for this, was that itsleaders narrowly focused their total efforts intrying to come up with the next great innova-tion. Instead, their time would have been betterspent designing and creating an environmentthat would be able to create innovations of thefuture. Companies aspiring towards innovativegoals need to learn from the examples of highlysuccessful companies like 3M, The Body Shopwhose leaders spend their energy and effort inbuilding organisational cultures and climateswhich perpetually create innovation.

In accepting this viewpoint, the key ques-tion in innovation begins to change from thetraditional issue of focusing effort on the nextgreat innovation to one which asks whetheryou are creating an environment that stimu-lates innovation. Are you simply focusing onyour product portfolio or are you focused on

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building a culture that cannot be copied? Areyou busy inventing a narrow base of products,or are you experimenting with creating innova-tiveness? Without doubt the most innovativecompanies of the future will be dominated bythose that do not simply focus energies uponproduct and technical innovation, but thosewho have managed to build enduring environ-ments of human communities striving towardsinnovation through the creation of appropriatecultures and climate. This will be the energy ofrenewal and the drive to a successful future.

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Documents

Culture and climate for innovation