Presentation by Mr. Tuomo Alasoini (Director, Tekes - Finnish Funding Agency for Technology and Innovation) on "Workplace Innovation and Workplace Development in Finland" during the study visit of the sub-committee on Innovative workplaces to Helsinki on 25 January 2011

1. Workplace Innovation and Workplace Development in Finland Dr. Tuomo Alasoini Director, Tekes – Finnish Funding Agency for Technology and Innovation tuomo.alasoini(at)tekes.fi

2. Concept of workplace innovation The concept of ”workplace innovation” is not limited here to the adoption of a ready-made set of ”high-performance” work practices. Workplace innovations refer here to collaboratively adopted changes in a company’s work organizational or human resource management (HRM) practices that lead to improved performance, and that also support other types of innovation. Different types of innovation are usually interwoven with each other, containing significant complementaries.

3. Why to support workplace innovation? Recent analyses made in both the US and Finland show that the value of intangible investments annually by companies is greater than tangible investments and that intangible investments have significant productivity impacts. Intangible investments include investments made in computer programs and computerized databases, innovative property, brand equity, work organization and human capital. Workplace innovations affect productivity through two mechanisms: They have direct effects in performance in a company. They help develop the innovation capability of a company and in this way help improve prerequisites for product, service and process innovation.

4. Major thresholds for workplace innovation Lack of information: companies may lack knowledge on how to promote workplace innovation. Lack of competence: companies may be well equipped with information, but they may lack competence to bring about necessary changes. Lack of motivation: management does not have a special incentive to actively promote workplace innovation, because the pressure on the part of customers, competitors or any stakeholder group is not strong enough. High risks related to changes: risks may stem, for example, from long pay-back times of the investments made, volatility of the product market, or the possibility of leaks included in the actions taken.

5. Key goals in the promotion of workplace innovation in Finland Speeding up the annual growth of productivity. Bringing about a favourable growth of productivity on a broader front of sectors and companies than today. Enabling the development of new engines for productivity growth for the future. Improving the quality of working life (QWL), with a view to helping people cope at work and continue in working life for longer through increased opportunities for learning and development and exerting influence at work.

6. Old-age-dependency ratio projections (persons aged 65 and over/persons aged 15 to 64) in Finland and EU-25 (%) (Eurostat 2007) 10/2009 © Copyright Tekes

7. Substantial restructuring or reorganisation in one’s workplace in the past three years (%) (EWCS 2010) 10/2009 © Copyright Tekes

8. Programme-based promotion of workplace innovation in Finland (1/2) 1980–89: Committee for Labour Relations provides studies on industrial conflicts, participation and negotiating systems, personnel management and effects of new technologies in working life. A need to shift emphasis from research to development supported with research emerges among a circle of devoted government officials and other experts. 1989–91: The Committee for Working Conditions proposes a national programme for the development of QWL. The government and the social partners do not reach mutual understanding on the need for such a programme in the middle of a severe economic depression. 1993–2003: A National Productivity Programme is launched, becoming a good example of tripartite programme-based development of working life. The programme which lasts until 2003 uses practically oriented research as its main instrument and has its main focus on approaches based on engineering science. The social partners show strong commitment to the programme.

9. Programme-based promotion of workplace innovation in Finland (2/2) 1996–99: The National Workplace Development Programme (TYKE) is launched based on the government’s programme. The need for such a programme is based on the national innovation system framework. In the proposal, the principles of the ”Finnish model for workplace development” take shape for the first time. 2000–03: The TYKE programme continues with relatively small revisions. 2004–10: A new Workplace Development Programme TYKES is launched as an umbrella which integrates activities of the TYKE programme and the National Productivity Progremme. TYKES has a more developed conceptual framework and more ambitious goals and it owes bigger financial resources. 2009–: Promotion of workplace innovation is consolidated as part of R&D&I activities of Tekes.

10. Key characteristics of the Finnish Workplace Development Programme TYKES A government-funded programme (2004–10) for the promotion of simultaneous improvement in productivity and QWL in Finnish workplaces. Coordinated originally by the Ministry of Labour, now by Tekes, with close involvement by the social partners. Annual budget of about EUR 12 million by the government. Nearly 1,200 projects in virtually all sectors of the economy funded (focus on SMEs and growth-oriented companies). Nearly 90% of the funding used for work input of researchers and consultants in the projects. All projects oriented to practice, research element involved in some projects.

11. Main forms of TYKES activity to support sustainable productivity growth in workplaces to support method development to support learning networks to disseminate information on project results to reinforce expertise on workplace development

12. Statistically significant positive association between improvements in performance and quality of working life (QWL) in 312 completed development projects funded by the TYKE programme in 1996–2003 was found (Pearson r=.501) Based on an analysis by Ramstad (2005)

13. Effects of TYKES development projects on performance (improved clearly/somewhat, %)

14. Effects of TYKES development projects on QWL (improved clearly/somewhat, %)

15. Effects of TYKES development projects on management and leadership and development activity (improved clearly/somewhat, %)

16. Finnish model for workplace development as represented by the TYKES programme (1/2) Productivity and QWL: A mutually supporting relationship between the promotion of productivity and QWL at workplace level, i.e. both can be supported with similar kind of development methods. System-level approach: The target of development at workplace level is the work system that consists of several interdependent work, organizational and HRM practices on the whole, rather than individual practices as such. Local learning processes: Workplace innovations usually call for a great deal of “local re-invention”. It is more important to support local learning processes than the transfer of ready-made “best practices” from one workplace context to another.

17. Finnish model for workplace development as represented by the TYKES programme (2/2) Labour-management cooperation: Cooperation between management and personnel in development is important. In this way it is possible to utilize versatile expertise in the planning and implementation of new solutions and to create shared understanding and acceptance on the grounds for the decisions that will be made. Research-supported development: Interplay between research and development in projects lays more favourable conditions for both innovative workplace-level solutions and the creation of new generalized knowledge than research or development alone. Expanded triple helix: In modern knowledge-based societies, there usually are several clusters of innovation which possess different kinds of knowledge, implying that the most favourable conditions for workplace innovations derive from close interaction and cooperation between them. Inclusiveness: For the maintenance of the conditions for the Finnish welfare state, it is important to foster innovative development in all sectors of the economy and in all kinds of workplaces.

18. Promotion of workplace innovation in contemporary Finnish innovation policy A new approach titled as ”broad-based innovation policy” is taking shape in Finland. Tekes now funds projects to promote workplace innovation as part of its regular R&D funding. The projects focus solely on workplace innovation, or the promotion of workplace innovation forms a part of a larger R&D project. Promotion of workplace innovation is also integrated in some programmes funded by Tekes. In addition to R&D projects, Tekes funds research on workplace innovation and working life. Discussions on a continuation programme for TYKES are under way.

19. Some challenges for the Finnish model for workplace development How to help companies achieve the capacity for dynamic performance, which simultaneously provides innovations and organizational learning? How to help companies adopt the capacity for employee-involving participatory forms of innovation? How to help companies better learn from each others’ experiments with workplace innovations and speed up processes of ”local re-invention”?

20. Crucial human capabilities from the perspective of value creation and current status of managerial competence (inspiration from Hamel 2007)

21. Various perspectives on organizational performance