Yevgeny sinyakov. Role of innovation culture during the crisis period.


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This article states the role of innovation culture in the life of the enterprise during the
crisis period. Old management models with “in-built system errors” have exhausted themselves, to carry out corrections it is necessary to know what exactly must be changed and in what way. What is connection between values of the innovation culture and business results? What are the elements of organizational culture? What organizational mechanisms provide translation of the values from the company leaders and higher management to the employees? Principles of values-based management.

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Yevgeny sinyakov. Role of innovation culture during the crisis period.

  1. 1. Role of Innovation Culture during the Crisis PeriodAbstract: This article states the role of innovation culture in the life of the enterprise during thecrisis period. Old management models with “in-built system errors” have exhausted themselves, tocarry out corrections it is necessary to know what exactly must be changed and in what way. What isconnection between values of the innovation culture and business results? What are the elements oforganizational culture? What organizational mechanisms provide translation of the values from thecompany leaders and higher management to the employees? Principles of values-based management.Key words: innovation culture, organizational culture, management model, values, innovations, crisis,values-based management  Information on the author: Sinyakov Yevgeny Viktorovich l Managing Partner of the Consulting Company TRIUNA Leaders (, Russia, member of the Global Cultural Transformation Tools (CTT) Network. Business coach, trainer and consultant. l Engaged in practical aspects of efficient organizational culture building for over 10 years. Earlier he held senior positions in representatives of international companies in Moscow. The only in Russia fully certified consultant (Stages 1 and 2) for application of Cultural Transformation Tools, developed by international guru of management Richard Barrett (the USA). l Studied leadership coaching in the International Academy of Transformation Coaching and Leadership from Peter Wrycza in Moscow and Bali Island, Indonesia. Received qualification of the consulting psychologist in Institute of Practical Psychology (SU-HSE). l Received MBA grade major “Strategic Management” in Graduate School of International Buisness under the Academy National Economy (GSIB ANE). l At the present time Yevgeny conducts his author’s course in Leadership for students of MBA Program in the Higher School of Economics (SU-HSE). Frequent speaker and facilitator at conferences, panel discussions, brainstorming in subjects “Ideas Management”, “Connection of Human Factor with Business-Results”, “Role of Innovation Culture in the Enterprise Development”, “Genius Attraction and Withholding”, “Integration of Different Organizational Cultures at Merger and Acquisition” and etc. Author of the educational course “Road Map of Innovation Culture Building”.
  2. 2. During the economic crisis companies faced the fact that old and well-tested management modelsceased to bring the desired efficiency and resources were not enough not only to develop but to survive.Every manager faced the question what to do under the present conditions of uncertainty, as thebusiness would not be able to operate with the same working efficiency they had had before the crisis.Of course, if the situation allows, one can try to wait till the crisis ends, reducing expenses to theminimum, but there is nobody who can guarantee that the crisis will finish quickly, so such strategywill work out until there is nothing to reduce. This means that besides expenses reduction there must besome other approaches for business stability preservation.Right here another alternative appears — to use general crisis as an opportunity for adjustment ofmanagement models in the company. What exactly needs adjustment in the existing managementmodels? The answer is simple – everything that influences business results negatively. It isobvious that each company is a unique social organism, which has its strengths and weaknesses.And these weaknesses can be proved themselves in different ways. But what is interesting — try to askin the business audience to raise hands those in whose companies there are disagreements betweenfunctional departments, let’s say between “sales” and “logistics” or “finances” or “production”...Almost three fourths of the audience will raise hands! Why does this happen, in spite of the fact thatrepresentatives of companies of different scales and industries may sit in the audience? It appears thatsuch disagreements or even smoldering–burning-up conflicts are “the in-built system error” of theexisting management model of the many companies.Although many managers know about these disagreements they consider them as thoughunpleasant but natural business components. There is another approach when such tense inter-functional interrelations are drawn up by the manager on purpose in order to develop “internalcompetition”. In the last situation the guiding principle can be a well-known statement “divide andrule”. Without close analysis of reasons for such behavior of the managers, let’s note that suchmanagement style has strengthening of personal power as its priority but not possible economicbusiness factors, as it is impossible to expect conscientious attitude to the quality of their work andhigher efficiency from the personnel in the environment uncomfortable for them. The situation isworsened by the fact that very often strain in human relations in the team is slopped out onto thecustomers. It can come to the point when nobody in the company is shocked with such “unofficial”attitude to the customers: “we just hate them”.As the majority of enterprises has found themselves face to face with crisis and they cannot look forany help from outside, it is necessary to activate own internal resources during short time, in particularto increase employees’ engagement in the company’s life. For example, in conditions of sharp slumpin demand every customer is valuable and now it is extremely important for business how affairsare conducted with the remained customers and if the employees are motivated for that. Moreover,this difficult time requires new creative approaches to current tasks. Innovation in decisions and actionsmust become the main point of each employee’s work not just for any independent creative division ortop-management. At the same time the task of employees’ engagement increase is complicated bythe fact that at the present moment the climate developing in many companies, if to put it mildly isnot the best after the wave of dismissals and the general information environment does notencourage optimism. Employees, left in the company, being under the pressure of the crisis, are notsure in their tomorrow position.
  3. 3. If we speak about adjustment of the management model as about strategic opportunity to go out of thecrisis for an individual company then it is necessary to formulate a range of requirements which suchinnovation management model has to satisfy: 1. Innovation management model must influence individual behavior of the employees in order to make it more efficient. Innovation culture will make sense only in case it is implemented in everyday work of the employees, encouraging business results improvement. 2. Personnel’s engagement in management decisions making and creativity must become the basis for the company’s innovation culture development. So that values “penetrate” the company’s organization culture some organization novelties in the management model are necessary. Management must work on creation and maintaining of the mechanism of innovation culture values formation. 3. Necessary changes in management should affect the whole company, including top- management. Moreover, the top-management itself must be an initiator for these changers and their leader. If the idea of the management model change is not supported by personal commitment of top-managers and the first person then it is doomed to die from the very start. The Leader (and top-management) must be the main keepers and encouragers of the innovation culture values.How employees’ engagement into the company’s life and creativity may influence the businessresults in general? People, interested in their business, in case hospitable supporting environment isdeveloped for them, are ready to work not “from here to there” but to realize themselves in the work,undertaking more liability, actively using new knowledge, making experiments and learning “inprocess”. All this energy, skillfully directed by the management into necessary channel, is bale tocreate much — the work is performed with better quality and it takes less time to accomplish. Inthis case the main task of innovation culture building-up comes down to defining and adjusting of thefollowing organization mechanisms: l development of employees’ engagement l development of hospitable and supporting environment l development of focus on the required resultsImplementation of these organization mechanisms, as a rule, is carried out with the followingmeasures: − Openness of information and easy exchange with it − Best practices sharing − Unnecessary bureaucracy reduction − Procedures simplification − Planar management structure − Autonomy and decentralization − Cutting time for decision-making − Risk encouragement − Development of small inter-functional teams − Internal networks of interaction − Mentorship in relation to novices − Feedback – assessment of the leader’s style and competences
  4. 4. − Selection of personnel appropriate by their values − Payment, based on contribution into the general resultConnection of innovation culture values with business results is reflected in Figure 1. Improvement of business results Values of People innovation People use People culture undertake experiment more more are implemented in knowledge and learn everyday liability work of employees -Openness of -Unnecessary -Autonomy and -Development -Mentorship -Selection of information bureaucracy decentrali- of small and in relation personnel, and easy reduction zation inter-functional to novices appropriate exchange -Procedures -Cutting by their Managementс creates with it simplification time for teams -Feedback values -Best -Planar decision -Internal assessment of -Payment, and maintain practices management making networks of the leader’s based on mechanism of sharing structure -Risk interactions style and contribution to innovation encouragement competences general result culture values formation Leader is the main Key values and principles of work: keeper and - faith in creative potential of people interested in business encourager of - faith in virtue of trust between people innovation - faith in achievement of better results by cooperation culture values Figure 1. Connection of Innovation Culture and Business ResultsLet’s consider in more details what management can face in transformation of organization culture.Any change in management models can result in the fact that with inadequate attention to “the humanfactor” new initiatives of the management will stall in the best case or get concealed or evidentcounteraction – in the worse. New culture to be developed often comes into contradiction with theexisting collective ideas about, for example: l ”what kind of business we do here”, l ”what is important for us in relations between each other, with management and with partners”, l ”what can motivate us for achievement of better results”As it is said in such cases, “reappraisal of values” is necessary as without it any administrative andmanagerial reforms will not get their support in the company’s culture, and as a result, support among
  5. 5. the personnel. By the way, it can be often observed that the top-management in words standing for“united close-knit team”, de facto, is insensibly separated from the rest of the team: “we can understandeverything perfectly, that is our employees who need to be changed”. And then, when the time comes tomake changes in the company’s culture they study methodology of such changes among the employeesin considerable details and preoccupation. However, as we have already mentioned, if top-management does not take personal sincerely concerned participation in changes, such changes aredoomed to die not even started.In order changes in the management model will work and become stable it is necessary to payattention to development of “nutrient solution” for them or new organization culture which wewill call innovation culture, as its role involves support of a new innovation management model.Diversity of culture representations in organization creates its many definitions. Every person maydefine culture of the organization as he understands it and it resembles the story when four blind peoplestarted describing the elephant. Perhaps the most complete definition of organization culture wasgiven by the founder of the scientific field “organization psychology” Edgar Schein. l “Organization culture – is the system of collective basic ideas, acquired by the group, solving problems of adaptation to the external environment and internal integration which prove their efficiency and thus they are considered as a value and transmitted to new members of the group as the regular system of perception, thinking and feeling in respect of the mentioned problems”.Organization psychology has shown that the person, being a social creature, when appear in a group,voluntarily tries to correlate his actions with copartners. A desire to be “an honorable member of theteam” is inherited desire of the majority of people. And if in course of time the team develops preciserules of conduct, based on common collective ideas what is good and what is bad then people usually try toadjust their actions to this type of behavior, which is considered “correct” in this particular group. Thisknowledge is the basis for the provision that managing collective ideas in the group it is possible tomanage individual behavior of a member. Only it is done not directly, in the form of an order to eachmember of the group what he is to do but by purposeful influence on collective ideas until at some time itappears that previous behavior of people fails to satisfy the renewed group images about themselves andabout the way the business must be conducted and they start to change their behavior for more efficientthemselves. The only condition to be observed — people want to belong to this group further. Positivecollective ideas strengthen people’s solidarity, helping to develop from heterogeneous “I” more orless homogeneous “we” (integration function). These positive collective ideas may also correctthe behavior of individual “I” in order to conform to the ideas of “we” (correction function).Example: an experienced and approving himself manager was transferred to another region to raisesales. Having got to the place and acquainted with figures and climate in the group, a new headgathered the affiliate’s management and showed that it was necessary to break the viciouscircle: current low sales results reduced employees’ self-assessment, everybody was in decadentmood and this resulted in the absence of initiative and interest in work, dismissals of the best
  6. 6. employees and consequently, slumping sales, bonuses reduction that in its turn caused fall in dutyperformance and so on in a circle. Collective ideas, ruling at that time might be described as: “we arelosers”. A new head together with some of the local managers who worried about the businessundertook monumental efforts to restore confidence of the buyers by improving service organization,sales went up, and senior management came from the head office to encourage local initiatives. Andgradually among the affiliate’s team the idea began to establish: “we are also able to do it!” it wasnecessary to get rid of lazybones and great talkers but the rest of the team had a great desire to work. Anew head, having broken general decadent mood, managed by his personal example to show andintegrate to his subordinates new ideas about their team as successful one which, in their turn, began tocorrect the behavior of individual employees for more efficient.The system of collective ideas may be transferred as by informal channels — from the employee to thenovice, for example, in stories about “how its is acceptable to work here” as by formal ones — viageneral meetings, meetings with authorities, instructions, internal regulations, codes of behaviorand provisions on corporate culture, company clothes, emblems and badges and etc. But the coreof organization culture which may be used as the company management tool is corporate systemof values. Everything that a person or a group of people is considered significant is called values.For example, in one company there was an opinion (or basic idea) spread among the employees:“nothing must be touched until it is broken”. Conducting culture diagnostics it was obvious to find outthat such values as “caution” and “traditions” come on top among the others. If such diagnostics hadbeen carried at the nuclear facility then, perhaps, such values would have appeared to bepositive and helpful for the enterprise but as the diagnostics was carried out at the enterprisemanufacturing goods for commercial marketing then the management got the first warning bellabout the state of organization culture as right at that moment they were thinking aboutimplementation of innovation technology. At that time the management was able to react in time andin some period the program, oriented to popularization of new values such as “openness to somethingnew” and “opportunity to show yourself” was launched mostly among the active young personnel.Conducting inter-corporate communications it is important to consider not only something that has tobe said to the company’s employee for him to remember but also regularly carry out monitoring oforganization culture state in the company to have opportunity to execute necessary managerialcorrections as “if you don’t measure then you won’t be able to manage”. In such case it is possible tospeak about introduction of the culture management system in terms of values in the company.If to represent the organization as a fruit-bearing tree (Figure 2), then fruits in such case will be anintegral work result of the whole company. Indeed, exactly like a tree the organization usesenvironmental resources, so that processing them to give into the same environment some finishedproducts (fruit). The more efficiently processing of external resources goes, the more finished productionit is. If to work hard then the harvest is rich, if something goes wrong then there are few fruit or no fruitat all. So that business results at the end of the reporting period do not come as a surprise the companiesdevelop their competencies, approve plans, targets and develop strategies, as well as a lot more that ismeant to motivate, order and concentrate activity of the employees. Both business results and strategies
  7. 7. of their achievement are frequently in sight but something that serves as a basis for them , corporate valuesand basic ideas, being the central elements of organization culture, all this is concealed from the manager’sattention. The same way as the condition of the tree’s root system determines its general vitality andfruitfulness the state of organization culture determines the quantity and quality of business results. Business results Strategies and purposes Values and collective ideas Figure 2. Organization as a Fruit-Bearing TreeCulture in the companies is either not managed at all or it is done on “the leftover principle” orwhen the company is “pushed to the wall” and the problems have already started or a favorableoccasion comes – a corporate party. Achievement of innovation results in such case is costly andinefficient affair as a lot of money, forces and time are spend for unproductive actions. It should be notedthat the Russian companies long ago acquired the tendency to present lists of corporate values forpublic observation. As a rule, it is done in corporate reports and advertising materials, as well as oncorporate web-sites. Lists of corporate values may be seen hanging on the walls in reception areas,offices, they are deciphered in details for the employees in internal brochures as well as duringcorporate events.Innovation culture, which is to increase engagement of the personnel into the process of decision-making, is built on the belief of each employee of the company, including top-management andminor executives that we are here “all in one boat”. If we want our employees to “root for business”and come to us with their ideas, let’s put ourselves at their place in order to understand what youwould like to get from your boss in this case. It can be rather difficult to imagine and it is even moredifficult to start acting as if “we are all in one boat” but it is unlikely to change anything without this.So, to begin with, in order the employee comes to the boss and brings an idea how to improve work hemust be sure, without any doubts, that he will be talked with, listened to his ideas, thanked, his idea willbe considered and should his proposal be sensible, he will be encouraged materially, but in any case, hisinitiative will be surely evaluated.
  8. 8. From a perspective of culture management in terms of values, the statement “we are all in one boathere” means that the employees of the given company have strong well-consolidated culture withcommon values which are shared by the majority.Actually, the values which the companies management suggest to their employees andcustomers very often have little in common with the values existing in the teams in reality.According to the results of many diagnostics of organization culture which were conducted by us, itmay safely be said about a great difference between so-called “declared” values and the actuallyexisting ones.Basically, such detected difference is able to show the manager the level of delusion concerning hisidea about actual state of affairs in the company. The company’s management has unconditionalopportunity to use creative potential of their employees fully and it is performed by coordinatingvalues of the whole organization, see Figure 3. Values of management Values of employees Figure 3. Cultures of successful companies involve both values of their leaders and collective values of the employeesIt is high time to admit the fact, proved by the statistics of corporate transformations:the values, given “from above” do not take hold in the collective groups. Moreover, there are cases whencorporate transformations were accompanied with wrecking acts on the part of production workers andthe management was not psychologically ready for that. Culture as a tree grows from the bottomupwards. This means that organization values are necessary to be “cultivated”, selective work is to bedone, something unwanted must be removed and something necessary for growth must be cherished andplanted, but this must be done very carefully, understanding in each particular case: what needs to bedone for new values not to be rejected. An experienced manager, dealing with culture as aplant breeder understands that a new organism will not be old but it will carry features of the old oneand new. For many successful top-managers the activity on culture transformation is a personalchallenge. There comes a time when it is possible to achieve new successes only oversteppingpersonal “I”. Not everyone manages to do it at once but some of them finally manage and this periodof life is long-remembered. It is both drive from a difficult managerial task and time of personalgrowth.(С) Yevgeny Sinyakov. 2009