Creativity and Innovation - the Key Factors to Maintain Sustainable Competitive Advantage - Case Study Example

Running Head: International Management International Management and Section # of Introduction In todays borderless dynamic and interdependent business world, organizations seeks sustainable competitive advantage.As Arie de Geus described learning as the most sustainable competitive advantage, organisations must keep on learning from environment and experience and be creative, dynamic and innovative in order to stay competitive. Creativity and innovation are the basic tools for organization to grow in today’s dynamic world. But why many organisations restrict creative ideas and changes? Why many organisations shy away from innovative solution? The objective of this study is to gain better understanding in relate to organisational creativity and the factors affecting it, which including the areas of : organisational climate, organisational culture, structure and decision making, leadership style, resource and skills (Andriopaulose, 2001). This paper not only evaluates the organisations against the creativity and innovation, but also presents recommendations. Creativity and innovation Change is the law to succeed in today’s competitive business environment. According to Politis (2005) creativity and innovation are key factors to maintain sustainable competitive advantage, whereas Nadler et al. (1997) advised that managing of innovation is the most vital task. Creativity may seem similar with innovation, but indeed, they are connected to each other. Creativity is the mental process of generating new ideas where innovation is the implementation of new ideas. Innovation typically involves creativity, it involves presenting the creative ideas in a feasible so that they become reality. Amabile et al (1996:1154-1155) indicated that “all innovation begins with creative ideas” and described creativity as “a starting point for innovation”. Creativity comes with more divergent and out of the box thinking. Salovey et al (2004) described that divergent thinking is a process that generate creative ideas by examine difference possible solutions, where convergent thinking means giving the most appropriate solution to the problem. Gurteen (1998, P.6) also make distinction between creativity and innovation as “creativity is about divergent thinking and Innovation is about convergent thinking.” In term of organisational creativity, it not only emphasises on inventing a new product, but also on the way to work better. Woodman (1993:293) described organisational creativity as “the creation of a valuable, useful new product, service, idea, procedure or process by individuals working within a complex social organisation”. Organisational Climate Organisational climate is a term that often interchanges with culture. Culture is deeply rooted within an organisation and is hard to change, as it is comprised of values and beliefs. However, organisational climate is often refer to recurring patterns of peoples behaviour that exhibit within the organisation and is easier to assess and change than culture (Ekvall et al, 2000). It is about shared perception of behaviour and attitudes within the organisation which is assumed to have influence on peoples performance and creativity. VanGundy indicated that organisation climate plays an important role in creativity and innovation process. Creativity ought to occur in a free and open climate, which encourage diversity, sharing of information and promote freedom to express ideas. It is understandable that not all creative endeavours will success and mistakes are ineluctable, so in order to develop organisational climate that encourage creativity and innovation, it is important to enlighten that failure are accepted and will not come with punishment. It is suggested that organisation should supports creative thinking of employees, openness to ideas and willing to commit resources can hence creativity behaviour (Amabile, 1988, VanGundy, 1987). Feurer et al. (1996) concluded creativity can be best achieved in open climates where three major steps can be taken: interaction with small barriers, a large number of stimuli, freedom to experiment. Organisational Culture and Decision Making As mention before, culture is deeply rooted in an organisations history and experience, which is hard to change. Schein (2004) described that organisation face challenges such as integrating individuals as a whole, and being adaptive to the rapidly changing environment in order to survive, as the organisations members continuous to find solutions, they engage in collective learning that creates norm, shared assumptions and beliefs that become organisational culture. An organizational culture itself is impacted by the national and global culture. As the world has turned into global village, the cultures are developing some familiar elements, giving birth to universal culture. To enhance organisation’s creativity, create a culture to nourish innovative way of finding problem and solution is one of a key challenge (Locke and Kirkpatrick, 1995). As Cook (1998) identified that creativity are 80% context and 20%techniques. Von Krogh et al. (2000) suggested creativity will enhance by organisational contexts include open communication between members and building trust relationship and atmosphere of care. Not only culture but also the style of decision making(centralized or decentralized) is important. An organization with a decentralized or de-facto centralized decision making will encourage more creativity and innovation than the ones using centralized decision making. Brand (1998) also pointed out that innovative and supportive culture will encourage creativity while controlling and directive culture will hamper it. Amabile (1996) also argued that individuals will be more creative while they can choose their way to complete their tasks. Schneider (2001) proposed that creativity can be effectuated while organisational culture can integrate with individual’s values, perceptions and capabilities in the workplace. Creativity will also depends of the willingness of risk-taking (Amabile, 1998) and reward system of innovative behaviour (West, 2002) but definitely, punishment will hamper creativity (Anderson et al., 1992) since individuals will afraid to speak out their ideas if management did not accept few mistakes. Tushman and OReilly (1997) claim that cultural norms which lead to quick decision making should promote the implementation of innovation. The creativity and innovation is also affected by the scale of formalization in the organization. Leadership Style Nystrom (1979) suggested that democratic, participate leadership style can enhances creativity, if employees are given high levels of autonomy (King & West, 1985). Cook (1998) suggested that leaders must communicate a vision conducive to creativity effectively, and hence encourage subordinates to find solution in innovative way. Amabile (1998) point out that leaders should also balance subordinate’s freedom and responsibilities in workplace. Tierney et al. (1999) view that, the leader who is conducive to creativity must be open to different approaches and willing to take risk and allow mistakes. It can be said that leaders who tend to be empowering individuals in decision making or solving problem is their own way, supporting them to develop autonomy, but still providing help or advise to subordinates while they need in generating new ideas are more likely to be conducive to creativity. Such kind of leadership style is name as transformational leadership. Ekvall (1996) indicated that creative leader will have a high tolerance of ambiguity and lack of structure but will depreciate the rule and routine of work. Leadership style can have positive impact on enhance organisational creativity profoundly (Yukl, 2001), in opposite, leaders with controlling and punishment will hamper creative ideas of subordinates which is known as transactional leadership style (Miller et al. 2007). Weerawardena (2003) suggested that the stronger degree of entrepreneurship, the stronger ability of organisational learning, and hence better creativity. Participative leadership not only motivates the subordinates but also make them take ownership of the work that they are involved in. This increases their commitment level and creativity. Organisational Structures and Systems As Woodman (1995) noted that adaptive organisational forms which emphasis the flexibility to adapt to change can enhance creativity, whereas bureaucratic, mechanistic or rigid structures will inhibit creativity. There for it is important for the organisation to have proper structure with the effective lines of communication and known lines of reporting. Arad et al. (1997) suggested organisation which has a flatter structures, autonomy and work teams will promote creativity. Flatter structure can help easier communication and information sharing; hence enhance creativity (Lawler, 1986). Simonton (2003) noted that creative persons have flatter hierarchies of associations; such attributes may develop through the training system. On the other hand in order to become creative and innovative in response to changing environment, organizations have to increase the complexity in their structures. That is because professionals or skilled people will be required for dealing with dynamic environment and to capture opportunities at the right time. Anderson, Dreu and Nijstad (2004) found that appropriate reward system is essential for motivating employees become innovative. Spangenberg et al. (1990) argue that external factors such as financial reward can actually exert a negative influence. In contrast, other research discussed by Unsworth and Parker (2003) suggests that external reward can, depending on its administration and the context, be beneficial to innovative activities. West and Farr (1990) indicate that individuals can participate in decision-making and express ideas without fear, is important for innovation. Lowe et al. (1996) suggested that participative is the most appropriate structures for innovations. While employees have freedom and authority to participate in decision making will have a positive impact on creativity and innovation. (Arad et al., 1997) high levels of participation in decision making come with information more exchangeable and higher level of interaction. Well-established work teams which allow for diversity and individuals talents that complement one another should promote creativity and innovation. (Arad et al. 1997) Resources & Skills It has been observed that the creative behaviour and the attitudes of the individuals can be affected by the resources of the organization. According to Amabile (1998) time and money are the two main elements of resources that can affect the behaviour and the attitude of the individuals. The quantity of time and the money given to the employees can put constrains on their activities or can support their activities as well. She gave the concept of “threshold of sufficiency”, which means that if the resources lie within this threshold then the impact on creativity will be positive, and if beyond that then the impact on creativity will be negative. According to her the organizations must provide ample time and money to their employees in order to become more creative and productive. In their study Andriopoulos C. & Patrick Dawson (2009) believed that support and the learning opportunities to acquire new and innovative skills must be provided to the employees of the organization by the managers by using different types of activities. A collection of projects that require a different mix of skills and variety of opinions and viewpoints of employees should be maintained by the managers in order to develop the creativity and skills of the employees. Individuals attain many skills through such projects and they learn to apply different techniques and ideas which are applied in different industries, and how they can be applied in their own organizations. Mentoring relationship between the employee and the manager is the most effective way in which the growth of necessary skills can take place. At the same time with all the creativity and flexibility, formalization of procedures is also necessary and a formal system should exist to transfer the advice, orders and knowledge from the top management to the lower hierarchy of the organization. Methodology The subject company is a financial organisation with thirty branches and around three hundred employees. The research was conducted in three parts: in order to eliminate bias, the quantitative research with stratified sampling method under questionnaire format. It involved every department within the whole organisation, by sending two questionnaires to each branches and departments with a total number of 114, which focus on the view of general staffs in relation to the organisational climate and culture. The total number of responses received was 73. Before sending out the questionnaire, five pilot questionnaires were sent out to prevent any misunderstanding or misleading of the questions. The qualitative research was conducted by interview manager of top management level which was in relation to leadership style, organisational climate, culture, structures and system. The research also included qualitative research by interview human resource manager in relation to resource and skill, structure and system. The data will be answering the following research question: is this case organisation a learning organisation which has the ability of creativity and innovation. Findings As the case organisation is a financial organisation, it can be assume that lot of regulations should be followed. On the basis of the interview with manager, it can be said that the company’s leadership style is conducive to creativity, as the managers’ beliefs on participation. But on the other hand, the manager is contradicting with his own approach of leadership as he claims that he does not encourage staff to be creative since all working should follow designed procedures. The flow of information is downwards and upward flow is not encouraged, whereas horizontal flow between colleagues is happening but prevents from the diagonal flow. The communication channel seems appropriate within the organisation but not effective enough to allow creativity instinct with in employees. As shown above in the table employees think that they cannot express their ideas, even though if anything can improve the system. Employees also think that they are not actively allowed to participate in decision making as majority said shown in table. Moreover, the organisation does not have any reward system for the employees according to innovative practice, and the manager seems not to have high degree of willingness to take risk. According to interview with human resource manager, the organisation encourage and support staff on some on-job training, such as the area of customers service improvement, credit risk etc. Also if employee wishes to study any job relate program, he can claim not more than 80% of course fee. Both HR manager and senior manager see creativity within the organisation as part of marketing department duty and does not involve all staff. If employee is attending any non job related training, he will have to use his official provided leaves for it and no support is provided by the organization. Staff workload does not seem in balance between frontline and back office, since frontline staff needs to handle multi-task and the workload may be over to handle some time. The organisation pay staff mainly base on sales amount and customer feedback but does not involve innovative practice. When recruiting, the organisations main concern is the experience in the field and the stability of candidate working history, but not the tendency of learning and interest. The organisations main focus is on providing benefits to top management in retaining scheme, such as provide housing allowance and family medical scheme, on the other hand, the organisation does not have punishment according to failure, but will have warning if cannot meet performance standard such as sales target. According to general staff questionnaire, the result of learning and training in staff viewpoints, agree and disagree is close, it may be said that the reason behind is the organisation just focus on job relate training and learning. Large portion of employees feel that they cannot express ideas freely and even speak out, because manager will not listen. Again, agree and disagree about free flow of information sufficient communication channel is close, it may recall that manager claim the information flow can be free of non-confidential information and the communication channel may appropriate but not effective enough. Almost staff agree that the job prevent themselves from being creative and more than 20 response claims that they never did any innovation related work. Also 23 response claim that they last did new thing in working more than one year and 26 response claim, they did not did new thing in work for more than six months. 61 respondent claims that they are not involved in important decision making that may affect them. When staff sees opportunities to improve procedures, some said will “do it myself”, “discuss with manager”, but the majority of employees said “ignore it, and need to follow manager designed procedures”. Team activities within the organisation are annual base: annual dinner, Marathon and visiting theme park, but still, 49 response claim they enjoy the job. Analysis The situation in the organization seems to be in conflict as there is a difference in the opinions of employees and the manager and the HR department. About half of the employees say that they are encouraged to learn but at the same time majority say that they are also prevented to be creative. Majority of employees say that they are not involved in the decision process and are not encouraged to express their ideas and opinions freely. Whereas the manager says that employees are involved in discussions and can express the opinions. The HR department also believes that there is no need of creativity and innovation because the nature of our business is financial and the creativity is the job of only marketing department. This complete situation lefts the organization in conflicting interests, because employees want to be creative and learn new things whereas the management thinks that these things are not required for them and there for not in objectives of the organization. It seems as there is a lack of HR planning and there are no hygiene factors (Hertzberg motivation model) for employee to get motivated. As the management and the HR people says that creativity is only the duty of marketing people and the rest don’t require it, it shows the attitude towards change management, and tells that organizations has little chances to develop creative and innovative procedures and employees. Conclusion As according to Politis (2005) creativity and innovation are key factors to maintain sustainable competitive advantage, this organizations does not seem to have any competitive advantage in terms of creativity and innovation. Creativity and innovation is ought to occur in the open and free climate of the organization (Amabile, 1988, VanGundy, 1987), whereas in this organization the climate is anti-creativity and innovation as the HR and management does not see any need of creative work to be done. Cook (1998) suggested that leaders must communicate a vision conducive to creativity effectively, and hence encourage subordinates to find solution in innovative way which not only develops the subordinates but also bring new dimensions to business. But findings about the organization shows that although manager claims to have the participative leadership, but it is not fully implemented. Staffs feel that the manager is controlling and not allow fun time in work place, he does not treated new ideas carefully, unwilling to change and take risk, and both parties agree that the leaders within the organisation do not encourage creativity. As Woodman (1995) said that adaptive organisational which emphasis the flexibility to adapt to change can enhance creativity, whereas bureaucratic, mechanistic or rigid structures will inhibit creativity, this organization seems to be more rigid than dynamic. Due to the centralized decision making and inappropriate flow of communication, employees have nothing to contribute from their part, other than the routine work. Decisions are made in closed door in top management level. The organisation has a hierarchy structure, hence people are comparatively hard to communicate to different level colleagues, and decision is made in a longer time. The organisation just provides and support job related training and that also only on-job training not the off job trainings which may result in employees leaving organizations as others organizations are adapting to change and invest in their employees. The work seems overload and pay depends on sales, which is also an outdated way of treating employees. As man is a social animal he/she needs other motivational factors as well. Resources and skills do not remain the things to discuss as the organization discourages the creativity and innovation. Recommendations As Politis (2005) considers creativity and innovation as key factors to maintain sustainable competitive advantage, the organization must develop its sustainable competitive advantage. Although the organization is of financial nature and needs closer control, but management should take few steps in order to keep the employees motivated. Following things can be done for employee motivation. Off the job training for excellent performers. This will not only motivate the employee who will get the training, but will also encourage other to do better job so that they can have such opportunities. This will also bring new approach and knowledge for organization. Employees should be more involved. Involve employees who are experienced and posses’ creativity in decisions making and listen to them. Flexibility in working environment. Let the employees decide their break or lunch time and introduce the target setting system. Management by Objective. Set organizational goals and then involve the employees in setting their own targets in alignment to the organizational goals and then monitor them. This will make the employee feel the ownership of the work. Balancing the overload. Create little incentives for the frontline employees who are working hard, such as free lunch etc. As due to the nature of business management is not ready to change they should keep their employee motivated and do some efforts in order to develop them so that they can remain loyal to the organization. Current situation is not so bad as well, as majority of employees are still happy with their work and enjoy it. References: Salovey, P., Brackett, M. A., and Mayer, J. 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