Innovation Management and Organizational Behaviour - Research Paper Example

Innovation Management and Organizational behaviour Executive Summary: This Report offers an analysis of staffing policies to be implemented at a company manufacturing heavy industrial lifts in the U.K which are targeted at engineering businesses. The Company has is currently staffing its north London office with some of its current employees transferred from existing sites and others being newly hired. The current advantage that the Company enjoys is its acquisition of low rent premises in North London, which in itself offer it a considerable advantage. Additionally, it also has new design and production facilities; therefore it can capitalize on these advantages by supplementing them with effective human resource and organizational policies that foster innovation, so that the firm enjoys a competitive advantage. This report provides an analysis of how the Company can staff the new site in London in order to motivate them effectively enough to maximize innovation. The business context: 1. PEST Analysis: The Company will be commencing its operations in a recessionary environment, where businesses are struggling to cope with increased costs, lower availability of funds and a reduced customer base. A PEST analysis identifies the relevant factors that must be taken into consideration in effectively planning the strategy of the Company and these are spelt out in the table below: POLITICAL ECONOMIC SOCIAL TECHNOLOGICAL Employment laws , such as Act of 1996 Recessionary environment Lifestyle changes with consumers preferring to save rather than spend Improved technology such as availability of Internet means easy access to markets across the world Forthcoming election which could see a Conservative victory Increased VAT after January Varying demographics with increasing diversity in large corporations Use of sophisticated technological devices creates a demand for more workers skilled in using ICT services The need to adhere to health and safety regulations Potential inflationary environment after current recession Changes in health consciousness, increased concerns about safety Interoperability between different devices facilitates quick transfer of information Environmental regulations and restrictions on manufacturing processes which are a threat to the environment Difficulties for commercial customers in securing loans for business purposes Changes in labour patterns, increased social mobility in society Faster rate of technology transfer means distances no longer hamper business operations On the basis of the above, the major factors in the environment that are likely to impact upon the functioning of the business are as follows: (a) The recessionary environment, including increased VAT, which has weakened the economy causing a reduced availability of funds available for hiring and retaining skilled personnel (b) Increased use of technology likely to foster demand for more workers with IT skills (c) Increased interoperability in IT services across mutable geographical boundaries provides a world market for human resources from across several different countries. (d) A change in Government policies if a Conservative Government comes into power would mean that immigration policies could be tightened, which would impact negatively upon the supply of skilled labour from other countries. 2. Customer Responsiveness: The degree of success the Company enjoys will also be determined by how responsive customers are to its products. The strategy that must be employed by the Company must take this into account; since it is involved in the manufacture of lifts for engineering businesses and plans to branch out to reach other customers in hotels and other businesses, the recessionary economy in the U.K. and Europe is a major cause of concern. It appears likely that the Company could find higher levels of success by targeting customers in the developing countries that have better economic growth. With increased availability of technology and the option of branching out into other countries, the Company must therefore arrive at a decision on whether to follow a policy of market diversification or market concentration. The former would involve finding new markets (Russow, 1996), i.e., new engineering businesses in other countries, while a policy of market concentration would involve a consolidation of the Company’s position in its existing markets. In a study conducted by Olusaga(1993) using 450 small, medium and large MNEs , the findings suggested that MNEs tend to function better if they follow a policy of diversification as opposed to concentration. This study also showed that whether firms used a market concentration strategy, those with low levels of internationalization appeared to perform better than those with high levels of internationalization. The Company has opted to follow a diversification policy because it has decided to branch out and market its products to hotels and airports, etc. This may be a helpful strategy for the Company to follow, since developing countries have not registered such a high level of negative fall out from the recent economic recession, while the U.K. is still struggling to drag itself out of a recession that has been dampening business activity. In this kind of environment, it is difficult for businesses to secure loans to manage their business activities; as a result, the Company may face difficulty in marketing its products within the UK. Environmental and other types of legislation are also another factor hampering effective sales and marketing within the U.K. In moving to other countries however, the Company would need to be flexible enough in its policies to be able to fit in with the cultural and other environmental factors operating in the target country; it would need to function as a learning organization. Senge describes a learning organization as one where “people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free and where people are continually learning how to learn together.” (www.rtis.com). By functioning as a learning organization, the Company can achieve the desired levels of success in new markets. It must also have a shared vision, or as Senge views it, “shared pictures of the future” which would enable employees to be genuinely committed to their Company and working according to the shared policies. Competitive strategy: Generic strategy for competitive advantage: Porter states that “Strategy is the creation of a unique and valuable position, involving a set of activities……different from rivals.” (Porter 1996: 68). Knowledge management has become very important in the global economy today and the expertise and skills of employees of the firm contributes to competitive advantage. The knowledge that some employees possess can be valuable to an organization in attaining a competitive advantage in the global marketplace, because such knowledge is the foundation of innovation, which sets one organization apart from another. Contrary to earlier decades, production itself does not ensure that a firm enjoys a competitive advantage, rather, intellectual capital or the knowledge base of a firm ensures that this objective is attained (Potter, 1999). In a knowledge economy, “knowledge becomes an essential factor of production alongside the traditional, more tangible factors….the ability…..to acquire and develop it becomes critical to ….successful integration into the global economy……..symbolic resources are replacing physical resources, mental exertion is replacing physical exertion and knowledge capital is beginning to challenge money and all other forms of capital.” (OCED, 2001:148). In the knowledge economy, creativity and innovative ideas become the driving force, brain is more important than brawn and human capital …… becomes of paramount importance.(Warhurst, 2008:72). The knowledge and professional expertise that workers possess originally or upon having received some formal training related to their line of work is a valuable factor in granting a competitive advantage to a business (Potter 1999). As a result, if the Company needs to implement effective recruitment policies to ensure that it hires the most knowledgeable and talented employees who can provide innovative solutions to problems and come up with effective marketing plans to get the company’s products out into new markets. Globalization may impact upon HRM systems within individual countries through the opening up of the national systems and economies to external forces, both through the entry of multinational enterprises or through investments made in other countries (Begin, 1997). Japanese HRM practices have been adopted by many countries because of their high level of flexibility and motivation of employees, which is an advantage in a global economy where the competitive advantage endowed by motivated employees is significant indeed. In an era of globalization where the use of information technology has become increasingly common, a new dimension has been added to the human resource function, i.e., the focus has shifted to strategic human resource management. While earlier, human resource management centred primarily on the motivation of employees, the availability of technology tools has provided scope for strategic planning of human resource tasks. Jiang and Qureshi (2006) in their survey of cost benefits in firms that have outsourced business processes, have emphasized the importance of knowledge management in enabling companies to remain profitable in a global environment by making use of knowledge available in developing countries at lower costs. Allowing employees to share in information about the Company, its goals and its operations, would also produce a higher level of motivation in them. Sharing of information about company strategy and performance provides employees with the sense that they are trusted. Additionally, it also enables employees to use the knowledge residing within the firm to its fullest potential (Pfeffer, 1998).Thirdly, team working among employees is likely to be more successful if workers are provided a base of information on which to base their suggestions and make contributions to improve organizational performance and productivity (Marchington and Wilkinson, 2005:77). The Company is thus likely to benefit from combining effective recruitment with a market diversification policy that could help it to be competitive within its industry sector. Porter (1996) has clearly indicated that operational excellence would not necessarily be equivalent to a strategy, because it would only constitute the same race their competitors are running. Targeting specific groups of customers and delivering different benefits would however, constitute strategy and an organization would be practising strategic positioning in following such a plan. The word “positioning” was first used to refer to the manner in which products were placed in stores, i.e, placing them at eye level for example. But they came to be associated with strategy when Al Ries and Jack Trout who first coined the term, stated: “Positioning is not what you do to a product. Positioning is what you do to the mind of a prospect.” (Kotler, 2003:136). Strategic positioning is the positioning of an organization in the future while also taking into account the projected changes in the environment and taking those into account in the process of realizing the positioning and making it a concrete long term reality. The Company must therefore consider innovative solutions in tapping into the developing markets and a strategic approach to human resource management would be vital in ensuring that skilled and knowledgeable workers are recruited into the North London office. The management style of the Company must therefore be changed such that it is more participative and involves employees in strategy and decision making. Sustaining competitive advantage: In the global, cut throat economy, it is becoming increasingly difficult for Companies to sustain a competitive advantage. There are several ways in which firms try to achieve this, including optimizing costs to achieve productivity. The table below sets out the necessary resource capabilities that must be attained in order to sustain a competitive advantage. Area Resource Capability This may be achieved by implementing well defined recruitment procedures with tests, etc to identify skilled talent in the local areas. Additionally, availability of raw materials should determine location of factories for manufacture of lifts. Design knowledge transfer across locations Knowledge that exists in one social context may be difficult to replicate in other locations, because knowledge is often specific to the location (Lam 1997) and helps faster diffusion of skills. Within the context of different countries, Lam (1997) points out how the institutional context within a particular country, including educational and judicial institutions, may influence the diffusion of knowledge and how it is managed. This is a very important aspect for the Company to take into consideration in devising effective organizational policies to enable it to survive in a competitive and recessionary environment. Marketing Brand awareness in new markets Customer satisfaction is the leading criterion to determine brand level of a product or service, in terms of price, performance and quality of the product or service, including satisfaction with the ongoing business relationship and because it has met customer expectations. (Vavra, 1997). Brand identity must first be created by highlighting the superiority of the lifts as compared to similar products in the market. Sustained marketing would then ensure that brand image is kept active in the customers mind Production economies of scale for a diversified product range The Company could secure raw materials cheaply from appropriate locations and establish factories nearby to use cheap labour available nearby to achieve cost advantages, which would be helpful in achieving a diversified product range. Logistics collaborative forecasting Arranging a well coordinated distribution network by identifying points along the supply chain where management modules could be implemented would be helpful. Services that could be provided could include forecasting of future demand using available sales figures and integrating them with environmental factors and historical data. The Classical Theory of Management states that the parameters of each function or operational tasks of managers must be clearly defined, as well as the conduct related to the performance of that function, with such specific performance standards being enforced by the managers/supervisors.(www.prm.nau.edu). Under this system, organizations function through a system of bureaucracy that was developed by Max Weber (1947) to control the unpredictable and highly individualistic behaviour of employees of large corporations. According to Graicunas (1937:43), “one of the surest sources of delay and confusion [in an organization] is to allow any superior to be directly responsible for the control of too many subordinates” or if a supervisor has too wide a span of control. Luther Gulick and Lydnall Urwick (1937) have defined the span of control as the number of employees who are reporting to a single supervisor. (www.prm.nau.edu) The span of control may include three or four complex tasks, or alternatively, up to 15 standardized tasks. The factors that will impact upon the span of control includes the complexity of the job, the actual physical location of the employees and the extent to which the work tasks are standardized. This theory can also be applied in the context of the Company’s organizational policy, in order to ensure that organizational behaviour conforms to a more flexible framework, where employees work in teams and are allowed the necessary leeway and freedom from rigidity to develop innovative solutions to problems. If the company is to function effectively in an international context, a centralized, bureaucratic framework would be ineffective while networking would achieve the desired objectives. Innovation Management: Creativity and Innovation: In today’s global marketplace, where competition has intensified, creativity and innovation are paramount and it is vital for a Company to have a fresh and novel strategy if it is to succeed in the market place. “Competitive strategy is about being different.” (Porter,1996:64). However, and directing the creativity of employees towards fostering innovation is considerably more effective in imparting a competitive advantage to an organization. The knowledge and professional expertise that workers possess originally or upon having received some formal training related to their line of work is a valuable factor in granting providing that competitive advantage to a business (Potter 1999). Human resource strategies within an organization are difficult to imitate because of path dependency, i,e, they are based upon organizational policies that have evolved over time. This is the reason why human resource management and its associated practices have come to be recognised as one of the most important factors that could impart a strategic advantage to an organization in competing in the global marketplace.(Boxall and Purcell, 2003). According to DeCenzo and Robbins (1996:8), human resource management has been defined as the organizational aspect that is concerned with the people dimension which is also inclusive of staff support. On this basis, they have set out the role of the human resource department as being associated with developing the skills of individuals and not only motivating them to achieve high standards of performance, but also ensuring that their commitment to the organization continues. Bratton and Gold (2003) define human resource management as a strategic management approach that is geared towards managing employment relations in a such a manner that it seeks to maximize people potential because this is the element that is crucial in attaining a competitive advantage.(Bratton and Gold, 2003:7). Since the Company proposes to hire a completely new set of employees at its north London premises, it needs to focus not only on a strong recruitment policy to pull in the best employees, it also needs to formulate effective motivation policies to ensure that the skilled employees who are recruited stay with the organization. Organizational design: The workplace has altered dramatically in recent years, with organizations transforming from routine, standardized tasks and hierarchical control systems to a free flowing, flexible workplace that is organized around networks (Daft and Marcic, 2008:18). Team work and flexibility have become more important in fostering innovation. Managers of small businesses tend to emphasize roles that are different from managers in large organizations, because there is a greater focus on entrepreneurs who are the source of innovation. Small organizations place a greater reliance on spokespersons, because they help to promote the organizational interests to the outside world and highlight the presence of the organization in the public eye, i.e., the market (Daft and Marcic, 2008:17). Innovation however, plays the more significant role, because in the absence of the advantages large organizations are able to achieve through economies of scale, small companies often rely on innovation to provide them with a competitive advantage in the marketplace. If the Company seeks to sell its products into new markets and also to reach markets in developing countries, it needs to take all the above factors into account and develop a strong staffing policy to ensure that innovation is fostered. A chart partially showing the networking between the various departments is shown below: Change Management: Force Field Analysis: Strategic leadership: As may be noted from the above, knowledge, motivation and an effective human resource policy are all likely to contribute to the success of the Company in its lift manufacturing business. Effective leadership would also be another important aspect in ensuring that the Company is provided the right strategic direction. In her article titled “Putting leadership back into strategy, Montgomery (2007) argues that the nature of strategy has changed but while the changes have been beneficial in some respects, they have also moved away from acknowledging the importance of leadership in shaping strategy. She states that strategy must be a dynamic tool for guiding the development of the Company over a period of time, but the role of the CEO in providing that leadership and guidance in formulating strategy is being ignored in recent times. She offers the view that in recent times, strategy is not effectively guiding the development of organizations over the long term but is too focused on short term results. She argues that the infusion of economics into the study of strategy has undoubtedly helped to consolidate its underpinnings, but the perception that strategy is nothing more than an analytical problem to be solved has relegated it to the status of a game plan where the leadership role is not being accorded the importance that it deserves. According to Kotler strategy is the “glue that aims to build and deliver a consistent and distinctive value proposition” to an organization’s target market (Kotler, 2003:171). Organizational strategy must also include effective leadership, which would be vital to ensure that the talent and skill of the workers is utilized effectively towards achieving good solutions while promoting a policy of market diversification. Leaders who can motivate and inspire workers and provide them the flexibility and space they require to work in teams without a hierarchical, bureaucratic framework would be of inestimable benefit to the organization in ensuring that the new office which has been set up is successful in achieving its goals. References: Boxall, P. and Purcell, J, 2003. “Strategy and human resource management”, London: Palgrave Macmillan. Daft, Richard and Marcic, Dorothy, 2008. “Understanding Management”, Cengage Learning. De Cenzo David A. and Robbins Stephen P. (1996) Human Resource Management fifth edition. Canada: John Wiley and Sons Inc Jiang, Bin and Qureshi, Amar, 2006. “Research on outsourcing results: current literature and future opportunities.” Management decision, 44(1):44-56 Kotler, Philip, 2003. “Marketing insights from A to Z”, Wiley. Montgomery, Cynthia A, 2007. “Putting leadership back into strategy”, Harvard Business School Publishing Corporation OECD, 2001. “Science, technology and Industry Scoreboard: towards a knowledge based economy”, Paris: OECD Olusaga, Ada S. “Market concentration versus market diversification and internationalization: Implications for MNE performance”, International Marketing Review, 10(2). “Review of the Fifth Discipline”, Fortune, 130(8): 147-157; Retrieved January 10, 2009 from: http://www.rtis.com/nat/user/jfullerton/review/learning.htm Russow, Lloyd C, 1996. “Market diversification: going international”, Review of Business, March 22, 1996, Retrieved January 5, 2009 from: http://www.allbusiness.com/marketing-advertising/562060-1.html Potter, David, 1999. Wealth creation in the knowledge economy of the next millennium, Third Millennium Lecture, Downing Street, 27 May, 1999, available online at: www.number-10.gov.uk/textsite/news/features/feature_display.asp?id=665; cited in Rikowski, Ruth, 2000. “The knowledge economy is here – but where are the information professionals?” Business Information Review, 17: 157 Vavra, T.G., 1997. “Improving your measure of Customer satisfaction: A guide to creating, conducting, Analyzing and reporting Customer satisfaction measurement.” WI: American Society for Quality. Weber, Max (1947) The Theory of Social and Economic Organization. Translated by A. M. Henderson and Talcott Parsons, The Free Press. Warhurst, C., 2008. The knowledge economy, skills and government labour market intervention, Policy Studies, 29(1): 71-86 Read More