Human Resources as an Engine of Innovation

Once upon a time, innovation meant technological innovation new products or features that offered quantifiable advantages over older solutions. In the decades after World War II, when the idea of industrial RD they're not even the only (or often even the primary) source of innovation. Companies no longer look solely to their research laboratories for innovation if they even maintain dedicated labs but instead seek to develop cultures that foster innovation across the workforce. That makes finding, training, and keeping the right people more important than ever, not just for the daily functioning of the organization but for its very survival. Suddenly, human resources the dreaded, much maligned HR department is (or should be) at the center of the quest for innovation. Indeed, as Rita McGrath points out in a 2008 Harvard Business Review commentary, a strategic approach to human resources is "a powerful potential source of competitive advantage. A strategically minded HR department can craft jobs, create networks among people, and provide the training that helps every person in the organization become part of its innovation engine." But most HR departments haven't progressed to that point; they don't have the strategic focus McGrath calls for. Instead, they're stuck in the past. The first human resources departments emerged in the early 20th century as a response to employee strikes and increasing government regulation. Generally called "personnel departments," they were focused on compliance making sure companies followed the rules around workplace safety and labor management, keeping track of pay issues, and responding to employee grievances. That function hasn't changed much in the last hundred years, as Jared Lindzon points out in a 2015 Fast Company article. Even as the companies they serve have become radically different increasingly digitized and distributed and ever more focused on innovation HR departments remain largely untouched, "focusing on risk, focusing on compliance, focusing on the transactional side of it," as management consultant Jason Averbook tells Lindzon. A number of studies offer empirical evidence for the importance of HR in building and sustaining competitive advantage. A long running study by Strategy (previously Booz Company) has repeatedly demonstrated that a company's RD rather the determinants are the alignment between innovation strategy and overall business strategy and between innovation strategy and culture. As Barry Jaruzelski, the creator of the Global Innovation 1000 study, told Jim Euchner in the July 2015 issue of RTM, there isn't any one model for innovation culture, but all innovative companies share some key cultural attributes that drive their work. Most notably, they focus on relationships and on people the province, arguably, of HR. The 2015 Global Innovation 1000 reinforces the importance of people to innovation, as it finds that companies are increasingly moving R&D spending overseas, not only in search of new, high growth markets but also to get "access to top talent." Talent that will have to be recruited, developed, and retained by HR. Indeed, a 2013 KPMG study, summarizing the myriad of studies identifying culture as the key driver of innovation in today's dynamic business and technology environment, suggests that "the most successful corporate innovation strategies are the ones that predominantly focus on people and human capital. These include finding, engaging and incentivizing key talent for innovation by promoting and rewarding entrepreneurship and risk taking and developing innovation skills for all employees.