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FEBRUARY 21, 2006

News & Features


Innovation: Why the Short Shrift?

North American HR leaders rank creativity low on the totem pole, a new survey reports. Consultant Rich Wellins explains why


With all the ballyhoo over innovation as the management mandate du jour -- one need look no further than the agenda at the World Economic Forum in Davos for proof -- it's tempting to think that the message might finally be getting through. The hunt for creative talent is crucial, the development of new products critical. And you, dear manager, should know your company holds the qualities of innovation and creativity in the highest respect.

But new data released from human-resources consulting firm Development Dimensions International show that's hardly the case. About a year ago, Pittsburgh-based DDI surveyed more than 900 human-resources managers and 4,500 leaders in other corporate departments across 42 countries and 36 industries. It asked leaders the following question: "In your organization, which of the following leader qualities get the most respect?"

Non-HR managers were asked to choose just one answer, with choices ranging from "ability to bring in the numbers" to "integrity or ethics." The percentage of North American leaders who checked "creativity or innovation" as the most respected quality -- just 4% -- tied with "technical expertise" for second-to-last place. (Only "ability to work across other cultures and countries" scored lower. See chart below, "Respected Leadership Qualities ranked by non-HR business leaders in China and North America.")


Respected Leadership Qualities ranked by non-HR business leaders in China and North America*
  China US/Canada
Ability to take a stand and make tough decisions 7% 7%
Creativity or innovation 16% 4%
Ability to bring in the numbers 30% 36%
Interpersonal skills
influence, coaching, networking, communication)		 5% 15%
Ability to create a strategy or vision for success 7% 12%
Ability to mobilize or motivate a team 15% 11%
Ability to work across other cultures and countries 1% 1%
Technical expertise 2% 4%
Integrity or ethics 15% 7%
Other 1% 3%

* Leaders were asked to select just the most respected characteristic within their organizations

DATA: Development Dimensions International

Perhaps even more startling was the response of HR managers, who could select more than 1 of the 10 choices. Just 39% of the North American HR respondents counted creativity and innovation as highly respected in their organizations, while every other quality besides the aforementioned cross-cultural strength got top marks from more than 50% of HR managers. Since HR managers often design performance-management and compensation systems, those numbers give cause for concern.


Respected Leadership Qualities ranked by HR managers in China and North America*
  China US/Canada
Creativity or innovation 72% 39%
Ability to take a stand and make tough decisions 40% 59%
Ability to bring in the numbers 40% 71%
Interpersonal skills
e.g. influence, coaching, networking, communication		 51% 59%
Ability to create a strategy or vision for success 56% 54%
Ability to mobilize or motivate a team 74% 66%
Ability to work across other cultures and countries 26% 19%
Technical expertise 30% 53%
Integrity or ethics 81% 52%
Other 0% 9%

* HR managers were able to select all qualities respected within their organizations

Compare the data to results from managers in China, and the numbers look even more dire. A full 16% -- quadruple the U.S. vote -- of Chinese leaders listed creativity and innovation as the quality most respected by their organizations. Similarly, Chinese HR respondents gave innovation especially high marks when able to select a number of respected leadership traits. Only ethics and team motivation ranked higher.

BusinessWeek's management editor, Jena McGregor, spoke recently with Rich Wellins, a senior vice-president at DDI, to learn more about the discrepancies in the numbers and how managers can make innovation more of a priority. Following are edited excerpts from their discussion:

Why did you pose the question so that managers had to choose the most-valued leadership quality?
We wanted a forced choice. We felt that, in any organization, all of those attributes are important. But we really wanted to know, at the end of the day: What signals are the organizations sending leaders in terms of what's important?

Why do you think creativity and innovation fared so poorly?
Let's face facts. Being in business is about bringing in results, so it's not surprising that cultures focus on the bottom line. We forced leaders to pick one of the choices, so in one sense, the results were not surprising. However, I think there are companies that are not placing enough emphasis on innovation, and they're certainly not doing an equally good job of rewarding innovation.

Innovation is the fuel of our future -- new products, new services, new markets. I would have liked to see innovation get the [highest] respect of maybe one in four leaders, and the survey shows that only 4% of leaders in North America -- that's 4 out of 100 leaders -- say that's what gets most respect in their organizations. That's pretty low.

To what extent is the design of performance-management systems to blame for that number being so low?
Performance systems don't generally reward innovation. They reward operational efficiency, reducing costs, or increasing sales. Unless you're in an R&D unit, I don't think you see [innovation] reflected [in] the way average employees are rewarded or recognized.

Being an innovative culture means many innovations are going to fail. A lot of managers just don't have the stomach for that. They want ideas that work, and they want 95% assurance that what you're proposing is actually going to pay off. You can't do that with innovation. It takes a certain amount of guts.

Have you ever worked with companies that reward failure?
No, but I have come across many companies who teach leaders that you have to set up a culture where failure is acceptable. It becomes a learning experience. It's not something that's punished. Innovation is one of the core competencies that organizations are looking for in managers today. Companies are looking to place and develop employees who are innovative to begin with.

What do you mean?
It's absolutely essential for leaders to have [an innovative mind-set], and we're finding a lot of leaders don't. It starts with a little bit of selection and assessment and making sure you're bringing people onboard, or even more important, promoting people into leadership positions who score high in this competency and would not have undue concerns about taking risks.

We call leaders who have very high scores on risk aversion "leadership derailers." These are usually very experienced leaders. As they've come up through the ranks, they have probably been punished or cautioned about taking too much risk.

What other personality traits define an innovative mind-set?
Curiosity is an important part of innovation -- that's sort of the opposite of being risk averse. But we don't measure curiosity. We measure the behaviors of innovation by asking leaders to go through simulations in which they have to come up with business plans. We're not so much looking for other personality characteristics, but we are looking at whether or not a person can actually come up with innovative ideas. Behavior is the best predictor of behavior.

Back to the survey. Why do you think it is that so many more Chinese leaders see innovation as a respected leadership trait?
I think there's going to be tremendous long-term pressure for China to continue to grow. I think [China's] government and industry realizes that, to do that, they have to move from what basically has been low-cost manufacturing to higher-value areas like design and R&D. There's recognition that they have a long way to go in terms of getting into those higher-value creation areas.

They're really cranking out people with engineering degrees and science degrees. Those people are going to go into jobs that require innovation. There's huge government support. [China is] putting in place business incubators and have very low-cost rents for organizations that are into R&D and into innovation.

How does that translate into what's a respected leadership trait in Chinese organizations?
I think there are cultural differences. They're not necessarily the most efficient in how they spend money, and because of that there tends to be more of a culture that says, "Let's experiment." There's less requirement for burden of proof. One article I read referred to it as "China's hungry spirit." Chinese managers tend to be much more eager to learn. Perhaps partly because of their history, they're much more eager to question conventional wisdom and existing paradigms. They're really open to change. I see that especially with younger Chinese.

How have your clients responded to the comparative results between China and the U.S. on innovation?
In all fairness, the question that comes up more is around the topic of ethics [which only 7% of U.S. leaders ranked as the most respected]. That's what's gotten the most attention.

It's not that North America isn't innovative. You could question that the reason China rates [creativity and innovation] higher is that China still has a lot of runway in that area, and so they'd better start doing things differently. Their starting point is way below that of the U.S.

As far as managers who can't change their performance-review or compensation systems, what can they do to make more people believe innovation is valued?
We already talked about assessment. Another thing companies need to be doing is training their leaders to encourage and foster innovation. A lot of this is about [management] style. When you get down to behaviors, an average manager in a conversation with an employee will [talk] 60% to 70% of the conversation and will [listen] for 30% of the conversation.

Just look at that one behavior. If all managers in the world are doing most of the talking in the conversations they have with their employees, it's become a "tell" environment, not a "seek" environment. It's not an interaction that encourages listening -- it's not an interaction that encourages employee ideas. It's the manager conveying to the employee how things ought to be done.

Do you think a better definition of innovation would help organizations value it more?
There are arguments about the differences between innovation and continuous improvement and creativity and innovation. So let's just define it here. I think there's a great misunderstanding that innovation means the next new billion-dollar patent. That's important, but that's going to come from R&D. I think innovation is about everyone in every job thinking about ways to do things better and ways to do things differently. When you apply that across an organization of 10,000 people, that's where you're going to get the bang for your buck.




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