Is HR Sabotaging Your Innovation Efforts?

Re-post from LinkedIn from May 10, 2016

In today’s fast-paced, global economy, the traditional means of differentiation (land, capital and equipment) are becoming less differentiated and available equally to businesses large and small, old and new (Drucker, 1992; Friedman, 2006; Teece, 1998). This leaves the organization’s only means of differentiation the ability to combine undifferentiated resources together in unique ways … i.e. innovation (Lawson & Samson, 2001; Teece, 2011, 2012). Regardless of the approach to innovation you subscribe to (there are dozens, see Bowonder, Dambal, Kumar, & Shirodkar, 2010), the depth, breadth, and diversity of an organization’s people are significant antecedents to innovation success (Crook, Todd, Combs, Woehr, & Ketchen, 2011; Kim & Ployhart, 2014).  As a result, HR is a critical part of your innovation efforts.

Pre-employment assessments have been the principal tool used by HR to ensure the organization only hires the best and brightest. The use of pre-employment assessments by large U.S. organizations has increased from 26% in 2001, to 57% by 2013; eight of the top ten private employers use pre-employment testing for at least some of their positions (Weber, 2015). Unfortunately, as previously mentioned many of the traditional assessment tools have proven to be less reliable than flipping a coin when it comes to predicting future real-world performance. This realization has led to the increased use of psychological value assessments.  Value assessments attempt to match the values of prospective candidates with the value profiles of existing, high performing employees, essentially creating a way to find people who share the same values and perspectives of existing employees.  The idea is to find people who think and perform like existing top-performers. While these assessments may not be any better at predicting future performance, Weber reported on organizations reducing 90-day attrition rages from 41% to 12% in the span of only 3 years of use. Given the significant costs of hiring and training, this reduction in short-term attrition can be a significant savings for the organization. As the ease of utilizing these assessments continues to increase, the costs to utilize them decreases, they become increasingly difficult for HR organizations to ignore.

Surely, value assessments have benefit to the organization, but that value is no longer in the attracting and hiring “the best and the brightest”, and become the value of “culture” or “fit”. Even the validation of one of the most popular value assessments, the Hartman Value Profile (HVP), shows almost no correlation to real-world performance even when performance is subjectively evaluated by other members of the organization (Weathington & Roberts, 2005). Furthermore, making hiring decisions based on how well individuals “fit” within the existing organization seems at odds with the need for diverse knowledge and perspectives for effective innovation. While no one is arguing cultural “fit” is not an important aspect to collaboration and productivity, it is potentially dangerous to be seduced by the perceived benefits of values-based pre-employment assessments.

Innovation starts, and ends, with people. Decades of research demonstrate that successful innovation requires, not just the best and brightest, but also diversity in the perspectives and knowledge of those people. If everyone has the same perspective, values, and beliefs, it will be increasingly difficult to create anything “new”. If we compound this by not hiring the best and brightest (because we are more concerned with fit), the effects could be devastating.

Be wary about letting your HR practices sabotage your innovation efforts before they even get started.

References

Bowonder, B., Dambal, A., Kumar, S., & Shirodkar, A. (2010). Innovation strategies for creating competitive advantage. Research Technology Management, 53(3), 19–32. Retrieved from http://www.iriweb.org/

Crook, T. R., Todd, S. Y., Combs, J. G., Woehr, D. J., & Ketchen, D. J. J. (2011). Does human capital matter? A meta-analysis of the relationship between human capital and firm performance. Journal of Applied Psychology, 96(3), 443–456. doi:10.1037/a0022147

Drucker, P. F. (1992). The post-capitalist world. Public Interest, 109(Fall 1992), 89–101. Retrieved from http://www.nationalaffairs.com/

Friedman, T. L. (2006). The world is flat: A brief history of the twenty-first century. New York, NY: Farrar, Straus and Giroux.

Kim, Y., & Ployhart, R. E. (2014). The effects of staffing and training on firm productivity and profit growth before, during, and after the Great Recession. The Journal of Applied Psychology, 99(3), 361–89. doi:10.1037/a0035408

Lawson, B., & Samson, D. (2001). Developing innovation capability in organisations: A dynamic capabilities approach. International Journal of Innovation Management, 5(3), 377. doi:10.1142/s1363919601000427

Teece, D. J. (1998). Capturing value from knowledge assets: The new economy, markets for know-how, and intangible assets. California Management Review, 40(3), 55–79. doi:10.2307/41165943

Teece, D. J. (2011). Dynamic capabilities: A guide for managers. Ivey Business Journal Online, 1. Retrieved from http://search.proquest.com/

Teece, D. J. (2012). Dynamic Capabilities: Routines versus entrepreneurial action. Journal of Management Studies, 49(8), 1395–1401. Retrieved from 10.1111/j.1467-6486.2012.01080.x

Weathington, B. L., & Roberts, D. P. (2005). Validation analysis of the Hartman Value Profile. Retrieved from http://www.hartmaninstitute.org/

Weber, L. (2015). Today’s personality tests raise the bar for job seekers. The Wall Street Journal. Retrieved from http://www.wsj.com

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