Hiring Innovation

by Tyler Presnall

For one weekend in November of 2012, Sony Electronics USA welcomed more than 40 MBA students to its San Diego headquarters for its annual Case Competition. Grouped in teams of four with strangers from other top MBA programs across the country, participants were given 24 hours to develop 15-minute business pitches in response to a realworld problem. Contestants signed non-disclosure agreements to assure the company that details of its strategic position would not be leaked.

Students had received the case a week in advance but spent most of the initial hours of the competition getting to know their teammates' diverse working styles.

Sony was getting to know them, too. While the students worked, HR representatives dropped in to evaluate each participant's creativity and efficiency. This was new. As recently as 2010, talent recruitment at the contest was more of an afterthought for Sony. But over the years, Sony recruiters began to recognize that the competition offered the chance to observe numerous qualities that couldn't be gleaned from traditional interviews. Today, winners of the Sony contest not only get $5,000 but are also guaranteed final-round interviews for the company's prestigious Rotation and Educational Development program, and Sony now views the MBA case competition as one of the most important recruiting tools in its arsenal.

The shift at Sony - away from a reliance on traditional interview techniques and toward an emphasis on creativity in the face of real business problems - is a response to an evolution in the way U.S. companies derive value from their employees. In 2010, IBM conducted a survey of 1,500 CEOs. The survey revealed that the most valuable management skill has shifted away from operational acumen to creativity. "Events, threats, and opportunities aren't just coming at us faster with less predictability," wrote IBM CEO Samuel Palmisano, "they are converging and influencing each other to create entirely unique situations that require unprecedented degrees of creativity."1 In the May 2013 issue of the Harvard Business Review, Stanford professor and entrepreneur Steve Blank concurred, saying that nearly all large companies need to continually innovate to effectively combat increasing external threats. Historically, companies have focused on costcutting to increase profit, but that approach has a limit.2 The U.S. Congressional Research Office has reported that over time, U.S. companies have outsourced more and more service jobs to save on labor costs.3 Today, the importance of innovation as a revenue driver has deepened, prompting adaptations in hiring practices, incentives, and organizational structures.

Hiring Practices

As the need for creativity in business increases, traditional job interviews become more and more unsuitable. Professional career coach Robin McNatt said that while traditional interviews can provide a good starting point for screening purposes, the correlation between an impressive interviewee and successful employee is low (30 percent to 50 percent). Once the field is narrowed down to a few finalists, the interviewer must focus on a diff erent process, one that determines motivation, culture fit, and potential for increased responsibility down the road. Interviews that center on split-second judgment and knowledge recall succeed in finding employees who make good first impressions with technical competence, but who can fail to realize a longlasting fit. "There's an opportunity to do it better," said McNatt. The high-pressure situations of job interviews only highlight the exceedingly coveted prize for a single "winner." Traditional economics - as well as our intuition - tells us that additional effort accompanies improved performance. However, psychology has proven otherwise in many cases.4 For instance, increased mental arousal, concentrating attention too narrowly, and focusing on the reward itself all tend to distract from the task at hand.5 The Yerkes-Dodson Law dictates that "performance increases with physiological or mental arousal, but only up to a point." Once arousal becomes too high, stress pushes performance downward, below optimal levels of production. This phenomenon, associated mostly with sports, is known familiarly as "choking under pressure." By fostering an expectation of fast recall, businesses call for job seekers to conform their cognitive abilities to the structure of the process - one ill-fitted for today's problem solving. This includes intense cramming, narrowed focus, and satisficing - techniques that all stifle long-term memory and innovation.

Incentives

Many companies choose to incentivize employees with a financial reward to increase their production. Ideally, management matches the incentive directly with the desired action or output, lest they risk rewarding unwanted behavior. Incentive strategies that correlate rewards to increased performance have been found to only be effective when the processes involve routine mechanized tasks.6 Such is the case of multinational manufacturer Lincoln Electric, which famously offers employees no base salary, but rather piecework compensation and bonuses depending on output. Because churning out arc welding equipment requires no strategic thinking, only brute effort, that type of incentive works well as a motivational technique at Lincoln Electric. But when the outcome requires even basic problem solving, a larger reward results in poorer performance.7 Extrinsic incentives tend to result in tunnel vision, thereby promoting efficiency at the expense of creativity, essentially creating a glass ceiling of improvements confined to the status quo.8 In today's corporate landscape, where routine, step-by-step operations are outsourced to people and software that can do those things faster and cheaper, the remaining internal problems require people who can think beyond the restrictions of the conventional.9 Knowledge that a large reward looms may be enough to distract employees.10 Cognitive skills, like attention, contract under the pressure to secure a reward, undermining the very reason for using it.11

Organizational Structure

Technological advances and shifts in the global economy have revolutionized organizational settings. Increased ease of business development through technology and outsourcing has mature industries slashing entire departments to help foster an environment of rapid growth. New challenges require new organizational structures and abilities. Enterprising companies create a culture that promotes collaboration and encourages employees to continuously learn from each other. Younger, more nimble companies place even greater emphasis on openness. Seventeenyear- old video game software company Valve feels so strongly that hierarchy stifles innovation that it has no management. Not even the president of the company has anyone who reports to him. "We want innovators, and that means maintaining an environment where they'll flourish," states the 2012 employee handbook.

Behavioral economics and organizational strategy demonstrate how creative thinking improves with a diverse group rather than with a group consisting only of top performers. San Diego software company Mitchell International's senior vice president of human resources, Jack Farnan, said he believes that diversity of thought stems from diversity of hire. According to Farnan, drawing on a large collection of cultures as well as equality in gender representation allows the company to have access to a wide array of problem solving techniques. Heterogeneity in thinking often produces different - and offsetting - estimations. Similar to diversifying a stock portfolio to vary exposure to different investment sectors, adding disparate points of view not only broadens the range of possible solutions, but also mitigates the risk of overcommitment to any one opinion. For collaborative jobs like product design, divergent experiences and opinions bring to light a fuller range of potential problems and solutions. Qualcomm's Forward Looking User Experience Outreach program (FLUX) allows employees from various technological backgrounds to meet biweekly in an effort to discover novel solutions to new or existing problems. Already generating more than 60 actionable solutions since inception, the FLUX program bends the rules of the traditional work week by allowing employees to independently assemble and develop ideas that go beyond their daily job descriptions. The depth of detail inherent in viable solutions drives creativity and connects people with different areas of expertise.

Small changes in structure impact the breadth of creativity within an organization. The nominal group technique (NGT) is a problem solving process that helps better identify and prioritize decision alternatives. Contrasted with brainstorming, which encourages an unstructured flurry of ideas and is subject to informational influence, NGT demands that individuals create a list of alternatives on their own before discussing with the group. A more thorough voting system ensures that the top ideas are ranked according to quality and feasibility. The idea was first developed in 1971 by behavioral scientists Andre L. Delbecq and Andrew Van de Ven to create innovative solutions to strategic problems. Fully discussing each of the independently conceived ideas not only allows creativity to blossom in the solution set, but it also ensures the minority opinion is heard. Simply voting by majority rule silences the minority in favor of an influential few. "The evidence is absolutely overwhelming that using a nominal group technique produces more and better ideas than does brainstorming," said Yuval Rottenstreich, professor of organizational strategy at UC San Diego's Rady School of Management. He compares the emerging importance of NGT with that of data analytics. "In both cases, there's a modern tool that's available that surely helps your firm, and the only thing keeping them from using it is themselves."

Traditional notions of management work solely to produce compliance. To get engagement, companies are better off focusing on self-direction. A burgeoning approach provides employees with the tools they need not only to motivate themselves, but also to produce innovative thoughts. The first device is autonomy, which urges employees to direct their own effort. Research shows that people who have some control over their work feel more positively about it.12 Second, allowing employees to master a task or complete a project reinforces in them the desire for self-improvement and individual growth. The third technique is purpose: the yearning to participate in something that has meaningful real-world implications. Companies that customize this three-pronged approach to human resource management are positioning themselves for a future where creativity and innovation is the primary source of competitive advantage.

Tyler Presnall (Rady MBA, 2013) concentrates on marketing and consumer behavior. His specialties include inbound and social media marketing, management strategy, and data analysis.

Endnotes
  1. Richardson, Adam. "IBM Study: CEOs Say Creativity and Managing Complexity Are Vital Today." CNET, May 26, 2010. Accessed June 9, 2013. http://news.cnet.com/8301- 13641_3-10474433-44.html.
  2. Blank, Steve. "Why the Lean Start-Up Changes Everything." Harvard Business Review, May 2013. Accessed June 9, 2013. http://hbr.org/2013/05/why-the-lean-start-up-changeseverything/.
  3. Levine, Linda. "Off shoring (or Off shore Outsourcing) and Job Loss Among U.S. Workers." Congressional Research Service, January 21, 2011. Accessed June 9, 2013. http://forbes. house.gov/uploadedfiles/crs_-_offshoring_and_job_loss_among_u_s__workers.pdf.
  4. Adler, Lou. "Are You Hiring Too Many 90-Day Wonders?" LinkedIn, May 19, 2013. Accessed June 9, 2013. http://www.linkedin.com/today/post/article/20130519183133- 15454-what-is-the-purpose-of-an-interview.
  5. Ariely, Dan, Uri Gneezy, George Lowenstein, and Nina Mazar. "Large Stakes and Big Mistakes." Federal Reserve Bank of Boston, working paper. Accessed June 9, 2013. www.bos. frb.org/economic/wp/wp2005/wp0511.pdf.
  6. Pink, Dan. "The Surprising Science of Motivation." (lecture, TED) Oxford, July 29, 2009. Accessed June 10,2013. http://blog.ted.com/2009/08/24/the_surprising/.
  7. Ariely, Gneezy. 2005.
  8. Ibid.
  9. Pink 2009. See also "Can the Promise of Reward Increase Creativity" (http://eisenberger. psych.udel.edu/files/12_Can_the_Promise_of_Reward_Increase_Creativity.pdf )
  10. Ariely, Gneezy. 2005.
  11. Ibid.
  12. Work Environment Structure and Psychological Ownership: the Mediating Eff ects of Control (http://www.ncbi.nlm.nih.gov/pubmed/15449699)
Summer 2013

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