Some widely practiced management techniques can actually hamper company efforts to innovate and encourage creativity. Practices such as emphasizing individual accountability, encouraging internal competition, practicing goal setting, and emphasizing budgets may be counterproductive, advises Professor Jeffrey Pfeffer of Stanford GSB.
It’s not that managers are intentionally trying to stifle innovation, says Pfeffer, the Thomas D. Dee II Professor of Organizational Behavior. “It requires a lot of courage to buck so much conventional management wisdom and practices… . Everyone wants to earn exceptional returns but to do it by doing what everyone else does,” he writes in the book Leading for Innovation and Organizing for Results.
The problem with individual performance appraisals is that they can encourage workers to look out for themselves and waste valuable time and energy trying to find someone else to hold responsible. “If you want people to learn and innovate, build a system that encourages teamwork, learning, and trying new things. Get people focused on those goals, not on avoiding blame and assigning responsibility. That’s why companies that excel at innovation and learning have management practices and a philosophy that encourages joint problem solving,” he said.
Goal setting also tends to focus on the individual. Pfeffer warns that to be effective, goals must be realistic and sufficiently challenging. Those charged with meeting the goals also must have training and resources to make it possible. And, he warns, goals can become ceilings. If the goal is to grow revenue by 20 percent, how much will it grow? he asks. Probably about 20 percent a year. And if revenue fails to meet that goal “the press is filled with financial scandals ranging from booking phantom revenues to trying to hide operating expenses in restructuring charges.”
Innovation is all about mistakes. “Companies that want to encourage innovation and entrepreneurship therefore have to build a forgiveness culture, one in which people are not punished for trying new things.
“At IDEO Product Development, one of the most successful product design companies in the world, founder and chairman David Kelley has as one of the company’s mottoes, ‘fail early and fail often.’ As he points out, this is much preferable to failing once, failing at the end, and probably failing big. The idea of rapid prototyping is to learn by doing, and invariably the early doing will be filled with mistakes. But that’s how you learn.”
Finally, writes Pfeffer, stimulating internal competition is likely to produce wide variation in performance across similar units in the same company as internal competitors shy away from sharing information, resources, or best practice experience. “Many companies have spent a fortune building intranets and other formal knowledge-sharing structures and systems that they then undermine by developing cultures of internal competition,” he writes. “There is a simple lesson from all of this-fight the competition, not one another. It’s much more productive.”
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