Mix hard and soft management practices to harness business success

In a world where the immediate pressure is always on maintaining productivity, how do you create an environment that promotes innovation among your workforce? Increased market competition can encourage organisations to focus on short-term goals and targets, but companies cannot afford to leave innovation to chance.

The Irish Innovation Panel survey has collected data on approximately 1,300 manufacturing firms across Ireland since 1994, and clearly documents the benefits of innovative activity to Irish firms.

It found that 18.5 per cent of sales are a result of introducing new products to the market: this increases to 32 per cent when improved products are also included.

But, before companies can reap the benefits of fostering an innovative environment, they are often forced to suffer short-term disruption. For management, understanding how to mitigate this disruption is key as your business begins to adopt new structures, improve its capabilities or develop new products that serve the ever-changing demands of their customers.

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Generally speaking, companies can employ either hard, scientific and mechanistic work practices or soft and more organic approaches.

In practice, the hard paradigm can often take the form of a rule-based top-down approach that requires conformity and stability. Hard or mechanistic work practices establish ingrained patterns of behaviour, ensuring that employees see things similarly, reducing the need for discussion with respect to interpretation and understanding of issues as they arise.

New ideas

Quite often, firms that employ these practices use formal methods of communication, such as newsletters or an intranet. It creates standardised and structured processes for discussing and introducing new ideas.

Conversely, the soft paradigm can be categorised as an organic bottom-up approach that encourages knowledge sharing, engagement and empowerment by promoting flexible working practices, providing autonomy for individuals over how they work, and systems that embrace a culture of continuous improvement that stimulates new ideas and reflection.

Irrespective of approach, the introduction of new management practices, either hard or soft, has a disruptive effect on innovation performance. Benefits are realised only over the longer term.

This will be of little surprise to managers, cognisant as they are of the managerial, organisational and technical challenges of introducing new work practices. In fact, it can take six years after the introduction of a management system, such as Total Quality Management to boost sales of a new product by 7 per cent.

Although the implementation of soft management practices can reduce the disruptive effect of new management systems, managers may have little choice but to adopt a formal quality management system for regulatory and competitive reasons. So, is there a way to offset this negative impact on innovation?

Our research suggests there is. In a recently published study, co-authored with Prof Stephen Roper of the Enterprise Research Centre and Warwick Business School, we found that the sequence in which quality management systems are adopted by firms can offset some of the short-term disruption.

Indeed, there is a growing recognition of the complementary nature of hard and soft management processes. For instance, early adoption of quality circles – a relatively straightforward and low-cost soft management practice where groups of employees meet regularly to consider ways of resolving problems and improving production in their organisation – significantly enhances the value of quality certification processes when they are subsequently imposed.

Boost production

It may be, for example, that the adoption of a soft quality management practices encourages employees to offer innovative solutions that improve efficiency or boost production. These systems can then be formalised through the adoption of a hard practice quality management system, like ISO 9000.

The initial introduction of soft quality practices may also help managers to overcome attitudinal barriers to change and to the implementation of more formal quality management systems.

Other international studies have also highlighted the benefit of incorporating a combination of hard and soft quality management practices to boost product innovation and firm performance.

Employees are more satisfied, creative and productive if they can contribute their thoughts and ideas to the achievement of the company goals. Remember two-way communication, supportive people management practices and teamwork positively impact innovation. It is just as important to focus on these aspects of quality management systems, as it is to adopt a more systematic or rule-based approach.

Encouraging employees to suggest new ways of working, products, or efficiencies can offset some of the short-term consequences of implementing a new rules-based quality management system. And the successful implementation of combined quality management systems is necessary to enjoy – sooner rather than later – positive returns to innovation, productivity and competitiveness.

Dr Jane Bourke is Senior Lecturer in Economics, Department of Economics, Cork University Business School, University College Cork