Why HR is uniquely placed to boost innovation during a downturn
The pandemic has created a huge number of job losses and investment in innovation has been particularly hard hit. HR has a crucial role to play in generating innovation through redeployment and helping exiting staff launch startups.
The field of human resource management has changed dramatically in the last century. Initially developed as a function to interface with unions, it evolved to become a ‘personnel’ division to have a strategic role in business operations.
Fast forward to today and most forward thinking companies have a Chief People Officer on the board to ensure the voice of the employee is considered at the highest level.
However, the evolution hasn’t finished – external factors have always played a part in the changing role of the HR division – from the industrial revolution, advances in behavioural science and the technological progress we have experienced in the last twenty years.
New innovation partnership
Today we are seeing a new shift, brought on by Covid-19 pandemic. Working models are changing, fuelled by the unprecedented levels of job losses and the huge rise of the white-collar gig economy. The International Labour Organization has predicted global unemployment rate of 250 million as a result of Covid-19.
Organisations are facing more difficult market conditions than those experienced during previous recessions or the 2008 financial crash. Future growth is being side-lined in favour of conserving cash and runway.
The winners from the last recession were those companies who stepped up their investment in innovation early during the crisis.
In May we released findings from a survey of 300+ C-suite leaders. The findings revealed that before extensive Covid-19 restrictions, just 8% of businesses surveyed said they would not be investing in innovation activity this year, with that rising to 25% during the current crisis – a 213% increase.
The survey also outlined that businesses predicted 2020 revenues have fallen by almost half in just one month as the implications of Covid-19 have become apparent. Over 29% were planning redundancies to help them navigate the crisis.
The study revealed over 90% of business leaders will not invest more in innovation in order to kickstart growth in their businesses, despite nearly half of respondents (46%) confirming that investment in innovation had helped to spur growth over the last year.
This paradox is evidenced by McKinsey research, which demonstrated that the winners from the last recession were those companies who stepped up their investment in innovation early during the crisis.
What role can HR play?
With these changing labour dynamics and innovation shortfalls, what is the role for HR? Put simply, there is a huge opportunity for them to step up and take a leading role in supporting corporate’s innovation strategy.
Corporates previously ran innovation programmes in three ways: investments and acquisitions, corporate accelerators and startup partnerships. With the mass exit of talent happening across industries, there is an opportunity to add ‘outskilling’ to the list of innovation programmes.
When businesses undergo changes that make reorganisation necessary, redundancy needn’t be the only option.
This ‘outskilling’ could happen in one of two ways – either through internal redeployment, or through ‘start-up outskilling’. When businesses undergo changes that make reorganisation necessary, redundancy needn’t be the only option.
Hard skills can be taught, soft skills cannot. It makes no sense to lose amazing talent when they can be trained to excel in another division. The key is for the HR division to work with the business to identify where the opportunities lie – whether it be a new innovation team within a department, or a division that is still growing so the business needs to double down on it and shift resources.
Start-up outskilling is different – it’s about creating a new pathway for exiting employees. Many employees that are being made redundant will want to work for themselves, perhaps as a contractor or to scale their own company. However, they would benefit hugely from training to learn the skills they need to succeed, which will derisk the venture.
This isn’t just a feel-good activity, it’s also good business. Aside from enabling the company to live its people-first values, it helps the company deliver a positive impact in the local communities via fuelling new growth and new local job creation.
Crucially though it can support innovation. Many of those wanting to build a start-up wiil be looking to solve a critical issue for the industry or the company and therefore offers an opportunity to keep connected and potentially help drive future growth for the organisation.
Nokia cut over 45% of its jobs and formed Bridge, an entrepreneurial stream for employees that had an idea for a start-up.
The process is tried and tested. Ten years ago, Nokia cut over 45% of its jobs and formed Bridge, an entrepreneurial stream for employees that had an idea for a start-up. Since its inception, Bridge has helped over 1,000 start-ups.
Out of the companies started, nearly 20% entered into commercial agreements with Nokia as they were solving key challenges facing the business and actually helped accelerate their innovation.
As we enter the next phase, the end of furloughing, the second wave of Covid-19 and an increasingly bleak outlook for recovery, it is time for HR to move from executioner to hero. Taking the strategic lead and evolving and innovating on the pathways open to departing talent can influence the health and survival of an organisation.