EMCC European Monitoring Centre on Change

Workplace innovation - fostering productivity and quality of work

About

Author: 
Van Hootegem, G., Delarue, A., Gilleir, C., Higher Institute for Labour Studies (HIVA) of the Katholieke Universiteit Leuven under contract to the Foundation

In a seminar organised for members of its Company Network, the European Foundation for the Improvement of Living and Working Conditions explored sustainable strategies related to the implementation of new forms of work organisation. The seminar ‘Workplace innovation - fostering productivity and quality of work’ was held in Bologna, Italy, on 27-28 June 2005. Four companies - Volvo Cars Ghent (Belgium), HERA (Italy), the Dutch Tax and Customs Administration (the Netherlands) and Grundfos (Denmark) - presented their company strategies and assessed the experiences they had made in terms of workplace innovations. In an active and lively debate, 48 participants from 15 EU Member States discussed the conditions, impact, limitations and policy implications of changing work systems.

Why?

Innovation is essential for enhancing European business competitiveness and sustainability and lies at the heart of the Lisbon Agenda. Developing business environments that enable innovative companies to flourish can contribute both to employment creation and economic growth.

‘Innovation’ is a broad term with many possible interpretations. The capacity for innovation can be defined as ‘the ability to do things alternatively and to continuously reinvent products and services’. Traditionally, while the focus for innovation within companies has mostly been on product or technology development and cost saving, the emergence of a knowledge economy will require employers to understand and develop approaches to work that are conducive to continuous learning and innovation across the entire organisation.

Looking at new ways of organising work and implementing changes in the organisational structure to improve performance should thus be seen as an important form of innovation. Workplace innovation can take many forms, including employee empowerment schemes, knowledge management policies, teamwork models, continuous skills development and learning plans, flexible work organisation arrangements, transparent communication practices, encouragement and nurturing of ideas at all levels of the organisation.

Promoting different forms of workplace innovation is important because organisations today are operating in demanding and turbulent environments, which creates a need for more flexibility and knowledge-based work. Against this backdrop, and in order to guarantee sustainable business success, companies need to give serious consideration to the nurturing of human creativity and to greater investment in human resource development and the involvement of employees in strategic business development.

What?

The seminar aimed at exploring the role of innovative work organisation models that enable companies to achieve higher performance levels and contribute to employee empowerment. Through the presentation of four company case examples, the workshop provided first-hand evidence of different approaches and methods used by organisations, and of the impact of these approaches on corporate performance and job quality. Representatives from two companies, Volvo Cars Ghent and Grundfos Denmark, explained the process of organisational change in their companies, both of which use ground-breaking team models. A third case, the Dutch Tax and Customs Administration, a public service, highlighted the fact that change can also be initiated from the bottom-up and can be employee-driven. Finally, the HERA Group, a new Italian company resulting from a merger of 15 public utility services, presented the challenges and objectives of their company from the perspective of an organisation undergoing a change process.

Who?

Francesco Garibaldo, director of the hosting institute, the Istituto per il Lavoro, Italy, opened the seminar and welcomed the participants. Barbara Gerstenberger and Gregorio de Castro from the European Monitoring Centre on Change (EMCC) introduced the theme of the workshop, emphasising its policy relevance and putting the seminar in the context of the EMCC’s overall mission.

Professor Pierre van Amelsvoort of the Nijmegen School of Management in the Netherlands set the scene by presenting a theoretical framework that outlined different organisational models and the usefulness of workplace innovation. In his presentation, he stressed the need for an integrated approach and then went on to introduce some key concepts necessary for the exchange of experiences and practices during the seminar.

Four informative company case examples were then presented, providing substantial information for the lively debates and plenary discussions that followed.

Finally, the seminar participants met in small groups to discuss three key questions that arose from the previous exchange of experiences and debates, namely:

  • What kind of support do organisations need in order to innovate and who can provide this support?
  • Is it possible to monitor progress and measure the success of innovative work practices?
  • Are the answers to the above applicable to or appropriate for SMEs?’

These discussions allowed for some interesting general conclusions to be drawn from the seminar.

Four company case examples

The report of the four company case examples is downloadable for free as a pdf file (pdf 750 kb), by clicking on the company’s name. The following sections provide an overview of the key workplace innovations that were outlined in the four presentations.

Developing a self-managing team model

HR manager, Hans Bogaert, explained how Volvo Cars Ghent (pdf 750 kb), Belgium, initiated the process of teamworking and described the progressive steps towards self-management that were taken over the years. Volvo Cars Ghent is one of the major car assembly plants of Volvo Cars Corporation, having produced some 246,007 cars in 2004 and employing 5,300 people. During the 1970s, industrial relations at Volvo Cars Ghent were characterised by conflict and distrust. A severe crisis in 1978 made employers and employees realise the importance of their cooperation for the continued existence of the plant. Since then, the consensus model that was reached between management and trade unions at the plant is considered to have been a decisive factor in the innovation of the working structure, which has resulted in continuous growth since the 1980s.

A complex merger as a starting point for change

HR director, Giancarlo Campri, gave an overview of the multi-faceted organisational challenge facing the HERA Group. With a turnover of €1,639 million and with 5,023 employees, HERA (pdf 750 kb) is an important player in Italy, providing multi-service utilities related to the water cycle, the use of energy resources and environmental services management. It was set up in 2002 following a merger between 15 public utility services in the province of Emilia-Romagna, Italy. With operations in a number of different sectors and regions and a diverse array of industrial relations agreements, the company inherited a complex legacy. HERA is now taking steps to become a more homogeneous organisation with a single structure and culture. With the expert help of the Istituto per il Lavoro, it is organising participation-based training in order to facilitate innovative work changes and to build on a new social dialogue model.

A bottom-up approach to integrated task-setting

Project manager, Jos Habets, presented the case example of the Dutch Tax and Customs Administration (pdf 750 kb). Part of the National Ministry of Finance, the organisation acts as the law enforcement body of the Dutch National Administration and employs 30,000 people nationwide. Its structure is subdivided into 13 different tax regions with several offices in each region. The presentation focused on an initiative that began on an ad hoc basis, whereby a group of employees wanting to improve the division of tasks in their unit developed an alternative way of organising their work. The new model proved to be a success and not only improved the efficiency of the organisation, but also allowed it to become more customer-oriented. As well as receiving the support of the director general, the model has been taken up by several regional tax offices across the country.

Implementing self-governing production groups

Grundfos (pdf 750 kb) is a leading world producer and innovator of a wide range of pumps for domestic and industrial use, employing 12,500 persons in seven major market zones. Its main business areas are domestic and business building services, original equipment manufacturing, industrial and user markets, dosing, water services and waste water. The group comprises 12 production companies, six acquired companies and 43 sales units spread all over the world. In his presentation, Thomas Okkels, production manager at Grundfos Denmark, focused on the implementation of self-governing production groups at all the Danish Grundfos (pdf 750 kb) production sites. He explained how the motivation for the implementation came from competitive challenges and how, although successful in the end, the process had its ups and downs and could only be implemented successfully by means of extensive training around teamwork, and thanks to the cooperative attitude of the trade unions.

Highlights

An integrated approach

In today’s workplace, organisations are operating in a complex and dynamic environment. To meet the continuously changing needs of their consumers, they are expected to deliver new and high quality products and services in an increasingly speedy and flexible way. Among the many factors influencing this environment are rapid evolutions in the labour market, technological developments, greater specialisation and automation of work processes, growing internationalisation both of production and of markets, and new legislation.

To cope with these developments, organisations will be increasingly expected to make new choices in the design of their work organisation. The old tayloristic structures that proved to be effective in the past are no longer appropriate in the new turbulent conditions.

In order to bring about greater understanding of the functioning of organisations and the strategic decisions that are made to adapt to changing circumstances, Professor Pierre van Amelsvoort presented a conceptual framework as one possible way of grasping the situation (van Amelsvoort, 2000). Largely based on the ‘modern socio-technical theory’ model, this approach views the functioning of an organisation in terms of a combination of technical systems and social systems. Systems are viewed as the totality of standardised and formalised procedures, rules and policies that pertain to an organisation. The technical system can be described as including the formal and informal structure of the organisation and the technology deployed. The social system can be viewed as the people or human resources, with all their attributes including their understanding, skills, beliefs and ideas. It also encompasses the organisational culture which is determined by the relations between people, the characteristics of the internal cooperation within and between various groups or departments, and the characteristics of relations between the employer and employees.

According to modern socio-technical theory, an ‘integrated approach’ occupies a central position. The model suggests that the performance level of an organisation is determined by the combination of all factors, i.e. people, culture, structure, systems. When all of these factors are taken into account, there is a better chance of achieving a sustained improvement and innovation of organisations. Many popular management approaches fail because they only pay attention to one of these factors. This failure results from not recognising that technological factors and structures have impacts on human behaviour, just as social factors have implications for the technical variables. For example, the structure can either promote or hinder specific cooperation patterns. Equally, people’s ideas influence the structure, in the same way that human understanding influences the choice and use of technological tools and systems. An integrated approach is therefore crucial to long-term and sustainable organisational change.

Figure 1: An integrated approach

Taking these four dimensions into account, it is possible to consider different organisational configurations, resulting from changing external demands over time. According to Bolwijn and Kumpe (1989), the following shifting pattern of business demands can be observed over the last 50 years:

  • 1950s/1960s: focus on price and cost control;
  • 1970s: focus on price and quality;
  • 1980s: focus on price, quality and flexibility;
  • 1990s: focus on price, quality, flexibility and rapid production and service innovation;
  • 2000s: focus on price, quality, flexibility, innovation and sustainable development.

An organisation therefore has to be active in all of these areas to survive today. More traditional organisations are faced with a need to implement workplace innovations in order to respond to an increasingly complex array of demands. This can be conceived as an evolutionary model with four different organisational configurations: (1) a tayloristic configuration; (2) a quality-driven configuration; (3) a flexible configuration; (4) a network configuration. In Figure 2, each of these configurations is described in relation to the four dimensions outlined above.

Table 1: Ideal types of organisations in connection with external demands
Business demands Structure Systems People Culture
Price SpecialisationHierarchyDivision of labour Detailed rules and proceduresBudget driven Narrow tasksSimple and routine work Focus on hierarchical authorityPower based: command and control
Price Quality Horizontal meetingsQuality circle Statistical processControl Integration of quality controlGroup meetingsQuality awareness Less hierarchicalReduced power distance
Price Quality Flexibility Business line orientedSmall units with a whole task and decentralised control Just in timeMinimal specificationLocal differentiationResult driven Multi-skillingTeamworkSelf management Transformation process is leadingManagers and staff have a supporting and facilitating role
Price Quality Flexibility Product innovation Mini companiesTemporal structuresNetworking Speeding up innovation process High involvementPartnership Customer focusedHuman talent is seen as business capital

Workplace innovation is particularly necessary for bridging the gap between the quality-driven and the flexible organisation. In this instance, a change has to be made using an expert, top-down approach towards a more participative policy. Here, the entire organisation needs to be overhauled. In a ‘quality-driven configuration’, continuous quality improvement is the main focus of action. This calls for greater harmonisation between all departments and hierarchical levels, which can be achieved by an intensive circuit of meetings. The basic structure of the tayloristic configuration remains in place, merely with a whole range of forms of horizontal consultation being added.

To bring about a ‘flexible configuration’, the organisation itself must be drastically changed. The primary process should be streamlined in an entirely new way. The functional structure should be replaced by a process-oriented structure, which focuses on the organisation’s business lines. Better integration of activities reduces the number of steps in the work process. The various processes are disentangled and organised separately and are directly linked to specific customer groups or market segments. As a result, the organisation is broken down into relatively independent units, each responsible for its own results.

The ‘network organisation’ is a learning organisation, with a highly customer-oriented culture and a strong focus on the personal development of employees. Here, the organisational structure changes frequently. The structure can be reconfigured on a temporary basis to respond to customer demands.

Workplace innovation as a long-term project

The concept of workplace innovation can encompass a wide range of approaches. Various types of teamworking, employee empowerment schemes, continuous skills development and learning plans, flexible work organisation arrangements or transparent communication practices, are all examples of changes that can improve working and living conditions, to achieve greater competitiveness and sustainability.

However, none of these diverse initiatives can be implemented overnight. Such innovations often require major and far-reaching steps, and the underlying organisational philosophy also has to change radically. Making the decision to adapt the form of organisation is only the starting point of a process which can take many years. As the case examples of Volvo Cars Ghent (pdf 750 kb) and Grundfos (pdf 750 kb) Denmark show, the transition from a traditional organisational model to a flexible configuration with self-managing work groups takes a long time to evolve and can involve many ups and downs. Sometimes, the results are initially disappointing, and relapses are possible during the process. To avoid failure and maintain motivation, good preparation, intensive training and continuous evaluations are vital.

Another essential ingredient is belief in the process. Because workplace innovations are long-term projects, a true belief in their usefulness is necessary to see the process through. There has to be a genuine willingness to sustain the effort. Some outside encouragement may help, but a real internal conviction is needed, both on an individual and organisational level. Support from all management levels is indispensable in helping to bring about successful organisational changes.

Social dialogue and employee involvement

Because changes in the work organisation affect the core of the organisation, all stakeholders should be involved from the beginning of the process. In some cases, this will involve cooperation between management and trade unions. Nevertheless, it is also important to give employees a direct participative role. Full information and consultation, as well as open communication, are paramount here. Whether the workplace change is instigated from the top-down, initiated by management, or from the bottom-up, initiated by workers, a good social dialogue and agreements on the strategic direction to be followed are essential.

This was clearly outlined in each of the four case examples presented at the seminar. At Volvo Cars Ghent (pdf 750 kb), recovery from a crisis period could only be achieved by moving from a conflict model to a consensus model involving all relevant stakeholders. Development of a positive social climate, in turn, provided a good foundation for implementing a team-based model. HERA (pdf 750 kb), a company only at the beginning of a change project, regards this as an essential preliminary condition. Its management has set up some basic common agreements involving all of the trade unions with which they negotiate. Developments at Grundfos (pdf 750 kb) Denmark clarify the importance of strong employee involvement in strategic decision making. Here, the trade union representatives act as spokespersons and the employees take part in the evaluation of the work process changes on a continuous basis. The case of the Dutch Tax and Customs Administration (pdf 750 kb)illustrates the opposite situation. In this instance, a group of employees started a new way of working from the bottom up and they convinced their supervisors of its merits; the supervisors, in turn, saw the advantages of the new system and transferred it to other offices.

Monitoring progress and measuring success

It is important that the process and results of workplace innovations are monitored. Although it can be difficult to provide concrete evidence of the advantages of new work systems by merely measuring financial results, it is possible to follow up on a limited number of parameters to measure the progress that has been made. Such measurements may be based on ‘hard’ statistical indicators, such as productivity, absenteeism or employee turnover, or ‘soft’ ones such as employee satisfaction. Measurable results are particularly important when evaluating pilot schemes to assess their suitability for the rest of the organisation.

A range of different indicators needs to be collected in order to address the concerns of all interest groups, including top management, line management, employees, customers, the parent company, suppliers or other stakeholders. It is also important that this information is appropriately presented, at the proper level, to each group in order to convince them that the change is in their interests.

Learning from best practices

The case examples show that there may be a need for workplace innovation in a variety of different sectors of the economy and in different regional settings. It can be useful, therefore, to share knowledge and experiences so that organisations are able to learn from each other’s experiences. Success stories can help to increase the awareness of the need to change work systems. Large companies can serve as examples to smaller companies in their supply chains. In some cases, they can encourage or enforce such changes by attaching certain conditions to their contract specifications.

However, care needs to be taken when copying other organisational models. Each organisation has to take into account its own sectoral, legal and cultural context when implementing changes. Most ‘best practice’ case examples offer many useful insights, but are the result of a long evolution process, the outcome of which is not readily transferable. A ‘one size fits all’ approach is rarely appropriate, therefore, and - particularly in the case of SMEs - an individually tailored approach has to be developed when embarking on changes in work organisation.

Policy implications

An interesting debate is taking place at present about the extent to which public policy can or should promote workplace innovations. At this seminar, agreement was reached on certain aspects of this debate.

First, there is widespread consensus that adequate training, at all organisational levels, is crucial for successfully implementing changes in the work organisation. As organisations have to continuously adapt their configuration to respond to changing external demands, lifelong learning has to be adopted to enable adaptation to these changes. Many different layers of the educational system can contribute to this process, ranging from primary schools to universities, and including technical and professional colleges, as well as workplace-based training centres.

Special attention needs to be paid to regional and sectoral training initiatives. Already operational in several EU Member States, sectoral Vocational and Educational Training (VET) initiatives could be usefully extended, to address workplace innovation more comprehensively, for instance, by making consultancy and appropriate training courses more widely available. In Belgium, for example, jointly managed sectoral training funds are already being financed by the imposition of a levy representing a very small percentage of the total wage bill.

Second, the idea that workplace innovation is a key factor in sustainable business success needs to be actively promoted. Governments, in particular, can play a key role in clearly indicating which direction should be followed. Efforts should be made, for example, to make existing research findings more accessible to all parties involved in workplace innovation. Within the EU, many studies on change management and workplace innovations have been carried out. In addition to subsidising this kind of research, governments can facilitate greater awareness of the need for workplace innovation, by collecting existing knowledge and ‘best practice’ examples and by making them available to all stakeholders across the EU. In addition, organisations can create their own networks, possibly subsidised by governments, in which they can share their knowledge and experiences.

Most existing research, theoretical models and best practice examples focus on industrial settings. However, the move towards a more knowledge-based economy implies that there are other possibilities to consider. Knowledge centres on workplace innovation can be extended more broadly across the economy, to include service sectors and the public sector, and across a wide range of occupational groups.

Finally, in some cases, there is a need for direct financial support at European, national, regional or local government level. Sometimes, pilot projects can be a good starting point at which to initiate organisational change, which at a later phase can be transferred throughout the entire organisation. Such small-scale initiatives could be facilitated by public financial support. This is also relevant in the case of SMEs, which often lack the time and money to initiate workplace innovation projects, although this is often necessary to remain competitive. Because managers of SMEs spend most of their time running the company and selling products, they have little time to focus on innovation. Also, there is a perception that smaller companies automatically have an efficient work organisation, because people work closely together. However, this organic way of organising work has its limits. Companies with 10 employees upwards need to implement workplace innovations to stay competitive. Greater awareness of the need for workplace innovation should be encouraged and practical tools, instead of complex procedures, should be developed. A tailor-made approach - for example, through action learning groups facilitated by a professional - has already proven to be effective. Government funding of such initiatives could prove particularly useful here.

References

Amelsvoort van, P., The design of work and organisation, Vlijmen, St-Groep, 2000.

Bolwijn, P. and Kumpe, T., ‘Wat komt er na flexibiliteit? De industrie in de jaren negentig’ [What comes after flexibility? The industry in the 1990s], Mens en onderneming, Vol. 43, No. 2, 1989.