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Is Stability The Key To Innovation?

Rather than investing in bigger and better, we should be increasing stability

31Jul

In a 2010 paper ‘High income improves evaluation of life but not emotional well-being’ by Nobel Prize winners Daniel Kahneman and Angus Deaton, they found that emotional well-being increases with pay rises until it hits $75,000, which seems to be the optimum salary for satisfaction. In 2015 Gravity Payments made headlines around the world when they decided that every single person in the company be given a minimum salary of $70,000. There has been some controversy around the decision, but at the very least the impact it has had publicly has been huge, with a powerful long time Yahoo employee, Tammi Kroll, quitting her job and going to work for Gravity at a claimed 80-85% salary decrease. Looking through reviews of working for the company, one of the enduring themes is not the minimum pay, but instead as one Glassdoor reviewer said ‘The pay is good but my coworkers and merchants I work with everyday keep me there.’

In a far broader experiment, Finland recently gave 2,000 citizens an ‘unconditional income’ which saw they receiving €560 per month regardless of whether they were in work, out of work, or searching for work. In this scheme there is no qualifying factors that must be achieved, unlike unemployment benefits, instead they receive the money whether they are working or not. The only real qualifying factor was that everybody in the experiment needed to be unemployed at the start of the experiment. According to initial reports this has led to an increased number of people looking for jobs, more people starting their own businesses, and greater satisfaction in the roles they have. Commentators have had mixed feelings about the move and given that there are, as yet, no solid results, its success cannot be judged. However, the most interesting element is that one clear finding is that this system motivated people to find jobs more than simple unemployment benefits.

Mika Ruusunen, one of the participants randomly selected in the experiment claimed that it promotes innovation and new businesses, saying, ’If someone wants to start their own business, you don’t get unemployment benefits even if you don’t have any income for six months. You have to have savings, otherwise it’s not possible.’

Although this is clearly a nation experiment with no actual results, could this idea of a solid foundation, whether financial or emotional, help companies to increase their innovation capabilities and improve productivity?

In his book ‘Leaders Eat Last’ Simon Sinek references the success of Barry-Wehmiller, a packaging machine company, who created strong employee connections through providing better working conditions and creating a close relationship with and amongst employees. During the financial crash in the late 2000’s, for instance, their orders dropped by 30% and layoffs seemed inevitable. However, instead of letting people go, all staff agreed to each take 4 weeks unpaid vacation throughout the year to make sure that nobody would need to lose their job, they also agreed to pause payments into their 401k to help the company stay afloat. When orders began to pick up again and these measures were no longer needed, their performance outpaced all competitors and their subsequent success not only saw them get back to where they were, but quickly exceed it, even allowing them to backpay the 401k deficits.

Creating a stable foundation for people at work has be shown multiple times to increase the freedom they feel to experiment and come up with some of the most innovative ideas, whether that’s Google’s 20% rule, Barry-Wehmiller’s refusal to let anybody go, or Gravity’s idea to create a minimum wage.

This is no surprise though, because those who feel comfortable with where they work and who they work with are more likely to experiment and try to achieve results for their companies. It comes down to, oddly, an acceptance of failure. If an employee believes that if they try something new and fail, then they will lose their jobs or a bonus that brings a meagre basic salary in line with what they need, they aren’t going to try anything. Companies who stay still in today’s business environment are essentially moving backwards, so this ability and confidence to experiment is what the world’s most innovative companies foster in their employees. If they need to risk losing their job to try a new idea, nobody is going to implement anything new.

Another key benefit of creating a working environment where people feel safe and secure is that it relieves the stress that comes from internal conflict. If there is a chance that 50% of their team could be let go because of a bad performance, people will care more about outpacing their team members rather than working with them. It creates a situation where they are going to be spending most of their time looking at internal threats rather than concentrating on those coming from competitors.

It also leads to situations where collaboration is easier and more profitable, speeding up processes, increasing the chances of innovation successes, and improving the overall health of the company. If people feel secure in their job and know that the person next to them isn’t going to try and stab them in the back to keep their jobs, they are far more likely to collaborate effectively, improve team morale, and work together towards a common goal.

Taking an approach like this is not always easy though, especially at companies who have traditionally been strictly hierarchical, such as banks and manufacturing companies, but it is a leap of faith that can create significant rewards. Also trying to implement this approach at larger companies is difficult because with a company that has a large number of levels in the corporate pyramid, this security often comes from the leaders of individual teams, meaning full buy-in needs to come from multiple stakeholders.

However, stability is something that comes from the top and needs to permeate through the company, so it is ultimately down to leaders to create this environment. It comes from trusting employees, hiring effectively, and ultimately having faith in everybody to do what’s needed. 

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