Encouraging employees to be agents in change is difficult due to the lack of theoretical frameworks associated with the new innovative paradigm. To ask an employee who has not contributed before to become a contributing member of organizational development is difficult until they are able to formalize such concepts into a process and then create an internalized routine of the new expectation. Developing employee innovation requires the understanding of bounded rationality and the need to create a methodology that fosters a participative process.
Employees follow a particular pattern and routine throughout their working day (Nelson and Winter, 1982). Even though these routines make for orderly workdays, ease of management, and stability of the organization they do not necessarily improve upon the organizations output. To encourage employees to act purposively, beyond daily routine, requires the ability of employees to deliberatively plan and make decisions (Kirzner, 1997).
Of course, one cannot expect employees to suddenly become freethinking, mature, and participative employees without changing the way they view their responsibilities to the organization and themselves. In economics, organizations represent bounded rationality. Employees are part of this bounded rationality and this has an impact on the limited scope of their decision-making abilities and the possible outcomes based within the organizational culture (Conlisk, 1996).
To change the poor employee expectations bounded within an organizations culture requires changing and adjusting the processes and routines by which employees operate. The ability to help employees critically think and reflect on their experiences and work practices requires social triggers through group interaction and social exchange (Jensen and Meckling, 1976). In other words, employee culture and social interaction with management should change to create higher expectations of performance.
The bounded rationality of organizations must become unbounded and rebounded on new principles and perceptions. Problem solving and innovative employees will require a new way of viewing themselves, their responsibilities, and their potential contributions to the organization. Instead of seeing themselves as process following, unquestioning, and uninspired contributors, they should be encouraged to question and contribute to organizational objectives through strong management-employee relationships that foster collaboration in problem solving.
One of the greatest social exchanges in innovation is between management and employee; management having the ability to use resources to implement ideas and the employees having the ability to find solutions to problems in their daily routines. Managers should create the right atmosphere and positive regard for employee ideas even if such ideas are not practical in the short-term. Employees invest a considerable amount of face and self-image when they bring forward ideas that may be blindly ignored by management despite the merit or benefit of those ideas (Clegg et al, 2002).
A single negative interaction with a manager will lessen the likelihood of that employee bringing forward those ideas again. Repeated among multiple employees and a culture begins to form with an ever-expanding divide between employees and management. To rectify this situation it may be beneficial for managers to write down ideas, no matter how silly they may seem at the time, and create a running battery of employee ideas for possible future development. A single idea may become a goldmine of resources in the future.
Innovation is not a process of certainty that has specific outcomes from the start. In innovation, ideas develop, transform into practical ideas, and are eventually created for the market. Because innovation is not able to be calculated numerically (Lewis, 2008) the collection of ideas today it can still help formulate future solutions to problems through the hedging of the large group of employees participating in daily organizational functioning. Management must only open up the possibility to the perspective that employees are not as incompetent as they seem.
Providing a useful framework where employees may participate based upon their abilities can be beneficial for developing employee innovative contribution. Management may have the power to implement ideas but employees know if such ideas should be adjusted or disregarded in order to make them more effective. The two responsibilities can be provided into a framework for higher levels of employee-management collaboration.
According to Kesting and Ulhoi (2010) it is possible to create employee driven innovation processes through the following methodology:
-There are managers and employees and each has their own authority level.
-Management innovation decisions are imperfect and only provide a framework.
-Employees must fill out this frame with operative and supportive decisions.
-Through trying this frame employees must go back to management to provide feedback.
-In time employee internalize routines and work off of autopilot until change is needed again.
In this methodology, management provides a framework through their authority and employees try the framework providing constant feedback on its effective utility. When adjustments are necessary, based upon this feedback, management changes the structure to improve the process. Overtime the new processes become routine and work off of processes of internalized expectation until change is needed again. In the process provided by Kesting & Ulhoi employee innovation is a supportive feedback loop to the effectiveness of management decisions. This requires the ability of management to be receptive to this feedback and implement change when necessary.
Clegg, C., Unsworth, K., Epitropaki, O.& Parker, G. (2002), Implicating trust in the innovation process. Journal of Occupational and Organizational Psychology, 75 (4), pp. 409-22.
Conlisk, J. (1996). Why bounded rationality? Journal of Economic Literature, 34, pp. 669-700.
Jensen, M.& Meckling, W. (1976), Theory of the firm: managerial behavior, agency costs, and ownership structure”, Journal of Financial Economics, 3, pp. 305-60.
Kesting, P. & Ulhoi, J. (2010). Employee-driven innovation: extending the license to foster innovation. Management Decision,
Kirzner, I. (1997). Entrepreneurial discovery and the competitive market process: an Austrian approach, Journal of Economic Literature, 35, pp. 60-85.
Lewis, P. (2008), Uncertainty, power and trust. Journal of Austrian Economics, 21. pp. 103-98.
Nelson, R. and Winter, S. (1982). An Evolutionary Theory of Economic Change. Harvard University Press, Cambridge, MA.