Human Capital Media editorial staffers brought home top honors in video, print design and online writing at the regional American Society of Business Publishers and Editors Awards banquet last night in Chicago.
Last week the U.S. Department of Labor announced that it’s launched a new toolkit for employers to help them understand mental health issues and create a supportive work culture.
The EARN Mental Health toolkit — created by the DOL’s Office of Disability Employment Policy and its Employee Assistance and Resource Network on Disability Inclusion, or EARN — includes an educational framework and a list of case studies of successful programs at organizations of various sizes.
Awareness: Build awareness and a supportive culture.
Accommodation: Provide accommodations to employees.
Assistance: Offer employee assistance.
Access: Ensure Access to treatment.
I want to focus on access for now, because no matter how much you try to create a disability-friendly culture, if employees can’t access or afford medication, therapy or whatever medical assistance they need to treat their mental illness on a regular basis, then a huge piece of the treatment puzzle is missing.
APA Publishing, a division of the American Psychiatric Association, recently published an informative article on this issue of access. The article covers a February 2019 panel discussion hosted by the New York Academy of Medicine, the New York County Psychiatric Society, and the New York State Psychiatric Association.
There are a lot of points I find valuable in this panel discussion of several people in the medical community. First, one of the panelists noted how Aetna recently settled a lawsuit in Massachusetts after an investigation found that the insurer violated state law with its “inaccurate and deceptive provider directories and inadequate provider networks.” Basically, this means that patients couldn’t access timely behavioral health care because listed providers weren’t accepting new patients or had retired.
This isn’t necessarily an anomaly, the article noted. For example, it cited a very comprehensive report that’s worth a read for anyone interested in this.
The 2017 research report by Milliman Inc. found that compared to medical/surgical care, people seeking behavioral health care more often have to access an out-of-network provider. While in-network care generally has lower co-pays for patients, when they must seek out-of-network care that means more out-of-pocket costs and more expensive behavioral health care.
Also, the report stated, “Some patients may want to avoid the higher costs and delay seeking needed services from behavioral health care providers, which can lead to less effective care.”
The article also stated the employer’s role in this. An excerpt:
Schwartz said that the business community is a strong ally in improving access to behavioral health care given the high cost of not addressing these issues in productivity loss, lower employee retention, high rates of disability, and higher overall employee costs. “While employers are paying for benefits, they are not getting what they paid for when employees cannot access behavioral health care,” he said. “Businesses are well positioned to ask health plans for data on provider networks and to examine disparities to improve accountability.”
Also noteworthy was a list of actionable items that presenters believe could help improve access to care. For example, a suggestion from the National Alliance and the Center for Workplace Mental Health is that “employers obtain quantitative assessments from third-party administrators on how well their employees are accessing mental health and substance use benefits.”
Again, I don’t want to suggest that environmental factors in the workplace don’t impact people’s general well-being. But offering free yoga classes in your building or teaching employees how to use mindfulness to reduce stress are NOT the medical equivalent of seeing a therapist or accessing an outpatient center.
Self-care is not medical care. If your organization has a deluge of trendy perks to help employees de-stress but doesn’t have a sufficient behavioral health provider network, how much of a difference could that really make?
A few months ago I participated in active-shooter training.
I presented harassment training for a local manufacturer and at its conclusion the company played a 10-minute video explaining to its employees what to do in an active-shooter situation.
Generally I’m not a fan of training videos. They tend to be boring, poorly acted and ineffective. This one, however, was quite effective. It was not only chilling to watch, but, a few months out, I still recall the ABCs of what to do during an active shooter (Avoid, Barricade, Confront).
An Indiana school district, however, had a different idea of how to train its employees to prepare for an active shooter.
This employer had its employees shot in the back, execution style, with plastic pellets.
Local law enforcement carried out the drill with the teachers of Meadowlawn Elementary School in Monticello, Indiana, in January, the Indiana State Teachers Association said in a meeting with state legislators on Wednesday. The drill involveddividing the teachers into small groups and instructing them to face a classroom wall and kneel. Then, deputies with the White County Sheriff’s Office fired plastic pellets into the backs ofmore than 20 teachers without warning. Several teachers were injured, a representative for the district’s union said, though none have publicly come forward about the incident.
The employees’ union further detailed on Twitter the mental anguish its members suffered.
During active shooter drill, four teachers at a time were taken into a room, told to crouch down and were shot execution style with some sort of projectiles – resulting in injuries to the extent that welts appeared, and blood was drawn.
Indiana State Teachers Association@ISTAmembers
The teachers were terrified, but were told not to tell anyone what happened. Teachers waiting outside that heard the screaming were brought into the room four at a time and the shooting process was repeated.
This is NUTS.
We all want our teachers to know how to keep our children safe in the event of an active shooter. I can’t believe I’m typing this … but mock executions are not the answer. To look at this another way, we want to end sexual harassment, but we’re not molesting our employees either.
Is it too early to declare a winner for 2019’s contest?
According to the complaint Jason Fields filed against the Hazard, Kentucky, Hampton Inn at which he worked, and its manager, Sharon Lindon, he had to endure some pretty odd stuff during his employment.
As he tells his story, Lindon decided to help Fields after she learned of his impending divorce. How? By offering to exorcise him.
I can’t do this story any better justice than how Field’s describes it in his lawsuit:
Lindon told the Plaintiff that the reason for his marital problems was that he had demons.
Lindon told the Plaintiff that if he were going to work for her he had to be cleansed.
Lindon told the Plaintiff she had been cleansed three or four times and it was similar to an exorcism.
The Plaintiff was also given a packet of papers by Lindon to be completed and turned in. The packet contained 1 page of instructions, 2 pages containing a release and indemnity agreement, and 9 pages of questions.…
The Plaintiff was told once he had completed the questionnaire, he would need to meet Lindon at the church and have a cleansing performed.…
The Plaintiff refused to participate in any exorcism.
After the Plaintiff refused to complete the form, and then after he completed it, but refused to give it to Lindon, and then refused to participate in a cleansing, (1) his shift was changed, (2) his job duties changed, (3) he was not allowed to take his days off, (4) he was threatened daily concerning the loss of his job, and (5) he did not receive a raise.
Fields ultimately quit.
What information did Lindon pressure Fields to provide?
For starters, workplace-inappropriate information about his religious beliefs and practices:
What is your church background?
Briefly explain your conversion experience.
In one word, who is Jesus Christ to you?
What does the blood of Calvary mean to you?
What is your prayer life like?
Were you conceived out of wedlock?
And then stuff just got weird:
Have you, your parents or grandparents been in any cults?
Have you ever made a pact with the devil?
Have you ever visited heathen temples?
Do you have any witches, such as “good luck kitchen witches,” in your home?
And then downright off-the-rails offensive:
Do you have lustful thoughts?
To your knowledge, was their evidence of lust in your family line?
Do you frequently masturbate?
Have you ever been a victim of incest by a family member?
Have you ever committed incest, rape or molested anyone?
Have you ever committed fornication, adultery, been with prostitutes, had homosexual or lesbian desires or experience?
Have you ever sexually fantasized about an animal?
Have you been in involved in oral or anal sex?
Have you fathered a child that has been aborted?
Has pornography ever attracted you?
Do you have desires of having sex with a child?
I’m a defense lawyer, trained to look at an employee’s allegations with a healthy dose of skepticism. But, does anyone think, after reading Fields’ allegations, that this didn’t happen? Who could make this up? Fields alleges that he “has the form and will produce it.”
Thus, even if just part of this happened, this employer has well earned its nomination as the Worst Employer of 2019.
Thanks to Eric Meyer, who brought this doozy to my attention.
An Australian court has rejected an employee’s claim that his supervisor unlawfully harassed him by farting on him.
David Hingst sought 1.8 million Australian dollars ($1.3 million) in damages based on a claim his supervisor would enter his small, windowless office several times a day and “break wind on him or at him … thinking this to be funny.”
According to NBC Chicago, Hingst said that his supervisor at Construction Engineering, Greg Short, would “fart behind me and walk away. He would do this five or six times a day.” For his part, Hingst would respond by spraying Short with deodorant and calling him “Mr. Stinky.”
The court was not persuaded that the stink bombs were illegal.
In oral submissions, the applicant put the issue of Mr Short’s flatulence to the forefront. He submitted that ‘flatulence is substance’, not merely peripheral, and that the judge should have so found. The applicant submitted that the flatulence constituted assaults, and challenged the notion that he had accepted that the issue was peripheral.
Yet, the court found that the “farting” was not “bullying in the ‘legal sense.’”
This case got me to thinking, has an American tribunal ever dealt with a similar issue?
The closest I could find is Stanford v. Department of the Army, an EEOC decision. The case involved a white male alleging race and sex discrimination. The allegations stemmed from what he perceived as the Department’s different treatment of his farting in the presence of female co-workers as compared to that of an African American co-worker.
Complainant argues that he was “written up” because a Black female accused him of “farting” …. He argues that Black males can “fart” in the presence of the Deputy and other co-workers and not be disciplined….
We find … that complainant’s harassment claim is severe or pervasive enough to state a claim of harassment.
I’m not sure I would have reached that same result.
But here’s the thing. Can we all just act like adults? Yes, farts can be funny. My 10-year-old laughs at them all the time. But he’s 10. He’s not a grown-up, working at a job. So can we all try to act like grown-ups, treat each other with respect, and not make a federal case out of every trivial thing that happens at work? We will all be the better for it.
MoMA PS1, a Queens, New York, art museum, has agreed to settle a pregnancy discrimination claim brought by Nikki Columbus, hired by the museum to direct its performance program.
She alleged that the museum rescinded her job offer after it learned she had recently given birth.
According to The New York Times, Columbus, five months pregnant when she applied for the job, chose not to disclose her pregnancy until after she was hired.
“I just went forward thinking that this is not their business, it’s not relevant to the job and to my abilities,” she told the Times. She added that Peter Eleey, the museum’s chief curator, told her during her interview that her predecessor had been “much less present” after she had a baby.
After being offered the job, Columbus asked Eleey for a soft transition-in period because she was recovering from just having a baby.
Eleey’s response, she alleged, “Why didn’t you tell me this two months ago?” A few days later, the museum rescinded its job offer, telling her that her conversations with Eleey “indicated that [she] would not be able to perform the job as it was structured.”
According to a museum spokesperson, “MoMA PS1 at all times has been compliant with the law and remains committed to supporting women and caregivers. We are satisfied with the agreement and are happy to put this matter behind us.”
Nevertheless, if you fire a new mom because she just had a baby, you might be the worst employer of 2019.
Over the past week, the Department of Labor’s announced proposals for significant (and much needed) regulatory updates to the definitions of “regular rate” and “joint employer.”
The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services.
Payments for unused paid leave, including paid sick leave.
Reimbursed expenses, even if not incurred “solely” for the employer’s benefit.
Reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and that satisfy other regulatory requirements.
Discretionary bonuses.
Benefit plans, including accident, unemployment, and legal services.
Tuition programs, such as reimbursement programs or repayment of educational debt.
This change, if finalized, would be significant, as it would exclude these items of compensations from non-exempt employees’ overtime pay. According to the DOL, this change is needed to encourage employers to offer more financial perks to their employees, as, under the current rules, employers don’t offer these perks out of a fear that it will lead to increased overtime pay. You can read the full proposed rule change here.
Second, the DOL proposed a new four-factor test to determine whether two entities are joint employers over the same employees. Under this proposed new test, to qualify as a joint employer, the entity would have to “actually exercise the power” to:
Hire or fire employees.
Supervise and control employees’ work schedules or conditions of employment.
Determine employees’ rate and method of payment.
Maintain employees’ employment records.
This change, if finalized, would also be significant, as it would limit a potential joint employer’s exposure for wage and hour liabilities of the primary employer. You can read the full proposed rule here.
Both of these rules are open for public comment for 60 days. Stay tuned, as if these become final, they represent key changes to employers’ wage and hour responsibilities.
John Bunch began his career with online retailer Zappos in 2009 as a software developer. Since then, he has become the lead organizational designer and technical adviser to Zappos CEO Tony Hsieh. Bunch was the key leader in the company’s shift from a traditional business hierarchy to a self-organizational structure called holacracy. Workforce Editorial Associate Bethany Tomasian spoke with Bunch about Zappos’ journey away from the more traditional business structure and how holacracy has changed the workplace environment.
Workforce: In your own words, can you describe the concept of holacracy?
John Bunch: There are several different elements that holacracy brings to an organization. Traditional organizations’ hierarchy are positions from entry level to CEO and an employee resides in one place along that ladder. One of the ways that holacracy is different is that it’s a hierarchy of work, not people. That means that within holacracy there are different circles of work and an employee can reside in different circles. A circle is just another name for a team, and an employee holds a certain role in that circle. A single employee could hold different roles throughout several circles in the organization. In that sense, holacracy breaks down the one-person, one-team ideology.
Along with that element, there is distributed authority. In a traditional hierarchy you get the authority from a person higher than you in the organization, your boss. In holacracy there is a governance process which determines what roles have the authority to take which actions. The goal should be to unleash people’s creative power, let them be autonomous and only implement restrictions when there is a good reason. There are processes for distributing authority and for limiting that authority within a circle or throughout the company.
In holacracy there is also the concept of evolution. Within holacracy, you are constantly evaluating if those roles and circles in the company need to change. Anybody in the organization can propose a change to what work is being done. I think in traditional organizations, restructuring work is a big deal that could take months to unpack and it might happen infrequently. In holacracy those restructures of work can happen on a weekly basis.
Workforce:What have been the greatest challenges to overcome in a self-managing workplace that is very adaptive?
Bunch: In self-managing workplaces there is more autonomy and there also tends to be more opportunity. One of the things that we talk about is how traditional workplaces run on a job ladder where your progression at a company eventually leads you to your boss’ position. In our workplace, there are so many roles throughout the organization, and if an employee is interested they can pitch themselves for any role. Our mental model is that we are moving away from the job ladder and to the job jungle gym.
However, with more autonomy, opportunity and self-lead progression comes its challenges. Some people thrive in the holacratic environment while other people need more defined direction in terms of their day-to-day work and overall career. It can be a challenge for those people to learn and grow in the new environment. We’ve done things to help those people adapt such as offering a mentorship through the process of professional development and life-training.
Workforce: What have been the greatest successes since introducing holacracy?
Bunch: The biggest successes are the ideas that get off the ground that probably wouldn’t have happened if not for holacracy. In this new environment, your job doesn’t have to be contained to a specific team as you can move across these different circles which enables people to offer ideas that can benefit the whole company. Whereas at a traditional company, your job might be in finance and finance is all you do.
One example of this was when we launched our initiative Zappos Adaptive. This initiative focused on customers that might have adaptive or special needs in terms of their clothes and shoes. Zappos Adaptive was done through employees whose traditional job did not include this focus. These employees had a passion and a vision for helping people in that community.
Workforce: What lessons have you learned along the way with perfecting this method of organization?
Bunch: Whenever you have a change within your organization, you have to be patient with every team and individual’s journey through that change. Especially with a change as fundamental as holacracy. It could take months or even years to become efficient. Zappos, as an organization, had to be very patient in order to make this change. That is a person-to-person connection and we had to monitor where each employee was during their journey. We preach to not only be patient with yourself but also with others. That went a long way.
We also had to be open to trying new things with no guarantee that they would work. If those didn’t work, then we would have to learn and adapt. A good example of that process was when we were transitioning to holacracy. We were thinking about resource allocation and how that would work in the new environment. We realized that this was causing some big challenges in our business metrics. Our fundamental customer service metrics were being degraded based upon the way that we were operating at the time. That was a big deal to us because it went against out ideology, which is, “To live and deliver WOW.”
We tried something as an organization that ultimately wasn’t working and so we had to shift, learn and adapt. We created systems that righted the shift in our resource allocation and our metrics normalized, perhaps better than they were before. You have to be willing to learn from those mistakes and adapt.
Workforce: How has the self-management of holacracy impacted employee work-ethic and sense of personal value in the company?
Bunch: I think that the ability for different people to get involved with ideas across the company has allowed more self-direction. People can be passion-forward and get involved in things that they are passionate about. That can really help employees see the personal value that they create. This isn’t a part of holacracy specifically, but some of the other systems that are scaffolded on top of holacracy speak to this.
For example, we are working on internal market-based dynamics, which essentially means that each circle in the organization would be run like a micro-business. In this system, each micro-enterprise would be funded by the customers. These can be internal customers or external customers. Instead of a top-down funding model, we are shifting our funding as being derived from the customer of whatever work you do. In a traditional company, employees might not see the value that they are creating. This change is relevant to the employee’s personal value because employees won’t think of themselves as a cost to an organization. By creating these internal customers through these micro-business interactions, employees can really see the value that they add to the company.
Workforce: How can innovation in leadership and organization such as holacracy shape the future of how companies operate?
Bunch: As we grew at Zappos, there was this sense we got from our leaders that the things which worked very quickly as a startup were not happening as fast anymore. If you’ve ever been frustrated by how long it takes you to get something done then you might resonate with this. As we started examining that challenge, we were really inspired by this research that had been done about cities. The research found that every time a city doubled in size, productivity per resident grew by 15 percent. As cities grow, they become more productive on a per-resident basic. However, the exact opposite happens when organizations grow larger. As the size of an organization doubles, productivity per employee goes down. I think we sense this as employees at large organizations when we become frustrated by how long things can take.
What if we could structure our companies in ways that cities are structured? Could we see the same exponential relationship between growth and productivity? That is the vision of where we want to go at Zappos. We want to show that with holacracy we can make more productive and happier employees.
Workforce: What advice would you offer other companies and even startups that are thinking about evolving the workplace hierarchy dynamic?
Bunch: It is easier to start when you are small. At Zappos, we started on this journey when had around 1,500 employees. Some of the challenges that we went through were due to our size. Those were challenges that we might not have had if we started these changes when we were a five-person company. If we started when we were small, some of these changes would have grown in scale with the organization.
I would also tell companies to think small. Think about small ways that you can make your workplace more dynamic and give those a try. If you see positive change, then keep going.
It is easy to go with the status quo and the traditional methods of organization. However, there is a growing amount of evidence of the fundamental flaws with that line of thinking. If you want to have an organization that is inspiring and resilient then it is important to think about these changes.
The H-1B visa approval rate dropped nearly 30 percent from 2016 to 2017, challenging employers and recruiters to find the right talent. Advanced technology, like artificial intelligence, can help.
Many organizations, especially those in technology, higher education and health-related industries increasingly depend on highly skilled non-U.S. candidates to fill positions left vacant due to a lack of experienced or interested domestic workers. A survey by Envoy Global, an immigration services firm, found 59 percent of companies planned to hire more foreign employees at their U.S. offices in 2018, which is up from 50 percent in 2017 and considerably higher than the 34 percent in 2016.
The reason firms are looking abroad: The U.S. is facing a significant skills gap, especially in STEM-related fields. Generational and technological shifts have created new roles, like mobile developers and programmers, that require significantly higher levels of technical or digital knowledge. Other countries tend to have higher quality math and science programs, and this rigorous education produces attractive candidates to fill the hundreds of thousands of new jobs across the United States.
The proposed federal changes to H-1B visa issuance, which include tightening qualification requirements, such as increasing minimum annual salaries, reducing the three-year duration, implementing more rigorous interview processes and limiting visas for family members and more, will make it even harder for workers to get approval to work here in the U.S. In an already extremely tight labor market, these changes add complications for hiring teams to be effective in their chase for talent. Few organizations are immune to the pressures of the H-1B crackdown. According to Envoy Global, 85 percent of U.S. employers surveyed say they have already felt impacts of the shifting immigration system.
Context Around the H-1B Challenge
Having worked across a variety of industries in my career, at privately held companies where visa sponsorship was not common as well as at Fortune 500 companies with and without visa sponsorship programs, I’ve found the immigration challenge is twofold. First, companies often don’t have the infrastructure and budget to support individuals with H-1B visas, since acquiring sponsorship is a long and capital-intensive process that requires involvement from outside immigration counsel. Second, the visa quota set by the government tends to run out so quickly that unless a company proactively applies for a certain number of visas a year in advance, it is left out of the game entirely.
The other element to the H-1B issue that companies must, but often don’t, think about is the well-being of the future employee. When a candidate emigrates to the U.S. to take the job, they must relocate, often with their families, which costs money and requires navigating cultural barriers.
Hiring organizations must decide if they will prepare these individuals with cultural training and help them find communities and schools for their children or leave them to their own devices. Figuring out where to help foreign workers and where to draw the line is never easy as there’s a natural inclination to help; providing support often takes a lot of time and effort from the organization.
U.S. companies are also facing geographic difficulties in sourcing talent. For hiring managers, dealing with restrictions of a candidate’s citizenship reduces the likelihood of finding the best person for the job. It may be that the perfect coding guru or IT specialist is not an American and needs sponsorship to work in the United States.
With tightening qualifications for H-1B visas, recruiting and attracting the right talent gets more difficult, and in some cases is seemingly impossible. Even when looking inside the U.S., IT jobs are easier to fill in metropolitan regions like New York and Silicon Valley. Companies based outside of major urban center locations are having a hard time attracting the talent they need without large hiring budgets and third party recruiting firms with high retainers to help fill those jobs.
Making concessions on skill requirements or a candidate’s experience based on low talent availability is never ideal. When applied on a larger scale and for contract or short-term roles, this brings a completely new set of challenges for hiring teams.
Some of these challenges include higher budgets and increased bids to reach the right level of talent; an inability to fill projects and requisitions quickly; and having to delay projects because the right domestic workers don’t exist or are hard to attract.
It’s also important to note that an HR team’s regular responsibilities don’t stop during the recruiting process, which can lead to either putting projects on hold due to constrained resources, or stretching employees too thin as the company tries to cover the work, which doesn’t create a positive work environment.
When restricted to the U.S. labor market, it can take a long time for companies to find qualified candidates. There have been many times in my career where my team has had to repost job openings several times before we found someone to fill the position.
Typically, teams can fill most positions within 90 days, but STEM roles can take up to six months or longer. In these cases, settling for a candidate that doesn’t have all the ideal capabilities, education and experience is unfortunately common because there’s a dire need to fill the role.
How AI Can Help
The tightening labor market will continue as unemployment rates hit all-time lows, coupled with the proposed H-1B rules. Human resources, consulting and professional services, IT, engineering, management, clerical and administrative gigs are all increasingly being sourced from outside the United States and the changes would affect these areas the most.
Being proactive and staying on top of legislation changes to understand how they impact the organization is the minimum baseline for success, as it helps companies proactively plan their workforce. However, this still doesn’t solve for filling roles that become vacant unexpectedly — so organizations also need a hiring strategy that utilizes technology and contingent labor to fill critical worker voids.
For example, AI mechanisms are aiding hiring managers in bringing in the right talent by making it easier to find, filter, interview and vet candidates on a variety of hard and soft skills. The matching capabilities bridge the skills gap by helping teams find domestic workers when H-1B visa rules make it tough to source abroad. The depth and breadth of candidate screening enabled by AI can help hiring teams find previously considered “nonexistent” employees and go beyond a candidate’s resume to determine if they are the right person for the job.
HR can now prioritize their time on reviewing the candidates that AI identifies, not spending countless hours trying to find the right candidates, sort through scrambled resumes and CVs, or deal with visa paperwork and other regulatory complexities. Not only will they be able to sort through resumes faster, but also get better-qualified candidates to interview more quickly, ultimately gaining an edge in the race for global talent.
Hiring departments across the nation are finding it challenging to uncover the right talent to bridge the growing STEM skills gap as attracting and supporting candidates from abroad is exponentially more expensive and harder than ever before. For U.S. organizations, not being able to find, attract and retain the right workers, especially those from abroad, to fill highly skilled or specialized roles stifles innovation and opportunity. Hiring teams at companies across all industries need to follow the H-1B visa changes, leverage emerging technologies and understand how to attract and acquire the talent they need — at the right cost — regardless of candidates’ country of origin.
Over his three-decade career, Gary Pisano has been a researcher and consultant to many of the world’s largest corporations in various industries from aerospace to nutrition. He is a Harry E. Figgie professor of business administration at Harvard Business School where he has been a member of the faculty since 1988. Pisano’s extensive experience has made him one of the leading experts in management, innovation and competitive strategy. In his new book, “Creative Construction: The DNA of Sustained Innovation,” Pisano examines how businesses of all sizes, not just plucky startups, can become transformative innovators. Workforce Editorial Associate Bethany Tomasian recently caught up with Pisano.
Workforce: When did you recognize the need for leadership-oriented innovation strategies?
Gary P. Pisano: I think it goes back very early in my career working with companies, consulting for them and case writing. I saw that without the right leadership to shape the innovation process, getting the strategy and building the right culture just doesn’t happen. I kept coming across situations with some organizations where you wouldn’t see progress over time. There was no one really taking the ball and running with it to provide that energy. Where there was lack of leadership, I would see there was a lack of progress.
Then there were companies where I would see a leader take ownership and you’d see results. So that crystalized for me that leadership plays a central role in driving innovation. I set out to write the book to give leaders a guide in how to do it.
Workforce: What is the relationship between necessity and competition as driving forces for innovation?
Pisano: I think competition is critical for driving innovation. It provides the motive. I don’t think we see a lot of innovation in sectors of the economy where there is little competition because of there is a lack of incentive. If you look at any of these companies such as Amazon, Apple and Google, there’s a lot of competition going on there between these very techy companies. They’re always changing and they can’t sit still. Competition plays an incredibly important role in spawning innovation and spawning a lot of a good economic outcomes. I’m speaking here as someone trained in economics, so I tend to feel in favor of competition to drive good outcomes in general. Competition does a lot more than innovation, too. It drives better prices and efficiency.
I think competition is one of the reasons companies get interested in innovating, particularly companies whose competitive space has suddenly gotten more intense. They might have had a period where they could get away with not being very innovative and then their space starts to change. That’s when they say, “OK, we need to reenergize this innovation muscle again.”
I’ve worked at a number of those companies where it has been some 20 to 30 years since they’ve been innovative and they got away with it because their markets were only moderately competitive. When the competition kicked up and prices began to erode, they saw they couldn’t generate the margins they needed to sustain themselves without innovation.
Workforce: In an era of nearly exponential technological growth, what defines innovation?
Pisano: We do think about innovation too much as being about the technology change but it’s not always technology. There is a lot of business model change that has very little to do with technology. Technology is not the magic; the magic is their business model.
Think about discount airline carriers, somebody like Ryanair and easyJet in Europe. They all use the same planes and airports as everyone else and they have to follow the same regulations as everyone else. Yet, the story there isn’t about technology; it’s about creating a completely new business model. I think we see a lot of that. There is a lot of business model innovation that doesn’t necessarily have to do with high technology.
Workforce: How can companies stay focused on small-scale innovation rather than becoming distracted by whiz-bang innovative strategies?
Pisano: I think it’s very easy to get inebriated by technology today. To some, it’s all about the technology and pushing the technological frontier. I think you have to go back to letting value become your compass and go back to what your competitive position is. This can help you figure out what you need and what is going to drive innovation. Sometimes that is going to be functionality that is created by technology but sometimes it could be a different kind of service offering, or business model.
Take men’s shaving products. Making a razor blade sharper using ever more sophisticated technology is probably not the value driver, but convenience is something different. Think about companies like Dollar Shave Club and Harry’s, which have online models that provide convenient access to the product. This goes back to the source of value and what customers would be willing to pay for. That’s the acid test of value.
Workforce: Are there examples of established companies that are leading in innovative strategies?
Pisano: I think there are many of them across all sectors of the economy in different ways. Innovation is in almost every sector. You see it in apparel with people buying clothing online. The whole retail sector is being turned on its head, so we see a lot of innovation there as well. If you are going to survive you need to innovate.
There is a lot interesting stuff in the auto industry today. People talk about the auto companies as being dinosaurs, but they are doing a lot of innovation on the technological side. They are doing a lot of advancement around alternative fuel and most of them have some major programs there. They are also experimenting with new business models such as ride sharing. Sometimes it’s the companies that we don’t think of as innovative. When people think of innovative auto companies everyone thinks of Tesla. There are some major auto companies that we haven’t normally thought of as these bastions of innovation that are doing fascinating things.
There are also profound changes going on technologically in the drug industry. These aren’t business model innovations per se, although many pharmaceutical companies are experimenting with new business models. There are scientific changes happening that these companies are actively involved with and investing in. It’s not just startups that are innovating, there are large, established companies.
Every company, I don’t care who you are, there is an opportunity to be an innovator. Some might say, “Innovation doesn’t apply to us. We can do what we have been doing, just do it a little better.” I don’t think that there are many sectors of the economy where that is true anymore. Particularly in the U.S. economy, where we are facing global competition. That’s going to be hard to compete on.
Workforce: As climate change remains an ever-encroaching threat to the environment, how can more companies gear strategies toward greener innovations?
Pisano: I think companies are looking very carefully at their incentives to do it. This is where government policy matters because policies often create the incentive for companies to innovate. Tax policies and other regulations can tilt the field, so you will see that kind of innovation. A lot of companies are waiting and watching. Auto companies certainly see themselves on the forefront of green innovation as they invest heavily in alternative fuel sources. I think that there are a lot of things that every company can do in terms of climate concern.
Think about plastic. Plastic is atrocious for the environment and it’s all over the place. Just thinking about changing materials doesn’t require massive innovation. You can see how much waste there is every day, especially in packaging. A lot of the stuff you buy online that is shipped to your house is loaded with plastic and Styrofoam. None of us want our stuff to be broken but there is an awful amount of waste just in packaging. We don’t think of packaging as this big innovation opportunity but figuring out ways to cushion items without using so much plastic would be amazing.
I think regardless of what business you’re in, you could be thinking about fitting green innovation into your business model. This can be done by just improving efficiency. Even incremental improvements in process efficiency, where you use less energy, can accumulate quite a big effect.
Again, we can see this in the auto industry where cars have become more efficient. We now have smaller cars with much cleaner and more powerful engines. That innovation was largely driven by change in fuel and clean air standards. This is an example of how government policy matters when it comes to driving the incentive for companies to pursue climate-conscious innovation.
There are tons of opportunities for innovation that help the climate. I do think companies need polices that provide those incentives. I would tell companies to have a clear strategy of how you are adding climate change as a priority into your innovation portfolio. Ask yourself how this is going to create value and think about your broader competitive advantage.
Workforce: Any final takeaways for companies that are thinking about approaching innovation?
Pisano: Take your time. There is no magic bullet for these kinds of strategies. I wish I could offer you three easy steps but if innovation were easy then it wouldn’t be a source of competitive advantage. If it were easy, then it wouldn’t be valuable.
It is hard to build an organization that is capable of innovating and doing it over and over again. If you can do that, then your organization has a fantastic competitive advantage.
