Moving From Human Resources to Human Capital to Build Culture of Innovation

Human Resources remains a compliance function in many companies. Building a culture of innovation and promoting creative flow requires reframing HR as a human capital function that develops needed leadership at all levels.
— By Daniel Perez

Human capital is defined as the economic value of an employee's knowledge, skills, experience, education, training, and intelligence. Missing from this definition is the ability to innovate and be creative. Human capital is crucial for business growth, competitiveness, productivity, and success, so leaving innovation and creativity out of the human capital definition ignores a critical element of economic value generation. Organizations know they need a culture of innovation, but do they know how to develop it?

Human capital professionals are tasked with bringing out the best in leaders on all levels and dimensions as contributors to business success through a culture of innovation. Organizational leaders must know how to empower employees and promote a sense of belonging so all people feel free to express their creativity. The recruitment and retention of leaders who understand empowerment and are willing to take calculated risks is at the core of an innovative culture. Without the right kind of leadership, innovation will remain in the shadows.

Meeting the Needs of the Employee Instead of Needs of the Company
The use of the term "human capital" (HC) instead of "human resources" (HR) is intentional.

HR is a function that focuses on compliance with company policies and procedures and federal and state laws. The HR team ensures compliance with compensation schedules, manages benefits programs, posts positions, and performs a host of other crucial responsibilities.

More HR professionals are transitioning to HC professionals because of what is missing in the traditional HR function – hiring and empowering leaders who understand the importance of developing people to generate innovation, competitiveness, and growth. HR considers a person's job title and job description. HC considers the person's capabilities and what needs to be done to ensure all employees are given opportunities to contribute full value and grow with the company. HR considers the needs of the company. HC considers the needs of the employees.

Employees must be given time to be creative, and in the traditional leadership style, this may seem like unproductive time.
A culture of innovation depends on its leaders understanding how to empower employees. The HC professional can play a central role in a variety of ways. Banfield Pet Hospital in Vancouver, Wash., which is owned by Mars Inc. and the largest privately owned general veterinary practice in the U.S. with more than 1,000 veterinary hospitals. The company is striving to better connect with its 17,000 associates, and its new President Brian Garish began by looking for a person to run its People & Organization function. Brian believed it is the HC leader who must know how to develop people, make better leaders, and create dialogue with leaders concerning developing employees. Dozens of chief HR executives were screened and few talked about developing people. They were compliance and efficiency people, focused on running programs rather than people. Brian wanted a people person. The person who was hired is a transformational diverse woman – Stephanie Neuvirth who The People & Organization Senior VP shares accountability for culture, aligning teams, talent development, analytics, using artificial intelligence, and designing talent strategies.

Getting Comfortable
Companies are using a variety of ways to develop a workspace that encourages people to innovate at all levels.

The insurance staffing and consulting company Jacobson Group promotes a culture of innovation by promoting an open door policy in which employees are encouraged to share their ideas with managers. There is an open floor plan, casual dress code and an emerging talent service. All were employee ideas. The important message the company sends is that employee ideas and insights need feedback, and that means the culture of innovation must be embraced from the top down as a core value. The HC professional is a key person in developing the kind of leaders across the organization that know how to promote innovation. Without empowering leadership at all levels, there will be big gaps in the effort.

Gabriella Rosen Kellerman is the chief innovation officer at BetterUp, a mobile-platform coaching company. She wanted to help new team members contribute quickly after onboarding so partnered with HR to develop a custom coaching program. The company also created a library stocked with books that were instrumental in the company's development, creating a comfortable space for the exchange of ideas and intellectual stimulation. The company tracks what people read and rewards those who make the effort. Another strategy the company employed to promote innovation is designating "no-meeting Fridays" and "inner work days" in which people are encouraged to focus on creative flow and reflective practices instead of answering emails and phone calls.

Leaders Taking Risks
Leaders must be willing to take risks to create a culture of innovation. They must be willing to listen to any kind of idea, ask probing questions, provide feedback, and follow through.

Data can play a role in capturing innovation and promoting the desired culture. The HC professional can make analytics available to leaders via dashboards to drive the continuing flow of new ideas. Instead of simply measuring employee engagement, the HC professional can collect and share data from the strategies implemented to promote innovation – number of new ideas, number of ideas pushed forward and rejected, ideas by level of employee, type of feedback, and other data that can deliver a picture of how well the organization is doing in generating innovation.

Leaders in innovation, like Google, LEGO and Amazon, can give the impression that a company must be very large and have unlimited cash flow to create a flow of creativity. Employees must be given time to be creative, and in the traditional leadership style, this may seem like unproductive time. The role of a HC professional is to change leadership mindset and behaviors and to assist with the hiring of leaders from this point forward who can support the desired culture.

Any size company should encourage employee creativity. Employees need to feel free to focus on new ideas and approaches to work, opportunities to indulge in blue-sky thinking exercises, encouraged to brainstorm ideas, and allowed to fail.

None of these strategies fit the traditional leadership role. It takes a HC development perspective instead of a HR compliance focus.