Creating a
Climate for Innovation
A Link Consulting White Paper
May 2014
Climate for Innovation
Rapid technological change, increasing global competition, and economic uncertainty all
contribute to companies’ increasing interest and focus on creativity and innovation.
McKinsey & Company (2014) released a special report stating, “digitization, automation, and
other advances are transforming labour markets, and the global economy . . . every leader
should care about digitization and disruptive innovation.”
Increased economic uncertainty has caused companies to be even more risk averse and
cautious with resources. Companies are either holding onto cash at record levels and/or
spending on stock buyback or dividend payments rather than spending on innovation
(Israelson, 2013; Rossi, 2013). Leaders are increasingly being asked to do more with less:



85% OF CEOs surveyed expect cost pressures to increase or continue
64% of that same group also expect revenue expectations to increase
Investment analysts continue to expect rapid growth for companies despite years
of cost cutting and anaemic growth (CEB, 2013)
Clearly, companies need to be able to generate new ideas to fuel growth. At the same time,
they need to be able to increase both the effectiveness and efficiency of the innovation
process. Increasing effectiveness means coming up with better ideas; moreover, these
ideas must be of a higher quality. High quality ideas are those which are truly distinctive,
workable, and profitable. However, it is very difficult to generate high quality innovation and
see it through to implementation. It’s even harder to sustain a track record of innovation
over the long term. Strategy professor Roger Martin (2014) stated, “that which can be built
simply and quickly can be simply and quickly torn down” through leap frog innovation and
market shifts. Transformative, breakthrough, and disruptive innovations provide true,
sustainable competitive advantage.
Increasing innovation efficiency means increasing the probability of success and reducing
the time and cost of the process. By definition, one cannot guarantee a successful
innovation project. However, there is a great deal that business leaders can do to improve
innovation effectiveness and efficiency.
One way leaders can increase innovation effectiveness and efficiency is by creating a
climate of creativity, or a place where new ideas are invented. This type of creative climate
often leads to innovation, which is “the translation of these ideas into useful new products”
(Hunter, Bedell, & Mumford, 2007). We are intentionally using the word “climate” here to
indicate that we are talking about the employee’s perception of their immediate work
environment (e.g., at the department, group, or team level) versus the word “culture” (e.g., of
the overall organization). Research has shown that climate is an effective predictor of
creative performance and, further, that creative people are especially influenced by climate.
A recent analysis of 42 research studies (Hunter, Bedell, & Mumford, 2007) found several
climate factors which significantly and positively impact creative performance. Here, we will
present ten of the most important factors along with practical examples of how each can be
implemented in organizations.
Challenging Work
Making the work challenging means designing jobs and tasks that are demanding, complex,
and interesting; yet, they must not be overly taxing or unduly overwhelming. Challenging
jobs are typically characterized by skill variety, autonomy, ambiguity, and frequent changes.
When jobs are complex and challenging, individuals are more excited about their work and
interested in completing their job well (Oldham & Cummings, 1996). Challenging work is
also often perceived as more significant and meaningful by employees, such that they may
derive their identity from the work. In fact, some research suggests that more complex jobs
may demand more creativity simply by requiring employees to focus on multiple things at
once and to shift their focus more often (Oldham & Cummings, 1996).
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Climate for Innovation
Leaders can influence this factor through job design by injecting enough complexity and
variety into the job to keep things interesting. Deconstructing processes and activities into
“assembly line” jobs which become routine and monotonous reduces creative performance.
Further, leaders can create a stimulating climate by setting challenging goals for the
workgroup. Innovation expert and Professor Christina Shalley (1991) found that teams given
challenging goals around productivity and creativity produced the highest levels of creative
performance.
Intellectual Stimulation
In this context, intellectual stimulation means encouraging open and honest debate and
discussion of ideas. Creativity flourishes in work environments where meaningful exchanges
take place around significant issues and ideas. (Note that discussion about interpersonal
issues or criticisms of individuals negatively impacts creative performance.) This kind of
debate takes time, focus, and
interaction in both formal and
Managing Virtual Teams
informal settings. In today’s
In today’s global workplace, virtual teams are very
virtual workplace, a
common. In fact, geographic diversity is an
controversial policy might be
advantage to innovation teams. However, it is much
required to create this type of
more difficult to create a climate for innovation within a
environment. Marissa Meyer
virtual team. Because team members tend to meet
was frequently criticized when
only when there is a particular purpose, the members
she rolled back Yahoo’s work
do not get the chance to engage in “ad hoc”
from home policy. However,
brainstorming or problem solving discussions over
she stuck to her decision saying
coffee or tea. In addition, research has shown that
employees are “more
virtual teams exhibit much more defensive
collaborative and innovative
communication patterns and less cohesion than face
when they're together. Some of
to face teams (Hunter, Thoroughgood, Myer, & Ligon,
the best ideas come from
2011). Thus, it is important to build in some face to
pulling two different ideas
face interaction for the team early in the project to
together (Tkaczyk, 2013).”
begin to build cohesion. Also, building a virtual space
Clearly, leaders must also be
to share ideas and feedback is another
courageous enough to welcome
recommendation to help facilitate sharing ideas,
challenges and facilitate open
brainstorming, and problem solving.
and honest conversations with
(Recommendations are from Watkins, 2013.)
employees. It takes courage to
field tough questions, but
leaders who are open to debate and questions foster trust and model constructive ways of
handling conflict. We’ll discuss these two elements in greater depth in later sections.
Positive Interpersonal Cohesion
Creativity also flourishes in climates where employees perceive a sense of togetherness and
cohesion and absence of emotional conflict. Organizations which emphasize group
success, rather than individual success, tend to have stronger interpersonal cohesion.
Collectivistic cultures where employees identify more as team members working toward
shared goals also foster greater positive interpersonal cohesion (Rawlston, 2005). Fostering
positive interpersonal relationships can be difficult when you must also encourage open
debate. It is important for the leader and group members to acknowledge the need to debate
ideas and issues while, at the same time, being careful that the debate does not erode
positive interpersonal cohesion. Continuing to have open conversations may even improve
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Climate for Innovation
interpersonal cohesion. Leadership expert Judith Glaser (2014) provides this advice to
manage interpersonal conflict:



Clarify the conflict by talking through each party’s position on the matter.
Consult a neutral friend or colleague.
Reframe the conversation to focus on finding common ground.
Conversely, leaders have to be careful not to err too far in fostering strong interpersonal ties.
In groups where relationships become more important than task performance, group think
can occur. Group think reduces team members’ willingness to express opinions that may
upset others on the team and reduces open debate of ideas and creativity.
Trust & Safety
Research and practice clearly show that a climate of trust and safety facilitates creative
performance (Reiter-Palmon, de Vreede, & de Vreede, 2013). We also know that it’s
important to establish this climate early on because it’s difficult to rebuild trust after initial
impressions have formed. Global innovation expert Charles Day (2013) says that “the fuel of
trust is transparency.” Transparency doesn’t necessarily mean telling everyone everything,
but it does mean being as open as possible with employees. This includes also being open
about what you do and don’t know, as well as, what you can and cannot share.
Transparency is demonstrated through work processes and evaluations. Leaders must
ensure that evaluation standards can be respected and are consistently applied.
Building trust also means showing
you trust your employees. Even as
“The best collaboration comes when there
Netflix has grown and become a
successful public company, it has
is trust . . . if you go one step further than
not implemented formal time off or
that it’s about generosity . . . People who
time and expense policies. Instead, it
are givers . . . are highly successful,
trusts employees to use their
complete all their objectives, and are
common sense and make decisions
incredible at networking, empower(ing)
in the best interest of the company.
This climate of trust helped Netflix
other people and help(ing) innovation.”
win 3 Emmy Awards, grow to over
Dana Anderson, Chief Marketing Officer at
25 million US subscribers, and triple
Mondelēz (Baker, 2013)
their stock price in 2013. Creating a
climate of trust must go beyond
policies and posters on the wall.
Organizational leaders must
demonstrate trust in their daily activities by assuming positive intent and giving colleagues
the benefit of the doubt.
Flexibility & Risk-Taking
Encouraging flexibility and risk-taking means being comfortable with the uncertainty that
comes along with creative work. Organizations that embrace the knowledge gained from
errors have a competitive advantage over those that ignore, discourage, or punish failure.
Leaders must clearly communicate through word and action that errors are to be learned
from and they must present opportunities to learn and improve (Hunter, Thoroughgood,
Myer, & Ligon, 2011). IDEO, the innovation powerhouse, shows support for risk-taking in a
company slogan, “Fail often to succeed sooner (Fredman, 2002).” MIT’s Andrew McAfee
advises innovation leaders: “do an experiment, set up at test . . . post a challenge . . . watch
what happens as a result (McKinsey & Company, 2014).” Given the technology available to
today’s businesses, failure is less expensive and time consuming than ever before. Through
rapid prototyping using digital models, 3D printing, and virtual focus groups, innovators can
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Climate for Innovation
test concepts quickly at a fraction of the cost. Scale is important here. Make your mistakes,
during prototyping which limits the risk, before moving into large scale production.
Harvard Professor Rosabeth Moss Kanter (2006) points out that flexibility is also key in
innovation efforts. For example, Honeywell set up a venue for divisions to present their best
innovation ideas during quarterly budget reviews. However, none of the budgets contained
funds for emerging ideas. Thus, the leaders were forced to fund projects by finding cost
savings in other areas. In contrast, IBM has set up a US$100 million innovation fund to
support new ideas which might emerge during the year.
For most managers, risk and error are things to be managed out of the process and leaders
are often uncomfortable with the idea of “rewarding failure.” However, we must make an
important distinction here. The idea is not to “reward failure,” but to encourage leaders to
reward quality attempts that result in learning. Making this distinction ensures that the
innovation team does not become complacent or too comfortable with failure.
Autonomy
Providing employees with autonomy in doing their jobs is another important aspect of a
creative climate. Autonomy can be seen as an extension of trust because management
must trust employees to provide them autonomy, but it goes a step further. Decades of
research on innovation clearly demonstrates that innovators prefer the freedom to be selfdirected and independent (Hunter, Thoroughgood, Myer, & Ligon, 2011). Innovation author
and researcher Scott Anthony (2012) observed that in the 1950s and 1960s the most
successful innovators chose to work autonomously outside of the bureaucracy of large
companies. Today, large corporations (e.g., IBM, Medtronic, Unilever) are creating so-called
“corporate garages” allowing innovators autonomy in their work while still enabling them to
draw on the overall resources of the organization. For example, China-based Haier Group
was recently named one of Fast Company Magazine’s 2014 list of 50 most innovative
companies in the world based on the work of Haier’s self-organizing employee workgroups
(Safian, 2014). These groups work autonomously to track evolving customer and market
trends and, then, to develop and launch new products (Haier, 2014).
Mission Clarity
Mission clarity is another critical aspect of a creative climate that can be highly influenced by
the leader. Academic and applied research clearly shows the importance of setting forth a
clear mission and engaging innovators in that endeavour (Hunter, Bedell, & Mumford, 2007).
There are two main steps to creating mission clarity within the team. The first is to define the
mission. This is often called “problem identification” or “problem construction” in the
academic literature and has been shown to be highly correlated with creative production and
solution generation (Reiter-Palmon & Illies, 2004). We also know that it is important to view
the problem broadly from multiple perspectives using experience from inside the
organization as well as the market and competitive landscape. Because the leader typically
has the most comprehensive viewpoint, his or her input in problem identification is vital.
IDEO, the global design powerhouse, recommends distilling these issues into one wellarticulated problem statement, while being careful not to pre-suppose any potential solutions
within the problem statement (Fredman, 2002). For example, rather than defining the
problem as “to get more people to take public transport to work,” it should be stated as “to
reduce traffic, pollution, and energy consumption related to worker commutes.” Notice that
the second doesn’t dictate a solution, but it does focus the problem on workplace
commuters.
The second step in creating mission clarity is to make clear strategic decisions that set the
context for innovation (Anthony, 2012). These decisions send strong signals about the
company’s strategic direction and the competitive landscape. Bain and Company in a 2013
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Climate for Innovation
study found that setting clear, specific innovation goals and models was the single most
important factor dividing top performing innovative companies from weaker performers.
They suggest that creating passion for the mission by capturing the hearts and minds of
innovators is also an important part of this factor (Almquist, Leiman, Rigby, & Roth, 2013).
Leaders need to ensure that innovators are given a clear, compelling, and aspirational
mission that challenges the mind and engages the heart. Charles Day (2013) suggests one
way to do this is to build the mission from the future back. Imagine how you want to impact
the world 5 to 10 years into the future. Once you have that destination in mind, your day to
day decisions can be weighed against if they bring you closer to that destination.
Commercial Emphasis
Promoting a strong balance of practicality and originality is another important aspect to
creating a climate for innovation. As mentioned in the opening of this paper, both are
required to produce commercially viable solutions. A solution that is original but not relevant
or effective (or not profitable) is of little use to the organization. Likewise, some solutions are
practical and effective but not original. Those solutions may work in the short term, but they
are not innovative. Thus, they are easily replicated and do not represent sustainable
competitive advantage. This is why “blank slate” brainstorming doesn’t work as well as
expected. Putting practical constraints on brainstorming has been shown to yield better
results (Heath & Heath, 2007).
Resources
Just as innovation is a risky endeavour, it can also be costly. Innovators need to perceive
that the organization is willing to invest the time and money necessary to support innovation
and implementation of these efforts. As pointed out earlier, leaders need to purposefully
plan for flexibility in budgets to support innovation efforts as they emerge. Likewise, leaders
need to allow flexibility in time allocation to encourage innovation. 3M’s policy allowing its
engineers to take 15% of their workweek to focus on independent projects has yielded such
innovations as the Post-It Note. Google allows employees to use one day a week (20% of
their time) on independent projects. Google’s policy resulted in Gmail.
Lavish spending on innovation is not required and it can actually be detrimental to the team’s
climate for innovation. Leaders need to provide enough resources to allow for proper
innovation. Yet, research has shown that an overabundance of resources can lead to
complacency and that some limitation of resources leads to resourcefulness which drives
innovation (Hunter, Thoroughgood, Myer, & Ligon, 2011). This same idea holds true for time
resources as the leader must allow adequate time for innovation but also be able to make a
call about when to “shelve” an idea that is not currently viable to technical or market reasons.
Ensuring adequate resources is not only important in the ideation phases of innovation.
They are, perhaps, even more important during the testing and implementation phases.
These steps require a great deal of patience and significant investments of time and money
to ensure the innovation becomes reality.
Leadership Support
Finally, innovation teams must believe that their efforts are important to top management.
The innovation team leader can influence this factor greatly by serving as a conduit between
the team and more senior leadership. The leader must sell the importance and potential
impact of innovation efforts to more senior levels in the organization. Likewise, the leader
will carry and interpret important messages from senior leadership back to the innovation
team. While leadership support for innovation is important overall, it is most important in the
testing and implementation stages of the innovation project. Earlier stages are primarily
driven by intrinsic motivation for innovative teams. Leadership support becomes more
important in the later stages. For example, during the testing stage, timelines and resource
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Climate for Innovation
needs become less predictable. Patience in support are necessary to ensure good ideas
are not abandoned too soon. Implementation is more predictable yet can be more
challenging to the organization’s resolve to follow through with the innovation. Rolling out
major changes across the organization to people uninvolved with the effort will require senior
leaders’ influence, patience, and resource support. During this phase, many people will
resist the change for a variety of reasons and will need to be convinced by leadership that
the change is needed.
Summary & Conclusions
Research and practice clearly show the strong positive impact that climate can have on
creativity (Hunter, Bedell, & Mumford, 2007). The positive linkage between these climate
factors and performance are applicable across a wide variety of work environments,
including those which do not require creativity. In fact, many of the same factors that drive
innovation are found in companies who are on Fortune’s 100 Best Places to Work For list.
Specifically, the factors of intellectual stimulation, trust, and mission clarity are highlighted as
driving engagement and lowering turnover (Dishman, 2014). Most of these “local” climate
factors can be influenced by the division, group, or team leader rather than trying to address
the overarching organizational culture. Strong, involved leadership can have a radical
impact on creativity and innovation by establishing the right climate early on in the creative
process (Reiter-Palmon, de Vreede, & de Vreede, 2013). However, creating and
maintaining the right climate is just the beginning. In future white papers, we will examine
two important factors: leading the innovation process and leading innovative teams.
Ten Climate for Innovation Factors
1. Challenging Work
Non-routine work characterised by variety and frequent
changes.
2. Intellectual Stimulation
Robust, open debate of ideas
3. Positive Interpersonal
Cohesion
Absence of interpersonal conflicts, team cohesion
4. Trust & Safety
5. Flexibility & Risk-Taking
Trust to empower team members to take risks and
safety to challenge the status quo and make mistakes
Comfort with uncertainty and viewing failure as an
opportunity to learn
6. Autonomy
Encouraging self-direction and independency
7. Mission Clarity
Sharp alignment on a shared problem to solve
8. Commercial Emphasis
Balancing business profitability equal to originality
9. Resources
10. Leadership Support
Organisational investment of people, time, and
finances into innovation
Influence and connection to other parts of the
organisation
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Climate for Innovation
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Acknowledgements
We would like to thank Dr. Roni Reiter-Palmon for her inspiration, encouragement and
advice on this paper. Roni’s research and thought leadership serves as the foundation for
this effort. Over the years, we have dreamed of collaborating together to bridge the gap
between research and practice on the topic of innovation.
Dr. Reiter-Palmon is the Isaacson Professor of Industrial/Organizational (I/O) Psychology
and the Director of the I/O Psychology Graduate Program at the University of Nebraska at
Omaha (UNO). She is also serves as the Director of Innovation for the Center for
Collaboration Science, an inter-disciplinary program at UNO. She received her Ph.D. in I/O
Psychology from George Mason University, Fairfax, Virginia. Her research has been
published in Journal of Applied Psychology, Creativity Research Journal, The Psychology of
Aesthetics, Creativity and the Arts, Human Resources Management Review, and Leadership
Quarterly. Her applied experiences include consulting to and grants totaling over 6 million
dollars from Fortune 500 companies as well as the government and military. She is the
Editor of The Psychology of Creativity, Aesthetics and the Arts, an associate editor for
Journal of Creative Behavior, and the associate editor for the European Journal of Work and
Organizational Psychology. She serves on the editorial boards of Journal of Organizational
Behavior, The Leadership Quarterly, Journal of Leadership and Organizational Studies,
Journal of Business and Psychology, and International Journal of Problem Solving and
Creativity.
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Link Consulting helps companies translate business strategy into people strategy by
ensuring individuals understand their role within the strategy and maximise their ability to
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