Prof. and Vice-Dean Tales Andreassi of FGV-EAESP shares research into the effectiveness of building good working climates to boost performance.
Based on on a research paper by Hashimoto, Marcos & Andreassi, Tales & Nakata, Lina & Artes, Rinaldo. (2016). Is Job Satisfaction Enough? Entrepreneurial Orientation vs Internal Climate Effects on Performance. Academy of Management Proceedings. 2016. 10971. 10.5465/AMBPP.2016.
Despite continuous efforts among companies to improve the internal working climate, many organisations still struggle to tangibly link employee job satisfaction with overall firm performance. This is particularly the case when there is a clear strategy to seek competitiveness through internal innovation: highly motivated teams, happy with their working conditions and with a high level of job satisfaction, do not necessarily generate innovative ideas. Using the data collected from surveys carried out among 69,000 employees in 213 companies in Brazil, prof. Tales Andreassi decided to investigate the enigma and compare firms that implement HR practices to create positive working climates with firms that implement, instead, an entrepreneurial spirit.
The satisfaction of the happy few
Despite external challenges and unfavourable circumstances, some companies still manage to obtain extraordinary achievements. Previous research has indicated that these happy few are characterized by employees that learn how to solve problems and conflicts through the development of a culture that emphasizes mutual trust, cooperation and open exchange of information. Needless to say, efforts to attract and retain talent through a good working climate is a key HR strategy. However, for many firms trying to improve the internal climate in return for expected performance the results actually show no improvement at all. This has led to the conclusion that HRM practices are not enough to engage employees in the competitive skills and competences required to improve firm performance – and consequently this has triggered a search for other factors that could explain the success of the happy few.
One factor under the research lens is what is termed Entrepreneurial Orientation (EO) – a behavioural phenomenon related to entrepreneurial and intrapreneurial attitude, culture, climate and mindset. Prof. Tales Andreassi forwards the argument that while good working conditions and job satisfaction might attract highly-qualified personnel, it is the level of entrepreneurial orientation within a company that results in making things happen and innovation among employees to really take off. The assumption behind this is that the proper conditions to generate and implement innovations are as crucial as attracting and retaining talent.
The importance of innovation
There is no doubt about the importance of innovation in the search for competitiveness. Innovation – the identification of opportunities, structuring of ideas and the ability to achieve relevant results – relies on the support and motivation of top management who set up up reward mechanisms, provide innovation-centric activities and encourage the creation of value. Some successful companies even inscribe innovation in their corporate values as a trigger for continuous change and transformation. But there’s a drawback. For most companies, improving the working environment remains the basis for achieveing innovation – and this doesn’t work. Moreover, in most organisations, the pursuit of innovation is nothing more than rhetoric. Size, complexity, slow decision-making processes and lack of vision for change are typical of such firms. And typically too, opportunities are missed as they arise. Looking deeper into the issue, the innovation that is expected to happen internally is often hampered by conflict.
Calling all agents
Prof. Andreassi points to what is termed ‘agency conflict’, agency being the ability of an individual to influence a process or an existing status. It refers to the way individuals interact with the environment to turn it in accordance to their own cognitive perspectives, influenced by their motivation, desire, purpose, intention, choice, initiative, freedom and creativity. Imagine any workplace – if everybody has a different view of how things should be done it is hardly surprising that conflict arises. Moreover, imagine a workplace in which top management encourages innovation – something that naturally implies change and disruption. And naturally, some people feel more comfortable when they can eliminate or minimize uncertainty and gain more stable processes. But what is good for some may be frustrating for others – especially those seeking opportunities to innovate via their own ideas, ambitions and creativity. This creates conflict. And conflict – not to mention internal politics and manouevering – is bad for innovation. It is here that entrepreneurial orientation can provide a beneficial environment for everyone to thrive.
The positive influence of entre/intrapreneurship
Entrepreneruship is beneficial: it opens people up to risk – and tolerance of it – proactivity, perseverance, adaptability, cross-functional co-constructing and an acceptance of failure as part of the path to success. Entrepreneurial oriented organizations act to minimize the barriers imposed by structures, rules and agents in order to stimulate employees to generate ideas without compromising process flows, internal controls and current daily operations. For this, an organizational environment has to be flexible in its administrative relations, informality and information processing capacities. Compensation and incentive initiatives are also triggers for an intrepreneurial mindset, although Tales Andreassi’s research also points to managers easily achieving these mechanisms when a good internal climate is already in place in the organizational culture. Indeed, classic HRM practices that include selection and recruitment, performance assessment, training and development, compensation systems, career development and employee relations can be seen as enablers of entrepreneurial orientation.
Prof. Andreassi’s research indicates that entrepreneurial orientation exerts more positive effects on firm performance than good internal climate and job satisfaction. However, he argues, a good working environment is a key pre-requisite for entrepreneurial orientation but will only be effective when intrapreneurs are allowed to proactively make impactful changes.
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