Ownership & Creativity at Work – Generating Innovation in the Social Sector

Innovation in the social sector is more likely to succeed if it is part of a larger program of organisational reform, writes Alan Greig from Employee Ownership Australia Ltd.

At the time of his elevation to Prime Minister, Malcolm Turnbull made the statement “the Australia of the future has to be a nation that is agile, that is innovative, that is creative”.

There is now much debate about how to generate this in the broader economy, with some of it impacting on the social services and Not for Profit sector.

Much of the innovation in the NFP sector though isn’t really “innovation” in terms of implementing something that is a very different idea or way of doing things. Change in the social services sector is usually more about “business improvement” rather than innovation – that is, more of the same, only better.

It might be that the NFP sector can avoid the intent in the statement above, but it won’t be able to do so for long. Technological disruption is a certainty and is coming sooner than most expect, with service users likely to be the primary beneficiaries.

What barriers are there to innovation in the social sector? Reflecting on our work in the field of employee ownership, these can usually be found in the more stifling aspects of “workplace culture”.

All Australian workplaces have a culture. Much of it is encapsulated in the organisation’s formal policies and procedures which are generally available for all to view. There is, however, another area of organisational culture that is equally powerful, but sometimes far more difficult to discover.

It is often best explained by the simple expression “it’s just the way we do things around here”.

Such habits, practices and traditions can be so entrenched in an organisation that they may be invisible to the outsider or new employee, but they have an enormous amount to do with what happens with innovation at work.

The implementation of innovation is far more likely to be a success if you have done some homework on the kind of culture that exists in your workplace.

Cultures are created by the people in the organisation. It stands to reason that if an organisation is described as inflexible, or bureaucratic, then this is definitely not the place to expect a new idea to be an immediate success! These attributes are also the platform for groupthink and disempowerment in the workplace.

A persistent theme about “ownership culture” is that when people work together to make decisions, the decisions are usually both smarter and more widely supported. The notion (and research) behind this has a simple premise: get employees – especially those on the front-line – to talk to one another about innovation and good things can happen.

Employees exchange information to refine ideas. When an idea gets discussed, it stimulates people to focus on an issue they might otherwise not have considered. It brings people with different experiences to bear on a problem, a useful tool given that creativity is often simply the process of focussing different perspectives on a problem.

If done right, it gets people involved who otherwise would not say anything. And when the decision is made, people comply with it with a great deal more energy.

Despite all their advantages, however, groups of people do not automatically make better decisions.

There are a few key problems to be particularly vigilant about:

Groupthink: We have all been involved in a process (think “Local Service Planning Forums”) in which a group forms a consensus around the views of its strongest members – even if their arguments are not well supported. Contrary arguments are not considered seriously, or even sought. Dissidents are seen as disruptive or disloyal. Negative information is discounted or ignored. The group may even develop a sense of moral certainty and superiority. Groupthink often emerges where there are very strong leaders and an unequal distribution of power.

Excess faith in consensus: Groups of all stripes tend to work through consensus. That has many advantages, but it can also mean that the maverick ideas that turn out to be real breakthroughs can be discouraged. It also can push decisions to the lowest common denominator, not the optimal solution. There is a powerful logic behind accepting a solution we can all live with, even if it is not the best one.

Negative geniuses: Where groupthink doesn’t rule, research shows that the most negative people in a group are usually seen as the smartest, creating a bias to inaction. After all, it’s a lot easier to suggest reasons something might not work (eg: “lack of funding”).

So when it comes to creativity and innovation in the social sector, there are a number of “myths” surrounding this that can be explored.

Fear is the key – you can’t stimulate innovation in environments in which people do not feel secure that they can take risks and challenge existing authority – especially in a prevailing culture  of “this is the way we do things ‘round here”.

So how do these impact in the social sector where the tradition has been that employees assume that the way things are done reflects approval from those in authority. In this environment, if you have some ideas that are a bit different (or maybe a lot different) than the current way of doing things, then are you really going to take the risk of rocking the boat? And especially if one works in a workplace where your boss is on your back about performing up to standards or where you are constantly under threat of being fired. Fear maybe an effective short-term motivator to do the same thing with a little more intensity, but it’s a lousy way to stimulate innovation.

Even if your ideas don’t threaten the existing order, there are still risks. What if you try something and it fails? New ideas, after all, often fail. Failed ideas are not cool in the sector, and certainly not celebrated. And given the well-established fact that negative people – those always with “concerns” – are seen as smarter by peers than positive ones, then this leaves you a lot to overcome.

For creativity to work, organisations have to create an environment in which failed ideas are at least OK. People need to feel secure that they can take risks and challenge existing authority or processes. For this, it may help to have a designated “devil’s advocate” for supporting new ideas.

Generally, however, organisations involving employees in few significant strategic or work-level decisions are much too much on the “safe” side. Our management culture keeps many organisations solidly mired in old-style, bureaucratic, command–and-control models, the problems of which are too well known. Dealing with these shortcomings requires vigilance, but just being aware of them can aid organisations to be more effective. Participation of course won’t just “happen” – it will need to be structured into day-to-day operations.

From a strategic perspective therefore, innovation is more likely to succeed if it is part of a larger program of organisational reform concentrating on employee participation and decentralised decision-making, linked to accessing new and developing forms of funding and finance, such as crowd funding, crowd sourced equity, community shares, social impact bonds and intentional philanthropy – as well as the “spinning out” and support of new social sector start-ups.

As social sector organisations are little more than their human capital, the application of human skill and talent will always be the main ingredient for success in such organisations. What is the best way of involving this “talent” in your organisation? Employee participation is always the answer.

There are strong social reasons as to why employees should expect to share in workplace decision-making in any organisation. There is a mass of research evidence which shows that employee participation (especially when combined with shared ownership, sound communications and structured workplace learning) has such an impact on productivity and innovation, that in organisations where this is normal practice, they always out-perform their peers in the same “marketplace”.

Based on the “participation” factor, it is no accident therefore that the largest social enterprises in the world are employee owned – the most famous of course being the Mondragon Cooperative Consortium in Spain which employs 80,000 worker owners and is still driven – since 1956 –  by its sole social objective of “creating jobs for the locals”.

Employee ownership will also be especially worthwhile in those organisations where the quality of outcomes rests firmly in the hands of front-line employees. It is this which makes employee ownership such an important component of public and social service reforms, especially in the provision of social care services (see Is employee ownership the future of social care).  

Examples of employee-owned social services are rare in Australia but are generally impressive in the UK. Greenwich Leisure Ltd is a staff-led “Leisure Trust”, structured as an Industrial and Provident Society for the benefit of the community. The members of the co-operative are the 6,000 employees of GLL, with the Trust’s board being democratically elected members of staff, with representation of other stakeholders, including Greenwich Council. GLL operates 115 sport and leisure facilities and libraries on behalf of local authorities in London and elsewhere in England, and has an annual turnover now of £80 million.

Employee owned Sunderland Home Care Associates (Social Enterprise of the Year in the UK in 2006) which employs 200 home care workers and has an annual turnover of £2.5 million (A$5 million), is now being replicated in other cities though “spinning out” similarly structured social care agencies in those locations (four so far). Most strikingly, annual staff turnover at Sunderland Home Care is below 5 per cent, compared with a national average of 20 per cent among home care workers.

Central Surrey Health is a public service mutual owned by its 780 staff, consisting mainly of nurses and therapists.

The central argument in favour of employee ownership of social care providers is the same as it is for all entities. A virtuous circle of representation, innovation and productivity can be achieved to win greater commitment and responsibility from both management and employees, with this resulting in a superior and ever evolving business model.

About the author: Alan Greig is a Board member Employee Ownership Australia Ltd , a director of The Mercury Centre Cooperative Ltd and coordinator of the Social Enterprise Legal Models Working Group. The extensive work of the US National Centre for Employee Ownership in this field over the years is acknowledged for the development of this article.