Photo by Riala on Pixabay

Innovation doesn’t grow on trees, granted. But it’s not that impossible to achieve either. Most people believe it takes genius, luck, and and huge capital investments. Actually, it’s much simpler than that.

Professors Chen Chen and Yangyang Chen of Monash University, along with Edward J. Podolski with La Trobe University have conducted a joint study to determine how employee treatment leads to corporate innovative success. Their findings, hardly surprising, confirm the often-ignored importance of morale in the workplace, a matter we consider paramount here at 4PSA.

The researchers note that a company’s ability to efficiently convert resource inputs into outputs is a sure way to winning. Truer words were never spoken. BUT, the process takes continuous innovation and talent retention in order to compete with rivals. One way to achieve this is to have high-paid engineers and researchers, and not just a handful of them either. In 2002, over 50% of R&D expenses went towards paying highly-skilled employees, a figure that holds true to this day (give or take a few points).

Investing in worker morale

But human capital investments expand far beyond the brainy employees. It also implies knowledge regarding employee treatment in general, and making the right moves in this particular area. This can include inviting employees to partake in decision making; providing flexible working hours; offering safety programs; seeking a more diversified employee background.

The tech sector makes this more visible than any other industry, and Google’s “20 percent time” program is perhaps the best hint that the notion of letting your employees be yields incredible results. Giving staffers the freedom to spend 20 percent of their work-hours fiddling with their wacky ideas produced the likes of AdSense, Gmail and Google Earth. Of course, the search giant offers a gazillion of other benefits as well, so it may not necessarily be the most feasible example to follow, but everyone gets the point.

Shareholders, listen up!

The paper – Employee Treatment and Corporate Innovative Success: Evidence from Patent Data – formally examines the effect well-being schemes have on corporate innovative success in light of the anecdotal evidence surrounding innovation in relaxed circles.

Prior studies similarly found that positive employee treatment led to an uptick in operational, financial, and stock price performance, so the idea that these schemes are relevant to success is not exactly new. However, the current paper looks at these effects on a deeper level, and finds that:

• firms with better employee treatment schemes generate greater innovative output
• the positive effect is most pronounced amongst large firms and firms with high risk of employee free-riding
• firms with more developed employee treatment schemes pursue a more focused and coherent patenting strategy
• a greater portion of the patents are directly related to the firm’s core business
• the market’s valuation of patents generated by firms with positive employees treatment schemes is higher

All in all, the paper ultimately shows that that treating employees well makes the innovation process more successful and benefits shareholders.