International Journal of Human Resource Management

ISSN: 0958-5192 (Print) 1466-4399 (Online) Journal homepage: https://www.tandfonline.com/loi/rijh20

Breaking the mould? Innovation as a strategy for

corporate renewal

Veronica Hope Hailey

To cite this article: Veronica Hope Hailey (2001) Breaking the mould? Innovation as a strategy for
corporate renewal, International Journal of Human Resource Management, 12:7, 1126-1140, DOI:
10.1080/09585190110068340

To link to this article: https://doi.org/10.1080/09585190110068340

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Int. J. of Human Resource Management 12:7 November 2001 1126–1140

Breaking the mould? Innovation as a

strategy for corporate renewal

Veronica Hope Hailey

Abstract In contrast to studies of HRM and innovation within hi-tech industries or

greenŽ eld sites, this paper uses longitudinal data to analyse the attempts of two mature
corporations to shift from business strategies of ‘cost reduction’ and ‘growth by
acquisition’ towards organizations that compete through innovation. The case studies
describe how human resource management interventions and the structure of the HR
function itself are used as change levers to support the shift in business strategies. By
analysing the different organizational contexts, the paper identiŽ es the complex micro-
processes that either facilitate or constrain such organizational change. Its contribution
lies in considering strategies concerned with innovation in both product and sales and
marketing; in tracking these change processes over time using in depth case studies; and
in considering innovation as a strategic trigger for corporate renewal.

Keywords Innovation; HRM; change management.

Introduction

In contrast to studies of HRM and innovation within hi-tech industries or greenŽ eld
sites, this paper uses longitudinal data to analyse the attempt of a mature corporation to
shift from a business strategy of ‘growth by acquisition’ towards an organization that
competes through innovation. The company presented in this paper is Kraft Jacob
Suchard, part of the Philip Morris Corporation. The case study describes how human
resource management interventions and the structure of the HR function itself are used
as change levers to support the shift in business strategy. By analysing the
organizational context, the paper identiŽ es the complex micro-processes that either
facilitate or constrain such organizational change.
Its contribution lies, therefore, in 1) considering strategic changes concerned with
innovation; 2) tracking these change processes over time using in depth case studies and
3) considering innovation as a strategic trigger for corporate renewal. A resource-based
view of strategy emphasizes our need to understand processes such as these (Muffato,
1998).
The paper starts by reviewing the general themes within the management of
innovation in order to situate the paper within current debates. It then goes on to focus
on the limited research that has been conducted on organizations changing to an
innovatory strategy and their use of human resource management (HRM) systems and

Veronica Hope Hailey, Senior Lecturer in Strategic Human Resource Management, School
of Management, CranŽ eld University, CranŽ eld, Bedford MK43 0AL, UK.

The International Journal of Human Resource Management

ISSN 0958-5192 print/ISSN 1466-4399 online © 2001 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/09585190110068340
 Hope Hailey: Breaking the mould? 1127
the human resource (HR) function in the process. This analysis forms the focus for
examining the longitudinal case study for the rest of the paper.

Innovation

Prevalence of innovation
Despite the inclusion of the term ‘innovation’ in every phrasebook of ‘essential
management rhetoric’ for the late 1990s, a recent North American survey concluded
that, out of the companies surveyed, 70 per cent were classiŽ ed as ‘traditional’. In other
words, these organizations were using few innovative practices. Eighteen per cent were
classiŽ ed as using ‘participation-based’ innovation – management practices which
included employee involvement, job redesign, etc. Twelve per cent were adopting
compensation-based innovatory practices (Newton, 1998).
The same survey found two other important factors. First, that the ability to inculcate
a more innovation-based approach was highly correlated with size. Second, that
‘complementary innovations’ had not penetrated as rapidly or widely as ‘hard
technological innovations’. Of those companies that had introduced technological
innovations, less than half had introduced complementary innovations in organizational
climate, work systems or human resource management. The author correctly identiŽ es
‘the innovation gap’ that exists within current organizations between the investment
made within hard technology and the attention given to building a complementary work
environment which supports that technology (Newton, 1998). This is despite all the
evidence that suggests that, for effectiveness in innovation, the two aspects, hard and
soft interventions, must go together.

Different kinds of innovation

This view is supported by the conclusions of several research projects (West et al.,
1999; Newton, 1998). One major study conducted within eighty-one companies within
the UK considers the organizational and environmental predictors of innovation. It
argues that:
Thus innovation must extend not just to the new products and services required by those
with the resources to sustain these organisations; it must also include the major processes
which indicate organisational life, such as production methods, the organisation of work,
and the support and guidance of people.
(West et al., 1999: 4)
The authors identify four kinds of innovation cited within the literature: product
innovation; innovations in product technology; production processes; and work
organization and HRM practices (West et al., 1999; Damanpour, 1996; Muffato, 1998;
Newton, 1998). These can again be clustered into two main patterns of innovation: 1)
products and technological systems; and 2) job design, work organization and HRM
practices.
This paper is concerned with the use of human resource management (HRM)
practices as change levers in the transition of a mature corporation, previously
competing through acquisition, towards a strategy focused on product innovation. Their
importance as change levers lies in their ability to create organizational settings which
are supportive of innovation. As such, the paper is not focusing on innovation within
greenŽ eld sites or new industries but instead upon innovation as a strategy for corporate
renewal.
1128 The International Journal of Human Resource Management
Organizational settings
A resource-based view on innovation would argue that organizational innovative
capabilities rest in the organizing principles and social relationships that exist between
people (Kogut and Zander, 1992). To date the existing literature suggests a number of
organizational characteristics which will promote innovation: ideas, creativity,  air,
know-how, judgement and experience, tacit knowledge and codiŽ ed knowledge (West
et al., 1999; Martell and Carroll, 1995). Jackson et al. (1989), speciŽ cally focusing on
HR strategies, also identify the promotion of a creative environment as being key, but
include too the importance of a climate of risk taking, a long-term focus, initiative and
co-operation.
For companies seeking to shift to a more innovatory stance, the creation of an
appropriate organizational climate is key because otherwise they may not have the
inducement to change their behaviour. Van der Ven (1988) talks of:

The physiological limitations of human beings to pay attention to non-routine tasks and
their corresponding inertial forces in organisational life . . . the more specialised,
insulated and stable an individual’s job, the less likely it is that the individual will
recognise a need for change or pay attention to innovative ideas.
(Van der Ven, 1988: 8)

At worst, the climate may contradict the espoused objectives within the corporate
strategy. Therefore, it is not simply the creation of a suitably supportive organizational
climate or culture that will promote innovation that is an important management
capability. It is also critical that mature corporations have the capacity to manage the
change from one internal environment to another.

Moving towards innovation: change and human resource management

Change and innovation

Individuals in organizations live and work within a created culture from which they
derive a paradigm or mindset that enables them to make sense of the world and thereby
operate on a day-to-day basis (Johnson and Scholes, 1988; Van der Ven, 1988). Tyler
(1999) has argued for the need to create a new ‘social reality’ when promoting
innovation and Muffato has highlighted the problems inherent within such change: ‘the
passage from one competence to a new one poses the problem of acquiring new
information which will, however, be Ž ltered by mental models which re ect the old
competence’ (1998: 842). In order to change, therefore, it is necessary to implement
projects or interventions that are at odds with the existing competencies or paradigms
within any one organization.
The change process can then take one of three routes: the maintenance of current
competencies; the recombination of new ones with old ones which requires a focus on
learning and innovation; or the building of completely different ones which requires a
great deal of experimentation (Muffato, 1998). The latter option is sometimes adopted
by mature corporations through bolting on a new business unit alongside the existing
brownŽ eld site. The establishment of telephone banking business divisions alongside
the established high street bank network is such an example, and can often be
successful. However, it has been achieved by recruiting new staff into a greenŽ eld site
often with no retail banking experience. As such it has been much more like setting up
a new business than transforming an existing organization.
 Hope Hailey: Breaking the mould? 1129
In contrast, most mature corporations who are seeking corporate renewal within their
core business units are concerned with the second route of adding new competencies to
their existing portfolio. Over time this may achieve transformation of the old paradigm
but it is likely to be a more evolutionary process than one that is achieved overnight.
This is not to diminish the nature of the challenge – most organizations would opt for
an evolutionary change process rather than a revolutionary change process with all its
attendant risks (Balogun and Hope Hailey, 1999a). Some organizations instigate a
change process with the intention of achieving this transformation but in reality fail to
move away from maintaining existing competencies. This is particularly true for
organizations with tightly coupled internal and institutional environments (Balogun and
Hope Hailey, 1999b).
In this paper the case-study company falls into the middle category – it is concerned
with changing an existing and highly successful workforce by adding new competencies
on to old ones through an evolutionary transformation process.

The promotion of innovation

If a company wants to change towards a more innovation-based culture, what should it
do? Research conducted within the States has found that innovation occurs readily
when the semi-structures within an organization are sufŽ ciently rigid so that change can
be organized to happen, but not so rigid that it cannot occur (Brown and Eisenhardt,
1997). To elaborate, researchers found that, in organizations which were successful
innovators, some structure around the process was necessary in the form of frequent
meetings and the establishment of some performance objectives; however, the design
process itself was left alone. This was referred to as the ‘intermediate zone between
order and disorder’ (1997: 22).
A recent research project within the UK concerned with predictors of innovation
culminated in some fascinating results (West et al., 1999). They reached the following
conclusions:
c Job design that emphasizes individual responsibility encourages innovation by
causing a friction of diverse perspectives and alternative perspectives at lower levels,
leading to the release of energy and creativity.
c Larger organizations report higher levels of organizational innovation as distinct
from technological innovation in the following areas: production processes, work
organization, HRM and overall innovation.
c Low market share is associated with higher levels of innovation in product and
technological areas. The authors argued that the competitive threat made the effort of
innovation worthwhile.
c Environmental uncertainty is a strong predictor of innovation in HRM. Again, the
threat of the unknown made the effort required to promote innovation worth the
energy.
c Decentralization predicted product innovation as decisions for task-related issues
could be pushed downwards.
c Centralization, by way of contrast, predicted innovation in HRM as some central
control was necessary in order to initiate, implement and sustain change.
c The more operator autonomy, the more the organization was innovatory in HRM.
c An emphasis on training produces product innovation and innovation within
HRM.
Furthermore, and somewhat surprisingly, the research showed that if responsibility was
decentralized and delegated to line managers, then it was unlikely that organizations
1130 The International Journal of Human Resource Management
would achieve a consistent pattern of innovation in HR. Instead, innovation in
organizational systems and HRM would be idiosyncratic because it was at the line
manager’s discretion how to proceed.

Implications for HRM and the HR function

There is a scattered and fragmented literature that examines the contribution that HRM
systems can make to the promotion and management of innovation (Schuler and
Jackson, 1989; Ulrich, 1997; Martell and Carroll, 1995; Brown and Eisenhardt, 1997)
and puts forward a series of recommendations:
c Avoid high employee turnover as that prohibits the development of ideas.
c Personal characteristics (which should be included in person speciŽ cations in
addition to technical know-how) include an ability to work with uncertainty, personal
adaptability, mental toughness, stress tolerance and a willingness to take risks and
demonstrate leadership.
c Cross-functional development of individuals.
c Pay attractive salaries in order to retain.
c Use incentive pay in order to allow managers to accept the high risks involved in
practising innovation.
c Reward risk taking, creativity and teamwork.
c High-performing innovation-based business units emphasized a different set of
performance criteria such as new product development, personal growth, meeting
quality standards and the development of subordinates.
c Higher-performing companies also had more informal appraisal more frequently.
c In addition, for innovation and creativity to be encouraged, line managers need to
demonstrate a managerial style that tolerates failure and promotes learning (Butcher
and Harvey, 1999).
There is less written about the role of the HR function in the promotion of innovation.
However, from studies of HR and professionals, it would seem likely that a non-
interventionist yet strategic function would be encouraged (Storey, 1992). For
understanding the role of HR in the case study, the four functional roles identiŽ ed by
Ulrich (1997) are used for mapping purposes. He puts forward two strategic roles:
strategic partner and change agent; two tactical roles: administrative expert and
employee champion. The strategic partner and administrative expert he labels as
organizational roles and the other two he sees as primarily focused on employees.

Limitations of existing research

Much of the existing research appears to be focused on two forms of innovatory
activity. First, there are studies of specialist units such as research and development
units within larger organizations. Second, there are studies of innovation-base d
organizations such as hi-tech or bio-tech companies. However, there are few in-depth
case studies of established companies trying to move sales, marketing and production
units towards a more innovation-based strategy.

Research methodology
In terms of the approach research strategy for tackling this question, case studies which
combine qualitative and quantitative methods would appear to be particularly suitable
because they have the capacity to examine emerging developments of the kind that
 Hope Hailey: Breaking the mould? 1131
concerns this paper. In this respect, the research which was conducted with the Leading
Edge Research Consortium (LERC) of organizations is of particular value.
If new strategic roles for the HR function in supporting innovation are to be
identiŽ ed, then there is a reasonable chance that it will be among this group of
organizations. First, the organizations were self-selected in that the human resource/
personnel director of each organization was a member of the Leading Edge Research
Consortium Limited group of organizations who sponsored the research along with
Arthur D. Little Inc. This ‘self-selection’ suggests that these organizations have a high
level of interest in HRM issues and practices. Indeed, some of the organizations, such
as Hewlett Packard, pride themselves on being at the ‘leading edge’ of human resource
practices and initiatives. Second, the sample contains some major ‘blue chip’
multinational private-sector Ž rms who are all in the top Ž ve of their respective sector/
industry with regard to size and level of turnover. Third, with the exception of W.H.
Smith News, the research sites were almost all white-collar settings in terms of
workforce composition.
It should, however, also be noted that this is a relatively small sample, albeit of an
élite group, of organizations. These are BT Payphones, Chelsea & Westminster
Healthcare, Citibank, Glaxo Pharmaceuticals, Hewlett-Packard, Kraft Jacobs Suchard,
Lloyds Bank and W.H. Smith News. This group was also drawn from a wide range of
business sectors: pharmaceuticals, electronics, investment banking, distribution, tele-
communications, food, retail banking, and the National Health Service. While this
results in an inability to provide generalizations for each of the sectors/industries that
the cases are drawn from, we can contribute to theory building through an intensive
multiple-case research strategy that allows for some comparative analysis. In each case
study company, the data are collected in divisions, whether national divisions of multi
nationals or business divisions of UK corporations. In each case, however, these
divisions operated as autonomous or semi-autonomous business units.
The empirical data were collected through four different methods in the Ž rst and
second stages (1993–5 and 1996–8) of a nine-year project. Focus group discussions
were held with members of the various human resource departments. Between twenty
and twenty-Ž ve semi-structured interviews were conducted with functional directors,
senior managers, line managers and general employees. A further twelve interviews
were conducted using a grounded theory approach with the aim of revealing the
unwritten rules of the game in each organization (Scott Morgan, 1994; McGovern,
1996). Finally, a questionnaire survey was distributed to a random sample of 20 per
cent of all employees – including managers. The average response rate across all eight
organizations was 52 per cent. In this paper, we present a combination of interviews and
survey evidence.

Kraft Jacob Suchard

The case study is presented in two parts. The Ž rst section describes the organizational
setting the research team found in 1994, while the second part reports on the changes
found on the team’s second visit to the company in 1997.

Growth by acquisition: the situation in 1994

Kraft Jacob Suchard is part of Philip Morris, the world’s largest packaged consumer
goods organization and the world’s No. 1 tobacco company, the world’s no. 2 food
company and the world’s no. 3 brewer. The Philip Morris Group has 165,000
1132 The International Journal of Human Resource Management
employees manufacturing and marketing more than 3,000 products in over 170
countries.
Kraft Jacob Suchard (KJS) is the European division of the Philip Morris food
business, the name derived from the merger of Kraft General Foods and Jacobs Suchard
in 1993. The focus of the research was on the head ofŽ ce of KJS UK, the fourth largest
business within the European region with a turnover in 1993 of £700 million, 9 per cent
of total European revenue and 4,000 employees.
The three names of Kraft, Jacob and Suchard stand for the company’s core categories
of cheese, coffee and confectionery, and also re ected the acquisitive nature of the
Philip Morris Corporation. A major organizational restructure was completed in January
1994, creating business-focused units for grocery, refrigerated goods, confectionery and
food service. Group operations, Ž nance and human resources support these units.
The culture of KJS UK was based on the concept of continuous improvement,
providing clear objectives and strategies and supporting a strong results-oriented
approach to business. A process-oriented management style had developed as a result,
which meant a strong adherence to policies and procedures, tight reporting requirements
and a focus on the business planning process. Clear Ž nancial targets, detailing growth
Ž gures in turnover and proŽ t, were agreed by KJS in Zurich, the European HQ, and
each company devised its own broad strategy to fulŽ l them. The severity of the targets,
together with a strong emphasis on driving costs out of the business, had brought a
culture, which stressed short-term payback – the targets were for twelve months.
With the emphasis on results and performance measures, and with the company
operating in a very strong competitive market, there was little welfare activity. The
needs of the business came Ž rst, and the treatment of individuals could be characterized
as using ‘tough love’, an approach which does not tolerate employees’ weaknesses, but
aims rather to secure employee development and good performance. There is no union
representation in the UK.

The contribution of HRM

The human resource director’s presence on the board of the UK company provided a
clear integrative linkage between the strategy-making process and the management of
human resources, on both a formal and an informal basis. The interaction could best be
described as ‘facilitative’, however, with one senior manager saying:
I don’t think HR gets factored into the development of business strategies. HR would be
involved in our three-year planning, in terms of development, succession planning and so
on, but it doesn’t determine which way the company goes or how the company is going
to expand into different cores. . . . HR falls out of business strategy.
HR generalists work alongside the business units.
HR were not directly involved in the acquisition ‘in terms of the economics of
putting the thing together’ (Senior Manager). It was once the acquisition had been
settled upon and agreed by the board that the HR director got involved. One senior
manager said: ‘Our determination is that we will need only so many people, our
determination is that there will be a cost of terminating people, can we move them and
so on. HR is very involved with this.’ ‘We do not buy companies and then continue to
have them run the way they are. We take them over and absorb them and this leads to
signiŽ cant HR involvement.’
When companies were brought into KJS, those acquired were expected to adopt the
culture and concept of continuous improvement. There was a strong emphasis on
performance management, training in the methods of continuous improvement, training
 Hope Hailey: Breaking the mould? 1133
in problem solving, strategic thinking, and provision of core knowledge and skills had
established a common way of managing key processes. Recruitment and selection
policies had reinforced the results-oriented approach, hiring employees who could
‘deliver the objectives in the right way’ and who were ‘high-calibre people capable of
progressing throughout the organization’. The large investment in training and
development workshops had established the culture from the top down and had instilled
a common set of values.
Three major HR interventions played a key role in this integration: the managing and
appraising performance process, and two training programmes, STEPS and GOLD. In
terms of performance management, each employee had a tight job description which
provided the basis for setting speciŽ c goals for the year. A goal statement set out
speciŽ c measurable objectives in the following areas:
c key annual and quarterly business goals
c continuous improvement goals
c subordinate/team development goals
c personal development goals.
Feedback was given at quarterly reviews, a progress review mid-year and an annual
formal review. Competencies also described the behaviours needed to support the
achievement of goals. There was a year-end rating which summarized employee
performance, proŽ tability and potential, and a conŽ dential suggestion for a merit
increase for the salary review. The interview data suggested that the performance
management system was seen as objective, focused and clear. Eighty-two per cent in
the survey said they knew the basis upon which their job was appraised. But only 31 per
cent said that the company really inspired them in terms of giving the very best in their
job performance. Some did not understand the workings of the reward system. In
addition, the pressure to achieve results had meant that the management of people has
tended to suffer: ‘The company is very task driven. On many occasions the personalities
and people management can be put to one side and morale becomes a problem.’ In
addition, there seemed to be a lack of  exibility in the performance management system.
As one senior manager said: ‘I think it is Ž rst class, though it does tend to focus on the
short term. MAP is meant to be a  exible process – but this doesn’t happen.’
The training programmes and their objectives were regarded as integral to business
success. Though some external recruitment at lower levels did take place, KJS preferred
to develop its own talent and had a stated management development aim of promoting
from within. The role of training in providing quality people was therefore crucial. The
core curriculum for the training programme was developed by the Philip Morris Group.
While 63 per cent said they were satisŽ ed with general training, again they felt that
much of the process was in exible, and the short-term thrust of the business has meant
that a number of employees said it was difŽ cult to Ž nd time to implement new skills
they had developed.
In conclusion, the task-driven nature of the business, together with the results-
oriented management style had ensured that KJS was a demonstrably lean organization.
With strict Ž nancial targets laid down by Europe, a short-term horizon had developed
within the majority of managers, particularly as the emphasis was on the speciŽ cation
of behaviour, and promotion was on results and fast payback on investment. But these
rigorous objectives had also produced a culture which is risk averse and, though there
was evidence of research and development initiatives, the last brand innovation had
been seven years ago. Some attempts had been made to free up innovation and break
down the strong internal bureaucracy, especially as the food-manufacturing sector had
1134 The International Journal of Human Resource Management
reached over capacity: ‘We are a major food-manufacturing organization. Yellow fats
are in decline so we need new product development. Other companies have come up
with new products.’
In 1995 a more determined shift in business strategy was announced with a declared
intention of becoming a company which grows organically and through innovation.

Growth by innovation: the situation in 1997

In 1995 KJS Europe was restructured. It was split into Northern and Western regions.
The UK was brought under the Northern region and virtually all the old UK board was
promoted to become the new KJS Northern Europe, still located in Cheltenham. KJS’s
current approach is to have related product brands grouped into the same categories
rather than having brands managed separately and often in competition with each other.
The salesforce has shifted from a geographic approach to a customer approach whereby
a rep will try to build a relationship with a particular client and sell across the brands.
The strategic focus has shifted from growth through acquisition to developing what are
known in food-manufacturing terms as power brands, such as Kenco coffee,
Philadelphia cheese, which must compete with the private brands of the supermarkets
and retailers.
This focus is intended to emphasize innovation and, since 1994, two major new
products have been introduced: Handysnacks and Carte Noire. However, driving out
costs has also remained central and the establishment of a supply-chain function has
prompted the re-engineering of distribution activity and produced costs savings. This in
turn is to be underpinned by the introduction of a new management information
system.

The contribution of HRM

Four clusters of initiatives have been introduced in the area of HRM to support this shift
in business strategy: the introduction of a new vision and values; the reŽ ning of the
performance management system; the development of new leadership talent; and the
restructuring of the HR department.

Vision and values The vision and values intervention was an attempt to free up
managerial entrepreneurial initiative and encourage creative and innovative behaviours.
In addition, there were murmurings from the lower levels of the company that the
company was too tough in its approach to managing people and there was no fun in
coming to work. This was seen as an inhibitor to innovative and creative behaviour. The
core values were identiŽ ed as ‘delivering results; openness, integrity and respect for
others; a passion for ideas; continuous improvement; development and recognition of
our people’. The vision includes ‘growth through innovation’.
Line managers gave feedback on the appropriateness of the senior management’s
development of the vision and values in a series of workshops, and the entire package
was shown to staff at a set-piece event at Cheltenham racecourse. There have been a
number of criticisms about the implementation of the values, namely that there has been
insufŽ cient follow-up after the sensational launch, and doubts about the UK board’s
personal commitment to the new culture. Eighty-nine per cent state there is a clear set
of values, compared with 63 per cent three years earlier, and 70 per cent say there is
more commitment to KJS’s vision values. However, their sustainability is dependent on
the organization’s capability in embedding them within the HR processes.
 Hope Hailey: Breaking the mould? 1135
Performance management The aim of the managing and appraising performance
process (MAP) is to link the company’s strategic objective to the goals of each
employee. The major change in the process is the introduction of the new values, with
the Philip Morris leadership proŽ les, into the evaluation and development needs
analysis process. These proŽ les stress teamwork, empowerment, innovation and
creativity in their vocabulary. MAP has also become much more future orientated,
rather than centred around evaluation of past performance.
However, only 36 per cent of staff in 1997 say that KJS inspires the best in them in
the way of performance (31 per cent in 1994). Also, there remain concerns about the
performance evaluation and the development review. Despite the system allowing for a
more developmental future-oriented stance, some of the work on development within
these reviews is patchy. Likewise, reward and recognition are a major block to the
achievement of a more creative culture. Despite being proud of being a meritocracy, the
bonus system does not extend to lower level employees. There is also a lack of
openness about the actual calculation of salaries and bonuses: ‘we just get an envelope
with our salary increase and that’s it’ (Line Manager). Correspondingly, some
employees complained that KJS were no longer among the leading payers in the top
quartile.
The provision of training remains excellent. In 1997 not a single respondent
expressed dissatisfaction with training. However, given the long-term direction of the
business some line managers were concerned about the extent to which the content of
training was sufŽ ciently future oriented:
The processes and the training are strong. The training programmes need to begin to look
forward now though and be spiced up in terms of the current issues. For example, I
believe that creativity for every individual in an organisation is critical and we don’t
necessarily have the organisational culture for creativity. One of the biggest opportunities
is to release some of these people’s potential and I don’t think we are currently doing
that. I think that people operate within a high stress and high autocratic structure which
I don’t think releases people’s potential.
(Line Manager)

More attention is being given to coaching and counselling, with middle to senior
managers going through an extensive coaching programme. Seventy-two per cent of
employees felt that coaching by their boss was signiŽ cant, which is an increase of 21
per cent in three years. However, the short-term demands of the business cause con ict,
with some staff questioning whether managers can give sufŽ cient time to coaching.

Developing leadership The new Philip Morris leadership proŽ les are intended to help
identify fast-track or high-potential staff. However, while these new proŽ les have been
incorporated into the career development process, there remains concern about the other
end of the human resource management cycle. KJS recruits under a’ Ž rst bounce’
strategy, which means it hires its staff already trained by its excellent marketing
competitors. There is no graduate entry scheme. Current satisfaction with recruitment is
at 63 per cent, but clearly the emphasis on innovation and risk taking requires the
company to encourage high-talent individuals in the Ž rst instance: ‘The problem is that
we attract people whom the larger companies have chosen not to keep’ (Line
Manager).

The HR function The HR function has moved away from providing what was
essentially a support role to one which stresses business partnerships. Before, the
1136 The International Journal of Human Resource Management
amount of administrative work to cope with meant that HR specialists had little time to
contribute to strategic planning. The speed and efŽ ciency required of an HR department
which is supporting a business strategy of acquisition earned the HR function in KJS a
reputation as a tough department. Innovation and risk taking bring different
demands.
The function needed to extend its power and in uence in order to run the launching
of the vision and values initiative, and indeed to mirror the message of that initiative in
the way it conducted its own business. The function faced a major task as, in order to
embed the cultural change required, they needed to shift the mindsets of the employees
within KJS away from an obsession with systems, processes and results towards a
tolerance of failure and fostering of creativity.
A new HR director was appointed who reappraised the purpose of the function with
its business customers. Six areas were identiŽ ed as important, including, for the Ž rst
time, organizational effectiveness and climate as well as the traditional areas of
recruitment and selection, etc. The statement which launched the newly vamped
department stressed the role of the department in managing change, working with
employee potential and being a business partner with the line. The function also
appointed HR client managers to each business unit and function, and removed much of
the administrative personnel management burden from these new posts by establishing
two speciality centres for recruitment and HR administration to add to the existing two
for training and development and compensation and beneŽ ts.
Although much of this was implemented only nine months before the research was
conducted the results seemed positive. Forty-eight per cent of employees said they were
satisŽ ed with the overall quality of service from the HR department (26 per cent in
1994). Fifty-six per cent think the HR department plays an important role in the success
of the organization (35 per cent in 1994) and 58 per cent think it is competent at its job
(39 per cent in 1994).

Analysis of case study

The change process at KJS is examined using the three central issues: the contribution
of HRM and the HR function to the change process; organizational features that appear
to promote innovation; and, Ž nally, the nature of change for results-driven companies
when trying to develop a new focus around innovation.

HRM and the HR function

In this section we examine the performance of KJS in the HRM areas identiŽ ed as
contributing towards a climate of innovation. The recognition of HRM’s importance in
creating change was obvious at a senior management level:
If we are to stand our best chance of growing the business even faster then we will only
do that if we have the best people and developing and retaining people is not just about
salary. More and more it is about the working environment.
(Director)
However, it is HR’s task to inculcate that change at the heart of the organization
through the use of HR policies and systems. As discussed earlier, organizations which
want to encourage innovation are advised to reduce employee turnover (West et al.,
1999; Schuler and Jackson, 1989). KJS does not seem to have turned its workforce into
an extremely loyal mass compared with some of the other members of the Consortium.
Only 30 per cent want to stay with KJS for the rest of their career whereas 55 per cent
 Hope Hailey: Breaking the mould? 1137
expect to work for a variety of different organizations in their career. This perhaps is
unsurprising given that KJS consciously seek to recruit people who wish to move from
an existing employer.
KJS has incorporated into its HRM systems the leadership proŽ les. These include
personal characteristics such as ‘managing with uncertainty, management toleration of
risk taking’, etc., as identiŽ ed above (West et al., 1999). It has also restructured to
promote more cross-functional working. It is unclear from the survey results whether
informal appraisal has increased. What is clear is that KJS have failed to realign their
rewards systems behind the new strategy. The salaries appeared to becoming less
attractive for employees, and there was no speciŽ c evidence of a shift towards
incentivizing risk taking.
There seem some doubts, therefore, over whether the supporting HR processes are in
place. The HR function, in contrast, seems to have successfully repositioned itself.
Whereas in 1994 it was primarily fulŽ lling the role of administrative expert, albeit very
effectively, by 1997 it seems to have extended its activities into the two strategic roles
of both business partner and change agent. What is important to note, however, is that
none of the Leading Edge Forum (LEF) organizations have been able to take up these
strategic roles unless they have proven expertise, efŽ ciency and effectiveness within the
administrative role (Hope Hailey et al., 1997).

Promotion of innovation
The predictors of innovation identiŽ ed in the second section seem to be present in the
history of KJS during the 1990s. First, there is evidence that the organization is trying
to move towards what Brown and Eisenhardt (1997) call ‘semi-structures’. KJS do not
appear to be completely abandoning objectives or results but attempting to free up
initiative at the lower levels of the organization. Second, when considering the issue of
job design and employee autonomy, paradoxically the old culture did emphasize
individual responsibility for results. What does need to increase is a climate of
empowerment.
The predictor of low market share as a trigger for generating innovation also appears
to have been a factor in KJS (West et al., 1999). The low results recorded in 1995
triggered the shift towards generating new power brands. Finally, West et al.’s (1999)
predictor that centralized HR systems will enable innovation in HRM also appears to be
illustrated by the case study. The heritage of ‘tough love’ and process discipline made
the implementation of changes within the performance management system more
achievable for the HR function.

Change and innovation

What the case study illustrates is the depth of change that is required in order to shift
a culture built on short-term results towards a culture that emphasizes risk, creativity
and uncertainty. It is change that requires the organization and the individuals within it
to transform their mental models of what constitutes good performance (Johnson, 1989;
Tyler, 1999; Balogun and Hope Hailey, 1999a). As such, it cannot be achieved
overnight, as the senior managers at KJS recognize:

We have communicated everything to everybody at all levels. As far as, ‘Does it live in
the day to day consciousness of the people?’, I would say it is patchy. Nowhere is it
perfect. A lot of areas are doing it and it is in their conscious level but not in their
subconscious level and that is where it has to be to live and breathe and have a life of its
1138 The International Journal of Human Resource Management
Table 1 Selected climate and commitment indices from the LERC employee surveys

Please state the extent to which you agree Agree Agree Disagree Disagree
or disagree with the following: 1997 1994 1997 1994

Managers take the long-term view 35 23 36 46

My organization is  exible enough to cope 81 58 8 22
with change
I believe the organization will achieve its 91 84 1 2
aims
I have conŽ dence in management’s ability 73 63 8 9
to cope with an unforeseen crisis
People are afraid of taking risks 53 61 24 17
People take responsibility for their own 83 65 9 11
performance
People work together as a team 62 56 11 22
People are criticized more readily than 39 45 34 27
praised
I do not have a great deal of trust in 17 26 58 50
management
Management cares about the needs and 40 29 28 45
morale of employees
There is a clear set of corporate values 89 63 1 7

own. I think it is primarily a matter of time. It is inertia and the reticence and the lack of
belief of some managers too, either consciously or subconsciously.
(Director)

There are doubts expressed within the organization about the follow-through on
implementation and the management of transition after the initial launch of the culture
change. Nevertheless we must not underestimate what KJS had achieved in the Ž rst two
years. Table 1 shows the comparative results from the organizational culture and
commitment section of the survey, and KJS achieved positive shifts, albeit in some
areas they are quite small changes. Given the depth of transformation required, this is
not a change that can be achieved rapidly. Instead it is likely to be evolutionary in
nature (Balogun and Hope Hailey, 1999a). Therefore, the change process required is a
recombination of competencies (Muffato, 1998). In order to keep the mature business
functioning (and therefore the group and stock market happy), the new competencies of
creativity and innovation had to be merged alongside the old competencies of achieving
short-term results.
As substantial change like this takes time, it will be possible to judge its success only
when we revisit the organization at the beginning of 2000. As one line manager said:
‘There has been a lot of mould-breaking innovation and creativity going on but it is still
happening in a reserved way. We have a long way to go.’

Conclusion
The paper makes a number of interesting contributions to our understanding of
organizational change processes, innovation and the role of HRM within that process.
First, from a change perspective, it conŽ rms that, for organizations seeking corporate
renewal through the promotion of innovation as a strategy, it is a change path that will
take several years to achieve. This is because the case study illustrates the depth of
 Hope Hailey: Breaking the mould? 1139
mindset change that is required in order to make the corporate rhetoric an individual
reality. Many mature Western organizations are embracing the rhetoric of innovation in
an attempt to seek forms of corporate renewal. What the KJS experience illustrates is
the investment in time, resources and energy that is necessary even to start to trigger
such a transformation. Indeed, some senior practitioners might argue that such a shift in
culture will be fully achieved only when a sense of crisis is felt by both senior managers
and employees within any organization (Christensen, 1997).
Second, the case study illustrates the importance of what has been called the
innovation of work organization and HRM alongside any technological innovation. Too
little attention is paid to considering the necessary employee behaviours and attitudes
that are necessary to create an enabling environment for innovation. Employees cannot
easily take on the mindsets of research and development scientists, which value long-
term thinking, creativity and independence, when they have been socialized into
delivering narrowly deŽ ned objectives within a short-term business cycle. Perhaps the
attractiveness of the descriptions of innovative cultures has masked the profound
implications of such a shift.
From a human resource management perspective, the paper demonstrates the
efŽ ciency of centralized rather than decentralized HRM systems in achieving that
organizational change. Given the emphasis in the prescriptive literature during the
previous decade on decentralizing responsibility for HRM, this is a con icting Ž nding.
While business strategies have been concentrating on change through cost reduction,
the decentralized approach to HRM systems may have been tenable. However, with
more transformational agendas within business strategies, certain advantages may be
gained from the function regaining a more central role.
Finally, the case study conŽ rms the necessity of achieving horizontal congruence
between different HRM systems. In other words any HR system must be aligned with
the others, for example, rewards systems with leadership development. This is
important in addition to the necessity of vertical integration of HR systems with HR and
business strategy.

Acknowledgements
The author acknowledges the funding and support of the companies who are members
of Leading Edge Research Consortium. Also, the author thanks her colleagues within
the research team that works on the project – particularly Dr Philip Stiles (University of
Cambridge), but also Dr Lynda Gratton (London Business School), Dr Katie Truss
(Kingston University) and Dr Joanna Zaleska (London Business School).

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