For businesses to thrive in the current business environment, it is important for them to adjust their approaches to business operations and management structures to nurture creativity and innovation. This paper discusses why hierarchical management structures are likely to be less evident in future, being replaced by structures that nurture innovation and creativity. The paper also discusses the shifts that have taken place in the global economy from being knowledge driven to creativity driven. Several factors that ought to be managed in order to enhance the creativity process in organizations have also been discussed, as well as the process of change management. Whilst the paper argues that hierarchical management structures shall diminish in the future, it has also pointed out some advantages that such structure have in organizations.
- Introduction. 1
- Changes in the Global Economy. 2
2.1. The Shift from Knowledge Economy to Creativity Economy. 2
2.2. Change in Management Structures. 4
- Factors that need to be managed in order to enhance creativity. 5
3.1. Job-Level Factors. 6
3.2. Team Factors. 6
3.3. Organizational Level Factors. 7
- The Change Management Process. 8
4.1. Impacts of the change management process. 11
- Conclusion. 11
The need for change and creativity has existed in organizations for a long time and continues to intensify. The current business environment is fast-moving and organizations that fail to adjust to this pace are likely to underperform (Brown and Osborne 2012). Embracing change and encouraging creativity in an organization partly depends on the management structures within the organization (Andriopoulos & Dawson, 2009). Whilst hierarchical management structures are still evident in many companies, they limit innovation and creativity (Foss et al., 2013). Therefore, this report supports the statement that “in future, hierarchical management structures will be less evident. The management of intellectual capital will require skills that nurture creativity and innovation in workforce rather than compliance as in the past.” Even though it is apparent that hierarchical management shall be less relevant in future, some of the strengths associated with it include clear promotional paths for employees and effective departmentalization of skills (Diefenbach & Todnem, 2012). As argued by Boje et al. (2012), changes take place within and outside the organizational environment. In the external business environment, there is a shift from the traditional knowledge-based economy to the creative industrial economy. In addition to this, competition among companies is shifting from being price driven to how creatively the goods and services are designed for clients (Cameron & Green, 2012). Within the organization, changes are taking place in nature of tasks and responsibilities of workers. Tasks are now more cognitive as opposed to the traditional repetitive tasks. Management styles and employee expectations are also among the organizational aspects that are changing (Myers et al., 2012). Since it is evident that change in organizations is inevitable, it is necessary for organizations to effectively manage the change processes (Beerel, 2009). In addition to supporting the argument that hierarchical management shall be less evident in future, this report also explains the factors that have to be managed to enhance innovation and creativity.
2. Changes in the Global Economy
There are several shifts and changes that have taken place in the global economy. Of interest in this report include the transformation of the economy from being knowledge based to creativity based, change in business competition from price to innovative competition and the changes in management styles. An example that demonstrates the shift in global economy is the emergence of a wide range of creative industries, especially in the European region (Hesmondhalgh, 2002).
2.1.The Shift from Knowledge Economy to Creativity Economy
The current business environment is characterized by several dynamics that have made organizations change their approaches to business issues. To thrive in the present day corporate environment, companies are increasingly recognizing the need of incorporating creativity in their day-to-day activities (Cooke et al., 2012). Creativity is the process through which new ideas or alternatives for solving different issues are generated. Implementation of these ideas is referred to as innovation. According to Andriopoulos and Lowe (2000), business entities are categorized as being creative if they get their main income by generating novel ideas that are appropriate in tackling the needs of their target clients. Creativity is a process that goes through the several stages. These are the preparation, incubation, insight, evaluation and elaboration (Wallas, 1926). On the other hand, Amabile (1983) suggests that creativity is a five-stage process that involves problem presentation, preparation, response generation, response validation and the outcome. Amabile’s (1983) model is summarized in the figure below.
Fig. 1: Amabile’s (1983) model of the creativity process
Adopted from: Amabile (1983)
There are several organizations that have prospered by encouraging their employees to be creative and creating a work environment that nurtures innovation. These companies include Google, Facebook, apple and Microsoft. Among ways in which companies are transforming towards being more creative is the elimination of hierarchical barriers that slow down the communication process and response to change. Eardley and Uden (2011) posit that hierarchical management structures are based on the notion that the management is supposed to create control, certainty and predictability. Even though bureaucracy has its advantages, the current business environment requires organizations to be flexible and ready to face unpredictable situations. This can only be achieved by encouraging creativity. As opposed to earlier times when competition between companies that offer the same service or product to clients was mostly based on price, creativity has also become an important aspect of competition. Creativity has been incorporated in advertising and other promotional techniques, product design, pricing strategies and distribution which are the key components of marketing (Slater et al., 2010).
Even though creativity and innovation is essential for survival in the current business environment, there are several setbacks that are associated with it. For instance, creativity involves taking risks with no certainty of a positive outcome. This is one of the reasons that make certain organizations to stick to hierarchical structures (Andriopoulos & Dawson, 2009).
2.2.Change in Management Structures
The need to encourage creativity in organizations has also had an effect on the management structures being used in present-day organizations. There is an ongoing shift from hierarchical management structures to adhocratic or flat management, where individuals are empowered to make initiatives that contribute to the development of organizations (Myers et al., 2012). Tseng (2010) argues that adhocracy is ideal for organizations that aim at increasing their flexibility so as to promptly take advantage of business opportunities. One of the organizations that use this management structure is Google, which has managed to be successful through allowing its employees to make innovative contributions to the company. For instance, the company has a policy where employees are allowed to spend 20% of their work time to concentrate on any project of their choosing. Some of the innovations that resulted from this policy at Google include Gmail, AdSense, Google maps and Gtalk among others (Kersten, 2009). This is as opposed to bureaucracy, where employee duties, responsibilities and daily schedules are usually set by the management and ought to be strictly adhered to. As opposed to the hierarchical management structure, adhocracy or flat management structures create an atmosphere where employees from different levels of the organization can freely communicate, learn from each other and also offer support where needed (Foss et al., 2013).
Even though many companies are adjusting their management structures to accommodate more creativity and innovation at the workplace, there are several disadvantages that are associated with flat or adhocratic structures. Since such management structures are designed for a flexible business environment, solving routine problems can be challenging in adhocratic organizations. Communication structures are also unclear in such organizations as opposed to hierarchical structures, where communication follows a predetermined path. Since fewer individuals are involved in strategic decision making processes in bureaucratic organizations, it takes a shorter time than flat structured organizations (Eden and Ackerman 2004).
3. Factors that need to be managed in order to enhance creativity
Creativity in organizations can be affected by several factors. Depending on how these factors are managed, they can either limit or enhance creativity in an organization. Shalley and Gilson (2004) classify these factors into job-level factors, team factors and organizational factors. Even though it is vital to encourage creativity in the workplace, it is also worth noting that it also increases the risks associated with it.
These factors include characteristics of the job and role expectations (Shalley & Gilson, 2004). Job characteristics have a great influence on the motivation of employees and their attitudes towards work. Amabile (1988) argues that this is among the vital components that managers should consider in creativity management because it affects the employee’s intrinsic motivations and creativity at work. Therefore, allocations of jobs should be effectively managed so that employees are allocated jobs with characteristics trigger their creativity. Shalley et al. (2000) established that complementing the work environment with the creative requirements of a job increases satisfaction levels of employees and reduces turnovers. Goals and expectations that managers set for employees have a direct impact on their creativity. Setting clearly defined goals for employees triggers their creativity as they device alternative ways of meeting the goals. On the other hand, when employees have no clear knowledge of what the management expects of them, they are likely to be less creative (Shalley et al., 2000). Employee motivation also encourages their creativity in the workplace. This can be done by recognizing innovative contributions that are made by individual employees or teams and rewarding them. Even though they will feel appreciated, it will motivate other employees to attempt making innovative contributions so that they can also be awarded (Harzing & Ruysseveldt, 2004). Other job-level factors that need to be effectively managed to enhance innovation include supervisory support, resource allocation and external job evaluations.
Teams in which employees are placed in the organization also have an effect on their creativity and innovation. Shalley and Gilson (2004) argue that whereas creativity may occur in isolation, it often occurs as a result of interaction among coworkers. In addition to this, opinions in support or criticism of ideas among team members affect their motivations for creativity. It has been proposed by researchers that creating diverse teams and ensuring effective communication among team members in the workplace encourages creativity. As diversity in organizations continues to increase with time, creation of diverse teams is becoming an easier task. Whilst diversity increases creativity, employees often prefer teaming up with those who are similar to themselves (Mumford, 2000). Therefore, achieving the desired levels of creativity in diverse groups requires a lot of effort in the early stages of group development.
3.3.Organizational Level Factors
One of the organizational-level factors that need to be effectively managed to encourage creativity is the organizational climate. This comprises of the values, traditions and beliefs of an organization (Shalley & Gilson, 2004). For managers to encourage creativity in the workplace, they need to foster an organizational climate that encourages experimentation and risk taking. This provides employees with the psychological safety and confidence in knowing that they shall not be blamed or punished for generating new ideas (Edmondson, 1999). The organizational structure also has a profound impact on the creativity of employees. According to Diefenbach and Todnem (2012), organizational structures that are too bureaucratic discourage employees from experimenting with new approaches for solving issues in the workplace. Therefore, encouraging creativity requires the organization to have a flatter structure with wider control span. Perception of conflict in the workplace is also a determinant of creativity levels within the organization. Creativity thrives in organizations that encourage constructive conflict because disagreement on certain ideas triggers generation of new ideas that are more appropriate and novel for the situation under the spotlight (Shalley & Gilson, 2004).
4. The Change Management Process
As discussed in earlier sections of this report, change is an inevitable aspect for any organization that intends to maintain its relevance in its industry of operation. Some of the factors that prompt organizations to implement change on a constant basis include the increase in market globalization, rapid evolutions in technology and the need to increase creativity and innovation in organizational operations (Cameron & Green, 2012). Therefore, it is vital for process of change to be effectively managed so as to minimize the disruptions it may have on business operations in the organization. Organizational change management is the framework that is used to manage effects of change when a company decides to transition itself into a more desired state.
Organizational change has been studied by several researchers, who have made suggestions of steps that need to be undertaken in managing it for the most favorable results. One of the change management models was suggested by Harris (1975), in which he suggested five stages through which the change process should undergo. These are: the planning and initiation stage, the momentum stage, problems stage, the turning point and the termination stage. The planning and initiation stage involves the consideration of the goals to be achieved by the change process and estimation of resources needed. In the momentum stage, activities directed towards achieving the change objective begin to gain momentum. Interest and involvement of the people taking part in the change process also begins to increase in this phase. In the problems phase, the change process begins experiencing unexpected problems. These include insufficiency of some resources and difference perceptions of change objectives among employees, increasing the complexity of the process. The turning point stage is where problems earlier experienced are either overcome, and the original momentum is regained until the next stage. The final phase is the termination stage, where the change is completed, transforming the organization to the desired stage. Accomplishment of the change process requires effective management of individuals and resources through all the mentioned stages. Harris’ stages of management are summarized in the figure below.
Fig. 2: Harris’ Management process
Source: Harris (1975)
Another approach to the change management process was suggested by (Kotter, 1996). In his model, he suggests eight steps of managing the change process. These steps are summarized in the chart below.
Fig. 3: Kotter’s eight-stage model of change management
Adopted from Kotter (2007)
4.1.Impacts of the change management process
The outcomes of change management chiefly depend on how effectively the management process was carried out. Effective management benefits individual stakeholders and the overall organization. For individuals, it maintains their focus and morale in their contribution to the organization’s progress. It also helps them to easily adjust from the old state of the organization to the new transformed state.
Cost reduction is one of the key organizational benefits of change management (Andriopoulos & Dawson, 2009). Change processes in organizations are usually very costly and if they are not effectively managed, confusions or problems that may arise in the course of the change process can increase the expenditure of the company on the change process. This also applies to time and other resources involved in the change process. Another benefit that change management has for the organization is that it places it a better competitive position in the industry in product and service delivery (Kotter, 2007). It also minimizes the possible resistance to the change process through making the involved parties realize the benefits of the change process.
Ineffective change management, on the other hand, is likely to increase the costs incurred by the organization in undergoing all steps of the change process. Employees and customers can also offer resistance to the change process if they are not well informed and prepared for the change (Andriopoulos & Dawson, 2009). This can negatively affect the competitiveness of the company.
Creativity is being embraced by many organizations across the globe to enable them to cope with the changes taking place in the economic environment. Some of the changes that have taken place include the shift from knowledge economy to creativity economy, changes in employee expectation, among others. Given that hierarchical management structures are unsupportive of creativity in organizations as presented in this report, it is definite that such management structures shall be replaced by those that encourage creativity. In addition to pointing out the need for creativity in the current organizational environment, this paper has discussed some of the factors that need to be managed to encourage creativity in organizations and the change management process. This report has presented a general view of the need to nurture creativity and innovation in the workplace. However, it is recommended that future research should focus on specific industries because some of them may benefit from hierarchical management structures.
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