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Employee innovativeness improves with fair and predictable HRM practices

Human resource management (HRM) can improve organisational trust and consequently increase innovativeness in organisations. A study conducted at Lappeenranta University of Technology (LUT) shows that the impersonal element of organisational trust plays an important role in organisational innovativeness.

According to the study, consistent HRM practices and their transparency enhance trust in the employer. People trust in an organisation when they know what systems are used and when they experience the systems as fair, impartial and possible to anticipate.

Increased trust in the employer creates a reciprocal relationship between the employee and employer. Employees are motivated to make an effort when they feel that they are treated fairly. The atmosphere of reciprocity leads to employees being more innovative and creative in their work.

Innovativeness and creativity can, for instance, be manifest in employees trying out creative solutions and supervisors enabling them, allowing innovative solutions by employees in the working community, and employees actively developing their working methods. Moreover, novel solutions are not considered as risks, but instead, their wider adoption is encouraged.

So-called strategic HRM practices that increase trust may include e.g. training and development, performance evaluation, participation in decision-making, career opportunities within the company, internal communication, and career planning. In previous studies, these aspects have been stated to improve organisational performance. Prior studies have, however, not sufficiently analysed the mechanisms through which these practices enhance the company’s competitiveness and employee innovativeness.

“There is a so-called black box between HRM practices and performance – a mechanism that leads from practices to performance. According to our study, it is impersonal trust, which refers to the trust of employees in their employer organisation,” relates Assistant Professor Mika Vanhala.

The researchers state that it is important for organisations to see to it that HRM practices are fair throughout the organisation and are not solely the concern of the HR department.

“If organisations wish to be innovative and creative, they should invest in the fair and impartial treatment of their staff, and transparent and systematic leadership. The best solution is to create courses of action that do not require costly investments,” explains Professor Paavo Ritala.

The study is based on responses by over 700 representatives from Finnish paper industry and ICT companies.