by Peter J. Jansen van Nieuwenhuizen
© July 30, 2010
ABSTRACT – Stress inhibits creative thinking in the twenty-first century firm. As firms increasingly form part of the knowledge economy, lower creative thinking can, eventually, make the firm competitively irrelevant. Managers must understand the link between creative thinking and stress.
Decisions and actions taken by management can disrupt innovation initiatives in a firm for many years. An action that has the most destructive effect on innovation is any form for restructuring. Whether the restructuring is accompanied with job losses or not, is of lesser importance from the innovator’s perspective. This article wants to discuss the effect of restructuring on innovation campaigns.
Any restructuring in a firm creates significant levels of stress. Even when the restructuring does not cause job losses, stress is ever present during the uncertainties before and after the restructure action. During this time, innovation efforts take a lower priority within the firm. This is especially the case where the firm asks staff to be part of a firm-wide innovation campaign. Briefly, it is generally accepted that staff are effective to identify innovations because they are closer to the so-called “coal face” than are the management teams. For the purpose of this article, it is assumed that the majority of the firm’s innovations are generated by staff other than a specialist innovation unit. Even when innovation is done exclusively by specialists that are separate from the firm, an action such as restructuring can have devastating effects on the overall innovation output from the firm.
The innovation campaigns of two different firms were compared. Firm A is a defunct financial services organization that operated in Saint Paul, Minnesota. The other is a well known bank in a country that merged four brands into one new brand during the mid-1990’s. Graphs tracking the innovation campaigns for both firms show distinct peaks and valleys. The first year marks the start of each innovation campaign. Readers must observe that one campaign ran between June 1991 and June 1997. The other campaign ran from March 1996 to October 2002. The only commonality between the campaigns is that both companies were in the financial services industry but the companies were located in two different countries.
2. RESTRUCTURING EFFECTS FOR FIRM A
At the end of Year 1 in the innovation campaign for Firm A, it was announced that the firm has been bought by a large insurance company. It was also announced that all staff will be retained, although management will have to be restructured. It meant that some managers were transferred to other departments. It also meant that some staff would be transferred. A decline in the number of innovations between Year 2 and Year 3 were observed and the firm could not understand the cause of the decline. Although staff communicated to management that they are under high uncertainty about their roles in the new structure, management firmly held onto a view that staff are not motivated enough and that they should be paid more so that they can work harder. A salary increase of 5% was announced but the innovation campaign still declined.
At the end of Year 5 of the campaign, Firm A announced that its share price is falling and that another restructure (this time with job cuts) would be necessary to save the firm. Barely six weeks later, the company’s share price sharply fell from $ 54-00 to $ 0-00 in a very short time and the company became yet another pre-Enron tale of corporate bankruptcy.
3. RESTRUCTURING EFFECTS FOR FIRM B
In the case of Firm B, a clear decline of innovations is seen at the end of Year 4.
At the start of their campaign, the four brands in Firm B have been seen as a unit for at least two years. High optimism was observed in the firm and everyone had high hopes for the future. At the end of Year 4, a restructure was announced and the firm assured staff that no job losses would result from this restructure. Despite the firm’s assurances, innovations sharply declined in Firm B.
4. CORRELATION BETWEEN FIRM A AND FIRM B
Announcements made by the two firms clearly created a negative effect to the innovation campaign of each firm. In each case, staff had a negative perception of announcements made by the two firms in this study. In each case where restructure was announced without a threat of job losses, innovations declined. Observations showed a direct link between staff morale and the level of new ideas being generated. Despite efforts from management, neither Firm A not Firm B could succeed to change the declining innovation curve.
5. LINKAGE BETWEEN STRESS AND DECLINE IN INNOVATION
Stress seems to have a definite contribution towards the rapid decline in intra-firm innovations. When any person stresses, it follows that a strong survival impulse takes over and that the brain sees creativity as secondary or tertiary to survival. Employees under stress are therefore not able to concentrate and be creative because the part in the brain that is responsible for creative thinking is completely overridden by the survival response.
A recent (29 July 2010) seminar about brain power indicated that stress releases two key chemicals in the brain: cortisone and adrenaline. Both chemicals heighten an individual’s survival instinct. Blood pressure rises, heart beats increase and the person under stress can no longer think clearly. A different set of brainwaves take over as the stressed employee moves from a so-called Alpha state into so-called Beta and Gamma waves. Although Beta waves increases alertness, it also increases a person’s anxiety levels, thus lowering the potential to think creatively. Higher states of stress can trigger the so-called Gamma waves which, in turn, generate a so-called Rambo-effect in the person under stress. High survival instinct kicks in and creativity takes last place in the brain’s list of priorities. The brain is following a sort of triage and any activity in the Beta or Gamma state that is not directly related to survival, is simply overruled by the brain. Figure 3 attempts to show the correlation between stress levels and creative thinking or productivity.
The stressed worker does not have control over the brain’s decision to suddenly move into the state of anxiety. In many cases, the stressed worker cannot understand what is happening to him/her. There is no understanding why concentration becomes impossible and why productivity lowers dramatically. Managers, on the other hand, observe the stressed worker as “difficult” or “not suitable for the job”.
Managers should be aware of the fact that stress and lower levels of creativity are irretrievably linked to one another. Managers should compare their own stress levels and their own ability to be creative when under stress. The belief that one performs better under stress is simply not true and literature shows that performance under stress is a myth. In fact, the myth perpetuates because some managers in some firms view the link between stress and lower performance as so-called soft issues. The stressed worker is expected to “snap out of it and go on with the job”.
6. CONCLUSIONS AND THE WAY FORWARD
As firms move more toward knowledge economies, it should be abundantly clear that the worker’s ability to do creative work is more taxed than ever before. Continuous exposure to stress will cause the firm to deteriorate because it will not be able to use its collective knowledge creatively. Organizational knowledge is firmly founded in the worker and the worker’s ability to create new products or services is based on that knowledge. Any action that can hinder the worker’s ability to focus on creative thinking should therefore be considered with care.
Little or no research has been done regarding the link between stress and innovation as it occurs in the South African firm. It is time that the relationship is fully understood so that firms can make the most of the knowledge economy. Any lack to create environments with lower stress levels will mean that firms depending on the knowledge economy will become competitively irrelevant. And that may happen quicker than the firm may realise.
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