Managing for Creativity

A R T I C L E www.hbr.org Managing for Creativity by Richard Florida and Jim Goodnight Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Managing for Creativity 9 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications Product 1832 Managing for Creativity The Idea in Brief The Idea in Practice Your company’s most important asset? Cre- SAS’s strategies for maximizing creativity: • Bringing groups of employees together to ative capital: the arsenal of creative think- exchange ideas ers whose ideas turn into valuable products HELP EMPLOYEES DO THEIR BEST WORK • Asking lots of questions and services. Creative people excel when you present them • Procuring materials that employees need Creative employees pioneer new technol- with on-the-job challenges. Give each type of ogies, birth new industries, and power employee the form of mental stimulation that • Avoiding penalizing people for making economic growth. But the process by most engages him or her. honest mistakes which they do all this is complex and cha- Example: otic. How to manage your firm’s creative SAS’s developers thrive on intellectual stim- ENGAGE CUSTOMERS AS CREATIVE capital so it delivers maximum value— ulation. So the company sends them to PARTNERS increasing efficiency, improving quality, industry- and technology-specific confer- Ensure that people throughout your organiza- and raising productivity? Apply software ences, where they hone their programming tion hear customers’ voices loud and clear. giant SAS’s three-pronged strategy, say skills. It also maintains a healthy training Customers will tell you why your company’s Florida and Goodnight: budget so developers can keep up with products or services aren’t ideal and how to • Help employees do their best work by cutting-edge technologies. make them better. And they’ll work with you to improve them. engaging them intellectually and elimi- But as much as creative people like to feel nating distractions. challenged, they don’t want to have to sur- Example: • Make all managers responsible for mount unnecessary obstacles, so SAS also Every day, SAS gathers—and acts on— sparking creativity, removing arbitrary strives to eliminate hassles off and on the job. customer complaints and suggestions through its Web site, over the phone, and distinctions between “suits” and “creatives.” Example: through annual users’ conferences. It priori- SAS provides perks—including on-site dry • Engage customers as creative partners tizes complaints and comments and routes cleaning, exercise, and medical facilities— so you deliver superior products. them to the appropriate experts, incorpo- that make it easy for employees to handle rating as many suggestions as possible The payoff? SAS’s results say it all: 28 straight everyday errands and chores. These bene- when developing next versions of software. years of revenue growth. A subscription re- fits make employees more productive and It has taken action on about 80% of all cus- newal rate of 98%. And an employee turn- improve retention. over rate of just 3%–5%, compared with a tomer requests. 20% industry average. MAKE MANAGERS “CREATIVES” Ensure that all managers do hands-on work: You’ll send the message that everyone’s on the same team, striving to provide a superior product. When employees know their boss has actually done the work they do, they ask more questions, put more faith in their boss’s decisions, and feel comfortable discussing problems and pitching new ideas. Example: SAS’s CEO writes software code for some of its products. The director of SAS’s on-site health care center is a nurse practitioner who sees her own patients one afternoon a week. Managers can further spark innovation by: OPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. OPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. C page 1 Over many years, the leaders of SAS Institute have distilled a set of principles for getting peak performance from creative people. Among them: Value the work over the tools, reward excellence with challenges, and minimize hassles. Managing for Creativity by Richard Florida and Jim Goodnight A company’s most important asset isn’t raw stock options and other crude financial incen- materials, transportation systems, or political tives. This view is supported by the research of influence. It’s creative capital—simply put, an Harvard Business School’s Teresa Amabile and arsenal of creative thinkers whose ideas can be Yale University’s Robert Sternberg, which turned into valuable products and services. shows that creative people are motivated from Creative employees pioneer new technologies, within and respond much better to intrinsic re- birth new industries, and power economic wards than to extrinsic ones. Mihaly Csikszent- growth. Professionals whose primary respon- mihalyi at Claremont Graduate University in sibilities include innovating, designing, and California has documented the factors that problem solving—the creative class—make up generate creativity and its positive effects on a third of the U.S. workforce and take home organizations, advancing the concept of “flow”— nearly half of all wages and sala-ries. If you the feeling people get when their activities want your company to succeed, these are the require focus and concentration but are also people you entrust it to. That much is certain. incredibly enjoyable and rewarding. What’s less certain is how to manage for maxi- While most students of the creative process mum creativity. How do you increase effi- have focused on what makes individuals cre- ciency, improve quality, and raise productivity, ative, a growing number of thinkers such as all while accommodating for the complex and Andrew Hargadon at the University of Califor- chaotic nature of the creative process? nia, Davis, and John Seely Brown, former chief Many academics and businesses have made scientist of Xerox, are unlocking the social and inroads into this field. Management guru Peter management contexts in which creativity is Drucker identified the role of knowledge work- most effectively nurtured, harnessed, and mo- ers and, long before the dot-com era, warned bilized. Eric von Hippel of MIT and Henry of the perils of trying to “bribe” them with Chesbrough of the University of California, OPYRIGHT © 2005 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. OPYRIGHT © 2005 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. C harvard business review • hbr.org • july–august 2005 page 2 Managing for Creativity Berkeley, have called attention to the critical individuals’ ideas, but a product of interaction. role played by users and customers in the cre- As University of Chicago organization theorist ative process and to a new model of “open in- Ronald Burt has shown, long-term relation- novation.” Duke University’s Wesley Cohen has ships between employees and customers add shown that corporate creativity depends upon to a company’s bottom line by increasing the a firm’s “absorptive capacity”—the ability of its likelihood of “productive accidents.” Thus, research and development units not just to when SAS nurtures such relationships among create innovations but to absorb them from developers, salespeople, and customers, it is in- outside sources. Business history is replete vesting in its future creative capital. with examples of companies—from General Managing with a framework like SAS’s pro- Electric and Toyota to the design-intensive duces a corporate ecosystem where creativity Electronic Arts, Pixar, and IDEO—that have and productivity flourish, where profitability tapped into the creativity of workers from a and flexibility go hand in hand, and where wide range of disciplines, as well as the creativ- hard work and work/life balance aren’t mutu- ity of users and customers, to become more in- ally exclusive. novative, more efficient, or both. Despite such insights and advances, most Help Workers Be Great businesses have been unable to pull these no- Creative people work for the love of a chal- tions of creativity together into a coherent lenge. They crave the feeling of accomplish- management framework. SAS Institute, the ment that comes from cracking a riddle, be largest privately held software company in the it technological, artistic, social, or logistical. world, is a notable exception. Based in Cary, They want to do good work. Though all people North Carolina, SAS has been in the top 20 of chafe under what they see as bureaucratic ob- Fortune’s 100 Best Companies to Work For list structionism, creative people actively hate it, every year it’s been published. The employee viewing it not just as an impediment but as the turnover rate hovers between 3% and 5%, com- enemy of good work. Do what you can to keep pared with the industry average of nearly 20%. them intellectually engaged and clear petty The governments and global corporations that obstacles out of their way, and they’ll shine rely on SAS’s sophisticated business-intelligence for you. software are overwhelmingly satisfied: The Stimulate their minds. SAS operates on the subscription renewal rate is an astounding 98%. belief that invigorating mental work leads to And in 2004, the company enjoyed its 28th superior performance and, ultimately, better straight year of revenue growth, with revenues products. It does not try to bribe workers with topping $1.5 billion. stock options; it has never offered them. At What’s the secret to all this success? As an ac- SAS, the most fitting thanks for a job well ademic and a CEO, the two of us approach this done is an even more challenging project. question differently, but we’ve come to the An InformationWeek survey of tens of thou- same conclusion. SAS has learned how to har- sands of IT workers confirms that theory: On- ness the creative energies of all its stakehold- the-job challenge ranks well above salary and ers, including its customers, software develop- other financial incentives as the key source of ers, managers, and support staff.

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