Employee Performance: The Influence of Innovation

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Abstract

In the face of constant striving to enhance employee productivity, HR specialists apply different strategies and approaches to improve working regimes through innovation. In small and medium-sized enterprises (SMEs), which make up a significant share of companies in the global market, such solutions are also promoted. At the same time, innovation is perceived by workers differently, and the key research problem to address is to assess the influence of innovation on staff performance in SMEs.

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Findings from relevant academic sources and online resources will be explored as an appropriate theoretical basis. The emphasis will be on analysing strategic concepts that include innovation and comparing findings from different authors regarding the value of implementing optimisation solutions to enhance employee productivity. The planned research will be qualitative, and a phenomenological approach will be applied to evaluate the experiences of the participants involved. As a theoretical framework, the onion research model will be utilised as a mechanism to explain the research philosophy, approach, strategy, time horizons and data collection methods. Through interviews with pre-prepared questions, the views of SMEs workers involved will be assessed, and by processing these responses, conclusions will be drawn concerning the impacts of innovation on productivity from an employee perspective.

Introduction

Achieving high employee performance is of great importance for the productivity of businesses in different directions since human resources are the main asset of modern companies. In this regard, various factors are to be taken into account, for instance, the professional training of personnel, the share of investments in the HR sector and other nuances. At the same time, one of the essential criteria to assess is the size of organisations. The market shares and business objectives that companies set depend directly on the resources available and the size of their businesses.

In a constant struggle for a competitive advantage, businesses are implementing numerous strategies and solutions designed to optimise the workflow and improve productivity. One of such approaches is introducing innovation as a factor speeding up and simplifying operational procedures. Therefore, this research proposal is aimed at identifying the relationship between innovation and employee performance in the context of SMEs.

These organisations are firms that do not operate in the international market and do not have significant resources to globalise their businesses. As Shahzad et al. (2019) state, to analyse this relationship in large firms, the human capital theory is applied to assess how the innovation factor affects the performance of personnel. However, in the case of SMEs, the more general entrepreneurship theory is relevant because the emphasis is not on expansion but on standard principles and approaches to strengthening businesses in the context of market dynamics (Valdez-Juárez, García-Pérez de Lema and Maldonado-Guzmán, 2016). As a result, by applying a qualitative analysis through interaction with target audiences, particularly employees of SMEs, evidence of the impact of innovation on labour performance will be examined.

The relevance of this topic is due to a number of factors and implications. As them, one can mention the constant growth of innovations in the business sphere, the need to optimise HR practices through effective influences and the role of digital and other high-tech tools in modern SMEs. As a related topic overlapping with the proposed one, the analysis of specific leadership approaches could be relevant because, according to Knezović and Drkić (2020), effective control practices are positively correlated with employee work behaviour in SMEs. Nevertheless, the role of innovation is preferable to consider because the use of external instruments rather than internal incentives requires more careful assessment.

The research value lies in the ability to identify a positive relationship between innovation and performance in SMEs through the data collected from stakeholders. Ndesaulwa and Kikula (2016) argue that combining theoretical and empirical evidence can help prove a positive relationship between the variables in question. The modern business environment is flexible, and, as Pérez-De-Lema et al. (2018) note, the theory of dynamic capabilities explains the need to adapt to specific conditions and implement innovative tools and practices to market promotion.

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Thus, the focus on workflow optimisation is the driving force of many companies, and this proposal is intended to assess the views of stakeholders on the real situation and the specific results of the corresponding changes. With the help of a literature review, relevant findings about the analysed variables will be obtained. The value of innovation in SMEs is high, and it is assumed that modern mechanisms and approaches based on the use of digital applications and other high-tech techniques have a positive impact on employee performance.

Research Question and Objectives

Assessing the positive impact of innovation on productivity is the key goal of this proposal. According to Sardi et al. (2020), in SMEs, the process of innovative development is often accompanied by various challenges, largely related to HRM policies and constraints caused by the staff’s unwillingness to change. Nevertheless, today, the focus on optimisation through the implementation of effective practical solutions is a trend in view of the real outcomes of business transformation. As Bali et al. (2019) state, the culture of innovation is based on such values as sustainable growth and organisational development since any intervention is designed to improve current performance and update outdated work algorithms. For instance, in a recent interview, Mr. Alain Law Min, Chief Executive Officer in Mauritius Commercial Bank, notes that the international market has been optimised significantly due to the introduction of digital payment transactions (Interview with Mr. Alain Law Min, 2021). Therefore, the research question may be as follows: Is an innovative approach objective to improve employee performance in SMEs?

To answer the proposed research question, several objectives are set. They are as follows:

  1. Proving the relevance of innovation to SMEs.
  2. Discussing the role of innovation in improving staff productivity in SMEs.
  3. Revealing the positive impact of innovation from an employee perspective in SMEs.

Literature Review

Analysing the value of innovation and its role in the context of the impact on performance in SMEs can be examined by evaluating findings from relevant resources, including both academic sources and other open data. Since the target platform to consider is SMEs, the focus on their work will be key. According to Vanhaverbeke (2018), in small firms, innovation can go beyond technological developments.

The author argues that for such organisations, in addition to practical changes in the operating environment, internal changes also play an important role, for instance, the transformation of personnel functions (Vanhaverbeke, 2018). However, in modern conditions, when social constraints and other limitations can affect productivity, labour optimisation through effective technological tools looks more reasonable and in-demand.

The current COVID-19 pandemic has made significant adjustments to SMEs worldwide. Mikkola, Deschryvere and Conn (2020) address this issue and propose potentially effective solutions to re-establish productive operations in such firms, with particular emphasis on the role of innovation. The authors propose to focus on attracting high-tech solutions to SMEs in different regions to create a unified development system and eliminate optimisation gaps in such organisations (Mikkola, Deschryvere and Conn, 2020). At a recent meeting of the European Commission, much attention was paid to the role of innovation in the development of SMEs (Link, 2021). The speakers acknowledged that these companies, being represented in the largest number in the European market, were the key platforms for digital innovation (Link, 2021). Thus, the values and relevance of work optimisation to such organisations are significant.

Relevance of Innovation to SMEs

Innovation in SMEs is an important source of productivity gains, but certain factors can make it difficult to implement optimisation solutions in such firms. Expósito and Sanchis-Llopis (2019) consider such barriers and note that a lack of resource base and unprepared staff can be obstacles to effective innovation. In addition, the researchers claim that a multi-dimensional approach based on the attraction of alternative optimisation methods is relevant to SMEs due to the ability to influence specific aspects of production without significant costs (Expósito and Sanchis-Llopis, 2019). Due to the current pandemic, such organisations have been most vulnerable to numerous business restrictions, and appropriate support, reinforced by investment from the authorities, is necessary (Times News Service, 2021). Therefore, the relevance of innovation to SMEs is high due to numerous barriers and obstacles in the modern entrepreneurial environment.

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Another reason why innovation should be part of the organisational development of SMEs is strengthening the intellectual base of such firms. The OECD report (2018, p. 3) discusses the role digitalisation plays, and “the diffusion of knowledge” is mentioned as one of the valuable consequences of innovative development. In other words, the more successfully an SME implements appropriate optimisation tools and practices, the higher is the likelihood of improving its status in the target market due to sustainable and strategically competent work.

This statement is logical since any innovation, be it a technical or functional solution, is associated with simplification, which, in turn, relieves the burden on employees and allows them to focus on more important tasks. From the perspective of government participation, this topic resonates because, as Elliott (2021) remarks, the financial support plan for SMEs reflects the authorities’ interest in the sustainable operation of such organisations. Thus, the relevance of innovation is recognised from different perspectives.

Role of Innovation in Improving Personnel Performance

While assessing academic findings, one can note that one of the main benefits of innovation in SMEs, which is often cited, is productivity gains. According to Adla, Gallego-Roquelaure and Calamel (2019), a competent HR system within such an organisation is the key to the sustainable implementation of technological developments and techniques aimed at optimising the workflow. However, even control by responsible specialists can be ineffective in the case of certain barriers.

Božić and Rajh (2016) note the lack of staff qualifications, insufficient funds to maintain the sustainability of innovation, the absence of experience and some other obstacles. At the same time, the authors argue that in the case of successful management control and the necessary additional measures, for instance, appropriate employee training, innovation is a significant driver to increase productivity (Božić and Rajh, 2016). The key explanation for this is work optimisation when workloads are reduced, and staff are given more opportunities to work on the most difficult and responsible tasks.

Due to a wide range of business innovations, there are many ways to improve subordinate productivity. One of the approaches that Al-Tal and Emeagwali (2019) cite is personalised tools that adapt to the work of the individual employee. Such instruments allow optimising the workflow at different stages, thereby improving overall productivity. There are also team practices, such as smart algorithms, that analyse group performance and simplify decision-making (Al-Tal and Emeagwali, 2019).

Improved productivity is directly correlated with increased profits, and for employees, the implementation of program and technology optimisation is associated with positive incentives, including material rewards (Lorenz and Potter, 2019). As a result, not only SMEs but also staff can benefit from the application of actionable workflow innovations to improve productivity.

Innovation in SMEs: Employee Perspective

The implementation of innovations in SMEs is often considered through an empirical approach, particularly from the perspective of these organisations’ employees. Saunila (2016) cites the experience of such workers and notes that improving the microclimate and well-being in the team are the real results of optimising the workflow. Li et al. (2021) corroborate these findings and add that employees cite workplace autonomy as one of the valuable drivers of innovation. These findings are objective because optimisation solutions simplify routine procedures and give workers greater freedom in choosing decision-making strategies.

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Taking into account the views of employees and their position regarding the need and conditions for introducing innovations in SMEs is a must for sustainable optimisation. Popa, Soto-Acosta and Martinez-Conesa (2017) consider the process of open innovation (OI) in such firms. As they state, “the resistance of employees and lack of internal commitment have been pointed out as strong barriers to SMEs adoption of OI practices” (Popa, Soto-Acosta and Martinez-Conesa, 2017, p. 135). In this regard, interaction with personnel and the discussion of the terms of innovation are mandatory management practices. Valaei, Rezaei and Emami (2017) emphasise the need for pre-learning, and according to their study of Thai SMEs, workers tend to be more flexible if they are ready for changes and understand the importance of innovation. Therefore, from an employee perspective, the optimisation process can improve the work process, but specific conditions are to be met.

Methodology

As mentioned above, to identify the relevance of innovation in the context of improving employee performance in SMEs, a qualitative study will be conducted. This method of analysis involves engaging with stakeholders and collecting data to compile an overall picture. As a blueprint for research, the Saunders research onion model will be utilised, which, as Melnikovas (2018, p. 29) argues, “explains seven steps of developing the research methodology and construction of research design”. These steps will shape the basis of the methodology for the proposed study.

Research Design

A qualitative study based on a phenomenological approach that evaluates the experiences of the participants involved will form the research design. As a research philosophy, the practice of constructivism will be relevant, which, according to Adom, Yeboah and Ankrah (2016), demonstrates the attitudes of an individual or group to a specific phenomenon. These common attitudes, in turn, shape the principles of perception. The role of innovation can be perceived differently by SMEs employees, which explains the choice of such a philosophy.

As a research approach, the deductive principle will be applied. This approach is based on using a particular concept and assessing its impact on the aspects under consideration, and taking into account the human capital theory proposed by Shahzad et al. (2019), this method is relevant. The analysis of the impact of innovation on employee performance in SMEs is considered a plausible fact, and the manifestations of this correlation can be proven through the general-to-specific approach.

To find out the necessary information from the participants involved, surveys will be used as the main research strategy. As Rahi (2017, p. 2) argues, this strategy is “associated with deductive research approach” and is a handy algorithm to obtain the information from the members involved. Since interaction with the research participants will take place within the framework of direct communication, from a time horizons perspective, the research will be cross-sectional. This form is convenient to get the necessary data and process it in the near future. Consequently, since the issue under consideration does not include the comparison of valuation results over a long period, a longitudinal study is irrelevant.

Data Collection and Analysis

To follow the survey strategy successfully, the interaction with the participants needs to be in real time. Therefore, as the main data collection tools, structured interviews will be conducted. Salum and Rozan (2016) examine a similar topic and review the specifics of implementing program optimisation in SMEs but focus on semi-structured interviews. However, regarding the planned research, this form of interaction is incorrect since, to obtain the most objective data, the questions are to be identical but not variable to measure and evaluate the answers accurately. Questionnaires are also an inconvenient form of obtaining information because the members may submit false data, while during face-to-face interviews, it is easier to receive sincere responses from the interlocutor.

With regard to the type of data to analyse, the attitudes of the participants towards the issue of innovation and their impact on personal performance will be examined. Questions will focus on the personal experiences of the study members and their views of either positive or negative changes. The selective sampling method will be applied to communicate with the employees of SMEs in which innovations have taken place. Demographic criteria, such as age, gender, or cultural background, will not be considered because the emphasis is on professional experiences but not the connection of the issue with the members’ individual backgrounds. It is assumed that the target group will be about 50 people to obtain as objective results as possible.

To analyse the obtained data, inferential statistics will be used. In particular, the principle of deduction will be applied because, as Minton and Lenz (2019) state, this practice of analysis corresponds to the method of working with a sample population. It helps answer specific research questions and evaluate general information with its subsequent interpretation. The data collected during the interviews will be checked due to a pre-prepared scale, and the participants’ responses will be considered within the respective levels. As a software, a simple computer program will record the members’ responses and correlate their answers by presenting their frequency. This approach will help identify general trends in the perception of innovation and present an objective picture.

Ethical Considerations

All involved participants will be made aware of the objectives of the proposed research. The engaged employees of SMEs will give written consent to the processing of their responses given during the interviews. At the same time, the aspect of confidentiality will be respected as an important criterion of a credible study. The work does not imply assessing the participants’ demographic data, and no personal information will be disclosed.

Reliability and Validity Aspects

Meeting the aspects of reliability and validity is a crucial factor in performing credible research. According to Tjora (2019, p. 148), in qualitative studies, “reliability is concerned with internal logic or consistency throughout the entire research project”, while “validity involves a logical consistency between the project’s design and its findings”. For the proposed study, reliability will be checked through the analysis of the research components, and validity will be achieved due to utilising an appropriate theoretical framework, particularly the onion model, to meet all the research nuances.

Limitations

As the limitation of the proposed study, one can name the lack of a specific industry for analysis. SMEs in different fields conduct distinctive businesses, and based on the information provided by KfW Group (2020), performance growth and decline depend on specific spheres. Nevertheless, the task of the planned work is to show general trends. As a consequence, another limitation manifests itself, particularly the lack of division by demographic factors. However, this categorisation is unnecessary when the phenomenon of innovation is viewed as a whole without focusing on attendant labour conditions and employee factors.

Timescale

To complete all the research stages, it will take approximately one and a half months. The relevant academic background, including theoretical concepts and relevant practical findings, will be explored within one week. Within the following week, invitations to potential participants will be sent out, and the necessary data processing tools will be prepared. The interview process will take about two weeks, and the remaining time will be devoted to processing the information, compiling the appropriate correlations and summarising the research outcomes.

Conclusion and Potential Outcomes

Assessing the value of innovation in terms of its impact on employee productivity in SMEs can be performed through qualitative analysis to obtain real feedback from the participants involved. The Saunders research onion model provides a convenient framework for conducting comprehensive research with a solid foundation and sufficient theoretical background. Through structured interviews, the data from the target participants will be collected and analysed by utilising inferential statistics and the deductive method. Despite some limitations, such as distinctive businesses and the ignorance of demographic factors in a sampling approach, this study can help answer the research question about the positive impact of innovation on employee performance in SMEs.

In terms of potential outcomes, a positive relationship between the variables under consideration is likely to be proven. Based on the results of the literature review, many SMEs employees confirm the effectiveness of the optimisation of various workflow aspects and agree with the position that continuous improvement is necessary. The research findings can help complement the existing academic base with relevant and credible insights and add value to applying an innovative approach to managing SMEs.

Reference List

Adla, L., Gallego-Roquelaure, V. and Calamel, L. (2019) ‘Human resource management and innovation in SMEs’, Personnel Review, 49(8), pp. 1519-1535.

Adom, D., Yeboah, A. and Ankrah, A. K. (2016) ‘Constructivism philosophical paradigm: implication for research, teaching and learning’, Global Journal of Arts Humanities and Social Sciences, 4(10), pp. 1-9.

Al-Tal, M. J. Y. and Emeagwali, O. L. (2019) ‘Knowledge-based HR practices and innovation in SMEs’, Organizacija, 52(1), pp. 6-21.

Bali, A. et al. (2019) Productivity and innovation in SMEs: creating competitive advantage in Singapore and South East Asia. New York: Routledge.

Božić, L. and Rajh, E. (2016) ‘The factors constraining innovation performance of SMEs in Croatia’, Economic research – Ekonomska Istraživanja, 29(1), pp. 314-324.

Elliott, L. (2021) ‘Rishi Sunak to offer ‘help to grow’ training for SME managers,’ The Guardian. Web.

Expósito, A. and Sanchis-Llopis, J. A. (2019) ‘The relationship between types of innovation and SMEs’ performance: a multi-dimensional empirical assessment’, Eurasian Business Review, 9(2), pp. 115-135.

Interview with Mr. Alain Law Min, Chief Executive Officer, Mauritius Commercial Bank (2021). Web.

KfW Group (2020) KfW SME innovation report 2019: innovator rate drops to 19%. Web.

Knezović, E. and Drkić, A. (2020) ‘Innovative work behavior in SMEs: the role of transformational leadership’, Employee Relations: The International Journal, 43(2), pp. 398-415.

Li, B. et al. (2021) ‘CSR and workplace autonomy as enablers of workplace innovation in SMEs through employees: extending the boundary conditions of self-determination theory’, Sustainability, 13(11), p. 6104.

Link, A. (2021) Innovation potential of SMEs at the centre of new European Commission’s 2030 digitalisation strategy. Web.

Lorenz, E. and Potter, J. (2019) Workplace organisation and innovation in small and medium-sized enterprises. Web.

Melnikovas, A. (2018) ‘Towards an explicit research methodology: adapting research onion model for futures studies’, Journal of Futures Studies, 23(2), pp. 29-44.

Mikkola, M., Deschryvere, M. and Conn, S. (2020) SME innovation: 10 priorities for support post-COVID-19. Web.

Minton, C. A. B. and Lenz, A. S. (2019) Practical approaches to applied research and program evaluation for helping professionals. New York: Routledge.

Ndesaulwa, A. P. and Kikula, J. (2016) ‘The impact of innovation on performance of small and medium enterprises (SMEs) in Tanzania: a review of empirical evidence’, Journal of Business and Management Sciences, 4(1), pp. 1-6.

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Pérez-De-Lema, D. G. et al. (2018) ‘Influence of the business environment in the dynamics of innovation and in the performance of SMEs’, International Journal of Innovation Management, 23(05), p. 1950044.

Popa, S., Soto-Acosta, P. and Martinez-Conesa, I. (2017) ‘Antecedents, moderators, and outcomes of innovation climate and open innovation: an empirical study in SMEs’, Technological Forecasting and Social Change, 118, pp. 134-142.

Rahi, S. (2017) ‘Research design and methods: a systematic review of research paradigms, sampling issues and instruments development’, International Journal of Economics & Management Sciences, 6(2), pp. 1-5.

Salum, K. H. and Rozan, M. Z. A. (2016) ‘Exploring the challenge impacted SMEs to adopt cloud ERP’, Indian Journal of Science and Technology, 9(45), pp. 1-8.

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Saunila, M. (2016) ‘Innovation capability in achieving higher performance: perspectives of management and employees’, Technology Analysis & Strategic Management, 29(8), pp. 903-916.

Shahzad, K. et al. (2019) ‘Unpacking the relationship between high-performance work systems and innovation performance in SMEs’, Personnel Review, 48(4), pp. 977-1000.

Times News Service (2021) ‘Multi-pronged efforts to support local businesses in Oman,’ Times of Oman. Web.

Tjora, A. (2019) Qualitative research as stepwise-deductive induction. New York: Routledge.

Valdez-Juárez, L. E., García-Pérez de Lema, D. and Maldonado-Guzmán, G. (2016) ‘Management of knowledge, innovation and performance in SMEs’, Interdisciplinary Journal of Information, Knowledge, and Management, 11(4), pp. 141-176.

Valaei, N., Rezaei, S. and Emami, M. (2017) ‘Explorative learning strategy and its impact on creativity and innovation: an empirical investigation among ICT-SMEs’, Business Process Management Journal, 23(5), pp. 957-983.

Vanhaverbeke, W. (2018) Managing open innovation in SMEs. Cambridge: Cambridge University Press.

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