I thank the Chairman. On behalf of NCPP I thank the committee for their invitation to address it today on the subject of workplace innovation and the role it can play in helping Irish business to gain competitive advantage in a challenging economic environment.
The NCPP was established by the Government in 2001 to promote and drive partnership-led change and innovation in Irish workplaces. Its establishment stemmed from the recognition that if Ireland was to develop a dynamic, inclusive and knowledge-based economy our private and public workplaces needed to be transformed into high-performance, high-quality places of work.
The area of partnership with which we are specifically concerned is at the level of the enterprise. At its most simple, enterprise-level or workplace partnership can be defined as employers and employees working together in a co-operative and collaborative manner to boost productivity and improve the quality of working life for all.
The NCPP has a staff complement of seven, and a total budget for 2009 of €1.2 million. Ours is a small team, working in a policy area that is effectively still in its infancy in Ireland, but which is nevertheless critical to the continued economic and social development of the State. Since its establishment, the NCPP has built a substantial body of evidence in support of the intellectual and business case for improved performance in Irish workplaces. It has also initiated a wide range of collaborative activities with key Departments, State agencies and the social partners to engage private enterprise and public sector organisations in implementing best workplace practice. I have included in my presentation some highlights of the body of work we have carried out over the years.
The NCPP is also a highly networked State agency. In pursuit of our remit, we work in close co-operation with a wide range of private and public bodies, including IBEC, ICTU, Enterprise Ireland, Forfás, IDA Ireland, the LRC, the Equality Authority, Skillnets, the CIPD, the Small Firms Association and Chambers Ireland, to name but a few. On the international stage, our efforts to drive and promote workplace innovation have been noted in many countries. In the past three months, we have welcomed to Ireland researchers from Australia, New Zealand, South Korea, Belgium and Finland, all keen to learn more about the national workplace strategy and other NCPP initiatives to boost productivity and performance through organisational innovation.
Workplace innovation is at the heart of our mission, which we pursue through a combination of research, evaluation and advocacy activities. Workplace innovation is about new ways of working based on new ideas, practices and behaviours that significantly add value to the organisation in terms of productivity, performance, innovation and quality of working life. In other words, it is about new ways of doing everyday things in the workplace, from the organisation of work and working practices to employee relations and beyond. Workplace innovation opens up the innovation process to everybody in the workplace and allows employees and managers at all levels to make a contribution.
It is important to understand that there is more to innovation than research and development, even though that is very significant. In a successful modern economy competing in a global marketplace, innovation requires many platforms. Innovation at the level of enterprise and the workplace is the most crucial aspect of a country's innovation system, but this is an area that is often neglected. Professor Michael Porter of Harvard Business School states that "All economic success is ultimately at the level of the firm." Therefore, our future economic success will be rooted in the success of innovative enterprises. A well-functioning, successful, modern economy is built on firms being innovative, that is, being able to produce new, higher-quality, lower cost products and services than those that were previously available.
It is also true to say that innovation increases in a time of crisis. A crisis or "performance gap" triggers mechanisms for the introduction of innovation and radical change. That is why supporting innovative capacity in enterprises and organisations is such a critical response to our current economic difficulties. Workplace innovation is a critical part of this response as it creates the conditions in businesses for further innovation to thrive and prosper, and builds capacity for change and flexibility.
Workplace innovation has now been recognised as a critical component of our national system of innovation. In July 2008, the Department of Enterprise, Trade and Employment published a policy statement on innovation in Ireland, in which workplace innovation was explicitly recognised as a key enabler of change in a rapidly changing domestic and international environment. Examples of innovative workplace practices include: participatory management and leadership styles; good internal communications; high levels of information and consultation; team working; learning and upskilling; performance management systems; flexible working arrangements, as well as flat and flexible structures. The key to improving innovation in our workplaces, regardless of size or sector, is by budding high levels of employee involvement, engagement and empowerment in the enterprise.
What is the business case for workplace innovation? Over the past 15 years, a growing body of Irish and international research evidence has emerged to show that a very strong link exists between the implementation of innovative workplace practices and outcomes such as: increased productivity and profitability; improved operational processes; improved product and service design; greater efficiencies throughout the enterprise; enhanced flexibility; reduced time spent in conflict and dispute resolution; improved staff retention; lower absenteeism; and enhanced employee understanding of business challenges.
One of the most recent empirical studies on this subject anywhere in the world was commissioned jointly by the NCPP and the Equality Authority in 2006, and published in January 2008. We asked a research team comprising senior academics from the University of Limerick, Dublin City University and the University of Kansas to measure the average labour productivity of 132 leading Irish firms drawn from the list of Ireland's top 1,000 companies. The research team was then charged with measuring the proportion of that productivity that could be attributed directly to the use of what academics call "high performance work systems", or the workplace innovation practices to which I have referred. The results were impressive, to say the least. Average labour productivity in the companies surveyed was found to be just under €300,000 per worker per annum. The use of these systems in the companies was linked to average variances in productivity of 14.8%. In other words, companies implementing innovative workplace practices were found to be significantly more productive than their competitors. In monetary terms, the researchers found that the productivity gains were equivalent to an extra €45,000 per employee per annum in additional sales revenue. For the median-sized company in the survey, which contains 277 employees, this was equivalent to an extra €12 million in annual turnover. The survey also found that companies with high levels of high performance work systems had a lower rate of staff turnover, at -7.7%, and higher rates of workforce innovation, measured as per capita sales revenue derived from recently introduced products or services.
In recognition of the fact that larger firms tend to find it easier to embrace the concepts and practices of workplace innovation, the Government has put in place a new funding mechanism called the workplace innovation fund, which will help Irish SMEs boost their productivity and performance through workplace partnership and employee participation. The workplace innovation fund is managed jointly by the NCPP and Enterprise Ireland. It has a budget of €6 million, which is administered by Enterprise Ireland. Since its launch 18 months ago, more than 30 Irish companies have benefited from the fund. Grants of between €10,000 and €200,000 have been approved to enable these firms to embed a culture of partnership and participation in their workplaces. Activities eligible for support include initiatives to improve internal communications systems, information and consultation arrangements, management training and leadership development, team working and team building, and performance management systems. The NCPP is working closely with Enterprise Ireland to raise further the profile of the workplace innovation fund and to expand the eligibility criteria, so that as many Irish companies as possible will be able to benefit from it.
Workplace innovation is a new and vital form of innovation, the potential of which has yet to be fully realised in Ireland. As a result, we need more employers and employees, as well as legislators, policy makers and others, to be aware of the huge potential of workplace innovation and its proven ability to help our firms gain competitive advantage in challenging economic circumstances. As leading economies around the world continue to seek out new strategies and new areas in which to build such advantage, the role and potential of workplace innovation is becoming increasingly apparent. At this critical juncture in our economic and social development, Ireland simply cannot afford to be left behind.
