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WHAT WOULD BE THE CHARACTERISTICS OF AN ORGANIZATIONAL CULTURE THAT

PROMOTES AND ENCOURAGES AN INNOVATIVE WORK ENVIRONMENT?

Simone de Freitas Santana Segatto

June 21, 2020

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Table of Contents

1. INTRODUCTION ............................................................................................................................ 3
2. LITERATURE REVIEW .................................................................................................................. 5
2.1 Amazon’s Superior Innovation: A Study of Amazon's corporate structure, CEO, and reasons
behind why it has become the most innovative company in today's market. (Rivet, 2017)............. 5
2.1.1 Overview of the research ......................................................................................... 5
2.1.2 Assessment of research quality ............................................................................. 5
2.2 Business Economics and Management 2015 Conference, BEM2015: Leadership and
organizational culture as the normative influence of top management on employee's behaviour in
the innovation process ................................................................................................................... 6
2.2.1 Overview of the research ......................................................................................... 6
2.2.2 Assessment of research quality ............................................................................. 6
2.3 Harvard Business Review: The Innovation Mindset in Action: 3M Corporation ....................... 7
2.3.1 Overview of the research ......................................................................................... 7
2.3.2 Assessment of research quality ............................................................................. 7
2.4 Comparison of the sources ...................................................................................................... 8
3. STAGES OF THE RESEARCH PROCESS AND DATA COLLECTION METHODS .................. 10
3.1 Stages of the research process ............................................................................................... 9
3.2 Advantage and disadvantages of different data collection methods ...................................... 11
4. CONCLUSIONS ........................................................................................................................... 12
5. RECOMMENDATIONS FOR IMPROVEMENTS ......................................................................... 13
6. REFERENCES ............................................................................................................................. 15
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1. INTRODUCTION

The global outbreak due Covid-19, has made the company face challenges related to the capability of
reaching the sustainable ramp-up of the operation in 2020 is already compromised. The company has
reduced the workforce on-site and the operational rate, there are uncertainties regarding the regular flow
of goods and services, essential for the maintenance of operational stability, and a maintenance plan
expected to April 2020, that would support an increase in the production, has been postponed without a
new start date, because there are transportation restrictions on people and equipment from other countries
to Mozambique.

Times of crisis such this one the world is going through, usually provokes an environment of uncertainty,
disruption and changes. There is no answer right now about what will be the “new normal” ways to do
business, to produce goods, to manage people.

At Vale Mozambique, for instance, the Covid-9 pandemic has led the company to suspend its 2020 coal
production goal of 8-10 Mt. However, for 2021 the company needs to meet the investors expectation to
deliver a new target of 15Mt / year, keeping the same number of employees and using the same resources,
as the operation project and company's process plant were initially calculated and designed to reach
22Mt/year, and it has never been delivered since the company's opening in 2008.

The reasons that have contributed to this discrepancy can be diverse, from project design errors, lack
of employees ’technical knowledge, constant equipment breaks, etc. This Business Report, will focus on
the organization's culture aspects, considering the culture as the shared beliefs and values established in
a company and reinforced through various methods, that shape employee perceptions and behaviors.

Based on the results obtained through theoretical research and benchmarking analysis, this report aims
to identify the relationship of organizational culture and innovation, answering the question: What would
be the characteristics of an organizational culture that promotes and encourages an innovative work
environment?

With the results of the studies at hand, the HR will present the findings and recommendation to the Coal
Executive Manager in Mozambique, aiming to get his sponsorship to have the HR as the caretaker of the
organizational culture, implementing transformational and of adequation action that will result in a strong
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organizational culture where leaders and employees will feel themselves able, confident and encouraged
to participate in the company's innovative processes.
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2. LITERATURE REVIEW

2.1. Amazon’s Superior Innovation: A Study of Amazon's corporate structure, CEO, and
reasons behind why it has become the most innovative company in today's market. (Rivet, 2017)

2.1.1. Overview of the research

Amazon.com, Inc., originally created to virtually sell books, has built an empire with a website that
currently offers everything from clothes to garden furniture and cleaning supplies, being now known as
one of the most innovative companies in the world. In his study about Amazon, Rivet (2017) defends that
at Amazon there is a leadership style that leads to a unique organizational structure focused on innovation.
Amazon’s structure has a great diversity of team processes where all teams are working on a diverse
set of projects that are not dependent of each other. Also, according to the author, what has enabled
Amazon to growth to different sectors was the company’s focus on what the customer wants, which is
clear observed from the Amazon’s leadership principle “Customer Obsession”. Still about the leadership
principles, Amazon has 14 Leadership Principles and they synergistically work together to reach
company’s objectives, and their implementation has been directly correlated to the success and innovative
environment of Amazon.
The environment of Amazon is characterized as being “hospitable to experimentation” and employees
know how to fail and how to accept failure, which energize them to have a mindset that like to venture to
new areas of business and products in a disruptive and innovative way, as they do not have to be afraid
of making mistakes.

2.1.2. Assessment of research quality

The study was published in 2017 and presents strong arguments to defend its position about what
makes Amazon.com Inc. a reference in terms of success and innovation. By presenting the company’s
initial history, size and results and the current company’s position in the market, the author has
unquestionably demonstrated the company's growth in recent years.
To justify that the company’s growth is due the capacity of Amazon to innovate, the author has used
the finds from another study (Harvey M. Sapolsky study for the University of Chicago on Organizational
Structure and Innovation) in several times, the author used the words of the company's own CEO.
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The initial objective of the study has been achieved, that was to identify the reasons that made Amazon
to become one of the most innovative company in today’s world. It has been accomplished by using
different source of data and information, mostly specifically about Amazon, being the most persuasive
point the fact that many different sources used in for the study reinforce the same aspects and practices
that are used to explain the company environment that inspires innovation.

2.2. Business Economics and Management 2015 Conference, BEM2015: Leadership and
organizational culture as the normative influence of top management on employee's behaviour
in the innovation process

2.2.1. Overview of the research

In the article the author stated that the organizational culture can be both a stimulus or a barrier to the
innovation, being that the main responsible for motivating and shaping the creative behaviors in
organisations, with the leadership as a major responsible to create and manage the innovative
organizational culture characterized by being proactive, risk-taken, creation of commitment and initiate
change.
According to the author, a characteristic of innovation-oriented culture is change. Not only, the
organizational condition that would create an innovative environment includes: a corporate strategy, a
human resources management system whose mission is to attract, maintain and train the right people, a
pro-innovation management system and an appropriate organizational structure that emphasize
commitment, supporting employee’s development at the social and technical level. In an innovative
environment, they do not stigmatize mistakes. About leadership, such as in a chain reaction, the top
managers would create a vision, communicates, cultivates and determine the attitudes and behaviors of
managers at lower levels, and these would influence the development of desirable attitudes and values of
subordinates, resulting in a pro-innovation organizational culture.

2.2.2. Assessment of research quality

The research presents a result drawn from a random sample of private sector managers, where 120
managers were direct interviewed by using a questionnaire consisting of 10 questions with a mixture of
Likert-scale and closed-ended questions.
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The results from the primary source (the questionnaire) were consistent with the theoretical research
conducted, being possible to say that the authors’ argument is valid, authentic and reliable, being the
matching between the questionnaire’s results and the existent theory considerable persuasive.
As the research was conducted around five years ago, would be recommendable a review, however, when
taking into consideration other more recent studies, it is observed that the finds are quite similar. Although,
after the Covid-19 outbreak, minor changes might be observed, considering that it is expected that nothing
will be the same.

2.3. Harvard Business Review: The Innovation Mindset in Action: 3M Corporation

2.3.1. Overview of the research

The article presents the 3M practices that have led the company to award the US government’s highest
award for innovation, the National Medal of Technology.
The company treats its promising employees by giving to them opportunities, support, and by watching
them to learn and thrive. At 3M, there are a rich variety of centers and forums to create a pool of practical
ideas, exploring possibilities, solving problems, and generating product ideas. There is an environment
that fosters the right tension with “and thinking” and that encourages resourcefulness and initiative. 3M
has also created measurement and reward systems that tolerate mistakes and encourage success.
According to the article, innovative companies have strong mechanisms to ensure a continuing focus
on expanding their business and it is exactly what 3M does with its “15% Culture” which has resulted in a
culture that allows the experimentation and collaboration that makes ideas flourish, resulting in innovation.

2.3.2. Assessment of research quality

The article finds can be considerable as reliable, considering that it describes the practices at 3M
company based in the company’s own statements and documents, such as the company’s book “A
Century of Innovation: The 3M Story”.
The characterization of the company and the stablished link between 3M practices and the innovation
capacity is supported by other finds from blog posts of profiling game changers such as Jerry Buss, Peter
Jackson, and Shanthi Raghunathan that possess a common innovation mindset.
The article arguments show themselves as persuasive when presenting real examples of how the
practices and culture have led conducted the company to be innovative and to launch new products to
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address the customer need and made the company be successful. Also, by having the content
corroborated by other sources, is shows that the article is authentic and valid. Even being 7 years old, the
article content remains actual, considering that a simple research about the company’s practices shows
that the practices still the same, which also leads to the understanding that the practices also remains
valid and leveraging competitive advantage for the company.

2.4. Comparison of the sources

In a general view, it is observed that the three sources reinforce that the culture directly influences the
company’s capacity of innovation and the practices adopted in the organization will determine if the that
culture will result or not in an innovative environment.
Below a table that summarize the finds from the three sources, followed by a brief explanation
consolidating the comparison:

SOURCE PRACTICES THAT ENABLES INNOVATION

Amazon’s Superior Innovation: A Study of Amazon's corporate - Well defined values and principles
structure, CEO, and reasons behind why it has become the most - Customer obsession
innovative company in today's market. (Rivet, 2017) - Leadership style that leads innovation
- Teams working independently in non-correlated projects
- Hospitable to experimentation
- Employees are not afraid of making mistakes.
Business Economics and Management 2015 Conference, BEM2015: - Company’s values that lead to the innovation
Leadership and organizational culture as the normative influence of - Supportive leadership, create a vision, communicates, cultivates and
top management on employee's behavior in the innovation process determine the attitudes and behaviors expected
- Existence of an HRM system to support the development of the talents
- Not stigmatize mistakes
- Promotes commitment and changes
Harvard Business Review: The Innovation Mindset in Action: 3M - Encourages experimentation and collaboration
Corporation - Give opportunities to employees to try
- Positive right tension with “and thinking
- Customer oriented
- Tolerate mistakes
- Reward success

Rivet (2017), in the case study about Amazon, states that the company’s capacity of innovation is
related to the existence of well-defined and know principles, that are reinforced and promoted by the
leadership, being employees allowed to make mistakes in the way of reach some innovation.

Similarly, the “Leadership and organizational culture study (2015)”, also highlights the needs of a
company to have values that lead to the innovation and the importance to have a leadership supporting
and promoting those values. Not only, as the first source, here is observed that in innovative environments,
mistakes are not stigmatizing which makes employees more comfortable to ty. In addition, this study brings
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the need of an HRM system that would support the development of the employees, equipping them with
the right and required skills and knowledge to be each time more innovative.

Lastly, the HBR article reinforces the finds from the other two sources, mentioning that innovative
environments encourage experimentation and collaboration, giving opportunities (and time) to employees
to try, tolerating mistakes and keeping a positive tension, rewarding success. This source also mentions
the orientation to the customer needs as a driver to make employees to be more innovative.
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3. STAGES OF THE RESEARCH PROCESS AND DATA COLLECTION METHODS

3.1. Stages of the research process

When conducting a research or study it is fundamental to know and explain how the conclusions were
reached, ensuring that the processes and practices were undertaken ethically and professionally. In this
sense, it is indicated to follow the key steps below:

- Problem definition: After decided the area or topic to be investigated, this step will allow to
narrow the area of concern down to one question.

- Review available literature or internal data: This step is to identify how much have already
been written about the topic of if it will be needed to do an internal research.

- Design the research approach (Types of data): He comes the definition about the source
(primary or secondary) and in case of being primary, the types of data, that can be quantitative
or qualitative.

- Analyze the literature: it is about reading, comparing and elaborating assumptions, based on
the content available about the topic.

- Write down the research question: this is a different approach where it can be defined a
question about the issue that needs to be solved.

- Evaluation: evaluate and critically analyses what was read, considering its validity, relevance,
soundness, reliabilities. This step is also called “critical review”.

- Interpret the results – drawing conclusions: collate and summaries to identify patterns
observed through the survey.

- Summaries findings for the audience: It is time to present the findings to the organization’s
stakeholders.
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3.2. Advantage and disadvantages of different data collection methods

Primary research occurs when the researcher collects the data by him/herself using for these one or
more techniques available (interviews, surveys, observation, focus group, questionnaire, etc.). To identify
the best technique to be used, it is important to know them and their advantages and disadvantages.
Below a brief explanation about two techniques commonly used:

Interview: It is very useful when the researcher wants to get an expert or knowledgeable opinion on a
subject. Can be a one-to-one or small group question-and-answer sessions and it provides information
from a small number of people. It has as vantage the fact that respondents can look at samples,
advertisements or other visual materials while the interviewer can conduct complex or lengthy interviews.
But it also has disadvantage as it can be costly and subject to bias if not carefully recruited.

Survey: It is a contra point for interviews, as it allows to get deeply information about a topic without
the biased viewpoint of an interview. Basically, it involves asking questions about the topic, getting insight
about specific people, events or areas. As vantage, can be highlighted the convenience as people can
answer according to the time and location where they are comfortable, it is a low-cost solution and the
researcher can have a good control over the sampling audience. Mentioning the disadvantages, the
interviewer is not present to explain complex instructions and respondents may opt to ignore the
questionnaire.
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4. CONCLUSIONS

The main conclusions from the study are that innovative companies have greater chance to be
successful in the market and the innovation capability will be positively or negatively influenced by the
company’s practices and existing environment.
In this sense, it is possible to develop employee’s creativity and innovation, by stablishing a culture that
promotes and encourages the experimentation and where employees do not need to fear mistakes that
they can make in the process of create something new.
From the research made and the congruence about the finds, it is possible to state that companies
where a culture of innovation is observed have similar features and practices, that could be used as
reference by other companies that aim to increase employees’ collaboration with new ideas, bringing more
innovation to the company, resulting in company’s growth and success.
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5. RECOMMENDATIONS FOR IMPROVEMENTS

Although the coal production in the company has totaled 2.0 Mt in 1Q20 which was 4.6 % higher than
in 4Q19, the coal sales totaled was 23.3% lower than in 4Q19. It has happened due to lower demand, an
impact of the COVID-19 pandemic, bringing the storage capacity at mine and port to their limits, which
can ultimately narrow the production capacity of the coming quarters if current market conditions persist.

This loss for the company is expected to be compensated in 2021, year where the Business Unit has
been requested by the Headquarter to deliver a production of 15Mt / year, a never reached production
since the company’s launching in 2008.

Below the production of the company plants regarding the last five years. It is observed that even in the
best years of production (2017 and 2018) the production was lower than the expected production (15mt).

Figure 01: Production report from 2015 to 2020 (YTD). Company has never been able do delivery the expected production.

To deliver that, leaders and employees must be aligned about the demand and work together to reach
the stablished goal. It is going to be a challenge in terms of time, equipment availability and manpower
available. But, but this challenge can be more easily overcome if the leaders and employees could find
more effective ways to perform their jobs, reducing occurrence of equipment breaks, raw material waste,
communication failures in the process. Also, they will need to improve their communication and
collaboration, working together for a common purpose.
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This needed and desirable scenario, would be achieved if the implementation of the proposals below
is approved by the Coal Executive Manager in Mozambique who, acting as a sponsor would cascade to
the other stakeholders (leaders and employees) the initiatives to be implemented and improve the
innovation in the company:

- Leadership Development Program focused on the supervision level: It is recommended

considering that HR has been receiving complaints from employees and managers related to
the leadership style adopted by most of the leaders. The style and behavior are constantly
characterized as autocratic, where discussions are not encouraged, and mistakes are punished.
In this sense, the supervisors need to have support to change their mindset to be more open for
collaboration, establishing a psychological safety among their teams, and allowing the to
contribute without be afraid to be rejected or punished.

- Technical learning actions for operational and specialist level – It is recommended, considering
that it is related in the company’s report the high occurrences of equipment break and process
failure based on human mistakes and low technical knowledge observed in the decision process.
The idea is to develop a technical trail according to positions and functions where they will learn
and be developed according to the basic and most important aspect required to the performance
of their tasks.

- Creation of an Innovation Lab: In commodities extraction business, usually employees feel them
with no space or chance to be innovative as the activity seems to be simple and a process
already defined and plastered. The idea of the implementation of this Lab, that can start with
workshops and team work groups is to promotes an atmosphere where they can understand that
innovation can be practiced in simple things and practices and even so, representing huge gains
to the company.

With the implementation of the proposed action above, it is expected to have gains in different levels
and for all stakeholders involved, for instance:
• Employees: They will be developed, acquiring the necessary knowledge to perform their job with
more quality and reducing the occurrence of errors. Also, by having more knowledge, being more
able to communicate with their leaders and proposing innovative initiatives, they will get more
changes to grown in their careers.
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• Leaders (Supervisors): There is no discussion: the employees will behave looking at their
leaders’ behaviors. A good leader will the role model for his subordinates, being able to motivate
and support them and facilitating communications among them. Leadership may be inborn for
some, but even in this occurrence it can be improved and polished. By participating in a
development program, the leaders will gain knowledge and tools that will support them in their
routine, people and process management. It will result in better result, a better environment and
more recognition among the company.
• CEO and Company itself: an efficient leadership with a high engaged team that promotes
innovation to the company, being antifragile in amidst to crises and learning with mistakes, will
deliver better results to the company that will be better placed in the market with high competitive
advantage.
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6. REFERENCES

• Scholars.unh.edu. 2015. [online] Available at:

<https://scholars.unh.edu/cgi/viewcontent.cgi?article=1347&context=honors> [Accessed 21
June 2020].

• Szczepańska-Woszczyna, K., 2015. Leadership And Organizational Culture As The Normative

Influence Of Top Management On Employee's Behaviour In The Innovation Process. [ebook]
Elsevier B.V., pp.396 – 402. Available at: <http://www.sciencedirect.com> [Accessed 21 June
2020].

• Harvard Business Review. 2013. The Innovation Mindset In Action: 3M Corporation. [online]
Available at: <https://hbr.org/2013/08/the-innovation-mindset-in-acti-3> [Accessed 21 June
2020].