How Much of a Role Does Company Innovativeness Play on Employee Satisfaction and Loyalty?

In an increasingly technology-driven marketplace filled with disruptive competition, it is imperative for companies to innovate or face going out of business.  We know from our extensive research on the subject that innovative companies have more loyal customers and better stock returns, but our latest research also shows that innovation is an important facet of the employee experience.  Companies that are viewed by workers as being innovative are more successful in satisfying and engaging employees, while an innovative environment plays a unique role in maintaining the workforce needed for an organization to succeed.

Employers spend considerable resources attracting and retaining talented staff, so it is troublesome to learn that employee satisfaction and engagement in the U.S. are at modest levels.  Based on the results of our recent survey with a cross-section of 552 U.S. workers conducted by Rockbridge Associates in early 2020, barely half of employees (56%) are highly satisfied with their current job and only 63% believe they are likely to continue working for their organization a year in the future.  In addition, three in ten workers (29%) plan to look for new job opportunities within the next year.  Tangible factors such as pay and benefits can play an important role in employee satisfaction and loyalty, but intangible factors such as the work environment and culture can be equally important.  In this research, we looked at the role that innovation plays in the work environment.

To study the role of innovation, we relied on metrics from the American Innovation Index™ program that Rockbridge conducts in partnership with Fordham University and the Norwegian School of Economics.  We asked workers in our national study about their views of their job, but we also asked them to evaluate the innovativeness of their companies.  One metric, the American Innovation Index™ (Aii), scores perceptions of innovation based on the employee’s view that their employer is innovative, creative, a category pioneer, and a game changer with its products and services.  A second metric, the Social Innovation Index™ (Sii),  scores perceptions of social innovation based on the employee’s view that their employer makes benefitting society and the environment a priority, offers goods and services that are beneficial to society and the environment, and comes up with innovative solutions to problems in society and the environment.

Our study reveals that employees working for employers they perceive as highly innovative tend to have higher satisfaction and a higher likelihood of planning on working at the company a year in the future (see Figure).  For example, job satisfaction is 87% among companies perceived as highly innovative, 53% in those perceived as moderately innovative, and 31% in those perceived as low in innovation.  Since job happiness is not all about pay and benefits, we believe that employees enjoy working in a stimulating environment and become more committed to staying with their employer.  In addition, employees gain greater satisfaction when they perceive their employer as innovative in achieving altruistic goals.  The relationship between satisfaction and social innovation (Sii) is nearly as strong as the relationship with business innovation (Aii).

The role of innovation is more complex when considering plans to look for a new job in the next 12 months.  As the figure also reveals, employees in companies that are perceived as low in innovativeness are more likely to plan to look for a new job in the next 12 months compared to companies perceived as moderately innovative (24% low versus 19% moderate).  A deeper analysis shows that lower satisfaction correlates with higher likelihood to look for a job, so we think low innovation environments are less satisfying and therefore less likely to hold on to staff.

Yet, the intention to look for a new job in 12 months is double that in companies viewed as highly innovative compared to others, so what is going on?  We think that highly innovative companies are different, as are their employees.  These companies have unique ways of operating where churn is beneficial, while many employees who are attracted to innovative environments seek new opportunities as a matter of course.  The best example is a tech start-up which draws in different talent sets over the company life cycle, while employees routinely move from one start-up to the next after they have fulfilled their purpose.  Skilled workers, particularly those with tech backgrounds, may feel a need to achieve a broad range of career experiences and continuously learn new skills.  In sum, highly innovative companies seek new ideas and employees seek new experiences.  These hypotheses are borne out by the data, as discussed in the next paragraphs.

Companies with more innovative environments (based on employee perceptions) are different from others.  Innovative companies are:

  • More likely to be in the technology sector
  • More likely to be in a for-profit business than in the government, education or healthcare sectors
  • Larger in size (100 or more employees)
  • More likely to provide jobs where artificial intelligence is important (56%)
  • Increasing their use of artificial intelligence, with more employees who think their job positions will be affected by AI in some manner within the next five years (21% of employees believe it will replace them, 18% believe it will make their jobs more secure)

Organizations with high innovation environments attract different types of individuals.  Workers in organizations perceived as highly innovative tend to be different in the following ways:

  • Younger (34% are under age 30 compared to 21% in less innovative companies)
  • More likely to be tech workers (42% compared to 22% in less innovative companies)
  • More likely to be a recent hire (employed at organization 2 years or less)
  • More likely to be a technology “pioneer,” a unique type of individual who is high in tech-readiness but possesses a love/hate relationship with technology
  • More hopeful than fearful about artificial intelligence and other advanced technologies
  • More optimistic about artificial intelligence – they are more likely to feel that artificial intelligence will augment, rather than replace, humans in jobs
  • Higher income
  • More likely to be a homeowner, married, and have young children at home (12 years in age or younger)

What innovativeness means to employers.  Organizations interested in retaining talented employees should track employee perceptions of innovativeness and identify the drivers behind these perceptions.  If the company is viewed as low in business or social innovation, it could have issues satisfying and retaining certain types of workers, particularly those who are younger and with tech specialties.  The company needs to ask questions about the work climate, such as the degree to which it challenges people and provides exposure to different roles, the level of bureaucracy and silos, and openness to new ideas.  Besides attractive compensation, work should be interesting and fun.  Companies should also consider employee perceptions of being socially innovative, as employees are more committed to companies they see as being on the forefront of benefitting the social good.  Social innovation starts at the top, with management accepting altruism as a priority and demonstrating these priorities through action and messaging.

It is natural in some types of companies and industries for staff to change jobs every few years in search of new opportunities and skills.  While it may not be possible (or even desirable) in some companies to hold on to people forever, companies low in innovation may pay a price in losing people due to dissatisfaction rather than natural churn.  Companies in highly innovative sectors (such as tech firms) must ensure they offer a stimulating and innovative environment and that the word gets out to the community of potential applicants.  This will ensure that when talented individuals with highly sought skill sets leave a competitor, they will consider the company for their next opportunity.

In today’s world, consumers and employees alike are not content with simply a great product/service or job, or with good value or pay.  They also seek a distinct provider or employer that is creative, innovative, pioneering and dedicated to the social good.

About the Study: The National Technology Readiness Survey is conducted by Rockbridge Associates, Inc. and A. Parasuraman, and has tracked technology and e-commerce trends since 1999. The survey is co-sponsored by the Center for Excellence in Service at the Robert H. Smith School of Business. The most recent wave was conducted in March 2020 and is based on an online survey of 1216 U.S. adults sampled at random from a consumer research panel. Results are weighted to match census characteristics.

Written by Charles Colby, Chief Methodologist, and Kristen Garrett, Research Director