From: http://www.bizjournals.com/

Many companies want their employees to be more innovative, but few have actually accomplished it.

Around the time that Yahoo CEO Marissa Mayer famously cancelled telecommuting, Frederick, Maryland-based iHire, a job site offering a network of more than 50 industry- and profession-specific communities, took the opposite approach.

In offering more schedule flexibility, iHire also offers a courageous example of how an organization can methodically build a culture of innovation.

I recently spoke with Lisa Shuster, the VP of Human Resources and chief administrative officer, who was integral to the company’s transformation.

When you set out to be more innovative, what did you do first?

We wanted more engagement from our employees and to set out to create an environment where they could be more innovative and fulfilled. Initially, we were intrigued by efforts like Best Buy’s Results-Only Work Environment (ROWE), and our leadership team also subscribed to many of the principles in Dan Pink’s bookDrive, especially autonomy, mastery, and purpose.

But instead of describing our environment as results only, we prefer to think of it as offering the ultimate in flexibility. We wanted to treat our employees like adults, and judge them purely on their performance, not on appearances. At iHire, no one is watching the clock, nor counting hours. Employees work as they wish – if they need to be home for the cable guy or have a doctor’s appointment, that’s fine.

Our team is pretty diverse. We employ software developers, information technology operations staff, product and marketing professionals and sales and customer service representatives. Some people worry about offering this much schedule flexibility to individuals in customer-facing roles, but we successfully transitioned everyone.

What did you learn from offering this kind of work environment?

Our goal in the transition was to increase innovation (the Holy Grail desired by every company, of course), which requires a lot of collaboration. So rather than making everyone be in the office, our managers had to learn how to offer schedule flexibility while still fostering collaboration.

We also realized that it was important to not just focus on the results, but the manner in which the results were achieved. It led us to reconsider our core values. We got everyone together to rethink our values — what we expect of each other — and ultimately the behaviors required to be successful at iHire.

Additionally, our assembling of cross-functional task forces and lots of testing and experimentation helped us increase our degree of innovation.

How do you keep people from taking advantage of the flexibility?

Part of our values assumption is the belief that employees want to do well. But to do well means making expectations clear. We conducted a good amount of manager training on topics such as objective setting, performance coaching and feedback, hiring for culture, and employee engagement.

We did away with the annual performance review in favor of regular performance feedback because research shows it is more effective and ultimately results in in more open, honest feedback and solution seeking dialogue. Taking advantage of the flexibility would mean one is not meeting their objectives or is behaving in a manner inconsistent with our values — that is what we manage, not the time.

Did you find that some people couldn’t adapt?

After three years, we definitely lost some people. Everyone likes flexibility, but we found that our environment is now best suited for the most motivated employees who take the initiative to consistently make things better. The A players are motivated by the higher performance standards and a desire to make iHire successful, not necessarily the flexibility (though they greatly appreciate it).

People worry that slackers will take advantage of flexible schedules. But you’re saying the slackers are the people who left?

Absolutely — by implementing this change, over time we’ve built a culture of trust in the organization. We wanted more transparency and to give more power and accountability to our employees.

We also started sharing financials each month. We needed an environment of full disclosure, where it was ok to fail. Without that, there’s no way to get more innovation. That didn’t used to be part of our culture — but now there is a great deal of experimentation going on. We started with the systems, programs and process, and then the culture emerged from that.

And the innovative culture and schedule flexibility make our recruiting easier. We’re finding that far more software developers, marketing and product people now want to work here.

What advice do you have for other companies considering this?

It’s all about intentionally building the culture. We created a series of new processes, which built trust over time. We didn’t just start by saying “trust us” or “be innovative.” We methodically demonstrated our trust in our employees and then worked to earn their trust by our actions. We created a work environment that encouraged innovation. Harvard Business Review just wrote about this — culture isn’t something you fix directly; it emerges from the process changes you make.

This is really a new management model.

There are so many organizations that are afraid to give their employees more flexibility. But freedom is a key driver of engagement. I don’t know how organizations will attract and retain employees in the future without some level of flexibility.