Profit, of course, is the most simple metric for business outcomes, indeed the very reason the business exists.
There is also a simple metric for managing growth and increased staff numbers – Profit divided by Headcount (P/H).
A new hire initially costs money so expect a short term dip in the P/H result, but in the longer term, this number should, in fact, be bigger than the pre-hire number. If that’s not the case, then the new person is in fact costing you money. This, of course, disregards any lifestyle choice you may make in sacrificing a higher P/H to enable yourself more leisure time.
In larger organisations, we often see headcount grow for no good reason. Even in smaller organisations, people are sometimes added with no real metric to determine the value they deliver.
Notwithstanding the organisation, it should be possible to find some quantities measure for the value people deliver. Without that, organisations can grow like “topsy” unabated.
Many companies have dedicated innovation departments and spend large amounts of money trying to embrace innovation. Lots of training is undertaken, special tee shirts handed out, coloured banners, slogans and special thinking spaces created, some even with coloured bean bags to sit on. The now fashionable co-working spaces with their multi-coloured and funky fitouts have taken this to an entirely new level. This is all considered part of the innovation message.
Being mindful that innovation is not research and development, which is popularly deemed a pursuit where a defined outcome is not guaranteed, innovation people should be required to pay their way. Otherwise, we risk ending up with the airport fire services scenario.
The P/H metric alone may be sufficient as a starting point, but it is vital the all parts of an organisation be contributing to the outcome.
Perhaps the best way to achieve an innovation metric is to have the very people engaged in innovation working to create their own meaningful metric they agree to deliver on. Self-developed KPI’s approved by senior management leave little “wiggle room” and if nothing else, this is a great way to open the conversations with staff.
Putting aside the innovations enabled by the IT and internet revolution, what period in history was the greatest for innovation? It’s the Second World War. In these times that saw the development of RADAR, SONAR, smart bombs, the tank, the huge development in aircraft, and the atomic bomb, a feat achieved in the USA less than four years from nothing more than a standing start founded on a mathematical equation.
In light of this we may ask why it should be any different from the innovation people in your business.
The present Coronavirus is a classic example of necessity inspiring invention. Look at the growth in food deliveries, a service that is sure to stay. Look at the IT-enabled home offices now sure to be a thing of the future. Bosses have realised they can gain more effective outcomes with people avoiding the drudgery of peak hour travel. Look too at the reduced office space and attendant overheads enabled by remote working. Shops are creating drive-through services, an initiative we suggested many years ago for convenience stores that in effect sell, nothing more than convince for products at exorbitant prices.
If your innovation initiative is awaiting a crisis to spring to life, it may be time to review your approach.
Yes indeed, we should demand a return on our innovation investment, and if you don’t think this will work, feel free to make contact and we’ll give simple and clear examples with quite remarkable outcomes.
Roger La Salle, innovation trainer, Matrix Thinking